Digest for Tax 2
2. Philippine Bank of Communications
v. CIR
DOCTRINE/S: Claims for refund or tax
credit should be exercised within the time
fixed by law because the BIR being an
administrative body enforced to collect
taxes, its functions should not be unduly
delayed or hampered by incidental matters.
FACTS: Petitioner PBCom reported on its
annual Income Tax Return for the year 1985
and 1986 a net loss of P 25, 317, 228 and P
14, 129 602 respectively.  But during both
year, But during these two years, PBCom
earned rental income from leased properties.
August 7, 1987: PBCom requested a tax
credit for the overpayment of taxes in the 1st
and 2nd quarters.
July 25, 1988: PBCom filed a claim for
refund of creditable taxes withheld by
lessees.
Pending the investigation, it filed a Petition
for Review before the CTA who denied its
request for filing beyond the 2-year
reglementary period provided by Sec. 292
and 295 of the NIRC and the claim for 1986
was denied based on the assumption that it
was automatically credited for the
succeeding year as shown in its 1986
adjusted final corporate annual tax return.   The BIR, in issuing said circular did not
PBCom filed a Motion for
Reconsideration and then a Petition for
Review with the CA which affirmed
the CTA's decision.  law cannot go beyond the terms and
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It raised the matter to the SC where it argues
that it relief on Revenue Memorandum
Circular No. 285 issued April 1, 1985 that
provides that the prescriptive period for
overpayment is NOT 2 years but 10 years
under Art. 114 of the Civil Code
It is likewise argued that the Commissioner
of Internal Revenue, after promulgating
RMC No. 7-85, is estopped by the principle
of non-retroactivity of BIR rulings.
ISSUE/S:
1. Whether or not the prescription for the
claim of tax refund or tax credit is covered
by Revenue Memorandum Circular No. 7-85
and not by the two-year prescriptive period
under the tax Code.
2. Whether the CIR is estopped by the
principle of non-retroactivity of BIR rulings.
RULING:
1. It is the Tax Code which provides for the
prescription for claims for refund or tax
credit. RMC 7-85 changed the prescriptive
period of two years to ten years on claims of
excess quarterly income tax payments. This
circular is inconsistent with the provision of
Sec 230, NIRC of 1977.
simply interpret the law; rather it legislated
guidelines contrary to the statute passed by
Congress. Rules and regulations issued by
the administrative officials to implement a

provisions of the latter. Since RMC 7-85
issued by the BIR is an administrative
interpretation which is contrary to the
provision of the statute, it cannot be given
weight and the State cannot be put in
estoppel by the mistakes or errors of its
officials or agents.
Taxes are the lifeblood of the nation.  Due
process of law under the Constitution does
not require judicial proceedings in tax cases.
This must necessarily be so because it is
upon taxation that the government chiefly
relies to obtain the means to carry on its
operations and it is of utmost importance
that the modes adopted to enforce the
collection of taxes levied should be
summary and interfered with as little as
possible.   provision of a statute (specifically Sec. 230,
From the same perspective, claims for
refund or tax credit should be exercised
within the time fixed by law because the
BIR being an administrative body enforced
to collect taxes, its functions should not be
unduly delayed or hampered by incidental
matters.
2. No, CIR is not estopped by the principle
of non-retroactivity of BIR rulings. The
Memorandum Circular, stating that a
taxpayer may recover the excess income tax
paid within 10 years from date of payment
because this is an obligation created by law,
was issued by the Acting Commissioner of
Internal Revenue.
On the other hand, the decision, stating that
the taxpayer should still file a claim for a
refund or tax credit and corresponding
petition for review within the two-year
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Digest for Tax 2
prescription period, and that the lengthening
of the period of limitation on refund from
two to ten years would be adverse to public
policy and run counter to the positive
mandate of Sec. 230, NIRC, - was the
ruling and judicial interpretation of the
Court of Tax Appeals.
Estoppel has no application in the case at bar
because it was not the Commissioner of
Internal Revenue who denied petitioner's
claim of refund or tax credit. Rather, it was
the Court of Tax Appeals who denied (albeit
correctly) the claim and in effect, ruled that
the RMC No. 7-85 issued by the
Commissioner of Internal Revenue is an
administrative interpretation which is out of
harmony with or contrary to the express
NIRC), hence, cannot be given weight for to
do so would in effect amend the statute.
Additional notes: Petitioner in this case relied on this
provision:
Sec. 246. Non-retroactivity of rulings— Any
revocation, modification or reversal of any of the
rules and regulations promulgated in accordance with
the preceding section or any of the rulings or
circulars promulgated by the Commissioner shall not
be given retroactive application if the revocation,
modification or reversal will be prejudicial to the
taxpayers except in the following cases:
a). where the taxpayer deliberately misstates or omits
material facts from his return or in any document
required of him by the Bureau of Internal Revenue;
b). where the facts subsequently gathered by the
Bureau of Internal Revenue are materially different
from the facts on which the ruling is based;
c). where the taxpayer acted in bad faith.
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