Philippine Bank of Communications v. Commissioner of Internal Revenue

Summary

Philippine Bank of Communications filed claims for tax refund/credits totaling P5,533,827.64 for overpaid income taxes in 1985-1986. PBCom initially paid quarterly income taxes in 1985 but later declared net losses for both years. The company relied on Revenue Memorandum Circular No. 7-85, which extended the prescriptive period for tax refund claims from 2 to 10 years under Article 1144 of the Civil Code. However, all courts denied the claims. The Supreme Court ruled that RMC 7-85 was invalid as it contradicted Section 230 of the NIRC, which mandates a 2-year prescriptive period. The Court emphasized that administrative circulars cannot override statutory provisions and that the State cannot be estopped by erroneous administrative interpretations. The decision reinforced the strict application of tax prescription periods and the hierarchy of legal authority, with statutes prevailing over administrative issuances.