COMMISSIONER OF INTERNAL REVENUE, vs. PROCTER & GAMBLE PHILIPPINE MANUFACTURING CORPORATION and THE COURT OF TAX APPEALS G.R. No. L-66838 December 2,

FACTS: Procter and Gamble Philippine Manufacturing Corporation declared dividends payable to its parent company and sole stockholder, Procter and Gamble Co., Inc. (USA) from which dividends the thirty-five percent (35%) withholding tax at source was deducted.

In 1977, private respondent filed with petitioner Commissioner of Internal Revenue a claim for refund or tax credit.There being no responsive action on the part of the Commissioner, it filed a petition for review with CTA. In 1984, the CTA rendered a decision ordering petitioner Commissioner to refund or grant the tax credit.

On appeal by the Commissioner, the Court reversed the decision of the CTA. Thus, this petition


ISSUE: Whether or not the issue on whether a withholding agent in the Philippines is legally entitled to refund may be raised for the first time on appeal by the Government.


HELD: The BIR should not be allowed to defeat an otherwise valid claim for refund by raising this question of alleged incapacity for the first time on appeal before this Court. This is clearly a matter of procedure. Petitioner does not pretend that P&G-Phil., should it succeed in the claim for refund, is likely to run away, as it were, with the refund instead of transmitting such refund or tax credit to its parent and sole stockholder. It is commonplace that in the absence of explicit statutory provisions to the contrary, the government must follow the same rules of procedure which bind private parties. It is, for instance, clear that the government is held to compliance with the provisions of Circular No. 1-88 of this Court in exactly the same way that private litigants are held to such compliance, save only in respect of the matter of filing fees from which the Republic of the Philippines is exempt by the Rules of Court.