G.R. No. 20057. March 24, 1923

The question at issue in this appeal is purely one of law, and is whether the
exemption of a married person is up to P8,000 or P6,000, in case of income
received by the taxpayer during the year 1920.

In his income tax return for the year 1920, filed March 1, 1921, the
plaintiff stated that the total of his net income of said year amounted to
P8,333.33, and that his exemption as a married man with three children amounted
to P9,200 in all, of which his personal exemption was P8,000; and therefore he
believed himself to be exempt from the payment of income tax.

The defendant, however, did not allow him but P6,000 as personal exemption,
and collected from him as a tax upon the remaining income the sum of P34, which
the plaintiff paid under protest, and which he now seeks to recover in this
action.

The defendant demurred to the complaint on the ground that under the law the
plaintiff was exempted up to P6,000 only.

The demurrer was overruled by the lower court by an order dated February 13,
1922, and that ruling is the subject-matter of this appeal.

Under the original provisions of Act No. 2833 in force in 1920, the personal
exemption was P8,000; but those provisions were in this respect amended by Act
No. 2926 which took effect on January 1, 1921, reducing such exemption to
P6,000.

The plaintiff contends that the law applicable to his income received in
1920, is not Act No. 2926, which took effect on January 1, 1921, but the
previous law, that is to say, Act No. 2833 which was in force in the year
1920.

However, these statutes dealing with the manner of collecting the income tax
and with the deductions to be made in favor of the taxpayer have reference to
the time when the return is filed and the tax assessed. If Act No. 2926 took, as
it did take, effect on January 1, 1921, its provisions must be applied to income
tax returns filed, and assessments made from that date. This is the reason why
Act No. 2833, and Act No. 2926, in their respective first sections, refer to
income received during the preceding civil year.

Wherefore, the order appealed from is reversed, and the demurrer filed by the
defendant sustained, the plaintiff being allowed to amend his complaint within
the period fixed by the Rules.

Without special pronouncement as to costs. So ordered.

Araullo, C.J.,
Street, Malcolm, Avanceña, Ostrand, and Johns, JJ., concur.