G.R. No. 162155 August 28, 2007, CIR vs Primetown Property Group, Inc.

FACTS:
On March 11, 1999, Gilbert Yap, vice chair of Primetown Property Group, Inc., applied for the refund or credit of income tax respondent paid in 1997. According to Yap, his business was good on the first quarter of 1997 but then the increase of labor and materials made it difficult in obtaining financing projects, hence suffered losses on that same year. Respondent paid its quarterly corporate income tax and remitted creditable withholding tax from real estate sales to the BIR in the total amount of ₱26,318,398.32.

On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to submit additional documents to support its claim. Respondent complied but its claim was not acted upon. Thus, on April 14, 2000, it filed a petition for review in the Court of Tax Appeals (CTA).

On December 15, 2000, the CTA dismissed the petition as it was filed beyond the two-year prescriptive period for filing a judicial claim for tax refund or tax credit, invoking Section 229 of the National Internal Revenue Code (NIRC).

The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or credit commenced on that date. The tax court applied Article 13 of the Civil Code which states: Art. 13. When the law speaks of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours, and nights from sunset to sunrise.

Thus, according to the CTA, the two-year prescriptive period under Section 229 of the NIRC for the filing of judicial claims was equivalent to 730 days. Because the year 2000 was a leap year, respondent's petition, which was filed 731 days after respondent filed its final adjusted return, was filed beyond the reglementary period.

Respondent moved for reconsideration but it was denied. Hence, it filed an appeal in the CA.

On August 1, 2003, the CA reversed and set aside the decision of the CTA. It ruled that Article 13 of the Civil Code did not distinguish between a regular year and a leap year. According to the CA: The rule that a year has 365 days applies, notwithstanding the fact that a particular year is a leap year.

Petitioners moved for reconsideration but it was denied. Thus, this appeal.

ISSUES:

Whether or not the petition filed by respondent is within the 2-year prescriptive period.

HELD:

Yes. The Court held that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period. CIR's petition was DENIED. 

The conclusion of the CA that respondent filed its petition for review in the CTA within the two-year prescriptive period provided in Section 229 of the NIRC is correct. Its basis, however, is not. The rule is that the two-year prescriptive period is reckoned from the filing of the final adjusted return. 

As already quoted, Article 13 of the Civil Code provides that when the law speaks of a year, it is understood to be equivalent to 365 days. In National Marketing Corporation v. Tecson, the court ruled that a year is equivalent to 365 days regardless of whether it is a regular year or a leap year.

However, in 1987, EO 292 or the Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I thereof provides:

Sec. 31. Legal Periods. — "Year" shall be understood to be twelve calendar months; "month" of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; "day", to a day of twenty-four hours and; "night" from sunrise to sunset. 

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject matter — the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is irrelevant.

There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, The Court holds that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Lex posteriori derogat priori.

Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-year prescriptive period (reckoned from the time respondent filed its final adjusted return on April 14, 1998) consisted of 24 calendar months, from April 15, 1998 up to April 14, 2000.