David Cagahastian

September 10, 2014

The Court of Tax Appeals (CTA) en banc has affirmed a decision of its Third Divi
sion nullifying a warrant of distraint and levy issued by the Bureau of Internal
Revenue (BIR) to collect P155 million in deficiency taxes from pre-need company
Abundance Providers and Entrepreneurs Corporation (APEC).
The CTA affirmed the findings of the Third Division that the warrant of distrain
t and levy issued to collect on the P155 million in deficiency value added tax (
VAT) assessed against APEC was issued beyond the five-year period within which t
he BIR should have collected on the assessed deficiency taxes.
The Formal Letter of Demand against APEC was dated February 5, 2004, hence, the
BIR had a period of five years to collect on such assessment.
However, it was only on February 22, 2010 when the Warrant of Distraint and/or Levy
dated February 11, 2010 was served on respondent, or after the lapse of the fiv
e-year reglementary period. Thus, the right of petitioner to collect the same is
deemed to have already prescribed, the CTA said.
The argument of the BIR was that the prescription period for the collection of t
he VAT deficiency assessed against APEC when APEC had written the BIR on Februar
y 1, 2005 to hold in abeyance any action by the BIR because there was then a pen
ding issue affecting the pre-need industry which was subsequently resolved by a
ruling dated January 31, 2006.
The pending issue referred to is the issue of whether the gross receipts of pre-
need companies, for the purpose of computing for their VAT liabilities, should i
nclude the trust fund contributions by plan holders. Such issue was resolved thr
ough a BIR ruling dated January 31, 2006.
Thus, the BIR argued that the period to collect was suspended from the time that
APEC made the request to hold in abeyance any action on its case up to the time
that the industry issue regarding the base from which VAT should be computed wa
s resolved.
However, the CTA ruled that according to the Tax Code, only requests for reinves
tigationand not requests for reconsiderationare included in the enumeration of instanc
es wherein the five-year period to collect on assessed taxes are suspended.
The CTA said that the letter dated February 1, 2005 by APEC is considered as a r
equest for reconsideration, and not a request for reinvestigation which has the
effect of suspending the prescriptive period.
The CTA added that the BIR itself submitted in evidence a decision dated Decembe
r 7, 2010 made by the BIR commissioner on this issue which referred to such lett
er by APEC as a request for reconsideration. (David Cagahastian)