Tuesday, February 13, 2007 Tax notes: Reasonable ground for nonpayment
INTEREST on a delay in the issuance of refund may be paid by government if the delay was attended by arbitrariness.
Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions. An action is not arbitrary if exercised honestly and judiciously, notwithstanding that it can lead to an erroneous conclusion.
A delay of eight years in refunding an erroneously withheld tax on retirement pay may be construed to be an arbitrary action in the absence of a justifiable circumstance.
However, the delay may be justified if caused by an issue on the entitlement to the refund. The retiree was found short of 96 days to the 50-year retirement age requirement based on the documents submitted to the Bureau of Internal Revenue (BIR).
The Appellate Division initially moved for a denial of the claim but the Legal Division finally resolved to grant the refund, which the Commissioner affirmed in the interest of fairness and equity.
It was only in his letter requesting for payment of interest that the retiree explained that the correct date of his retirement which fulfills the 50-year requirement is the date of his letter to his employer expressing his desire to retire.
However, the employer requested that the retirement date be made retroactive to which the retiree was forced to agree.
(BIR Ruling 015-2006, Nov. 15, 2006) (Source: Punongbayan & Araullo)
