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[G.R. No. 132228.� January 21, 2003]

GOROSPE vs. VINZONS-CHATO

EN BANC

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated JAN 21 2003.

G.R. No. 132228 (Rene B. Gorospe, Manuel M. Sunga, Francisco C. Gatchalian, Oscar C. Ventanilla, Jr., Jose D. Flores, Jr., Fina Victoria B. So-Liwanag, Augusto K. Aligada, Jr., Anicia C. Marquez, Elizabeth V. Inoturan, Alan Roullo Yap, Jose S. Ramos, Philip P. Aguinaldo, Victor T. Reyes, Alden Francis C. Gonzales, Vincent Z. Bolivar, Nunilo O. Marapao, Jr., Carla E. Santamaria, Milagros D. Cadacio-Cruz, Lilia F. Echeverri, Lourdes D. Somera, Michelle B. Luz Roque, Edith A. Mendoza, Annabelle L. Lazaro, Anna Marie M. Gutierrez, Estella S. Reoliquio, Annie M. Ordo�ez, Bethelin S. Sayo, Jonalyn C. Villanueva, Elizabeth A. Antonio, Erlinda T. Valdez, Teofilo T. Alvarez, John Anthony G. Lacson, Melicia Jane N. Pere�ea, Ildefonso R. Aycocho, Jr., Edison Q. Palmiano, Susana Y. Makabenta, Herminia B. Gapuz, Elsie S. Castro and Gloria C. Tumaliuan vs. Hon. Liwayway Vinzons-Chato, in her capacity as Commissioner of Internal Revenue.)

Before us is a petition for mandamus and prohibition [1] cralaw assailing the validity of Bureau of Internal Revenue (BIR) Revenue Memorandum Circular (RMC) No. 1-98 and directing respondent, then BIR Commissioner Liwayway Vinzons-Chato, to apply the adjusted rates provided for in R.A. 8424 to income earned in 1997.

On January 1, 1998, Republic Act No. 8424, which amended the National Internal Revenue Code (NIRC), took effect. Section 35 of R.A. No. 8424 increased the personal and additional exemptions of individual taxpayers as illustrated below:

Taxpayer������������������������������ R.A. No.��������������������� R.A. No. 8424

�� Classification�������������������������� �� 7167 [2] cralaw ����������������������� �� New Rate

Old Rate

Single or Legally Separated��������������������� P9,000.00������������������� �� P20,000.00

Individual

Head of Family����������������������������������������� 12,000.00������������������� ���� 25,000.00

Married Individual������������������������������������� 18,000.00������������������� ���� 32,000.00

Additional Exemption [3] cralaw ������������������������������ � 5,000.00������������������� ������ 8,000.00

Forthwith, then Commissioner of Internal Revenue Liwayway Vinzons-Chato (respondent Commissioner) issued RMC No. 1-98 dated January 2, 1998, partly quoted as follows:

"For the information and guidance of all concerned, hereunder enumerated are some salient amendments to the National Internal Revenue Code (NIRC), which need to be implemented immediately and which were introduced by R.A. No. 8424, effective January 1, 1998:

"x x x

"(20) Increased the allowable personal and additional exemptions of individuals as follows:

a.      Personal Exemption:

1. Single�������������������� -�� P20,000

2. Head of Family����� - ��P25,000

3. Married������������������ -�� P32,000

b.      Additional Exemption for dependent children of Eight Thousand Pesos (P8,000) for every dependent child, provided that the number of such dependent children shall not exceed four (4).

"The foregoing personal and additional exemptions, however, shall be effective January 1, 1998 and applicable only on income earned for the taxable calendar year 1998." (emphasis ours)

On February 2, 1998, all thirty-nine (39) petitioners filed a petition for mandamus and prohibition with this Court on their behalf, and on behalf of all other individual taxpayers who might be similarly situated, assailing RMC No. 1-98. Petitioners alleged therein that the increase in personal and additional exemptions should be applicable to income earned in 1997, instead of income earned from 1998 onwards, as decreed in RMC No. 1-98.

Petitioners cited Ingalls vs. Trinidad, [4] cralaw and Umali vs. Estanislao [5] cralaw wherein this Court ruled that the new rates of personal and additional exemptions provided by an amendatory law are applicable to income earned the year before the law took effect, the corresponding tax return of which was filed after the effectivity of the said amendatory law.

Petitioners further alleged that when Congress enacted R.A. No. 8424, it was aware of this Court's ruling in Umali. Likewise, when Congress specified January 1, 1998 as the effectivity date of R.A. No. 8424, it intended that the increased personal and additional exemptions should apply to income earned in the previous year (1997), the returns of which are to be filed not later than April 15, 1998, in conformity with this Court's ruling in Umali.

In her Comment, respondent Commissioner alleged that Umali is not applicable because while R.A. No. 7167 deals solely with amendments to allowable personal and additional exemptions under the NIRC, R.A. No. 8424 includes amendments to several other provisions of the same Code. Thus, R.A. No. 7167 could easily be made retroactive, while it would be unfeasible to give retroactive effect to Section 35 of R.A. No. 8424 for in doing so, all the other provisions of the law will also be retroactive. Respondent Commissioner further alleged that if Congress intended to apply the amended rates for personal and additional exemptions to income earned in 1997, it would have provided the corresponding provision in the law. Finally, respondent Commissioner claimed that petitioners failed to exhaust administrative remedies, asserting that they did not request her to reconsider the issuance of RMC No. 1-98 or ask the Secretary of Finance to review the same.

R.A. No. 8424 provides:

"SECTION 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance.

"The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals." (emphasis ours)

Respondent Commissioner contends that notwithstanding the above provisions, petitioners did not ask her to reconsider the issuance of RMC No. 1-98. Neither did they elevate the matter on appeal to the Secretary of Finance. [6] cralaw

For their part, petitioners maintain that because they disagreed with the position taken by respondent Commissioner, they sought immediate recourse before this Court. [7] cralaw They insist that their action is one of the exceptions to the rule on exhaustion of administrative remedies. [8] cralaw

Under Section 3, Rule 65 of the 1997 Rules of Civil Procedure, as amended, mandamus is an extraordinary remedy that may be availed of only when "there is no other plain, speedy and adequate remedy in the ordinary course of law." If superior administrative officers can grant the relief prayed for, then special civil actions are generally not entertained. [9] cralaw Petitioners should have observed this rule before they resorted to the present recourse of mandamus and prohibition.

This Court, in Laguna CATV vs. Maraan, et al., [10] cralaw held:

"This Court, in a long line of cases, has consistently held that if a remedy within the administrative machinery can still be resorted to by giving the administrative officer every opportunity to decide on a matter that comes within his jurisdiction, then such remedy must be exhausted first before the court's power of judicial review can be sought (Province of Zamboanga del Norte vs. Court of Appeals, 342 SCRA 549, 557 [2000]; Zabat vs. Court of Appeals, 338 SCRA 551, 560 [2000]; Diamonon vs. Department of Labor and Employment, 327 SCRA 283, 291 [2000]; Social Security System Employees Association vs. Bathan-Velasco, 313 SCRA 250, 252 [1999]; Paat vs. Court of Appeals, 266 SCRA 167, 175 [1997]). The party with an administrative remedy must not merely initiate the prescribed administrative procedure to obtain relief but also pursue it to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to the court (Carale vs. Abarintos, 269 SCRA 132, 142 [1997])." (emphasis ours)

The doctrine of exhaustion of administrative remedies has practical and legal reasons. Resort to administrative remedies entails lesser expenses and provides for speedier disposition of controversies. Thus, for reasons of comity and convenience, courts will shy away from a dispute until the system of administrative redress has been completed and complied with so as to give the administrative agency every opportunity to correct its error and to dispose of the case. [11] cralaw The underlying principle of the rule rests on the presumption that the administrative agency, if afforded a complete chance to pass upon the matter, will decide the same correctly. [12] cralaw

Petitioners argue that the urgency of the issue they now raise necessitates direct resort to this court. We disagree. Aggrieved by the issuance of RMC No. 1-98, they should have asked respondent Commissioner for a reconsideration and if her action is adverse, they should have appealed to the Secretary of Finance, pursuant to Section 4, R.A. 8424 earlier quoted. By filing the instant petition with this Court, they acted on the assumption that their appeal to the Finance Secretary would be denied. They should not have acted on mere conjecture or speculation.

The doctrine of primary jurisdiction does not authorize a court to arrogate unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence. [13] cralaw This doctrine squarely applies to this case considering that the issuance of the questioned Circular is within the exclusive and original jurisdiction of respondent Commissioner.

A catena of cases establishes the basic rule that the court will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies. [14] cralaw It bears stressing that Revenue Memorandum Circulars are considered administrative rulings issued from time to time by the Commissioner of Internal Revenue. [15] cralaw The Bureau of Internal Revenue, which respondent Commissioner heads, is the government agency charged with enforcement of tax laws. It is presumed to be familiar with all the considerations pertinent to the meaning and purpose of tax laws, and to have formed an independent, conscientious and competent expert opinion thereon.

In fact, government agencies or officials charged with the implementation of the law, like respondent Commissioner, are frequently the drafters of the law they interpret. Thus, the courts give much weight to their competence, expertness, experience, and informed judgment. [16] cralaw

WHEREFORE, the instant petition for mandamus and prohibition is DISMISSED.

Bellosillo, J., is on leave.

Very truly yours,

LUZVIMINDA D. PUNO
Clerk of Court

(Sgd.) MA. LUISA D. VILLARAMA

Asst. Clerk of Court



Endnotes:

[1] cralaw Pursuant to Rule 65 of the 1997 Rules of Civil Procedure, as amended.

[2] cralaw "An Act Adjusting The Basic Personal And Additional Exemptions Allowable To Individuals For Income Tax Purposes To The Poverty Threshold Level, Amending For The Purpose Section 29, Paragraph (L), Items (1) and (2) (A) Of The National Internal Revenue Code, As Amended, And For Other Purposes."

[3] cralaw For every dependent child, provided that the number of such dependent children shall not exceed four (4).

[4] cralaw 46 Phil. 807 (1923).

[5] cralaw 209 SCRA 446 (1992).

[6] cralaw Rollo, at 144.

[7] cralaw Id., at 91.

[8] cralaw Id., at 53.

[9] cralaw Militante vs. Court of Appeals, 330 SCRA 318, 329-331 (2000).

[10] cralaw G.R. No. 139492, November 19, 2002.

[11] cralaw Province of Zamboanga Del Norte vs. Court of Appeals, 342 SCRA 549, 557 (2000).

[12] cralaw Laguna CATV vs. Alex Maraan, et al., supra.

[13] cralaw Province of Zamboanga Del Norte vs. Court of Appeals, supra at 559, citing Paat vs. Court of Appeals, 266 SCRA 167 (1997). See also Vidad vs. RTC of Negros Oriental, Br. 42, 227 SCRA 271, 276 (1993).

[14] cralaw Province of Zamboanga Del Norte vs. Court of Appeals, supra at 560, citing Sta. Ines Melale Forest Products Corporation vs. Macaraig, 299 SCRA 491 (1998); Felipe Ysmael, Jr. and Co. vs. Deputy Executive Secretary, 190 SCRA 673 (1993); and Concerned Officials of MWSS vs. Vasquez, 240 SCRA 502 (1995).

[15] cralaw Philippine Bank of Communications vs. Commissioner of Internal Revenue, 302 SCRA 241, 252 (1999).

[16] cralaw Energy Regulatory Board vs. Court of Appeals, 357 SCRA 30, 40 (2001) citing Melendres, Jr. vs. Comelec, 319 SCRA 262, 275-276 (1999) in turn citing Nestle Philippines, Inc. vs. Court of Appeals, 203 SCRA 504 (1991) and Asturias Sugar Central, Inc. vs. Commissioner of Customs, 29 SCRA 617 (1969).


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