MA. CORAZON GREGORIO, as represented by Virgilio A. Abogado v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY MA. CORAZON GREGORIO, as represented by Virgilio A. Abogado, Petitioner, -versus- C.T.A. CASE NO. 5863 COMMISSIONER OF INTERNAL Promulgated: ~~~~: ~~~po~d~~~~ ~~ ~~- ~~ ___________ ________________ _ . RESOLUTION Before Us for resolution is a Motion to Dismiss filed by the herein Respondent praying for the dismissal of the above captioned case on the ground of lack of cause of action. Respondent' s main theory lies on the alleged failure of the Petitioner to comply with the 1993 Tax Code which mandates that a written claim for refund must be filed first with the Commissioner of Internal Revenue prior to its elevation to the Court of Tax Appeals via Petition for Review. Petitioner is an employee of Intel Manufacturing Philippines, Inc. (Intel) with business address at 1321 Apolinario Street, Bangkal Makati. As alleged in the petition, Petitioner earned compensation income for the period January to December 1996. During the period covered in this case, Petitioner was assigned to a foreign country where she remained an employee of Intel, thus, earning compensation income partially paid in Philippine Pesos and in US dollars. Accordingly,

RESOLUTION C.T.A. CASE NO . 5863 Page 2 taxes due on said compensation mcome of Petitioner were allegedly withheld and remitted to the Bureau of Internal Revenue by Intel. However, upon computation of the annual tax due on the gross compensation income, Petitioner found out that the taxes allegedly withheld and paid by Intel exceed the tax due in the amount of 1!15,856.69. Petitioner alleged that the said amount of tax refund/credit has not yet been used against any tax liability. Fearing that her claim fo r refund would be barred by the two-year period of prescription, Petitioner filed the instant Petition for Review with this Court on April 15, 1999. Unable to accept Petitioner's assertion, Respondent fi led a Motion to Dismiss on May 12, 1999 where he ascribes to Us Petitioner 's fai lure to state a cause of action. Respondent' s protestation hinges mainly on the failure of the Petitioner to file a written claim for refund with the Commissioner of Internal Revenue before elevating her grievance to this Court. This, according to the Respondent, is a condition sine qua non explicitly and categorically mandated under Section 230 of the 1996 Tax Code which provides thus: XXX XXX XXX "No suit or proceeding shall be mai ntained in any court for the recovery of any internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected UNTIL A CLAIM FOR REFUND OR CREDIT HAS BEEN DULY FILED WITH THE COMMISSIONER; x x x." (Emphasis ours) Thus, the petition wanting in material respect, Respondent is of the view that the instant Petition for Review must be outrightly dismissed .

RESOLUTION C.T.A. CASE NO. 5863 Page 3 Upon the other hand, in an Opposition filed on June 3, 1999, Petitioner theorizes that an application for credit is not needed insofar as refund of withholding taxes on purely compensation income is concerned based on the following provisions of law and regulations; viz: Revenue Regulations No. 2-98 S ection 2.58.3. Claim for tax credit or refund- XXX (b) Excess Credits. - An individual or corporate taxpayer's excess expanded withholding tax credits for the taxable quarter/taxable year shall automatically be allowed as a credit against his income tax due for the taxable quarter/year immediately succeeding the taxable quarter/year in which the aforesaid excess credit arose, provided he submi ts with his income tax return, a copy of the first page of his income tax return for the previous taxable period showing the amount of his excess withholding tax credits, and on which he has not opted for a cash refund or tax credit certificate. XXX Section 204(c) ofthe Tax Reform Act of 1997, it is provided that, "Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and in his discretion , redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the tax payer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty. Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund. " (emphasis supplied). Relying heavily on the above provisi ons, Petitioner is of the conclusion that by indicating in the income tax return the overpaid am ount of withholding tax, this fact by

RESOLUTION C.T.A. CASE NO. 5863 Page4 itself, already constitutes "the fact of filing a claim for credit" as contemplated by the above cited provisions of law. In other words, Petitioner's principal submission is to the effect that since a mere indication in the return of the fact of overpayment already constitutes the fact of filing a claim for tax credit, there is no longer a necessity to file a letter claim for refund with the Commissioner of Internal Revenue seeking for a refund of overpaid taxes. This, according to the Petitioner, is the command of Revenue Regulations No. 12-94 which considers the filin g of an income tax return with an indication of overpayment as an automatic claim for credit. Buttressing her stance, Petitioner invokes the provisions of Section 204 (c) of the Tax Reform Act of 1997 which, according to her must be given retroactive effect, it being favorable to the taxpayer. No attempt to becloud the issues can di sgui se the fact that forming the crux of the controversy at bar are two fold, viz: 1) Whether or not a mere indication in the income tax return of the fact of overpayment already constitutes the fact of filing a tax credit or refund with the Commissioner of Internal Revenue as contemplated by Section 230 of the National Internal Revenue Code; 2) Whether or not Section 204 (c) of the Tax Reform Act of 1997 must be given retroactive effect. Petitioner' s opposition to Respondent 's Motion to Dismiss is anchored on her argument that the filing of the mcome tax return with an indication therein of overpayment of taxes is equivalent to filin g a written claim for refund hence satisfying the requirement provided in Section 230 of the Tax Code. Petitioner's theory is based on

RESOLUTION C.T.A. CASE NO. 5863 Page 5 the provisions of Revenue Regulations No. 2-98 and 12-94 whi ch both proclaim of automatic tax crediting of a taxpayer' s excess withholding taxes, thus the income tax return with an indication of overpayment can undeniably be construed as the written claim for refund contemplated by the law. And as if to block all possible defenses against the foregoing assertions, Petitioner invokes Sec tion 204(c) of the Tax Reform Act of 1997 which, as quoted earlier, provides that a return fil ed showing an overpayment shall be considered a written claim for refund, hence her failure to file an actual written claim for refund can no longer be a ground for di smi ssa l of the petition. Petitioner' s arguments are patently devoid of merit. It is already well-settled that a claim for refund duly filed with the Commissioner of Internal Revenue is a condition precedent to the prosecution of a suit before this Court and failure to comply with this condition subj ec ts the petiti on for dismissal for lack of cause of action (Republic vs. Limaco and De Guzman Commercial Co., 5 SCRA 990). This is a positive requirement of Section 230 or the 1996 Tax Code. To this issue, this Court deems it necessary to cite the ratio leg is which was aptl y enunciated by the Supreme Court in the case of P.J. Kiener Co., Ltd. Ys. David, 92 Phils. 945 when the Supreme Court ruled, thus: "To this end, and bearing in mind tha t the Legi slature is presumed to have understood the language it used and to have acted with full idea of what it wanted to accomplish, it is fair and reaso nable to say without doing violence to the context or either of the two provisions, that by the first is meant simply that the Collector of In ternal Revenue shall be given an opportunity to consider his mistake, if mi sta ke has been committed, before he is sued." (Underscoring supplied) It is important to note that this Court makes reference to the 1996 Tax Code (specifically the Tax Code prior to the Tax Reform Act of 1997) because the

RESOLUTION C.T.A. CASE NO . 5863 Page 6 compensation income subject of this petition was earned by Petitioner in 1996. Section 204(c) of the Tax Reform Act of 1997 which was earlier quoted cannot apply to the instant case because this law took effect only on .I an uary 1, 1998 while this case involves income earned in 1996. Article 4 of the Civi l Code of the Philippines declares that "laws shall have no retroactive effect, unless the cont rary is provided" and there is no provision in the Tax Reform Act of 1997 which calls fo r its retroactivity. The Supreme Court in the case of Montilla vs. La Corporacion de PP. Agustinos Calzados, 24 Phils. 220 plainly stated a basic rule in statutory constructi on when it ruled, thus: "It is a rule of statutory construction that all statutes are to be considered as having only a prospective operati on, unless the purpose and intention of the Legislature to give them a retros pective effect is expressly declared or is necessarily implied from the language used." We also find Petitioner's reliance on Section 2.58.3 of Revenue Regulations No. 2-98 and Section 5(b) of Revenue Regulations No . 12-94 to be misplaced and deserves no consideration in resolving the issues at bar. A reading of these two provisions re vea l that the �'automatic crediting" mentioned therein refers to expanded withholding taxes. It must be remembered that the subject of this petition for review is the withholding tax on compensation income (see No . 4 of the Petition for Review and No.1 of Petitioner' s Opposition to the Motion to Dismiss) and it is basic that this does not fall under the cate gory of an expanded withholding tax as enumerated under Section 2.57.2 of Reven ue Regulation s No. 2-98. At its inception, this case would have been outrightly dismissed by reason of Petitioner's failure to comply with certain important preconditions. Charge this to the precipitate filing of the Petition for Review fi kd on the very date the claim is about to

RESOLUTION C.T.A. CASE NO. 5863 Page 7 prescribe, "assuming the Petitioner filed its fin al adjustm ent return on April 15, 1997". A sedulous review of Petitioner's initiatory pl eading vvo uld readily reveal that it failed to comply with Section 2, Rule 5 of the Rul es of' the Court of Tax Appeals which provides, thus: "x X X X .'\ X X X X Section 2. The Petition for Revi ew sha ll contai n all egatio ns showing jurisdiction in the Court, a concise statemc1 1t of the ultimate facts and a summary statement ofthe issues involved in thi s case, as we ll as the reasons relied upon for the reversal of the Respondent �s decision. A copy of the decision appealed from shall be attac hed to the Petition for Review. (Emphasis Ours) XXX XXX XXX" Apparently, there are no allegati ons wh<lhocver in Petiti oner' s Petition for Review "showing jurisdiction in the Court''. Pe titi ot 1cr sho uld have all eged the fact that a claim for refund was filed with the Commi ss ioner o I' Inte rnal Revenue and that the latter failed to act upon the said claim. Unfortunately, C\ en the date of the filing of the Final Adjustment Return was omitted, inadvertentl y or othe n\ ise. Prescinding from the above, there is no way by which this Court would be able to decipher with accuracy whether or not the Pet itioner had already exhausted administrative remedies thereby making the ca se Call wi thin the province of this Court. In view ofthis, We strongly reject Petitioner's theo ry that all egations of these matters in her petition would be a mere superfluity since absence o l' which wo uld render the petition dismissible on the ground of lack of juri sdiction. It must be borne in mind that the question as to whether or not a Court has jurisdic ti on ove r the subj ect matter ofthe case is determined from the allegations stated in the comp laint. Parallel to thi s is the fact, that a

RESOLUTION C.T.A. CASE NO. 5863 Page 8 Court, m resolving a Motion to Dismiss. can not go beyond the four corners of the complaint, thus, if the petition fails to al lege materia l jurisdicti onal preconditions, this Court can dismiss a case ex mero motu (C om mission er of Interna l Revenue vs. Villa, 22 SCRA 3). WHEREFORE, in view of all the ltHego in g. Respo ndent 's Motion to Dismiss is GRANTED. Accordingly the Petition for Rev iew is hereby DISMISSED. SO ORDERED. ~l9-�~ I ERNESTO D. ACOST A Ah-�1. /, Presid ing Judge RAM ON o. n'i'ViwRA Associate J:u;dge ( I