Metropolitan Bank & Trust Company v. Commissioner of Internal Revenue
REITERATIONFacts
1. The Antecedents: Solidbank Corporation, later acquired by petitioner Metropolitan Bank & Trust Company (Metrobank), extended a foreign currency denominated loan to Luzon Hydro Corporation (LHC). LHC agreed to shoulder all internal revenue taxes required to be deducted or withheld on this loan. LHC made payments to Metrobank in March and October 2001, and pursuant to their agreement, LHC withheld and remitted the ten percent (10%) final tax on the interest portions of these payments to the Bureau of Internal Revenue (BIR). Metrobank claims these amounts were inadvertently included in its own Monthly Remittance Returns of Final Income Taxes Withheld for the same months, leading to a mistaken double remittance. 2. Procedural History: Metrobank filed an administrative claim for refund with the Commissioner of Internal Revenue (CIR) on December 27, 2002. Following the CIR's inaction, Metrobank filed a judicial claim for refund with the Court of Tax Appeals (CTA) on September 10, 2003. The CTA First Division denied Metrobank's claim for the March 2001 tax due to prescription, as the judicial claim was filed beyond the two-year period from the April 25, 2001 payment date. The CTA Division also denied the claim for the October 2001 tax for insufficiency of evidence. Metrobank moved for reconsideration, which was partially granted to allow further evidence for the October 2001 claim, but the denial for the March 2001 tax on grounds of prescription was affirmed. Metrobank then appealed to the CTA En Banc, which affirmed the CTA Division's ruling, holding that the claim for the March 2001 tax had prescribed. 3. The Petition: Metrobank filed this petition for review on certiorari with the Supreme Court, assailing the CTA En Banc's decision. Metrobank argued that the two-year prescriptive period for claiming a refund should be reckoned from the filing of its Final Adjustment Return or Annual Income Tax Return for 2001, not from the date of payment of the final withholding tax. The Supreme Court, however, rejected this argument, distinguishing the case from those involving corporate income taxes where quarterly payments are considered advance payments. The Court held that final withholding taxes are considered full and final payments, and thus, the two-year prescriptive period commences from the date of payment. Since Metrobank filed its judicial claim on September 10, 2003, which was beyond the two-year period from the April 25, 2001 payment date, its claim for refund was deemed to have prescribed.
Issue(s)
Whether or not the CTA En Banc correctly held that Metrobank's claim for refund relative to its March 2001 final tax had already prescribed.
Ruling
The petition is without merit. The Supreme Court affirmed the decision of the CTA En Banc, holding that Metrobank's claim for refund had prescribed.
Ratio Decidendi
On the Issue of Prescription for Final Withholding Tax Refund: The Supreme Court held that Metrobank's claim for refund of the final withholding tax remitted in March 2001 had prescribed. Section 204(C) of the National Internal Revenue Code (NIRC) provides that no credit or refund of taxes shall be allowed unless the taxpayer files a written claim with the Commissioner within two (2) years after the payment of the tax. Section 229 of the NIRC further states that no suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty, regardless of any supervening cause. The Court clarified that for final withholding taxes, which are considered full and final payments of income tax due from the payee and are not subject to adjustment, the two-year prescriptive period commences from the date such tax was paid. In this case, the final withholding tax for March 2001 was remitted on April 25, 2001. Therefore, Metrobank had until April 25, 2003, to file both its administrative and judicial claims for refund. While the administrative claim was filed on December 27, 2002, the judicial claim was filed only on September 10, 2003, which was beyond the prescriptive period. The Court distinguished this from cases involving corporate income taxes, where the prescriptive period is reckoned from the filing of the Final Adjustment Return or Annual Income Tax Return because quarterly payments are considered mere installments or advances of the annual tax due. The principle of solutio indebiti was also deemed inapplicable because there was a binding relation between the taxing authority and the taxpayer, and the NIRC, as a special law, explicitly provides for a mandatory period for claiming tax refunds.
Main Doctrine
The two-year prescriptive period for claiming a refund of final withholding taxes commences from the date such tax was paid, not from the discovery of the erroneous payment or the filing of the annual income tax return, as final withholding taxes are considered full and final payments not subject to adjustment.