G.R. No. L-14421. April 29, 1961.
THE GUAGUA ELECTRIC LIGHT PLANT COMPANY, INC., petitioner, vs. THE COLLECTOR OF INTERNAL REVENUE and THE HON. COURT OF TAX APPEALS, respondents.

FACTS

Petitioner Guagua Electric Light Plant Co., Inc., a domestic corporation, filed a petition for review with the Court of Tax Appeals (CTA) seeking a refund of franchise taxes allegedly overpaid from 1947 to 1954, totaling P18,969.93. It claimed its municipal franchise prescribed tax rates of 1% and 2% of gross earnings, not the 5% rate under Section 259 of the National Internal Revenue Code applied by the Collector of Internal Revenue. Petitioner asserted it discovered a copy of its franchise only in December 1956, after its records were destroyed in the war, and filed its administrative claim for refund on March 27, 1957. The Collector denied the claim on August 27, 1957, and petitioner’s motion for reconsideration was denied on February 3, 1958. It filed its petition for review with the CTA on February 28, 1958.
The Collector moved to dismiss the petition, arguing it was filed beyond the two-year prescriptive period from the date of tax payment mandated by Section 306 of the Tax Code. The CTA granted the motion and dismissed the petition, with one judge concurring in the result on the same prescriptive ground.

ISSUE

Whether the Court of Tax Appeals correctly dismissed the petition for refund for being filed beyond the two-year prescriptive period under Section 306 of the National Internal Revenue Code.

RULING

Yes, the CTA correctly dismissed the petition. The Supreme Court affirmed the dismissal, holding that the two-year prescriptive period under Section 306 is mandatory and jurisdictional. The provision states that no suit for recovery of an erroneously collected tax shall be begun after two years from the date of payment. The Court found it undisputed that both the administrative claim and the judicial petition were filed beyond this period, thus barring the action.
Petitioner’s argument of misrepresentation by the Collector was rejected. The Court noted that a 1953 letter from petitioner to the Collector indicated petitioner itself had represented it was subject to a 5% tax under Republic Act No. 418 , amending the Tax Code. The Collector had no reason to know the terms of petitioner’s municipal franchise, which even petitioner claimed was unknown to it until 1956. Thus, no factual basis for misrepresentation existed. Regardless, the Court ruled Section 306 applies unconditionally, irrespective of the circumstances of payment.
Petitioner’s reliance on Panay Electric Co. v. Collector of Internal Revenue was misplaced. In that case, the prescriptive period was deemed suspended due to special circumstances: a pending Supreme Court case between the parties on the same tax issue and an agreement by the Collector to abide by the Court’s decision. No such pending litigation or agreement existed here. Therefore, the strict two-year limitation applied, and the right to seek a refund via judicial action was extinguished. The resolution of the CTA was affirmed.