PIERRE LAVAPIE, as represented by Virgilio A. Abogado v. COMMISSIONER OF INTERNAL REVENUE.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PIERRE LAVAPIE, as represented by Virgilio A. Abogado, Petitioner, -versus- C. T.A. CASE NO. 5846 COMMISSIONER OF INTERNAL Promulgated: JUL 20 1999 ~ ,- REVENUE, Respondent. ~ X - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - RESOLUTION At bar for Resolution is Respondent's Motion to Dismiss filed on May 11, 1999 praying for the dismissal of the instant petition for review on the ground of lack of cause of action. On April15, 1999, herein petitioner as represented by Virgilio Abogado by virtue of a Special Power of Attorney, filed a petition for review with this Court for the refund in the amount of P23,909.08 allegedly representing excess withholding taxes paid on the compensation income earned by Petitioner for the period January to December 1996. Respondent, in his :tvlotion to Dismiss, claims that since there was no written claim for refund duly filed with the Commissioner pursuant to Section 230, the instant petition should be dismissed. He further avers that a claim for refund with the Commissioner is mandatory as a condition precedent to recover taxes erroneously collected and non-compliance therewith is fatal to the action. Tllis is likewise a way in order to afford the Commissioner an opportunity to correct the action of his subordinates and at the same time notify the Government that the taxes are under question.

RESOLUTION C.T.A. CASE NO . 5846 Page 2 Petitioner, on June 3, 1999, submitted his Opposition to the :t-.1otion to Dismiss contending among others that the written claim is no longer necessary. Using as basis Sec. 230 ofthe 1977 NIRC in relation to Revenue Regulations No. 2-98, Petitioner points out that by indicating in his income tax retum that he has an overpaid amount of withholding tax, he is in fact filing a claim for tax credit with the respondent and this ovetl)ayment shall be automatically allowed as a credit. Furthennore, Petitioner likewise asserts that pursuant to the last provtso of Section 204( c) of the Tax Refotm Act of 1997, mere declaration in the tax retum that there was an overpayment of tax is sufficient and shall be considered as a written claim for credit or refund in confotmity with the requirement of Sec. 230 of the NIRC. Respondent, on June 11, 1999 filed its "Reply" thereto and avers that Petitioner's ooposition has no basis, his argument anchored mainly on the "no-automatic granting of refund." Pursuant to Sec. 230 of the NIRC in relation to Sec. 5 of Revenue Regulation 12-94. He furthet� asserts that the Tax Refotm Act of 1997 cannot be given retroactive effect. .And lastly, he points out that what is appealable to this Court is the decision of the Commissionet� and since there is no claim for refund, there is yet no decision appealable to this Court. We fmd for the Respondent. It is already well-settled that a claim for refund duly filed with the Commissioner of Intemal Revenue is a condition precedent to the prosecution of a suit before this Cout1 and failure to comply with this condition subjects the petition 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 of the 1996 Tax Code. To this issue, this Court deems it necessary to cite the ratio legis which was aptly enunciated by the

RESOLUTION C.T.A. CASE NO. 5846 Page 3 Supreme Court in the case of P.J. Kiener Co., Ltd. Vs. David, 92 Phils. 945 when the Supreme Court mled, thus: "To this end, and bearing in mind that the Legislature 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 reasonable to say without doing violence to the context or either of the two provisions, that by the ftrst is meant simply that the Collector of Intemal Revenue shall be given an opportunity to consider his mistake, if mistake has been committed, before he is sued." (Underscoring supplied) It is impottant to note that this CoUtt makes reference to the 1996 Tax Code (specifically the Tax Code prior to the Tax Reform Act of 1997) because the compensation income subject of thi.~;_; petition was eamed 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 January 1, 1998 while this case involves income eamed in 1996. Article 4 of the Civil Code of the Philippines declares that "laws shall have no retroactive effect, unless the contrary is provided" and there is no provision in the Tax Refonn Act of 1997 which calls for its retroactivity. The Supreme Court in the case of Mantilla vs. La Corporacion de PP. Agustinos Calzados, 24 Phils. 220 plainly stated a basic mle in statutory constmction when it mled, thus: "It is a rule of statutory construction that all statutes are to be considered as having only a prospective operation, unless the purpose and intention of the Legislature to give them a retrospective effect is expressly declared or is necessarily implied from the language used." We also fmd 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.

RESOLUTION C.T.A. CASE NO. 5846 Page 4 A reading of these two provisions reveal 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 ofPetitioner's Opposition to the Motion to Dismiss) and it is basic that this does not fall under the category of an expanded withholding tax as enumerated under Section 2.57.2 ofRevenue Regulations No. 2-98. At its inception, this case would have been outrightly dismissed by reason of petitioner's failure to comply with certain impmtant preconditions. Charge this to the precipitate filing of the Petition for Review filed on the very date the claim is about to prescribe, "assuming the petitioner filed its fmal adjustment retum on April15, 1997". A sedulous review of petitioner's initiatory pleading would readily reveal that it failed to comply with Section 2, Rule 5 of the Rules of the Cout1 of Tax Appeals which provides, thus: "XXX XXX XXX Section 2. The Petition for Review shall contain allegations showing jurisdiction in the Comt, a concise statement of the ultimate facts and a summary statement of the issues involved in this case, as well as the reasons relied upon for the reversal of the respondent's decision. A copy of the decision appealed from shall be attached to the Petition for Review. (Emphasis Ours) X X X X X X X X X" Apparently, there are no allegations whatsoever in petitioner's Petition for Review "shmt-'ing jurisdiction in the Court". Petitioner should have alleged the fact that a claim for reftmd was filed with the Commissioner of Intemal Revenue and that the latter failed

RESOLUTION C.T.A. CASE NO . 5846 Page 5 to act upon the said claim. Unfortunately, even the date of the filing of the Final Adjustment Retum was omitted, inadvertently or otherwise. Prescinding from the above, there is no way by which this Court would be able to decipher with accuracy whether or not the petitioner had already exhausted administrative remedies thereby making the case fall within the province of this Court. In view of this, We strongly reject petitioner's theory that allegations of these matters in its petition would be a mere superfluity since absence of which would render the petition dismissible on the ground of lack of jurisdiction. It must be bome in mind that the question as to whether or not a Court has jurisdiction over the subject matter of the case is determined from the allegations stated in the complaint. Parallel to this is the fact, that a Cout1, in resolving a Motion to Dismiss, cannot go beyond the four comers of the complaint, thus, if the petition fails to allege material jurisdictional preconditions, this Cout1 can dismiss a case ex mero motu (Commissioner of Internal Revenue vs. Villa, 22 SCRA 3). WHEREFORE, in view of the foregoing, the Motion to Dismiss ftled by the Respondent is GRANTED. Accordingly, the petition for review filed on April 15, 1999 is hereby DISMISSED. SO ORDERED. ~to.~ ERNESTO D. ACOSTA Presiding Judge Associate Judge