HOW TO COUNT THE PRESCRIPTIVE PERIOD TO CLAIM REFUND
By: Atty. Aziza Hannah Bacay on August 20,2020
Taxes are the lifeblood of the government. To ensure that the government lives, the Bureau of Internal Revenue was granted the power to collect taxes and even issue assessments against taxpayers if their taxes are deficient.
To balance this power, the law also gives the taxpayer an opportunity to claim a refund if the payment of taxes was erroneously made. Under Section 229 of the National Internal Revenue Code (Tax Code), the taxpayer must file a written claim for the refund before the “expiration of two years from the date of payment of the tax or penalty, regardless of any supervening cause that may arise after the payment.”
As we know, two years consist of 730 days (a year has 365 days). Thus, a taxpayer has those number of days during which to file the claim for a refund of erroneously paid taxes. But what happens when there is a leap year?
The recent case of ED & F Man Philippines Inc. v. Commissioner of Internal Revenue (Court of Tax Appeals [CTA] Case 9577 and 9739, Aug. 5, 2020) dealt with the timeliness of the filing of that claim. In this case, the taxpayer paid its alleged deficiency tax on Dec.18, 2015 and filed its administrative and judicial claim for refund on Dec. 18, 2017. However, the claim was questioned for being filed beyond the prescriptive period, since 2016 is a leap year and, thus, 731 days had passed on the date the petition was filed.
In resolving this matter, the CTA Second Division cited the Supreme Court case of Commissioner of Internal Revenue v. Primetown Property Group Inc. (G.R. 162155, Aug. 28, 2007), which explained how the two-year prescriptive period should be counted, even when there is a leap year involved. This case involved a similar set of facts with the ED & F Man Philippines case, since it involved the year 2000, which was also a leap year. The Supreme Court compared provisions of the Civil Code (Republic Act 386 ) and the Administrative Code of 1987 (Executive Order 292 ), both of which deal with the computation of legal periods.
Under Article 13 of the Civil Code, when a law speaks of a year, it shall be understood to be equivalent to 365 days. But Section 31, Chapter 8 of the Administrative Code says “‘Year’ shall be understood to be twelve calendar months.” As such, the number of days is irrelevant. It should also be noted that the Administrative Code has a repealing clause that impliedly repeals all laws inconsistent therewith.
The Supreme Court eventually held that, for purposes of computation of legal periods, the Administrative Code’s counting of year on a monthly basis is applicable, since it is the more recent law. This is also pursuant to the legal maxim “lex posteriori derogat priori,” which means that a later statute takes away the effect of a prior one. With this view, the Supreme Court held that the petition for refund in the Primetown case, which was filed on the 24th calendar month, was timely filed despite the number of days involved.
Accordingly, in the ED & F Man Philippines case, the CTA Second Division followed the Supreme Court’s decision in the Primetown case and held that the petition was indeed timely filed.