ROMULO, MABANTA, BUENAVENTURA, SAYOC

& DE LOS ANGELES vs. HOME DEVELOPMENT

MUTUAL FUND
G.R. No. 131082 June 19, 2000

Facts:

 Petitioner Romulo, Mabanta, Buenaventura, Sayoc and De Los Angeles (hereafter PETITIONER), a law
firm, was exempted for the period 1 January to 31 December 1995, from the Pag-IBIG Fund coverage by
respondent HDMF because of a superior retirement plan.
 The HDMF Board of Trustees, pursuant to Section 5 of Republic Act No. 7742, issued Board Resolution No.
1011, Series of 1995, amending and modifying the Rules and Regulations Implementing R.A. No. 7742. As
amended, Section 1 of Rule VII provides that for a company to be entitled to a waiver or suspension of Fund
coverage, 3 it must have a plan providing for both provident/retirement and housing benefits superior to
those provided under the Pag-IBIG Fund.
 PETITIONER submitted to the HDMF a letter explaining that the Amendments to the Rules are invalid. In
that the amendments are void insofar as they abolished the exemption granted by Section 19 of P.D. 1752,
as amended.
 The repeal of such exemption involves the exercise of legislative power, which cannot be delegated to
HMDF.
 HDMF disapproved PETITIONER’s application on the ground that the requirement that there should be both
a provident retirement fund and a housing plan is clear in the use of the phrase “and/or,” and that the Rules
Implementing R.A. No. 7742 did not amend nor repeal Section 19 of P.D. No. 1752 but merely implement
the law.
 The respondent Board was merely exercising its rule-making power under Section 13 of P.D. No. 1752. It
had the option to use “and” only instead of “or” in the rules on waiver in order to effectively implement the
Pag-IBIG Fund Law. By choosing “and,” the Board has clarified the confusion brought about by the use of
“and/or” in Section 19 of P.D. No. 1752, as amended.
 PETITIONER filed a petition for review before the Court of Appeals but was dismissed on the ground that
the coverage of employers and employees under HDMF is mandatory in character as clearly worded in
Section 4 of PD 1752, as amended by RA 7742.

Issue: Whether or not the board of HDMF exceeded its delegated power.

Held: YES. The controversy lies in the legal signification of the words “and/or.”

 It seems to us clear from the language of the enabling law that Section 19 of P.D. No. 1752 intended that an
employer with a provident plan or an employee housing plan superior to that of the fund may obtain
exemption from coverage.
 If the law had intended that the employee [sic] should have both a superior provident plan and a housing
plan in order to qualify for exemption, it would have used the words “and” instead of “and/or.”
 Notably, paragraph (a) of Section 19 requires for annual certification of waiver or suspension, that the
features of the plan or plans are superior to the fund or continue to be so. The law obviously contemplates
that the existence of either plan is considered as sufficient basis for the grant of an exemption; needless to
state, the concurrence of both plans is more than sufficient.
 To require the existence of both plans would radically impose a more stringent condition for waiver which
was not clearly envisioned by the basic law. By removing the disjunctive word “or” in the implementing rules
the respondent Board has exceeded its authority.
 It is without doubt that the HDMF Board has rule-making power as provided in Section 51 17 of R.A. No.
7742 and Section 13 18 of P.D. No. 1752. However, it is well-settled that rules and regulations, which are
the product of a delegated power to create new and additional legal provisions that have the effect of law,
should be within the scope of the statutory authority granted by the legislature to the administrative agency.

 It is required that the regulation be germane to the objects and purposes of the law, and be not in
contradiction to, but in conformity with, the standards prescribed by law.
In the present case, when the Board of Trustees of the HDMF required in Section 1, Rule VII of the 1995
Amendments to the Rules and Regulations Implementing R.A. No. 7742 that employers should have both
provident/retirement and housing benefits for all its employees in order to qualify for exemption from the Fund, it
effectively amended Section 19 of P.D. No. 1752. And when the Board subsequently abolished that exemption
through the 1996 Amendments, it repealed Section 19 of P.D. No. 1752. Such amendment and subsequent repeal of
Section 19 are both invalid, as they are not within the delegated power of the Board. The HDMF cannot, in the
exercise of its rule-making power, issue a regulation not consistent with the law it seeks to apply. Indeed,
administrative issuances must not override, supplant or modify the law, but must remain consistent with the law they
intend to carry out. Only Congress can repeal or amend the law.
 Philippine Bank of Communications vs. Commissioner of Internal Revenue
G.R. No. 112024, January 28, 1999
 FACTS:
Philippine Bank of Communications (PBCom), settled its total income tax returns for the first and
second quarters of 1985 by applying its tax credit memos. However, it incurred losses so it
declared no tax payable for the year when it filed its year-end Annual Income Tax Returns.
 Nevertheless in 1985 and 1986, PBCom earned rental income from leased properties in which the
lessees withheld and remitted to the BIR withholding creditable taxes
 On August 7, 1987, petitioner requested the CIR for a tax credit for the overpayment of taxes in
the first and second quarters of 1985. Thereafter, on July 25, 1988, petitioner filed a claim for
refund of creditable taxes withheld by their lessees from property rentals in 1985 and 1986.
 Pending the investigation, petitioner filed a petition for review with the CTA which denied the
claims of the petitioner for tax refund and tax credits for 1985 for filing beyond the two-year
reglementary period.
 CTA also denied the claim for refund for 1986 on the speculation that petitioner had
automatically credited against its tax payment in the succeeding year.
 CA affirmed CTA’s decision. Hence, this petition for review.

Petitioner’s argument: that its claims for refund and tax credits are not yet barred by prescription relying
on the applicability of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The circular
states that overpaid income taxes are not covered by the two-year prescriptive period under the tax Code
and that taxpayers may claim refund or tax credits for the excess quarterly income tax with the BIR
within ten (10) years under Article 1144 of the Civil Code.

ISSUES:
1. Whether or not the prescription for the claim of tax refund or tax credit is covered by Revenue
Memorandum Circular No. 7-85 and not by the two-year prescriptive period under the tax Code.
2. Whether or not CA erred in affirming CTA’s decision denying its claim for refund of tax overpaid in
1986, based on mere speculation, without proof, that PBCom availed of the automatic tax credit in 1987.

W/N THE COURT OF APPEALS ERRED IN DENYING THE PLEA FOR TAX REFUND OR TAX
CREDITS ON THE GROUND OF PRESCRIPTION, DESPITE PETITIONER’S RELEANCE ON RMC
NO. 7-85, CHANGING THE PRESCRIPTIVE PERIOD OF 2 YEARS TO 10 YEARS?

RULING:
1. It is the Tax Code which provides for the prescription for claims for refund or tax credit. RMC 7-85
changed the prescriptive period of two years to ten years on claims of excess quarterly income tax
payments. This circular is inconsistent with the provision of Sec 230, NIRC of 1977. The BIR, in issuing
said circular did not simply interpret the law; rather it legislated guidelines contrary to the statute passed
by Congress. Rules and regulations issued by the administrative officials to implement a law cannot go
beyond the terms and provisions of the latter. Since RMC 7-85 issued by the BIR is an administrative
interpretation which is contrary to the provision of the statte, it cannot be given weight and the State
cannot be put in estoppel by the mistakes or errors of its officials or agents.

2. Sec. 69 of the 1977 NIRC 29 (now Sec. 76 of the 1997 NIRC) provides that any excess of the total
quarterly payments over the actual income tax computed in the adjustment or final corporate income tax
return, shall either(a) be refunded to the corporation, or (b) may be credited against the estimated
quarterly income tax liabilities for the quarters of the succeeding taxable year.
The corporation must signify in its annual corporate adjustment return (by marking the option box
provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax
credit for the succeeding taxable year. To ease the administration of tax collection, these remedies are in
the alternative, and the choice of one precludes the other.
The CTA examined the adjusted final corporate annual income tax return for taxable year 1986 and found
out that petitioner opted to apply for automatic tax credit. This was the basis used together with the fact
that the 1987 annual corporate tax return was not offered by the petitioner as evidence by the CTA in
concluding that petitioner had indeed availed of and applied the automatic tax credit to the succeeding
year, hence it can no longer ask for refund, as the two remedies of refund and tax credit are alternative.

NOTES:
Basic is the principle that taxes are the lifeblood of the nation. The primary purpose is to generate funds
for the State to finance the needs of the citizenry and to advance the common weal. Due process of law
under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so
because it is upon taxation that the government chiefly relies to obtain the means to carry on its
operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied
should be summary and interfered with as little as possible.

[G.R. No. 131787. May 19, 1999]

CHINA BANKING CORPORATION AND CBC PROPERTIES AND COMPUTER CENTER, INC., petitioners, vs.
THE MEMBERS OF THE BOARD OF TRUSTEES, HOME DEVELOPMENT MUTUAL FUND (HDMF); HDMF
PRESIDENT; AND THE HOME MUTUAL DEVELOPMENT FUND, respondents.

FACTS:

Before the amendment of PD 1752 by RA 7742, petitioner China Banking Corporation and CBC Properties
and Computer Center applied and was granted a periodic certificate of waiver by the Home Development
Mutual Fund for having an existing retirement/provident plan and/or employees housing plan. The
waiver exempts the employer from participation in the HDMF created under the law. Upon amendment
of PD 1752, the Board of Trusties of the HDMF issued a circular revising the guidelines and procedure for
filing of waiver or suspension from coverage under said law. The amended guidelines, a company must
have a provident/retirement and housing plan superior to that provided under the Pag-IBIG Fund to be
entitled to exemption/waiver from fund coverage. When CBC and CBC-PCCI applied for renewal of
waiver of coverage from the fund for the year 1996, their application was denied for non-compliance
with the amended guidelines, which provides that to qualify for waiver, a company a must have a
retirement plan and housing plan which are both superior to Pag IBIG fund.

Petitioners thus filed a petition for certiorari and prohibition before the Regional Trial Court of Makati
seeking to annul and declare void the Amendment and the Guidelines for having been issued in excess
of jurisdiction and with grave abuse of discretion amounting to lack of jurisdiction alleging that in
requiring the employer to have both a retirement/provident plan and an employee housing plan in
order to be entitled to a certificate of waiver or suspension of coverage from the HDMF, the HDMF
Board exceeded its rule-making power.

Respondent Board filed a Motion to Dismiss and the court a quo, in its first challenged order dated
October 10, 1997 granted the same. The Court dismissed the petition for certiorari on the grounds (1)
that the denial or grant of an application for waiver/coverage is within the power and authority of the
HDMF Board, and the said Board did not exceed its jurisdiction or act with grave abuse of discretion in
denying the applications; XXXXX

ISSUE: Whether the words “and/or” in Section 19 of PD 1752 refers to the existence of either a superior
provident plan or a superior housing plan, and not the existence of both plans.

Petitioner contends that respondent, in the exercise of its rule making power has “overstepped the
bounds and exceeded its limit,”. The law provides as a condition for exemption from coverage, the
existence of either a superior provident (retirement) plan, and/or a superior housing plan, and not the
existence of both plans.

On the other hand, respondents claim that the use of the words “and/or” in Section 19 of P.D. No.
1752, which words are “diametrically opposed in meaning”, can only be used interchangeably and not
together, and the option of making it either both or any one belongs to the Board of Trustees of HDMF,
which has the power and authority to issue rules and regulations for the effective implementation of
the Pag-IBIG Fund Law, and the guidelines for the grant of waiver or suspension of coverage.

xxxxx

The controversy lies in the legal signification of the words “and/or”.

In the instant case, the legal meaning of the words “and/or” should be taken in its ordinary signification,
i.e., “either and or”; e.g. butter and/or eggs means butter and eggs or butter or eggs. i[6]

“The term “and/or” means that effect shall be given to both the conjunctive “and” and the disjunctive
“or;” or that one word or the other may be taken accordingly as one or the other will best effectuate
the purpose intended by the legislature as gathered from the whole statute. The term is used to
avoid a construction which by the use of the disjunctive “or” alone will exclude the combination of
several of the alternatives or by the use of the conjunctive “and” will exclude the efficacy of any one of
the alternatives standing alone.”ii[7]

It is accordingly ordinarily held that the intention of the legislature in using the term “and/or” is that the
word “and” and the word “or” are to be used interchangeably. iii[8]

It is seems to us clear from the language of the enabling law that Section 19 of P.D. No. 1752, intended
that an employer with a provident plan or an employee housing plan superior to that of the fund may
obtain exemption from coverage. If the law had intended that the employee should have both a
superior provident plan and a housing plan in order to qualify for exemption, it would have used the
words “and” instead of “and/or”. Notably, paragraph (a) of Section 19 requires for annual certification
of waiver or suspension, that the features of the plan or plans are superior to the fund or continue to be
so.

The law obviously contemplates that the existence of either plan is considered as sufficient basis for
the grant of an exemption; needless to state, the concurrence of both plans is more than sufficient. To
require the existence of both plans would radically impose a more stringent condition for waiver which
was not clearly envisioned by the basic law. By removing the disjunctive word “or” in the implementing
rules the respondent Board has exceeded its authority.

It is well settled that the rules and regulations which are the product of a deligated power to create new
or additional legal provisions that have the effect of law, should be within the scope of the statutory
authority granted by the legislature to the Administrative agency. iv[9] “Department zeal may not be
permitted to outrun the authority conferred by statute.” v[10] As aptly observed in People vs.
Macerenvi[11]:

“Administrative regulations adopted under legislative authority by a particular department must be in

harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its
general provisions. By such regulations, of course, the law itself cannot be extended. U.S. vs. Tupasi
Molina, supra). An administrative agency cannot amend an act of Congress (Santos vs. Estenzo, 109 Phil.
419 422; Teoxon vs. Members of the Board of Administrators, L-25619, June 30, 1970, 33 SCRA 585;
Manuel vs. General Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao vs. Casteel, L-
21906, August 29, 1969 SCRA 350).

The rule making power must be confined to details for regulating the mode or proceeding to carry into
effect the law as it has been enacted. The power cannot be extended to amending or expanding the
statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute
cannot be sanctioned. (University of Santo Tomas vs. Board of Tax Appeals, 93 Phil. 376, 382, citing 12 C.
J. 845-46. As to invalid regulations, see Collector of Internal Revenue vs. Villaflor, 69 Phil. 319; Wise &
Co. vs. Meer, 78 Phil. 655, 676; Del Mar vs. Phil. Veterans Administration, L-27299, June 27, 1973, 51
SCRA 340, 349). “

While it may be conceded that the requirement of the concurrence of both plans to qualify for
exemption would strengthen the Home Development Mutual Fund and make it more effective both as a
savings generation and a house building program, the basic law should prevail as the embodiment of the
legislative purpose, and the rules and regulations issued to implement said law cannot go beyond its
terms and provisions.

We accordingly find merit in petitioner’s contention that Section 1, Rule VII of the Rules and Regulations
Implementing R.A. 7742, and HDMF Circular No. 124-B and the Revised Guidelines and Procedure for
Filing Application for Waiver or Suspension of Fund Coverage under P.D. 1752, as amended by R.A.
7742, should be declared invalid insofar as they require that an employer must have both a superior
retirement/provident plan and a superior employee housing plan in order to be entitled to a certificate
of waiver and suspension of coverage from the HDMF.

WHEREFORE, the petition is given due course and the assailed Orders of the court a quo dated October
10, 1997 and December 19, 1997 are hereby set aside. Section 1 of Rule VII of the Amendments to the
Rules and Regulations Implementing R.A. 7742, and HDMF Circular No. 124-B prescribing the Revised
Guidelines and Procedure for Filing Applications for Waiver or Suspension of Fund Coverage under P.D.
1752, as amended by R.A. No. 7742, insofar as they require that an employer should have both a
provident/retirement plan superior to the retirement/provident benefits offered by the Fund and a
housing plan superior to the Pag-IBIG housing loan program in order to qualify for waiver or suspension
of fund coverage, are hereby declared null and void.
i

ii

iii

iv

vi