CASE BRIEF 2008-138

CASE: Cagayan Valley Drug Corporation vs. Commissioner of Internal Revenue (G.R. No. 151413 February 13, 2008)

PONENTE: Velasco, Jr., J.:

SUBJECT: RA 7432; Tax Refund/Tax Credit; Verification and Certification of non-forum shopping

FACTS:

Cagayan Valley Drug Corporation, a domestic corporation, is a duly licensed retailer of medicine and other pharmaceutical products.

Cagayan alleged that in 1995, it granted 20% sales discounts to qualified senior citizens on purchases of medicine pursuant to Republic Act No. (RA) 7432.

In compliance with Revenue Regulation No. (RR) 2-94, Cagayan treated the 20% sales discounts granted to qualified senior citizens in 1995 as deductions from the gross sales in order to arrive at the net sales, instead of treating them as tax credit as provided by Section 4 of RA 7432.

Thereafter, Cagayan filed with the BIR a claim for tax refund/tax credit of the full amount of the 20% sales discount it granted to senior citizens for the year 1995 in accordance with Sec. 4 of RA 7432.

The BIR’s inaction on its claim for refund/tax credit compelled Cagayan to file a petition for review before the CTA.

The CTA rendered a Decision dismissing the petition for review for lack of merit. It ruled that the 20% sales discounts Cagayan granted to qualified senior citizens should be deducted from its income tax due and not from petitioner’s gross sales as erroneously provided in RR 2-94. However, notwithstanding Cagayan’s entitlement to a tax credit, the CTA denied the tax credit to Cagayan on the ground that it had suffered net loss in 1995.

The CTA ratiocinated that on matters of tax credit claim, the government applies the amount determined to be reimbursable after proper verification against any sum that may be due and collectible from the taxpayer. However, if no tax has been paid or if no amount is due and collectible from the taxpayer, then a tax credit is unavailing.

Aggrieved, Cagayan elevated the matter before the CA

***(please note that , now, Decisions of CTA can no longer be appealed to CA).

One of the issues raised before the CA is the irregularity of the verification and certification of non-forum shopping as it was signed by the president without any proof of authorization by the Board of Directors of Cagayan.

ISSUES:

A) Whether Cagayan’s president can sign the subject verification and certification sans the approval of its Board of Directors.

B) Whether the CTA committed error in denying Cagayan’s action for refund or tax credit.

RULING:

A)      Yes, the president can sign the verification and certification. The Court has recognized the authority of some corporate officers to sign the verification and certification against forum shopping. In Mactan-Cebu International Airport Authority v. CA, we recognized the authority of a general manager or acting general manager to sign the verification and certificate against forum shopping; in Pfizer v. Galan, we upheld the validity of a verification signed by an “employment specialist” who had not even presented any proof of her authority to represent the company; in Novelty Philippines, Inc., v. CA, we ruled that a personnel officer who signed the petition but did not attach the authority from the company is authorized to sign the verification and non-forum shopping certificate; and in Lepanto Consolidated Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), we ruled that the Chairperson of the Board and President of the Company can sign the verification and certificate against non-forum shopping even without the submission of the board’s authorization.

In sum, we have held that the following officials or employees of the company can sign the verification and certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case.

While the above cases do not provide a complete listing of authorized signatories to the verification and certification required by the rules, the determination of the sufficiency of the authority was done on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of corporate officers or representatives of the corporation to sign the verification or certificate against forum shopping, being “in a position to verify the truthfulness and correctness of the allegations in the petition.”

Read related case briefs: [CASE BRIEF 2013-052] UNIVERSITY OF THE EAST, Dean Eleanor Javier, Ronnie Gillego and Dr. Jose C. Benedicto vs. Analiza F. Pepanio and Mariti D. Bueno (G.R. No. 193897 January 23, 2013) ;

B)      The Court has resolved several cases involving the very same issue. In Commissioner of Internal Revenue v. Central Luzon Drug Corporation (Central Luzon),we held that private drug companies are entitled to a tax credit for the 20% sales discounts they granted to qualified senior citizens under RA 7432 and nullified Secs. 2.i and 4 of RR 2-94. In Bicolandia Drug Corporation (formerly Elmas Drug Corporation) v. Commissioner of Internal Revenue,we ruled that petitioner therein is entitled to a tax credit of the “cost” or the full 20% sales discounts it granted pursuant to RA 7432. In the related case of Commissioner of Internal Revenue v. Bicolandia Drug Corporation, we likewise ruled that respondent drug company was entitled to a tax credit, and we struck down RR 2-94 to be null and void for failing to conform with the law it sought to implement.

The CTA correctly ruled that the 20% sales discounts Cagayan granted to qualified senior citizens should be deducted from its income tax due and not from its gross sales as erroneously provided in RR 2-94. However, the CTA erred in denying the tax credit to Cagayan on the ground that Cagayan had suffered net loss in 1995, and ruling that the tax credit is unavailing.

“Net loss in a taxable year does not preclude grant of tax credit.”

It is true that Cagayan did not pay any tax in 1995 since it suffered a net loss for that taxable year. This fact, however, without more, does not preclude Cagayan from availing of its statutory right to a tax credit for the 20% sales discounts it granted to qualified senior citizens.

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THINGS DECIDED:

A)      The following officials or employees of the company can sign the verification and certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case.

The rationale in justifying the authority of corporate officers or representatives of the corporation to sign the verification or certificate against forum shopping, is because they are “in a position to verify the truthfulness and correctness of the allegations in the petition.”

B) The fact that the taxpayer incurred “net loss” in a taxable year, this does not preclude him from availing of its statutory right to a tax credit for the 20% sales discounts it granted to qualified senior citizens.

 ‘Stand by things decided’ ~ Stare Decisis


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