Cta 2D CV 07242 D 2010dec06 Ref PDF
Cta 2D CV 07242 D 2010dec06 Ref PDF
Cta 2D CV 07242 D 2010dec06 Ref PDF
SECOND DIVISION
DECISION
MINDARO-GRULLA, J.:
(2), in relation to Rule 8, Section 4(o), of the Revised Ru les of the Court
1
Roll o , pp . 479-493 ~
1111
MERALCO vs . Commissioner of Internal Revenue Page 2 o f 40
CTA Case No. 7242
DECISION
Taxable Original Tax Disallowed Adjusted Income Adjusted Income Excess Income
4 6
Year Payments CWTs Tax Payments Tax Due Tax Payments
3 5
with CWTs with CWTs
1994 p 1,847,186,617 p 1,847,186,617 p 1,149,772,719.52 p 697,413,897.48
1995 p 2,112,659,180 p 2,112,659,180 p 1,369,237,724.71 p 743,421 ,455.29
1996 p 2,601,323,036 p 15,544 p 2,601,307,492 P1 ,584,311 ,872.82 p 1,016,995,619.18
1997 p 2,591 ,310,020 p 54,568.24 p 2,591,255,451.76 p 1,496,450,692.45 p 1,094,804,759.31
1998 p 2,361,775,866 p 18,214 p 2,361,757,652 p 1,233,907,225.60 p 1'127,850,426.40
2000 p 1,558,159,055 p 2,687,466.29 p 1,555,471,588.71 p 439,614,953.66 p 1'115,856,635.05
Total P13,072,413,774 p 2,775,792.53 P13,069,637,981.47 p 7,273,295,188.76 p 5,796,342,792.71 -~~
The orig inal claim for a tax refund o r credit of excess income tax
payments for the taxable years 1994-1998 and 2000-2001 amoun ted to
P7, 107,534,282.00 less MERALCO's c laim for the taxab le year 2001 in the
2
Supplemen tal Joint Stipu lation o f Fac ts and Issues, Rollo, pp. 623-624
3
Supplemen tal Joint Stipu lation of Facts and Issues, Annexes "0", "P", "Q","R", "S" &
"S- 1"
4 Supplemental Joint Stipulation of Facts and Issues, citing CIR's Decision doled
111 2
MERALC O vs . Commissioner of Internal Re v enue Page 3 of 40
CT A Case No. 7242
DE C ISION
a tax refund or credit of excess income tax payments for the taxable
Court in the consolidated cases of Republic of the Philippines, et. al. vs.
Monopoly, etc. vs. Manila Electric Company, G.R. No. 141369, which
SO ORDERED ."
and existing under the laws of the Republic of the Philippines, with
111 3
MERALCO vs . Commissio ner o f Internal Re venue Page 4 of 40
CT A Case No . 7242
DECISION
and co llec t all national internal revenue ta xes, fees , and charges,
other charges, w ith offic e address at the BIR Natio nal Office Building ,
for the revision of its rate schedules, docke ted as ERB Case No. 93- 11 8.
per kwh , subje c t to the co nditio n that after hearing and evaluation,
'
1114
MERALCO vs. Comm issioner o f Internal Revenue Pag e 5 o f 40
CT A Case No. 7242
DE C ISION
Thus, MERALCO paid the income tax due on its taxable income
distribution rate of P2.996 per kwh (i.e. existing average rote of P2.812
De c ision and upheld the previous Dec ision of the Energy Regulatory
Board.s
during the ta xa ble years 1994- 1998 and 2000-2001, taxable inco me
s Republic o f th e Philippines, represented by the Energy Regula tory Board vs. Manila
Electric Company, G. R. No. 141314. and Lawyers Agains t Monopoly and Poverty
(LAMP), et. a l. vs. Manila Elec tri c Company, G.R. No. 141 369, November 15, 2002.
111 5
MERA LCO vs. Commissioner o f Inte rnal Revenue Page 6 of 40
CTA Case No . 7242
DE C I S ION
Court and filed a "Petition for Review (Ad Cau telam )" and principa lly
anchored its claim for a tax refund or credit of excess incom e tax
period of six (6 ) years, pursuant to Art. 1145 o f the New Civil Code or
within two (2) years, as provided in Section 229 o f the 1997 Tax Code .
111 6
M ERA LCO vs . Commissioner o f In ternal Revenue Page 7 o f 40
CTA Case No. 7242
DE C ISION
11 17
MERALCO vs . Commissioner of Internal Revenue Page 8 of 40
CTA Case No. 7242
DECISION
(_
111 8
MERALCO vs. Commissioner of Internal Revenue Page 9 of 40
CT A Case No. 7242
DECISION
MERALCO's claim for a tax refund or credit for the taxable year 2001 to
11 19
MERALCO vs . Commissioner o f Internal Revenue Page 10 o f 40
CT A Case No . 7242
DECISION
the extent of P894,473,932.58 but denied the c laim with respect to the
that a task force was crea ted by the Large Ta xpayers Service and
Jose Ronald V. Va ll es (tsn., August 14, 2006, pp. 5-1 0), and Mr. Gener R.
[.
1120
MERALCO vs. Comm issioner of Internal Revenue Page 11 o f 40
CT A Case No . 7242
D EC I S I O N
Montemayor (tsn ., November 12, 2007, pp. 4-12; tsn., February 20, 2008,
pp. 4-1 0; tsn., March 31, 2008, pp. 4-9; tsn ., May 12, 2008, pp .5- 13; and
Hercules M. Catapia (tsn., April 27, 2009 ) and Mr. Oscar A. Sable (tsn .,
decision.
foll ows:
1121
MERALCO vs. Comm is sioner of lnl erno l Revenue Page 12 of 40
CT A Cose No. 7242
DECISION
must file within two (2) years from the date of payment of the tax or
penalty regardless of any supe rvening cause that may arise after
payment.JJ
11Sec. 229. Recovery of Tax Erroneously or Illega lly Colle c ted. - No suit or
proceeding shall be maintained in any cou rt for the recovery of any notional internal
112 2
MERA LCO vs. Com missio ner o f In terna l Revenu e Pa g e 13 o f 40
CTA C ase No. 7242
DECISION
refund of ta xes c ollec ted under the Tax Code may proc eed as a claim
for refund and anch o r its claim under Article 22 and Article 2154 in
relation to Article 1145 o f the New Civil Code, citing the principle of
solutio indebiti as justific atio n a nd basis as to its presc ription , when the
re ve nue tax he rea ft er a ll eged Ia have b e e n erro neously o r ill ega lly asse ssed or
coll ec te d , or o f any p e na lty c la imed to have been co ll ec ted w ith out a uthority, o r o f
any sum a ll eged to have been excessive ly o r in any mann e r w ro ng full y collec te d ,
until a c laim fo r re fun d or c redit has b een d uly fil ed w ith th e Commissio ne r; but suc h
suit or p roceedin g may b e maintaine d , w he th e r or no t suc h tax, p e na lty, o r sum has
b een paid unde r pro test o r d uress.
In a ny case, no suc h suit or p roceedin g sha ll be fil ed a ft e r th e expira ti o n o f
two (2) years fro m th e da te o f payment o f th e tax o r pe na lty reg ardl ess o f any
superve nin g cause that may a rise a ft e r payment : Provided, however, Th a t th e
Com missio ne r may, even w ith ou t a w ritten c la im th e re fo r, re fund or c redit a ny tax,
w here o n th e fa c e o f th e re turn upon w hic h paym e nt was m a d e, suc h paym e nt
app e ars c le arly to have b een e rroneously paid.
12 Art. 22 . Every p e rso n w ho thro ug h a n a c t o f p e rfo rman c e b y a no th er, or a ny o ther
mea ns, ac q uires or com es into possessio n o f som e thing a t th e exp e nse o f the latter
w ith o ut ju st or legal g ro und, sha ll re turn the sa m e to him .
13 Art. 2 154. If somethin g is received w he n th ere is no ri g ht to dem a nd it, a nd it was
c..
112 3
MERALCO vs . Commissi o ner of Internal Revenue Page 14 of 40
CTA Case No. 7242
DE C ISION
same has already prescribed under the Tax Code. The answer is in the
negative.
But we rule pro hac vice that MERALCO's right to recover its
excess income tax payments for the taxable years 1994-1998 and 2000
has not prescribed . MERALCO is entitled to its claim for a tax refund or
credit for the taxable years 1994-1998 and 2000 due to the special
NIRC. The two (2) - year prescriptive period should commence to run
on May 5, 2003, the date the Supreme Court's Decision in G.R . Nos .
141314 and 141369 bec ame· final and e xec utory. It is only at that time
and the basis for the exc essive or erroneou s payment arises .
In G.R . Nos. 141314 & 141369, the Supreme Court, in its desire to
public when it found out that MERALCO used a higher rate in billing the
claim for refund for the tax excessively paid to and collected by
respondent CIR.
L.
112 4
MERALCO vs. C ommissioner of Internal Revenue Page 15 of 40
CT A Case No. 7242
DE C ISION
running of the prescriptive period whether it be two (2) years or six (6)
April, for the years 1995-1999 and 2000- when the excess paymen ts and
the right to recover the same came about only on 5 May 2003 which is
the date the Decision of the Supreme Court in G.R . Nos. 141314
and fairness dictate that the filing of the original petition (May 4, 2005)
and the amended petition (November 22, 2005) before this Court are
we ll within the prescriptive period of two (2) years or six (6) years.
or illegally collected tax under the principle of solutio indebiti is six (6)
years, pursuant to Article 1145 of the New Civil Code. MERALCO states
further that the counting of this period should be reckoned from May 5,
2003 when the Supreme Court Decision became final and executory
since it was only then that MERALCO's right of action for the recovery
c..
112 5
MERALCO vs . Comm issioner of Internal Revenue Page 16 o f 40
CT A Case No. 7242
DE C I S ION
Section 229 of the NIR C o f 1997 and at the same time, anchors its claim
Insurance Co.ls, CIR vs . PNB 16, and Ramie Textiles, Inc. vs. Mathay, SrY,
the special circumstance in the instant case, such that "it would seem
or c redit was filed beyond the two (2) - year prescriptive period
pursuant to Sec tio n 229 o f the NIRC o f 1997. A ta x refund, being in the
ta xpaye r.
Revenue vs. Aichi Forging Company of Asia, lnc. 1s the Supreme Court stated
that-
112 6
MERALCO vs . Commissioner of Internal Revenue Page 17 of 40
CTA Case No . 7242
DE C ISION
law and the NIRC of 1997, which is special law governing national
has always been the rule that on a specific matter, the special law shall
prevail over the general law, which, shall be resorted only, to supply
Also, where there are two (2) statutes, the latter a special law
and the former a general law- it shall be construed to mean that the
provided for in the special law. The fact that one is special and the
general law of the land, the other as the law of a particular case . It is a
and not expressly repealing a prior special statute, will ordinarily not
112 7
MERALCO vs. Comm issioner of Internal Revenue Page 18 o f 40
CT A Case No . 7242
DE C ISION
The inco me tax w hich MERALCO seeks to refund falls under the
that the Tax Code governs the period of limitation and not the Civil
Code.
exclusively for the res o lution of tax problems, if the ground for which
the claim for a tax refund or cred it, as provided in the Tax Code, is
1128
MERALCO vs . Com missioner of Internal Revenue Page 19 of 40
CTA Case No. 7242
DECISION
The c ase o f United States vs. C lintwoo d Elkh o rn Mining Co. et. a l.,
in structi o nal and mainta in s th e co nsiste nt inte rpretati o n o f tax law s, the
2o No. 07-308, Argued March 24, 2008, decided April 15, 2008, 553 U.S . 1 (2008)
c..
112 9
MERALCO vs. Commissioner o f Internal Revenue Page 20 of 40
CT A Case No. 7242
DECISION
limitation to a claim for a tax refund under th e Tax Code which is two (2)
11 30
MERALCO vs. Commissioner of Internal Revenue Page 21 o f 40
CTA Case No. 7242
DECISION
operate and with which the State effect its functions for the we lfare o f
its constituents.23
Thus, in the examination of Section 229 of the Tax Code and the
before the expiration o f two (2) years from the date of payment of the
claim for refund for the ta xable years 1994 to 1998 and 2000, both in
23
Dayrit, et al. vs. Cruz, L-3991 0, September 21, 1988, 165 SCRA 57 1.
24Commissioner of Internal Revenue and Arturo V. Parce ro in his o ffi cia l capacity as
Revenue Distric t O ffi cer o f Revenue District No. 049 (Makoti) vs. Primetown Property
G roup, Inc., G.R. No. 162155 . August 28, 2007.; Philippine Bank o f Communica tions vs.
Commissioner o f Internal Revenue, Court o f Tax Appea ls and Court o f Appea ls, G.R.
No. 11 2024. January 28, 1999
c..
1131
MERALCO vs. Commissioner o f Internal Revenue Page 22 o f 40
CTA Case No . 7242
DECISION
2005) were both filed beyond the two-year reglementary period from
cavil that neither the right to claim for refund can be determined nor
there was basis for MERALCO to know that the income ta x payments
for the taxab le years 1994- 1998 and 2000 were erroneous and
G.R. Nos. 141314 and 14136925 became final and executory on May 5,
2003.
prescriptive period o f two (2) years should commence to run only from
the time that the refund is ascertained, which con only be determined
25Supra. Note 6.
26 244 SCRA 447, 453( 1995) '-
113 2
MERA LCO vs . Com missio ner o f Intern a l Revenue Pag e 23 of 40
CTA C a se No. 7242
DECISION
tax refund for the taxable years 1994-1998 and 2000 cannot yet be
Hence, the two (2) - year period should not yet commence to run.
and not as its replacement .2B Indisputably, at the time MERA LCO filed
its final adjustment re turn and paid the income tax thereon, the
and wrongfully co llec ted" . It w as o nly o n May 5, 2003, that the income
ta x payments for the taxable years 1994-1998 and 2000 being claimed
running of the prescripti ve period from the filing of the final adjustment
27
C IR vs. Co urt o f Appea ls, e t. a l. , G .R. No . 11 7254 . Ja nu ary 2 1.1 999.
28Aguil a vs. Court o f Fi rs t Ins ta nce o f Ba ta ngas . Bra nc h 1, 160 SCRA 352
29Tamio vs. Ticso n. G . R. No. 154895, Nove m ber 18. 2004; ci ting Air M a nila vs. C IR, 83
SC RA 579, 589. June 9. 1978.
c.
113 3
MERALCO vs. Comm issioner o f Internal Re ve nue Page 24 of 40
CT A Case No. 7242
DE C ISION
return and payment of the tax thereon for the taxable years 1994-1998
and 2000 when the excess payments and the right to recover the same
CIR vs. Philippine American Life Insurance Co.3o, the Supreme Court,
held that -
used a high er rate in billing the public, it is only but equitable that the
113 4
•
th a t :
" ... Tec hnica lities a nd lega lisms, however exalte d , shou ld
no t be misused by th e g overnm ent to kee p mo ney no t
belo nging to it and thereby enric h itself at the exp e nse of its
law-abiding ci tize ns. If th e State expects its taxpayers to
o bserve fairn ess a nd ho nesty in paying their taxes , so must it
a pply th e same sta ndard aga inst itse lf in paying the ir taxes, so
m ust it apply the same sta ndard a g ainst itself in re fundin g
excess pa ym ents o f suc h taxes. Indeed, the State must lead by
its own exa m p le o f ho nor, d ig nity a nd up rig htn ess ."31
it. No o ne, no t e ven the Sta te, sho uld enric h o neself at the expense of
penalizing d e linque nt taxp ayers w ith surc harges and interests. While taxes
are the lifeblo od o f the governm e nt, this Court must likewise be sensitive of its
respo nsibility to apply the princ ip les o f justice, e quity and fa irness as its guide
'
11 35
MER ALCO vs. Com m issioner o f In te rn a l Reve nue Pag e 26 o f 40
CTA Case No . 7242
DECISION
electric bills fo r consumers, clearly, substantial justice, equity and fair play are
o n the side of MERALCO. Technic alities and legalisms, however exa lted,
it, th ereby enric hing itself at th e exp e nse o f its la w-abiding c itizens.33
Corporatio n (Formerly South ern Energy Q uezon, lnc .) 34, the Supreme Court
held that:
33 Sta te Land Investm e nt Corpora tion, vs. Commissio ner o f Inte rn a l Revenue, G .R. No .
171956, January 18,2008, 542 SCRA 11 4 (2008)
3 4 G. R. No. 172 129, Sep tember 12, 2008, 565 SCRA 154 (2008)
!..
1136
MERALCO vs. Commissioner of Internal Revenue Page 27 of 40
CT A Case No. 7242
DE C ISION
against reported revenues in its Income Tax Returns (ITRs) for the
Audited Financial Statements35 for the years ended December 31, 2003
35
Exhibit "Y", Notes to Financial Statements, page 3, paragraph 4
c..
113 7
MERALCO vs. Commissioner of Internal Revenue Page 28 of 40
CT A Case No. 7242
DECISION
to the Supreme Court Decision in G.R. Nos. 141314 and 141369 totalled
the year ended December 31, 2002 shows that MERALCO treated the
net of tax effect for 1999 of P1, 126 million. Likewise, MERALCO
36 Exhibit "W", Statement of Income for the year ended December 31, 2002
t..
1138
MERALCO vs. Commissioner of Internal Revenue Page 29 o f 40
CT A Case No. 7242
DE C ISION
year. The related ta x effect of P1, 133 million was shown as a reduction
ta xab le year 200237 , MERALCO did not charge to expense or loss nor
deduct against its revenues for the year 2002 any of the refundable
Reconciliation of Net Income Per Books Against Taxable Income for the
ta xab le year 2002, wherein MERALCO's net ta xable income per return
the net loss per books of P2,015,232,945.00 was the amount reported by
and P3, 785 million as e xtraordinary loss and revenue reversal for the
reduction of its revenues for the months of January to May 2003. With
37 Exhibit "V"
L
113 9
MERALCO vs . Commissioner of Internal Revenue Page 30 of 40
CT A Case No. 7242
DE C I S ION
P26,469 million 38 net of the tax effect for 1999 and 2002 in the
respective amounts of P1, 126 million and P1, 133 million. In other words,
in arriving at its net income per books of P907 million for the year ended
December 31, 2003, MERALCO deducted from its revenues only the
P907 million which was reconciled with the net income per Annual
Income Tax Return for the year ended December 31, 2003 and none of
did not charge to e xpense/loss nor deduct against its revenues for the
Financial Statements 39 and Annual Income Tax Returns4o for the said
1140
MERALCO vs. C ommissioner of Internal Revenue Page 3 1 of 40
CT A Case No. 7242
DECISION
years a lso proved tha t it did not charge to expense or loss nor deduct
agains t its revenues for the said years the amounts it has
as summarized below:
1141
MERALCO vs. Commissi o ner of Internal Revenue Page 32 of 40
CT A Case No. 7242
DECISION
this does not negate the findings of this Court that MERALCO did not
charge to expense/loss nor deduct against its revenues for the said
separate and distinct from the present claim for a tax refund or credit
considering that the legal basis and requirements for the Supreme
11 42
MERALCO v s. C ommissio ner o f Internal Rev enue Page 33 of 40
CT A C ase No . 7242
DE C ISION
Court's mandated refund are different from the legal basis and
requirements for the present claim for a tax refund or credit. MERALCO
versa.
income tax payments for the taxable years 1994-1998 and 2000 cannot
by MERALCO.
We disagree .
nor do the legal basis and requirements for the Supreme Court's
Nos. 141314 and 141369, MERALCO would not be entitled to the claim
for a tax refund for the ta xable years 1994-1998 and 2000. Thus, due to
equity consideration, the two (2) - year prescriptive period under the
11 43
MERALCO vs. Commissioner o f Internal Revenue Page 34 of 40
CTA Case No . 7242
DE C ISION
excess income ta x payments was subject to the condition tha t the tax
equitable not only for the MERALCO and the government but also the
1144
MERALCO vs. Commissioner of Internal Revenue Page 35 o f 40
CT A Case No. 7242
DECISION
114 5
MERALCO vs. Commissioner of Internal Revenue Page 36 of 40
CTA Case No. 7242
DECISION
"Courts in this jurisdic tio n ore not only courts of law but also of
equity, and therefore cannot unqualifiedly apply a provision of
law so as to cause clear injustice which the framers of the law
could no t ha ve inte nd ed to so deliberately ca use. In Carce//er v.
Court o f Appeals, this Court had occasio n to stress :
payments for the taxab le years 1994-1998 and 2000, which would have
all the excess inc ome ta x payments when it did not refund all to the
114 6
MERALCO vs. Commissio ner o f Inte rnal Revenue Page 37 of 40
CT A Case No. 7242
DE C ISION
the Supreme Court's Decision in G.R. Nos. 141314 and 141369 would
not have been rendered, and MERALCO would not have made
good faith and if it had fully disbursed the amount it overcharged from
arise and which would be the basis of this claim for a tax refund.
the conclusions that the same has prescribed and subject to the
45 Da vid Rey es (Substituted b y Vic toria R. Fabella) vs. Jose Lim , C huy Cheng Keng and
Harriso n Lumber, Inc ., G .R. No . 134241 , Augu st 11, 2003]
46
Supple mental Joint Stipulati o n o f Fac ts and Iss ue s.
(
11 47
MERALCO vs . Commissioner of Internal Revenue Page 38 of 40
CT A Case No . 7242
DE C ISION
to customers.47
and issues and from respondent CIR's decision dated September 21,
2005, 48 there were excessive collections for the taxable years 1994-1998
and 2000-2001.
its Income Tax Returns (ITRs) for the taxable years 2003-2005 the
47
Ibid . (
48
Ibid.
1148
MERALCO vs. C o mmissioner of Internal Revenue Page 39 of 40
CT A Case No . 7242
DE C ISION
establish the factual . basis of his or her claim for a tax refund or
credit. Tax refunds, like tax exemptions, are construed strictly against
claim for a tax refund or credit for the taxable years 1994-1998 and
P5,796 ,342, 792.7 1, corresponding to the claim for a tax refund or credit
for the taxable years 1994-1998 and 2000, subject to and in proportion
from the Supreme Court's Decision in G . R. Nos. 141314 and 141369, has
SO O RDERED.
~N.M~~- G~
C IELITO N. MINDARO-GRULLA
Associate Justice
1149
M ERA LCO vs. Comm issioner o f Intern a l Reve nue Page 40 o f 40
CTA Case No. 7242
DECISION
WE CONCUR :
ATTESTATION
~t;-Cl.QT~~ \)_ .
JUANITO C . CASTANEDd,t3R.
Associate Justi c e
C hairpe rs o n
CERTIFICATION
~__;-k;Z. Q~
ERNESTO D. ACOSTA
Presiding Justic e
11!:'.0