Lim Co Chui vs. Juan Posadas, Jr.

The 25% increase for late payment of percentage tax under Section 1458 of the Administrative Code is mandatory and automatic, and the Collector of Internal Revenue has no discretion to remit it; Section 1582's power to remit before payment a tax unjustly assessed or excessive does not authorize remission of a penalty fixed by law.

Lim Co Chui was a Chinese alien residing in Manila and the owner of three dry goods stores. Juan Posadas, Jr. was the Collector of Internal Revenue. The dispute implicated the Administrative Code's percentage-tax regime: Section 1458, as amended by Act No. 3074, governed payment of percentage taxes and imposed a 25% increase for late payment, while Section 1582, as amended by Act No. 2835, authorized the Collector to remit before payment any tax appearing unjustly assessed or excessive.

Lim Co Chui was a Chinese alien residing in the City of Manila and the owner of three dry goods stores located in Manila. During the quarter comprising July, August, and September 1924, the amount stated was P33,808.34, and the tax of one and one-half per cent on the business transacted during that calendar quarter was P507.13.

On October 18, 19, and 20, 1924, a riot against the Chinese existed in the City of Manila. Under such conditions, the Chinese were forced to stay in their homes, especially on October 20 when the riot was at its height. As alleged in the complaint, in order to end the riot it was thought proper and expedient on the part of the Chinese citizens to close their homes and stores, and they did close them as a result of a mutual agreement had thereon.

On account of those conditions, Lim was prevented from making a return on October 20, 1924, the last day for paying the taxes due. Instead, on that day a representative of the Chinese Chamber of Commerce, acting for and on behalf of all Chinese citizens, requested the respondent to extend the time prescribed for payment. The respondent denied the request on the ground that he had no authority to grant it. Subsequently, the same representative asked the respondent to accept payment of taxes due on the business conducted by all Chinese citizens which they were not able to pay on October 20, 1924, without requiring the additional increase of twenty-five per cent as a penalty.

On October 21, 1924, Lim tendered payment to the respondent of the tax due on his business, stating at the same time that his delay was due to the riot. On November 3, 1924, the respondent refused to accept the payment, saying that according to existing law he had neither power nor discretion to accept the tax without the additional penalty of twenty-five per cent. On request for reconsideration, the respondent again declared that he lacked power to grant the request, although admitting that the additional tax of twenty-five per cent "seems unjust and excessive."

The above facts were taken from the allegations of the complaint as admitted by the respondent. The petition asked the Court to declare that the Collector of Internal Revenue had discretionary power to remit additional percentage taxes and to require him to exercise that discretion, citing Sections 1458 and 1582 of the Administrative Code as amended.

• Discretion to Remit: Petitioner sought a declaration that the Collector of Internal Revenue had discretionary power to remit the additional percentage taxes and an order requiring him to exercise that discretion.
• Statutory Basis: Petitioner cited Sections 1458 and 1582 of the Administrative Code, as amended, in support of the petition.

• No Authority to Grant Extension or Accept Late Payment Without Penalty: Respondent denied the request for extension on the ground that he had no authority to grant it, and refused the October 21 tender because existing law gave him neither power nor discretion to accept the tax without the 25% penalty.
• Failure to State a Cause of Action: The Attorney-General demurred on the statutory ground that the complaint did not state facts sufficient to constitute a cause of action.
• No Power to Remit: On reconsideration, respondent again declared that he lacked power to grant the request, although he admitted the additional tax "seems unjust and excessive."

• Discretion to Remit Penalty: Whether the Collector of Internal Revenue has discretionary power to remit the 25% increase imposed for late payment of percentage tax under Section 1458 and Section 1582 of the Administrative Code, as amended.
• Mandamus: Whether mandamus lies to compel the Collector to exercise such discretion.
• Impossibility: Whether the October 1924 riot and the closure of Chinese homes and stores by mutual agreement excused the late payment of the tax.

• Discretion to Remit Penalty: No. Section 1458 is mandatory and automatically increases the tax by 25%; it confers no discretion. Section 1582 does not apply because the penalty is not unjustly assessed or excessive.
• Mandamus: No. Mandamus cannot compel the exercise of a discretion that the law does not confer.
• Impossibility: No. The impossibility maxim does not excuse nonpayment absent an allegation that the inability was due to a government order or action, or to the fault of the Collector; the complaint alleged closure by mutual agreement.

• Discretion to Remit Penalty: Section 1458 provides that percentage taxes on business shall be payable at the end of each calendar quarter and that if the tax is not paid within the prescribed time, the amount shall be increased by 25%, the increment to be part of the tax. This provision is mandatory and works automatically; it confers no discretion on the Collector, who may not disregard the law and substitute his personal judgment. Section 1582 allows the Collector to remit before payment any tax that appears unjustly assessed or excessive, but the 25% penalty for non-payment is not unjustly assessed because it is assessed at all, and is not excessive because it is merely the amount specifically fixed by law. The Collector simply collects what the law says he must collect and is not authorized to refund taxes as a matter of gratuity. The respondent's admission that the additional tax "seems unjust and excessive" did not create authority to remit it.
• Mandamus: Because the Collector had no discretionary power to remit the penalty, the request to declare such discretion and to require its exercise could not succeed. Mandamus does not lie to compel the exercise of a discretion that the law does not confer.
• Impossibility: The maxim Impossibilium nulla obligatio est states that there is no obligation to do impossible things, and it may be that there are excuses for non-payment that would justify court interference. Here, however, the complaint did not allege that the inability of the Chinese to pay their taxes on time was due to any order by the Government or to any action taken by the Government, nor that the delay was caused by the fault of him to whom it was to be paid. Instead, the averment was that the Chinese closed their homes and stores and stayed therein as a result of a mutual agreement had thereon. Thus, the impossibility principle did not excuse the late payment.

• Mandatory 25% Increase for Late Percentage Tax — Under Section 1458 of the Administrative Code, as amended by Act No. 3074, percentage taxes on business are payable at the end of each calendar quarter, and if not paid within the prescribed time, the amount of the tax is increased by 25%, the increment being part of the tax. The provision is mandatory and automatic and confers no discretion on the Collector of Internal Revenue. The Court applied it to hold that the Collector could not accept Lim's late payment without the penalty.
• Limited Power to Remit Taxes Under Section 1582 — Section 1582 of the Administrative Code, as amended by Act No. 2835, authorizes the Collector of Internal Revenue to remit before payment any tax that appears unjustly assessed or excessive. This power does not extend to a penalty fixed by law, because such a penalty is not unjustly assessed or excessive. The Court applied it to reject remission of the 25% increase.
• Impossibilium nulla obligatio est — No obligation exists to do impossible things. The principle may excuse nonpayment where the inability is due to a government order or action, or to the fault of the officer to whom payment was to be made. The Court found it inapplicable because the complaint alleged only that the Chinese closed their homes and stores by mutual agreement.
• Mandamus Does Not Lie to Compel Nonexistent Discretion — Mandamus may compel the exercise of discretion lawfully conferred, but it cannot create or compel a discretion that the law does not grant. The Court applied it to deny the petition because the Collector had no discretion to remit the penalty.

• "If the percentage tax on any business is not paid within the time prescribed above the amount of the tax shall be increased by twenty-five per centum, the increment to be a part of the tax." — Section 1458 of the Administrative Code, as quoted by the Court, establishes the mandatory and automatic 25% increase for late payment.
• "The Collector of Internal Revenue ... may remit before payment any tax that appears to be unjustly assessed or excessive." — Section 1582, as quoted by the Court, defines the limited remission power invoked by petitioner.
• "The twenty-five per cent penalty for non-payment is not "unjustly assessed" because it is assessed at all, and is not "excessive" because it is merely the amount specifically fixed by the law." — The Court's ratio for holding that Section 1582 does not authorize remission of the statutory penalty.
• "Impossibilium nulla obligatio est. There is no obligation to do impossible things." — The Court acknowledged the maxim but found no excuse because the complaint did not allege government action or fault of the Collector, only closure by mutual agreement.

• Section 1458, Administrative Code, as amended by Act No. 3074 — Provides that percentage taxes on business shall be payable at the end of each calendar quarter and that failure to pay within the prescribed time increases the tax by 25%, the increment being part of the tax. The Court held the provision mandatory and automatic, leaving the Collector no discretion to remit the increase.
• Section 1582, Administrative Code, as amended by Act No. 2835 — Authorizes the Collector of Internal Revenue to remit before payment any tax that appears unjustly assessed or excessive. The Court held it did not apply to the 25% penalty, which was neither unjustly assessed nor excessive because it was fixed by law.

Villamor, Ostrand, Johns, and Romualdez, JJ., concurred. Johnson, Acting Chief Justice, filed a separate concurring opinion. He agreed that the writ of mandamus should not issue, but was of the opinion that, in the interest of justice, the discretion conferred upon the respondent should have been exercised in favor of the petitioner. He reasoned that the riot made it impossible for the petitioner to leave his house or place of business, that it was not his fault, that he did all he could to pay his taxes when due, and that he should not have been penalized for things he could not prevent.