Court of Appeals affirms DOJ ruling on BIR's P2.6-billion tax assessment against GSIS

MANILA, Philippines - The Court of Appeals recently affirmed a resolution of the Department of Justice which nullified the Bureau of Internal Revenue’s P2.6-billion deficiency documentary stamp tax assessment on the Government Service Insurance System (GSIS) for the years 2001 to 2003 for having no basis.

In an 11-page decision penned by Associate Justice Arcangelita Romilla-Lontok, the CA’s Sixth Division dismissed the BIR’s petition for certiorari which questioned the jurisdiction of the Office of the Secretary of Justice in handing down its March 28, 2007 and May 30, 2007 resolutions in favor of GSIS.

The CA decision, dated Sept. 10, 2009, was concurred in by Associate Justices Jose Sabio Jr. and Sixto Marella Jr.

The appellate court rejected the argument of the BIR that it is the Court of Tax Appeals (CTA) which has jurisdiction to hear cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, and penalties imposed under the National Internal Revenue Code (NIRC) and under Sec. 7 of Republic Act No. 1125, the law creating the Court of Tax Appeals.

 It sided with the position of the GSIS and the office of the Solicitor General (OSG) that Presidential Decree No. 242 should prevail over RA 1125 since the former took effect only July 9, 1973 while the latter was implemented as early as June 16, 1954.

PD 242 is an act prescribing the procedure for administrative settlement of disputes between government instrumentalities.

 “Therefore, this Court cannot find fault with the action of GSIS in filing the case before the OSJ. The OSJ at that time was the proper venue for settling the issues involved. The OSJ having been vested with jurisdiction over the subject case at the time of its filing pursuant to PD 242 continues to be vested and is not divested of jurisdiction to another tribunal,” the CA said.

The appellate court also agreed with the contention of the GSIS that the BIR did not have express authority from the Office of the Solicitor General to file the suit.

The CA also gave weight to the comment of the OSG that the BIR petition be dismissed for lack of merit as the OSJ possesses jurisdiction over the disputed tax assessments.

The Appellate Court said that the Supreme Court had earlier affirmed its ruling in a previous case that there is an irreconcilable “repugnance” between Sec. 7 of RA 1125 and PD 242.

Because of this, the CA held that “the latest expression of the legislative will, should prevail” over the one which took effect earlier.

In sustaining the DOJ’s jurisdiction over the case, the GSIS and OSG used as its basis Sections 1 and 3 of PD 242, which provide that all disputes, claims and controversies involving government offices, including government-owned or controlled corporations shall be administratively settled except cases already pending in court at the effectivity of the law.

The CA said, PD 242 cited that cases involving questions of law shall be settled by the solicitor general with respect to disputes of claims or controversies between or among government agencies; the Government Corporate Counsel with respect to disputes among government-owned or controlled corporations being served by the OGCC; and the Secretary of Justice with respect to all other disputes not within the jurisdiction of the OSG and the OGCC.