FACTS
The NIRC provides that a suit to recover tax erroneously collected must be filed within two years from the date of payment of the tax. However, the BIR issued a Revenue Memorandum Circular (RMC) that extended to ten years the period in which one may file a suit to recover tax erroneously collected—contrary to the provisions of the NIRC.
Relying upon an RMC inconsistent with the provisions of the NIRC, PBCOM filed a suit to recover tax erroneously collected beyond the two-year prescriptive period set by law. Relying upon an RMC inconsistent with the provisions of the NIRC, PBCOM filed a suit with the CTA to recover tax erroneously collected beyond the two-year prescriptive period set by law.
The CTA denied the petition and the MR on the ground that it was filed beyond the prescriptive period set by the NIRC. PBCOM appealed the decision of the CTA to the SC, arguing that it relied in good faith upon the BIR’s RMC, which extended the period to file a suit to recover erroneously collected tax to ten years.
RULING
The Supreme Court ruled in favor of the CTA.
The SC held that the RMC is invalid as it is inconsistent with the NIRC provisions; a wrong construction of law by administration officials cannot estop the Government from correcting or overruling the same. The non-retroactivity of CIR rulings is not applicable in this case, too, because the nullity of the RMC was declared by respondent courts and not by the Commissioner of Internal Revenue.
A memorandum-circular of a bureau head could not operate to vest a taxpayer with a shield against judicial action. It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue.
