G.R. No. 39801 ; March 14, 1934
FILIPINAS COMPAÑIA DE SEGUROS, plaintiff-appellee, vs. JUAN POSADAS, JR., as Collector of Internal Revenue, defendant-appellant.

FACTS

Filipinas Compañia de Seguros received dividends totaling P64,045 from three corporations in 1930. The corporations had already paid the corresponding 3% income tax on these dividends at source. The plaintiff, in its income tax return for 1930, declared these dividends as part of its taxable net income. The Collector of Internal Revenue assessed and collected a 3% normal tax on the plaintiff’s entire net income, which included the P64,045 in dividends. The plaintiff paid the total tax, including the amount attributable to the dividends, voluntarily and without protest. Later, the plaintiff sought a refund of P1,921.35, representing the tax paid on the dividends, claiming they were exempt under the law. The Collector denied the request.

ISSUE

Whether the plaintiff, having paid the income tax voluntarily and without protest, is entitled to a refund of the tax paid on dividends that are admittedly exempt from income tax.

RULING

No. The Supreme Court reversed the trial court’s decision ordering the refund. While the dividends were exempt under Section 10 of the Income Tax Law ( Act No. 2833 ), the right to recover taxes alleged to have been illegally collected is governed by Section 1579 of the Revised Administrative Code, as amended. This section requires that when the validity or amount of a tax is disputed, the taxpayer must pay under protest (either instantly or within thirty days) to preserve the right to sue for recovery. Section 19 of the Income Tax Law makes this procedural requirement applicable to income tax cases. Since the plaintiff paid the tax voluntarily and without the required protest, it lost its right to recover the sum. The defendant was absolved from the complaint, with costs against the plaintiff.

AI Generated by Armztrong.