International Container Terminal Services, Inc. v. City of Manila

DOCTRINES

• If the taxpayer receives an assessment and does not pay the tax, its remedy is strictly confined to Section 195 of the Local Government Code (LGC); If the taxpayer opts to pay the assessed tax, fee, or charge, it must still file the written protest within the sixty (60)-day period, and then bring the case to court within thirty (30) days from either the decision or inaction of the local treasurer. 
• If no assessment notice is issued by the local treasurer, and the taxpayer claims that it erroneously paid a tax, fee, or charge, or that the tax, fee, or charge has been illegally collected from him, then Section 196 applies. 
• The notice of assessment must state “the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties.” 
• To be entitled to a refund under Section 196 of the Local Government Code (LGC), the taxpayer must comply with the following procedural requirements: first, file a written claim for refund or credit with the local treasurer; and second, file a judicial case for refund within two (2) years from the payment of the tax, fee, or charge, or from the date when the taxpayer is entitled to a refund or credit. 

FACTS: International Container was assessed for two (2) business taxes: one for which it was already paying, and another for which it was newly assessed. It was already paying a local annual business tax for contractors equivalent to 75% of 1% of its gross receipts for the preceding calendar year pursuant to Section 18 of Manila Ordinance No. 7794. The newly assessed business tax was computed at 50% of 1% of its gross receipts for the previous calendar year, pursuant to Section 21(A) of Manila Ordinance No. 7794, as amended by Section 1(G) of Manila Ordinance No. 7807. It paid the additional assessment, but filed a protest letter before the City Treasurer of Manila. The City Treasurer failed to decide thus, International Container filed a petition for certiorari and prohibition with prayer for issuance of TRO against the City Treasurer and Resident Auditor of Manila with the RTC Manila. City Treasurer and Resident Auditor of Manila moved for the dismissal which the RTC granted.

The City of Manila continued to impose the business tax under Section 21(A), in addition to the business tax under Section 18, on International Container so that it would be issued business permits. International Container reiterated its protest to the business tax.

International Container filed an Amended and Supplemental Petition which the RTC dismissed for failing to comply with Sec. 195 of LGC.

International Container filed a petition for review with the CTA. CTA Second Division set aside the RTC’s Decision and partially granting International Container’s prayer for a refund. It found that imposing the business tax under Section 21(A) in addition to the contractors’ tax under Section 18 constituted direct double taxation. Both parties filed an MR but both were denied.

International Container filed a Petition for Review with Prayer for Temporary Restraining Order and/or Preliminary Injunction before the CTA En Banc. It also filed an Urgent Motion to Suspend Collection which the CTA En Banc granted. The PetRev was dismissed. International Container’s MR was also denied. 

International Container filed a PetRev on certiorari. 

ISSUE: Whether or not Section 195 or Section 196 of the Local Government Code govern petitioner International Container Terminal Services, Inc.’s claims for refund

HELD: If the taxpayer receives an assessment and does not pay the tax, its remedy is strictly confined to Section 195 of the Local Government Code. Thus, it must file a written protest with the local treasurer within 60 days from the receipt of the assessment. If the protest is denied, or if the local treasurer fails to act on it, then the taxpayer must appeal the assessment before a court of competent jurisdiction within 30 days from receipt of the denial, or the lapse of the 60-day period within which the local treasurer must act on the protest. In this case, as no tax was paid, there is no claim for refund in the appeal. If the taxpayer opts to pay the assessed tax, fee, or charge, it must still file the written protest within the 60-day period, and then bring the case to court within 30 days from either the decision or inaction of the local treasurer. In its court action, the taxpayer may, at the same time, question the validity and correctness of the assessment and seek a refund of the taxes it paid. “Once the assessment is set aside by the court, it follows as a matter of course that all taxes paid under the erroneous or invalid assessment are refunded to the taxpayer.” 

If no assessment notice is issued by the local treasurer, and the taxpayer claims that it erroneously paid a tax, fee, or charge, or that the tax, fee, or charge has been illegally collected from him, then Section 196 applies. Here, there is no dispute on the refund of P6,224,250.00, representing the additional taxes paid for the first three (3) quarters of 1999, as ordered by the Court of Tax Appeals Second Division in its May 17, 2006 Decision on to petitioner’s entitlement to a refund of the taxes paid subsequent to the third quarter of 1999, which was denied by the Court of Tax Appeals Second Division on the ground that petitioner failed to comply with the requirements of Section 195. 

What determines the appropriate remedy is the local government’s basis for the collection of the tax. It is explicitly stated in Section 195 that it is a remedy against a notice of assessment issued by the local treasurer, upon a finding that the correct taxes, fees, or charges have not been paid. The notice of assessment must state “the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties.” 

A tax refund or credit is in the nature of a tax exemption, construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. Claimants of a tax refund must prove the factual basis of their claims with sufficient evidence. To be entitled to a refund under Section 196 of the Local Government Code, the taxpayer must comply with the following procedural requirements: first, file a written claim for refund or credit with the local treasurer; and second, file a judicial case for refund within two (2) years from the payment of the tax, fee, or charge, or from the date when the taxpayer is entitled to a refund or credit.