JULIUS ZINAMPAN, as represented by Virgilio A. Abogado v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF Ti lE P H ILlPPINES COURT O F TAX APPEALS QUEZON CIT Y J ULIUS ZINAMPAN, as represented by Virgilio A. Abogado, Petitioner, -versus- C.T.A. CASE NO. 5864 COMMISSIONER OF INTERNAL Promulgated: < REVENUE, JUl231999 ~ Respond en t. - - - - - - - - - - - -- - - - - - - - - -~ X-------------------------- -- -- -- - - RESO LUTI ON Before Us for resolution is a M oti ,nl t\l Di:-- tn is s liled by the herein Respondent praying for the dismissal of the above cap , lt lL'd c,hc 011 the gro und of lack of cause of action. Respondent's main theory lies 011 t!.L' ~~~ le ~L�J t'ai lure of the Petitioner to comply with the 1993 Tax Code which mandates t h ~tl a writl1.' 11 claim for refund must be filed first with the Commissioner of Internal Re \et ll,c pr io r tu its elevati on to the Court of Tax Appeals via Petition for Review. Petitioner is an employee of Inte l \ hlt luLtc tu t�i ng Phi li ppines, Inc. (Intel) with business address at 1321 Apolinario Stree t. i~ <tng kcli :'\Ll ka ti. As alleged in the petition, Petitionu Cclrne d co mpensation income for the period January to December 1996. During the� ~c�ri u d -.: u\ creel in thi s case, Petitioner was assigned to a foreign country where he r�_ t,1a1 11cd llll emplo yee of Intel , thus, earning compensation income partially paid in P hi;,,'p itlC Pc�sus and in US dollars. Accordingly, taxes due on said compensation incom c u i' Pctitio11e r were allegedly withheld and

RESOLUTION C.T.A. CASE NO . 5864 Page 2 remitted to the Bureau of Internal Revenue h\ Inte l. llowever, upon computation of the annual tax due on the gross compensation Ilullll L' . Pe ti tio ner fo un d out that the taxes allegedly withheld and paid by Intel exceed tl, c t,t \ due in the amount of 1!1 2,935.86. Petitioner alleged that the said amount of ta'-. rL� i'und/credit has not yet been used against any tax liability. Fearing that his claim f'o1 rc f'u nd wou ld be barred by the two-year period of prescription, Petitioner fil ed the in .<t. tl Petition fo r Rev iew with this Court on April 15, 1999. Unable to accept Petitioner ' s assert ioi t. IZc:--pondc nt fil ed a Motion to Dismiss on May 12, 1999 where he ascribes to Us Petit ioitl'I�s l~t ilure to state a ca use of action. Respondent' s protestation hinges mni. tl: on the failu re of the Petitioner to file a written claim for refund with the Commi ssi ut,l', ol' Internal Revenue before elevating his grievance to this Court. This, according to t'tl Rl:.. ponde nt, is a cond ition sine qua non explicitly and categorically mandated und c1 \,�c ti ll n 230 of the 1996 Tax Code which provides thus: XXX X '-.\ .\X\ "No suit or proceeding shall I c m<tin tainecl in any co urt fo r the recovery of any intern al rc \ .:1 uc ta\ hereafte r all eged to have been erroneously or ill ega ll : .hsc:-.sed or coll ected without authority, or of any sum alleged !1 I , , , been excess ive or in any manner wrongfully collected Ul'\ II f\ CLA IM FOR RE FUND OR CREDIT HAS BEEN IJl I.Y FILE D WITH THE COMMISSIONER; x x x." (EniJJ!/(/1/ S ours) Thus, the petition wanting in materi<I ' 1, 'i j)L'Ll . Respo nde nt is of the view that the instant Petition for Review must be outri ght! : l,.s m i..;scd. Upon the other hand, in an Oppos iti P 1 lied on .l une 3, 1999, Peti tio ner theorizes that an application for credit is not need ed IJJ-;oLir as refund of withholding taxes on

RESOLUTION C.T.A. CASE NO. 5864 Page 3 purely compensation income is concern ed b.tsed u11 the f'o ll owing provisions of law and regulations; viz: Revenue Regulations No. 2-98 Section 2.58.3 . Claim for tax cred it m refun d- X (b) Excess Credits. - An indi vid ua l or corporate taxpayer ' s excess expanded withholding tax credits I(H th'-' tax ab le quarter/taxable year shall automatically be a llo" cd as a credit against his income tax due for th e t<tX <tbk qu arter/year immediately succeeding the taxable quar te1 ye<tr in \\' hich the aforesaid excess credit arose, provi ded h, ~uhmits w ith his income tax .r return, a copy of the first pagL' t h1~ i11co nJe tax return for the previous taxable period sho'' iiig tl1e amou nt of his excess withholding tax credits, and on ''h ic h he has not opted for a cash refund or tax credit certifi ca te. X .\ Section 204(c) of the Tax Refo rm 1\c t ol� 199 7. it is provided that, " Credit or refund taxes CITOI.eously or ill egal ly received or penalties imposed without aut ho1 it~. 1�cl'u nd the va lue of internal revenue stamps when they are re turned in good condition by the purchaser, and in his di sc ret il 11. 1nkem o r chan ge unused stamps that have been ren dered UIJI!t l(lr use an d refund their value upon proof of destru cti on. :\t, cred it or refund of taxes or penalties shall be allowed un lc :-,s the taxpaye r files in writing with the Commissioner a clai m lor m:d it or re fu nd within two (2) years after the payment ul' the ta:-. or pe nal ty. Provided, however, that a return fil ed sho~_l1L'. an O\ erpay ment shall be considered as a written cla im l'or credit or refund. " (emphasis supplied). Relying heavily on the above prm htOil l>l't itione r is of the conclusion that by indicating in the income tax return th e O\'crpaid am ou nt o f w ithholding tax, this fact by itself, already constitutes "the fact of fili ng a clai111 f'or credit" as contemplated by the

RESOLUTION C.T.A. CASE NO . 5864 Page4 above cited provisions of law. In other ' 'ord:-. . 1\ . .tio ner�s principal submission is to the effect that since a mere indicati on in the t�eturn o f the fact of overpayment already constitutes the fact of filin g a claim for tax lTcdi t. the re is no longer a necessity to file a letter claim for refund with the Commi ssion n or Inte rnal Revenue seeking for a refund of overpaid taxes. This, according to the Petit io ne r. is the command of Revenue Regulations No. 12-94 which considers thL� liling of' an income tax return with an indication of overpayment as an autom ati c cl ai111 Cor cred it. Buttressing his stance, Petitioner invokes the provisions of Sectio n _t J4( c) n l' th c Tax Reform Act of 1997 which, according to him must be given retroacti \'e e llcct. it being favorable to the taxpayer. No attempt to becloud the issues C<lll ll is gui ~ c the !'act that fo rming the crux ofthe controversy at bar are two fold, viz: 1) Whether or not a mere ind ica ti,1 n in the in co me ta x return of the fact of overpayment already constitutes the l'<lct o r !ili ng a tax credit or refund with the Commissioner of Internal Rc n: nue <lS conte mp lated by Section 230 of the National Internal Reve nue Code:. 2) Whether or not Section 204 (c) o 1� the Tax Re !orm Act of 1997 must be given retroactive effect. Petitioner's opposition to Respon dct1l 's l\ lo tion to Dismiss is anchored on his argument that the filing of the income tax rl't urn " ith an indication therein of overpayment of taxes is equi valent to li lin!; .t " ,en cla im fo r refund hence satisfying the requirement provided in Section 230 ol' til e Ttx Code . Petitioner ' s theory is based on the provisions of Revenue Regul ati on s Nll. 2-9X and 12-94 which both proclaim of automatic tax crediting of a taxpayer's cxc L�ss "it hho ldi ng taxes, thus the income tax

RESOLUTION C.T.A. CASE NO . 5864 Page 5 return with an indication of overpayment ca11 undeniabl y be construed as the written claim for refund contemplated by the law. l\ nL1<~s if to bl ock all possible defenses against the foregoing assertions, Petitioner invokes ( cd ion 204(c) of the Tax Reform Act of 1997 which, as quoted earlier, pro vides that <J .:t urn fil ed showing an overpayment shall be considered a written claim for refund. hencL� his failure to file an actual written claim for refund can no longer be a ground fo r di sm i~.s;d of the petiti on. Petitioner' s arguments are paten t!) de \, 1I of meri t. It is already well-settled that a claim 1, � ..:fund dul y tiled with the Commissioner oflntemal Revenue is a condition precedent tu th e prosecution of a suit before this Court and failure to comply with this condi tion su h ~.:...:t s the peti ti on for dismissal for lack of cause of action (Republic vs. Limaco and Dt ;uzman Co mmercial Co., 5 SCRA 990). This is a positive requirement of Sect ion 23 0 1! the 1996 Tax Code. To this issue, this Court deems it necessary to cite the rutio 1 .-'.is whic h was aptly enunciated by the Supreme Court in the case of P.J. Kie ner C o , U d. Vs. David, 92 Phils. 945 when the Supreme Court ruled, thus: "To this end, and bearing in mi nd th at the Legislature is presumed to have understood the language it used am, ,, 1 have ac ted with full idea of what it wanted to accomplish, it is fair <lll �i reasonabl e to say without doing violence to the context or ei ther of thL� t\\ o provi sio ns, that by the first is meant simply that the Coll ecto r or l1 k rnal Reve nue shall be given an opportunity to consider his mi stake. if' 111.~ ::e has been committed, before he is sued." (Underscoring suppli ed) It is important to note that th is Cou 1 !l, akes re!Crence to the 1996 Tax Code (specifically the Tax Code pri or to th e t J, Reform Ac t of 1997) because the compensation income subject of this peti tion ' " earned by Petitioner in 1996. Section

RESOLUTION C.T.A. CASE NO . 5864 Page 6 204(c) of the Tax Reform Act of 1997 whi �!1 was earli er quoted cannot apply to the instant case because this law took effect o nl y ~ :, January I , 1998 while this case involves income earned in 1996. Article 4 of the Civi l < 1de ofthe Philippines declares that "laws shall have no retroactive effect, unl ess the co nt. <~~'Y is provid ed" and there is no provision in the Tax Reform Act of 1997 which calls l't 1 its retroac tivity. The Supreme Court in the case of Montilla vs. La Corpo nt ci on d l� P P. Agu stinos Calzados, 24 Phils. 220 plainly stated a basic rule in statutory co nstrue, t 11 when it rul ed, thus: "It is a rule of statutory co nslt 1on that all statutes are to be considered as having only a prospccti\, t' peration. un less the purpose and intention of the Legislature to give th c1 1 ;1 retrospective effect is expressly declared or is necessarily im pli ed from til� Lmguage used." We also find Petitioner 's reli ance on \ ti on 2.58.3 of Revenue Regulations No. 2-98 and Section 5(b) of Revenu e Re gu l a t i o n ~ \tl . 12-94 to be misplaced and deserves no consideration in resolving the issues at bar. A reading ofthese two prov isions re n -. i that the '�automatic crediting" mentioned therein refers to expanded withholdi ng taxes. 11 must be remembered that the subject of this petition for review is the withhol di ng ta:-; 111 compen satio n income (see No. 4 of the Petition for Review and No.1 of Peti ti oner' s ( 1 jl\JSition to the Motion to Dismiss) and it is basic that this does not fall under the c;1� ~ 1�y of an ex panded withholding tax as enumerated under Section 2.57.2 of Revenue J;, ' dations No. 2-98 . At its inception, this case wou ld hm l been outri ghtly dismissed by reason of Petitioner's failure to comply with certain in. l.'lant precond itions. Charge this to the precipitate filing of the Petition for Review J, '� on the \'e ry date the claim is about to prescribe, "assuming the Petitioner fil ed it s fi 1�., .t djustment return on April15, 1997". A

RESOLUTION C.T.A. CASE NO. 5864 Page 7 sedulous review of Petitioner' s init iatory pk c~ d ing wo uld readily reveal that it failed to comply with Section 2, Rule 5 of the Ru les o 1 the Court of Tax Appeals v. hich provides, thus: "X X X X X X X X X Section 2. The Petiti on for Re\ ,._. ,, shall contain allegations showing jurisdiction in the Court, a conci se SL tte me nt of the ultimate fac ts and a summary statement of the issues ill\oh , d in this case, as well as the reasons relied upon for the reversa l ol the R ~..�,p on de nt 's dec ision. A cop y of the decision appealed from shall be at Ltc hed to the Petition for Review. (Emphasis Ours) X X X X "\ .\ X X x" Apparently, there are no allegation '' hatsoever in Petitioner' s Petition for Review "showing jurisdiction in the C'our('. I ~._�t itio ne r shoul d have allege the fact that a claim for refund was fil ed with the Co mmissi ll1er o f Internal Revenue an that the latter failed to act upon the said claim . Unlortun a11.� ly. even the date of the fili ng of the Final Adjustment Return was omitted , inad ve rten t! ) 01' otherwise. Prescinding from the above, there is n� ' ' ay by which this Court would be able to decipher with accuracy whether ut no t the Petiti oner had already exhausted administrative remedies thereby mak ing the c .sc 1~111 within the province of this Court. In view of this, We strongly rej ect Peti tioner 's tl1cory that all egations ofthesc matters in his petition would be a mere superflui ty sin ce ~~ 1sencc of whi ch would render the petition dismissible on the ground of lack o r ju risd td io n. It must be borne in mind that the question as to whether or not a Court has j uri scl ictio n over the subject matter of the case is determined from the allegations stated in the ~o mpla int. Parallel to thi s is the fact, that a Court, in resolving a Motion to Di smi ss, ctnn 1t go beyo nd the four corners of the

RESOLUTION C.T.A. CASE NO . 5864 Page 8 complaint, thus, if the petition fa ils to allege material j urisdictional pr .di tions, this Court can dismiss a case ex mero motu (Co m missi oner of Internal Rc 11 vs. Villa, 22 SCRA3). WHEREFORE, in view of all the foregoing. Respondent' s Mot i J) ismiss is GRANTED. Accordingly the Petiti on fo r Rc\ iew is hereby DISMISSE I SO ORDERED. ~lO.. Q~_ ERN ESTO D. ACOSTA Pres id i11 1,. .I udge J~ Associate I