CTA Case No. 2855 (Decision)

/ REPUBLIC OT THE PBILlPPIN' , COURT OF TAX APPF.ALS Ot:IJi,ZON cn�y IBM PHILIPPINES, INC., Petitioner, - versus - C.T.A. CASE NO. 2855 THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X - - .- - -------X DE C I S I 0 N Petitioner, a domestic corporation organized an~ existing under Philippine laws, 99% of the capital stock of which is owned by IBM World Trade Corporati on, a non-resident foreign corporation not engaged in trade or business in the Philippines, organized and existing under the laws of the State of Delaware, United States, seeks the recovery of an overpaid with- holding income tax at source on dividend received by the latter, consequenced by ~espondent's Ruling No. 76-0 04 dated July 19, 1976 in implementation of Sectio n 24 (b) (1) _of the National Internal Revenue Code as amended by Presidential Decr ee No. 369 which took effect on January l, 19 74 , imposing a reduced rate of 15% instead of the 35% withholding tax under cer - tain conditions on inter-company dividends of non- resident foreign corporations domiciled in the United States. 13G

.. DECISION - CTA CASE NO . 2855 �- 2 - Petitioner applied on January 21 , 1977 with respondent for a tax credit aggregating a total amou nt of P3 ,9 61,756.08 as overpayments of with- holding income tax at s~urce on dividends remitted to the parent company in the United States, IBM World Trade Corporation , shown thus - Date of Pavment Tax Overpaid January 25, 1974 Pl,053,106.00 January 27, 1975 1,184 , 250 . 08 January 26, 1976 __W24, 408. oo Total Tax Credit Claimed �� il3,961 ,7 64 . 08 On January 26, � 1977 petitioner filed with this Court a petition for review. In a le t ter dated April 5, 1978 r e spondent granted petitioner a tax credit in the aggregate sum of P2,908 , 658.08 but disallowe d the amount of ~1 ,0 53 , 1 06.00 representing the January 25, 1974 overpayment as the r ight to recover the same had already prescribed by mandate of Section 309 (now Sec. 295) .of the Nation a l Inte rnal Revenue Code, insofar as pertinent, provides , "No credit or refund of taxes or penalties shall be a llowed unless the taxpayer file~ in writing with the Commissioner a :claim for credit o r refund withi n two years after payment of the tax or pen alty." Mo re than two years from the date of payment of J anuary 25, 1974 to the filing of the claim an January 21, 1977 had elapsed. 137

.. DECISION - CTA CASE NO. 2855 -- 3 - Accordingly, an amended petition for review was filed on May 4, 1978, f ollowed by respondent's amended answer on September 14, 1978, invoking the lack of jurisdiction of this Court, as both peti- ti oner's claim for credit as well as petition for review were filed beyond the specified statutory li- mitations prescribed in Section 306 (now Sec. 292) . of the National Internal Revenue Code, thus, " In any case, no such suit or proceeding shall be begun after the expiration of the two years from the date of pay- ment of the tax or penalty regardless of any super- vening cause that may arise after payment." The simple issue is whether the statutory period of prescription fixed in Section 306 and 309 of the National Internal Reven~e Code applies in this case . Petitioner has taken exceptive allegations, as- serting, first, the sufficiency of the applicability of Section 306, supra, which only refers to taxes erroneously or illegal ly collected and the overpaid withholding tax for which credit is 12resen tl_y claimed was legally collected from the beginning, hence, the two- yea ~ statute of limitations for filing a suit in court should not be c ounted from the date of pay- ment of the tax but from the time the right to claim � the tax r efund or c r edit arose or accrued on July 19, 1976 or the is s uance of the BIR Ruling No. 76-0G4, ., -~ () 0 JJ._ \)

.. DECISION - CTA CASE NO . 2855 - 4- and second, on equitable grounds, a s r ight to a tax credit came after the statute of limi tations had set in. Pe titioner's claim had been barred by the statute of limitations . As so determined, respondent did not err. Prior to the amendment under Presidential Decree No . 69 which incorporated the phrase , "reg~.rdless of the supervening cause that may arise after payment," as integral part of the provision of Section 306, the Supreme Court in a number of cases made exception to the applica tion o f the statutory period of limitations, such that, " when the tax sought to be refunded is illegally or erroneously collected, the period of prescr iption starts from. the date the tax was paid , but when the tax is legally collected , the pres- criptive period commenc es to run from the date of t he occurrence of the supervening cause which gave rise to the right to refund . " (Commissioner of Internal Re v e nue v. Central Azucarera Don Pedro, 4 9 SCRA 474; Commissioner of Internal Revenue v. Insular Lumber Co . , 21 SCRA 1237; Commissioner of Internal Revenue v. Na ti onal Power Corporation, 31 SCRA 113; Litton ' v. Commissioner of Internal Revenue, CTA Case No. 2180, Ap ril 4, 1977) ~ Apparently, the supervening cause which gave rise to the right to the tax credit 13!)

.. DECISION - CTA CASE NO. 2855 - .5� - was the issuance of BIR Ruling No. 76-004 dated July 19, 1976 and petitioner's claim was filed on January 21, 1977 well within the two-year period. Were we not confronted with the amended pro- vision of Section 306, supra, the precise question raised by petitioner could have been easily and readily decided and disposed on the strength of the broad concensus of the decisions in the above- mentioned cases, which, in most respects come closely hewed with the circumstances of the case at bar. But the proper solution of the question must necessarily depend upon the construction to be placed on Section 306, as amended . As must be expected in order to confer jurisdiction upon the court, it is necessary that in all cases the suit must be brought within the statutory period of two years from date of payment of the tax and there- ~ quirements provided in Section 306 must be complied with. (Manila Electric Co. v. Collector of Internal Reve nu e , CTA Case No . 83 , March 30, 1955 , cited in Collector of Internal Revenue v. CTA and Hume Pipe and Asbestos Co., Inc. 1 SCRA 90~ Paracale-Gamaus Co. v. Blaquera, CTA Case No. 211 , August 22 , 1956)~ Moreover , the provision is mandatory and is not subject to any qualification, hence, it applies regardless of the conditions under which paymen.t may 140

.. DECISION - CTA CASE NO. 2855 -6 - have been made. (Guagua Electric Light Plant Co., Inc., v. Collector of Internal Revenu e, l SCRA 1221) �. We shall not attempt to belabor the authorities relied upon by petitioner more than to say that the an imating principles enunciated in the cases of Central Azucarera Don Pedro , Insular Lumber Co., National Power Corporation and Litton, supra, could no longer portray the true meaning or intent of the amended Section 306 of the Tax Code which expressly excepted any condition, event or circumstance arising after payment. The prevailing pronouncements in said cases, then controlling, have been eviscerated by the PD 69 amendment and are large ly nostalgic illusions. And we do not think tha~ the amendment was intended as a mere bargaining ploy to further discombobulate the effect ive tolling of the specified statutory period of limitations. Be that as it ma y, it now appears settled, "Under Section 306 of th e Revenue Code as amended by PD 69 the claim for refund must be filed and court action instituted within the two-year period from date of paymen t despite any supervening cause that may arise after payment of the tax. Undoubtedly, the amendment is intended to overrule the decision of the Supreme Court." (Morales v. Commissioner of Internal R~venue and University of the East , CTA Case No. 2838, January 24, 1978) ~ If, in so holding, we have misread the

.. DECISION CTA CASE NO. 2855 -7 - statu tory provision and misconceived its intendment there would utterly be no reason and justification for the amendment of PD 69 . ~oc~~idem perguam durum es~, sed ita lex scripta est. As to whether respondent in an equitable action might have been held to be estopped from invoking the benefit of the statute of l imitations had it appeared that he had prevented the petitioner from filing its claim for tax credit until after the petitioner ' s cause of action had been barred by lapse of time , it is not necessary for us to consider here. Suffice it to s t ate , we are c onf irmed in the conclusion that pe- titioner has no wa~ of enforcing its right after having been barred by the s tatute of limitations and this Court can do little in leading petitioner out of what could be a legal. cul de sac. WHEREFO E , the petition for review is hereby dis- missed at petitioner ' s costs. SO ORDERED . Qu ezon City , February 27, 1981. ~~ Associate Judge WE CONCUR : ,1: CO STANTE iillAQU IN Associate Judge ~~l ( d--��. AMANTE ILLER , Presiding Judge