Acosta v. Commissioner of Internal Revenue

FORMER EIGHTH DIVISION [CA-G.R. SP No. 55572. February 13, 2002.] ROSEMARIE ACOSTA, as represented by VIRGILIO A. ABOGADO , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N AQUINO , J p : This case shall be resolved under the Rules on Statutory Construction. Sec. 230 of the 1993 National Internal Revenue Code (NIRC) provides: "Section 230. Recovery of tax erroneously or illegally collected . No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner ; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided however, That the Commissioner may, even without a written claim therefore, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Emphasis supplied)" On January 1, 1998, the Tax Reform Act of 1997 took effect. Sec. 204 (c) of said law provides: "Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund on Credit Taxes . The Commissioner may: xxx xxx xxx (c) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund . (Emphasis supplied). " Note that Sec. 204 (c) of the Tax Reform Code has modified Sec. 230 of the National Internal Revenue Code insofar as the requirement that a written claim for refund or credit should first be filed with the BIR Commissioner before a petition for review may be filed with the Court of Tax Appeals in that this requirement is satisfied with just the filing of a tax return showing an overpayment. The question before the Court is whether Sec. 204 (c) of the Tax Reform Code can be given retroactive effect to apply to the case at bench. The undisputed facts are the following: For the period January 1, 1996 to December 31, 1996, petitioner was an employee of Intel Philippine Manufacturing, Inc. (IPMI) assigned in a foreign country. For taxable year 1996, IPMI withheld taxes due on the year from compensation income of petitioner in the amount of PhP308,084.56 which was remitted to respondent Bureau of Internal Revenue (BIR) per Certificate of Income Tax Withheld on Compensation (Annex C, Petition). On March 21, 1997, petitioner and her husband filed with the BIR their Joint Individual Income Tax Return for taxable year 1996 paying the latter PhP 48,030.07 per BIR Form No. 1701A (Annex D, Petition). On June 17, 1997, representatives of petitioner filed an Amended Individual Income Tax Return (BIR Form No. 1701A) and Non-Resident Citizen Income Tax Return (BIR Form No. 1701C) which allegedly reflected the correct taxable gross income of petitioner earned within and outside the Philippines per BIR Form Nos. 1701A and 1701C (Annexes E and F, respectively, Petition) and paid to respondent BIR PhP 17,693.37 per BIR Form No. 1701C and interest due in the amount of Ph 14,455.76. On October 8, 1997, petitioner filed yet another Amended Individual Income Tax Return (BIR Form No. 1701A) (Annex H, Petition) an indication of overpayment in the amount of PhP 358,274.63. Petitioner claims that the Amended Individual Income Tax Return (Annex H, Petition) showed that she made an overpayment of Php 340,918.92 to respondent BIR. Within the 2-year prescriptive period and after the BIR failed to act upon her claim for refund/credit, petitioner filed a Petition for Review with the Court of Tax Appeals. On August 4, 1999, the Court of Tax Appeals dismissed petitioner's Petition for Review on the ground that the latter failed to initially file a written claim for refund with the BIR Commissioner before filing the Petition for Review. That adjudication was based upon the above quoted provision of the 1993 National Internal Revenue Code. Petitioner moved for a reconsideration but the same was denied in the Resolution dated August 4, 1999. ICcDaA Hence, this Petition for Review. In her Petition, petitioner argues that the Court of Tax Appeals was in error in applying the 1993 National Internal Revenue Code instead of the Tax Reform Act of 1997. The petition is meritorious. Note that the tax involved pertained to taxable year 1996 and therefore covered by the regime of the 1993 National Internal Revenue Code, but the petition for review was instituted with the Court of Tax Appeals on April 15, 1999 after the Tax Reform Act of 1997 was already in full force and effect. A resolution of the issue in this case requires a determination of the nature of the above-quoted provisions of law. Are they substantive or remedial laws? Jurisprudence gives the concept of substantive and adjective laws, thus: "Substantive law is that part of the law which creates rights concerning life, liberty or property, or the powers of instrumentalities for the administration of public affairs" (Primicias vs. Ocampo, 81 Phil. 650)." "Procedural law refers to the adjective laws which prescribe rules and forms of procedure in order that courts may be able to administer justice (Lopez vs. Gloria, 40 Phil. 33)." It is clear and plain, therefore, that laws or rules which prescribe remedies and the requirements for the entitlement of said remedies as well as the various modes of procedure to enforce rights are remedial laws. It does not matter whether said laws or rules are embodied in a code or in other statutes or in rules of court prescribed by the Supreme Court for as long as they do not create individual rights or power for the administration of public affairs, they are remedial laws. In light of said concept, this Court has no doubt that the above quoted laws are both procedural laws insofar as they prescribe the method of obtaining a tax refund or credit and the requirements for entitlement to said remedy. Procedural laws can be applied retrospectively to actions still pending and undetermined at the time of their passage . ( Municipal Government of Coron, Palawan v . Cario , 154 SCRA 216; Ruiz v . Court of Appeals , 303 SCRA 637; Atlas v . Court of Appeals , 201 SCRA 51). Conformably with this doctrine, since Sec. 204 (c) of the Tax Reform Act of 1997 was already in effect at the time of the institution of appellant's petition for review with the Court of Tax Appeals, said law may, therefore, be applied retrospectively in the resolution of said petition. Consequently, the filing by petitioner of an Amended Individual Income Tax Return (Annex H, Petition) with the BIR on October 8, 1997 indicating an income tax overpayment of PhP 340,918.92 was sufficient compliance with the requirement of a written claim for refund or credit for tax overpayment entitling her to avail of the remedy of petition for review with the Court of Tax Appeals. This Court, therefore, rules that the Court of Tax Appeals erred in disregarding the foregoing juridical concepts, rules and jurisprudence. WHEREFORE, finding the petition to be meritorious, this Court GRANTS it due course and REVERSES the appealed Resolutions and DIRECTS the Court of Tax Appeals to resolve the Petition for review on the merits. SO ORDERED. Guerrero and Gozo-Dadole, JJ ., concur.