GR 24221; (December, 1967) (Digest)
G.R. No. L-24221 December 11, 1967
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. INSULAR LUMBER COMPANY and COURT OF TAX APPEALS, respondents.
FACTS
Insular Lumber Company, a corporation licensed to do business in the Philippines, purchased 292,274.76 liters of refined and manufactured oils and fuels from Standard-Vacuum Oil Co. in 1958. It used these oils in its logging operations during the same year. The specific tax imposed by Section 142 of the Tax Code, amounting to P21,452.42, was paid by Standard-Vacuum Oil Co. before the oils’ removal from the distillery. On February 23, 1961, Insular Lumber Company filed a claim with the Commissioner of Internal Revenue for a refund of P5,363.22, representing 25% of the specific tax paid, pursuant to Section 5 of Republic Act 1435, which grants a refund to forest concessionaires for oils used in their operations. The Commissioner denied the claim on September 28, 1961, stating it was filed beyond the two-year prescriptive period under Section 306 of the Tax Code. After its motion for reconsideration was denied, Insular Lumber Company appealed to the Court of Tax Appeals, which, on January 13, 1965, reversed the Commissioner’s decision and ordered the refund. The Commissioner appealed this judgment to the Supreme Court.
ISSUE
Whether or not the right to file the claim for refund has prescribed.
RULING
Yes, the right to file the claim for refund has prescribed. The Supreme Court reversed the decision of the Court of Tax Appeals. It held that Sections 306 and 309 of the National Internal Revenue Code govern all refunds of internal revenue taxes, whether the tax was erroneously/illegally collected or legally collected but later became refundable due to a supervening cause. The two-year prescriptive period for filing a claim for refund begins to run from the date of payment if the tax was erroneously or illegally collected. However, if the tax was legally collected, the prescriptive period commences from the date of the occurrence of the supervening cause that gives rise to the right to a refund. In this case, the supervening cause was the use of the oils in logging operations in 1958. Since the claim was filed on February 23, 1961, and the appeal to the Court of Tax Appeals was filed on February 17, 1962, both dates were more than two years after 1958, the claim had prescribed. The Court modified the ruling in Muller & Phipps (Manila) Ltd. v. Collector of Internal Revenue accordingly and dismissed the petition for refund.