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REPUBLIC v. IAC

FACTS:

The case involves a legal issue on whether the tax amnesty payments made by the private respondents bar an action for recovery of deficiency income taxes. The Republic of the Philippines filed a complaint to collect deficiency income taxes from the spouses Antonio Pastor and Clara Reyes-Pastor. The Pastors filed a motion to dismiss, claiming that they had availed of the tax amnesty under Presidential Decrees (P.D.) Nos. 23, 213, and 370 and had already paid the corresponding amnesty taxes. The government rejected their offer to settle the deficiency, and ten years later, filed the action. The trial court held that the government had waived its right to further recover deficiency income taxes from the defendants due to their acceptance of the amnesty income taxes. The government appealed to the Intermediate Appellate Court, arguing that the private respondents were not qualified for the tax amnesty under P.D. 213.

ISSUES:

  1. Whether or not the tax amnesty payments made by the private respondents bar an action for recovery of deficiency income taxes under P.D.'s Nos. 23, 213, and 370.

RULING:

  1. Yes, the tax amnesty payments made by the private respondents bar an action for recovery of deficiency income taxes. The Court held that the acceptance of the tax amnesty payment by the government waives its right to further recover deficiency income taxes from the defendants under the existing assessment against them. The amnesty income tax returns' Summary Statement included the deficiency assessment for the years in question, and the payment of the amnesty income taxes under P.D. No. 213 had the effect of remission of the income tax deficiency for those years. It was also ruled that Revenue Regulation No. 7-73, which excludes certain taxpayers from the coverage of P.D. No. 213, is null and void.

PRINCIPLES:

  • The acceptance of tax amnesty payment by the government bars the recovery of deficiency taxes.

  • Amnesty income tax payments have the effect of remission of the income tax deficiency.

  • Revenue regulations that exclude certain taxpayers from the coverage of amnesty decrees may be rendered null and void.