(NAR) VOL. 10 NO. 2 / APRIL - JUNE 1999
"Moreover, for value-added tax purposes, the transfer of the respective assets, including tangible and movable properties, by the 10 ABSORBED CORPORATIONS to USWCI pursuant to the merger shall not be subject to the value-added tax, and any unused input tax of each of the 10 ABSORBED CORPORATIONS as of the date of merger, will be absorbed by USWCI as the surviving corporation, pursuant to Section 5(b)(3) of the Revenue Regulations No. 5-87. (BIR Ruling No. 063-93 dated January 10, 1993; BIR Ruling No. 472-93 dated December 3, 1993)"It is provided therein that (a) the transferred assets, which include the merchandise inventory of the absorbed corporations, "shall not be subject to the value-added tax" and (b) that the unused input taxes of the absorbed entities shall be transferred for the use or tax credit to the output tax of the surviving corporation.
"x x x that all such issuances must not override, but must remain consistent and in harmony with, the law they seek to apply and implement. Administrative rules and regulations are intended to carry out, neither to supplant nor to modify the law" (Commissioner of Internal Revenue vs. Court of Appeals, 240 SCRA 368[1995]).Regulations that are in conflict with the law are null and void (Wise and Co. vs. Meer 78 Phil. 655), so that the above quoted portion of Ruling S34-263-97 is hereby REVOKED/SET ASIDE. The portion thereof which pertains to the tax-free exchange, for income tax purposes, under Section 34 (c) (2) and 6 (b) of Tax Code, is retained and not covered by this revocation.- and -
"It seems too clear for serious argument that an administrative officer can not change a law enacted by Congress. A regulation that is merely an interpretation of the statute when once determined to have been erroneous becomes nullity. An erroneous construction of the law by the Treasury Department or the Collector of Internal Revenue does not preclude or estop the government from collecting a tax which is legally due." (Ben Stocker, et al.; B.T.A., 1351, underlining supplied, Hilado vs. Comm. of Internal Revenue and CTA 100 Phil. 288).
"When the Commissioner determined in 1937 that the petitioner was not exempt and never had been, it was his duty to determine, assess and collect the tax due for all years not barred by the statutes of limitation. The conclusion reached and announced by his predecessor in 1924 was not binding upon him. It did not exempt the petitioner from tax. This same point was decided in this way in Stanford University Bookstore, 29 B.T.A., 1280; affd., 83 Fed. (2d) 710". (Southern Maryland Agricultural Fair Association vs. Commissioner of Internal Revenue, 40 B.T.A., 549, 554).The provisions of Section 246 on non-retroactivity of Rulings have been carefully considered, in the light of the two (2) cases decided by the Supreme Court wherein the revocatory administrative issuances were not given retroactive application. In the case of ABS-CBN vs. Court of Tax Appeals (108 SCRA 143), the Court opined that there will be an injustice and would be violative of fair play if the withholding agent would be made to pay additional withholding taxes for 1965 to 1968 under the provisions of a Circular later issued in 1971. The film rental payments were already long remitted before to the foreign film owner. In the case of Commissioner of Internal Revenue vs. Burroughs Ltd. et al. (142 SCRA 324), Burroughs paid its branch profit remittance tax in accordance with a Ruling of the BIR which, later on, was revoked by an RMC issued 3 years after payment, increasing the profit remittance tax. Again, it appears obvious that there has been a violation of the rules of justice and fair play. Nolledo stated that the overpayment of the tax is a case of "solutio indebiti" (payment by mistake), so that the excess should be returned to Burroughs (footnote on page 1269, the NIRC, annotated, 1996 17th and revised edition).
"With regards to the contention that General Circular No. V-139 cannot be given retroactive effect because that would affect and obliterate the vested right acquired by petitioner under the previous circular, suffice it to say that General Circular No. V-123, having been issued on a wrong construction of the law, cannot give rise to a vested right that can be invoked by a taxpayer. The reason is obvious: a vested right cannot spring from a wrong interpretation. This is too clear to require elaboration. (emphasis supplied, Hilado, supra.)