A counterclaim to a collection case filed by a municipality against a taxpayer for local tax assessment is not a substitute for appeal to a denial of protest.

A notice of assessment was received by the taxpayer on February 23, 2009, directing the taxpayer to pay municipal taxes for the year 2008. Taxpayer filed its protest on March 16, 2009. The protest was denied by the municipality in a letter dated April 7, 2009, and received by the taxpayer on April 22, 2009. On April 20, 2009, the municipality filed a complaint for collection of taxes before the RTC, docketed as Civil Case No. 18931. On May 28, 2009, the taxpayer filed its answer (to amended complaint with special and affirmative defences and counterclaim) praying among others, that its answer be treated as its appeal to a court of competent jurisdiction of the denial of its letter-protest as provided in Section 195 of the Local Government Code of 1991 (LGC).
The court ruled that the taxpayer made a timely written protest against the notice of assessment. Taxpayer, however, failed to elevate the denial of its protest for judicial review, which amount is within the jurisdiction of the RTC. Counting from April 22, 2009, taxpayer had only 30 days or until May 22, 2009 to appeal the case to the RTC. For failure to make a timely appeal, the protested local tax assessment became conclusive and unappealable pursuant to Section 195 of the LGC. The court cannot treat taxpayer’s counterclaim in Civil Case No. 18931 as the “appeal” contemplated in the LGC. While a counterclaim is not a substitute for a lost appeal, the counterclaim itself was filed only on May 28, 2009, way beyond the 30-day period prescribed by the LGC. Moreover, taxpayer’s counterclaim does not qualify as a compulsory counterclaim. Instead, it is a permissive counterclaim, which requires payment of docket fees for the court to acquire jurisdiction. (National Transmission Commission vs. Municipal Treasurer of Labrador, Pangasinan, CTA EB No. 948, October 07, 2013)