Extraordinary Prescription: Suspension of Prescriptive Period 92
STEPHANIE PUA Continental Micronesia, Inc. - Phil. Branch v. CIR Applying Sec. 203, the counting of the three-year C.T.A. CASE NO. 6191 | March 22, 2006| Casanova, C., J.: period commences on the last day prescribed by law for the filing of return, that is, March 1, 1996 in this Petitioners: CONTINENTAL MICRONESIA, INC. PH BRANCH case, because the information returns were filed before Respondents: COMMISSIONER OF INTERNAL REVENUE the last day prescribed by law for its payment. Accordingly, respondent had three (3) years from March FACTS 1, 1996 or up to March 1, 1999 within which to assess the Petitioner is a Philippine branch of a non-resident foreign withholding tax liability of petitioner for the year 1995. corp incorporated in Delaware, U.S.A., engaged in the Respondent issued the subject Assessment Notices and operation of air transportation in international traffic. Formal Letters of Demand all on December 29, 1999, December 12, 1996: Petitioner received a Letter of which petitioner received on January 5, 2000. Authority authorizing Revenue Officer Dosado, and Therefore, the formal deficiency assessments were made Group Supervisor Batoon, to examine petitioner's books and issued beyond the three-year prescriptive period of accounts and other accounting records for all internal prescribed by law within which respondent can legally revenue taxes for the period January to December 1995 assess the petitioner of deficiency withholding taxes. Respondent informed petitioners of proposed Thus, the assessments are barred by prescription. assessments for Deficiency of Gross Philippine Billings, Common Carrier's Tax, Withholding Tax on Compensation ISSUE(S) and Expanded Withholding Tax W/N the assessments are barred by prescription [YES, MOSTLY but not for petitioners reasoning see below] In a conference, Petitioner expressed its willingness to settle the deficiency gross Philippine billings and RULING common carrier's tax but would protest the remaining At this juncture, We would like to correct the notion of deficiency taxes upon receipt of the assessment notice. petitioner with respect to prescriptive period. May 5, 1998: Petitioner paid deficiency gross Phil. Billings Based on the law, rules & regulations, and jurisprudence, and common carriers tax. the counting of the prescriptive period is reckoned May 15, 1998: A PAN was issued for the remaining from the last day required by law for the filing of the deficiency taxes. This was received by petitioner on monthly remittance return, which is ten (10) days after October 8, 1998. In it, petitioner was invited to a the end of each calendar month (save December) and conference to hear its side or to present its evidence twenty-five (25) days after the end of December for taxes within 15 days from receipt thereof. withheld from the last compensation/income payment for October 15, 1998: Petitioner, however, opted to file its the said month. objection to the PAN. [See Notes 2 for tables on Petitioners case] Thus, it resulted to a reinvestigation of the case. Applying now the rule on prescription, the final December 10, 1999: another PAN was issued based on assessment notice should be issued on the below the report of reinvestigation. Petitioner was still held to be respective last days to assess. Inasmuch as the liable for the deficiency taxes. assessment notices for both deficiency withholding tax on compensation and expanded withholding tax were issued Shortly thereafter, respondent, issued Assessment only on December 29, 1999, it would appear that both Notices on December 29, 1999 covering the deficiency subject deficiency assessments are time barred. taxes aforementioned, in the increased amounts of P2,501,523.64 and P93,193.66, respectively. This was However, since petitioner requested a reinvestigation on received by petitioner on January 5, 2000 together with October 15, 1998, and which request was granted by their corresponding demand letters. respondent in the letter dated November 9, 1998, 27 the running of the three-year period to assess was February 4, 2000: Petitioner filed an administrative suspended pursuant to the Section 223 of the NIRC. protest seeking the cancellation and withdrawal thereof Settled is the rule that when the taxpayer requests for a due to prescription and lack of factual and legal bases. reinvestigation of an assessment which is granted by October 31, 2000: Petitioner filed the instant Petition for respondent, the running of the period to assess under Review with this [CTA] Court pursuant to Sec 228. Section 203 and 222 is suspended. While We have noted that the request for reinvestigation *Petitioner insists that the present assessments were which was granted by the respondent in the case at bar already barred by prescription, the same having been was on the Preliminary Assessment Notice and not on the issued beyond the three-year period provided for by Sec. Final Assessment Notice or Assessment Notice, still, 203 of the NIRC Section 223 applies. Petitioner points out that under Sec. 5 of RR. 6-85, the Section 223 of the Code makes no distinction as to filing of the annual return of income tax withheld at whether the request for reinvestigation of an assessment source shall be made on or before the 1st day of March against the taxpayer is on a preliminary assessment notice of the following year in which the payments were made. or final assessment notice. It is a well-known maxim in However, petitioner filed its annual information returns statutory construction that where the law does not for the year 1995 on earlier dates of January 30, 1996 distinguish, We should not distinguish. and February 26, 1996, respectively. [TAX II] VIII.A.6.c. Extraordinary Prescription: Suspension of Prescriptive Period 92 STEPHANIE PUA It is further worthy to stress that the suspension of the member of his household with sufficient discretion, and no running of Statute of Limitations provided in Sections 203 property could be located; and when the taxpayer is out of the and 222 refers to the phrase "on the making of Philippines. assessment" which phrase refers to the three-year or ten year period, as the case may be, which includes the 2. Tables of Pertinent dates of this case issuance of a preliminary assessment notice. a. Dates when petitioner filed its Monthly Remittance Returns of Income Taxes Withheld (covering As interpreted by the Supreme Court in several cases, withholding tax on compensation and expanded requests for investigation which had the effect of withholding tax) for the months of January to December suspending the period of limitation refers to 1995 as well as the corresponding dates within which reinvestigation of a prior assessment paving the way for respondent is allowed to assess petitioner: a new or revised assessment. Such period spent reinvestigating is deducted from the total period Period in Date Filed Last Date to Last Day to prescribed by law. 1995 File Return Assess The above pronouncements are clear, the period spent for January Feb 7 1995 Feb 10 1995 Feb 9 1998 reinvestigation should be deducted from the three-year February Mar 7 1995 Mar 10 1995 Mar 9 1998 period to issue another assessment. March Apr 5 1995 Apr 10 1995 Apr 9 1998 Based on the foregoing, the following deficiency April May 4 1995 May10 1995 May11 1998 withholding tax on compensation and expanded May Jun 9 1995 Jun 12 1995 Jun 11 1998 withholding taxes for the months of January 1995 to June Jul 7 1995 Jul 10 1995 Jul 9 1998 September of 1995 are time-barred [See notes 2] July Aug 7 1995 Aug 10 1995 Aug 10 1998 What remains for review by the Court are the August Sept 6 1995 Sep 11 1995 Sep 10 1998 deficiency assessments for the months of October, September Oct 5 1995 Oct 10 1995 Oct 9 1998 November and December of 1995 October Nov 9 1995 Nov 10 1995 Nov 9 1998 November Dec 6 1995 Dec 11 1995 Dec 10 1998 DISPOSITIVE PORTION December Jan 9 1996 Jan 25 1996 Jan 24 1999 WHEREFORE, the Petition for Review is PARTIALLY GRANTED. *on dates other than 10 for last date to file a return, it is The assessments for deficiency withholding tax on because the 10th day fell on a Saturday or Sunday compensation and expanded withholding tax for the months ** on dates other than 9 for last date to assess, it is because of January 1995 to September 1995 are hereby the 9th day fell on a Saturday or Sunday declared VOID for having been issued out of time. However, the deficiency assessments for the months of October, b. The following deficiency withholding tax on compensation and expanded withholding taxes for November and December 1995 are UPHELD the months of January 1995 to September 1995 are time-barred, to wit: ***NOTES*** 1. NIRC PROVISIONS Period in Last Day to Suspension Date of 1995 Assess Date of Issuance of SEC. 203. Period of Limitation Upon Assessment and Issuance of Assessment Collection. Except as provided in Section 222, internal Assessment Notice revenue taxes shall be assessed within three (3) years after the January Feb 9 1998 Oct 15 1998 Dec 29 1999 last day prescribed by law for the filing of the return , and no February Mar 9 1998 Oct 15 1998 Dec 29 1999 proceeding in court without assessment for the collection of such March Apr 9 1998 Oct 15 1998 Dec 29 1999 taxes shall be begun after the expiration of such period: April May11 1998 Oct 15 1998 Dec 29 1999 Provided, That in a case where a return is filed beyond the period May Jun 11 1998 Oct 15 1998 Dec 29 1999 prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a June Jul 9 1998 Oct 15 1998 Dec 29 1999 return filed before the last day prescribed by law for the filing July Aug 10 1998 Oct 15 1998 Dec 29 1999 thereof shall be considered as filed on such last day." August Sep 10 1998 Oct 15 1998 Dec 29 1999 September Oct 9 1998 Oct 15 1998 Dec 29 1999 SEC. 223. Suspension of Running of Statute of Limitations. The running of the Statute of Limitations provided in Sections 3. Other Issues 203 and 222 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect a. Deficiency Withholding Tax on compensation of any deficiency, shall be suspended for the period during which The deficiency withholding tax on compensation allegedly the Commissioner is prohibited from making the assessment or arose from petitioner's failure to withhold income tax on its beginning distraint or levy or a proceeding in court and for sixty payments for housing rentals of its expatriate for 1995. (60) days thereafter; when the taxpayer requests for a We do not agree with petitioner that the rental value of the reinvestigation which is granted by the Commissioner; when the house should not form part of the compensation of its taxpayer cannot be located in the address given by him in the expatriates under the "benefit-of-the-employer" rule as It return filed upon which a tax is being assessed or collected: does not conform with the standard stated under Section Provided, That, if the taxpayer informs the Commissioner of any 2.33(B)(1)(g) of RR 3-98. change in address, the running of the Statute of Limitations will However, We agree with petitioner that the tax based should not be suspended; when the warrant of distraint or levy is duly be 50% of the rental value pursuant to RAMO 1-87 served upon the taxpayer, his authorized representative, or a [TAX II] VIII.A.6.c. Extraordinary Prescription: Suspension of Prescriptive Period 92 STEPHANIE PUA
b. Deficiency Expanded Withholding Tax
We noted that in its protest letter to the respondent, petitioner did not pose any objection to the alleged deficiency withholding except on commission income. Failure to present proof of error in the assessment will justify judicial affirmance of said assessment. Hence, except for deficiency expanded withholding tax on commission income, the rest of the deficiency withholding taxes are presumed to be proper. The deficiency in withholding tax on commission income stemmed from petitioner's failure to withhold 5% creditable withholding tax from its sales agents and travel agencies' commissions in selling its airplane tickets.
c. BIR records are part of the official records of the
case We do not concur with petitioner's position that respondent failed to support the subject deficiency assessments with factual evidence. While it is true that respondent did not formally offer his entire marked documentary exhibits, however, what We have considered in the disposition of the case were all found in the BIR records. The Court has ruled that the documents found in the BIR records, although not formally offered, forms part of the official records of the case pursuant to Section 2 Rule 7 of the Rules of the Court of Tax Appeals.