TAXATION

CIR vs. BPI

G.R. No. 134062

April 17, 2007

Corona, J.:
FACTS:
In October 28, 1988, petitioner assessed BPI of deficiency percentage
and documentary stamp tax for the year 1986, in the total amount of
P129,488,056.63. A letter reply by respondent was sent on December 10, 1988
stating among other:
... we shall inform you the taxpayers decision on whether to pay of protest the
assessment, CTA ruled that BPI failed to protest on time under Sec 270 of NIRC of
1986.
ISSUE:
Whether or not the assessments issued to BPI for deficiency percentage
and documentary stamp taxes for 1986 had already become final and unappealable.
RULING:
In merely notifying BPI of his findings. CIR relied on the provisions of the
former Section 270 prior to its amendment by RA 8424. The sentence
the taxpayers shall be informed in writing of the law and the facts on which the
assessment is made
Was not in the old Section 270 but was only later on inserted in the
renumbered Section 228 in 1997.
Tax assessments by tax examiners are presumed correct and are made
in good faith. The taxpayer has the duty to prove otherwise. In the absence of proof
of any irregularities in the performance of duties, an assessment duly made by BIR
examiner and approved by his superior officers will not be distributed. All
presumptions are in favor of the correctness of tax assessments.

TAXATION
BPI vs. CIR

G.R. 139736

October 17, 2005

Chico-Nazario,J.:
FACTS:
On June 6 and 14, 1985, petitioner bank sold $500,000.00 to the Central
Bank, for the total sale amount of $1M. BIR issued deficiency assessment for DST in
the amount of 28,020.00 for the said sales. On October 20,1989, petitioner received
the notice and consequently filed a protest in November 16,1989. Petitioner did not
receive a reply but soon after, October 15, 1992, BIR issued a Warrant of distraint,
and finally in August 13, 1997, BPI received a letter denying its request for
reconsideration. Petitioner alleged prescription to CTA but the latter denied the
same. CTA likewise ruled in the negative that the sales of currency by petitioner was
not subject to DST. CA sustained first issue but reinstated the second.
ISSUE:
Whether or not the right to collect has prescribed;
Request for reconsideration
It will not suspend the running of the statute of limitations because reconsideration
of tax assessment is limited to the evidence.
Request for reinvestigation
will suspend the running of statute of limitations because it entails the reception
and re-evaluation of additional evidence. It will take more time.
RULING:
The period for the BIR to assess and collect an internal revenue tax is
limited to three years by Section 203 of the Tax Code. This period is limited by
Section 223
Exemptions a) in the case of a false or fraudulent return with intent to evade tax
or of failure to file a return, the tax may be assessed, or a proceeding in court for
the collection of such tax may be begun without assessment, at any time within 10
years after the discovery of the falsity, fraud or omission
BPI executed no waiver of the Statute of Limitations, thus it did not
suspend running of the prescription. Likewise, BPI requested for a reconsideration
and suspension of the running of the statute of limitations shouldnt apply. The
statute of limitations for collection against BPI had expired; none of the conditions
from the statute of limitations on collection exists herein.
TAXATION
BPI (Far East Bank and Trust Co) vs. CIR
G.R. 174492
Tinga, J.:

March 7, 2008

FACTS:
Following a pre-assessment notice on deficiency tax filed by respondent
in 1986, the latter sent final demand to petitioner on April 7, 1989. Petitioner filed a
protest and a waiver of the Statutes of Limitations was effected until December 31,
1994. On August 9, 2002, respondent issued a final decision on petitioners protest
ordering the withdrawal and cancellation of the deficiency withholding tax
assessment in the amount of P190,752,860.82 and considered the sane as close
and terminated but the documentary stamp tax of P24,587,174.63 was reiterated.
Thereafter petition for review was filed with CTA. The court denied the petition.
ISSUE:
Whether or not the collection of the deficiency DST is barred by
prescription:
RULING:
In order to determine whether the prescriptive period for collecting the
tax deficiency tolled by BPIs filing of the protest letters dated April 7, 1989. Section
20 of the Tax Code must be examined:
The running of the Statute of Limitations on the making of assessment and the
beginning of distraint or levy or a proceeding in court of collection shall be
suspended for the period when the taxpayer requests for re-investigation which is
granted by the Commissioner.
In order to suspend the running of the prescriptive periods for
assessment and collection, the request for re-investigation must be granted by CIR.
There is nothing in this case which indicates, expressly or impliedly, that the CIR
had granted the request for re-investigation filed by BPI. What is reflected is the
silence and inaction of the CIR.
Given the prescription of the Governments claim, we no longer deem it
necessary to pass upon the validity of the assessment.

TAXATION
CIR vs. Phil. Global Communitions
G.R. No. 167146
Chico Nazario, J.:

October 31, 2006

FACTS:
Responded was pre-assessed for a deficiency tax for the year 1990. In
1994, final assessment was sent to respondent and through counsel, Philcon sent
protest letter to CIR. In 2002, after 8 long years, respondent received from CIR a
final decision denying the respondents protest and affirming said assessment. CTA
ruled on prescription and ordered CIR to withdraw and cancel assessment previously
issued against petitioner.
ISSUE:
Whether or not CIRs right to collect alleged deficiency tax is barred by
prescription
RULING:
There was nothing from the respondents protest letter that could tell
the running of prescriptive period upon which CIR could have caused the collection
from respondent. The motion for reconsideration was in effect denied by CIR and
prescription runs from 1994 until 1997, collection effected in 2002 was barred now,
by prescription.

Commissioner of Internal Revenue vs. Algue Inc.

GR No. L-28896 | Feb. 17, 1988

Facts:

Algue Inc. is a domestic corp engaged in engineering, construction and other

allied activities

On Jan. 14, 1965, the corp received a letter from the CIR regarding its
delinquency income taxes from 1958-1959, amtg to P83,183.85

A letter of protest or reconsideration was filed by Algue Inc on Jan 18

On March 12, a warrant of distraint and levy was presented to Algue Inc. thru
its counsel, Atty. Guevara, who refused to receive it on the ground of the pending
protest

Since the protest was not found on the records, a file copy from the corp was
produced and given to BIR Agent Reyes, who deferred service of the warrant

On April 7, Atty. Guevara was informed that the BIR was not taking any action
on the protest and it was only then that he accepted the warrant of distraint and
levy earlier sought to be served

On April 23, Algue filed a petition for review of the decision of the CIR with the
Court of Tax Appeals

CIR contentions:

the claimed deduction of P75,000.00 was properly disallowed because it was

not an ordinary reasonable or necessary business expense
payments are fictitious because most of the payees are members of the
same family in control of Algue and that there is not enough substantiation of such
payments

CTA: 75K had been legitimately paid by Algue Inc. for actual services
rendered in the form of promotional fees. These were collected by the Payees for
their work in the creation of the Vegetable Oil Investment Corporation of the
Philippines and its subsequent purchase of the properties of the Philippine Sugar
Estate Development Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by Algue as legitimate business expenses in its income tax
returns

Ruling:

Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance, made in accordance with law.

RA 1125: the appeal may be made within thirty days after receipt of the
decision or ruling challenged

During the intervening period, the warrant was premature and could therefore
not be served.

Originally, CIR claimed that the 75K promotional fees to be personal holding
company income, but later on conformed to the decision of CTA

There is no dispute that the payees duly reported their respective shares of
the fees in their income tax returns and paid the corresponding taxes thereon. CTA
also found, after examining the evidence, that no distribution of dividends was
involved

CIR suggests a tax dodge, an attempt to evade a legitimate assessment by

involving an imaginary deduction

Algue Inc. was a family corporation where strict business procedures were not
applied and immediate issuance of receipts was not required. at the end of the year,
when the books were to be closed, each payee made an accounting of all of the
fees received by him or her, to make up the total of P75,000.00. This arrangement
was understandable in view of the close relationship among the persons in the
family corporation


The amount of the promotional fees was not excessive. The total commission
paid by the Philippine Sugar Estate Development Co. to Algue Inc. was P125K. After
deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from
the transaction. The amount of P75,000.00 was 60% of the total commission. This
was a reasonable proportion, considering that it was the payees who did practically
everything, from the formation of the Vegetable Oil Investment Corporation to the
actual purchase by it of the Sugar Estate properties.

Sec. 30 of the Tax Code: allowed deductions in the net income Expenses All the ordinary and necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including a reasonable allowance for salaries or
other compensation for personal services actually rendered xxx

the burden is on the taxpayer to prove the validity of the claimed deduction

In this case, Algue Inc. has proved that the payment of the fees was
necessary and reasonable in the light of the efforts exerted by the payees in
inducing investors and prominent businessmen to venture in an experimental
enterprise and involve themselves in a new business requiring millions of pesos.

Taxes are what we pay for civilization society. Without taxes, the government
would be paralyzed for lack of the motive power to activate and operate it. Hence,
despite the natural reluctance to surrender part of one's hard earned income to the
taxing authorities, every person who is able to must contribute his share in the
running of the government. The government for its part, is expected to respond in
the form of tangible and intangible benefits intended to improve the lives of the
people and enhance their moral and material values

Taxation must be exercised reasonably and in accordance with the prescribed

procedure. If it is not, then the taxpayer has a right to complain and the courts will
then come to his succor

Algue Inc.s appeal from the decision of the CIR was filed on time with the CTA in
accordance with Rep. Act No. 1125. And we also find that the claimed deduction by
Algue Inc. was permitted under the Internal Revenue Code and should therefore not
have been disallowed by the CIR.

COMMISSIONER OF INTERNAL REVENUE vs. AICHI FORGING COMPANY OF ASIA, INC.Tax Refund

FACTS:
On September 30, 2004, Aichi Forging filed a claim for refund/credit of input VAT
attributable to its zero-rated sales for the period July 1, 2002 to September 30, 2002

with the CIR through the DOF One-Stop Shop. On the same day, Aichi Forging filed a
Petition for Review with the CTA for the same action. The BIR disputed the claim and
alleged that the same was filed beyond the two-year period given that 2004 was a
leap year and thus the claim should have been filed on September 29, 2004. The
CIR also raised issues related to the reckoning of the 2-year period and the
simultaneous filing of the administrative and judicial claims.

ISSUES:
(1) Was the Petitioners administrative claim filed out of time?
(2) Was the filing of the judicial claim premature?

HELD:
(1) NO. The right to claim the refund must be reckoned from the close of the
taxable quarter when the sales were made in this case September 30, 2004. The
Court added that the rules under Sections 204 (C) and 229 as cross-referred to
Section 114 do not apply as they only cover erroneous payments or illegal
collections of taxes which is not the case for refund of unutilized input VAT. Thus,
the claim was filed on time even if 2004 was a leap year since the sanctioned
method of counting is the number of months.

(2) YES. Section 112 mandates that the taxpayer filing the refund must either wait
for the decision of the CIR or the lapse of the 120-day period provided therein
before filing its judicial claim. Failure to observe this rule is fatal to a claim. Thus,
Section 112 (A) was interpreted to refer only to claims filed with the CIR and not
appeals to the CTA given that the word used is application. Finally, the Court said
that applying the 2-year period even to judicial claims would render nugatory
Section 112 (D) which already provides for a specific period to appeal to the CTA --i.e., (a) within 30 days after a decision within the 120-day period and (b) upon
expiry of the 120-day without a decision.