STATUTORY CONSTRUCTION (Aids to Construction)

CASE: COMMISSION OF INTERNAL REVENUE V TMX SALES, INC.

FACTS:
In the case of Commission of Internal Revenue versus TMX Sales, TMX filed
its quarterly income tax return for the first quarter of 1981 and consequently
paying the income tax on May 15, 1981. However, during the subsequent
quarters, TMX Sales suffered losses that is why when it filed its Annual ITR
for the year 1981, it declared net loss. TMX then filed for refund (BIR). The
Commissioner of Internal Revenue averred that TMX is already barred from
claiming such refund considering that more than two years has already
elapsed between the payment (May 15, 1981), thus invoked Section 292 of
the Tax Code. The Tax Court however rendered a decision in favor of TMX
in view that the quarterly income tax paid as installment or portion of the
annual income tax due, there is no payment until the whole or entire tax
liability is completely paid. Thus, payment of a portion thereof cannot operate
to start the commencement of the statute limitations (tax –entire tax not a
portion).
ISSUE:
Whether or not in computing the prescription period should start on the date
when the quarterly income tax was paid (May 15, 1981) and not when the
Final Adjustment Return for the year ended (April 15,1982).
HELD:
The Court affirmed the decision of the Court of Tax Appeals. In its
explanation, the court said that the National Internal Revenue Code should
be interpreted in relation to the other provisions of the Tax Code in order to
give effect to the legislative intent and to avoid application of the law which
may lead to inconvenience and absurdity. The court said that statutes should
receive a sensible construction, such as will give effect to the legislative
intention and so as to avoid an unjust or an absurd conclusion. The Court
emphasized that courts must give effect to the general legislative intent that
can be discovered form or is unraveled by the four corners of the statute,
and in order to discover said intent, the whole statute, and not only particular
provision should be considered. In resolving the said case, it is not only
Section 292 of the National Internal Revenue Code that should be consider
but also Sections 84, 85, 86, 87 on Quarterly Income Tax Payment and
Section 321 on keeping of book accounts. These provisions should be
harmonized in order to arrive with the conclusion that it is only when the final
adjustment return, covering the whole year, was filed that the taxpayer would
know a tax is still due or refund could be claimed based on the adjusted and
audited figures. And that is the only time that the statute of limitation starts
to commence.