G.R. No. 41206; September 8, 1934
PHILIPPINE SUGAR ESTATE DEVELOPMENT CO., LTD., INC., plaintiff-appellee, vs. JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.

FACTS

The plaintiff, Philippine Sugar Estate Development Co., Ltd., Inc., paid income taxes on dividends and interest it received from 1916 to 1931. These dividends had already been subjected to tax at source by the distributing corporations. The plaintiff, without filing a protest at the time of payment, later sought a refund of these taxes from the Collector of Internal Revenue, claiming they were paid in excess under the refund provision of Section 14(a) of the Income Tax Law (Act No. 2833). The Collector refused the refund, leading the plaintiff to file this action.

ISSUE

Whether the plaintiff’s action for a tax refund lies despite its failure to pay the taxes under protest as required by Section 1579 of the Revised Administrative Code.

RULING

No. The Supreme Court reversed the lower court’s judgment and dismissed the complaint. The refund provision in Section 14(a) of the Income Tax Law is governed by the general requirement in Section 1579 of the Revised Administrative Code, as amended, which mandates that a taxpayer must pay under protest to preserve the right to sue for recovery. This requirement is made applicable to income tax cases by Section 19 of Act No. 2833, which extends all general tax administration provisions not inconsistent with the law. The Court held that the plaintiff’s failure to pay under protest, or to file a protest within thirty days after payment, barred its right to recover the taxes. The distinction between an error of fact and an error of law is irrelevant, as the law prescribes the protest requirement without such differentiation.

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