CARMELINO F.

PANSACOLA, Petitioner,

G.R. No. 159991

Present:

QUISUMBING, J., Chairperson, CARPIO, - versus CARPIO MORALES, TINGA, an !"#ASCO, $R., JJ.

COMMISSIONER OF INTERNAL REVENUE, Respon ent.

Pro%u&'ate :

Nove%(er )*, +,,*

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.: For review on certiorari is the Decision [1] dated June 5, 2 ! o" the Court o" A##ea$s in CA%&'R' S'P' (o' ) *+5' ,he a##e$$ate court denied #etitioner-s avai$.ent o" the increased a.ounts o" #ersona$ and additiona$ e/e.#tions under Re#u0$ic Act (o' 1*2*, the (ationa$ Interna$ Revenue Code o" 233+ [2] 4(IRC5, which too6 e""ect on Januar7 2, 2331' A$so assai$ed is the a##e$$ate court-s Reso$ution[3] dated Se#te.0er 22, 2 !, den7in8 the .otion "or reconsideration' ,he "acts are undis#uted'

On A#ri$ 2!, 2331, #etitioner Car.e$ino F' Pansaco$a "i$ed his inco.e ta/ return "or the ta/a0$e 7ear 233+ that re"$ected an over#a7.ent o" P5,35 ' In it he c$ai.ed the increased a.ounts o" #ersona$ and additiona$ e/e.#tions under Section !5[4] o" the (IRC, a$thou8h his certi"icate o" inco.e ta/ withhe$d on co.#ensation indicated the $esser a$$owed a.ounts [5] on these e/e.#tions' 9e c$ai.ed a re"und o" P5,35 with the :ureau o" Interna$ Revenue, which was denied' Later, the Court o" ,a/ A##ea$s a$so denied his c$ai. 0ecause accordin8 to the ta/ court, ;it wou$d 0e a0surd "or the $aw to a$$ow the deduction "ro. a ta/#a7er-s 8ross inco.e earned on a certain 7ear o" e/e.#tions avai$in8 on a di""erent ta/a0$e 7ear<=[6] Petitioner sou8ht reconsideration, 0ut the sa.e was denied'[7] On a##ea$, the Court o" A##ea$s denied his #etition "or $ac6 o" .erit' ,he a##e$$ate court ru$ed that Umali v. Estanislao,[8] re$ied u#on 07 #etitioner, was ina##$ica0$e to his case' It "urther ru$ed that the (IRC too6 e""ect on Januar7 2, 2331, thus the increased e/e.#tions were e""ective on$7 to cover ta/a0$e 7ear 2331 and cannot 0e a##$ied retroactive$7' Petitioner, 0e"ore us, raises a sin8$e issue>
<?@Ahether or not the increased #ersona$ and additiona$ e/e.#tions under ?the (IRCA can 0e avai$ed o" 07 the ?#Aetitioner "or #ur#oses o" co.#utin8 his inco.e ta/ $ia0i$it7 "or the ta/a0$e 7ear 233+ and thus 0e entit$ed to the re"und'[9]

Si.#$7 stated, the issue is> Cou$d the e/e.#tions under Section !5 o" the (IRC, which too6 e""ect on Januar7 2, 2331, 0e avai$ed o" "or the ta/a0$e 7ear 233+B Petitioner ar8ues that the #ersona$ and additiona$ e/e.#tions are o" a "i/ed character 0ased on Section !5 4A5 and 4:5 o" the (IRC [10] and as ru$ed 07 this Court in Umali, these #ersona$ and additiona$ e/e.#tions are "i/ed a.ounts to which an individua$ ta/#a7er is entit$ed' 9e contends that un$i6e other a$$owa0$e deductions, the avai$a0i$it7 o" these e/e.#tions does not de#end on the ta/#a7er-s #ro"ession, trade or 0usiness "or a #articu$ar ta/a0$e #eriod' Re$7in8 a8ain in Umali, #etitioner a$$e8es that the Court o" A##ea$s erred in ru$in8 that the increased e/e.#tions were .eant to 0e a##$ied 0e8innin8 ta/a0$e 7ear 2331 and were to 0e re"$ected in the ta/#a7ers- returns to 0e "i$ed on or 0e"ore A#ri$ 25, 2333' Petitioner reasons that such ru$in8 wou$d #ost#one the avai$a0i$it7 o" the increased e/e.#tions and $itera$$7 de"er the e""ectivit7 o" the (IRC to Januar7 2, 2333' Petitioner insists that the increased e/e.#tions were a$read7 avai$a0$e

on A#ri$ 25, 2331, the dead$ine "or "i$in8 inco.e ta/ returns "or ta/a0$e 7ear 233+, 0ecause the (IRC was a$read7 e""ective' Res#ondent, throu8h the O""ice o" the So$icitor &enera$, counters that the increased e/e.#tions were not 7et avai$a0$e "or ta/a0$e 7ear 233+ 0ecause a$$ #rovisions o" the (IRC too6 e""ect on Januar7 2, 2331 on$7C that the "i/ed character o" #ersona$ and additiona$ e/e.#tions does not necessari$7 .ean that these were not ti.e 0oundC and #etitioner-s #ro#osition was contrar7 to Section !5 4C5[11] o" the (IRC' It "urther stated that #etitioner-s e/e.#tions were deter.ined as o" Dece.0er !2, 233+ and the e""ectivit7 o" the (IRC durin8 the #eriod o" Januar7 2 to A#ri$ 25, 2331 did not a""ect his ta/ $ia0i$ities within the ta/a0$e 7ear 233+C and the inc$usive #eriod "ro. Januar7 2 to A#ri$ 25, 2331, the "i$in8 dates and dead$ine "or ad.inistrative #ur#oses, was outside o" the ta/a0$e 7ear 233+' Res#ondent a$so .aintains that Umali is not a##$ica0$e to this case' Pre"atori$7, #ersona$ and additiona$ e/e.#tions under Section !5 o" the (IRC are "i/ed a.ounts to which certain individua$ ta/#a7ers 4citiDens, resident a$iens5[12] are entit$ed' Persona$ e/e.#tions are the theoretica$ #ersona$, $ivin8 and "a.i$7 e/#enses o" an individua$ a$$owed to 0e deducted "ro. the 8ross or net inco.e o" an individua$ ta/#a7er' ,hese are ar0itrar7 a.ounts which have 0een ca$cu$ated 07 our $aw.a6ers to 0e rou8h$7 eEuiva$ent to the .ini.u. o" su0sistence,[13] ta6in8 into account the #ersona$ status and additiona$ Eua$i"ied de#endents o" the ta/#a7er' ,he7 are "i/ed a.ounts in the sense that the a.ounts have 0een #redeter.ined 07 our $aw.a6ers as #rovided under Section !5 4A5 and 4:5' Fn$ess and unti$ our $aw.a6ers .a6e new adGust.ents on these #ersona$ e/e.#tions, the a.ounts a$$owed to 0e deducted 07 a ta/#a7er are "i/ed as #redeter.ined 07 Con8ress' A care"u$ scrutin7 o" the #rovisions[14] o" the (IRC s#eci"ica$$7 shows that Section +3 4D5[15] #rovides that the #ersona$ and additiona$ e/e.#tions sha$$ 0e deter.ined in accordance with the .ain #rovisions in ,it$e II o" the (IRC' Its .ain #rovisions #ertain to Section !5 4A5 and 4:5 which state,

SEC' !5' Allowance of Personal Exemption for Individual Taxpayer. 4A5 In General'%For purposes of determining the tax provided in Section 2 !A" of this Title#[16] there sha$$ 0e a$$owed a 0asic #ersona$ e/e.#tion as "o$$ows> //// For each .arried individua$ H P32,000 //// 4:5 Additional Exemption for Dependents.H,here sha$$ 0e a$$owed an additiona$ e/e.#tion o" Ei8ht thousand #esos 4P8,0005 "or each de#endent not e/ceedin8 "our 4*5' 4E.#hasis ours'5

Section !5 4A5 and 4:5 a$$ow the 0asic #ersona$ and additiona$ e/e.#tions as deductions "ro. 8ross or net inco.e, as the case .a70e, to arrive at the correct ta/a0$e inco.e o" certain individua$ ta/#a7ers' Section 2* 4A5 425 4a5 i.#osed inco.e ta/ on a resident citiDen-s ta/a0$e inco.e derived "or each ta/a0$e 7ear' It #rovides as "o$$ows>
SEC' 2*' Income Tax $ates. (A) Rates of Income Tax on Individual Citi en ! (1) An income tax is he e!" im#ose$% 4a5 %n the taxa&le income defined in Section '( of this )ode, other than inco.e su0Gect to ta/ under Su0sections 4:5, [17] 4C5,[18] and 4D5[19] o" this Section, derived for each taxa&le year "ro. a$$ sources within and without the Phi$i##ines 07 ever7 individua$ citiDen o" the Phi$i##ines residin8 thereinC 4E.#hasis ours'5

Section !2 de"ines ;ta/a0$e inco.e= as the #ertinent ite.s o" 8ross inco.e s#eci"ied in the (IRC, $ess the deductions andIor #ersona$ and additiona$ e/e.#tions, i" an7, authoriDed "or such t7#es o" inco.e 07 the (IRC or other s#ecia$ $aws' As de"ined in Section 22 4P5,[20] ;ta/a0$e 7ear= .eans the ca$endar 7ear, u#on the 0asis o" which the net inco.e is co.#uted under ,it$e II o" the (IRC' Section *![21] a$so su##orts the ru$e that the ta/a0$e inco.e o" an individua$ sha$$ 0e co.#uted on the 0asis o" the ca$endar 7ear' In addition, Section *5[22] #rovides that the deductions #rovided "or under ,it$e II o" the (IRC sha$$ 0e ta6en "or the taxa!&e "ea in which the7 are ;#aid or accrued= or ;#aid or incurred'=

Moreover, Section +3 495[23] reEuires the e.#$o7er to deter.ine, on or 0e"ore the end o" the ca$endar 7ear 0ut #rior to the #a7.ent o" the co.#ensation "or the $ast #a7ro$$ #eriod, the ta/ due "ro. each e.#$o7ee-s ta/a0$e co.#ensation inco.e "or the entire ta/a0$e 7ear in accordance with Section 2* 4A5' ,his is "or the #ur#ose o" either withho$din8 "ro. the e.#$o7ee-s Dece.0er sa$ar7, or re"undin8 to hi. not $ater than Januar7 25 o" the succeedin8 7ear, the di""erence 0etween the ta/ due and the ta/ withhe$d' ,here"ore, as #rovided in Section 2* 4A5 425 4a5 in re$ation to Sections !2 and 22 4P5 and Sections *!, *5 and +3 495 o" the (IRC, the inco.e su0Gect to inco.e ta/ is the ta/#a7er-s inco.e as derived and co.#uted durin8 the ca$endar 7ear, his ta/a0$e 7ear' C$ear$7 "ro. the a0oveEuoted #rovisions, what the $aw shou$d consider "or the #ur#ose o" deter.inin8 the ta/ due "ro. an individua$ ta/#a7er is his status and Eua$i"ied de#endents at the c&ose o' the taxa!&e "ea and not at the ti.e the return is "i$ed and the ta/ due thereon is #aid' (ow co.es Section !5 4C5 o" the (IRC which #rovides,
Sec' !5' Allo"ance of #ersonal Exemption for Individual Taxpa$er. //// 4C5 C%an&e of 'tatus' H I" the ta/#a7er .arries or shou$d have additiona$ de#endent4s5 as de"ined a0ove durin8 the ta/a0$e 7ear, the ta/#a7er .a7 c$ai. the corres#ondin8 additiona$ e/e.#tion, as the case .a7 0e, in "u$$ "or such 7ear' I" the ta/#a7er dies durin8 the ta/a0$e 7ear, his estate .a7 sti$$ c$ai. the #ersona$ and additiona$ e/e.#tions "or hi.se$" and his de#endent4s5 as i" he died at the c$ose o" such 7ear' I" the s#ouse or an7 o" the de#endents dies or i" an7 o" such de#endents .arries, 0eco.es twent7%one 4225 7ears o$d or 0eco.es 8ain"u$$7 e.#$o7ed durin8 the ta/a0$e 7ear, the ta/#a7er .a7 sti$$ c$ai. the sa.e e/e.#tions as i" the s#ouse or an7 o" the de#endents died, or as i" such de#endents .arried, 0eca.e twent7%one 4225 7ears o$d or 0eca.e 8ain"u$$7 e.#$o7ed at the c$ose o" such 7ear'

E.#hasis .ust 0e .ade that Section !5 4C5 o" the (IRC a$$ows a ta/#a7er to sti$$ c$ai. the corres#ondin8 "u$$ a.ount o" e/e.#tion "or a ta/a0$e 7ear, e.&. i" he .arriesC have additiona$ de#endentsC he, his s#ouse, or an7 o" his de#endents dieC and i" an7 o" his de#endents .arr7, turn 22 7ears o$dC or 0eco.e 8ain"u$$7

e.#$o7ed' It is as i" the chan8es in his or his de#endents- status too6 #$ace at the c$ose o" the ta/a0$e 7ear' ConseEuent$7, his correct ta/a0$e inco.e and his corres#ondin8 a$$owa0$e deductions e.&. #ersona$ and additiona$ deductions, i" an7, had a$read7 0een deter.ined as o" the end o" the ca$endar 7ear' In the case o" #etitioner, the avai$a0i$it7 o" the a"ore.entioned deductions i" he is thus entit$ed, wou$d 0e re"$ected on his ta/ return "i$ed on or 0e"ore the 25th da7 o" A#ri$ 2333 as .andated 07 Section 52 4C5 425' [24] Since the (IRC too6 e""ect on Januar7 2, 2331, the increased a.ounts o" #ersona$ and additiona$ e/e.#tions under Section !5, can on$7 0e a$$owed as deductions "ro. the individua$ ta/#a7er-s 8ross or net inco.e, as the case .a70e, "or the ta/a0$e 7ear 2331 to 0e "i$ed in 2333' ,he (IRC .ade no re"erence that the #ersona$ and additiona$ e/e.#tions sha$$ a##$7 on inco.e earned 0e"ore Januar7 2, 2331' ,hus, #etitioner-s re$iance in Umali is .is#$aced' In Umali, we noted that des#ite 0ein8 8iven authorit7 07 Section 23 425 4*5 o" the (ationa$ Interna$ Revenue Code o" 23++ to adGust these e/e.#tions, no adGust.ents were .ade to cover 2313' (ote that Re#' Act (o' +2)+ is entit$ed ;An Act Ad(ustin& t%e )asic #ersonal and Additional Exemptions Allo"a*le to Individuals for Income Tax #urposes to t%e #overt$ T%res%old +evel, Amendin& for t%e #urpose 'ection ,-, #ara&rap% (+), Items (.) and (,) (A), of t%e /ational Internal Revenue Code, As Amended, and 0or 1t%er #urposes '= ,hus, we said in Umali, that the adGust.ent #rovided 07 Re#' Act (o' +2)+ e""ective 2332, shou$d consider the #overt7 thresho$d $eve$ in 2332, the ti.e it was enacted' And we o0served therein that since the e/e.#tions wou$d es#ecia$$7 0ene"it $ower and .idd$e%inco.e ta/#a7ers, the e/e.#tion shou$d 0e .ade to cover the #ast 7ear 2332' ,o such an e/tent, Re#' Act (o' +2)+ was a socia$ $e8is$ation intended to re.ed7 the non%adGust.ent in 2313' And as cited in Umali, this $e8is$ative intent is a$so c$ear in the records o" the 9ouse o" Re#resentatives- Journa$'
[25]

This is not so in the -ase at (ar. There is nothin' in the NIRC that e.presses an/ su-h intent. The po&i-/ e-&arations in its ena-t%ent o not in i-ate it 0as a so-ia& &e'is&ation that a 1uste persona& an a itiona& e.e%ptions a--or in' to the povert/ thresho& &eve& nor is there an/ in i-ation that its app&i-ation shou& retroa-t. At the ti%e petitioner 2i&e his )334 return an pai the ta. ue thereon in Apri& )335, the in-rease

a%ounts o2 persona& an a itiona& e.e%ptions in Se-tion 67 0ere not /et avai&a(&e. It has not /et a--rue as o2 8e-e%(er 6), )334, the &ast a/ o2 his ta.a(&e /ear. Petitioner9s ta.a(&e in-o%e -overs his in-o%e 2or the -a&en ar /ear )334. The &a0 -annot (e 'iven retroa-tive e22e-t. It is esta(&ishe that ta. &a0s are prospe-tive in app&i-ation, un&ess it is e.press&/ provi e to app&/ retroa-tive&/. [26] In the NIRC, 0e note, there is no spe-i2i- %ention that the in-rease a%ounts o2 persona& an a itiona& e.e%ptions un er Se-tion 67 sha&& (e 'iven retroa-tive e22e-t. Con2or%a(&/ too, persona& an a itiona& e.e%ptions are -onsi ere as e u-tions 2ro% 'ross in-o%e. 8e u-tions 2or in-o%e ta. purposes parta:e o2 the nature o2 ta. e.e%ptions, hen-e stri-t&/ -onstrue [27] a'ainst the ta.pa/er[28] an -annot (e a&&o0e un&ess 'rante in the %ost e.p&i-it an -ate'ori-a& &an'ua'e [29] too p&ain to (e %ista:en. [3 ] The/ -annot (e e.ten e (/ %ere i%p&i-ation or in2eren-e. [3!] An , 0here a provision o2 &a0 spea:s -ate'ori-a&&/, the nee 2or interpretation is o(viate , no p&ausi(&e pretense (ein' entertaine to 1usti2/ non-o%p&ian-e. A&& that has to (e one is to app&/ it in ever/ -ase that 2a&&s 0ithin its ter%s.[32] Accordin8$7, the Court o" A##ea$s and the Court o" ,a/ A##ea$s were correct in den7in8 #etitioner-s c$ai. "or re"und' ()*+*,-+*, the #etition is .*/0*. "or $ac6 o" .erit' ,he Decision dated June 5, 2 ! and the Reso$ution dated Se#te.0er 22, 2 ! o" the Court o" A##ea$s in CA%&'R' S'P' (o' ) *+5 are here07 A,,0+1*.' SO OR"ERE".