Domingo vs. Garlitos

Compensation in taxation. — There can be no off-setting of taxes against the claims that the taxpayer may have against the government. Government and taxpayer are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. EXCEPT when both taxes and claim against the government is overdue, demandable and fully liquidated. Government has been recognized and an amount has already been appropriated for the purpose by a corresponding law. Compensation, therefore, takes place by operation of law, in accordance with the provisions of Articles 1279