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RepublicofthePhilippines
SUPREMECOURT
Manila

SECONDDIVISION

G.R.No.151413February13,2008

CAGAYANVALLEYDRUGCORPORATION,petitioner,
vs.
COMMISSIONEROFINTERNALREVENUE,respondent.

DECISION

VELASCO,JR.,J.:

TheCase

ThispetitionforreviewunderRule45oftheRulesofCourtseekstherecalloftheAugust31,2000Resolution1of
the Court of Appeals (CA) in CAG.R. SP No. 59778, which dismissed petitioner Cagayan Valley Drug
CorporationspetitionforreviewoftheApril26,2000Decision2oftheCourtofTaxAppeals(CTA)inC.T.A.Case
No.5581onthegroundofdefectiveverificationandcertificationagainstforumshopping.

TheFacts

Petitioner,acorporationdulyorganizedandexistingunderPhilippinelaws,isadulylicensedretailerofmedicine
and other pharmaceutical products. It operates two drugstores, one in Tuguegarao, Cagayan, and the other in
Roxas,Isabela,underthenameandstyleof"MercuryDrug."

Petitioner alleged that in 1995, it granted 20% sales discounts to qualified senior citizens on purchases of
medicinepursuanttoRepublicActNo.(RA)74323anditsimplementingrulesandregulations.

In compliance with Revenue Regulation No. (RR) 294, petitioner treated the 20% sales discounts granted to
qualifiedseniorcitizensin1995asdeductionsfromthegrosssalesinordertoarriveatthenetsales,insteadof
treatingthemastaxcreditasprovidedbySection4ofRA7432.

On December 27, 1996, however, petitioner filed with the Bureau of Internal Revenue (BIR) a claim for tax
refund/tax credit of the full amount of the 20% sales discount it granted to senior citizens for the year 1995,
allegedlytotalingtoPhP123,083inaccordancewithSec.4ofRA7432.

The BIRs inaction on petitioners claim for refund/tax credit compelled petitioner to file on March 18, 1998 a
petitionforreviewbeforetheCTAdocketedasC.T.A.CaseNo.5581inordertoforestallthetwoyearprescriptive
periodprovidedunderSec.2304ofthe1977TaxCode,asamended.Thereafter,onMarch31,2000,petitioner
amendeditspetitionforreview.

TheRulingoftheCourtofTaxAppeals

OnApril26,2000,theCTArenderedaDecisiondismissingthepetitionforreviewforlackofmerit.5

TheCTAsustainedpetitionerscontentionthatpursuanttoSec.4ofRA7432,the20%salesdiscountspetitioner
extendedtoqualifiedseniorcitizensin1995shouldbetreatedastaxcreditandnotasdeductionsfromthegross
salesaserroneouslyinterpretedinRR294.TheCTAreiterateditsconsistentholdingsthatRR294isaninvalid
administrative interpretation of the law it purports to implement as it contravenes and does not conform to the
standardsRA7432prescribes.

Notwithstandingpetitionersentitlementtoataxcreditfromthe20%salesdiscountsitextendedtoqualifiedsenior
citizens in 1995, the CTA nonetheless dismissed petitioners action for refund or tax credit on account of
petitioners net loss in 1995. First, the CTA rejected the refund as it is clear that RA 7432 only grants the 20%
salesdiscountsextendedtoqualifiedseniorcitizensastaxcreditandnotastaxrefund.Second,inrejectingthe
tax credit, the CTA reasoned that while petitioner may be qualified for a tax credit, it cannot be so extended to
petitioneronaccountofitsnetlossin1995.

The CTA ratiocinated that on matters of tax credit claim, the government applies the amount determined to be
reimbursable after proper verification against any sum that may be due and collectible from the taxpayer.
However, if no tax has been paid or if no amount is due and collectible from the taxpayer, then a tax credit is
unavailing. Moreover, it held that before allowing recovery for claims for a refund or tax credit, it must first be
establishedthattherewasanactualcollectionandreceiptbythegovernmentofthetaxsoughttoberecovered.
Intheinstantcase,theCTAfoundthatpetitionerdidnotpayanytaxbyvirtueofitsnetlosspositionin1995.

Petitioners Motion for Reconsideration was likewise denied through the appellate tax courts June 30, 2000
Resolution.6

TheRulingoftheCourtofAppeals

Aggrieved, petitioner elevated the matter before the CA, docketed as CAG.R. SP No. 59778. On August 31,
2000,theCAissuedtheassailedResolution7dismissingthepetitiononproceduralgrounds.TheCAheldthatthe
person who signed the verification and certification of absence of forum shopping, a certain Jacinto J.
Concepcion,Presidentofpetitioner,failedtoadduceproofthathewasdulyauthorizedbytheboardofdirectors
todoso.

AsfarastheCAwasconcerned,themainissuewaswhetherornottheverificationandcertificationofnonforum
shopping signed by the President of petitioner is sufficient compliance with Secs. 4 and 5, Rule 7 of the 1997
RulesofCivilProcedure.

Theverificationandcertificationinquestionreads:

I,JACINTOJ.CONCEPCION,oflegalagewithofficeaddressat2ndFloor,MercuryDrugCorporation,No.
7MercuryAve,Bagumbayan,QuezonCity,underoath,herebystatethat:

1. I am the President of Cagayan Valley Drug Corporation, Petitioner in the aboveentitled case and am
duly authorized to sign this Verification and Certification of Absence of Forum Shopping by the Board of
Director.

xxxx

The CA found no sufficient proof to show that Concepcion was duly authorized by the Board of Directors of
petitioner.TheappellatecourtanchoreditsdispositiononourrulinginPremiumMarbleResources,Inc.v.Court
ofAppeals(Premium),that"[i]ntheabsenceofanauthorityfromtheBoardofDirectors,noperson,noteventhe
officersofthecorporation,canvalidlybindthecorporation."8

Hence,wehavethispetition.

TheIssues

Petitionerraisestwoissues:first,whetherpetitionerspresidentcansignthesubjectverificationandcertification
sanstheapprovalofitsBoardofDirectors.Andsecond,whethertheCTAcommittedreversibleerrorindenying
anddismissingpetitionersactionforrefundortaxcreditinC.T.A.CaseNo.5581.

TheCourtsRuling

Thepetitionismeritorious.

Premiumnotapplicable

Asregardsthefirstissue,wefindtheCAtohaveerroneouslyreliedonPremium.Insaidcase,theissuetackled
wasnotonwhetherthepresidentofPremiumMarbleResources,Inc.wasauthorizedtosigntheverificationand
certificationagainstforumshopping,butratheronwhichofthetwosetsofofficers,bothclaimingtobethelegal
board of directors of Premium, have the authority to file the suit for and in behalf of the company. The factual
antecedentsandissuesinPremiumarenotonallfourswiththeinstantcaseandis,therefore,notapplicable.

With respect to an individual litigant, there is no question that litigants must sign the sworn verification and
certification unless they execute a power of attorney authorizing another person to sign it. With respect to a
juridicalperson,Sec.4,Rule7onverificationandSec.5,Rule7oncertificationagainstforumshoppingaresilent
astowhotheauthorizedsignatoryshouldbe.Saidrulesdonotindicateifthesubmissionofaboardresolution
authorizingtheofficerorrepresentativeisnecessary.
 Corporatepowersexercisedthroughboardofdirectors

ItmustbeborneinmindthatSec.23,inrelationtoSec.25oftheCorporationCode,clearlyenunciatesthatall
corporatepowersareexercised,allbusinessconducted,andallpropertiescontrolledbytheboardofdirectors.A
corporation has a separate and distinct personality from its directors and officers and can only exercise its
corporatepowersthroughtheboardofdirectors.Thus,itisclearthatanindividualcorporateofficercannotsolely
exerciseanycorporatepowerpertainingtothecorporationwithoutauthorityfromtheboardofdirectors.Thishas
beenourconstantholdingincasesinstitutedbyacorporation.

Inaslewofcases,however,wehaverecognizedtheauthorityofsomecorporateofficerstosigntheverification
andcertificationagainstforumshopping.InMactanCebuInternationalAirportAuthorityv.CA,werecognizedthe
authority of a general manager or acting general manager to sign the verification and certificate against forum
shopping9 in Pfizer v. Galan, we upheld the validity of a verification signed by an "employment specialist" who
hadnotevenpresentedanyproofofherauthoritytorepresentthecompany10inNoveltyPhilippines,Inc.,v.CA,
we ruled that a personnel officer who signed the petition but did not attach the authority from the company is
authorized to sign the verification and nonforum shopping certificate11 and in Lepanto Consolidated Mining
Company v. WMC Resources International Pty. Ltd. (Lepanto), we ruled that the Chairperson of the Board and
PresidentoftheCompanycansigntheverificationandcertificateagainstnonforumshoppingevenwithoutthe
submissionoftheboardsauthorization.12

In sum, we have held that the following officials or employees of the company can sign the verification and
certificationwithoutneedofaboardresolution:(1)theChairpersonoftheBoardofDirectors,(2)thePresidentof
a corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an
EmploymentSpecialistinalaborcase.

While the above cases do not provide a complete listing of authorized signatories to the verification and
certificationrequiredbytherules,thedeterminationofthesufficiencyoftheauthoritywasdoneonacasetocase
basis. The rationale applied in the foregoing cases is to justify the authority of corporate officers or
representativesofthecorporationtosigntheverificationorcertificateagainstforumshopping,being"inaposition
toverifythetruthfulnessandcorrectnessoftheallegationsinthepetition."13

Authorityfromboardofdirectorsrequired

In Philippine Airlines v. Flight Attendants and Stewards Association of the Philippines, we ruled that only
individuals vested with authority by a valid board resolution may sign the certificate of nonforum shopping on
behalfofacorporation.Theactioncanbedismissedifthecertificationwassubmittedunaccompaniedbyproofof
the signatorys authority.14 We believe that appending the board resolution to the complaint or petition is the
betterproceduretoobviateanyquestionontheauthorityofthesignatorytotheverificationandcertification.The
requiredsubmissionoftheboardresolutionisgroundedonthebasicpreceptthatcorporatepowersareexercised
bytheboardofdirectors,15andnotsolelybyanofficerofthecorporation.Hence,thepowertosueandbesued
inanycourtorquasijudicialtribunalisnecessarilylodgedwiththesaidboard.

ThereissubstantialcompliancewithRule7,Secs.4and5

In the case at bar, we so hold that petitioner substantially complied with Secs. 4 and 5, Rule 7 of the 1997
Revised Rules on Civil Procedure. First, the requisite board resolution has been submitted albeit belatedly by
petitioner.Second,weapplyourrulinginLepantowiththerationalethatthePresidentofpetitionerisinaposition
toverifythetruthfulnessandcorrectnessoftheallegationsinthepetition.Third, the President of petitioner has
signedthecomplaintbeforetheCTAattheinceptionofthisjudicialclaimforrefundortaxcredit.

Consequently,thepetitioninCAG.R.SPNo.59778oughttobereinstated.However,inviewoftheenactmentof
RA9282whichmadethedecisionsoftheCTAappealabletothisCourt,wewilldirectlyresolvethesecondissue
whichisapurelylegalone.

Petitionerentitledtotaxcredit

Thepithofthedisputebetweenpetitionerandrespondentiswhetherpetitionerisentitledtoataxrefundortax
creditof20%salesdiscountgrantedtoseniorcitizensunderRA7432orwhetherthediscountshouldbetreated
asadeductionfromgrossincome.

Thisissueisnotnew,astheCourthasresolvedseveralcasesinvolvingtheverysameissue.InCommissionerof
InternalRevenuev.CentralLuzonDrugCorporation(CentralLuzon),16weheldthatprivatedrugcompaniesare
entitled to a tax credit for the 20% sales discounts they granted to qualified senior citizens under RA 7432 and
nullified Secs. 2.i and 4 of RR 294. In Bicolandia Drug Corporation (formerly Elmas Drug Corporation) v.
CommissionerofInternalRevenue,17weruledthatpetitionerthereinisentitledtoataxcreditofthe"cost"orthe
full20%salesdiscountsitgrantedpursuanttoRA7432.IntherelatedcaseofCommissionerofInternalRevenue
v. Bicolandia Drug Corporation,18 we likewise ruled that respondent drug company was entitled to a tax credit,
andwestruckdownRR294tobenullandvoidforfailingtoconformwiththelawitsoughttoimplement.

AperusaloftheApril26,2000CTADecisionshowsthattheappellatetaxcourtcorrectlyruledthatthe20%sales
discountspetitionergrantedtoqualifiedseniorcitizensshouldbedeductedfrompetitionersincometaxdueand
notfrompetitionersgrosssalesaserroneouslyprovidedinRR294.However,theCTAerredindenyingthetax
credit to petitioner on the ground that petitioner had suffered net loss in 1995, and ruling that the tax credit is
unavailing.

Netlossinataxableyeardoesnotprecludegrantoftaxcredit

It is true that petitioner did not pay any tax in 1995 since it suffered a net loss for that taxable year. This fact,
however,withoutmore,doesnotprecludepetitionerfromavailingofitsstatutoryrighttoataxcreditforthe20%
salesdiscountsitgrantedtoqualifiedseniorcitizens.Thelawthenapplicableonthispointisclearandwithoutany
qualification.Sec.4(a)ofRA7432pertinentlyprovides:

Sec.4.PrivilegesfortheSeniorcitizens.Theseniorcitizensshallbeentitledtothefollowing:

a)thegrantoftwentypercent(20%)discountfromallestablishmentsrelativetoutilizationoftransportation
services, hotels and similar lodging establishments, restaurants and recreation centers and purchase of
medicines anywhere in the country: Provided, That private establishments may claim the cost as tax
credit.(Emphasisours.)

Thefactthatpetitionersufferedanetlossin1995willnotmakethetaxcreditduetopetitionerunavailable.Thisis
the core issue resolved in CentralLuzon, where we ruled that the net loss for a taxable year does not bar the
grantofthetaxcredittoataxpayerpursuanttoRA7432andthatpriortaxpaymentsarenotrequiredforsuch
grant.Weexplained:

Although this taxcredit benefit is available, it need not be used by losing ventures, since there is no tax
liability that calls for its application. Neither can it be reduced to nil by the quick yet callow stroke of an
administrative pen, simply because no reduction of taxes can instantly be effected. By its nature, the tax
creditmaystillbedeductedfromafuture,notapresent,taxliability,withoutwhichitdoesnothaveanyuse.
xxx

xxxx

Whileataxliabilityisessentialtotheavailmentoruseofanytaxcredit,priortaxpaymentsarenot.Onthe
contrary, for the existence or grant solely of such credit, neither a tax liability nor a prior tax payment is
needed. The Tax Code is in fact replete with provisions granting or allowing taxcredits, even though no
taxeshavebeenpreviouslypaid.19

It is thus clear that petitioner is entitled to a tax credit for the full 20% sales discounts it extended to qualified
senior citizens for taxable year 1995. Considering that the CTA has not disallowed the PhP 123,083 sales
discountspetitionerclaimedbeforetheBIRandCTA,weareconstrainedtograntthemastaxcreditinfavorof
petitioner.

Consequently,petitionersappealbeforetheCAinCAG.R.SPNo.59778mustbegranted,and,necessarily,the
April26,2000CTADecisioninC.T.A.CaseNo.5581reversedandsetaside.

WHEREFORE, the petition is GRANTED. The August 31, 2000 CA Resolution in CAG.R. SP No. 59778 is
ANNULLEDANDSETASIDE.TheApril26,2000CTADecisioninC.T.A.CaseNo.5581dismissingpetitioners
claim for tax credit is accordingly REVERSED AND SET ASIDE. The Commissioner of Internal Revenue is
ORDEREDtoissueaTaxCreditCertificateinthenameofpetitionerintheamountofPhP123,083.Nocosts.

SOORDERED.

PRESBITEROJ.VELASCO,JR.
AssociateJustice

WECONCUR:

LEONARDOA.QUISUMBING
AssociateJustice
Chairperson
ANTONIOT.CARPIO CONCHITACARPIOMORALES
 AssociateJustice AssociateJustice
DANTEO.TINGA
AssociateJustice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourtsDivision.

LEONARDOA.QUISUMBING
AssociateJustice
Chairperson

CERTIFICATION

PursuanttoSection13,ArticleVIIIoftheConstitution,andtheDivisionChairpersonsAttestation,Icertifythatthe
conclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourtsDivision.

REYNATOS.PUNO
ChiefJustice

Footnotes

1Rollo,pp.7778.PennedbyAssociateJusticeRamonA.BarcelonaandconcurredinbyAssociate
JusticesMarinaL.BuzonandEdgardoP.Cruz.

2Id.at3744.PennedbyAssociateJudgeRamonO.DeVeyraandconcurredinbyAssociateJudge
AmancioQ.Saga.PresidingJudgeErnestoD.Acostadissented.
3"AnActtoMaximizetheContributionofSeniorCitizenstoNationBuilding,GrantBenefitsandSpecial
PrivilegesandforOtherPurposes"(1992).

4NowSec.229ofRA8424entitled"AnActAmendingtheNationalInternalRevenueCode,asAmended,
andforOtherPurposes"(1997).
5Supranote2,at44.

6Rollo,p.50.

7Supranote1.

8G.R.No.96551,November4,1996,264SCRA11,18.

9G.R.No.139495,November27,2000,346SCRA126,132133.

10G.R.No.143389,May25,2001,358SCRA240,246248.

11G.R.No.146125,September17,2003,411SCRA211,217220.

12G.R.No.153885,September24,2003,412SCRA101,109.

13Pfizerv.Galan,supranote10,at247.

14G.R.No.143088,January24,2006,479SCRA605,608.

15CorporationCode,Sec.23.

16G.R.No.159647,April15,2005,456SCRA414.

17G.R.No.142299,June22,2006,492SCRA159.
 18G.R.No.148083,July21,2006,496SCRA176.

19Supranote16,at429430.

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