BANK
OF THE PHILIPPINE G.R. No. 174942
ISLANDS (Formerly:
Bank and Trust Company), Present:
Petitioner,
CARPIO,
J.,
Acting
Chairperson,
CARPIO
MORALES,
AZCUNA,*
-
versus - TINGA, and
VELASCO,
JR., JJ.
COMMISSIONER OF INTERNAL Promulgated:
REVENUE,
Respondent. March 7, 2008
x----------------------------------------------------------------------------x
Tinga,
J.:
The
Bank of the Philippine Islands (BPI) seeks a review of the Decision[1]
dated 15 August 2006 and the Resolution[2]
dated 5 October 2006, both of the Court of Tax Appeals (CTA or tax
court), which ruled that BPI is liable for the deficiency documentary stamp tax
(DST) on its cabled instructions to its foreign correspondent bank and that prescription
had not yet set in against the government.
The following undisputed facts are
culled from the CTA decision:
Petitioner, the surviving bank after
its merger with Far East Bank and Trust Company, is a corporation duly created
and existing under the laws of the Republic of the
Respondent thru then Revenue Service
Chief Cesar M. Valdez, issued to the petitioner a pre-assessment notice (PAN)
dated
Petitioner, in a letter dated
On April 7, 1989, respondent issued
to the petitioner, assessment/demand notices FAS-1-82 to 86/89-000 and FAS 5-82
to 86/89-000 for deficiency withholding tax at source (Swap Transactions) and
DST involving the amounts of P190,752,860.82 and P24,587,174.63,
respectively, for the years 1982 to 1986.
On
On
Petitioner
executed several Waivers of the Statutes of Limitations, the last of which was
effective until
On August 9, 2002, respondent issued
a final decision on petitioner’s protest ordering the withdrawal and
cancellation of the deficiency withholding tax assessment in the amount of P190,752,860.82
and considered the same as closed and terminated. On the other hand, the deficiency DST
assessment in the amount of P24,587,174.63 was reiterated and the
petitioner was ordered to pay the said amount within thirty (30) days from
receipt of such order. Petitioner received a copy of the said decision
on
On
IN VIEW OF ALL THE FOREGOING, the
petition is hereby DENIED for lack
of merit. Accordingly, petitioner is ORDERED
to PAY the respondent the amount of P24,587,174.63 representing
deficiency documentary stamp tax for the period 1982-1986, plus 20% interest
starting February 14, 2003 until the amount is fully paid pursuant to Section
249 of the Tax Code.
SO
ORDERED.
On
On
On
I. THIS HONORABLE COURT OVERLOOKED THE
SIGNIFICANCE OF THE WAIVER DULY AND VALIDLY AGREED UPON BY THE PARTIES
AND EFFECTIVE UNTIL
II. THIS
TAX COURT ERRED IN HOLDING THAT THE COLLECTION OF ALLEGED DEFICIENCY TAX HAS
NOT PRESCRIBED.
III.
THIS HONORABLE
COURT ERRED IN HOLDING THAT RESPONDENT DID NOT VIOLATE PROCEDURAL DUE PROCESS
IN THE ISSUANCE OF ASSESSMENT NOTICE RELATIVE TO DOCUMENTARY STAMP DEFICIENCY.
IV.
THIS
HONORABLE COURT ERRED IN HOLDING THAT THE 4 MARCH 1987 MEMORANDUM OF THE LEGAL
SERVICE CHIEF DULY APPROVED BY THE BIR COMMISISONER VESTS NO RIGHTS TO
PETITIONER.
V. THIS
HONORABLE COURT ERRED IN HOLDING THAT PETITIONER IS LIABLE FOR DOCUMENTARY
STAMP TAX ON SWAP LOANS TRANSACTIONS FROM 1982 TO 1986.[3]
The CTA synthesized the foregoing
issues into whether the collection of the deficiency DST is barred by
prescription and whether BPI is liable for DST on its SWAP loan transactions.
On the first issue, the tax court,
applying the case of Commissioner of Internal Revenue v. Wyeth Suaco
Laboratories, Inc.,[4]
(Wyeth Suaco case), ruled that BPI’s protest and supplemental
protest should be considered requests for reinvestigation which tolled the
prescriptive period provided by law to collect a tax deficiency by distraint,
levy, or court proceeding. It further
held, as regards the second issue, that BPI’s cabled instructions to its
foreign correspondent bank to remit a specific sum in dollars to the Federal
Reserve Bank, the same to be credited to the account of the Central Bank, are
in the nature of a telegraphic transfer subject to DST under Section 195 of the
Tax Code.
In its Petition for Review[5]
dated 24 November 2006, BPI argues that the government’s right to
collect the DST had already prescribed because the Commissioner of Internal
Revenue (CIR) failed to issue any reply granting BPI’s request for
reinvestigation manifested in the protest letters dated 20 April and 8 May
1989. It was only through the
Moreover, BPI avers that the cabled
instructions to its correspondent bank are not subject to DST because the National
Internal Revenue Code of 1977 (Tax Code of 1977) does not contain a specific
provision that cabled instructions on SWAP transactions are subject to DST.
The Office of the Solicitor General
(OSG) filed a Comment[6]
dated
The OSG cites the case of Collector
of Internal Revenue v. Suyoc Consolidated Mining Company, et al.[7]
(Suyoc case) in support of its argument that BPI is already estopped
from raising the defense of prescription in view of its repeated requests for
reinvestigation which allegedly induced the CIR to delay the collection of the
assessed tax.
In its Reply[8]
dated
We grant the petition.
Section 318[9] of
the Tax Code of 1977 provides:
Sec.
318. Period of limitation upon assessment and collection.—Except as
provided in the succeeding section, internal revenue taxes shall be assessed
within five years after the return was filed, and no proceeding in court
without assessment for the collection of such taxes shall be begun after the
expiration of such period. For the purposes of this section, a return filed
before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day: Provided, That this limitation
shall not apply to cases already investigated prior to the approval of this
Code.
The statute of limitations on
assessment and collection of national internal revenue taxes was shortened from
five (5) years to three (3) years by Batas Pambansa Blg. 700.[10] Thus, the CIR has three (3) years from the
date of actual filing of the tax return to assess a national internal revenue
tax or to commence court proceedings for the collection thereof without an
assessment.
When it validly issues an assessment
within the three (3)-year period, it has another three (3) years within which
to collect the tax due by distraint, levy, or court proceeding. The assessment of the tax is deemed made and
the three (3)-year period for collection of the assessed tax begins to run on the
date the assessment notice had been released, mailed or sent to the taxpayer.[11]
As applied to the present case, the
CIR had three (3) years from the time he issued assessment notices to BPI on
In order to determine whether the
prescriptive period for collecting the tax deficiency was effectively tolled by
BPI’s filing of the protest letters dated 20 April and
Sec.
320. Suspension of running of statute.—The running of the statute of
limitations provided in Sections 318 or 319 on the making of assessment and the
beginning of distraint or levy or a proceeding in court for collection, in
respect of any deficiency, shall be suspended for the period during which the
Commissioner is prohibited from making the assessment or beginning distraint or
levy or a proceeding in court and for sixty days thereafter; when the
taxpayer requests for a re-investigation which is granted by the Commissioner;
when the taxpayer cannot be located in the address given by him in the return
filed upon which a tax is being assessed or collected: Provided, That if
the taxpayer informs the Commissioner of any change in address, the running of
the statute of limitations will not be suspended; when the warrant of distraint
and levy is duly served upon the taxpayer, his authorized representative, or a
member of his household with sufficient discretion, and no property could be
located; and when the taxpayer is out of the Philippines. (Emphasis supplied)
The above section is plainly worded.
In order to suspend the running of the prescriptive periods for assessment and
collection, the request for reinvestigation must be granted by the CIR.
In BPI v. Commissioner of Internal
Revenue,[13]
the Court emphasized the rule that the CIR must first grant the request for
reinvestigation as a requirement for the suspension of the statute of
limitations. The Court said:
In
the case of Republic of the Philippines v. Gancayco, taxpayer Gancayco
requested for a thorough reinvestigation of the assessment against him and
placed at the disposal of the Collector of Internal Revenue all the evidences
he had for such purpose; yet, the Collector ignored the request, and the
records and documents were not at all examined. Considering the given facts,
this Court pronounced that—
x x
x The act of requesting a reinvestigation alone does not suspend the
period. The request should first be granted, in order to effect suspension. (Collector
v. Suyoc Consolidated, supra; also Republic v. Ablaza, supra).
Moreover, the Collector gave appellee until
In Republic
of the Philippines v. Acebedo, this Court similarly found that—
x x
x T]he defendant, after receiving the assessment notice of September 24, 1949,
asked for a reinvestigation thereof on October 11, 1949 (Exh. “A”). There is no evidence that this
request was considered or acted upon. In fact, on
The Court went on to declare that the
burden of proof that the request for reinvestigation had been actually granted
shall be on the CIR. Such grant may be
expressed in its communications with the taxpayer or implied from the action of
the CIR or his authorized representative in response to the request for
reinvestigation.
There is nothing in the records of
this case which indicates, expressly or impliedly, that the CIR had granted the
request for reinvestigation filed by BPI. What is reflected in the records is the
piercing silence and inaction of the CIR on the request for reinvestigation, as
he considered BPI’s letters of protest to be.
In fact, it was only in his comment to the present petition that
the CIR, through the OSG, argued for the first time that he had granted the
request for reinvestigation. His
consistent stance invoking the Wyeth Suaco case, as reflected in the
records, is that the prescriptive period was tolled by BPI’s request for
reinvestigation, without any assertion that the same had been granted or at
least acted upon.[15]
In the Wyeth Suaco case,
private respondent Wyeth Suaco Laboratories, Inc. sent letters seeking the
reinvestigation or reconsideration of the deficiency tax assessments issued by
the BIR. The records of the case showed
that as a result of these protest letters, the BIR Manufacturing Audit Division
conducted a review and reinvestigation of the assessments. The records further showed that the company,
thru its finance manager, communicated its inability to settle the tax
deficiency assessment and admitted that it knew of the ongoing review
and consideration of its protest.
As differentiated from the Wyeth
Suaco case, however, there is no evidence in this case that the CIR
actually conducted a reinvestigation upon the request of BPI or that the latter
was made aware of the action taken on its request. Hence, there is no basis for the tax court’s
ruling that the filing of the request for reinvestigation tolled the running of
the prescriptive period for collecting the tax deficiency.
Neither did the waiver of the statute
of limitations signed by BPI supposedly effective until
We also find the Suyoc case
inapplicable. In that case, several
requests for reinvestigation and reconsideration were filed by Suyoc
Consolidated Mining Company purporting to question the correctness of tax
assessments against it. As a result, the
Collector of Internal Revenue refrained from collecting the tax by distraint,
levy or court proceeding in order to give the company every opportunity to prove
its claim. The Collector also conducted
several reinvestigations which eventually led to a reduced assessment. The company, however, filed a petition with
the CTA claiming that the right of the government to collect the tax had
already prescribed.
When the case reached this Court, we
ruled that Suyoc could not set up the defense of prescription since, by its own
action, the government was induced to delay the collection of taxes to make the
company feel that the demand was not unreasonable or that no harassment or
injustice was meant by the government.
In this case, BPI’s letters of
protest and submission of additional documents pertaining to its SWAP
transactions, which were never even acted upon, much less granted, cannot be
said to have persuaded the CIR to postpone the collection of the deficiency DST.
The inordinate delay of the CIR in
acting upon and resolving the request for reinvestigation filed by BPI and in
collecting the DST allegedly due from the latter had resulted in the
prescription of the government’s right to collect the deficiency. As this Court declared in Republic of the
The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens; to the Government because tax officers would be obliged to act promptly in the making of assessment, and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers, not to determine the latter’s real liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens. Without such a legal defense taxpayers would furthermore be under obligation to always keep their books and keep them open for inspection subject to harassment by unscrupulous tax agents. The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommend the approval of the law.[18]
Given the prescription of the
government’s claim, we no longer deem it necessary to pass upon the validity of
the assessment.
WHEREFORE, the petition is GRANTED.
The Decision of the
Court of Tax Appeals dated
SO ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Acting Chairperson
CONCHITA CARPIO MORALES
ADOLFO S. AZCUNA
Associate
Justice
Associate Justice
PRESBITERO J. VELASCO,
JR.
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
ANTONIO T. CARPIO
Associate
Justice
Acting
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Acting Division Chairperson’s Attestation, it is
hereby certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
*As replacement of Justice Leonardo A. Quisumbing who is on official leave per Administrative Circular No. 84-2007.
[10]Approved
on
[11]BPI v. Commissioner of Internal Revenue,
G.R. No. 139736,
[13]Bank of the Philippine