Taxwise Or Otherwise

By Archie D. Guevarra
One of the well-established doctrines in the legal practice is stare decisis —
a Latin term for “to stand by things decided”. It is based on the principle that
once a question of law has been examined and decided, it should be
deemed settled and closed from further argument. As aptly discussed by
then Chief Justice Reynato Puno, there are two types of stare decisis:
vertical and horizontal. The first pertains to the duty of lower courts to apply
the decisions of the higher courts to cases involving the same facts, while
the second requires that the high court must follow its own precedents. The
application of stare decisis is a bar to any attempt to re-litigate the same
issues, necessary for two simple reasons, i.e. economy and stability.
On March 7, 2018, the Supreme Court’s Third Division, through the
ponencia of Justice Samuel Martires, settled a novel issue on the
irrevocability of the option to refund by the taxpayer. The Court held that the
irrevocability rule found under Section 76 of the Tax Code only applies to
the carryover option and not to the refund option. Although the taxpayer
initially elected the refund option in its annual income tax return (ITR), the
subsequent carryover it made the following year effectively abandoned its
refund claim from the government. The Court explained that the last
sentence of Section 76 of the Tax Code unmistakably discloses that the
irrevocable option refers only to the carryover option.
In a complete turnaround in a separate case on Aug. 1, 2018, the same
division of the Supreme Court rendered a new ruling that appears to
contradict its earlier pronouncement. Through the ponencia of incumbent
Chief Justice Lucas Bersamin, the Court took the position that once
elected, the option to refund is already irrevocable regardless of the
subsequent carryover by the taxpayer. The Court held that the Court of Tax
Appeals misappreciated the fact that the taxpayer already exercised the
option to refund its unutilized creditable withholding tax for the year 2005
when it filed its annual ITR. It went on to explain that the requisites for
entitlement to refund were sufficiently satisfied by the taxpayer, which are:
(1) the refund must be filed within the two-year reglementary period; (2) the
income is declared on the ITR; and (3) the fact of withholding is established
by a copy of the withholding tax statement.
Given the conflicting decisions of the Supreme Court, how should we
interpret the two decisions?
The application or interpretation placed by the Supreme Court upon a law
is part of the law as of the date of its enactment since the Court’s
application or interpretation merely establishes the contemporaneous
legislative intent that the construed law purports to carry into effect.
Following the 1987 Philippine Constitution, no doctrine or principle of law
laid down by the Supreme Court in a decision rendered En Banc or in
Division may be modified or reversed except by the Court sitting En Banc.
This is not the first instance where the Supreme Court had conflicting
positions in its decisions. Based on the precedent decisions, the Supreme
Court would tend to uphold the validity of a later ruling which contradicts an
established doctrine laid out by its previous ruling on the matter. This is
irrespective of whether the later decision was decided by the Court sitting
En Banc or in Division.
In dealing with inconsistencies, there are two approaches applied by the
Supreme Court — either to harmonize the varying positions or to abandon
one of the rulings.
As the highest tribunal, never in its history has the Supreme Court declared
any decision rendered by its divisions as invalid. Based on a survey of
decided cases, the Supreme Court tends to harmonize decisions rendered
by its divisions by reconciling conflicting points, treating the latest decision
as a mere clarification and not an abandonment of earlier rulings.
In certain cases, however, the Supreme Court’s latest decision on the
matter serves as an abandonment of its previous decisions. Nonetheless,
the Supreme Court recognizes the prospective application of such
decisions, hence, upholding the validity of its earlier ruling. It should not
apply to parties who had relied on the old doctrine.
A good example of the second approach would be the Supreme Court
decisions involving the reckoning of the two-year prescriptive period for
input VAT refund. Following the Atlas doctrine promulgated on June 8,
2007, the two-year prescriptive period for filing a claim for refund/credit of
input VAT on zero-rated sales should be reckoned from the date of filing of
the return and payment of the tax due. However, this was reversed by the
Mirant doctrine on Sept. 12, 2008, where the Court held that the two-year
period is reckoned from the close of the taxable quarter when the relevant
sales were made. In resolving the two doctrines in the San Roque case, the
Supreme Court En Banc held that the Atlas doctrine is only effective from
its promulgation on June 8, 2007 until its abandonment on Sept. 12, 2008
by the Mirant doctrine.
Of the two approaches, which one did the Supreme Court take on the
irrevocability rule?
It may be inferred that the March decision was abandoned and superseded
by the August decision of Chief Justice Bersamin. However, it would be
good if the Court En Banc would be able to clarify and settle this issue just
like what it did in the San Roque case.