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BANK OF PHILIPPINE ISLANDS v. CIR

FACTS:

FACTS

The Bank of the Philippine Islands (BPI) is seeking a review of the Decision and Resolution of the Court of Tax Appeals (CTA). BPI is being held liable for deficiency documentary stamp tax (DST) on its cabled instructions to its foreign correspondent bank. The CTA ruled that prescription had not yet set in against the government. BPI is the surviving bank after its merger with Far East Bank and Trust Company, and it is a corporation duly created and existing under Philippine laws.

The Commissioner of Internal Revenue issued a pre-assessment notice (PAN) to BPI on November 26, 1986. BPI requested for the details of the alleged deficiency taxes mentioned in the PAN on November 29, 1986. The Commissioner issued assessment/demand notices to BPI for deficiency withholding tax at source (Swap Transactions) and DST for the years 1982 to 1986 on April 7, 1989. BPI filed a protest on the demand/assessment notices on April 20, 1989, and a supplemental protest on May 8, 1989. BPI requested an opportunity to present additional documentation on the Swap Transactions on March 12, 1993. BPI executed several Waivers of the Statutes of Limitations, the last of which was effective until December 31, 1994.

On August 9, 2002, the Commissioner issued a final decision ordering the withdrawal and cancellation of the deficiency withholding tax assessment and reiterated the deficiency DST assessment. BPI filed a Petition for Review before the Court on January 24, 2003. The CTA denied BPI's Petition for Review, ordering BPI to pay the deficiency DST. BPI filed a Motion for Reconsideration, which was denied, and subsequently filed a Petition for Review before the Court.

The CTA summarized the 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. BPI argues that the collection of the DST had already prescribed because the CIR failed to reply to BPI's request for reinvestigation in the protest letters. The OSG asserts that the prescriptive period was tolled by BPI's protest letters, which were granted and acted upon by the CIR. BPI maintains that it did not receive any communication from the CIR in reply to its protest letters.

The Court grants the petition and concludes that BPI is not liable for the deficiency DST.

ISSUES:

  1. Whether the filing of protest letters by BPI effectively tolled the running of the prescriptive period for collecting the tax deficiency.

  2. Whether the CIR granted the request for reinvestigation filed by BPI.

  3. Whether the filing of a request for reinvestigation tolled the running of the prescriptive period for collecting the tax deficiency.

  4. Whether the waiver of the statute of limitations signed by BPI suspended the prescriptive period.

RULING:

  1. The filing of protest letters by BPI did not effectively toll the running of the prescriptive period for collecting the tax deficiency. The request for reinvestigation must be granted by the CIR in order to suspend the statute of limitations. In this case, there is no evidence that the CIR had granted the request for reinvestigation filed by BPI.

  2. The CIR did not grant the request for reinvestigation filed by BPI. The burden of proof that the request for reinvestigation had been granted is on the CIR. In this case, there is nothing in the records indicating that the CIR had granted the request for reinvestigation.

  3. The filing of a request for reinvestigation did not toll the running of the prescriptive period for collecting the tax deficiency. There is no evidence that the Commissioner of Internal Revenue (CIR) actually conducted a reinvestigation upon the request of BPI or that BPI was made aware of the action taken on its request. Therefore, the tax court's ruling that the filing of the request for reinvestigation tolled the prescriptive period was erroneous.

  4. The waiver of the statute of limitations signed by BPI did not suspend the prescriptive period. Even the CIR himself contends that the waiver is void. Furthermore, there is no evidence that the Bureau of Internal Revenue made any effort to collect the deficiency tax after the expiration of the waiver until eight (8) years later when it finally issued a decision on the protest.

PRINCIPLES:

  • The prescriptive period for collecting a tax deficiency is three years from the date of assessment.

  • The running of the prescriptive periods for assessment and collection may be suspended if the request for reinvestigation is granted by the CIR.

  • The burden of proof that the request for reinvestigation had been granted is 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.

  • The law on prescription for the collection of taxes is beneficial both to the government and citizens. It obliges tax officers to act promptly in making assessments and provides citizens with a feeling of security against unscrupulous tax agents.

  • The law on prescription should be interpreted in a way that will bring about its beneficent purpose of affording protection to taxpayers.