PRC v.

CA 256 SCRA 667

[05-08-1996]

Petitioner: Philippine Refining Company (now Unilever Philippines)

Respondents: Court of Appeals, Court of Tax Appeals, Commissioner of Internal Revenue

Facts:
Petitioner Philippine Refining Company (PRC) was assessed by respondent
Commissioner of Internal Revenue (Commissioner) to pay a deficiency tax for the year
1985 in the amount of P1,892,584.00. The assessment was timely protested by petitioner
Petitioner Philippine Refining Company (PRC)., on the ground that it was based on the
erroneous disallowances of bad debts and interest expense although the same are both
allowable and legal deductions.
It appears that the only evidentiary support given by PRC for its aforesaid claimed
deductions was the explanation or justification posited by its financial adviser or
accountant.
Out of the sixteen accounts alleged aas bad debts, only 3 complied with th
requirements of worthlessness. To justify one of the other accounts, particularly the
account of AFPCES (Armed Forces of the Philippines Commisary and Exchange Service) for
unpaid supplies in the amount of P13,833.62, petitioner asserts that since the debtor is an
agency of the government, PRC did not file a collection suit therefor.

Issue:
WON the PRC may not file a suit against a government agency for the recovery of a
debt.

Ruling:
No, the mere fact that AFPCES is a government agency does not preclude PRC from
filing suit since said agency, while discharging proprietary functions, does not enjoy
immunity from suit. Such pretension of petitioner cannot pass judicial muster.