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National Capital Judicial Region
Branc !
"aria Clara Recolecto#
$CASE No% &'()'!*)+,-
Co..i##ioner o/ Internal
Re0enue and1 te
Honora2le Secretar3 o/
Herein is a Petition for Review assailing the
constitutionality and validity of Revenue Regulation No. 12-
relating to disallowance of expenses if deciency
withholding tax is paid during a !"R tax audit.
Petitioner# $aria %lara Recolectos# &y undersigned
counsel# unto this Honora&le %ourt# respectfully states'
1. Petitioner is a tax payer of legal age# single and a
residence at 1 Recto (ve.# $anila)
2. *ithout in any way pre-e+pting any Resolution &y
the Honora&le %ourt# petitioner desires to refute the
constitutionality and legality of !"R Revenue Regulation No.
12-2013 as &eing ar&itrary# against pu&lic policy# in violation
of the due process of law# and against the e,ual protection
of the law)
3. -he assailed regulation is here&y reproduced in part#
Amending Section 2.58.5, Revenue Regulation No. 2-98, as amended.
.Section 1. Scope. --- Pursuant to the Provisions
of Sections 34(K)
and 244
, in relation to Section 245 of the
National Internal Revenue ode of !""# ($a% ode), as
a&ended, these re'ulations are here() pro&ul'ated to
a&end the provisions of Revenue Re'ulation No. 2*"+, as
Section 2. Amendment. --- Section 2.5+.5 of RR
2*"+, as a&ended, is here() further a&ended to read as
Section 2.5+.5. Re.uire&ents for
/educti(ilit). *** 0n) inco&e pa)&ent ,hich
is other,ise deducti(le under the ode shall
(e allo,ed as a deduction fro& the pa)or1s
'ross inco&e onl) if it is sho,n that the
inco&e ta% re.uired to (e ,ithheld has (een
paid to the 2ureau in accordance ,ith
Sections 5# and 5+ of this ode.
No deduction ,ill also (e allo,ed
not,ithstandin' pa)&ents of ,ithholdin'
ta% at the ti&e of the audit investi'ation or
reinvesti'ation3reconsideration in cases
,here no ,ithholdin' of ta% ,as &ade in
accordance ,ith Sections 5# and 5+ of the
3. R.R. 12-2013 is not reasona&le &ecause it prevents
the deductions of expenses su&/ect to %redita&le *ithholding
-ax not paid during a !"R tax (udit not withstanding
taxpayers0 voluntary co+pliance with his tax o&ligations)
1. 2eduction of expenses will &e disallowed where
pay+ent of withholding tax is +ade only at the ti+e of audit
investigation or reinvestigation# thus# proper deductions of
proper expenses will &e denied even if withholding tax has
SECTION 34 (K). Additional Requirements for Deduti!ilit" of Certain #a"ments.
$$$ Any Amount paid or payable !ic! is ot!erise deductible "rom, or ta#en into
account in computing gross income or "or !ic! depreciation or amorti$ation may be
alloed under t!is Section, s!all be alloed as a deduction only i" it is s!on t!at t!e ta%
re&uired to be deducted and it!!eld t!ere"rom !as been paid to t!e 'ureau o" (nternal
Revenue in accordance it! t!is Section, Sections 58 and 81 o" t!is )ode.
SECTION %44. Aut&orit" of Seretar" of 'inane to #romul(ate Rules and
Re(ulations. $$$ +!e Secretary o" ,inance, upon recommendation o" t!e )ommissioner,
s!all promulgate all need"ul rules and regulations "or t!e e""ective en"orcement o" t!e
provisions o" t!is )ode.
&een paid when such pay+ent is e3ected only at the ti+e of
the investigation or reinvestigation.
4. 5ection 216 of the National "nternal Revenue %ode
already i+poses pertinent additions to the tax or deciency
taxes# further# 5ection 217 of the sa+e %ode already
i+poses a general interest at the rate of twenty percent
8209: per annu+# or such higher interest rate as +ay &e
prescri&ed &y rules and regulations# as well as deciency
interest# delin,uency interest and interest on extended
;. 5uch disallowance of expense deduction shall &e
had together with taxpayer0s pay+ent of other penalties#
surcharges# interests and co+pro+ise# thus# it is indirectly
adding additional pay+ent of .penalties< on the part of the
6. -he i+plication of disallowance as provided for
under the assailed Revenue Regulation clearly results to an
oppressive tax syste+ prohi&ited under the %onstitution.
=. Pursuant to Revenue $e+orandu+ >rder 8R$>:
No. 62-2010# a -ax -reaty Relief (pplication 8--R(: +ust &e
led prior to the rst taxa&le event# hence# it +ay &e argued
that once a --R( is led# a withholding agent +ay withhold
tax on a pay+ent +ade to a treaty country resident at a rate
specied in a treaty with the contracting country# su&/ect to
a nal conr+ation via a ruling. "f said ruling denies the
--R(# the withholding agent +ust re+it an additional
withholding tax lia&ility.
7. -he enact+ent of RR 12-2013 gives rise to a
situation where the taxpayer0s otherwise voluntary
co+pliance with law is +ade +ore oppressive and
&urdenso+e &y reason of the disallowance in clear violation
of the %onstitutional prohi&ition against ta?ing of private
property without due process of the law.
10. "n the case of (!!>-- @(!>R(->R"A5# "N%. B5.
# the 5upre+e %ourt ruled in favor of the taxpayer and
disagreed with the !"R0s ndings citing that the ti+ing of
withholding on co+pensation +ust &e upon pay+ent only.
-he %ourt in said case ruled i+proper when the !"R
disallowed the deductions due to the therein petitioner
&ecause of the petitioner0s non-withholding and non-
)+A )ase No. 5.18, ,ebruary 1/, 2001.
re+ittance of any tax upon the accrual of the salaries# wages
and co++issions.
11. "n the sa+e vain# the 5upre+e %ourt in the case of
566ISSI5N7R 58 IN$7RN09 R7:7N;7 :S. IS02790
;9$;R09 5RP5R0$I5N
ruled that following the accrual
+ethod of accounting# an expense though the a+ount of
which is an esti+ate only# +ust &e clai+ed in the year when
the sa+e was incurred and not when the sa+e is paid. -hus#
indiscri+inate disallowance of proper expenses denitely
deprives the taxpayers certain su&stantial tax reliefs
regardless of due pay+ent on investigation or
12. Revenue Regulations No. 12-77
Revenue Regulations No. 12-=4# sets forth in 5ection 3
thereof the procedural steps governing ad+inistrative
protests. >ne of the re+edies a3orded taxpayers under said
issuance is the ling of a written re,uest for reconsideration
or reinvestigation with an additional right to appeal any
adverse decision with the %ourt of -ax (ppeals pursuant to
5ection 6 of Repu&lic (ct No. 1124'
a. Cnder a&ove-cited Regulation# no action
shall &e ta?en on the taxpayer0s disputed
issues until the taxpayer has paid the
deciency tax or taxes attri&uta&le to the
said undisputed issues.
&. %onsidering the a&ove provision of the
regulation# it will &e clearly inferred that the
&asic law itself and the supporting revenue
regulation only de+and that taxpayer pay
upon protest the undisputed portion of the
tax ,uestioned.
c. -hat disallowance of expenses when paid
at the ti+e of investigationDreinvestigation is
a +anifest circu+vention of the clear
provisions of the law for depriving the
taxpayer to exercise a right or re+edy
lawfully a3orded to hi+.
13. Herein petitioner recogniEes that the law
li?ewise gives taxpayers certain re+edies to collect fro+
1.R. No. 1.22*1, ,ebruary 12, 200..
2ated September /, 1999.
the govern+ent illegally andDor i+properly collected
taxes# however# &eing in the nature of -ax Refund or -ax
%redit# such re+edies do not ensure that expenses not
deducted shall &e re+itted &ac? to the taxpayers account
considering the stringent +easures that the -ax laws
i+ple+ent when it co+es to such re+edies availa&le to
the taxpayers.
11. (s provided for under 5ections 201 8%:
and 227 of
the National "nternal Revenue %ode# -ax recovery or
refunds +ay cover the following pay+ents' 8a:
erroneously or illegally assessed or collected internal
revenue taxes) 8&: penalties i+posed without authority)
and# 8c: su+ alleged to have &een excessive or in any
+anner wrongfully collected.
14. However# in 7660N;79 0N/ <0N0I/0
0=;I90R :S. 566ISSI5N7R
the %ourt reiterated that
&eing in the nature of an exe+ption fro+ taxation# a clai+
for refund is strictly construed against the clai+ant and
the failure to discharge said &urden is fatal to the clai+.
1;. -he aforesaid strict construction of clai+s for
tax refunds andDor credit places the taxpayer0s initially
strictly construed right to tax exe+ption to another strict
construction of the law# should his exe+ptions &e
converted into tax refundDcredit &y reason of the assailed
16. -his Petition is not intended to delay the
resolution of any pending nor future case &ut solely
necessitated &y the foregoing.
PRA$"5A5 %>N5"2ARA2# it is respectfully prayed of this
Honora&le %ourt that the herein Petition for Review as to the
SECTION %)4. Aut&orit" of t&e Commissioner to Com*romise+ A!ate and Refund
or Credit Ta,es. $$$$ ). )redit o" re"und ta%es erroneously or illegally received or
penalties imposed it!out aut!ority, re"und t!e value o" internal revenue stamps !en
t!ey are returned in good condition by t!e purc!aser, and in !is discretion, redeem or
c!ange unused stamps t!at !ave been rendered un"it "or use and re"und t!eir value upon
proo" o" destruction. No credit or re"und o" ta%es or penalties s!all be alloed unless t!e
ta%payer "iles in riting it! t!e )ommissioner a claim "or credit or re"und it!in to
324 years a"ter t!e payment o" t!e ta% or penalty5 6rovided, !oever, t!at a return "iled
s!oing an overpayment s!all be considered as a ritten claim "or credit or re"und. 3%%%4
)A-1.R. No. S6-1/-*2, 7arc! *0, 1990.
constitutionality and legality of the assailed regulation &e
(2$"--A2 and %>N5"2ARA2 &y the Honora&le %ourt in its
resolution of the Petition and thus -H(- RABANCA
RAFC@(-">N 12-2013 !A 2A%@(RA2 CN%>N5-"-C-">N(@
(N2 >G N> AGGA%- *H(-5>ABAR.
Petitioner prays for such further and other reliefs /ust
and e,uita&le under the circu+stances.
$anila# $arch 1=# 2011.
%ounsel for Petitioner
Cnit 1# H !uilding# Recto# $anila
"!P No. 12314) 01D10D73 I $anila
P-R No. 12314) 01D10D73 I $anila
Roll No. 12314) 04D04D73
$%@A No. " I 001231) 7D07D73
$%@A No. "" I 004;6=) 7D07D73
RAPC!@"% >G -HA PH"@"PP"NA5 :
%"-J >G $(N"@( : 5.5.
"# $aria %lara Recolectos# of legal age# single and a
resident of 1 Recto (ve.#$anila state under oath that'
1. " a+ the petitioner in the a&ove entitled case)
2. -he facts stated in the a&ove co+plaint are true and
correct to the &est of +y?nowledge and authentic records)
3. " have not co++enced any action or led any clai+
involving the sa+e issuesin any court# tri&unal or ,uasi-
/udicial agency and# to the &est of +y?nowledge# no
such other action or clai+ is pending in the+) and#
1. "f " should learn that the sa+e or si+ilar action or
clai+ has &een led or ispending after its ling# " shall report
that fact within ve 84: days fro+ noticeto the court or where
the co+plaint or initiatory pleading has &een led.
$anila# $arch 1=# 2011.
5C!5%R"!A2 (N2 5*>RN to &efore +e# in the %ity of
$anila# this 1=th dayof $arch# 2011# the aKant exhi&iting
her %-% No. 12314;6= issued at the %ity of $anila on
Lanuary =# 2011 and the 2river0s @icense No. N24-012314;
issued &y the @and -ransportation >Kce on Luly 1# 2011.
Notary Pu&lic for $anila Cnit 1# H !uilding# Recto#
(ppoint+ent No. 123# until 2ec. 31# 2011
"!P No. 12314) 01D10D73 I $anila
P-R No. 12314) 01D10D73 I $anila
Roll No. 12314) 04D04D73
$%@A No. " I 001231) 7D07D73
$%@A No. "" I 004;6=) 7D07D73
5erial No. of %o++ission $-123
2oc. No. 11)
Page No. 23)
!oo? No. B)
5eries of 2011.