G.R. No.

L-17406

November 29, 1965

FINLEY J. GIBBS and DIANE P. GIBBS, petitioners, vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents. FACTS: On Feb 1956, CIR issued against Finley Gibbs a deficiency income tax assessment notice. 1 month after, Allison Gibbs, signing as attorney in fact for her brother, acknowledged receipt of the above assessment notice and notified the CIR that Finley Gibbs was then living in California and that the latter was notified by him of the said deficiency assessment. In the same letter, Allison Gibbs questioned the disallowance of certain items which gave rise to the deficiency assessment and requested for a correction of it. CIR denied the request on August 1965. Having deemed the denial as the final decision of the CIR, Allison Gibbs wrote on October 1956 the CIR saying they are paying the assessed amount as a sign of good faith, but reiterated that the assessment is contrary to law. She also demanded refund of the payment. In a letter in Oct 1956, CIR denied petitioners claim for refund. Such denial was admittedly received by the office of Allison Gibbs on NOV 1956. In Sept 1958, Allison, signing as counsel for Finley, wrote another letter addressed to CIR to reiterate the demand for refund. Letter also said that the denial letter in Oct 1956 was NOT a ruling on Finleys claim for refund. On Oct 1958, petitioners filed with the CTA a Petitioner for Review and Refund of Income Tax with Motion for Suspension of Collection of Additional Taxes, alleging mainly the claims for refunds and tax credits in the letter. CTA dismissed the case on the ground of lack of jurisdiction given that the petition for review was filed BEYOND 30 days from date of receipt of CIRs decision. ISSUE #1) W/n Gibbs claims have already prescribed HELD: YES, Gibbs claims HAVE already prescribed

Petitioners contend that the claims had NOT yet prescribed because there was no evidence that they received a copy of the letter in Oct 1956 DENYING their claim for refund, and the letter itself is NOT a denial of their claim for refund. HOWEVER, it is has been proven that Allison is not a mere atty-in-fact but counsel of Gibbs, and thus, receipt she should have immediately filed an appeal upon denial. Also, the claim that the letter of Oct 26 1956 was NOT a denial of the claim for refund was unmeritorious. The letter clearly states that for reasons stated in our letter dated Aug 28 1956, THIS OFFICE has NO JUSTIFIABLE BASIS to grant your request. ISSUE 2) W/n withholding tax credits amount to payment for the purpose of determining the 2-year period provided in Sec 306 of the NIRC HELD: YES, w/holding tax credits = payment! 2 year period shall be counted from the DATE THE WITHOLDING TAX IS DUE. A taxpayer, resident or non-resident, who contributes to the withholding tax system, does so not really to deposit an amount to the CIR but to perform and extinguish his tax obligation for the year concerned. In other words, he is paying his tax liabilities for that year. Consequently, a taxpayer whose income is withheld at the source will be deemed to have paid his tax liability when the same falls due at the end of the tax year. THUS, it is when the tax liability falls due, that the 2-year prescriptive period under Section 306 of the Revenue Code starts to run with respect to payments effected through the withholding tax system. It is of no consequence whatever that a claim for refund or credit against the amount withheld at the source may have been presented and may have remained unresolved since. Taxpayer who has paid the tax, whether under protest or not, and who is claiming a refund of the same, must file a claim for refund with the CIR within 2 years from the date of his payment of the tax (Sec 306, NIRC) He must then appeal to the CTA w/in 30 DAYS from receipt of the CIRs decision denying claim for refund (Sec 11, RA 1125) If, however, the Collector takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the CTA BEFORE the end of the 2-year period WITHOUT awaiting the decision of the Collector. This is so because of the positive requirement of Section 306 and the doctrine that delay of the Collector in rendering decision does not extend the peremptory period fixed by the statute.

Gibbs v. Collector of Internal Revenue G.R. No. L-13453, February 29, 1960 FACTS: Allison and Esther Gibbs protested the 1950 deficiency income tax assessment issued against them by the CIR, on the ground that said deficiency assessment was based on a disallowance of bad debts and losses claimed in their income tax return for 1950. CIR rejected Gibbs' protest and reiterated his demand. Gibbs however paid the deficiency and at the same time demanding the immediate refund of the amount paid. CIR denied the request for refund, and required Gibbs to pay the amounts of P1.5k and P2k as surcharge, interest, and compromise penalty. Notice of said denial was received by Gibbs on November 14, 1956. On September 27, 1957 - Gibbs filed with CTA a petition for review and refund, with a motion for suspension of collection of penalties. CIR filed a motion to dismiss, on the ground that the petition was filed beyond the 30-day period provided under Section 11, in relation to Section 7, of RA No. 1125, which motion, was opposed by Gibbs. CTA dismissed the petition saying they no longer had jurisdiction because Gibbs filed the appeal 10 months after the receipt, clearly beyond the 30-day period set by law. Gibbs argued that Section 306 of the Revenue Code provides that judicial proceedings may be instituted for recovery of an internal revenue tax within two years from the date of payment. CTA said this was before RA1125 was enacted. ISSUE: W/n the appeal of Gibbs was made within the statutory period HELD: NO, the appeal was NOT made w/in the statutory period. RA No. 1125 provides that CTA has appellate jurisdiction to review decisions of the CIR in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto but filing must be within 30 days after receipt of such ruling. SEC. 306 of the Tax Code provides that for Recovery of tax erroneously or illegally collected, the suit shall be begun within 2 years from the date of payment of the tax or penalty. RA No. 1125 was intended to cope with a situation where the taxpayer, upon receipt of a decision or ruling of the CIR, elects to appeal to the CTA instead of paying the tax. For this reason, the

latter part of said Section 11 RA 1125, provides that no such appeal would suspend the payment of the tax demanded by the Government, unless for special reasons, the CTA would deem it fit to restrain said collection. Section 306 of the Tax Code, on the other hand, contemplates of a case wherein the taxpayer paid the tax, whether under protest or not, and later on decides to go to court for its recovery. THUS, where payment has already been made and the taxpayer is merely asking for its refund, he must first file with the CIR a claim for refund WITHIN 2 YEARS from time of payment before taking the matter to the CTA, as required by Section 306 of the NIRC. Appeals from decisions of CIR to CTA must ALWAYS be perfected within 30 days after the receipt of the decision that is being appealed, as required by Section 11 of RA No. 1125. If the CIR takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the CTA before the end of the 2-year period without awaiting the decision of the Collector. This is so because of the positive requirement of Section 306 and the doctrine that delay of the Collector in rendering decision does not extend the peremptory period fixed by the statute. THERE is no conflict and the 2 laws must be reconciled. In this case, Gibbs filed the appeal MORE THAN 10 MONTHS after receipt of the CIRs notice of denial. Thus, it was beyond the 30-day period.

G.R. No. 83736 January 15, 1992 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. TMX SALES, INC. and THE COURT OF TAX APPEALS, respondents. FACTS: Private respondent TMX Sales, Inc., a domestic corporation, filed its quarterly income tax return for the first quarter of 1981, declaring an income of P571,174.31, and consequently paying an income tax thereon of P247,010.00 on May 15, 1981. During the subsequent quarters, however, TMX Sales, Inc. suffered losses so that when it filed on April 15, 1982 its Annual Income Tax Return for the year ended December 31, 1981, it declared a gross income of P904,122.00 and total deductions of P7,060,647.00, or a net loss of P6,156,525.00 (CTA Decision, pp. 1-2; Rollo, pp. 45-46). Thereafter, on July 9, 1982, TMX Sales, Inc. thru its external auditor, SGV & Co. filed with the Appellate Division of the Bureau of Internal Revenue a claim for refund in the amount of P247,010.00 representing overpaid income tax. (Rollo, p. 30) This claim was not acted upon by the Commissioner of Internal Revenue. On March 14, 1984, TMX Sales, Inc. filed a petition for review before the Court of Tax Appeals against the Commissioner of Internal Revenue, praying that the petitioner, as private respondent therein, be ordered to refund to TMX Sales, Inc. the amount of P247,010.00, representing overpaid income tax for the taxable year ended December 31, 1981. In his answer, the Commissioner of Internal Revenue averred that "granting, without admitting, the amount in question is refundable, the petitioner (TMX Sales, Inc.) is already barred from claiming the same considering that more than two (2) years had already elapsed between the payment (May 15, 1981) and the filing of the claim in Court (March 14, 1984). (Sections 292 and 295 of the Tax Code of 1977, as amended)." On April 29, 1988, the Court of Tax Appeals rendered a decision granting the petition of TMX Sales, Inc. and ordering the Commissioner of Internal Revenue to refund the amount claimed.

ISSUE: In a case involving corporate quarterly income tax, does the two-year prescriptive period to claim a refund of erroneously collected tax provided for in Section 292 (now Section 230) of the National Internal Revenue Code commence to run from the date the quarterly income tax was paid, as contended by the petitioner, or from the date of filing of the Final Adjustment Return (final payment), as claimed by the private respondent?

HELD: COURT HELD THAT THE PETITION WAS DENIED AND IT AFFIRMED THE DECISION OF THE COURT OF TAX APPEALS. The filing of quarterly income tax returns required in Section 85 (now Section 68) and implemented per BIR Form 1702-Q and payment of quarterly income tax should only be considered mere installments of the annual tax due. The two-year prescriptive period provided in Section 292 (now Section 230) of the Tax Code should be computed from the time of filing the Adjustment Return or Annual Income Tax Return and final payment of income tax. Where the tax account was paid on installment, the computation of the two-year prescriptive period under Section 306 (Section 292) of the Tax Code, should be from the date of the last installment.

STATUTORY CONSTRUCTION LESSON: Court stated 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. INTERPRETATIO TALIS IN AMBIGUIS SEMPER FRIENDA EST, UT EVITATUR INCONVENIENS ET ABSURDUM. Where there is ambiguity, such interpretation as will avoid inconvenience and absurdity is to be adopted. Furthermore, courts must give effect to the general legislative intent that can be discovered from or is unraveled by the four corners of the statute, and in order to discover said intent, the whole statute, and not only a particular provision thereof, should be considered

G.R. No. 105208 May 29, 1995 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE PHILIPPINE AMERICAN LIFE INSURANCE CO., THE COURT OF TAX APPEALS and THE COURT OF APPEALS, respondents. FACTS: Respondent Philamlife herein sought refund of excess quarterly income tax paid by it in the amount of P3,643,0125.00 representing excess corporate income taxes for the first and second quarters of 1983. The CTA ruled in favor of Philamlife when it filed its appeal seeking for refund, hence this instant review on certiorari filed by the CIR. The facts showed that on May 30, 1983, private respondent Philamlife paid to the Bureau of Internal Revenue (BIR) its first quarterly corporate income tax for Calendar Year (CY) 1983 amounting to P3,246,141.00, subsequently it again paid on August 29, 1983, it paid P396,874.00 for the Second Quarter of 1983 for the Third Quarter of 1983, private respondent declared a net taxable income of P2,515,671.00 and a tax due of P708,464.00. After crediting the amount of P3,899,525.00 it declared a refundable amount of P3,158,061.00. In 1984, private respondent again suffered a loss and declared no income tax liability. However, it applied as tax credit for 1984, the amount of P3,991,841.00 representing its 1982 and 1983 overpaid income taxes and theamount of P250,867.00 as withholding tax on rental income for 1984. On December 10, 1985 the responder Philamlife filed with the CIR a claim for refund, when it was denied it filed a petition for review with the CTA. The contention of the CIR is that the claim for refund has prescribed. ISSUE: Whether or not the claim for refund has prescribed? Held: No, the claim for refund has not prescribed. The main questioned to be resolved in this case in order to rule on the claim of prescription is the running of the prescriptive period i.e. in the case of a corporate tax payer should the prescriptive period be counted from the date of the actual payment or should the reckoning date be that wherein the corporate final adjustment return was filed. Herein the Court ruled that the counting of the period of prescription should commence at the filing of the final adjustment return. In order to come up with the above decision the SC harmonised the provisions of Sec 292 (now Section 230) with the provisions of Section 68 and 69 of the Tax Code to wit:while section 292 stipulates that the two year prescriptive period for refunds should be counted from date of payment of the tax sought to be refunded; when applied to tax payers filing income tax returns

on a quarterly basis, the date of payment mentioned in Section 292 must be deemed to be qualified by Section 68 and 69 of the Tax Code which provides, in the case of corporations, the necessity of filing a quarterly income tax and a final adjustment return. Thus, the court said that it is only upon the filing of the final adjustment return that the amount due to the government or what should be refunded to the corporation may be ascertained. Therefore, when private respondent paid P3,246,141.00 on May 30, 1983, it would not have been able to ascertain on that date, that the said amount was refundable. The same applies with cogency to the payment of P396,874.00 on August 29, 1983. The prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished. In the present case, this date is April 16, 1984, and two years from this date would be April 16, 1986. The record shows that the claim for refund was filed on December 10, 1985 and the petition for review was brought before the CTA on January 2, 1986. Both dates are within the two-year reglementary period. Private respondent being a corporation, Section 292 (now Section 230) cannot serve as the sole basis for determining the two-year prescriptive period for refunds.

G.R. No. 178788

September 29, 2010

UNITED AIRLINES, INC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. Facts: International airline, petitioner United Airlines, filed a claim for income tax refund. Petitioner sought to be refunded the erroneously collected income tax in the amount of P5,028,813.23 on passenger revenue from tickets sold in the Philippines, the uplifts of which did not originate in the Philippines. The airlines ceased operation originating from the Philippines since February 21, 1998. Court of Tax Appeals ruled that the petitioner is not entitled to a refund because under the NIRC, income tax on GPB also includes gross revenue from carriage of cargoes from the Philippines. And upon assessment by the CTA, it was found out that petitioner deducted items from its cargo revenues which should have entitled the government to an amount of P 31.43 million, which is obviously higher than the amount the petitioner prayed to be refunded. Petitioner argued that the petitioners supposed underpayment cannot offset his claim to a refund as established by well-settled jurisprudence. Issue: Whether or not petitioner is entitled to a refund? HELD: Petitioner was correct in averring that his claim to a refund cannot be subject to offsetting or, as it claimed the offsetting to be, a legal compensation under Sec. 28(A)(3)(a) Petitioners (similar) tax refund claim assumes that the tax return that it filed was correct. Given, however, the finding of the CTA that petitioner, although not liable under Sec. 28(A)(3)(a) of the 1997 NIRC, is liable under Sec. 28(A)(1), the correctness of the return filed by petitioner is now put in doubt. As such, we(the court) cannot grant the prayer for a refund. The court held that the petitioner is not entitled to a refund, Having underpaid the GPB tax due on its cargo revenues for 1999, the amount of the former being even much higher (P31.43 million) than the tax refund sought (P5.2 million). Relevant note: The Court have consistently ruled that there can be no off-setting [or compensation] of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.(Francia v. Intermediate appellate court)

The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts stated therein are true and correct. The deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge against the truth and accuracy of the facts stated in said return which, by itself and without unquestionable evidence, cannot be the basis for the grant of the refund. (CIR v. CTA)

G.R. No. 76281 September 30, 1991 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. WYETH SUACO LABORATORIES, INC. and THE COURT OF TAX APPEALS, respondents. Facts: On December 16 and 17, 1974, the Commissioner of Internal Revenue (CIR) issued two assessment notices to Wyeth Suaco Laboratories, Inc. (Wyeth) asking the latter to pay about P2 million in taxes. On January 17, 1975, Wyeth filed its protest. In December 1979, Wyeths protest was denied. On January 18, 1980, Wyeth filed a petition for review with the Court of Tax Appeals (CTA) asking the said court to enjoin the CIR from enforcing the assessment on the ground that the governments right to collect the assessed taxes has already prescribed; that the CIR has 5 years from December 1974 (issuance of assessment) to collect but it never did and the right has already prescribed in December 1975. The CIR then issued a warrant of distraint/levy in February 1980. Meanwhile, the CIR filed its answer with the CTA. It averred that the running of the prescriptive period was suspended when Wyeth filed its protest; that such protest was a request for reinvestigation and reconsideration, hence, the suspension of the period of prescription. Wyeth however averred that it never requested for a reconsideration or a reinvestigation but rather its protest was a request for cancellation and withdrawal of the assessment, hence, the prescriptive period was never tolled. ISSUE: Whether or not the prescriptive period was suspended. HELD: Yes. What Wyeth asked was a request for a reconsideration and reinvestigation based on the letters it sent to the CIR, to wit: xxx We submit this letter as a follow-up to our protest filed with your office, through our tax advisers, Sycip, Gorres, Velayo & Co., on January 20 and February 10, 1975 regarding alleged deficiency on withholding tax at source of P3,178,994.15 and on percentage tax of P60,855.21, including interest and surcharges, on which we are seeking reconsideration. (emphasis supplied) xxx Further, the assessments issued in 1974 are not yet final. These assessments only became final in December 1979 when the CIR finally denied the protest filed by Wyeth. Hence, the warrant of distraint/levy issued by the CIR in February 1980 was issued well within the prescriptive period for the government to collect the assessed taxes.

G.R. No. L-52306 October 12, 1981 ABS-CBN BROADCASTING CORPORATION, petitioner, vs. COURT OF TAX APPEALS and THE COMMISSIONER OF INTERNAL REVENUE, respondents. Facts: During the period pertinent to this case, petitioner corporation was engaged in the business of telecasting local as well as foreign films acquired from foreign corporations not engaged in trade or business within the Philippines for which petitioner paid rentals after withholding income tax of 30% of one-half of the film rentals. In implementing Section 4(b) of the Tax Code, the Commissioner issued General Circular V-334. Pursuant thereto, ABS-CBN Broadcasting Corp. dutifully withheld and turned over to the BIR 30% of of the film rentals paid by it to foreign corporations not engaged in trade or business in the Philippines. The last year that the company withheld taxes pursuant to the Circular was in 1968. On 27 June 1908, RA 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30% to 35% and revising the tax basis from such amount referring to rents, etc. to gross income. In 1971, the Commissioner issued a letter of assessment and demand for deficiency withholding income tax for years 1965 to 1968. The company requested for reconsideration; where the Commissioner did not act upon. Issue: Whether Revenue Memorandum Circular 4-71, revoking General Circular V-334, may be retroactively applied. Held: Rulings or circulars promulgated by the Commissioner have no retroactive application where to so apply them would be prejudicial to taxpayers. Herein, the prejudice to the company of the retroactive application of Memorandum Circular 4-71 is beyond question. It was issued only in 1971, or three years after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334. The assessment and demand on petitioner to pay deficiency withholding income tax was also made three years after 1968 for a period of time commencing in 1965. The company was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and had no longer control over them when the new circular was issued. Insofar as the enumerated exceptions are concerned, the company does not fall under any of them.