SECOND DIVISION
COMMISSIONER OF INTERNAL G.R. No. 148512
REVENUE,
Petitioner, Present:
PUNO,
J., Chairperson,
-
versus – SANDOVAL-GUTIERREZ,
AZCUNA,
and
GARCIA,
JJ.
CORPORATION, Promulgated:
Respondent.
June
26, 2006
x
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x
DECISION
AZCUNA,
J.:
This
is a petition for review under Rule 45 of the Rules of Court seeking the nullification
of the Decision, dated May 31, 2001, of the Court of Appeals (CA) in CA-G.R. SP
No. 60057, entitled “Central Luzon Drug Corporation v. Commissioner of Internal
Revenue,” granting herein respondent Central Luzon Drug Corporation’s claim for
tax credit equal to the amount of the 20% discount that it extended to senior
citizens on the latter’s purchase of medicines pursuant to Section 4(a) of Republic
Act (R.A.) No. 7432, entitled “An Act to Maximize the Contribution of Senior Citizens to Nation Building, Grant
Benefits and Special Privileges and for other Purposes” otherwise known as the
Senior Citizens Act.
The
antecedents are as follows:
Central Luzon Drug Corporation
has been a retailer of medicines and other pharmaceutical products since
For the period January 1995 to
December 1995, in conformity to the mandate of Sec. 4(a) of R.A. No. 7432,
petitioner granted a 20% discount on the sale of medicines to qualified senior
citizens amounting to P219,778.
Pursuant
to Revenue Regulations No. 2-94[1]
implementing R.A. No. 7432, which states that the discount given to senior
citizens shall be deducted by the establishment from its gross sales for
value-added tax and other percentage tax purposes, respondent deducted the
total amount of P219,778 from its gross income for the taxable year
1995. For said taxable period, respondent reported a net loss of P20,963
in its corporate income tax return. As a
consequence, respondent did not pay income tax for 1995.
Subsequently, on P219,778
should be applied as a tax credit, respondent filed a claim for refund in the
amount of P150,193, thus:
Net
Sales P 37,014,807.00
Add:
Cost of 20% Discount
to
Senior Citizens 219,778.00
Gross Sales P
37,234,585.00
Less:
Cost of
Sales
Merchandise
Inventory, beg P
1,232,740.00
Purchases 41,145,138.00
Merchandise
Inventory, end 8,521,557.00 33,856,621.00
Gross
Profit P
3,377,964.00
Miscellaneous
Income 39,014.00
Total Income 3,416,978.00
Operating
Expenses 3,199,230.00
Net Income Before Tax P 217,748.00
Income
Tax (35%) 69,585.00
Less:
Tax Credit
(Cost
of 20% Discount
to Senior Citizens) 219,778.00
Income Tax Payable (P
150,193.00)
Income Tax Actually Paid -0-
Tax
Refundable/Overpaid Income Tax (P
150,193.00)
As
shown above, the amount of P150,193 claimed as a refund represents the
tax credit allegedly due to respondent under R.A. No. 7432. Since the
Commissioner of Internal Revenue “was not able to decide the claim for refund
on time,”[2] respondent
filed a Petition for Review with the Court of Tax Appeals (CTA) on
On
Thus,
respondent filed with the CA a Petition for Review on
On
WHEREFORE,
the instant petition is hereby GRANTED and the decision of the CTA dated
SO ORDERED.[4]
Hence,
this petition raising the sole issue of whether the 20% sales discount granted
by respondent to qualified senior citizens pursuant to Sec. 4(a) of R.A. No.
7432 may be claimed as a tax credit or as a deduction from gross sales in
accordance with Sec. 2(1) of Revenue Regulations No. 2-94.
Sec. 4(a) of R.A. No. 7432 provides:
Sec. 4. Privileges for the Senior citizens. – The senior citizens shall be entitled to the following:
(a)
the grant of twenty percent (20%) discount from all
establishments relative to utilization of transportations services, hotels and
similar lodging establishments, restaurants and recreation centers and purchase
of medicines anywhere in the country: Provided, That private establishments may claim the cost as tax credit.
The CA and the CTA correctly ruled
that based on the plain wording of the law discounts given under R.A. No. 7432
should be treated as tax credits, not deductions from income.
It is a fundamental rule in statutory
construction that the legislative intent must be determined from the language
of the statute itself especially when the words and phrases therein are clear
and unequivocal. The statute in such a case must be taken to mean exactly what
it says.[5]
Its literal meaning should be followed;[6] to
depart from the meaning expressed by the words is to alter the statute.[7]
The above provision explicitly
employed the word “tax credit.” Nothing
in the provision suggests for it to mean a “deduction” from gross sales. To
construe it otherwise would be a departure from the clear mandate of the law.
Thus, the 20% discount required by
the Act to be given to senior citizens is a tax credit, not a deduction from
the gross sales of the establishment concerned. As a corollary to this, the
definition of ‘tax credit’ found in Section 2(1) of Revenue Regulations No.
2-94 is erroneous as it refers to tax
credit as the amount representing the 20% discount that “shall be deducted by the said
establishment from their gross sales for value added tax and other percentage
tax purposes.” This definition is contrary to what our lawmakers had envisioned
with regard to the treatment of the discount granted to senior citizens.
Accordingly, when the law says that
the cost of the discount may be claimed as a tax credit, it means that the
amount -- when claimed – shall be treated as a reduction from any tax
liability.[8] The law cannot be amended by a mere
regulation. The administrative agencies issuing these regulations may not
enlarge, alter or restrict the provisions of the law they administer.[9] In
fact, a regulation that “operates to create a rule out of harmony with the
statute is a mere nullity.”[10]
Finally, for purposes of clarity, Sec.
229[11]
of the Tax Code does not apply to cases that fall under Sec. 4 of R.A. No. 7432
because the former provision governs exclusively all kinds of refund or credit
of internal revenue taxes that were erroneously or illegally imposed and
collected pursuant to the Tax Code while the latter extends the tax credit
benefit to the private establishments concerned even before tax payments have
been made. The tax credit that is contemplated under the Act is a form of just
compensation, not a remedy for taxes that were erroneously or illegally
assessed and collected. In the same vein, prior payment of any tax liability is
not a precondition before a taxable entity can benefit from the tax credit. The
credit may be availed of upon payment of the tax due, if any. Where there is no
tax liability or where a private establishment reports a net loss for the
period, the tax credit can be availed of and carried over to the next taxable
year.
It must also be stressed that unlike in
Sec. 229 of the Tax Code wherein the remedy of refund is available to the
taxpayer, Sec. 4 of the law speaks only of a tax credit, not a refund.
As earlier mentioned, the tax credit
benefit granted to the establishments can be deemed as their just compensation
for private property taken by the State for public use. The privilege enjoyed
by the senior citizens does not come directly from the State, but rather from
the private establishments concerned.[12]
WHEREFORE, the petition is DENIED. The
Decision of the Court of Appeals in CA-G.R. SP No. 60057, dated
No pronouncement as to costs.
SO ORDERED.
ADOLFO S. AZCUNA
Associate Justice
WE
CONCUR:
REYNATO S. PUNO
Chairperson
Associate Justice
ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA
Associate Justice
Associate Justice
CANCIO C. GARCIA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the
Constitution and the Division Acting Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
ARTEMIO V. PANGANIBAN
Chief Justice
[1] Section 2(i) of Revenue
Regulations No. 2-94:
i. Tax Credit
– refers to the amount representing the 20% discount granted to a qualified
senior citizen by all establishments relative to their utilization of
transportation services, hotels and centers, theaters, cinema houses, concert
halls, circuses, carnivals and other similar places of culture, leisure and
amusement, which discount shall be deducted by the said establishment from
their gross sales for value-added tax and other percentage tax purposes.
[2] Rollo,
p. 24.
[3]
[4]
[5] Banawa v. Mirano, G.R. No. 24750,
[6] Tan Lin v. Republic, 112 Phil. 308
(1961).
[7] Tañada v. Yulo, 61 Phil. 515 (1935).
[8]
[9] Pilipinas Kao, Inc. v. Court of Appeals,
G.R. No. 105014, December 18, 2001, 372 SCRA 548.
[10]
[11] SEC.
229. Recovery of Tax Erroneously or Illegally Collected. – No suit or
proceeding shall be maintained in any
court for the recovery of any national internal revenue tax hereafter alleged
to have been erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum alleged to have
been excessively or in any manner wrongfully collected, until a claim for
refund or credit has been duly filed with the Commissioner; but such suit or
proceeding may be maintained, whether or not such tax, penalty or sum has been
paid under protest or duress.
In any case, no such suit or
proceeding shall be filed after the expiration of two (2) years from the date
of payment of the tax or penalty regardless of any supervening cause that may
arise after payment: Provided, however, That the Commissioner may, even
without a written claim therefor, refund or credit any tax, where on the face
of the return upon which payment was made, such payment appears clearly to have
been erroneously paid.
[12] Commissioner
of Internal Revenue v. Central Luzon Drug Corporation, G.R. No. 159647,