FACTS:

The petitioner, a real estate investment and management consultancy corporation, filed its annual corporate income tax return for the taxable year 1981 on April 15, 1982, reporting a net loss. It declared the taxes withheld by various withholding agents as creditable, amounting to P82,751.91. The withholding agents paid and remitted these amounts to the Bureau of Internal Revenue from February to December 1981. On December 29, 1983, the petitioner filed a claim for refund, asserting that it had no tax liability against which to credit the withheld amounts. The Commissioner of Internal Revenue did not respond to the claim, prompting the petitioner to file a petition for review with the Court of Tax Appeals on April 13, 1984, seeking the refund of the overpaid income taxes.

The Court of Tax Appeals dismissed the petition on January 27, 1988, ruling that the claim for refund had prescribed due to the two-year period for filing. The Court of Appeals affirmed the CTA's decision on May 28, 1990. Dissatisfied with these rulings, the petitioner brought the case to the Supreme Court. It argued that its judicial action for recovery was timely and that the two-year prescriptive period should be reckoned from April 15, 1982, the date it filed its income tax return. The Supreme Court agreed with the petitioner, emphasizing the interpretation of the phrase "from the date of payment of the tax" in section 230 of the National Internal Revenue Code. It disagreed with the appellate court's incorrect application of jurisprudential law and ultimately concluded that the petitioner's claim for refund was not barred.

ISSUES:

1. Whether or not the petitioner corporation is barred from recovering the amount of P82,751.91 representing overpaid taxes for the taxable year 1981.

RULING:

1. The petitioner corporation is not barred from recovering the amount of P82,751.91 representing overpaid taxes for the taxable year 1981.

PRINCIPLES:

• The two-year prescriptive period for filing a claim for refund of overpaid taxes is counted from the date of payment of the tax, not from the date of filing of the income tax return. (Section 230 of the National Internal Revenue Code of 1986)

• Payment of taxes under the withholding tax system is deemed to have been made at the end of the tax year.

• Payment is a mode of extinguishing obligations and it means not only the delivery of money but also the performance, in any other manner, of an obligation.