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L24108

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RepublicofthePhilippines
SUPREMECOURT
Manila

ENBANC

G.R.No.L24108January3,1968

COMMISSIONEROFINTERNALREVENUE,petitioner,
vs.
VICTORIASMILLINGCO.,INC.,andTHECOURTOFTAXAPPEALS,respondents.

OfficeoftheSolicitorGeneralforpetitioner.
Ross,SelphandCarrascosoforrespondentCompany.

BENGZON,J.P.,J.:

Specific tax on manufactured oils and other fuels used in agriculture during the five years from June 18, 1952
shallberefundedbytheCommissionerofInternalRevenuetotheextentof50%.1

Accordingly, on December 23, 1957 Victorias Milling Co., Inc., filed a claim for the refund of the sum of
P12,464.53representing50%ofthespecifictaxpaidonthemanufacturedoilsandfuelsusedinitsagricultural
operation for the period from June 18, 1952 to June 18, 1957. The Commissioner of Internal Revenue granted
refundinthesumofP3,415.18representingthetaxpaidfortheperiodfromJanuary1,1956toJune18,1957
butdeniedtheclaimintheamountofP2,817.08whichcorrespondstothetaxpaidduringtheperiodfromJune
18,1952toDecember31,1955forthereasonthatthesamewasfiledafterthetwoyearperiodprovidedforin
Section306oftheTaxCodehadelapsed.

Subsequently, Victorias Milling Co., Inc. appealed to the Court of Tax Appeals contending that the aforesaid
Section306doesnotapplytoitsclaiminthelightofOurrulinginMuller & Phipps (Manila), Ltd. v. Collector of
InternalRevenue,103Phil.145.TheCourtofTaxAppealstookthetaxpayer'sviewandrenderedthefollowing
judgmentonJanuary4,1965:

WHEREFORE,inviewoftheforegoingconsiderations,therespondentisherebyorderedtorefundtothe
petitioner the amount of P2,817.08 representing the 50% of the specific tax paid on the oils used by it in
agricultureduringtheperiodfromJune18,1952toDecember31,1955.

From said judgment, the Commissioner of Internal Revenue has appealed, maintaining that Section 306 of the
TaxCodeappliestotheinstantclaimforrefund.Ontheotherhand,VictoriasMillingCo.,Inc.insiststhatsincethe
taxsoughttoberefundedwasnotoriginallycollectederroneouslyorillegally,Section306oftheTaxCodewhich
states

Sec.306.Recoveryoftaxerroneouslyorillegallycollected.Nosuitorproceedingshallbemaintainedin
anycourtfortherecoveryofanynationalinternalrevenuetaxhereafterallegedtohavebeenerroneously
orillegallyassessedorcollected,orofanypenaltyclaimedtohavebeencollectedwithoutauthority,orof
anysumallegedtohavebeenexcessiveorinanymannerwrongfullycollected,untilaclaimforrefundor
credit has been duly filed with the Collector of Internal Revenue but such suit or proceeding may be
maintained,whetherornotsuchtax,penalty,orsumhasbeenpaidunderprotestorduress.Inanycase,
nosuchsuitorproceedingshallbebegunaftertheexpirationoftwoyearsfromthedateofpaymentofthe
taxorpenalty.

findsnoapplication.

This legal controversy has already been settled in the case of Commissioner of Internal Revenue v. Insular
LumberCompanyandCourtofTaxAppeals,L24221,December11,1967,thefactsofwhicharesimilartothose
inthepresentcase.Wetherestatedthat:

Sections306and309oftheNationalInternalRevenueCodewereintendedtogovernallkindsofrefunds
ofinternalrevenuetaxesthosetaxesimposedandcollectedpursuanttotheNationalInternalRevenue

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Code. Thus, this Court stated that "this provision" referring to Section 306, "which is mandatory, is not
subjecttoqualification,andhence,it applies regardless of the conditions under which payment has been
made." And to hold that the instant claim for refund of a specific tax, an internal revenue tax imposed in
Section 142 of the National Internal Revenue Code, is beyond the scope of Sections 306 and 309 as to
thwarttheaforesaidintentionandspiritunderlyingsaidprovisions.

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...theintentionisclearthatrefundsofinternalrevenuetaxesaregenerallygovernedbySections306and
309oftheTaxCode.Sinceinthosecasesthetaxsoughttoberefundedwascollectedlegally,therunning
ofthetwoyearprescriptiveperiodprovidedforinSection306shouldcommence,notfromthedatethetax
waspaid,butfromthehappeningofthesuperveningcausewhichentitledthetaxpayertoataxrefund.And
theclaimforrefundshouldbefiledwiththeCommissionerofInternalRevenue,andthesubsequentappeal
totheCourtofTaxAppealsmustbeinstituted,withinthesaidtwoyearperiod.

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In fine, when the tax sought to be refunded is illegally or erroneously collected, the period of prescription
starts from the date the tax was paid but when the tax is legally collected, the prescriptive period
commences to run from the date of occurrence of the supervening cause which gave rise to the right of
refund.TherulinginMuller&Phippsisaccordinglymodified.

ItisnotdisputedthattheoilsandfuelsinvolvedinthiscasewereusedduringtheperiodfromJune18,1952to
December31,1955thattheclaimforrefundwasfiledonDecember23,1957andthattheappealtotheCourtof
TaxAppealswasinstitutedonlyonFebruary14,1962.Thetaxpayer'sclaimforrefundwiththeBureauofInternal
RevenueofDecember23,1957iswithintwoyearsfromDecember1955thelastmonthoftheperiodduring
whichthefuelsandoilswereused.TheappealtotheCourtofTaxAppealshowever,wasinstitutedsixyearsand
two months from December 31, 1955. We have repeatedly held that the claim for refund with the Bureau of
InternalRevenueandthesubsequentappealtotheCourtofTaxAppealsmustbefiledwithinthetwoyearperiod.
"If,however,theCollectortakestimeindecidingtheclaim,andtheperiodoftwoyearsisabouttoend,thesuitor
proceedingmustbestartedintheCourtofTaxAppealsbeforetheendofthetwoyearperiodwithoutawaitingthe
decisionoftheCollector."2 Inthelightoftheabovequotedruling,WefindthattherightofVictoriasMillingCo.,
Inc.toclaimrefundofP2,817.08hasprescribed.

WHEREFORE,thedecisionappealedfromisreversed,andthepetitionforrefundisdismissedonthegroundof
prescription.Nocosts.

Soordered.

Concepcion,C.J.,Reyes,J.B.L.,Dizon,Makalintal,Zaldivar,Sanchez,Castro,AngelesandFernando,JJ.,
concur.

Footnotes

1Sec.142,asamendedbyRepublicAct775whichtookeffectonJune18,1952,oftheNationalInternal
RevenueCode.
2Gibbs v. Collector, L13453, Feb. 29, 1960, citing College of Oral and Dental Surgery v. Court of Tax
Appeals,102Phil.912Collectorv.CourtofTaxAppeals,L11494,Jan.28,1961.

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