Pansacola v. Commissioner of Internal Revenue

ELEVENTH DIVISION [CA-G.R. SP No. 60475. June 5, 2003.] CARMELINO F. PANSACOLA , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N VALDEZ, JR. , J p : Can the increased personal and additional exemptions provided under RA 8424 1 which took effect on January 1, 1998 be availed of by petitioner for the purpose of computing his income tax liability for the taxable year 1997? This is the novel question posed in this Petition for Review 2 filed by Carmelino F. Pansacola assailing the June 13, 2000 Decision 3 of the Court of Tax Appeals denying his claim for tax refund, as well as the August 10, 2000 Resolution 4 of the Tax Court denying his Motion for Reconsideration. Petitioner likewise appeals the Resolution 5 promulgated by the Court of Tax Appeals on January 26, 2000 admitting respondent Commissioner of Internal Revenue's Memorandum. The facts, as found by the Court of Tax Appeals, remain undisputed, thus: "On April 13, 1998, Petitioner filed his annual Income Tax Return for the year 1997 showing an overpayment of P5,950.00 arising from the difference in the manner by which the tax due was computed, detailed as follows: Per appellant Per BIR Difference Gross compensation income P654,270.43 P654,270.43 Less: Personal exemptions P32,000.00 P18,000.00 Additional exemptions P8,000.00 P5,000.00 Taxable income P40,000.00 P23,000.00 P17,000.00 Tax Due P162,169.65 P168,119.65 Less: Withholding tax P168,119.65 P168,119.65 (BIR W-2) Refundable Amount P5,950.00 P P5,950.00 "Petitioner computed the tax due in his return on the basis of RA 8424, otherwise known as the Tax Reform Act of 1997, granting personal exemption as a married individual in the amount of P32,000.00 and an additional exemption of P8,000.00 for each dependent. On the other hand, the tax withheld from petitioner as shown by his Certificate of Income Tax Withheld on Compensation was arrived at pursuant to RA 7167 which granted a personal exemption of P18,000.00 for married individuals and P5,000.00 for each dependent. Thus, on April 16, 1999, Petitioner(,) invoking the provisions of RA 8424 as applicable to his case, filed a claim for refund before the office of herein Respondent (Annex B, Petition for Review). Through a letter dated June 7, 1999 which was received by petitioner on July 22, 1999, Respondent denied with finality Petitioner's claim for refund (Annex C, Petition for Review). Hence, the instant petition." 6 On June 13, 2000, the Court of Tax Appeals issued the assailed Decision denying petitioner's claim for tax refund for lack of merit. His Motion for Reconsideration was also denied through a Resolution dated August 10, 2000. SIcCTD Petitioner Carmelino F. Pansacola is now before us raising the following issues to wit: "THE ISSUES "I. Petitioner's constitutional right of due process was violated when the Court of Tax Appeals promulgated its Resolution dated January 26, 2000. "II. Petitioner's constitutional right to equal protection of the laws was violated when the Court of Tax Appeals promulgated its Resolution dated January 26, 2000. "III. The Court of Tax Appeals erred in denying Petitioner's claim for refund with brazen disregard for the pronouncements of the Highest Tribunal." 7 The first two issues raised pertain to procedural matters. Before the Court of Tax Appeals rendered its assailed decision respondent filed a Motion to Admit Respondent's Memorandum 8 dated January 13, 2000. This was opposed by petitioner through an Urgent Motion to Deny Respondent's Motion and/or Reset Hearing 9 which was dated January 19, 2000. During the scheduled hearing on January 21, 2000, the Tax Court, in the absence of both parties and their respective counsels, admitted respondent's memorandum and denied petitioner's motion. The case was thus submitted for decision in a Resolution 10 dated January 26, 2000. In his February 11, 2000 Motion for Reconsideration, petitioner faulted the court a quo for admitting respondent's memorandum: 1) even if it was filed out of time; and 2) despite respondent's alleged failure to comply with the service requirement under Section 4, Rule 15 11 of the 1997 Rules of Civil Procedure. The Tax Court denied petitioner's motion through its March 10, 2000 Resolution 12 where it held that the Motion to Admit Respondent's Memorandum, being a motion ex parte , may be filed without notice to the other party because the question presented therein is not debatable Without delving into the matter of whether respondent's motion can be considered a motion ex parte or not, the fact is, respondent's memorandum was filed eleven (11) days late. During the December 2, 1999 hearing 13 of the case, the court a quo directed both parties to submit their respective memoranda within thirty (30) days, or on January 1, 2000. Since this is a regular holiday, the parties' memoranda should have been filed the next working day, January 2, 2000. Respondent, however, submitted his memorandum only on January 13, 2000. On this score, we find the Tax Court to have acted with grave abuse of discretion when it admitted respondent's memorandum. Nevertheless, even without the questioned memorandum of respondent, petitioner's assertions with respect to the merits of this case have no leg to stand on. Petitioner avers that the ruling enunciated in the case of Umali vs. Estanislao 14 is applicable to RA 8424. The bone of contention in the Umali case is the effectivity of Rep. Act 7167, entitled "AN ACT ADJUSTING THE BASIC PERSONAL AND ADDITIONAL EXEMPTIONS ALLOWABLE TO INDIVIDUALS FOR INCOME TAX PURPOSES TO THE POVERTY THRESHOLD LEVEL, AMENDING FOR THE PURPOSE SECTION 29, PARAGRAPH (L), ITEMS (1) AND (2)(A) OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES". Section 3 of Rep. Act 7167 provides that "this act shall take effect upon its approval". Said Act was signed and approved by the President on December 19, 1991 and published in the January 14, 1992 issue of the MALAYA , a newspaper of general circulation. The principal issues in the Umali case were the following: (1) whether or not Rep. Act 7167 took effect upon its approval by the President on December 19, 1991, or on January 30, 1992, which is after fifteen (15) days following its publication in a newspaper of general circulation; and (2) assuming that Rep. Act 7167 took effect on January 30, 1992, whether or not the said law nonetheless covers or applies to compensation income earned or received during the calendar year 1991. ASaTHc In holding that Rep. Act 7167's effectivity date is January 30, 1992, which is after fifteen (15) days following its publication in the January 14, 1992 issue of the MALAYA , the Supreme Court relied on its ruling in Caltex (Phils.), Inc. vs. The Commissioner of Internal Revenue (G.R. No. 97282, June 26, 1991), to wit: "The central issue presented in the instant petition is the effectivity of R.A. 6965 entitled: 'An Act Revising the Form of Taxation on Petroleum Products from Ad Valorem to Specific, Amending For the Purpose Section 145 of the National Internal Revenue Code, As amended by Republic Act Numbered Sixty Seven Hundred Sixty Seven.' "Section 3 of R.A. 6965 contains the effectivity clause which provides, 'This Act shall take effect upon its approval.' "R.A. 6965 was approved on September 19, 1990. It was published in the Philippine Journal, a newspaper of general circulation in the Philippines, on September 20, 1990. Pursuant to the Act, an implementing regulation was issued by the Commissioner of Internal Revenue, Revenue Memorandum Circular 85-90, stating that R.A. 6965 took effect on October 5, 1990. Petitioner took exception thereof and argued that the law took effect on September 20, 1990 instead. "Pertinent is Article 2 of the Civil Code (as amended by Executive Order No. 200) which provides: 'Article 2. Laws shall take effect after fifteen days following the completion of their publication either in the official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided. . . .' "In the case of Taada vs. Tuvera (L-64915, December 29, 1986, 146 SCRA 446, 452) we construed Article 2 of the Civil Code and laid down the rule: '. . .: the clause 'unless it is otherwise provided' refers to the date of effectivity and not to the requirement of publication itself, which cannot in any event be omitted. This clause does not mean that the legislator may make the law effective immediately upon approval, or on any other date without its previous publication.' 'Publication is indispensable in every case, but the legislature may in its discretion provide that the usual fifteen-day period shall be shortened or extended. . . .' "Inasmuch as R.A. 6965 has no specific date for its effectivity and neither can it become effective upon its approval notwithstanding its express statement, following Article 2 of the Civil Code and the doctrine enunciated in Taada, supra., R.A. 6965 took effect fifteen days after September 20, 1990, or specifically, on October 5, 1990." 15 With respect to the second issue in the Umali case, the Supreme Court was of the view that Rep. Act 7167 should cover or extend to compensation income earned or received during the calendar year 1991, citing the following reasons therefor: ". . . Rep. Act 7167 speaks of the adjustments that it provides for, as adjustments ' to the poverty threshold level .' Certainly, ' the poverty threshold level ' is the poverty threshold level at the time Rep. Act 7167 was enacted by Congress, not the poverty threshold levels in futuro , at which time there may be need of further adjustments in personal exemptions. xxx xxx xxx "And then Rep. Act 7167 says that the increased personal exemptions that it provides for shall be available thenceforth, that is, after Rep. Act 7167 shall have become effective. In other words, these exemptions are available upon the filing of personal income tax returns which is, under the National Internal Revenue Code, done not later than the 15th day of April after the end of a calendar year. Thus, under Rep. Act 7167, which became effective, as aforestated, on 30 January 1992, the increased exemptions are literally available on or before 15 April 1992 (though not before 30 January 1992). But these increased exemptions can be available on 15 April 1992 only in respect of compensation income earned or received during the calendar year 1991 . "The personal exemptions as increased by Rep. Act 7167 cannot be regarded as available in respect of compensation income received during the 1990 calendar year; the tax due in respect of said income had already accrued, and had been presumably paid, by 15 April 1991 and by 15 July 1991, at which time Rep. Act 7167 had not been enacted. To make Rep. Act 7167 refer back to income received during 1990 would require language explicitly retroactive in purport and effect, language that would have to authorize the payment of refunds of taxes paid on 15 April 1991 and 15 July 1991: such language is simply not found in Rep. Act 7167. 16 Respondent Commissioner of Internal Revenue maintains that the Umali case finds no application in the case at bar. We agree. cSaADC The ambiguity surrounding the effectivity date of Rep. Act 7167 cannot be found in RA 8424 for the latter law, which was approved on December 11, 1997, categorically states that it shall take effect on January 1, 1998. This, the parties do not dispute. As such, we find the Court of Tax Appeals to have correctly ruled that: "For the purpose of determining the tax due from an individual taxpayer's income earned on a particular year, the law allows the deduction of basic personal and additional exemption of the taxpayer certainly for the same taxable year. It would be absurd for the law to allow the deduction from a taxpayer's gross income earned on a certain year of exemptions availing on a different taxable year. And like business expenses which are required to be paid or incurred during the taxable year in order that they may be allowed as deductions, personal and additional exemptions, though fixed amounts, likewise refer to the status of the taxpayer at the end of the year. This is why under Section 35(C) of the Tax Code, the taxpayer may still claim in full the exemptions corresponding for a taxable year where a change of status has occurred during such year, thus: "Sec. 35. Allowance of Personal Exemption for Individual Taxpayer . (C) Change of Status. If the taxpayer marries or should have additional dependent(s) as defined above during the taxable year , the taxpayer may claim the corresponding additional exemption, as the case may be, in full for such year . "If the taxpayer dies during the taxable year , his estate may still claim the personal and additional exemptions for himself and his dependent(s) as if he died at the close of such year . "If the spouse or any of the dependents dies or if any of such dependents marries, becomes twenty-one (21) years old or becomes gainfully employed during the taxable year , the taxpayer may still claim the same exemptions as if the spouse or any of the dependents died, or as if such dependents married, became twenty-one (21) years old or became gainfully employed at the close of such year ." "Clearly from the above, what the law considers for purposes of determining the tax due from an individual taxpayer is his status and qualified dependents at the close of the taxable year and not at the time of the filing of the return and payment of the tax due thereon, as alleged by Petitioner." 17 Petitioner cannot thus validly claim that, like Rep. Act 7167, the personal and additional exemptions under RA 8424 can be availed of a year prior to said law's effectivity. It is a cardinal rule in statutory construction that courts must give effect to the general legislative intent that can be discovered from or is unraveled by the four corners of the statute, and in order to discover said intent, the whole statute, and not only a particular provision thereof, should be considered. 18 It is clear that the legislative intent behind Rep. Act 7167, which became effective on January 30, 1992, was to make the increased personal and additional exemptions apply to the taxable year 1991. Rep. Act 7167 was enacted or approved on December 19, 1991. The title of said law clearly states that it is an Act "adjusting the basic personal and additional exemptions allowable to individuals for income tax purposes to the poverty threshold level . . .". The poverty threshold level referred to was determined by the Supreme Court in the Umali case to mean the poverty threshold level at the time the law was enacted by Congress, which is December 19, 1991. Thus, even if said law's effectivity date is January 30, 1992, which is after fifteen (15) days following its publication in a newspaper of general circulation, it was held that the personal and additional exemptions provided under Rep. Act 7167 were meant to be applied for the taxable year 1991, in keeping with the law's objective which was to adjust said tax exemptions vis-a-vis the poverty threshold level at the time of its enactment. This was the reason why the Supreme Court had to make it painstakingly clear that although Rep. Act 7167 was approved in December 19, 1991, the increased exemptions laid out therein cannot refer back to income received during 1990, for that is simply not found in the language of said law. The circumstances attendant to Rep. Act 7167, however, are entirely different from those of RA 8424. CIHTac There is no question that RA 8424 took effect on January 1, 1998. It is a recognized principle that where the provision of the law is clear and unambiguous, so that there is no occasion for the court's seeking the legislative intent, the law must be taken as it is, devoid of judicial addition or subtraction 19 . This means then that the increased personal and additional exemptions laid out in Section 35 of RA 8424 were meant to be applied beginning the taxable year 1998, which exemptions were to be reflected in the taxpayer's income tax returns to be filed on or before April the following year. RA 8424, though approved by Congress in December 11, 1997, cannot be made to retroact to the taxable year 1997 for the simple reason that the effectivity clause of said Act specifically states that the same shall take effect on January 1, 1998. A statute should be considered as prospective in its operation whether it enacts, amends or repeals a tax, unless the language of the statute clearly demands or expresses that it shall have a retroactive effect 20 . WHEREFORE, the instant petition is DENIED for lack of merit. The Memorandum of Respondent Commissioner of Internal Revenue dated January 12, 2000 21 is hereby ORDERED stricken off the records of this case. SO ORDERED. Reyes and Pine, JJ . , concur. Footnotes 1. Also known as the Tax Reform Act of 1997. 2. Petition for review, Rollo , pp. 221. 3. Annex "A", Ibid ., pp. 2229. 4. Annex "B", Ibid ., p. 30. 5. Annex "C", Ibid ., p. 31. 6. Annex "A", Supra ., pp. 2223. 7. Petition for Review, Supra ., pp. 45. 8. Annex "I", Ibid ., pp. 5556. 9. Annex "G", Ibid ., pp. 3941. 10. Annex "C", Ibid ., p. 31. 11. "Sec. 4. Hearing of motion . Except for motions which the court may act upon without prejudicing the rights of the adverse party, every written motion shall be set for hearing by the applicant. "Every written motion required to be heard and the notice of the hearing thereof shall be served in such a manner as to ensure its receipt by the other party at least three (3) days before the date of the hearing, unless the court for good cause sets the hearing on shorter notice." 12. Annex "D", Petition for Review, Rollo , pp. 3234. 13. Annex "H", Ibid ., p. 53. 14. 209 SCRA 446 (1992). 15. As cited in Umali vs. Estanislao, Supra , pp. 450451. 16. Ibid ., pp. 453454. 17. Annex "A", Supra ., pp. 2728. 18. Commissioner of Internal Revenue vs. TMX Sales, Inc . 205 SCRA 184, 188 (1992), citing Manila Lodge No. 761, et al. vs. Court of Appeals, et al ., 73 SCRA 162 (1976). 19. Acting Commissioner of Customs vs. Manila Electric Company , 77 SCRA, 469, 473474 (1977). 20. Commissioner of Internal Revenue vs. Filipinas Compaia de Seguros , 107 Phil 1055, 1058 (1960). 21. Annex "I", Rollo , pp. 5561.