CTA Case No. 2246 (Decision)

cw 'x c" r Hf.:f'l''li.IC1OFTFfF.?BTU'f"Pi~f::S t ,~ T A F' p.e; :1... L~ QUEZON UTY ' . RURAL BANK 014' STA . CRUZ , (LAGUNA) , INC ., Petitioner , - versus - C. T. A. CASE NO . 2246 CO.tvlHISSIONER OF INTERNAL REVENUE, Respondent . X- - - - - - - - ~- - - ~X DE C I S I 0 N Petitioner is s e eking refund of the sum of ~9 , 906 . 48 , representing deficiency income tax paid by it for the taxable year 1968 under .Of- ficial Receipt No . 1024601 , dated August 12 , 1969. The facts of this case are embodied in the "Stipulation of Facts" filed by the parties on October 1, 1974, reading as follows : "1 . That petitioner is a corpo- ration organized and constituted under Rep . Act No . 720 , as amended , and Act 1459, and subject to super- vision by the Central Bank under the provisions of Rep . Acts 720 , 265 and 33~ as amended ; "2 . That petitioner was assessed by respondent for corporate income tax f or the period commencing from July 1 , 1968 to December 31 , 1968 , and out of the said tax assessment petitioner paid the following s Amount Paid Date Paid Place of o.R. Payment No . ~t9 , 906 . 48 Aug . 12 , 1~69 Sta. Cruz , 1024601 Laguna "l � That petitioner , on September 23 ,

IECISIO - CTA Case No . 2246 2 1~. , wrote respondent for the re- fund of said payment ; "4. That the aforementioned letter of refund was received and acknowledged by the respondent in his letter of February 2 , 1970; "5 � That the instant petition was filed on March 29 , 1971 ; "6. That petitioner uses the calendar method (January 1 to Decem- ber 31 of any year) in its account- ing system, as provided for by Sections 2~2 and 243 of the Rules and Regulations Governing Rural Banks , promulgated by the Monetary Board of the Central Bank as Res . No . 865 on May 19 , 1969 , and pub- lished in the September 11, 1967 issue of the Official Gazette (See page 7995 et sec.)". In the answer of respondent , the jurisdiction of this Court to take cognizance of the case was raised . It is alleged that the claim for refund of the said amount of ~9 , 906 . 48 contained in the letter of petitioner dated September 23 , 1969 was denied by respondent in his letter dated February 2 , 1970 , but the petition for review was filed only on March 29 , 1971 which is beyond the 30- day period within which to appeal to this eourt, pursuant to Section 11 of Republic Act No . 1125. It appears however , that the decision of re~ spondent dated February 2 , 1970 , which was sent by

DECISION - CTA CASE No . 2246 3 ordinary mail, denying petitioner ' s claim for refund has not been received by the latter . In fact , in the petition for review it is alleged in paragraph 7 thereof that , up to the filing of ~~id petition, respondent had not answered the claim for refund of petitioner , and the petition for r eview was being filed "as the two- year period allowed (it) by law is aoout to expire . " In view �thereof, we are of the opinion that the two- year period provided in Section 306 of the Revenue Code, within which appeals in cases involving re- funds of internal revenue taxes may be filed , applies, and not the thirty- day period provided in Section 11 of Republic Act No . 1125 . (See Gibbs v . Coll ector, 107 Phil . 232; Koppel v . Collector, G. R. No. L-10550, Sept . 16, 1961; Commissioner v . Victorias Milling , G. R. No . L-2~108 , Jan . 3 , 1968 , 22 SCRA 12 . ) Accordingly, we are of the opinion that the herein appeal was timely filed. The other issue is whether or not the provisions of Republic Act . No . 5~31 should apply to petitioner effective July 1, 1968. In the affirmative, it is not entitled to the refund of the aforesaid amount ; in the negative , it is entitled to the refund. Section 10 of Republic Act No . 5~31 provides that the provisions of said Act "shall apply to

DEGISION - CTA Case No . 2246 4 income for taxable years beginning after June 30 , 1968 . 11 Resolving a similar question in the case of the Rural Bank of Camiling , Inc . vs . Commissioner of Internal Revenue , C. T. A. Case No . 2041 , promul- gated on March 1 , 1974 (cert . denied in G. R. No . L-38476 , May 10 , 1974) , this Court held: �It appears that petitioner is keeping its books of account on the calend ar year basis . o f I ts " tIancxoambele1ax year 11 fo r pur poses the Law is the period from January 1 to December 31 each year. Therefore , the beginning of its taxable year after June 30, 1968, is January 1 , 1969, and not July 1 , 1968 . The de- cision of respondent holding that the provisions of Republic Act No . 543l .are applicable to petitioner effective July 1 , 1968 , is obviously erroneous. In view of our opinion that rural banks are not subject to income tax on their income prior to December 31 , 1968, pursuant to Section 10 of Republic Act No . 5431 , we find it unnecessary to pss upon the issue whether or not said Act repealed the exemption from taxation of petitioner under Re- public Act No . 720 , as amended . At any rate , the exemption from taxation of rural banks has ap- parently been restored by Republic Act No . 5939 , assuming that Republic Act No . 5431 repealed the prior exemption. WHEREFORE , respondent is hereby ordered to refund to petitioner the sum of ~9 , 906 . 48 which

DECISION. - CTA CASE NO . 2246 5 was erroneously paid by the latter as deficiency income tax for 1968o No costs . SO ORDERED . Quezon City , November 11 , 197lto ~~~L,_-, ROMAN Mo UMALI Presiding Judge WE CONCUR: ~~lf?~~_e ANISLAO R. ALV.AJ.lliz_:r-- Associate Judge ~ t..- it~- RAMON L. AVANCENA Associate Judge