Republi U F the Philippines | Court of 1 Tax Appeals | Koppel Inc. vs. Case No. 22893 | Collector Ne of Internal IV | Kespondent, et al.

DECISION

This is an appeel from the decision ef the | respondent Collector ef Internel Revenue denying | the claim ef the petitioner Keppel (Philippines) | inc. for the refund ef the sum of $30,726.53 paid by it ae deficiency income t tax fer the year 1947.

It appears from the stipulation ef fects of } the parties that the petitioner is « domestic cor poretion with American capital, doing business in the Philippines. During the year 1942 te the early part ef 1945, it gusteined losses arising from the occupation ef the Philippines by the Japanese Millie tary Forces. Relying on the War Damage Insurance Aet of the United States Congress (Public Law ie. $06) which was pessed on March 27, 1942, the peti- thoner entered in ite beoks as accednts receivable from the United States the velue ef its properties } damaged and destroyed by the wer. Mewever, on April 30, 1946, the United Ststes Congress enacted the | Philippine Rehabilitation Act ef 1946 (Public Law Se, 37%), under the provisions ef which, the wer damace cleim ef the netitioner herein was “reduced ‘ b&cls - sanile Givil Case No. 22893 «2 by 2 per ceatum of the excess over $500." In 1947, the petitioner sllegedly came to know for the first time thet Lts lesses equivalent to 25% of the excess over £1,000,00, or §256,054,8%, could not be recovered, and therefore wrote It eff in its books of accounts for the year 1947, and included in its income tex return for 1947, 6 war losses, bac debis eud/or a6 business losees, the seid sum of £256,054.85. The respondent Cel- Lecter of internel Sevenve disallowed the emount come tex return for i947, and on June 6, 194), a5- sessed against and demanded from the petitioner peyment of deficiency income tax for the year 1947 in the sum of €34,536.21 corresponding to the dis@- Sllewed amount of $256,054.83.

Qa June 29, 1949, the petitioner, pursuant to the deiiciency essessment cnd demand of the rese- pondent, paid under protest the sum of §34,636.2 on September 5, 1949, and thereafter, it repeetedly sought from the respondent a reconsideration of the deficiency inceme tax assesswent and the refund of the amount of °34,436.21 which was later reduced te 030,726.53, aileging that the said assessment was Silegal under Section BD, par. (d), sub-par, (2), | and Section 30, par. (2), sub-par, (1) of the Ne- tional Internal Revenue Code. On July 28, 1953, | the respondent denied the claim for refund of #30,726.53. Hence, on August 27, 1953, the peti-+ 122 — 22 tioner filed a “Petition fer Review” with the dee funct Soard of Tax Appeals which effirmed the de- ¢isien ef the respondent and denicd the claim of gwefund of the petftioner or: October 26, 1953. On Decenber €, 1953, (not 1951 oc stated fn the sti- pulation of fects) the petitioner appesled the de Gision of the defunct Soard of Tax Appeals to the Supwene Court, but the same was disaiased without peajudice Sy the Supreme Court on April 9, 19H, im Gonsonance with its decision in the case of University of Sto. Tomas va, Soard of Tax Appeals, GR. Ho. L-S7O1, prom. June 23, 1953 (49 0.0, 2245), On May 16, 1954, viz approximetely one month before the crestion of this Court, the petitioner filed thie cese with the Court of First Instance of | Manila, and on April 16, 1955, the Gourt of First Instence of Menile remanded the case te this Court fer final dicposition pursuant to Section 22 of Re« public Act No. 1125.

There ore only two issues saised in this ape peal, condensed as follows:

A. Whether or net this Court has jurisdiction over the instent case under Section 306 of the Naq tional Internal Revenue Code which gives the tax. payer only two (2) yeers from the dete of payment ef taxes within which to commence his suit or pro- ceeding in court for the recovery of the seme; and

2. thether or net the losses sustained by the | petitioner in the amount of * 256,054.88 is deduc« tible under Section 30, par (4), subepar, (2) and/ + ress les:

—_—- , . ee . o he DECISION - wenile 4 vivil vase Ne, 22693

a. a!

cx section BD, par. (e), sub-par, (1) of the Na- tienal internal Nevenue Code.

seing es it is a prefudicial question, wa shall first proveed to resolve the question of juvisdiction which was raised by the respondent as & special detense in paregraph (b) of his ane ewer, ihe respondent contends that a sere perusal of the uncontroverted fects of the case will resdily and ciearly show that the right of the petitioner te w@intiein the present ection for the refund of the sum of #30,726,53 has long prescribed under Sectien 306 of the Nationsl Internal Revenue Code which reads és follows Ox proc 4% Snell be maintained in any court for the recevery ef any na- tional] internal revenue tax hereafter alieged to have been erroneously or dilegally assessed or collected, or of aay penalty claimed te have been cole lected without suthority, or of any sus alleged to have been excessive or in any manner wrongiully collected, watil a slain for refund or credit has been duly filed with the Collector of Internel Ae- venue; but such suit or proceeding may be m@intained, whether or not such tex, penalty or sum has been peid under protest mn a é } 0 ae in P. J. Kiener Company Lid, vs, Saturninoe David, G.A. No. L-5157, April 277, 1953 (49 ©.G, No. 5, 1852) the Supreme Court blazed the computation of the two yeer prescriptive period fixed in the 424 == a eS a SS ee ee eee

DECISION « Manila

Civil Case Me. 22893 sbove-quoted provision of our Tax Code, thus:

“Te this end, end bearing in mind thet the Legislature is presumed to have understeed the 1 it used and to have acted with full idea of what it wanted to — at is fair and reasonable to say, without doing vio~ lence te the con ext of either of the ternal hoveies shell be B nos an opper- tate ha to consider his stake, if ais- take has none Committed. aelfoses he is tne Saxpever shall ore he is noticied of tic fe time to study it. the clei naeed Sh0uld, within the statutory period prio Wears paogeed wit his sult utthou' iin. ier the collecyor ve. .

erstanc ‘3 ¢ re with the Collector ot internel path to be intended pr as a notice or thet, unless the or penalty alleged to have been collected erroneously or illegally is refunded, court ection will follow. *" (Underscering supp] fed, ) in the case et ber, the petitioner admittedly paid te the respondent on June 29, 1949, the defi- efienty income tax which it seeks to recover in the present ection. Obviously, from the said date, it hed under Section 306 ef our Tex Code, two (2) years within which to file its action in Court for the re« covery of the amount paid (P34,636.2] thereafter re- @uced to 30,726.53) or until June 29, 1951. During @ll this period, the petitioner failed to file an aetion for refund either fn the Court of First In- 125) a

DECISION = Manila

Civil vase N@. 22893 etanse of Manila or the Soard of Tax Appeals imne- @iately siter the crestion of the letter under Ex- ecutive Order No. 401-4, promilgated on January 5, 3952. Instead, the petitioner siaply folded its hends and just waited for the decision of the res- pendent Collector of Internal Revenue — which as wuled in the Alener case it should not hawe waited —- on its claim for refund which wes bended only efter mere than four (4) years, or more particu- daply en July 28, 1953. On thet date, the action fer refund ef the tax in controversy hed already lemg prescrived by such unnecessary waiting on the pert of the petitioner, On January 5, 1951, Executive Order No. 401A emeating the Sosrd of Tax Appeals was issued by the Preeident of the Philippines by suthority of Republic Ast Re. 422, 20m Une Gate question, i.e., June 29, 1949, to the creation of the Board of [ax Appeals on January 5, 1951, the pe- Citioner herein could have neintained its suit to re- Syment of the tex in a sever the tax paid in the Court of First Instance, Tet wes the relief evalleble to it then before the creation. of the Soard of Tax Appeals. During this pemied from the date of payment to the crestion of the Beard of fax ppeels, one (1) year, six (€) aonths end six (6) days were consuned by the petitioner with- @ut amy suit being filed by it in the Court of First Inetence of vanila thereby leaving only five (5) months wad suantwefee 124) dave of the two<veaer statutory 126 joe

DECISION «- Manila

Civil Case No. 22893 o~ Js period provided for in Section 306 of the Tax Code, Pursuant to section 20 of Executive Order No, 40l-A which wes then presumed te be valid and en- forceable end considered to be legs) in all respects, “No judicial proceedings against the Government in- volving metters arising under the Netional Internal Revenue Code, x x x x x shall be mainteined except #s herein provided, until end uniess an ap- peel hes been previously filed with the Board of Tex Appeals and disposed of in accordance with the pro= visions hereef,.* Inasmuch as the petitioner heseia under the above-quoted section of Executive Urder No. Wle-A, could not heve filed an action for the refund of the tax in question in the Court of First Instance during the remaining period of five (5) months and twenty-four (24) days, then it should have gone to the Board of Tax Appeals within the said remaining period for the recovery ef the taxes paid as that was the last and enly possisle renedy left to it at thet time. Nowever, as heretofore stated, the petitioner, for reasons ef its own, pree ferred to wait fer the decision of the Cellecter of Internal Aevenue regarding his claim fer refuad which, a8 ruled in the Kiener case, he should not have weited fer, and allowed the remaining five (5) months end twenty-four (24) days ef the two-yeer period fixed by lew to expire without taking the necessary legal action. Thus, from the foregoing facts and applying Section 306 ef our Tax Code and 127 lg OT a ee Pe ee the ruling of the Supreme Court in the Kiener case, &% is obvious, that the right of ection of the pe- titioner herein to recover the sum of #30,726.53 which it alleges to heve been illegally collected by the respondent, hes long prescribed and this Court is now without jurisdiction over the instant case filed before the Court of First instance of Manila on May 18, 1954.

Moreover, even if we were te consider in all liberelity to the petitioner, the running of the two-year prescriptive pericd suspended from the creation cf the Board of Tax Appeals on January 5, 1981 to the promulgation by the supreme Court of its decision in the case of Vaiversity of Sto, Tomes ve, The Board of Tax Appeais (47 O.G, 2245) on June 23, 1953, let us say because the petitioner wes then at @ quandary as te where to file its action for re- fund inasmuch as the defunct Soard of fax Appeals Wes not @ regular court of justice, still we shali apeive at the sane final result. In the University ef Santo Tomas case cited above, the Supreme Court held in clear and umaisiakeble words that “éxecutive Order No. “l-A is null and void in so far ac it iaterieres with the jurisdiction of the Courts of First instance in cases érising not only under the internal xevenue lew but alse customs lew and eesess- ment law x x x." Nowever, notwithstending such weling which should have served as a clear guide to the petitioner, after receiving the Collector's de- oo |

DECISION - Manile

Civil Case Ne. 22893 «9 = cision ef July 28, 1953 denying its claim fer refund, (approximately one month after the promulgatien ef the decision in the Sto. Tomas case) it still filed its petition for review with the Beard ef Tax Appeals, instead ef with the proper Court ef First Instance. It wes only on May 16, 1954, after the case was brought on appeel te and dismissed by the Supreme Court, when the petitioner filed its action te recover the tax in controversy with the Court of First Ine stance ef Manila. Indeed, even if we were te inter- pret the provision of Section 306 of the [ax Cede to liberal extremes in favor of petitioner, we would Still have no jurisdiction over the present case filed far beyond the two-year prescriptive peried.

Having thus decided that we heve ne jurisdic~ tien over the instant case, it becones unnecessary therefore te decide the second issue which goes inte the merit ef the case.

WHEREFORE, let the above-entitled case be, as it is hereby dismissed for leck ef jurisdiction, with cestse against the petitioner.

DECISION - Manila

Civil Case lio, 22893

VC Ltttan

Assoeiate Jdudgre