College of Oral and Dental Surgery v. Collector of Internal Revenue
REITERATIONFacts
1. The Antecedents: The College of Oral and Dental Surgery, an educational institution, protested the collection of income taxes for the years 1950 and 1951, totaling P6,767.89. The institution claimed exemption under Section 27(f) of the National Internal Revenue Code. The Collector of Internal Revenue denied this claim, citing Republic Act No. 82 and an opinion from the Secretary of Justice that made income derived from profit-making activities taxable regardless of disposition. The Collector further denied a reconsideration, noting that while profits were used for school improvement, the president and treasurer received salaries, and the potential for dissolution and distribution of assets to stockholders indicated indirect benefit to individuals. 2. Procedural History: The College of Oral and Dental Surgery initially protested the tax collection and sought a refund from the Collector of Internal Revenue on November 14, 1952. This protest was denied on January 12, 1953. A subsequent request for reconsideration was denied on April 20, 1955. On April 29, 1955, the College filed a petition for review with the Court of Tax Appeals (CTA Case No. 121). The Collector of Internal Revenue moved to dismiss the petition, arguing that the CTA lacked jurisdiction because the case was filed beyond the two-year prescriptive period under Section 306 of the Tax Code. The CTA granted this motion on December 19, 1955, dismissing the petition for lack of jurisdiction. The College's motion for reconsideration was denied, leading to the present appeal. 3. The Petition: The College of Oral and Dental Surgery appealed to the Supreme Court, arguing that the Court of Tax Appeals erred in dismissing its petition. The core of the petitioner's argument is that Republic Act No. 1125, which created the CTA, superseded Section 306 of the Tax Code. Petitioner contended that under Section 11 of R.A. 1125, the appeal to the CTA should be filed within thirty days of receiving the Collector's decision, and since the denial of reconsideration was received on April 20, 1955, the petition filed on April 29, 1955, was timely. The Supreme Court, however, affirmed the CTA's dismissal, holding that R.A. 1125 could not revive actions already prescribed under the prior law (Section 306 of the Tax Code) at the time of its enactment, as the taxes were paid in 1951 and 1952, and the two-year prescriptive period had already lapsed before R.A. 1125 took effect.
Issue(s)
Whether the Court of Tax Appeals erred in dismissing the petition for review on the ground of lack of jurisdiction due to the expiration of the two-year prescriptive period for filing a suit for the recovery of taxes. Whether Republic Act No. 1125 abrogated the two-year prescriptive period provided in Section 306 of the National Internal Revenue Code for instituting suits for the recovery of taxes.
Ruling
The Supreme Court affirmed the resolution of the Court of Tax Appeals dismissing the petition. The Court held that the petition was filed beyond the two-year prescriptive period provided by Section 306 of the National Internal Revenue Code, thus barring the suit for recovery of taxes. The Court also ruled that Republic Act No. 1125, which created the Court of Tax Appeals, could not be invoked to revive actions that had already prescribed before its enactment.
Ratio Decidendi
On the issue of the two-year prescriptive period: The Court reiterated the principle that no suit or proceeding can be maintained for the recovery of any national internal revenue tax alleged to have been erroneously or illegally assessed or collected until a claim for refund or credit has been duly filed with the Collector of Internal Revenue. Crucially, the Court emphasized that "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." This provision, as construed by this Court in prior cases such as P.J. Kiener Co., Ltd. vs. David, mandates that the taxpayer's failure to institute judicial proceedings within two years after payment of taxes bars recovery, irrespective of whether a claim for refund is still pending with the Collector. The taxes in question were paid in 1951 and 1952, and the petition with the CTA was filed in 1955, clearly exceeding the two-year limit. On the applicability of Republic Act No. 1125: The petitioner argued that Section 11 of Republic Act No. 1125, which grants a 30-day period to appeal to the Court of Tax Appeals from the receipt of the Collector's decision, should govern. However, the Court found this argument untenable. Republic Act No. 1125 took effect on June 16, 1954. Since the taxes were paid in 1951 and 1952, the action for recovery must be governed by the law in force at the time of payment, which was Section 306 of the Tax Code. The Court explicitly stated that "said legislative enactment (Rep. Act No. 1125) cannot be invoked as the action for recovery of the taxes paid in this case must be governed by the pertinent law then enforced." Furthermore, the Court held that there is "no reason to construe R. A. 1125 as reviving actions that have already prescribed on the date of its enactment." Therefore, the prescriptive period under Section 306 of the Tax Code was the controlling law, and the petition was indeed filed out of time.
Main Doctrine
A suit for the recovery of national internal revenue taxes alleged to have been erroneously or illegally assessed or collected must be instituted within two years from the date of payment of the tax, irrespective of any pending claim for refund or reconsideration with the Collector of Internal Revenue. The enactment of Republic Act No. 1125 does not revive actions that have already prescribed.