CTA Case No. 83 (Resolution)

REPUBLIC OF. TJm PHILIPPINES COURT OF TAX APPEALS MANILA M NIL ELECTRIC cm.iP NY , , C..T �� CASE NO . 83 Petitioner , - versus -; COLLECTOR OF INTERN 1 REVE:NUE, Respondent . x- - - - - - - - - - - - - - - - x RESOLU1'ION This is in connection with the "Motion to Dismiss'' fil ed by counsel for the r espondent , dated Iv1arch 5, 1955, praying that the Petition for Review filed by the petitioner on Feb- ruary 1:3 , 1955 b dismissed on the ground that the petitioner failed to file a claim or request for the refund of the tax in question as required by section 306 of the National Internal Ee venue Code . In his opposition to the motion to dismiss, the peti- tione r contend s that section 306 of the National Internal Re- venue Code is no longer applicable it having been i mplied ly r epe aled by section 11 of the law (Rapublic ct No. 1125) creating this Court . Secti on 306 of the National Internal Re venue Code requires that a claim for r efund of the tax allegd to have been erron- eously or illegally colle cted be fil ed vdth the Collector of Internal Revenue before any suit is commenced . True inde E:d , no such r equir ement is provided for under section 11 of Repu- blic !!let No . 1125 bfore any appeal from a de cision or ruling of t he Collector of Internal Revenue may be taken -to this Court . Likewise , VJhereas section 306 makes it imperativ the bringing of the action in court vdthin tv,1 o years from the payment of the

RRSDLUTION - C.'r . A. C&SE NO . 83 - 2- tax, section 11 of Republic Act No. 1125, provides t hat an appeal fr om a ruling or decision of the Coll ector must be filed within thirty days after the receipt of such decision or ruling . "'t first blush , it vJOuld seem t hat section 306 of the Na- ti onal Internal Revenue Code is in confli ct with the provision of section 11 of Republic ct No . 1125 . The conflict , however , is more apparent than r eal. These two pr0visions could easily be r e: conciled , which is the fun ction of statutory construction t o give effect to both enact ments . The Supreme Court , in the cas es of Wee Poco vs . Posada s , 64 Phil . 6/j.) , and lBermej o vs . The Colle ctor of Internal Hevenue , G., H. No . L-3029 , July 25 , 1950 , i nterpreted se ction 306 of the National Internal Revenue Code thus: 11The law clearly stipulates that after payi ng the ta:x , the citizen must submit a claim for r efund before r esorting to the courts . The i dea probably is , first , to afford the Collector an opportunity to corrct the action of subordinate officers; and second , to notify the Government that such taxes have been queptioned , and the notice should then be borne in mind in es timating the revenue avail- able for eYpenditure . Previous obj ections to the tax may not take the place of that claim for refund , because there may be some r eason to believe that , in paying, the paxpayer has finally come to realize the validity of the assessment . iillyway , strict compliance with t he cond itions imposed f or the return of revenue collected is a doctrine consis tently applied here and i n the United :States . tt Mindful that Congress is pr esumed to have understood the language it used and to have acted vvith full knowlede;:e of \'IJhat it VJanted to accomplish , it is fair and r easonable to say without doing violence to the cont ext of either of the t wo enactments, that by section 306 the Collector of Internal Revenue shall be given first an opportunity to consider his mistake , if mistake

RESOLUTION - C.T. A. C. SE NO . 83 - 3- has been committed , before he is sued . (See Kiener vs . David , G. R. No . L- 5163 , pr:Ll 22 , 1953 . ) However , should the Col- lector of Internal Revenue finally decide that the claim for refund is not meritorious and denies the same , the taxpayer is given thirty (30 ) days from receipt of said decision within v1hich to file his appeal with the Court of Tax ppeals under . section 11 of Republic hCt No. 1125 . On the other hand , having ' filed his claim and the Collector of Internal Revenue having had ample time to study it , the claimant may , inde d should , within the statutory period of tvJo years proceed VJi th his suit without vJaiting for the Collector ' s decision . t~e understand the filing of the claim V!ith the Collector of Internal hevenue to be intended primarily as a notice or warning that unless the tax or penalty alleged to have been collected erroneously or illegally is refunded , court action will follow . Previous and timely notice is , in other case-s and for diverse salutary re asons , made a prsrequisit~ to the prosecution of contemplated proce -d- ings without imposing on the party to whom the notice was sent any obligation to make any more . (See Kiener vs . David , supra) . It is insinuated that it \~auld be superfluous and unneces- sary to file a claim or request for refund with the Collector of Internal Revenue pursuant to section 306 of the Tax Code, as under Republic �ct 1~0 . 1125 an;y de cis1ion of the Collector may be app saled to this Court for review of the matter treated therein . But the law prescribes, among others , that before an action can be maintained in court for the refund of internal revenue t axes the pe r son bringing the action must have previously filed vdth the Collector of Internal Revenue a claim or request for the refund

RESOi.Ur ION - C. T. A. CASE NO . 83 . - 4- of the tax . Strict compliance of this condition precedent is necessary in order that the court will have jurisdiction to pass upon an action for recovery of internal revenue taxes . nd the reason is obvious: as stated by the Supreme Court , the idea is to afford the Collector an opportunity to correct the action of subordinate officers and to notify the Government that such taxes have been questioned, and the notice should then be borne in mind in estimating the revenue available for expenditure . (~v.ee Poco vs . Posadas , supra , Bermejo vs . Col- lector, supra . ) Before the passage of Republic lict No . 1125, the remedy provided by section 306 that the taxpayer should pay the tax first before he can sue the Collector of Internal Re venue was exclusive , and no other remedy could be substituted for it . (Sarasola vs . Trinidad , 40 Phil . 257) . With the approval of said Republic 4ct No. 1125 , a new remedy was given to the tax- payer , in addition to that already providOO. for by section ,306, in the sense that he can que stion the assessment of the Collec- tor before paying the tax by appealing to the Court of Tax ~ppeals within thirty (30) days from receipt thereof'. � However , in case he should pay the tax first and later on bring an action for its refund , section .306 still applieil and the taxpayer mllSlt comply with the r equirements therein provided . Having f i led his request for refund and the Collector of Internal Revenue having had ample time to study it , the taxpayer should , within the statu- tory period of two years proceed with his suit VJithout waiting for the Collector ' s decision . Hov1ever , should the Collector , within the statutory period of two ye ars , deny the claim , the �

REBOLUT ION - C.T.A . CASE NO . 83 - 5- taxpayer is given thirty (30) days from receipt of the decision viithin which to file his appeal under section 11 of Republic b.ct No o 1125 . In order to confer jurisdiction upon the court , it is necessary , however , that in all cases the suit must be brought within the statutory period of two years and the requirements provided for in section 306 must have been duly complied with . No claim or request for r efund of the tax in question having been filed with the r espondent Collector of Internal Re- venue, it follows that this Court lacks jurisdiction to hear the case . ':lli'PJ!iFORE' , the Petition for Review of the petitioner I.ianila Electric Company filed on .February 18, 1955 , must be , and the same is , hereby dismissed for lack of jurisdiction, with costs against the petitioner . SO O:F:DERF~D � Manila , I\�,arch 30, 1955 . A~ Presiding Judge