Meralco Securities v Savellano

Facts:

 The late Juan G. Maniago (substituted in these proceedings by his wife and children) submitted to petitioner Commissioner of Internal Revenue confidential denunciation against the Meralco Securities Corporation for tax evasion for having paid income tax only on 25 % of the dividends it received from the Manila Electric Co, thereby allegedly shortchanging the government of income tax due from 75% of the said dividends.

 Commissioner caused the investigation of the denunciation after which he found and held that no deficiency corporate income tax was due from the Meralco Securities Corporation since under the law then prevailing (in the case of dividends received by a domestic or foreign resident corporation liable to corporate income tax only 25% shall be returnable for the purposes of the tax. The Commissioner rejected Maniago's contention that the Meralco from whom the dividends were received is not a domestic corporation liable to tax.

In a letter, the Commissioner denied Maniago's claim for informer's reward on a non-existent deficiency. This action of the Commissioner was sustained by the Secretary of Finance. Maniago filed a petition for mandamus to compel the Commissioner to impose the alleged deficiency tax assessment on the Meralco Securities Corporation and to award to him the corresponding informer's reward under the provisions of R.A. 2338.

The Commissioner filed a motion to dismiss, arguing that since in matters of issuance and non-issuance of assessments, he is clothed under the National Internal Revenue Code and existing rules and regulations with discretionary power in evaluating the facts of a case and since mandamus win not lie to compel the performance of a discretionary power, he cannot be compelled to impose the alleged tax deficiency assessment. 

On the other hand, the Meralco Securities Corporation averred that since no taxes have actually been recovered and/or collected, Maniago has no right to recover the reward prayed for

The respondent judge rendered a decision granting the writ prayed for and ordering the Commissioner to assess and collect from the Meralco Securities Corporation the sum of P51,840,612.00 as deficiency corporate income tax plus interests and surcharges due thereon and to pay 25% to Maniago as informer's reward.

Issue: 

Whether or not mandamus is proper in this case

Held:

No. It is furthermore a well-recognized rule that mandamus only lies to enforce the performance of a ministerial act or duty and not to control the performance of a discretionary power. Purely administrative and discretionary functions may not be interfered with by the courts. Discretion means the power or right conferred upon the office by law of acting officially under certain circumstances according to the dictates of his own judgment and conscience and not controlled by the judgment or conscience of others. Mandamus may not be resorted to so as to interfere with the manner in which the discretion shall be exercised or to influence or coerce a particular determination

Moreover, since the office of the Commissioner of Internal Revenue is charged with the administration of revenue laws, which is the primary responsibility of the executive branch of the government, mandamus may not be against the Commissioner to compel him to impose a tax assessment not found by him to be due or proper for that would be tantamount to a usurpation of executive functions. 

In the case, after the Commissioner who is specifically charged by law with the task of enforcing and implementing the tax laws and the collection of taxes had after a mature and thorough study rendered his decision or ruling that no tax is due or collectible, and his decision is sustained by the Secretary, such decision or ruling is a valid exercise of discretion in the performance of official duty and cannot be controlled much less reversed by mandamus.

No deficiency taxes may therefore be assessed and collected against the said corporation. Since no taxes are to be collected, no informer's reward is due to private respondents as the informer's heirs. Since no assessment, much less any collection, has been made in the instant case, respondent judge's writ for the Commissioner to pay respondents 25% informer's reward is gross error and without factual nor legal basis.

*Respondent judge has no jurisdiction to take cognizance of the case because the subject matter thereof clearly falls within the scope of cases now exclusively within the jurisdiction of the Court of Tax Appeals. 

*The determination of the correctness or incorrectness of a tax assessment to which the taxpayer is not agreeable, falls within the jurisdiction of the Court of Tax Appeals and not of the Court of First Instance.

Notes:

Informer's reward is contingent upon the payment and collection of unpaid or deficiency taxes. informer is entitled by way of reward only to a percentage of the taxes actually assessed and collected.