The Supreme Court (SC) has ruled that the South Luzon Tollway Corporation, now SMC SLEX, Inc., is entitled to a refund of more than P20.5 million in cash from the Makati City government for the erroneously collected business tax in 2011.
The ruling, contained in a resolution issued by the SC’s third division and made public last Jan. 16, affirmed the decision issued by the Court of Tax Appeals (CTA) en banc, full court, on March 11, 2020.
The SC dismissed the petition filed by the Makati City government and its treasurer.
South Luzon Tollway Corporation used to hold office in Makati City until 2011 when it transferred its offices to Calamba City in Laguna.
On Aug. 3, 2011, South Luzon applied for a certificate of business retirement with Makati City. As a result, the firm was assessed more than P20.5 million in local business tax from Jan. 1 to Sept. 30, 2011. The tax was paid by the firm on Jan. 31, 2012.
On Dec. 13, 2013, South Luzon asked the Makati City government to refund the P20.5 million taxes it paid as it pointed out that it was a registered as a pioneer enterprise with the Board of Investments (BOI) on March 3, 2010 and was therefore exempt from paying said tax for six years, or from March 3, 2010 to March 3, 2016. It submitted its BOI certificate of registration.
When the Makati City government did not reply to the request, South Luzon filed a petition with the Calamba City regional trial court (RTC) on Feb. 3, 2014 with pleas to declare it exempt from local business tax and for refund of the amount it paid for the 2011 taxes.
On Jan. 6, 2017, the RTC ruled in favor of South Luzon as it confirmed the latter’s tax-exempt status and ordered the refund of the taxes paid.
When Makati City’s motion for reconsideration was denied by the RTC, the local government elevated the case to the CTA which, on May 9, 2018, through its first division affirmed the trial court’s ruling except on the payment of attorney's fees of P10,000.
CTA’s first division said that the Makati City government erroneously collected the amount and that the payment made by South Luzon should be refunded in cash.
Makati City’s appeal before the CTA’s en banc was denied and also junked the local government’s claim that if the taxes were found to be erroneously or illegally collected, South Luzon could only be granted tax credits. It elevated the case to the SC.
Among other allegations, Makati City told the SC that South Luzon failed to file its judicial claim for refund within two years from the date of the payment of the business tax and that it was justified in assessing the tax and colleting it and denying the request for refund.
Also, Makati City said that if South Luzon would be entitled to refund, it could be granted only in the form of tax credit.
The SC ruled that the claim for refund made by South Luzon was seasonably filed within the two-year mandated period.
It said the two-year period to file an action for refund expired on Jan. 31, 2014 or 24 months from the day of payment on Jan. 31, 2012. However, Jan. 31, 2014 was declared a non-working holiday and Feb. 1 and 2, 2014 were Saturday and Sunday, respectively.
It ruled that South Luzon’s filing of a petition for refund before the RTC on Feb. 3, 2014 was within the prescriptive period set by law.
At the same time, the SC said: “The non-presentation of the BOI Certificate of Registration at the time of payment of the local business tax was not fatal to respondent's (South Luzon) case. It does not constitute a waiver to recover the tax erroneously collected and paid.”
On the cash payment of the refund sought by South Luzon, the SC cited the Revised Makati Revenue Code (RMRC) which provides that any recovery of erroneously or illegally collected tax can be done through refund or credit.
“As correctly pointed out by the CTA En Banc, the use of the disjunctive ‘or’ expresses an alternative or choice; it signifies dissociation and independence of one thing from other things enumerated,” it said.
“That said, respondent is entitled to be refunded of the P20,585,603.19 it paid to petitioners (Makati City), in cash, contrary to petitioners' asseveration that respondent may only avail of a tax credit,” it pointed out.
The SC also said:
“Indeed, the taxpayer expects fair dealing from the Government, and the latter has the duty to refund without any unreasonable delay what it has erroneously collected.
“If the State expects its taxpayers to observe fairness and honesty in paying their taxes, it must hold itself against the same standard in refunding excess (or erroneous) payments of such taxes. It should not unjustly enrich itself at the expense of taxpayers.
“WHEREFORE, premises considered, the Decision dated March 11, 2020 and the Resolution dated October 20, 2021 of the Court of Tax Appeals En Banc in CTA EB No. 1928 are AFFIRMED. SO ORDERED.”
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