Title
Hon. Lourdes R. Jose, in her capacity as City Treasurer of Caloocan vs. Tigerway Facilities and Resources, Inc.
Case
G.R. No. 247331
Decision Date
Feb 26, 2024
Tigerway paid local taxes, contested deficiency assessments as void due to lack of factual/legal basis, and successfully claimed a refund under Section 196 of the LGC.
local government
code
tax refund
A

Case Summary (G.R. No. 247331)

Procedural Posture

Tigerway filed a complaint in the Regional Trial Court (RTC) under Section 196 of the LGC seeking refund/credit for taxes it paid. The RTC granted the refund and denied the City Treasurer’s counterclaim. The City Treasurer’s motion for reconsideration before the RTC was denied. The City Treasurer then petitioned the Court of Tax Appeals (CTA); the CTA Third Division denied relief to the City Treasurer. The CTA En Banc likewise denied the City Treasurer’s petition. The City Treasurer sought review by the Supreme Court under Rule 45; the Supreme Court affirmed the CTA En Banc decision with modification.

Factual Background

For renewal of its mayor’s permit in 2005, Tigerway received an Order of Payment dated January 21, 2005 and promptly paid PHP 219,429.80. Thereafter, the Caloocan BPLO issued a Final Demand and subsequent notices asserting deficiency business taxes and fees amounting initially to PHP 1,220,720.00—purportedly based on ocular inspections of Tigerway’s premises on May 27, 2005 and June 10, 2005. Notices included a Notice of Deficiency (July 15, 2005), Last and Final Demand (December 2, 2005), an Order of Payment (December 8, 2005), and a further Order of Payment (December 29, 2005) which reflected a reduced claimed amount of PHP 500,000.00. Tigerway paid the reduced amount on December 29, 2005. On December 27, 2007 Tigerway filed a written claim for refund or credit asserting actual tax liability for 2005 was PHP 234,234.79; having paid a total of PHP 719,429.80, it sought a refund of PHP 485,195.01 and immediately thereafter filed suit.

City Treasurer’s Principal Defense

The City Treasurer argued that Section 195 (protest of assessment) governed the dispute because assessment notices had been issued, and that Tigerway had lost its right to contest the assessment by failing to file a written protest within sixty (60) days from receipt of the Order of Payment (the December 29, 2005 Order of Payment). The Treasurer maintained that, by failing to timely protest, the assessment became final and executory and precluded subsequent claims of error or refund.

Legal Framework: Sections 195 and 196 of the LGC

Section 195 provides the administrative protest and judicial appeal mechanism for taxpayers who receive an assessment: a written protest with the local treasurer within 60 days of receipt of the notice of assessment, the treasurer’s decision within 60 days, and a 30‑day judicial appeal period from denial or inaction. Section 196 establishes the written claim for refund or credit and requires court action for recovery to be filed within two years from payment (or from the date the taxpayer becomes entitled to a refund). Jurisprudential principles (as articulated in cases cited by the Court) clarify that Sections 195 and 196 provide alternative but related remedies: an issued assessment typically invokes Section 195 procedures, while an asserted erroneous payment in the absence of a valid assessment invokes Section 196; where there is an assessment and payment, a taxpayer who seeks refund must both administratively question the assessment within 60 days and bring judicial action within 30 days from denial or inaction, even if styled under Section 196.

Threshold Issue: Which Remedy Applies?

The dispositive legal question was whether the notices issued by the City Treasurer constituted valid assessments under Section 195 (thus requiring timely protest and availing its procedural bars) or were defective so as to render Section 195 inapplicable and leave Section 196 as the proper remedy. The Supreme Court examined whether the notices satisfied the due‑process/notice requirements inherent in Section 195—that the notice of assessment must state the nature of the tax, the amount of deficiency, and the factual and legal bases supporting the assessment.

Defects in the Notices of Assessment and Resulting Voidness

The courts below, affirmed by the Supreme Court, found the notices deficient because they failed to set out the factual and legal bases and did not explain how the assessment computations (including floor area and employee counts) were made. The additional documents submitted by the Treasurer failed to remedy this omission and the Treasurer did not prove that those documents were actually received by Tigerway. Testimony of the City’s witness (Nestor CaAas) contained inconsistencies and was accorded little probative weight. Under settled jurisprudence cited by the Court, a notice that does not adequately inform the taxpayer of the facts and law underlying the assessment violates due process and renders the assessment void. Because the notices lacked requisite factual and legal particulars, they did not qualify as valid assessments under Section 195.

Application of Section 196 and Procedural Compliance

Given the absence of a valid assessment, the Court applied Section 196. Section 196 requires: (1) a written claim for refund or credit filed with the local treasurer; and (2) initiation of judicial proceedings within two years from payment of the tax or from the date the taxpayer is entitled to a refund. Tigerway filed its written claim on December 27, 2007 and instituted suit on December 28, 2007—both within two years from the December 29, 2005 payment. Thus the Court concluded Tigerway satisfied the procedural prerequisites of Section 196.

Merits and Computation of Refund

On the merits, Tigerway admitted its correct tax liability for 2005 was PHP 234,234.79, but had paid PHP 719,429.80. The Court therefore upheld the refund calculation: PHP 719,429.80 less PHP 234,234.79 equals PHP 485,195.01. The Supreme Court affirmed the lower courts’ rulings ordering refund of that amount to Tigerway.

Interest on the Refund: Denied

The lower courts had awarded legal interest (6% per annum) on the refunded amount. The Supreme Court modified that relief by setting aside the award of interest. The Court reiterated that interest on tax refunds is permissible only when authorized by law or when collection was attended by arbitrariness (i.e., inexcusable or obstinate disregard of legal provisions). Finding no statutory basis for interest and no arbi

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