Hilado vs Collector of Internal Revenue

100 Phil. 188

Secretary of Finance revoked a general circular pursuant to which a taxpayer claimed deductions from his gross income.

Hilado filed his income tax return wherein he claimed the amount of P12,387.65 as a deductible item from his gross income pursuant to the Collector of Internal Revenue’s General Circular No. V-123, issued pursuant to certain rules laid down by the Secretary of Finance.
Subsequently, the new Secretary of Finance, through the CIR, issued General Circular No. V-139 which revoked General Circular No. V-123 and laid down the rule that property losses which occurred during the World War II are deductible in the year of actual loss/destruction of said property. As a consequence, the P12,387.65 was disallowed as a deduction from petitioner’s gross income for 1951 and the CIR demanded from him the payment of P3,546 as deficiency income tax for the year.

Whether the Secretary of Finance acted with valid authority in revoking General Circular No. V-123 and approving in lieu thereof, General Circular No. V-139.

Yes. The Secretary of Finance is vested with authority to revoke, repeal or abrogate the acts or previous rulings of his predecessors in office because the construction of a statute by those administering it is not binding on their successors if the latter becomes satisfied that a different construction should be given. General Circular No. V-123, having been issued on a wrong construction by the law, cannot give rise to a vested right that can be invoked by a taxpayer. A vested right cannot spring from a wrong interpretation.
An administrative officer cannot change a law enacted by Congress. Once a regulation which merely interprets a statute is determined erroneous, it becomes a nullity. The CIR’s erroneous construction of the law does not preclude or stop the Government from collecting a tax legally due.
Under Art. 2254 of the Civil Code, no vested/acquired right can arise from acts/omissions which are against the law or which infringe upon the rights of others.


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