CIR vs.

Central Luzon Drug Corp

G.R. No. 159610
June 12, 2008
Facts:
After incurring net loss, Central Luzon Drug Corp fled a claim for refund or credit of overpaid income tax for
te taxa!le "ear 1##$ in te amount of%2,&&0,82#'00 alleging tat te overpaid tax (as te result of te (rongful
implementation of )A $*+2' ,e" treated te 20- sales discount as a deduction from gross sales in compliance (it
)) 2.#* instead of treating it as a tax credit as provided under /ection *0a1 of )A $*+2'

2n & April 2000, te" fled a %etition for )evie( (it te C,A in order to toll te running of te t(o."ear statutor"
period (itin (ic to fle a 3udicial claim' )espondent reasoned tat )) 2.#*, (ic is a mere implementing
administrative regulation, cannot modif", alter or amend te clear mandate of )A $*+2' Conse4uentl", /ection 20i1 of
)) 2.#* is (itout force and e5ect for !eing inconsistent (it te la( it see6s to implement'
7

8o(ever, te C9) stated tat te construction given to a statute !" a specialized administrative agenc" li6e te
:9) is entitled to great respect and sould !e accorded great (eigt' ;en )A $*+2 allo(ed senior citizens< discounts
to !e claimed as tax credit, it (as silent as to te mecanics of availing te same' =or clarifcation, te :9) issued ))
2.#* and defned te term >tax credit? as a deduction from te esta!lisment@s gross income and not from its tax
lia!ilit" in order to avoid an a!surdit" tat is not intended !" te la('
Issue:
;eter te refund (ill !e allo(ed'
Ruling:
,e petition lac6s merit'
,e Court as s4uarel" ruled tat te 20- senior citizens< discount re4uired !" )A $*+2 ma" !e claimed as a
tax credit and not merel" a tax deduction from gross sales or gross income' Ander )A $*+2, Congress granted te tax
credit !eneft to all covered esta!lisments (itout conditions' ,e net loss incurred in a taxa!le "ear does not
preclude te grant of tax credit !ecause !" its nature, te tax credit ma" still !e deducted from a future, not a present,
tax lia!ilit"' 8o(ever, te senior citizens< discount granted as a tax credit cannot !e refunded'
,ax credit is defned as a peso.for.peso reduction from a taxpa"er<s tax lia!ilit"' 9t is a direct su!traction from
te tax pa"a!le to te government' 2n te oter and, )) 2.#* treated te amount of senior citizens< discount as a
tax deduction (ic is onl" a su!traction from gross income resulting to a lo(er taxa!le income' )) 2.#* treats te
senior citizens< discount in te same manner as te allo(a!le deductions provided in /ection +*, Capter B99 of te
Cational 9nternal )evenue Code' )) 2.#* a5ords merel" a fractional reduction in te taxes pa"a!le to te government
depending on te applica!le tax rate'
/ection *0a1 of )A $*+2 expressl" provides tat private esta!lisments ma" claim te cost as a tax credit' A
tax credit can onl" !e utilized as pa"ment for future internal revenue tax lia!ilities of te taxpa"er (ile a tax refund,
issued as a cec6 or a (arrant, can !e encased' A tax refund can !e availed of immediatel" (ile a tax credit can
onl" !e utilized if te taxpa"er as existing or future tax lia!ilities'