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CITY OF MANILA v. COSMOS BOTTLING CORPORATION

FACTS:

The case involves a dispute between the petitioners and respondent Cosmos Bottling Corporation (Cosmos) regarding the assessment and collection of local business taxes imposed by the City of Manila. Cosmos protested the assessment and argued that the collection of local business tax constituted double taxation. Despite its protest, Cosmos was required to pay the assessed amount. Cosmos then filed a claim for refund and subsequently filed a complaint with the Regional Trial Court (RTC). The RTC ruled in favor of Cosmos but denied the claim for refund.

The Court of Tax Appeals (CTA) Third Division ruled in favor of Cosmos by partially granting its appeal from the RTC's decision. The CTA Division held that the collection of local business tax under both Section 21 and Section 14 of the Revenue Code of Manila constituted double taxation. It further held that the City Treasurer of Manila cannot assess local business tax based on the increased rates after they have been declared null and void. The CTA Division ordered the City Treasurer to issue a tax credit certificate or refund to Cosmos.

The petitioners failed to file a motion for reconsideration or new trial before the CTA Division, resulting in the dismissal of their petition for review. Instead of filing a motion for reconsideration or new trial, the petitioners directly appealed to the CTA En Banc, which was dismissed for lack of jurisdiction. The petitioners filed a motion for reconsideration but it was denied by the CTA En Banc. Hence, the petition for review before the Supreme Court.

The petitioners argue that their case should be considered on its merits despite their failure to appeal within the prescribed period due to an excusable mistake made by their lawyer. They also contend that Cosmos should have filed a protest against the assessment and that its remedy is governed by Section 195 of the Local Government Code. On the other hand, Cosmos argues that Section 196 of the same code is applicable to its case.

The CTA En Banc interpreted the relevant provisions of the law and the CTA Rules and held that a motion for reconsideration or new trial must be filed with the CTA Division before an appeal can be made to the CTA En Banc. Failure to do so is a ground for dismissal of the appeal.

The City of Manila argued that the tax imposed under Section 21 of the Revenue Code of Manila was different from the tax imposed under Section 14 and therefore did not constitute double taxation. However, the court ruled that there was indeed double taxation since both taxes were imposed on the same subject matter, for the same purpose, by the same authority, within the same jurisdiction, for the same taxing periods, and of the same kind. The court also found that the ordinances on which the assessment was based were declared null and void for failure to comply with the required publication, making the taxes assessed against Cosmos unenforceable.

ISSUES:

  1. Whether the collection of taxes under both Sections 14 and 21 of the Revenue Code of Manila constitutes double taxation.

  2. What is the proper basis for the computation of the business tax under Section 14.

  3. Whether a taxpayer who had protested and paid an assessment is precluded from later instituting an action for refund or credit.

  4. Whether the written protest or claim for refund must follow a specific form to be considered valid.

  5. Whether the two-year prescriptive period for filing a claim for refund includes the period of inaction by the local treasurer.

  6. Whether the payment of the tax under protest is required prior to instituting a judicial action questioning the validity or correctness of the assessment.

  7. What are the alternative remedies available to a taxpayer protesting an assessment?

  8. Can a taxpayer seek a refund after protesting and paying the assessed tax?

  9. When is the period within which a taxpayer can successfully prosecute an action for refund after receiving an assessment?

RULING:

  1. Yes, the collection of taxes under both Sections 14 and 21 of the Revenue Code of Manila constitutes double taxation. The court held that there is double taxation if a taxpayer is subjected to taxes on the same subject matter, for the same purpose, by the same taxing authority, within the same taxing jurisdiction, for the same taxing periods, and of the same kind or character. The distinction between the taxes under Sections 14 and 21 of the Revenue Code of Manila is specious. The court explained that when a municipality or city has already imposed a business tax on manufacturers, etc. of certain goods under Section 143(a) of the Local Government Code (LGC), it may no longer subject the same manufacturers, etc. to a business tax under Section 143(h) of the same Code. Therefore, the tax imposed under Section 21, which is based on Section 143(h) of the LGC, cannot be imposed on businesses that are already subject to a tax under Section 14, which is based on Section 143(a) of the LGC.

  2. The proper basis for the computation of the business tax under Section 14 is the taxpayer's gross sales or receipts of the preceding calendar year. The court held that an assessment for business tax under Section 14 of the Revenue Code of Manila should be computed based on the taxpayer's gross sales or receipts of the preceding calendar year. In this case, the court found that the computation of the business tax was based on the taxpayer's gross sales for the wrong calendar year and therefore adjusted the computation based on the correct year, resulting in a refundable amount for the taxpayer.

  3. No, a taxpayer who had protested and paid an assessment is not precluded from later instituting an action for refund or credit.

  4. No, the written protest or claim for refund does not need to follow a specific form to be considered valid.

  5. Yes, the two-year prescriptive period for filing a claim for refund includes the period of inaction by the local treasurer.

  6. The success of a judicial action questioning the validity or correctness of the assessment is not necessarily dependent on the previous payment of the tax under protest.

  7. The taxpayer facing an assessment may either appeal the assessment in court or pay the tax and then seek a refund. These are considered alternative remedies for a protesting taxpayer.

  8. Yes, a taxpayer can seek a refund after protesting and paying the assessed tax, provided that the twin conditions for prosecuting an action for refund are satisfied.

  9. The period within which a taxpayer can successfully prosecute an action for refund after receiving an assessment is as follows: (a) administratively assail the assessment within 60 days before the local treasurer, and (b) bring an action in court within 30 days from the decision or inaction by the local treasurer.

PRINCIPLES:

  • Double taxation exists when a taxpayer is subjected to taxes on the same subject matter, for the same purpose, by the same taxing authority, within the same taxing jurisdiction, for the same taxing periods, and of the same kind or character.

  • When a municipality or city has already imposed a business tax on certain businesses under Section 143(a) of the Local Government Code, it may no longer subject the same businesses to a business tax under Section 143(h) of the same Code.

  • The computation of the business tax under Section 14 of the Revenue Code of Manila should be based on the taxpayer's gross sales or receipts of the preceding calendar year.

  • A taxpayer may protest an assessment issued by the local treasurer and later on institute an action for refund or credit (Section 195 and 196 of the Local Government Code).

  • The written protest or claim for refund does not need to follow a specific form to be considered valid; it suffices that it expresses in substance the desired relief and is addressed to the local treasurer.

  • The two-year prescriptive period for filing a claim for refund includes the period of inaction by the local treasurer; the taxpayer is not required to await the decision of the local treasurer if it takes an extended period of time.

  • The taxpayer may proceed with or without payment of the assessed tax when protesting an assessment. The protest in writing must be made within sixty (60) days from receipt of the notice of assessment to prevent it from becoming final and conclusive.

  • Where no payment is made, the taxpayer's procedural remedy is to appeal the assessment with the court of competent jurisdiction. The appeal seeks to question the validity or correctness of the assessment, but does not seek a refund.

  • Where payment was made, the taxpayer may maintain an action in court questioning the validity and correctness of the assessment while also seeking a refund of the taxes paid. Once the assessment is set aside, refund of the taxes paid under the erroneous or invalid assessment follows.

  • The suit for refund is conditioned on the prior filing of a written claim for refund or credit with the local treasurer. The letter-protest submitted to the treasurer may be considered as the administrative claim for refund.

  • The judicial action for refund must be initiated within thirty (30) days from the denial of or inaction on the letter-protest or claim, not any time later, even if within two (2) years from the date of payment. The action must be filed within the thirty-day period to prevent the assessment from becoming conclusive and unappealable.

  • If a taxpayer receives an assessment, the taxpayer cannot choose to pay the assessment and thereafter seek a refund at any time within the full period of two years from the date of payment.

  • In order to successfully prosecute an action for refund in case the taxpayer receives an assessment, two conditions must be satisfied: (a) pay the tax and administratively assail the assessment within 60 days before the local treasurer, and (b) bring an action in court within 30 days from the decision or inaction by the local treasurer.

  • A taxpayer, after protesting and paying the assessed tax, is permitted by law to seek a refund if the twin conditions for prosecuting an action for refund are met.

  • The Court of Tax Appeals did not commit a reversible error when it allowed the refund in favor of the taxpayer.