Commissioner of Internal Revenue v. Bicolandia Drug Corp.

THIRTEENTH DIVISION [CA-G.R. SP No. 62824. May 3, 2001.] THE COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . BICOLANDIA DRUG CORPORATION (formerly known as ELMAS DRUG COMPANY) , respondent . D E C I S I O N VILLARAMA , JR. , J p : This is a petition for review of the Decision of the Court of Tax Appeals in C.T.A. Case No. 5599 which disposed of respondent's claim for refund or issuance of a tax credit certificate as follows: 1 "WHEREFORE, in view of the foregoing, Petitioner's claim for refund is hereby partially GRANTED. Respondent is hereby ORDERED to REFUND in favor of Petitioner the amount of P236,321.52, representing overpaid income tax for the year 1995. "SO ORDERED." The facts as found by the Tax Court are: 2 Respondent is a corporation duly organized and existing under the laws of the Philippines. It is engaged in the business of retailing pharmaceutical products under the business style of "MERCURY DRUG." For the year 1995, respondent granted 20% sales discount to qualified senior citizens on their purchases of medicines pursuant to Section 4 (a) of Republic Act No. 7432, otherwise known as "An Act To Maximize Contribution Of Senior Citizens To Nation Building, Grant Benefits And Special Privileges And For Other Purposes . " Respondent treated these amounts as a deduction from its gross income in compliance with Revenue Regulations No. 2-94 which implemented the aforesaid law. On April 15, 1996, respondent filed its 1995 Corporate Annual Income Tax Return declaring a net loss position with nil income tax liability. Therein, the sales discounts granted to senior citizens were treated as a deduction instead of a tax credit. On December 27, 1996, respondent filed a claim for tax refund or credit with the Appellate Division of the Bureau of Internal Revenue reasoning that: "since petitioner [herein respondent] incurred net losses from its operations during the tax year 1995, it has not benefited from the treatment of sales discounts as a deduction from gross sales during the said taxable year. Hence, petitioner [herein respondent] is entitled to claim the full amount of the sales discount as tax credit." 3 Respondent alleged that petitioner erred in treating the 20% sales discount given to senior citizens as a deduction from its gross income for income tax purposes or other percentage tax purposes rather than as a tax credit. On April 6, 1998, respondent appealed to the court a quo to toll the running of the two (2)-year prescriptive period to file a claim for refund pursuant to Section 230 of the Tax Code, as amended. Thereat, respondent contends that Section 4 of R.A. No. 7432 provides in clear and unequivocal language that discounts granted to senior citizens may be claimed as tax credit. Hence, Section 2 (i) of Revenue Regulations No. 2-94 is illegal, void and without effect for being inconsistent with the statute it seeks to implement. Petitioner, on the other hand, maintains that the revenue regulation in question is valid inasmuch as the Department of Finance which issued the same has the authority to issue the necessary rules and regulations to carry out the objectives of the Act. In due course, the court a quo rendered the questioned judgment by declaring Section 2 (i) of Revenue Regulation No. 2-94 null and void for having been issued in contravention of Section 4 (a) of R.A. No. 7432. Hence, the present petition for review with the sole issue of: 4 "WHETHER OR NOT HEREIN RESPONDENT IS ENTITLED TO THE REFUND OF THE AMOUNT OF P236,321.52, ALLEGEDLY REPRESENTING OVER-PAID INCOME TAX FOR THE YEAR 1995." Petitioner insists that the 20% sales discount granted to senior citizens should be interpreted only as a deduction from gross income/sales of respondent and not as a tax credit considering that the purpose of R.A. No. 7432 is to grant benefits and special privileges to senior citizens and not to give private establishments benefit greater than those granted to senior citizens. In other words, petitioner posits that the court a quo erred in giving and/or applying the literal interpretation of Section 4 (a) of R.A. No. 7432. Petitioner further claims that the 20% sales discount cannot be refunded by way of tax credit because the same was not paid by the respondent to the government as a tax. 5 While We do not agree with petitioner's arguments in support of its appeal, We nevertheless find merit in its present course of action. The provision in question of R.A. No. 7432 reads: "SECTION 4. Privileges for the Senior Citizens . The senior citizens shall be entitled to the following: a) the grant of twenty percent (20%) discount from all establishments relative to utilization of transportation services, hotels and similar lodging establishments, restaurants and recreational centers and purchase of medicines anywhere in the country; Provided, that private establishments may claim the cost as tax credit." Well-settled is the rule that where the statutory norm speaks unequivocally, there is nothing for the courts to do except to apply it. 6 Indeed, where the law speaks in clear and categorical language, there is no room for interpretation or construction. There is only room for application. A plain and unambiguous statute speaks for itself and any attempt to make it clearer is vain labor and tends only to obscurity. 7 Thus, no process of interpretation or construction needs to be resorted to where a provision of law peremptorily calls for application. Consequently, We find no merit in the petitioner's contention that the tax credit allowed by Section 4 (a) to be claimed is only in the nature of a deduction inasmuch as Section 4 (a) of R.A. No. 7432 granting tax credit to establishments giving 20% sales discount is very clear on the matter. It should also be emphasized that if the words and phrases of a statute are not obscure or ambiguous, its meaning and the intention of the legislature must be determined from the language employed, and where there is no ambiguity in the words, there is no room for construction. The courts may not speculate as to the probable intent of the legislature apart from the words as the legislature must be presumed to know the meaning of words, to have used words advisedly and to have expressed its intent by the use of such words as are found in the statute. 8 However, as regards the tax court's award of refund, We are constrained to annul such an award inasmuch as the same was not expressly provided in Section 4 (a) of R.A. No. 7432. Neither could We infer this intention from the proviso allowing the affected establishments to claim the 20% sales discount as tax credit. The reason being that, under our system of taxation, tax refund and tax credit carry different meanings and are not considered synonymous to each other. For, while tax refund is where taxpayers ask for restitution of the money paid as tax, tax credit is where taxpayers ask that money so paid be applied to his/her existing tax liability. Thus, the grant of tax credit does not necessarily carry with it the grant of tax refund unless so provided by law. Hence, in this respect, We apply the concept of strict construction of the law against the respondent because tax refunds are in the nature of tax exemptions and are regarded as in derogation of the sovereign authority. TDEASC WHEREFORE, premises considered, the present appeal is hereby GRANTED and the Decision of the Court of Tax Appeals in C.T.A. Case No. 5599 is hereby MODIFIED in the sense that the award of tax refund is ANNULLED and SET ASIDE. Instead, the petitioner is hereby ORDERED to issue a tax credit certificate in favor of the respondent in the amount of P236,321.52. No pronouncement as to costs. SO ORDERED. Vasquez, Jr . and De Los Santos, JJ . , concur. Footnotes 1. Rollo , p. 31. 2. Decision, Rollo , pp. 22-24. 3. Complaint, Rollo , p. 45. 4. Rollo , p. 12. 5. Rollo , pp. 15-17. 6. Gonzaga vs. Court of Appeals, 51 SCRA 381. 7. 50 Am. Jur. Sec. 255, p. 207, cited in Statutes by Prof. Samson S. Alcantara, 1993 Edition, p. 24. 8. Aparri vs. Court of Appeals, 127 SCRA 231.