G.R. No. L-28896 February 17, 1988COMMISSIONER OF INTERNAL REVENUE,petitioner,vs.ALGUE, INC., and THE COURT OF TAX APPEALS,respondents.CRUZ,J.:Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved.The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns. The corollary issue is whether or not the appeal of the private respondent from the decision of the Collector of Internal Revenue was made on time and in accordance with law.We deal first with the procedural question.The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged in engineering, construction and other allied activities, received a letter from the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959.1On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp received on the same day in the office of the petitioner.2On March 12, 1965, a warrant of distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest.3A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant.4On April 7, 1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served.5Sixteen days later, on April 23, 1965, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals.6The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged.7It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment"8and renders hopeless a request for reconsideration,"9being "tantamount to an outright denial thereof and makes the said request deemed rejected."10But there is a special circumstance in the case at bar that prevents application of this accepted doctrine.The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. This was apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the intervening period, the warrant was premature and could therefore not be served.As the Court of Tax Appeals correctly noted,"11the protest filed by private respondent was notpro formaand was based on strong legal considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the date the assessment was received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the reglementary period had been consumed.Now for the substantive question.The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company.Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees to be personal holding company income12but later conformed to the decision of the respondent court rejecting this assertion.13In fact, as the said court found, the amount was earned through the joint efforts of the persons among whom it was distributed It has been established that the Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation, inducing other persons to invest in it.14Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased the PSEDC properties.15For this sale, Algue received as agent a commission of P126,000.00, and it was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals.16There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon.17The Court of Tax Appeals also found, after examining the evidence, that no distribution of dividends was involved.18The petitioner claims that these payments are fictitious because most of the payees are members of the same family in control of Algue. It is argued that no indication was made as to how such payments were made, whether by check or in cash, and there is not enough substantiation of such payments. In short, the petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction.We find that these suspicions were adequately met by the private respondent when its President, Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made in one lump sum but periodically and in different amounts as each payee's need arose.19It should be remembered that this was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not required. Even so, at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or her, to make up the total of P75,000.00.20Admittedly, everything seemed to be informal. This arrangement was understandable, however, in view of the close relationship among the persons in the family corporation.We agree with the respondent court that the amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to the private respondent was P125,000.00.21After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. This finding of the respondent court is in accord with the following provision of the Tax Code:SEC. 30.Deductions from gross income.--In computing net income there shall be allowed as deductions (a) Expenses:(1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; ...22and Revenue Regulations No. 2, Section 70 (1), reading as follows:SEC. 70.Compensation for personal services.--Among the ordinary and necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and its practical application may be further stated and illustrated as follows:Any amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible. (a) An ostensible salary paid by a corporation may be a distribution of a dividend on stock. This is likely to occur in the case of a corporation having few stockholders, Practically all of whom draw salaries. If in such a case the salaries are in excess of those ordinarily paid for similar services, and the excessive payment correspond or bear a close relationship to the stockholdings of the officers of employees, it would seem likely that the salaries are not paid wholly for services rendered, but the excessive payments are a distribution of earnings upon the stock. . . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)It is worth noting at this point that most of the payees were not in the regular employ of Algue nor were they its controlling stockholders.23The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity of the claimed deduction. In the present case, however, we find that the onus has been discharged satisfactorily. The private respondent has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed.It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.We hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the respondent court in accordance with Rep. Act No. 1125. And we also find that the claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the petitioner.ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMEDin toto,without costs.SO ORDERED. Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.

G.R. No. L-68252 May 26, 1995COMMISSIONER OF INTERNAL REVENUE,petitioner,vs.TOKYO SHIPPING CO. LTD., represented by SORIAMONT STEAMSHIP AGENCIES INC., and COURT OF TAX APPEALS,respondents.PUNO,J.:For resolution is whether or not private respondent Tokyo Shipping Co. Ltd., is entitled to a refund or tax credit for amounts representing pre-payment of income and common carrier's taxes under the National Internal Revenue Code, section 24 (b) (2), as amended.1Private respondent is a foreign corporation represented in the Philippines by Soriamont Steamship Agencies, Incorporated. It owns and operates tramper vessel M/V Gardenia. In December 1980, NASUTRA2chartered M/V Gardenia to load 16,500 metric tons of raw sugar in the Philippines.3On December 23, 1980, Mr. Edilberto Lising, the operations supervisor of Soriamont Agency,4paid the required income and common carrier's taxes in the respective sums of FIFTY-NINE THOUSAND FIVE HUNDRED TWENTY-THREE PESOS and SEVENTY-FIVE CENTAVOS (P59,523.75) and FORTY-SEVEN THOUSAND SIX HUNDRED NINETEEN PESOS (P47,619.00), or a total of ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY-TWO PESOS and SEVENTY-FIVE CENTAVOS (P107,142.75) based on the expected gross receipts of the vessel.5Upon arriving, however, at Guimaras Port of Iloilo, the vessel found no sugar for loading. On January 10, 1981, NASUTRA and private respondent's agent mutually agreed to have the vessel sail for Japan without any cargo.Claiming the pre-payment of income and common carrier's taxes as erroneous since no receipt was realized from the charter agreement, private respondent instituted a claim for tax credit or refund of the sum ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY-TWO PESOS and SEVENTY-FIVE CENTAVOS (P107,142.75) before petitioner Commissioner of Internal Revenue on March 23, 1981. Petitioner failed to act promptly on the claim, hence, on May 14, 1981, private respondent filed a petition for review6before public respondent Court of Tax Appeals.Petitioner contested the petition. As special and affirmative defenses, it alleged the following: that taxes are presumed to have been collected in accordance with law; that in an action for refund, the burden of proof is upon the taxpayer to show that taxes are erroneously or illegally collected, and the taxpayer's failure to sustain said burden is fatal to the action for refund; and that claims for refund are construed strictly against tax claimants.7After trial, respondent tax court decided in favor of the private respondent. It held:It has been shown in this case that 1) the petitioner has complied with the mentioned statutory requirement by having filed a written claim for refund within the two-year period from date of payment; 2) the respondent has not issued any deficiency assessment nor disputed the correctness of the tax returns and the corresponding amounts of prepaid income and percentage taxes; and 3) the chartered vessel sailed out of the Philippine port with absolutely no cargo laden on board as cleared and certified by the Customs authorities; nonetheless 4) respondent's apparent bit of reluctance in validating the legal merit of the claim, by and large, is tacked upon the "examiner who is investigating petitioner's claim for refund which is the subject matter of this case has not yet submitted his report. Whether or not respondent will present his evidence will depend on the said report of the examiner." (Respondent's Manifestation and Motion dated September 7, 1982). Be that as it may the case was submitted for decision by respondent on the basis of the pleadings and records and by petitioner on the evidence presented by counselsansthe respective memorandum.An examination of the records satisfies us that the case presents no dispute as to relatively simple material facts. The circumstances obtaining amply justify petitioner's righteous indignation to a more expeditious action. Respondent has offered no reason nor made effort to submit any controverting documents to bash that patina of legitimacy over the claim. But as might well be, towards the end of some two and a half years of seeming impotent anguish over the pendency, the respondent Commissioner of Internal Revenue would furnish the satisfaction of ultimate solution by manifesting that "it is now his turn to present evidence, however, the Appellate Division of the BIR has already recommended the approval of petitioner's claim for refund subject matter of this petition. The examiner who examined this case has also recommended the refund of petitioner's claim. Without prejudice to withdrawing this case after the final approval of petitioner's claim, the Court ordered the resetting to September 7, 1983." (Minutes of June 9, 1983 Session of the Court) We need not fashion any further issue into an apparently settled legal situation as far be it from a comedy of errors it would be too much of a stretch to hold and deny the refund of the amount of prepaid income and common carrier's taxes for which petitioner could no longer be made accountable.On August 3, 1984, respondent court denied petitioner's motion for reconsideration, hence, this petition for review oncertiorari.Petitioner now contends: (1) private respondent has the burden of proof to support its claim of refund; (2) it failed to prove that it did not realize any receipt from its charter agreement; and (3) it suppressed evidence when it did not present its charter agreement.We find no merit in the petition.There is no dispute about the applicable law. It is section 24 (b) (2) of the National Internal Revenue Code which at that time provides as follows:A corporation organized, authorized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines, shall be taxable as provided in subsection (a) of this section upon the total net income derived in the preceding taxable year from all sources within the Philippines:Provided, however, That international carriers shall pay a tax of two and one-half per cent (2 1/2%) on their gross Philippine billings: "Gross Philippine Billings" include gross revenue realized from uplifts anywhere in the world by any international carrier doing business in the Philippines of passage documents sold therein, whether for passenger, excess baggage or mail, provided the cargo or mail originates from the Philippines. The gross revenue realized from the said cargo or mail include the gross freight charge up to final destination. Gross revenue from chartered flights originating from the Philippines shall likewise form part of "Gross Philippine Billings" regardless of the place or payment of the passage documents . . . .Pursuant to this provision, a resident foreign corporation engaged in the transport of cargo is liable for taxes depending on the amount of income it derives from sources within the Philippines. Thus, before such a tax liability can be enforced the taxpayer must be shown to have earned income sourced from the Philippines.We agree with petitioner that a claim for refund is in the nature of a claim for exemption8and should be construed instrictissimi jurisagainst the taxpayer.9Likewise, there can be no disagreement with petitioner's stance that private respondent has the burden of proof to establish the factual basis of its claim for tax refund.The pivotal issue involves a question of fact whether or not the private respondent was able to prove that it derived no receipts from its charter agreement, and hence is entitled to a refund of the taxes it pre-paid to the government.The respondent court held that sufficient evidence has been adduced by the private respondent proving that it derived no receipt from its charter agreement with NASUTRA. This finding of fact rests on a rational basis, and hence must be sustained. Exhibits "E", "F," and "G" positively show that the tramper vessel M/V "Gardenia" arrived in Iloilo on January 10, 1981 but found no raw sugar to load and returned to Japan without any cargo laden on board. Exhibit "E" is the Clearance Vessel to a Foreign Port issued by the District Collector of Customs, Port of Iloilo while Exhibit "F" is the Certification by the Officer-in-Charge, Export Division of the Bureau of Customs Iloilo. The correctness of the contents of these documents regularly issued by officials of the Bureau of Customs cannot be doubted as indeed, they have not been contested by the petitioner. The records also reveal that in the course of the proceedings in the courta quo, petitioner hedged and hawed when its turn came to present evidence. At one point, its counsel manifested that the BIR examiner and the appellate division of the BIR have both recommended the approval of private respondent's claim for refund. The same counsel even represented that the government would withdraw its opposition to the petition after final approval of private respondents' claim. The case dragged on but petitioner never withdrew its opposition to the petition even if it did not present evidence at all. The insincerity of petitioner's stance drew the sharp rebuke of respondent court in its Decision and for good reason. Taxpayers owe honesty to government just as government owes fairness to taxpayers.In its last effort to retain the money erroneously prepaid by the private respondent, petitioner contends that private respondent suppressed evidence when it did not present its charter agreement with NASUTRA. The contention cannot succeed. It presupposes without any basis that the charter agreement is prejudicial evidence against the private respondent.10Allegedly, it will show that private respondent earned a charter fee with or without transporting its supposed cargo from Iloilo to Japan. The allegation simply remained an allegation and no court of justice will regard it as truth. Moreover, the charter agreement could have been presented by petitioner itself thru the proper use of asubpoena duces tecum. It never did either because of neglect or because it knew it would be of no help to bolster its position.11For whatever reason, the petitioner cannot take to task the private respondent for not presenting what it mistakenly calls "suppressed evidence."We cannot but bewail the unyielding stance taken by the government in refusing to refund the sum of ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY TWO PESOS AND SEVENTY FIVE CENTAVOS (P107,142.75) erroneously prepaid by private respondent. The tax was paid way back in 1980 and despite the clear showing that it was erroneously paid, the government succeeded in delaying its refund for fifteen (15) years. After fifteen (15) long years and the expenses of litigation, the money that will be finally refunded to the private respondent is just worth a damaged nickel. This is not, however, the kind of success the government, especially the BIR, needs to increase its collection of taxes. Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR should refund without any unreasonable delay what it has erroneously collected. Our ruling inRoxas v. Court of Tax Appeals12is apropos to recall:The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the "hen that lays the golden egg." And, in order to maintain the general public's trust and confidence in the Government this power must be used justly and not treacherously.IN VIEW HEREOF, the assailed decision of respondent Court of Tax Appeals, dated September 15, 1983, is AFFIRMEDin toto. No costs.SO ORDERED. Narvasa, C.J., Regalado and Mendoza, JJ., concur.

G.R. No. 122480 April 12, 2000BPI-FAMILY SAVINGS BANK, Inc.,petitioner,vs.COURT OF APPEALS, COURT OF TAX APPEALS and the COMMISSIONER OF INTERNAL REVENUE,respondents.PANGANIBAN,J.:If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments. When it is undisputed that a taxpayer is entitled to a refund, the State should not invoke technicalities to keep money not belonging to it. No one, not even the State, should enrich oneself at the expense of another.The CaseBefore us is a Petition for Review assailing the March 31, 1995 Decision of the Court of Appeals1(CA) in CA-GR SP No. 34240, which affirmed the December 24, 1993 Decision2of the Court of Tax Appeals (CTA). The CA disposed as follows:WHEREFORE, foregoing premises considered, the petition is hereby DISMISSED for lack of merit.3On the other hand, the dispositive portion of the CTA Decision affirmed by the CA reads as follows:WHEREFORE, in [view of] all the foregoing, Petitioner's claim for refund is hereby DENIED and this Petition for Review is DISMISSED for lack of merit.4Also assailed is the November 8, 1995 CA Resolution5denying reconsideration.The FactsThe facts of this case were summarized by the CA in this wise:This case involves a claim for tax refund in the amount of P112,491.00 representing petitioner's tax withheld for the year 1989.In its Corporate Annual Income Tax Return for the year 1989, the following items are reflected:Income P1,017,931,831.00Deductions P1,026,218,791.00Net Income (Loss) (P8,286,960.00)Taxable Income (Loss) (P8,286,960.00)Less:1988 Tax Credit P185,001.001989 Tax CreditP112,491.00TOTAL AMOUNT P297,492.00REFUNDABLEIt appears from the foregoing 1989 Income Tax Return that petitioner had a total refundable amount of P297,492 inclusive of the P112,491.00 being claimed as tax refund in the present case. However, petitioner declared in the same 1989 Income Tax Return that the said total refundable amount of P297,492.00 will be applied astax creditto the succeeding taxable year.On October 11, 1990, petitioner filed a written claim for refund in the amount of P112,491.00 with the respondent Commissioner of Internal Revenue alleging that it did not apply the 1989 refundable amount of P297,492.00 (including P112,491.00) to its 1990 Annual Income Tax Return or other tax liabilities due to the alleged business losses it incurred for the same year.Without waiting for respondent Commissioner of Internal Revenue to act on the claim for refund, petitioner filed a petition for review with respondent Court of Tax Appeals, seeking the refund of the amount ofP112,491.00.The respondent Court of Tax Appeals dismissed petitioner's petition on the ground that petitioner failed to present as evidence its corporate Annual Income Tax Return for 1990 to establish the fact that petitioner had not yet credited the amount of P297,492.00 (inclusive of the amount P112,491.00 which is the subject of the present controversy) to its 1990 income tax liability.Petitioner filed a motion for reconsideration, however, the same was denied by respondent court in its Resolution dated May 6, 1994.6As earlier noted, the CA affirmed the CTA. Hence, this Petition.7Ruling of the Court of AppealsIn affirming the CTA, the Court of Appeals ruled as follows:It is incumbent upon the petitioner to show proof that it has not credited to its 1990 Annual income Tax Return, the amount of P297,492.00 (including P112,491.00), so as to refute its previous declaration in the 1989 Income Tax Return that the said amount will be applied as a tax credit in the succeeding year of 1990. Having failed to submit such requirement, there is no basis to grant the claim for refund. . . .Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construedstrictissimi jurisagainst the person or entity claiming the exemption. In other words, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to the claim for refund.8IssueIn their Memorandum, respondents identify the issue in this wise:The sole issue to be resolved is whether or not petitioner is entitled to the refund of P112,491.90, representing excess creditable withholding tax paid for the taxable year 1989.9The Court's RulingThe Petition is meritorious.Main Issue:Petitioner Entitled to RefundIt is undisputed that petitioner had excess withholding taxes for the year 1989 and was thus entitled to a refund amounting to P112,491. Pursuant to Section 6910of the 1986 Tax Code which states that a corporation entitled to a refund may opt either (1) to obtain such refund or (2) to credit said amount for the succeeding taxable year, petitioner indicated in its 1989 Income Tax Return that it would apply the said amount as a tax credit for the succeeding taxable year, 1990. Subsequently, petitioner informed the Bureau of Internal Revenue (BIR) that it would claim the amount as a tax refund, instead of applying it as a tax credit. When no action from the BIR was forthcoming, petitioner filed its claim with the Court of Tax Appeals.The CTA and the CA, however, denied the claim for tax refund. Since petitioner declared in its 1989 Income Tax Return that it would apply the excess withholding tax as a tax credit for the following year, the Tax Court held that petitioner was presumed to have done so. The CTA and the CA ruled that petitioner failed to overcome this presumption because it did not present its 1990 Return, which would have shown that the amount in dispute was not applied as a tax credit. Hence, the CA concluded that petitioner was not entitled to a tax refund.We disagree with the Court of Appeals. As a rule, the factual findings of the appellate court are binding on this Court. This rule, however, does not apply where,inter alia, the judgment is premised on a misapprehension of facts, or when the appellate court failed to notice certain relevant facts which if considered would justify a different conclusion.11This case is one such exception.In the first place, petitioner presented evidence to prove its claim that it did not apply the amount as a tax credit. During the trial before the CTA, Ms. Yolanda Esmundo, the manager of petitioner's accounting department, testified to this fact. It likewise presented its claim for refund and a certification issued by Mr. Gil Lopez, petitioner's vice-president, stating that the amount of P112,491 "has not been and/or will not be automatically credited/offset against any succeeding quarters' income tax liabilities for the rest of the calendar year ending December 31, 1990." Also presented were the quarterly returns for the first two quarters of 1990.The Bureau of Internal Revenue, for its part, failed to controvert petitioner's claim. In fact, it presented no evidence at all. Because it ought to know the tax records of all taxpayers, the CIR could have easily disproved petitioner's claim. To repeat, it did not do so.More important, a copy of the Final Adjustment Return for 1990 was attached to petitioner's Motion for Reconsideration filed before the CTA.12A final adjustment return shows whether a corporation incurred a loss or gained a profit during the taxable year. In this case, that Return clearly showed that petitioner incurred P52,480,173 as net loss in 1990. Clearly, it could not have applied the amount in dispute as a tax credit.Again, the BIR did not controvert the veracity of the said return. It did not even file an opposition to petitioner's Motion and the 1990 Final Adjustment Return attached thereto. In denying the Motion for Reconsideration, however, the CTA ignored the said Return. In the same vein, the CA did not pass upon that significant document.True, strict procedural rules generally frown upon the submission of the Return after the trial.1wphi1The law creating the Court of Tax Appeals, however, specifically provides that proceedings before it "shall not be governed strictly by the technical rules of evidence."13The paramount consideration remains the ascertainment of truth. Verily, the quest for orderly presentation of issues is not an absolute. It should not bar courts from considering undisputed facts to arrive at a just determination of a controversy.In the present case, the Return attached to the Motion for Reconsideration clearly showed that petitioner suffered a net loss in 1990. Contrary to the holding of the CA and the CTA, petitioner could not have applied the amount as a tax credit. In failing to consider the said Return, as well as the other documentary evidence presented during the trial, the appellate court committed a reversible error.It should be stressed that the rationale of the rules of procedure is to secure a just determination of every action. They are tools designed to facilitate the attainment of justice.14But there can be no just determination of the present action if we ignore, on grounds of strict technicality, the Return submitted before the CTA and even before this Court.15To repeat, the undisputed fact is that petitioner suffered a net loss in 1990; accordingly, it incurred no tax liability to which the tax credit could be applied. Consequently, there is no reason for the BIR and this Court to withhold the tax refund which rightfully belongs to the petitioner.Public respondents maintain that what was attached to petitioner's Motion for Reconsideration was not the final adjustment Return, but petitioner's first two quarterly returns for 1990.16This allegation is wrong. An examination of the records shows that the 1990 Final Adjustment Return was attached to the Motion for Reconsideration. On the other hand, the two quarterly returns for 1990 mentioned by respondent were in fact attached to the Petition for Review filed before the CTA. Indeed, to rebut respondents' specific contention, petitioner submitted before us its Surrejoinder, to which was attached the Motion for Reconsideration and Exhibit "A" thereof, the Final Adjustment Return for 1990.17CTA Case No. 4897Petitioner also calls the attention of this Court, as it had done before the CTA, to a Decision rendered by the Tax Court in CTA Case No. 4897, involving its claim for refund for the year 1990. In that case, the Tax Court held that "petitioner suffered a net loss for the taxable year 1990 . . . ."18Respondent, however, urges this Court not to take judicial notice of the said case.19As a rule, "courts are not authorized to take judicial notice of the contents of the records of other cases, even when such cases have been tried or are pending in the same court, and notwithstanding the fact that both cases may have been heard or are actually pending before the same judge."20Be that as it may, Section 2, Rule 129 provides that courts may take judicial notice of matters ought to be known to judges because of their judicial functions. In this case, the Court notes that a copy of the Decision in CTA Case No. 4897 was attached to the Petition for Review filed before this Court. Significantly, respondents do not claim at all that the said Decision was fraudulent or nonexistent. Indeed, they do not even dispute the contents of the said Decision, claiming merely that the Court cannot take judicial notice thereof.To our mind, respondents' reasoning underscores the weakness of their case. For if they had really believed that petitioner is not entitled to a tax refund, they could have easily proved that it did not suffer any loss in 1990. Indeed, it is noteworthy that respondents opted not to assail the fact appearing therein that petitioner suffered a net loss in 1990 in the same way that it refused to controvert the same fact established by petitioner's other documentary exhibits.In any event, the Decision in CTA Case No. 4897 is not the sole basis of petitioner's case. It is merely one more bit of information showing the stark truth: petitioner did not use its 1989 refund to pay its taxes for 1990.Finally, respondents argue that tax refunds are in the nature of tax exemptions and are to be construedstrictissimi jurisagainst the claimant. Under the facts of this case, we hold that petitioner has established its claim. Petitioner may have failed to strictly comply with the rules of procedure; it may have even been negligent. These circumstances, however, should not compel the Court to disregard this cold, undisputed fact: that petitioner suffered a net loss in 1990, and that it could not have applied the amount claimed as tax credits.Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness.WHEREFORE, the Petition is hereby GRANTED and the assailed Decision and Resolution of the Court of Appeals REVERSED and SET ASIDE. The Commissioner of Internal Revenue is ordered to refund to petitioner the amount of P112,491 as excess creditable taxes paid in 1989. No costs. SO ORDERED. Melo, Purisima and Gonzaga-Reyes, JJ., concur. Vitug, J., abroad on official business.PHILIPPINE BANK OF COMMUNICATIONS,petitioner, vs.COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF APPEALS,respondents. [G.R. No. 112024.January 28, 1999]D E C I S I O NQUISUMBING,J.:This petition for review assails the Resolution[1]of the Court of Appeals dated September 22, 1993,affirmingthe Decision[2]and Resolution[3]of the Court of Tax Appeals which denied the claims of the petitioner for tax refund and tax credits, anddisposingas follows:IN VIEW OF ALL THE FOREGOING, the instant petition for review is DENIED due course.The Decision of the Court of Tax Appeals dated May 20, 1993 and its resolution dated July 20, 1993, are hereby AFFIRMEDintoto.SO ORDERED.[4]The Court of Tax Appeals earlier ruled as follows:WHEREFORE,petitioners claim for refund/tax credit of overpaid income tax for 1985 in the amount ofP5,299,749.95 is hereby denied for having been filed beyond the reglementary period.The 1986 claim for refund amounting toP234,077.69 is likewise denied since petitioner has opted and in all likelihood automatically credited the same to the succeeding year.The petition for review is dismissed for lack of merit.SO ORDERED.[5]The facts on record show the antecedent circumstances pertinent to this case.Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns for the first and second quarters of 1985, reported profits, and paid the total income tax ofP5,016,954.00.The taxes due were settled by applying PBComs tax credit memos and accordingly, the Bureau of Internal Revenue (BIR) issued Tax Debit Memo Nos. 0746-85 and 0747-85 forP3,401,701.00 andP1, 615,253.00, respectively.Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the year-ended December 31, 1985, it declared a net loss ofP25,317,228.00, thereby showing no income tax liability.For the succeeding year, ending December 31, 1986, the petitioner likewise reported a net loss ofP14,129,602.00, and thus declared no tax payable for the year.But during these two years, PBCom earned rental income from leased properties.The lessees withheld and remitted to the BIR withholding creditable taxes ofP282,795.50 in 1985 andP234,077.69 in 1986.On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax credit ofP5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985.Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 forP282,795.50and in 1986 forP234,077.69.Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA).The petition was docketed as CTA Case No. 4309 entitled:Philippine Bank of Communications vs. Commissioner of Internal Revenue.The losses petitioner incurred as per the summary of petitioners claims for refund and tax credit for1985 and 1986, filed before the Court of Tax Appeals, are as follows:19851986

Net Income (Loss)(P25,317,228.00)(P14,129,602.00)

Tax DueNILNIL

Quarterly tax

Payments Made5,016,954.00---

Tax Withheld at Source282,795.50234,077.69

Excess Tax PaymentsP5,299,749.50*==========P234,077.69==============

*CTAs decision reflects PBComs 1985 tax claim asP5,299,749.95. A forty-five centavo difference was noted.On May 20, 1993, the CTA rendered a decision which, as stated on the outset, denied the request of petitioner for a tax refund or credit in the sum amount ofP5,299,749.95, on the ground that it was filed beyond the two-year reglementary period provided for by law.The petitioners claim for refund in 1986 amounting toP234,077.69 was likewise denied on the assumption that it was automatically credited by PBCom against its tax payment in the succeeding year.On June 22, 1993, petitioner filed a Motion for Reconsideration of the CTAs decision but the same was denied due course for lack of merit.[6]Thereafter, PBCom filed a petition for review of said decision and resolution of the CTA with the Court of Appeals.However on September 22, 1993, the Court of Appeals affirmedintotothe CTAs resolution dated July 20, 1993.Hence this petition now before us.The issues raised by the petitioner are:I.Whether taxpayer PBCom -- which relied in good faith on the formal assurances of BIR in RMC No. 7-85 and did not immediately file with the CTA a petition for review asking for the refund/tax credit of its 1985-86 excess quarterly income tax payments -- can be prejudiced by the subsequent BIR rejection, applied retroactively, of its assurances in RMC No. 7-85 that the prescriptive period for the refund/tax credit of excess quarterly income tax payments is not two years but ten (10).[7]II.Whether the Court of Appeals seriously erred in affirming the CTA decision which denied PBComs claim for the refund ofP234,077.69 income tax overpaid in 1986 on the mere speculation, without proof, that there were taxes due in 1987 and that PBCom availed of tax-crediting that year.[8]Simply stated, the main question is: Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground of prescription, despite petitioners reliance on RMC No. 7-85, changing the prescriptive period of two years to ten years?Petitioner argues that its claims for refund and tax credits are not yet barred by prescription relying on the applicability of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985.The circular states that overpaid income taxes are not covered by the two-year prescriptive period under the tax Code and that taxpayers may claim refund or tax credits for the excess quarterly income tax with the BIR within ten (10) years under Article 1144 of the Civil Code.The pertinent portions of the circular reads:REVENUE MEMORANDUM CIRCULAR NO. 7-85SUBJECT:PROCESSING OF REFUND OR TAX CREDIT OF EXCESS CORPORATE INCOME TAX RESULTING FROM THE FILING OF THE FINAL ADJUSTMENT RETURNTO:All Internal Revenue Officers and Others ConcernedSections 85 and 86 of the National Internal Revenue Code provide:x x xx x xx x xThe foregoing provisions are implemented by Section 7 of Revenue Regulations Nos. 10-77 which provide:x x xx x xx x xIt has been observed, however, that because of the excess tax payments, corporations file claims for recovery of overpaid income tax with the Court of Tax Appeals within the two-year period from the date of payment, in accordance with Sections 292 and 295 of the National Internal Revenue Code.It is obvious that the filing of the case in court is to preserve the judicial right of the corporation to claim the refund or tax credit.It should be noted, however, that this is not a case of erroneously or illegally paid tax under the provisions of Sections 292 and 295 of the Tax Code.In the above provision of the Regulations the corporation may request for the refund of the overpaid income tax or claim for automatic tax credit.To insure prompt action on corporate annual income tax returns showing refundable amounts arising from overpaid quarterly income taxes, this Office has promulgated Revenue Memorandum Order No. 32-76 dated June 11, 1976, containing the procedure in processing said returns.Under these procedures, the returns are merely pre-audited which consist mainly of checking mathematical accuracy of the figures of the return.After which, the refund or tax credit is granted, and, this procedure was adopted to facilitate immediate action on cases like this.In this regard, therefore, there is no need to file petitions for review in the Court of Tax Appeals in order to preserve the right to claim refund or tax credit within the two-year period.As already stated, actions hereon by the Bureau are immediate after only a cursory pre-audit of the income tax returns.Moreover, a taxpayer may recover from the Bureau of Internal Revenue excess income tax paid under the provisions of Section 86 of the Tax Code within 10 years from the date of payment considering that it is an obligation created by law (Article 1144 of the Civil Code).[9](Emphasis supplied.)Petitioner argues that the government is barred from asserting a position contrary to its declared circular if it would result to injustice to taxpayers.CitingABS-CBN Broadcasting Corporation vs. Court of Tax Appeals[10]petitioner claims that rulings or circulars promulgated by the Commissioner of Internal Revenue have no retroactive effect if it would be prejudicial to taxpayers.In ABS-CBN case, the Court held that the government is precluded from adopting a position inconsistent with one previously taken where injustice would result therefrom or where there has been a misrepresentation to the taxpayer.Petitioner contends that Sec. 246 of the National Internal Revenue Code explicitly provides for this rule as follows:Sec. 246.Non-retroactivity of rulings--Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayers except in the following cases:a)where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue;b)where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based;c)where the taxpayer acted in bad faith.Respondent Commissioner of Internal Revenue, through the Solicitor General, argues that the two-year prescriptive period for filing tax cases in court concerning income tax payments of Corporations is reckoned from the date of filing the Final Adjusted Income Tax Return, which is generally done on April 15 following the close of the calendar year.As precedents, respondent Commissioner cited cases which adhered to this principle, towit:ACCRA Investments Corp. vs. Court of Appeals,et al.,[11]andCommissioner of Internal Revenue vs. TMX Sales, Inc., et al..[12]Respondent Commissioner also states that since the Final Adjusted Income Tax Return of the petitioner for the taxable year 1985 was supposed to be filed on April 15, 1986, the latter had only until April 15, 1988 to seek relief from the court.Further, respondent Commissioner stresses that when the petitioner filed the case before the CTA on November 18, 1988, the same was filed beyond the time fixed by law, and such failure is fatal to petitioners cause of action.After a careful study of the records and applicable jurisprudence on the matter, we find that, contrary to the petitioners contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year prescriptive period set by law.Basic is the principle that taxes are the lifeblood of the nation.The primary purpose is to generate funds for the State to finance the needs of the citizenry and to advance the common weal.[13]Due process of law under the Constitution does not require judicial proceedings in tax cases.This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible.[14]From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters.Section 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997) provides for the prescriptive period for filing a court proceeding for the recovery of tax erroneously or illegally collected,viz.:Sec. 230.Recovery of tax erroneously or illegally collected. --No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.In any case,no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Italics supplied)The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced.The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.InCommissioner of Internal Revenue vs. Philippine American Life Insurance Co.,[15]this Court explained the application of Sec. 230 of 1977 NIRC, as follows:Clearly, the prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished.In the present case, this date is April 16, 1984, and two years from this date would be April 16, 1986.x x x As we have earlier said in the TMX Sales case, Sections 68,[16]69,[17]and 70[18]on Quarterly Corporate Income Tax Payment and Section 321 should be considered in conjunction with it.[19]When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC.In so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress.It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue.It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts.Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous.[20]Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to apply and implement.[21]In the case ofPeople vs. Lim,[22]it was held that rules and regulations issued by administrative officials to implement a law cannot go beyond the terms and provisions of the latter.Appellant contends that Section 2 of FAO No. 37-1 is void because it is not only inconsistent with but is contrary to the provisions and spirit of Act. No. 4003 as amended, because whereas the prohibition prescribed in said Fisheries Act was for any single period of time not exceeding five years duration, FAO No. 37-1 fixed no period, that is to say, it establishes an absolute ban for all time.This discrepancy between Act No. 4003 and FAO No. 37-1 was probably due to an oversight on the part of Secretary of Agriculture and Natural Resources.Of course, in case of discrepancy, the basic Act prevails, for the reason that the regulation or rule issued to implement a lawcannot go beyondthe terms and provisions of the latter.x x x In this connection, the attention of the technical men in the offices of Department Heads who draft rules and regulation is called to the importance and necessity of closely following the terms and provisions of the law which they intended to implement, this to avoid any possible misunderstanding or confusion as in the present case.[23]Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents.[24]As pointed out by the respondent courts, the nullification of RMC No. 7-85 issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is not in harmony with Sec. 230 of 1977 NIRC, for being contrary to the express provision of a statute.Hence, his interpretation could not be given weight for to do so would, in effect, amend the statute.As aptly stated by respondent Court of Appeals:It is likewise argued that the Commissioner of Internal Revenue, after promulgating RMC No. 7-85, is estopped by the principle of non-retroactivity of BIR rulings.Again We do not agree.The Memorandum Circular, stating that a taxpayer may recover the excess income tax paid within 10 years from date of payment because this is an obligation created by law, was issued by the Acting Commissioner of Internal Revenue.On the other hand, the decision, stating that the taxpayer should still file a claim for a refund or tax credit and the corresponding petition for review within the two-year prescription period, and that the lengthening of the period of limitation on refund from two to ten years would be adverse to public policy and run counter to the positive mandate of Sec. 230, NIRC, - was the ruling and judicial interpretation of the Court of Tax Appeals.Estoppel has no application in the case at bar because it was not the Commissioner of Internal Revenue who denied petitioners claim of refund or tax credit.Rather, it was the Court of Tax Appeals who denied (albeit correctly) the claim and in effect, ruled that the RMC No. 7-85 issued by the Commissioner of Internal Revenue is an administrative interpretation which is out of harmony with or contrary to the express provision of a statute (specifically Sec. 230, NIRC), hence, cannot be given weight for to do so would in effect amend the statute.[25]Article 8 of the Civil Code[26]recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country.But administrative decisions do not enjoy that level of recognition.A memorandum-circular of a bureau head could not operate to vest a taxpayer with a shield against judicial action.For there are no vested rights to speak of respecting a wrong construction of the law by the administrative officials and such wrong interpretation could not place the Government in estoppel to correct or overrule the same.[27]Moreover, the non-retroactivity of rulings by the Commissioner of Internal Revenue is not applicable in this case because the nullity of RMC No. 7-85 was declared by respondent courts and not by the Commissioner of Internal Revenue.Lastly, it must be noted that, as repeatedly held by this Court, a claim for refund is in the nature of a claim for exemption and should be construed instrictissimi jurisagainst the taxpayer.[28]On the second issue, the petitioner alleges that the Court of Appeals seriously erred in affirming CTAs decision denying its claim for refund ofP234,077.69 (tax overpaid in 1986), based on mere speculation, without proof, that PBCom availed of the automatic tax credit in 1987.Sec. 69 of the 1977 NIRC[29](now Sec. 76 of the 1997 NIRC) provides that any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return,shall either(a) be refunded to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year.The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year.To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other.As stated by respondent Court of Appeals:Finally, as to the claimed refund of income tax over-paid in 1986 - the Court of Tax Appeals, after examining the adjusted final corporate annual income tax return for taxable year 1986, found out that petitioner opted to apply for automatic tax credit.This was the basis used (vis-avis the fact that the 1987 annual corporate tax return was not offered by the petitioner as evidence) by the CTA in concluding that petitioner had indeed availed of and applied the automatic tax credit to the succeeding year, hence it can no longer ask for refund, as to [sic] the two remedies of refund and tax credit are alternative.[30]That the petitioner opted for an automatic tax credit in accordance with Sec. 69 of the 1977 NIRC, as specified in its 1986 Final Adjusted Income Tax Return, is a finding of fact which we must respect.Moreover, the 1987 annual corporate tax return of the petitioner was not offered as evidence to controvert said fact.Thus, we are bound by the findings of fact by respondent courts, there being no showing of gross error or abuse on their part to disturb our reliance thereon.[31]WHEREFORE,the petition is hereby DENIED.The decision of the Court of Appeals appealed from is AFFIRMED,with COSTS against the petitioner.SO ORDERED. Bellosillo, (Chairman), Puno, Mendoza,andBuena, JJ.,concur.

G.R. No. 76778 June 6, 1990FRANCISCO I. CHAVEZ,petitioner,vs.JAIME B. ONGPIN, in his capacity as Minister of Finance and FIDELINA CRUZ, in her capacity as Acting Municipal Treasurer of the Municipality of Las Pias, respondents, REALTY OWNERS ASSOCIATION OF THE PHILIPPINES, INC.,petitioner-intervenor.Brotherhood of Nationalistic, Involved and Free Attorneys to Combat Injustice and Oppression (Bonifacio) for petitioner.Ambrosia Padilla, Mempin and Reyes Law Offices for movant Realty Owners Association.MEDIALDEA,J.:The petition seeks to declare unconstitutional Executive Order No. 73 dated November 25, 1986, which We quote in full, as follows (78 O.G. 5861):EXECUTIVE ORDER No. 73PROVIDING FOR THE COLLECTION OF REAL PROPERTY TAXES BASED ON THE 1984 REAL PROPERTY VALUES, AS PROVIDED FOR UNDER SECTION 21 OF THE REAL PROPERTY TAX CODE, AS AMENDEDWHEREAS, the collection of real property taxes is still based on the 1978 revision of property values;WHEREAS, the latest general revision of real property assessments completed in 1984 has rendered the 1978 revised values obsolete;WHEREAS, the collection of real property taxes based on the 1984 real property values was deferred to take effect on January 1, 1988 instead of January 1, 1985, thus depriving the local government units of an additional source of revenue;WHEREAS, there is an urgent need for local governments to augment their financial resources to meet the rising cost of rendering effective services to the people;NOW, THEREFORE, I. CORAZON C. AQUINO, President of the Philippines, do hereby order:SECTION 1. Real property values as of December 31, 1984 as determined by the local assessors during the latest general revision of assessments shall take effect beginning January 1, 1987 for purposes of real property tax collection.SEC. 2. The Minister of Finance shall promulgate the necessary rules and regulations to implement this Executive Order.SEC. 3. Executive Order No. 1019, dated April 18, 1985, is hereby repealed.SEC. 4. All laws, orders, issuances, and rules and regulations or parts thereof inconsistent with this Executive Order are hereby repealed or modified accordingly.SEC. 5. This Executive Order shall take effect immediately.On March 31, 1987, Memorandum Order No. 77 was issued suspending the implementation of Executive Order No. 73 until June 30, 1987.The petitioner, Francisco I. Chavez,1is a taxpayer and an owner of three parcels of land. He alleges the following: that Executive Order No. 73 accelerated the application of the general revision of assessments to January 1, 1987 thereby mandating an excessive increase in real property taxes by 100% to 400% on improvements, and up to 100% on land; that any increase in the value of real property brought about by the revision of real property values and assessments would necessarily lead to a proportionate increase in real property taxes; that sheer oppression is the result of increasing real property taxes at a period of time when harsh economic conditions prevail; and that the increase in the market values of real property as reflected in the schedule of values was brought about only by inflation and economic recession.The intervenor Realty Owners Association of the Philippines, Inc. (ROAP), which is the national association of owners-lessors, joins Chavez in his petition to declare unconstitutional Executive Order No. 73, but additionally alleges the following: that Presidential Decree No. 464 is unconstitutional insofar as it imposes an additional one percent (1%) tax on all property owners to raise funds for education, as real property tax is admittedly a local tax for local governments; that the General Revision of Assessments does not meet the requirements of due process as regards publication, notice of hearing, opportunity to be heard and insofar as it authorizes "replacement cost" of buildings (improvements) which is not provided in Presidential Decree No. 464, but only in an administrative regulation of the Department of Finance; and that the Joint Local Assessment/Treasury Regulations No. 2-862is even more oppressive and unconstitutional as it imposes successive increase of 150% over the 1986 tax.The Office of the Solicitor General argues against the petition.The petition is not impressed with merit.Petitioner Chavez and intervenor ROAP question the constitutionality of Executive Order No. 73 insofar as the revision of the assessments and the effectivity thereof are concerned. It should be emphasized that Executive Order No. 73 merely directs, in Section 1 thereof, that:SECTION 1. Real property values as of December 31, 1984 as determined by the local assessors during the latest general revision of assessments shall take effect beginning January 1, 1987 for purposes of real property tax collection. (emphasis supplied)The general revision of assessments completed in 1984 is based on Section 21 of Presidential Decree No. 464 which provides, as follows:SEC. 21.General Revision of Assessments. Beginning with the assessor shall make a calendar year 1978, the provincial or city general revision of real property assessments in the province or city to take effect January 1, 1979, and once every five years thereafter: Provided; however, That if property values in a province or city, or in any municipality, have greatly changed since the last general revision, the provincial or city assesor may, with the approval of the Secretary of Finance or upon bis direction, undertake a general revision of assessments in the province or city, or in any municipality before the fifth year from the effectivity of the last general revision.Thus, We agree with the Office of the Solicitor General that the attack on Executive Order No. 73 has no legal basis as the general revision of assessments is a continuing process mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No. 464 which should be challenged as constitutionally infirm. However, Chavez failed to raise any objection against said decree. It was ROAP which questioned the constitutionality thereof. Furthermore, Presidential Decree No. 464 furnishes the procedure by which a tax assessment may be questioned:SEC. 30.Local Board of Assessment Appeals. Any owner who is not satisfied with the action of the provincial or city assessor in the assessment of his property may, within sixty days from the date of receipt by him of the written notice of assessment as provided in this Code, appeal to the Board of Assessment Appeals of the province or city, by filing with it a petition under oath using the form prescribed for the purpose, together with copies of the tax declarations and such affidavit or documents submitted in support of the appeal.xxx xxx xxxSEC. 34.Action by the Local Board of assessment Appeals. The Local Board of Assessment Appeals shall decide the appeal within one hundred and twenty days from the date of receipt of such appeal. The decision rendered must be based on substantial evidence presented at the hearing or at least contained in the record and disclosed to the parties or such relevant evidence as a reasonable mind might accept as adequate to support the conclusion.In the exercise of its appellate jurisdiction, the Board shall have the power to summon witnesses, administer oaths, conduct ocular inspection, take depositions, and issue subpoena and subpoenaduces tecum.The proceedings of the Board shall be conducted solely for the purpose of ascertaining the truth without-necessarily adhering to technical rules applicable in judicial proceedings.The Secretary of the Board shall furnish the property owner and the Provincial or City Assessor with a copy each of the decision of the Board. In case the provincial or city assessor concurs in the revision or the assessment, it shall be his duty to notify the property owner of such fact using the form prescribed for the purpose. The owner or administrator of the property or the assessor who is not satisfied with the decision of the Board of Assessment Appeals, may, within thirty days after receipt of the decision of the local Board, appeal to the Central Board of Assessment Appeals by filing his appeal under oath with the Secretary of the proper provincial or city Board of Assessment Appeals using the prescribed form stating therein the grounds and the reasons for the appeal, and attaching thereto any evidence pertinent to the case. A copy of the appeal should be also furnished the Central Board of Assessment Appeals, through its Chairman, by the appellant.Within ten (10) days from receipt of the appeal, the Secretary of the Board of Assessment Appeals concerned shall forward the same and all papers related thereto, to the Central Board of Assessment Appeals through the Chairman thereof.xxx xxx xxxSEC. 36.Scope of Powers and Functions. The Central Board of Assessment Appeals shall have jurisdiction over appealed assessment cases decided by the Local Board of Assessment Appeals. The said Board shall decide cases brought on appeal within twelve (12) months from the date of receipt, which decision shall become final and executory after the lapse of fifteen (15) days from the date of receipt of a copy of the decision by the appellant.In the exercise of its appellate jurisdiction, the Central Board of Assessment Appeals, or upon express authority, the Hearing Commissioner, shall have the power to summon witnesses, administer oaths, take depositions, and issuesubpoenasandsubpoenas duces tecum.The Central Board of assessment Appeals shall adopt and promulgate rules of procedure relative to the conduct of its business.Simply stated, within sixty days from the date of receipt of the, written notice of assessment, any owner who doubts the assessment of his property, may appeal to the Local Board of Assessment Appeals. In case the, owner or administrator of the property or the assessor is not satisfied with the decision of the Local Board of Assessment Appeals, he may, within thirty days from the receipt of the decision, appeal to the Central Board of Assessment Appeals. The decision of the Central Board of Assessment Appeals shall become final and executory after the lapse of fifteen days from the date of receipt of the decision.Chavez argues further that the unreasonable increase in real property taxes brought about by Executive Order No. 73 amounts to a confiscation of property repugnant to the constitutional guarantee of due process, invoking the cases ofErmita-Malate Hotel, et al. v. Mayor of Manila(G.R. No. L-24693, July 31, 1967, 20 SCRA 849) andSison v. Ancheta, et al.(G.R. No. 59431, July 25, 1984, 130 SCRA 654).The reliance on these two cases is certainly misplaced because the due process requirement called for therein applies to the "power to tax." Executive Order No. 73 does not impose new taxes nor increase taxes.Indeed, the government recognized the financial burden to the taxpayers that will result from an increase in real property taxes. Hence, Executive Order No. 1019 was issued on April 18, 1985, deferring the implementation of the increase in real property taxes resulting from the revised real property assessments, from January 1, 1985 to January 1, 1988. Section 5 thereof is quoted herein as follows:SEC. 5. The increase in real property taxes resulting from the revised real property assessments as provided for under Section 21 of Presidential Decree No. 464, as amended by Presidential Decree No. 1621, shall be collected beginning January 1, 1988 instead of January 1, 1985 in order to enable the Ministry of Finance and the Ministry of Local Government to establish the new systems of tax collection and assessment provided herein andin order to alleviate the condition of the people, including real property owners, as a result of temporary economic difficulties.(emphasis supplied)The issuance of Executive Order No. 73 which changed the date of implementation of the increase in real property taxes from January 1, 1988 to January 1, 1987 and therefore repealed Executive Order No. 1019, also finds ample justification in its "whereas' clauses, as follows:WHEREAS, the collection of real property taxes based on the 1984 real property values was deferred to take effect on January 1, 1988 instead of January 1, 1985,thus depriving the local government units of an additional source of revenue;WHEREAS, there isan urgent need for local governments to augment their financial resources to meet the rising cost of rendering effective services to the people;(emphasis supplied)xxx xxx xxxThe other allegation of ROAP that Presidential Decree No. 464 is unconstitutional, is not proper to be resolved in the present petition. As stated at the outset, the issue here is limited to the constitutionality of Executive Order No. 73. Intervention is not an independent proceeding, but an ancillary and supplemental one which, in the nature of things, unless otherwise provided for by legislation (or Rules of Court), must be in subordination to the main proceeding, and it may be laid down as a general rule that an intervention is limited to the field of litigation open to the original parties (59 Am. Jur. 950. Garcia, etc., et al. v. David, et al., 67 Phil. 279).We agree with the observation of the Office of the Solicitor General that without Executive Order No. 73, the basis for collection of real property taxes win still be the 1978 revision of property values. Certainly, to continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues must be adequate to meet government expenditures and their variations.ACCORDINGLY, the petition and the petition-in-intervention are hereby DISMISSED. SO ORDERED.

[G.R. No. 125704.August 28, 1998]PHILEX MINING CORPORATION,petitioner,vs.COMMISSIONER OF INTERNAL REVENUE, COURT OF APPEALS, and THE COURT OF TAX APPEALS,respondents.

D E C I S I O NROMERO,J.:Petitioner Philex Mining Corp. assails the decision of the Court of Appeals promulgated on April 8, 1996 in CA-G.R. SP No. 36975[1]affirming the Court of Tax Appeals decision in CTA Case No. 4872 dated March 16, 1995[2]ordering it to pay the amount ofP110,677,668.52 as excise tax liability for the period from the 2ndquarter of 1991 to the 2ndquarter of 1992 plus 20% annual interest from August 6, 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977.The facts show that on August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities for the 2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992 in the total amount ofP123,821,982.52 computed as follows:PERIOD COVEREDBASIC TAX 25%SURCHARGEINTERESTTOTAL EXCISETAX DUE2nd Qtr., 199112,911,124.603,227,781.153,378,116.1619,517,021.913rd Qtr., 199114,994,749.213,748,687.302,978,409.0921,721,845.604th Qtr., 199119,406,480.134,851,620.032,631,837.7226,889,937.88--------------------------------------------------------------------------47,312,353.9411,828,088.488,988,362.9768,128,805.391st Qtr., 199223,341,849.945,835,462.491,710,669.8230,887,982.252nd Qtr., 199219,671,691.764,917,922.94215,580.1824,805,194.8843,013,541.7010,753,385.431,926,250.0055,693,177.1390,325,895.6422,581,473.9110,914,612.97123,821,982.52==========================================[3]In a letter dated August 20, 1992,[4]Philex protested the demand for payment of the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount ofP119,977,037.02 plus interest.Therefore, these claims for tax credit/refund should be applied against the tax liabilities, citing our ruling inCommissioner of Internal Revenue v. Itogon-Suyoc Mines, Inc.[5]In reply, the BIR, in a letter dated September 7, 1992,[6]found no merit in Philexs position.Since these pending claims have not yet been established or determined with certainty, it follows that no legal compensation can take place.Hence, he BIR reiterated its demand that Philex settle the amount plus interest within 30 days from the receipt of the letter.In view of the BIRs denial of the offsetting of Philexs claim for VAT input credit/refund against its exercise tax obligation, Philex raised the issue to the Court of Tax Appeals on November 6, 1992.[7]In the course of the proceedings, the BIR issued a Tax Credit Certificate SN 001795 in the amount ofP13,144,313.88 which, applied to the total tax liabilities of Philex ofP123,821,982.52; effectively lowered the latters tax obligation ofP110,677,688.52.Despite the reduction of its tax liabilities, the CTA still ordered Philex to pay the remaining balance ofP110,677,688.52 plus interest, elucidating its reason, to wit:Thus, for legal compensation to take place, both obligations must beliquidated and demandable.Liquidated debts are those where the exact amount has already been determined (PARAS, Civil Code of the Philippines, Annotated, Vol. IV, Ninth Edition, p. 259).In the instant case, the claims of the Petitioner for VAT refund is still pending litigation, and still has to be determined by this Court (C.T.A. Case No. 4707).Afortiori, theliquidated debtof the Petitioner to the government cannot, therefore, be set-off against theunliquidated claimwhich Petitioner conceived to exist in its favor (see Compaia General de Tabacosvs.French and Unson, No. 14027, November 8, 1918, 39 Phil. 34).[8]Moreover, the Court of Tax Appeals ruled that taxes cannot be subject to set-off on compensation since claim for taxes is not a debt or contract.[9]The dispositive portion of the CTA decision[10]provides:In all the foregoing, this Petition for Review is hereby DENIED for lack of merit and Petitioner is hereby ORDERED to PAY the Respondent the amount ofP110,677,668.52 representing excise tax liability for the period from the 2ndquarter of 1991 to the 2ndquarter of 1992 plus 20% annual interest from August 6, 1994 until fully paid pursuant to Section 248 and 249 of the Tax Code, as amended.Aggrieved with the decision, Philex appealed the case before the Court of Appeals docketed as CA-G.R. CV No. 36975.[11]Nonetheless, on April 8, 1996, the Court of Appeals affirmed the Court of Tax Appeals observation.The pertinent portion of which reads:[12]WHEREFORE, the appeal by way of petition for review is hereby DISMISSED and the decision dated March 16, 1995 is AFFIRMED.Philex filed a motion for reconsideration which was, nevertheless, denied in a Resolution dated July 11, 1996.[13]However, a few days after the denial of its motion for reconsideration, Philex was able to obtain its VAT input credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994, computed as follows:[14]Period Covered ByTax Credit CertificateDate Of IssueAmountClaims For VatNumberrefund/credit1994 (2nd Quarter)00773011 July 1996P25,317,534.011994 (4th Quarter)00773111 July 1996P21,791,020.61198900773211 July 1996P37,322,799.191990-199100775116 July 1996P84,662,787.461992 (1st-3rd Quarter)00775523 July 1996P36,501,147.95In view of the grant of its VAT input credit/refund, Philex now contends that the same should,ipso jure, off-set its excise tax liabilities[15]since both had already become due and demandable, as well as fully liquidated;[16]hence, legal compensation can properly take place.We see no merit in this contention.In several instances prior to the instant case, we have already made the pronouncement that taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other.[17]There is a material distinction between a tax and debt.Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity.[18]We find no cogent reason to deviate from the aforementioned distinction.Prescinding from this premise, inFrancia v. Intermediate Appellate Court,[19]we categorically held that taxes cannot be subject to set-off or compensation, thus:We have consistently ruled that there can be no off-setting of taxesagainstthe claims that the taxpayer may have against the government.A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected.The collection of tax cannot await the results of a lawsuit against the government.The ruling inFranciahas been applied to the subsequent case ofCaltex Philippines, Inc. v. Commission on Audit,[20]which reiterated that:x x xa taxpayer may not offset taxes due from the claims that he may have against the government.Taxes cannot be the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.Further, Philexs reliance on our holding inCommissioner of Internal Revenue v. Itogon-Suyoc Mines, Inc., wherein we ruled that a pending refund may be set off against an existing tax liability even though the refund has not yet beenapproved by the Commissioner,[21]is no longer without any support in statutory law.It is important to note that the premise of our ruling in the aforementioned case was anchored on Section 51(d) of the National Revenue Code of 1939.However, when the National Internal Revenue Code of 1977 was enacted, the same provision upon which theItogon-Suyocpronouncement was based was omitted.[22]Accordingly, the doctrine enunciated inItogon-Suyoccannot be invoked by Philex.Despite the foregoing rulings clearly adverse to Philexs position, it asserts that the imposition of surcharge and interest for the non-payment of the excise taxes within the time prescribed was unjustified.Philex posits the theory that it had no obligation to pay the excise liabilities within the prescribed period since, after all, it still has pending claims for VAT input credit/refund with BIR.[23]We fail to see the logic of Philexs claim for this is an outright disregard of the basic principle in tax law that taxes are the lifeblood of the government and so should be collected without unnecessary hindrance.[24]Evidently, to countenance Philexs whimsical reason would render ineffective our tax collection system.Too simplistic, it finds no support in law or in jurisprudence.To be sure, we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has a pending tax claim for refund or credit against the government which has not yet been granted.It must be noted that a distinguishing feature of a tax is that it is compulsory rather than a matter of bargain.[25]Hence, a tax does not depend upon the consent of the taxpayer.[26]If any payer can defer the payment of taxes by raising the defense that it still has a pending claim for refund or credit, this would adversely affect the government revenue system. A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government or that the collection of the tax is contingent on the result of the lawsuit it filed against the government.[27]Moreover, Philex's theory that would automatically apply its VAT input credit/refund against its tax liabilities can easily give rise to confusion and abuse, depriving the government of authority over the manner by which taxpayers credit and offset their tax liabilities.Corollarily, the fact that Philex has pending claims for VAT input claim/refund with the government is immaterial for the imposition of charges and penalties prescribed under Section 248 and 249 of the Tax Code of 1977. The payment of the surcharge is mandatory and the BIR is not vested with any authority to waive the collection thereof.[28]The same cannot be condoned for flimsy reasons,[29]similar to the one advanced by Philex in justifying its non-payment of its tax liabilities.Finally, Philex asserts that the BIR violated Section 106(e)[30]of the National Internal Revenue Code of 1977, which requires the refund of input taxes within 60 days,[31]whenit took five years for the latter to grant its tax claim for VAT input credit/refund.[32]In this regard, we agree with Philex. While there is no dispute that a claimant hasthe burden of proof to establish the factual basis of his or her claim for tax credit or refund,[33]however, once the claimant has submitted all the required documents, it is the function of the BIR to assess these documents with purposeful dispatch. After all, since taxpayers owe honesty to government it is but just that government render fair service to the taxpayers.[34]In the instant case, the VAT input taxes were paid between 1989 to 1991 but the refund of these erroneously paid taxes was only granted in 1996. Obviously, had the BIR been more diligent and judicious with their duty, it could have granted the refund earlier. We need not remind the BIR that simple justice requires the speedy refund of wrongly-held taxes.[35]Fair dealing and nothing less, is expected by the taxpayer from the BIR in the latter's discharge of its function. As aptly held inRoxas v. Court of Tax Appeals:[36]"The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collectot kill the 'hen that lays the golden egg.' And, in the order to maintain the general public's trust and confidence in the Government this power must be used justly and not treacherously."Despite our concern with the lethargic manner by which the BIR handled Philex's tax claim, it is a settled rule that in the performance of governmental function, the State is not bound by the neglect of its agents and officers. Nowhere is this more true than in the field of taxation.[37]Again, while we understand Philex's predicament, it must be stressed that the same is not valid reason for the non- payment of its tax liabilities.To be sure, this is not state that the taxpayer is devoid of remedy against public servants or employees especially BIR examiners who, in investigating tax claims are seen to drag their feet needlessly. First, if the BIR takes time in acting upon the taxpayer's claims for refund, the latter can seek judicial remedy before the Court of Tax Appeals in the manner prescribed by law.[38]Second, if the inaction can be characterized as willful neglect of duty, then recourse under the Civil Code and the Tax Code can also be availed of.Article 27 of the Civil Code provides:"Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudiceto any disciplinary action that may be taken."More importantly, Section 269 (c) of the National Internal Revenue Act of 1997 states:"xxxxxxxxx(c) wilfully neglecting to give receipts, as by law required for anysum collected in the performance of duty orwilfully neglecting to perform, any other duties enjoined by law."Simply put, both provisions abhor official inaction, willful neglect and unreasonable delay in the performance of official duties.[39]In no uncertain terms must we stress that every public employee or servant must strive to render service to the people with utmost diligence and efficiency. Insolence and delay have no place in government service. The BIR, being the government collecting arm, must and should do no less. It simply cannot be apathetic and laggard in rendering service to the taxpayer if it wishes to remain true to its mission of hastening the country's development. We take judicial notice of the taxpayer's generally negative perception towards the BIR; hence, it is up to the latter to prove its detractors wrong.In sum, while we can never condone the BIR's apparent callousness in performing its duties, still, the same cannot justify Philex's non-payment of its tax liabilities. The adage "no one should take the law into his own hands" should have guided Philex's action.WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED. The assailed decision of the Court of Appeals dated April 8, 1996 is hereby AFFIRMED.SO ORDERED. Narvasa, C.J.,(Chairman), KapunanandPurisima, JJ.,concur.

G.R. No. L-25043 April 26, 1968ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as judicial co-guardians of JOSE ROXAS,petitioners,vs.COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE,respondents.Leido, Andrada, Perez and Associates for petitioners.Office of the Solicitor General for respondents.BENGZON, J.P.,J.:Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession the following properties:(1) Agricultural lands with a total area of 19,000 hectares, situated in the municipality of Nasugbu, Batangas province;(2) A residential house and lot located at Wright St., Malate, Manila; and(3) Shares of stocks in different corporations.To manage the above-mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership called Roxas y Compania.AGRICULTURAL LANDSAt the conclusion of the Second World War, the tenants who have all been tilling the lands in Nasugbu for generations expressed their desire to purchase from Roxas y Cia. the parcels which they actually occupied. For its part, the Government, in consonance with the constitutional mandate to acquire big landed estates and apportion them among landless tenants-farmers, persuaded the Roxas brothers to part with their landholdings. Conferences were held with the farmers in the early part of 1948 and finally the Roxas brothers agreed to sell 13,500 hectares to the Government for distribution to actual occupants for a price of P2,079,048.47 plus P300,000.00 for survey and subdivision expenses.It turned out however that the Government did not have funds to cover the purchase price, and so a special arrangement was made for the Rehabilitation Finance Corporation to advance to Roxas y Cia. the amount of P1,500,000.00 as loan. Collateral for such loan were the lands proposed to be sold to the farmers. Under the arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price but by installment, and contracted with the Rehabilitation Finance Corporation to pay its loan from the proceeds of the yearly amortizations paid by the farmers.In 1953