G.R. No. L-11494; January 28, 1961
THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs. THE COURT OF TAX APPEALS and HUME PIPE and ASBESTOS CO., INC., respondents.

FACTS

Respondent Hume Pipe & Asbestos Co., Inc., a domestic corporation, filed its income tax return for the fiscal year ending March 31, 1954, declaring a net taxable income. The Collector of Internal Revenue assessed and collected the corresponding tax, which the company paid in two installments on August 14, 1954, and November 11, 1954. Almost two years later, on June 12, 1956, the company filed a petition for refund with the Bureau of Internal Revenue, claiming an overpayment. It argued that only 25% of certain dividends it received should have been included in its taxable income, pursuant to Section 24 of the National Internal Revenue Code.
On August 14, 1956, before the Collector could rule on the refund petition, the company filed a petition for review directly with the Court of Tax Appeals (CTA), seeking to compel the refund. The Collector filed an answer, arguing the assessment was correct and asserting the CTA lacked jurisdiction because no final decision had been rendered on the administrative claim for refund. The CTA, after a preliminary hearing, issued a resolution holding it had jurisdiction and set the case for hearing on the merits. The Collector then filed the instant petition for certiorari and prohibition, challenging this interlocutory resolution.

ISSUE

Whether the Court of Tax Appeals correctly assumed jurisdiction over the taxpayer’s petition for review despite the absence of a formal decision from the Collector of Internal Revenue on the pending administrative claim for refund.

RULING

The Supreme Court dismissed the Collector’s petition. First, it ruled that the challenged CTA resolution was merely interlocutory, as it did not terminate the case but merely scheduled a hearing on the merits. An appeal from an interlocutory order is not permissible; only final rulings may be appealed to prevent multiple appeals and judicial inefficiency.
On the substantive jurisdictional question, the Court upheld the CTA’s authority to take cognizance of the case. The legal logic centers on the interplay between the prescriptive period for filing refund suits and administrative inaction. Under Section 306 of the National Internal Revenue Code, a judicial claim for refund must be filed within two years from tax payment. The company paid the first installment on August 14, 1954, and filed its court petition on August 14, 1956—the last day of the two-year period. The Collector had held the administrative claim for over two months without action.
The Court reasoned that a taxpayer cannot be compelled to wait indefinitely for an administrative decision at the risk of letting the statutory period lapse. To require a formal denial from the Collector before allowing judicial recourse would leave the taxpayer at the mercy of administrative delay and potentially deprive them of their right to a judicial remedy. Therefore, when the Collector fails to act on a refund claim within a reasonable time, and the prescriptive period is about to expire, the taxpayer may—and indeed must—presume a denial and file the corresponding judicial action to preserve its claim. The CTA correctly assumed jurisdiction under these circumstances to prevent a failure of justice.