Gana v. Commissioner of Internal Revenue

NINTH DIVISION [CA-G.R. SP No. 46938. May 28, 2001.] LUIS MA. GIL L. GANA , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N BELLO , E.R., JR. , J p : This is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure of the Decision dated January 30, 1998 of the Court of Tax Appeals in CTA Case No. 5480 rendered against herein petitioner. The undisputed facts of the case are as follows: Petitioner Luis Ma. Gil L. Gana is an individual taxpayer earning mixed compensation and professional income. On July 22, 1996, petitioner received Notice of Assessment No. 0001110 from respondent Commissioner of Internal Revenue for income tax deficiency for the year 1994 in the amount of P117,586.11. Because of this, petitioner filed a protest/motion for reconsideration of said Notice of Assessment. Respondent then replied by issuing an Audit Sheet for individual (BIR Form No. 1749) showing the corrected amount of P10,588.40 as deficiency income tax due from petitioner inclusive of surcharge, interest and compromise penalty. The respondent arrived at the amount of P10,588.40 as deficiency income tax on the premise that the petitioner, who was receiving mixed compensation and professional income, committed an error in deducting his personal exemption in the amount of P28,000.00 from his gross professional income instead of deducting the same against his gross compensation income. On September 6, 1996, petitioner again questioned the adjustment by filing another motion for reconsideration through a letter query dated September 5, 1996. He likewise sought the opinion of BIR Head Office, Legal Department, as to the validity of Section 4 of Revenue Regulation No. 2-93 restricting the deduction of personal exemption from gross compensation income first and only the remainder or excess therefrom to be deducted from professional income, pointing out that no provision in the NIRC imposes such a restriction. The Regional Director of BIR, Revenue Region 8, Makati City, in its letter-response dated February 20, 1997, denied the petitioner's protest and upheld the authority of the respondent to promulgate the necessary rules and regulations for the effective implementation of R.A. 7496 (adopting SNITS). On April 2, 1997 petitioner filed a petition for review before the Court of Tax Appeals which again upheld the position of respondent Commissioner of Internal Revenue. The dispositive portion of the decision of the CTA reads: "WHEREFORE, in the light of all the foregoing, the instant Petition for Review is hereby DENIED and petitioner is ordered to pay the adjusted amount of P10,588.40 representing his deficiency income tax for the year 1994 plus twenty percent (20% ) interest computed from the date prescribed for payment until the full payment thereof pursuant to the provisions of Section 249 of the Tax Code. SO ORDERED." ( Rollo, page 17 ) Hence, this petition with only one assignment of error raised, to wit: "THE COURT OF TAX APPEALS ERRED IN RULING THAT SEC. 4 OF REVENUE REGUL ATION NO. 2-9 3 (SN ITS IMPLEME NTING RULES) RESTRICTING THE DEDUCTION OF PERSONAL EXEMPTION FIRST FROM GROSS COMPENSATION INCOME AND ONLY THE EXCESS THEREFROM FROM PROFESSIONAL/BUSINESS INCOME AS A VALID EXERCISE OF RESPONDENT'S POWERS TO ISSUE ADMINISTRATIVE REGULATIONS WHEN NEITHER THE SNITS OR THE NI RC PR OVIDE FOR SUCH RESTRICTION." ( Rollo, page 5 ) Petitioner contends that Section 4 of Revenue Regulation No. 2-93 (SNITS Implementing Rules) is an invalid exercise of respondent's rule-making authority. Said section provides: "When the taxpayer receives mixed income (compensation and business/professional income) the personal and additional exemptions shall first be deducted from compensation income and any excess therefrom, from business or professional income." In effect, this section imposes upon taxpayers receiving mixed income (compensation and business/professional income) the further condition of first deducting their personal and additional exemptions from compensation income and deducting only the remainder therefrom from business/professional income. This imposes an additional burden to the taxpayer, as what happened to herein petitioner who had to pay a deficiency income tax in the amount of P10,588.40 by reason of the application of this provision. EIcTAD Petitioner is now questioning the said provision, considering that neither Republic Act No. 7496 (Adopting SNITS) nor Sec. 29(1) of the NIRC as amended by Secs. 4 and 5 of Republic Act 7497 (Finality of the Withholding Tax on Purely Compensation Income) make any qualification in the availment by a taxpayer of his personal exemption. Petitioner claims that the BIR, through Revenue Regulations or implementing Rules, cannot expand the law by imposing qualifications or restrictions as to its availment, which in operation would increase the taxpayer's tax burden. This Court, however, finds no reason to consider Section 4 of Revenue Regulation 2-93 as void and therefore upholds the questioned provision as a valid exercise of respondent's rule-making power. The rule-making power of respondent is mandated by no other than the provisions of the Tax Reform Act of 1997 (National Internal Revenue Code) Republic Act No. 8424, itself, to wit. "SECTION 244. Authority of Secretary of Finance to promulgate rules and regulations . The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code. . . . SECTION 245. Specific provision to be contained in regulations . The regulations of the Bureau of Internal Revenue shall, among other things, contain provisions specifying, prescribing, or defining xxx xxx xxx (i) The manner in which tax returns, information, and reports shall be prepared and reported and the tax collected and paid, as well as the condition under which evidence of payment shall be furnished the taxpayer, and the preparation and publication of tax statistics; xxx xxx xxx" As has been pointed out by the petitioner, the provisions of the National Internal Revenue Code merely provided for the personal exemptions of taxpayers and were silent as to how it should be deducted. This detail was left for the determination of the respondent which is considered as a more specialized body tasked with the enforcement of tax laws. Section 4 of Revenue Regulation 2-93 merely provided for the details on how the same should be deducted in cases where taxpayers earn mixed compensation and business/professional incomes. Moreover, "the opinion or ruling of the Commissioner of Internal Revenue, the agency tasked with the enforcement of tax laws, is accorded much weight and even finality, when there is no showing that it is patently wrong, particularly where the findings and conclusions of the internal revenue commissioner were subsequently affirmed by the Court of Tax Appeals, a specialized body created for the exclusive purpose of reviewing tax cases, and the Court of Appeals." ( Afisco Insurance Corporation vs. Court of Appeals [302 SCRA 1]) WHEREFORE, the present petition is hereby DENIED for lack of merit and the assailed decision of the Court of Tax Appeals is accordingly AFFIRMED. SO ORDERED. Labitoria and Tria Tirona, JJ . , concur.