The Supreme Court, in this resolution, clarified its earlier decision regarding the invalidity of a Quezon City ordinance provision concerning real property tax assessments. The Court affirmed that while the invalid provision entitled taxpayers to a refund, the process for claiming that refund must adhere to the procedures outlined in the Local Government Code. This means taxpayers cannot bypass the established administrative process for seeking tax refunds, even when the basis for the refund is a declaredly illegal tax assessment.

From Erroneous Tax to Entitled Refund: Navigating the Legal Path Back to Rightful Dues

This case arose from a dispute over Quezon City Ordinance No. 357 Series of 1995, specifically the third sentence of Section 3 (the proviso), which dictated how real property tax should be assessed on lands sold after the ordinance’s enactment. Allied Banking Corporation, as trustee for College Assurance Plan Philippines, Inc. (CAP), challenged this provision, arguing that it conflicted with the Local Government Code. The Supreme Court initially declared the proviso invalid but stipulated that CAP’s claim for a refund must be lodged with the Local Board of Assessment Appeals (LBAA). CAP then sought clarification, asserting that the declaration of invalidity should automatically trigger a refund.

The Quezon City government, in its comment, argued that CAP should not be allowed to circumvent the administrative remedies available under the Local Government Code, particularly Sections 252, 226, 229, 230, and 231, which outline the process for protesting and claiming refunds of real property taxes. This stance hinged on the principle of exhaustion of administrative remedies, which generally requires parties to pursue all available avenues within the administrative system before resorting to judicial intervention. Building on this principle, the City asserted that CAP should follow the proper channels for claiming a tax refund instead of demanding an automatic reimbursement based solely on the Court’s declaration of the proviso’s invalidity.

The Court, however, clarified its position, emphasizing that the invalidity of the proviso entitled similarly situated taxpayers to a tax refund. The Court noted that CAP had previously sought a refund from the City Treasurer, who then referred the matter to the City Assessor. The City Assessor denied the claim, citing the assessor’s duty to implement the ordinance. The Supreme Court decisively ruled that the assailed proviso was void ab initio. It emphasized the importance of procedural compliance when pursuing tax refunds.

SEC. 253. Repayment of Excessive Collections. – When an assessment of basic real property tax, or any other tax levied under this Title, is found to be illegal or erroneous and the tax is accordingly reduced or adjusted, the taxpayer may file a written claim for refund or credit for taxes and interests with the provincial or city treasurer within two (2) years from the date the taxpayer is entitled to such reduction or adjustment.

The amended decision reinforces the significance of adhering to administrative procedures, even when the legal basis for the claim is firmly established. The Court acknowledged that while the invalidity of the ordinance created a right to a refund, the factual determination of the amount and the processing of the claim must still follow the established course. Under Section 253 of the Local Government Code, the claim must be filed before the city treasurer. Here the treasurer will review the tax declarations, affidavits, and other documents submitted by the taxpayer.

Court Decision	Effect on Refund Process
Declared ordinance invalid	Taxpayers entitled to a refund based on illegal tax assessment
Acknowledged previous attempts for refund	Still must follow administrative procedures for tax refund

In summary, the resolution reinforces that while the declaration of the proviso’s invalidity creates a right to a refund for those who paid taxes under it, it does not circumvent the need to comply with the administrative procedures for claiming such a refund. Taxpayers seeking refunds must follow the process outlined in the Local Government Code.

FAQs

What was the key issue in this case?	The central issue was whether a declaration of invalidity of a tax ordinance automatically entitles a taxpayer to a refund without following established administrative procedures.
What did the Supreme Court decide?	The Supreme Court ruled that while the invalid ordinance entitled taxpayers to a refund, they still must comply with the administrative procedures for claiming the refund under the Local Government Code.
What is Quezon City Ordinance No. 357?	Quezon City Ordinance No. 357 Series of 1995 revised real property assessments, and the specific part in question (Section 3) concerned how land sales affected tax rates.
What is the significance of Section 253 of the Local Government Code?	Section 253 outlines the procedure for claiming refunds or credits for taxes that have been illegally or erroneously assessed, requiring taxpayers to file a written claim with the city treasurer.
Where should a taxpayer file a claim for a real property tax refund in this situation?	The taxpayer must file a written claim for a refund with the City Treasurer of Quezon City, providing all necessary tax declarations, affidavits, and supporting documents.
What is the deadline for filing a refund claim?	The refund claim must be filed within two years from the date the taxpayer is entitled to the reduction or adjustment due to the illegal or erroneous assessment, as stated in Section 253.
What happens if the City Treasurer denies the refund claim?	If the City Treasurer denies the claim, the taxpayer can pursue the remedies outlined in Chapter 3, Title Two, Book II of the Local Government Code.
What does ‘void ab initio’ mean?	‘Void ab initio’ means ‘void from the beginning,’ indicating that the provision never had any legal effect and conferred no rights from its inception.

The Supreme Court’s resolution serves as a reminder of the importance of procedural compliance in tax matters. Even when the legal ground for a refund is clear, taxpayers must still navigate the established administrative processes to ensure their claims are properly processed. Taxpayers seeking guidance on the specific steps for claiming a refund should consult with legal professionals to protect their rights and interests.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ALLIED BANKING CORPORATION vs. QUEZON CITY, G.R. NO. 154126, September 15, 2006