Gk No 148S12 Iune 26 2006

CCMMISSICNLk CI IN1LkNAL kLVLNUL eLlLloner

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CLN1kAL LU2CN DkUG CCkCkA1ICN 8espondenL
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1hls ls a peLlLlon for revlew under 8ule 43 of Lhe 8ules of CourL seeklng Lhe nulllflcaLlon of Lhe ueclslon daLed May 31 2001 of Lhe CourL of
Appeals (CA) ln CAC8 S no 60037 enLlLled CenLral Luzon urug CorporaLlon v Commlssloner of lnLernal 8evenue granLlng hereln respondenL
CenLral Luzon urug CorporaLlon's clalm for Lax credlL equal Lo Lhe amounL of Lhe 20 dlscounL LhaL lL exLended Lo senlor clLlzens on Lhe laLLer's
purchase of medlclnes pursuanL Lo SecLlon 4(a) of 8epubllc AcL (8A) no 7432 enLlLled An AcL Lo Maxlmlze Lhe ConLrlbuLlon of Senlor ClLlzens Lo
naLlon 8ulldlng CranL 8eneflLs and Speclal rlvlleges and for oLher urposes oLherwlse known as Lhe Senlor ClLlzens AcL
1he anLecedenLs are as follows
CenLral Luzon urug CorporaLlon has been a reLaller of medlclnes and oLher pharmaceuLlcal producLs slnce uecember 19 1994 ln 1993 lL opened
Lhree (3) drugsLores as a franchlsee under Lhe buslness name and sLyle of Mercury urug
lor Lhe perlod !anuary 1993 Lo uecember 1993 ln conformlLy Lo Lhe mandaLe of Sec 4(a) of 8A no 7432 peLlLloner granLed a 20 dlscounL on
Lhe sale of medlclnes Lo quallfled senlor clLlzens amounLlng Lo 219778
ursuanL Lo 8evenue 8egulaLlons no 2941 lmplemenLlng 8A no 7432 whlch sLaLes LhaL Lhe dlscounL glven Lo senlor clLlzens shall be deducLed
by Lhe esLabllshmenL from lLs gross sales for valueadded Lax and oLher percenLage Lax purposes respondenL deducLed Lhe LoLal amounL of
219778 from lLs gross lncome for Lhe Laxable year 1993 lor sald Laxable perlod respondenL reporLed a neL loss of 20963 ln lLs corporaLe
lncome Lax reLurn As a consequence respondenL dld noL pay lncome Lax for 1993
SubsequenLly on uecember 27 1996 clalmlng LhaL accordlng Lo Sec 4(a) of 8A no 7432 Lhe amounL of 219778 should be applled as a Lax
credlL respondenL flled a clalm for refund ln Lhe amounL of 130193 Lhus
neL Sales 3701480700
Add CosL of 20 ulscounL Lo Senlor ClLlzens 21977800

Gross Sa|es 37234S8S00
Less CosL of Sales
Merchandlse lnvenLory beg 123274000
urchases 4114313800
Merchandlse lnvenLory end
832133700

3383662100

Cross roflL 337796400
Mlscellaneous lncome 3901400

1ota| Income 341697800
CperaLlng Lxpenses 319923000

Net Income 8efore 1ax 21774800
lncome 1ax (33) 6938300
Less 1ax CredlL
(CosL of 20 ulscounL Lo Senlor ClLlzens) 21977800

Income 1ax ayab|e ( 1S019300)
lncome 1ax AcLually ald 0
1ax kefundab|e]Cverpa|d Income 1ax ( 1S019300)
As shown above Lhe amounL of 130193 clalmed as a refund represenLs Lhe Lax credlL allegedly due Lo respondenL under 8A no 7432 Slnce Lhe
Commlssloner of lnLernal 8evenue was noL able Lo declde Lhe clalm for refund on Llme2 respondenL flled a eLlLlon for 8evlew wlLh Lhe CourL of
1ax Appeals (C1A) on March 18 1998
Cn Aprll 24 2000 Lhe C1A dlsmlssed Lhe peLlLlon declarlng LhaL even lf Lhe law LreaLs Lhe 20 sales dlscounLs granLed Lo senlor clLlzens as a Lax
credlL Lhe same cannoL apply when Lhere ls no Lax llablllLy or Lhe amounL of Lhe Lax credlL ls greaLer Lhan Lhe Lax due ln Lhe laLLer case Lhe Lax
credlL wlll only be Lo Lhe exLenL of Lhe Lax llablllLy3 Also no refund can be granLed as no Lax was erroneously lllegally and acLually collecLed based
on Lhe provlslons of SecLlon 230 now SecLlon 229 of Lhe 1ax Code lurLhermore Lhe law does noL sLaLe LhaL a refund can be clalmed by Lhe
prlvaLe esLabllshmenL concerned as an alLernaLlve Lo Lhe Lax credlL
1hus respondenL flled wlLh Lhe CA a eLlLlon for 8evlew on AugusL 3 2000
Cn May 31 2001 Lhe CA rendered a ueclslon sLaLlng LhaL SecLlon 229 of Lhe 1ax Code does noL apply ln Lhls case lL concluded LhaL Lhe 20
dlscounL glven Lo senlor clLlzens whlch ls LreaLed as a Lax credlL pursuanL Lo Sec 4(a) of 8A no 7432 ls consldered [usL compensaLlon and as such
may be carrled over Lo Lhe nexL Laxable perlod lf Lhere ls no currenL Lax llablllLy ln vlew of Lhls Lhe CA held
WPL8LlC8L Lhe lnsLanL peLlLlon ls hereby C8An1Lu and Lhe declslon of Lhe C1A daLed 24 Aprll 2000 and lLs resoluLlon daLed 06 !uly 2000 are SL1
ASluL A new one ls enLered granLlng peLlLloner's clalm for Lax credlL ln Lhe amounL of hp 13019300 no cosLs
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Sec 4(a) of 8A no 7432 provldes
Sec 4 rlvlleges for Lhe Senlor clLlzens 1he senlor clLlzens shall be enLlLled Lo Lhe followlng
(a) Lhe granL of LwenLy percenL (20) dlscounL from all esLabllshmenLs relaLlve Lo uLlllzaLlon of LransporLaLlons servlces hoLels and slmllar lodglng
esLabllshmenLs resLauranLs and recreaLlon cenLers and purchase of medlclnes anywhere ln Lhe counLry 9 1haL prlvaLe esLabllshmenLs may
clalm Lhe cosL as Lax credlL
1he CA and Lhe C1A correcLly ruled LhaL based on Lhe plaln wordlng of Lhe law dlscounLs glven under 8A no 7432 should be LreaLed as Lax credlLs
noL deducLlons from lncome
lL ls a fundamenLal rule ln sLaLuLory consLrucLlon LhaL Lhe leglslaLlve lnLenL musL be deLermlned from Lhe language of Lhe sLaLuLe lLself especlally
when Lhe words and phrases Lhereln are clear and unequlvocal 1he sLaLuLe ln such a case musL be Laken Lo mean exacLly whaL lL says3 lLs llLeral
meanlng should be followed6 Lo deparL from Lhe meanlng expressed by Lhe words ls Lo alLer Lhe sLaLuLe7
1he above provlslon expllclLly employed Lhe word Lax credlL noLhlng ln Lhe provlslon suggesLs for lL Lo mean a deducLlon from gross sales 1o
consLrue lL oLherwlse would be a deparLure from Lhe clear mandaLe of Lhe law
1hus Lhe 20 dlscounL requlred by Lhe AcL Lo be glven Lo senlor clLlzens ls a Lax credlL noL a deducLlon from Lhe gross sales of Lhe esLabllshmenL
concerned As a corollary Lo Lhls Lhe deflnlLlon of 'Lax credlL' found ln SecLlon 2(1) of 8evenue 8egulaLlons no 294 ls erroneous as lL refers Lo Lax
credlL as Lhe amounL represenLlng Lhe 20 dlscounL LhaL shall be deducLed by Lhe sald esLabllshmenL from Lhelr gross sales for value added Lax
and oLher percenLage Lax purposes 1hls deflnlLlon ls conLrary Lo whaL our lawmakers had envlsloned wlLh regard Lo Lhe LreaLmenL of Lhe dlscounL
granLed Lo senlor clLlzens
Accordlngly when Lhe law says LhaL Lhe cosL of Lhe dlscounL may be clalmed as a Lax credlL lL means LhaL Lhe amounL when clalmed shall be
LreaLed as a reducLlon from any Lax llablllLy8 1he law cannoL be amended by a mere regulaLlon 1he admlnlsLraLlve agencles lssulng Lhese
regulaLlons may noL enlarge alLer or resLrlcL Lhe provlslons of Lhe law Lhey admlnlsLer9 ln facL a regulaLlon LhaL operaLes Lo creaLe a rule ouL of
harmony wlLh Lhe sLaLuLe ls a mere nulllLy10
llnally for purposes of clarlLy Sec 22911 of Lhe 1ax Code does noL apply Lo cases LhaL fall under Sec 4 of 8A no 7432 because Lhe former
provlslon governs excluslvely all klnds of refund or credlL of lnLernal revenue Laxes LhaL were erroneously or lllegally lmposed and collecLed
pursuanL Lo Lhe 1ax Code whlle Lhe laLLer exLends Lhe Lax credlL beneflL Lo Lhe prlvaLe esLabllshmenLs concerned even before Lax paymenLs have
been made 1he Lax credlL LhaL ls conLemplaLed under Lhe AcL ls a form of [usL compensaLlon noL a remedy for Laxes LhaL were erroneously or
lllegally assessed and collecLed ln Lhe same veln prlor paymenL of any Lax llablllLy ls noL a precondlLlon before a Laxable enLlLy can beneflL from Lhe
Lax credlL 1he credlL may be avalled of upon paymenL of Lhe Lax due lf any
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lL musL also be sLressed LhaL unllke ln Sec 229 of Lhe 1ax Code whereln Lhe remedy of refund ls avallable Lo Lhe Laxpayer Sec 4 of Lhe law speaks
only of a Lax credlL noL a refund
As earller menLloned Lhe Lax credlL beneflL granLed Lo Lhe esLabllshmenLs can be deemed as Lhelr [usL compensaLlon for prlvaLe properLy Laken by
Lhe SLaLe for publlc use 1he prlvllege en[oyed by Lhe senlor clLlzens does noL come dlrecLly from Lhe SLaLe buL raLher from Lhe prlvaLe
esLabllshmenLs concerned12
JLkLICkL Lhe peLlLlon ls DLNILD 1he ueclslon of Lhe CourL of Appeals ln CAC8 S no 60037 daLed May 31 2001 ls AIIIkMLD
no pronouncemenL as Lo cosLs