SC to Makati: Refund P20.5m tax to SLEX

The Supreme Court (SC) has ordered the Makati City government to refund the South Luzon Tollway Corp., now SMC SLEX, Inc. of more than P20.5 million in cash after ruling that the local government unit erroneously collected business tax from the tollway operator in 2011.

In a decision, the SC’s Third Division affirmed the verdict issued by the Court of Tax Appeals (CTA) en banc on March 11 2020 denying the petition filed by the Makati City government and its treasurer.

South Luzon Tollway used to hold office in Makati City until 2011 when it transferred its offices to Calamba City in Laguna.

On Aug. 3, 2011, South Luzon applied for a certificate of business retirement with the Makati government. As a result, the firm was assessed more than P20.5 million in local business tax from Jan. 1 to Sept. 30, 2011. The tax was paid by the firm on Jan. 31, 2012.

On Dec. 13, 2013, South Luzon asked the Makati City government to refund the P20.5 million taxes it paid, asserting that it was registered as a pioneer enterprise with the Board of Investments (BOI) on March 3, 2010and was therefore, exempted from paying said tax for six years, or from March 3, 2010 to March 3, 2016. SLEX submitted as proof its BOI certificate of registration.

When the city government did not reply to the request, SLEX filed a petition with the Calamba City Regional Trial Court (RTC) on Feb. 3, 2014, asking to be declared as exempted from local business tax and for refund of the amount it paid for the 2011 taxes.

On Jan. 6, 2017, the RTC ruled in favor of the petitioner as it upheld the company’s tax-exempt status, thus ordered the refund of the taxes paid.

When Makati City’s motion for reconsideration was denied by the RTC, the local government elevated the case to the CTA which, on May 9, 2018, through its first division affirmed the trial court’s ruling.

The CTA said that the Makati City government erroneously collected the amount and that the payment made by SLEX should be refunded in cash.

Makati filed a motion for reconsideration, but the CTA en banc was denied it, along with its plea that the SLEX could only be granted tax credits.

This prompted SLEX to elevate the case to the SC.

Among other allegations, Makati City told the SC that the SLEX failed to file its judicial claim for refund within two years from the date of the payment of the business tax and that it was justified in assessing the tax and colleting it and denying the request for refund.

The SC ruled that the claim for refund made by South Luzon was filed within the two-year mandated period.

It said the two-year period to file an action for refund expired on Jan. 31, 2014 or 24 months from the day of payment on Jan. 31, 2012. However, Jan. 31, 2014 was declared a non-working holiday and Feb. 1 and 2, 2014 were Saturday and Sunday, respectively.

It ruled that SLEX filing of a petition for refund before the RTC on Feb. 3, 2014 was within the prescriptive period set by law.

“The non-presentation of the BOI Certificate of Registration at the time of payment of the local business tax was not fatal to respondent’s (South Luzon) case. It does not constitute a waiver to recover the tax erroneously collected and paid,” the SC said.

On the cash payment of the refund sought by SLEX, the SC cited the Revised Makati Revenue Code (RMRC) which provides that any recovery of erroneously or illegally collected tax can be done through refund or credit.

“As correctly pointed out by the CTA En Banc, the use of the disjunctive ‘or’ expresses an alternative or choice; it signifies dissociation and independence of one thing from other things enumerated,” it said.

“That said, respondent is entitled to be refunded of the P20,585,603.19 it paid to petitioners (Makati City), in cash, contrary to petitioners’ asseveration that respondent may only avail of a tax credit,” it pointed out.

The SC stressed that the taxpayer expects fair dealing from the government, and the latter has the duty to refund without any unreasonable delay what it has erroneously collected.

“If the State expects its taxpayers to observe fairness and honesty in paying their taxes, it must hold itself against the same standard in refunding excess (or erroneous) payments of such taxes. It should not unjustly enrich itself at the expense of taxpayers,” the SC noted.