Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=50618:gr-151413-2008&amp;catid=1502&amp;Itemid=566
Timestamp: 2019-04-24 02:17:00+00:00

Document:
CAGAYAN VALLEY DRUG CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
This Petition for Review under Rule 45 of the Rules of Court seeks the recall of the August 31, 2000 Resolution1 of the Court of Appeals (CA) in CA-G.R. SP No. 59778, which dismissed petitioner Cagayan Valley Drug Corporation's Petition for Review of the April 26, 2000 Decision2 of the Court of Tax Appeals (CTA) in C.T.A. Case No. 5581 on the ground of defective verification and certification against forum shopping.
Petitioner, a corporation duly organized and existing under Philippine laws, is a duly licensed retailer of medicine and other pharmaceutical products. It operates two drugstores, one in Tuguegarao, Cagayan, and the other in Roxas, Isabela, under the name and style of "Mercury Drug."
Petitioner alleged that in 1995, it granted 20% sales discounts to qualified senior citizens on purchases of medicine pursuant to Republic Act No. (RA) 74323 and its implementing rules and regulations.
In compliance with Revenue Regulation No. (RR) 2-94, petitioner 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.
On December 27, 1996, however, petitioner filed with the Bureau of Internal Revenue (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, allegedly totaling to PhP 123,083 in accordance with Sec. 4 of RA 7432.
The BIR's inaction on petitioner's claim for refund/tax credit compelled petitioner to file on March 18, 1998 a Petition for Review before the CTA docketed as C.T.A. Case No. 5581 in order to forestall the two-year prescriptive period provided under Sec. 2304 of the 1977 Tax Code, as amended. Thereafter, on March 31, 2000, petitioner amended its Petition for Review .
The CTA sustained petitioner's contention that pursuant to Sec. 4 of RA 7432, the 20% sales discounts petitioner extended to qualified senior citizens in 1995 should be treated as tax credit and not as deductions from the gross sales as erroneously interpreted in RR 2-94. The CTA reiterated its consistent holdings that RR 2-94 is an invalid administrative interpretation of the law it purports to implement as it contravenes and does not conform to the standards RA 7432 prescribes.
Notwithstanding petitioner's entitlement to a tax credit from the 20% sales discounts it extended to qualified senior citizens in 1995, the CTA nonetheless dismissed petitioner's action for refund or tax credit on account of petitioner's net loss in 1995. First, the CTA rejected the refund as it is clear that RA 7432 only grants the 20% sales discounts extended to qualified senior citizens as tax credit and not as tax refund. Second, in rejecting the tax credit, the CTA reasoned that while petitioner may be qualified for a tax credit, it cannot be so extended to petitioner on account of its 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. Moreover, it held that before allowing recovery for claims for a refund or tax credit, it must first be established that there was an actual collection and receipt by the government of the tax sought to be recovered. In the instant case, the CTA found that petitioner did not pay any tax by virtue of its net loss position in 1995.
Aggrieved, petitioner elevated the matter before the CA, docketed as CA-G.R. SP No. 59778. On August 31, 2000, the CA issued the assailed Resolution7 dismissing the petition on procedural grounds. The CA held that the person who signed the verification and certification of absence of forum shopping, a certain Jacinto J. Concepcion, President of petitioner, failed to adduce proof that he was duly authorized by the board of directors to do so.
As far as the CA was concerned, the main issue was whether or not the verification and certification of non-forum shopping signed by the President of petitioner is sufficient compliance with Secs. 4 and 5, Rule 7 of the 1997 Rules of Civil Procedure.
1. I am the President of Cagayan Valley Drug Corporation, Petitioner in the above-entitled case and am duly authorized to sign this Verification and Certification of Absence of Forum Shopping by the Board of Director.
Petitioner raises two issues: first, whether petitioner's president can sign the subject verification and certification sans the approval of its Board of Directors. And second, whether the CTA committed reversible error in denying and dismissing petitioner's action for refund or tax credit in C.T.A. Case No. 5581.
As regards the first issue, we find the CA to have erroneously relied on Premium. In said case, the issue tackled was not on whether the president of Premium Marble Resources, Inc. was authorized to sign the verification and certification against forum shopping, but rather on which of the two sets of officers, both claiming to be the legal board of directors of Premium, have the authority to file the suit for and in behalf of the company. The factual antecedents and issues in Premium are not on all fours with the instant case and is, therefore, not applicable.
With respect to an individual litigant, there is no question that litigants must sign the sworn verification and certification unless they execute a power of attorney authorizing another person to sign it. With respect to a juridical person, Sec. 4, Rule 7 on verification and Sec. 5, Rule 7 on certification against forum shopping are silent as to who the authorized signatory should be. Said rules do not indicate if the submission of a board resolution authorizing the officer or representative is necessary.
It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code, clearly enunciates that all corporate powers are exercised, all business conducted, and all properties controlled by the board of directors. A corporation has a separate and distinct personality from its directors and officers and can only exercise its corporate powers through the board of directors. Thus, it is clear that an individual corporate officer cannot solely exercise any corporate power pertaining to the corporation without authority from the board of directors. This has been our constant holding in cases instituted by a corporation.
In Philippine Airlines v. Flight Attendants and Stewards Association of the Philippines, we ruled that only individuals vested with authority by a valid board resolution may sign the certificate of non-forum shopping on behalf of a corporation. The action can be dismissed if the certification was submitted unaccompanied by proof of the signatory's authority.14 We believe that appending the board resolution to the complaint or petition is the better procedure to obviate any question on the authority of the signatory to the verification and certification. The required submission of the board resolution is grounded on the basic precept that corporate powers are exercised by the board of directors,15 and not solely by an officer of the corporation. Hence, the power to sue and be sued in any court or quasi-judicial tribunal is necessarily lodged with the said board.
In the case at bar, we so hold that petitioner substantially complied with Secs. 4 and 5, Rule 7 of the 1997 Revised Rules on Civil Procedure. First, the requisite board resolution has been submitted albeit belatedly by petitioner. Second, we apply our ruling in Lepanto with the rationale that the President of petitioner is in a position to verify the truthfulness and correctness of the allegations in the petition. Third, the President of petitioner has signed the complaint before the CTA at the inception of this judicial claim for refund or tax credit.
Consequently, the petition in CA-G.R. SP No. 59778 ought to be reinstated. However, in view of the enactment of RA 9282 which made the decisions of the CTA appealable to this Court, we will directly resolve the second issue which is a purely legal one.
The pith of the dispute between petitioner and respondent is whether petitioner is entitled to a tax refund or tax credit of 20% sales discount granted to senior citizens under RA 7432 or whether the discount should be treated as a deduction from gross income.
This issue is not new, as the Court has resolved several cases involving the very same issue. In Commissioner of Internal Revenue v. Central Luzon Drug Corporation (Central Luzon),16 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,17 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,18 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.
A perusal of the April 26, 2000 CTA Decision shows that the appellate tax court correctly ruled that the 20% sales discounts petitioner granted to qualified senior citizens should be deducted from petitioner's income tax due and not from petitioner's gross sales as erroneously provided in RR 2-94. However, the CTA erred in denying the tax credit to petitioner on the ground that petitioner had suffered net loss in 1995, and ruling that the tax credit is unavailing.
It is thus clear that petitioner is entitled to a tax credit for the full 20% sales discounts it extended to qualified senior citizens for taxable year 1995. Considering that the CTA has not disallowed the PhP 123,083 sales discounts petitioner claimed before the BIR and CTA, we are constrained to grant them as tax credit in favor of petitioner.
Consequently, petitioner's appeal before the CA in CA-G.R. SP No. 59778 must be granted, and, necessarily, the April 26, 2000 CTA Decision in C.T.A. Case No. 5581 reversed and set aside.
WHEREFORE, the petition is GRANTED. The August 31, 2000 CA Resolution in CA-G.R. SP No. 59778 is ANNULLED AND SET ASIDE. The April 26, 2000 CTA Decision in C.T.A. Case No. 5581 dismissing petitioner's claim for tax credit is accordingly REVERSED AND SET ASIDE. The Commissioner of Internal Revenue is ORDERED to issue a Tax Credit Certificate in the name of petitioner in the amount of PhP 123,083. No costs.
1 Rollo, pp. 77-78. Penned by Associate Justice Ramon A. Barcelona and concurred in by Associate Justices Marina L. Buzon and Edgardo P. Cruz.
2 Id. at 37-44. Penned by Associate Judge Ramon O. De Veyra and concurred in by Associate Judge Amancio Q. Saga. Presiding Judge Ernesto D. Acosta dissented.
3 "An Act to Maximize the Contribution of Senior Citizens to Nation Building, Grant Benefits and Special Privileges and for Other Purposes" (1992).
4 Now Sec. 229 of RA 8424 entitled "An Act Amending the National Internal Revenue Code, as Amended, and for Other Purposes" (1997).
5 Supra note 2, at 44.
8 G.R. No. 96551, November 4, 1996, 264 SCRA 11, 18.
9 G.R. No. 139495, November 27, 2000, 346 SCRA 126, 132-133.
10 G.R. No. 143389, May 25, 2001, 358 SCRA 240, 246-248.
11 G.R. No. 146125, September 17, 2003, 411 SCRA 211, 217-220.
12 G.R. No. 153885, September 24, 2003, 412 SCRA 101, 109.
13 Pfizer v. Galan, supra note 10, at 247.
14 G.R. No. 143088, January 24, 2006, 479 SCRA 605, 608.
15 Corporation Code, Sec. 23.
16 G.R. No. 159647, April 15, 2005, 456 SCRA 414.
17 G.R. No. 142299, June 22, 2006, 492 SCRA 159.
18 G.R. No. 148083, July 21, 2006, 496 SCRA 176.
19 Supra note 16, at 429-430.

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