FILIPINAS COMPANFA DE SEGUROS, PLAINDFF AND APPELLEE, VS. JUAN POSADAS, JR., AS COLLECTOR OF INTERNAL REVENUE, DEFENDANT AND APPELLANT.

This is an appeal taken by the defendant,
as Collector of Internal Revenue, from a judgment rendered by the Court
of First Instance of Manila, ordering him to pay to the plaintiff the
sum of P1,921.35, with the costs. The amount in question represents the
normal tax of 3 per cent on the sum of P64,045 which the plaintiff
received as dividends from three corporations.

The material and pertinent facts of the case have been agreed upon by the parties and are as follows:

“I. That the facts alleged in paragraphs 1 and 11 of the complaint are admitted.

“II. That the plaintiff, with the competent authority of the Insurance
Commissioner, has invested part of its funds in shares of other
corporations.

“III. That, as such shareholder, the plaintiff
received from other corporations dividends or net profits for the year
1930, the amounts being more particularly specified as follows:

Central Azucarera de Bais………………………………………………….	P1,200.00
Insular Life Assurance Co., Ltd………………………………………..	40,000.00
The Philippine Guaranty Co…………………………………………….	22,845.00
	__________
Total…………………………………………………………………….	64,045.00

“IV. That on the amounts specified in the next
preceding paragraph, the corresponding 3 per cent income tax has
already been paid at source by each of the above-named corporations.

“V. That the plaintiff, on or about January 27, 1931, filed voluntarily
with the defendant its income tax return for the calendar year ended
December 31, 1930, in a form furnished by the defendant marked herein
Exhibit A, and the said plaintiff declared in said return dividends
received from other corporations, among them and as a part thereof
being the P64,045 specified in paragraph III of this agreement; that
the defendant, acting under the authority of the provisions of section
14 (a) of Act No. 2833, commonly known as the Income Tax Law,
computed the three (3) per cent normal tax on the sum of P493,349.76,
the entire taxable net income of the plaintiff as declared in its
aforesaid return; that the plaintiff was notified of this assessment on
or about February 13, 1931.

“VI. That, on June 12, 1931, the
plaintiff paid the said sum of P14,800.49, voluntarily and without
protest, of which sum the amount of P1,921.35 represents the income tax
due on the dividends or net profits in the aggregate amount of P64,045
as specified in paragraph III of this agreement.

“VII. That,
on July 31, 1931, the plaintiff through its attorney requested the
refund or reimbursement of the said tax in the sum of P1,921.35, but
the defendant under its letter dated June 13, 1932, denied said request.

“VIII. That both parties hereby reserve the right to introduce further evidence in support of their pleadings.”

The defendant assigns the following four alleged errors as committed by the trial court in its appealed judgment, to wit:

“I. The trial court erred in holding that, under section 14 (a) of Act No. 2833, appellee can recover income taxes paid without protest.

“II. The trial court erred in sentencing defendant-appellant to pay appellee the sum of P1,921.35.

“IIL The trial court erred in sentencing defendant-appellant to the payment of the costs of this action.

“IV. The trial court erred in denying the motion for new trial of defendant-appellant.”

The parties admit that the dividends amounting to P64,045, which
the plaintiff received from other corporations, are exempt from the
payment of income tax in accordance with the provisions of section 10
of Act No. 2833, as amended by Acts Nos. 2926 and 3761. However, the
defendant contends that the plaintiff has lost its right to ask for the
refund of the tax paid by it on the ground that it was voluntarily paid
and no protest was filed within the period prescribed by law for that
purpose.

The trial court based its decision on the saving clause contained in section 14 (a) of Act No. 2833 which reads as follows:

“SEC. 14. (a) All assessments shall be
made by the Collector of Internal Revenue, and the several
corporations, joint-stock companies, partnerships, joint-accounts
(cuentas en participacion), associations, and insurance companies shall
be notified of the amount for which they are respectively liable on or
before the first day of June of each year, and said assessment shall be
paid on or before the fifteenth day of June: Provided, That
every corporation, joint-stock company, partnership, joint-account
(cuenta en participacion), association, and insurance company,
computing taxes upon the income of the fiscal year which it may
designate in the manner hereinbefore provided, shall pay the taxes due
under its assessments within one hundred and five days after the date
upon which it is required to file its list or return of income for
assessment; except in cases of refusal or neglect to make such return,
and in cases of erroneous, false, or fraudulent returns, in which cases
the Collector of Internal Revenue shall, upon the discovery thereof, at
any time within three years after said return is made or due, make a
return upon information obtained as provided for in this law or by
existing law or require the return made to be corrected and the
assessment made by the Collector of Internal Revenue thereon shall be
paid by such corporation, joint-stock company, partnership,
joint-account (cuenta en participacion), association, or insurance
company immediately upon notification of the amount of such assessment;
and to the tax due and unpaid after the fifteenth day of June of any
year, or after one hundred and five days from the date on which the
return of income is required to be made by the taxpayer, and after ten
days’ notice and demand thereof by the Collector, there shall be added
five per centum on the amount and interest at the rate of one per
centum per month upon the said tax, from the time the same becomes due:
Provided, That upon the examination of any return of income
made pursuant to this law, if it shall appear that amounts of tax have
been paid in excess of those properly due, the taxpayers shall be
permitted to present a claim for refund thereof.”

The trial court held that inasmuch as the refund authorized in the
last clause of the above-quoted section is not made to depend upon any
condition precedent, a protest was not an indispensable requisite and
the absence thereof did not deprive the plaintiff of its right to bring
the action.

This court is of the opinion that the conclusion of law arrived at
by the trial court is erroneous. In interpreting section 14 (a),
it did not take into consideration the provisions of section 1579 of
the Revised Administrative Code, as amended by Act No. 3685, and those
of section 19 of Act No. 2833, which read as follows:

“SEC. 1579. Recovery of tax paid under protest.—When
the validity of any tax is questioned, or its amount disputed, or other
question raised as to liability therefor, the person against whom or
against whose property the same is sought to be enforced shall pay the
tax under instant protest, or upon protest within thirty days, and
shall thereupon request the decision of the Collector of Internal
Revenue. If the decision of the Collector of Internal Revenue is
adverse, or if no decision is made by him within six months from the
date when his decision was requested, the taxpayer may proceed, at any
time within two years after the payment of the tax to bring an action
against the Collector of Internal Revenue for the recovery without
interest of the sum alleged to have been illegally collected, the
process to be served upon him, upon the provincial treasurer, or upon
the officer collecting the tax.”

“SEC. 19. All
administrative, special, and general provisions of law, including the
laws in relation to the assessment, remission, collection, and refund
of internal-revenue taxes not Heretofore specifically repealed and not
inconsistent with the provisions of this law are hereby extended and
made applicable to all of the provisions of this law and to the tax
herein imposed.”

According to the said section 1579, when the validity of any tax is
questioned, or its amount disputed, or other question raised as to
liability therefor, the taxpayer, if he desires to preserve his right,
should pay it under instant protest, or upon protest within thirty (30)
days from the date of such payment. Section 19 extended such rule and
made it applicable to all the provisions contained in Act No. 2833,
otherwise known as the Income Tax Law. Applying the rules on
interpretation of laws, it is evident that the refund authorized under
the last clause of section 14 (a) should be understood as
subject to the indispensable prerequisite or condition precedent that
the taxpayer should make the payment under protest, to be filed
immediately or within thirty (30) days after such payment is made.

It being admitted that the plaintiff did not pay under protest the
tax which it now seeks to recover, nor did it file such protest within
the period of thirty (30) days fixed by law, it follows that it has
entirely lost its right to recover the same.

The foregoing favorably disposes of the first two assignments of
error. The third assignment is likewise well founded on the ground that
no costs should be allowed against the Government, which, in this case,
is represented by the defendant, in accordance with the doctrine laid
down in the case of Hongkong & Shanghai Banking Corporation vs. Rafferty (39 Phil., 145).

The judgment appealed from is hereby reversed and the defendant is
absolved from the complaint, with the costs of both instances against
the plaintiff. So ordered.

Malcolm, Villa-Real, Hull, and Goddard, JJ., concur.