In China Banking Corporation v. City Treasurer of Manila, the Supreme Court addressed the complexities of local tax refund claims, emphasizing the strict adherence to procedural requirements. The Court ruled against China Banking Corporation’s (CBC) claim for a tax refund, citing the failure to file the appeal within the prescribed period and with the appropriate court. This decision underscores the importance of taxpayers meeting deadlines and understanding jurisdictional rules when contesting local tax assessments, particularly when seeking refunds.

Missed Deadlines and Misplaced Appeals: The High Cost of Procedural Lapses in Tax Protests

The case arose from a dispute over a local business tax imposed by the City Treasurer of Manila on CBC’s Sto. Cristo Branch. CBC paid the assessed amount of P267,128.70, which included P154,398.50 under Section 21 of the Manila Revenue Code, but protested the imposition, claiming it constituted double taxation. When the City Treasurer did not act on the protest within the 60-day period, CBC filed a Petition for Review with the Regional Trial Court (RTC). The RTC initially ruled in favor of CBC, ordering a refund, based on the opinion that the underlying ordinances were unconstitutional.

However, the Court of Tax Appeals (CTA) reversed the RTC’s decision, finding that CBC’s petition for review was filed one day beyond the reglementary period allowed by Section 195 of the Local Government Code (LGC). Section 195 of the LGC stipulates the process for protesting tax assessments:

SECTION 195. Protest of Assessment. – When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice canceling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60)-day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.

The CTA En Banc affirmed the CTA Division’s ruling, emphasizing that the failure to file the appeal within the prescribed period resulted in the assessment becoming final and unappealable. The Supreme Court agreed with the CTA, highlighting that the perfection of an appeal within the period laid down by law is not merely mandatory but jurisdictional. The Court quoted Commissioner on Internal Revenue v. Fort Bonifacio Development Corporation to support this view:

Time and again, it has been held that the perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also jurisdictional. The failure to perfect an appeal as required by the rules has the effect of defeating the right to appeal of a party and precluding the appellate court from acquiring jurisdiction over the case. At the risk of being repetitious, the Court declares that the right to appeal is not a natural right nor a part of due process. It is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the law.

Adding to the complexity, CBC shifted its argument, initially seeking leniency for the late filing due to its counsel’s error, and later claiming the appeal was timely filed based on a different reckoning point. The Supreme Court took note of this inconsistent stance, frowning upon CBC’s attempt to confuse the Court by changing its position on the timeliness of the appeal. The court emphasized the importance of consistent legal arguments.

Further compounding CBC’s predicament, the Supreme Court addressed the issue of jurisdiction. Even if the appeal had been timely filed, it was filed with the incorrect court. The Court clarified that, considering the amount of the claim, the Metropolitan Trial Court (MeTC) should have been the court of competent jurisdiction. The Court cited Section 33(1) of Batas Pambansa (B.P.) Blg. 129, as amended, which defines the jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts in Civil Cases:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases. – Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:

(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate, including the grant of provisional remedies in proper cases, where the value of the personal property, estate, or amount of the demand does not exceed One hundred thousand pesos (P300,000.00) or, in Metro Manila where such personal property, estate, or amount of the demand does not exceed Two hundred thousand pesos (P400,000.00) x x x

The Court also referenced Yamane v. BA Lepanto Condominium Corporation to explain the jurisdictional nuances. While Yamane initially recognized the RTC’s original jurisdiction over appeals from decisions of the city treasurer, the Court clarified that with the enactment of Republic Act (R.A.) No. 9282, the jurisdiction over such cases depended on the amount of the claim. Since the amount in question fell within the jurisdiction of the MeTC, the RTC was not the proper venue for the appeal.

The Supreme Court emphasized that claims for refunds are exceptions to the general rule and require strict compliance with the prescribed conditions. In every claim for a tax refund, the taxpayer bears the burden of demonstrating that they have adhered to all the conditions for the grant of the refund or credit. Non-compliance with these conditions can result in the denial of the claim, regardless of the merits of the underlying tax assessment.

FAQs

What was the key issue in this case?	The key issue was whether China Banking Corporation (CBC) was entitled to a refund of local business taxes, considering the timeliness of their appeal and the jurisdiction of the court where it was filed. The Supreme Court ultimately focused on CBC’s failure to comply with procedural requirements.
What is the prescribed period to appeal a tax assessment denial?	According to Section 195 of the Local Government Code, a taxpayer has thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60)-day period within which to appeal with the court of competent jurisdiction. Failure to appeal within this period renders the assessment conclusive and unappealable.
What constitutes a valid protest against a tax assessment?	A valid protest must state the taxpayer’s objection to the assessment and the reasons for the objection. The law does not prescribe any formal requirements to constitute a valid protest.
Which court has jurisdiction over local tax refund claims?	The court with jurisdiction depends on the amount of the claim. Metropolitan, Municipal, and Municipal Circuit Trial Courts have exclusive original jurisdiction over claims not exceeding P400,000 in Metro Manila, while the Regional Trial Court may have jurisdiction over claims exceeding that amount, subject to the jurisdiction of the Court of Tax Appeals.
What is the effect of filing an appeal out of time?	Filing an appeal beyond the prescribed period has the effect of defeating the right to appeal and precluding the appellate court from acquiring jurisdiction over the case. The tax assessment becomes final and unappealable.
What is the burden of proof in tax refund cases?	In tax refund cases, the burden is on the taxpayer to show that they have strictly complied with all the conditions for the grant of the tax refund or credit. This includes demonstrating that the appeal was filed timely and with the correct court.
What was the significance of R.A. No. 9282 in this case?	R.A. No. 9282 expanded the jurisdiction of the Court of Tax Appeals (CTA), granting it exclusive appellate jurisdiction to review decisions of the Regional Trial Courts in local tax cases originally decided by them in the exercise of their original or appellate jurisdiction. This law clarified the appellate process for tax disputes.
Can a taxpayer change their legal position during litigation?	The Supreme Court frowned upon CBC’s inconsistent stance regarding the timeliness of the appeal. It emphasized that parties should maintain consistent legal arguments throughout the litigation process.

The China Banking Corporation v. City Treasurer of Manila case serves as a crucial reminder of the importance of adhering to procedural rules in tax disputes. Taxpayers must be vigilant in meeting deadlines and understanding jurisdictional requirements when contesting tax assessments and seeking refunds. Failure to do so can result in the loss of their right to appeal, regardless of the merits of their claim.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: China Banking Corporation v. City Treasurer of Manila, G.R. No. 204117, July 01, 2015