Digest: Commissioner of Internal Revenue vs. Victorias Milling Co. (GR L-24108, 3 January 1968)

Commissioner of Internal Revenue vs. Victorias Milling Co. (GR L-24108, 3 January 1968)

Facts: On 23 December 1957 Victorias Milling Co., Inc. filed a claim for the refund of the sum of P12,464.53 representing 50% of the specific tax paid on the manufactured oils and fuels used in its agricultural operation for the period from 18 June 1952 to 18 June 1957. The Commissioner of Internal Revenue granted refund in the sum of P3,415.18 representing the tax paid for the period from 1 January 1956 to 18 June 1957 but denied the claim in the amount of P2,817.08 which corresponds to the tax paid during the period from 18 June 1952 to 31 December 1955 for the reason that the same was filed after the 2-year period provided for in Section 306 of the Tax Code had elapsed. Victorias Milling Co., Inc. appealed to the Court of Tax Appeals contending that Section 306 does not apply to its claim. The Court of Tax Appeals took the taxpayer’s view and ordered the CIR to refund Victorias Milling the amount of P2,817.08 representing the 50% of the specific tax paid on the oils used by it in agriculture during the period from 18 June 1952 to 31 December 1955. From said judgment, the Commissioner of Internal Revenue has appealed. The Supreme Court reversed the decision appealed from, and dismissed the petition for refund on the ground of prescription; without costs.

Issue: Whether the Victorias Milling’s claim for refund has prescribed.

Held: The intention is clear that refunds of internal revenue taxes are generally governed by Sections 306 and 309 of the Tax Code. Since in those cases the tax sought to be refunded was collected legally, the running of the two-year prescriptive period provided for in Section 306 should commence, not from the date the tax was paid, but from the happening of the supervening cause which entitled the taxpayer to a tax refund. And the claim for refund should be filed with the Commissioner of Internal Revenue, and the subsequent appeal to the Court of Tax Appeals must be instituted, within the said two- year period. If, however, the Collector takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the Court of Tax Appeals before the end of the two-year period without awaiting the decision of the Collector. In the light of the ruling in CIR vs. Insular Lumber Co., the right of Victorias Milling Co,, Inc. to claim refund of P2,817.08 has prescribed.