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COMMISSIONER OF INTERNAL REVENUE vs.

CEBU
PORTLAND CEMENT COMPANY and COURT OF TAX
APPEALS COMMISSIONER OF INTERNAL REVENUE vs.
CEBU PORTLAND CEMENT COMPANY and COURT OF TAX
APPEALS G.R. No. L-29059 December 15, 1987
FACTS: By virtue of a decision of the Court of Tax
Appeals rendered on June 21, 1961, as modified on
appeal by the Supreme Court on February 27, 1965, the
Commissioner of Internal Revenue was ordered to
refund to the Cebu Portland Cement Company the
amount of P359,408.98, representing overpayments of
ad valorem taxes on cement produced and sold by it
after October 1957. On March 28, 1968, following denial
of motions for reconsideration filed by both the
petitioner and the private respondent, the latter moved
for a writ of execution to enforce the said judgment. The
motion was opposed by the petitioner on the ground
that the private respondent had an outstanding sales
tax liability to which the judgment debt had already
been credited. In fact, it was stressed, there was still a
balance owing on the sales taxes in the amount of P
4,789,279.85 plus 28% surcharge. On April 22, 1968,
the Court of Tax Appeals granted the motion, holding
that the alleged sales tax liability of the private
respondent was still being questioned and therefore
could not be set-off against the refund.
ISSUE: Whether or not the judgment debt can be
enforced against private respondents sales tax liability,
the latter still being questioned.
RULING: The argument that the assessment cannot as
yet be enforced because it is still being contested loses
sight of the urgency of the need to collect taxes as "the
lifeblood of the government." If the payment of taxes
could be postponed by simply questioning their validity,
the machinery of the state would grind to a halt and all
government functions would be paralyzed. The Tax Code

provides: Sec. 291. Injunction not available to restrain


collection of tax. - No court shall have authority to grant
an injunction to restrain the collection of any national
internal revenue tax, fee or charge imposed by this
Code. It goes without saying that this injunction is
available not only when the assessment is already being
questioned in a court of justice but more so if, as in the
instant case, the challenge to the assessment is still-and
only-on the administrative level. There is all the more
reason to apply the rule here because it appears that
even after crediting of the refund against the tax
deficiency, a balance of more than P 4 million is still due
from the private respondent. ValreD at 4:30 PM
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
CEBU PORTLAND CEMENT COMPANY and COURT OF TAX
APPEALS, respondents. G.R. No. L-29059 December 15,
1987
FACTS: By virtue of a decision of the CTA, as modified on
appeal by the Supreme Court, the CIR was ordered to
refund to Cebu Portland Cement Company the amount
of P 359,408.98, representing overpayments of ad
valorem taxes on cement produced and sold by it. When
respondent moved for a writ of execution, petitioner
opposed on the ground that the private respondent had
an outstanding sales tax liability to which the judgment
debt had already been credited. In fact, it was stressed,
there was still a balance owing on the sales taxes in the
amount of P 4,789,279.85 plus 28% surcharge. The CTA
granted the CIRs motion. The CIR claims that the refund
should be charged against the tax deficiency of the
private respondent on the sales of cement under
Section 186 of the Tax Code. His position is that cement
is a manufactured and not a mineral product and
therefore not exempt from sales taxes. The petitioner
also denies that the sales tax assessments have already
prescribed because the prescriptive period should be
counted from the filing of the sales tax returns, which

had not yet been done by the private respondent.


Meanwhile, the private respondent disclaims liability for
the sales taxes, on the ground that cement is not a
manufactured product but a mineral product. As such, it
was exempted from sales taxes. Also, the alleged sales
tax deficiency could not as yet be enforced against it
because the tax assessment was not yet final, the same
being still under protest and still to be definitely
resolved on the merits. Besides, the assessment had
already prescribed, not having been made within the
reglementary five-year period from the filing of the tax
returns.
ISSUE: Whether or not sales tax was properly imposed
upon private respondent.
HELD: Yes, because cement has always been considered
a manufactured product and not a mineral product. This
matter was extensively discussed and categorically
resolved in Commissioner of Internal Revenue v.
Republic Cement Corporation, decided on August 10,
1983, stating that cement qua cement was never
considered as a mineral product within the meaning of
Section 246 of the Tax Code, notwithstanding that at
least 80% of its components are minerals, for the simple
reason
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
CEBU PORTLAND CEMENT COMPANY and COURT OF TAX
APPEALS, respondents. G.R. No. L-29059 December 15,
1987
FACTS: By virtue of a decision of the CTA, as modified on
appeal by the Supreme Court, the CIR was ordered to
refund to Cebu Portland Cement Company the amount
of P 359,408.98, representing overpayments of ad
valorem taxes on cement produced and sold by it. When
respondent moved for a writ of execution, petitioner
opposed on the ground that the private respondent had

an outstanding sales tax liability to which the judgment


debt had already been credited. In fact, it was stressed,
there was still a balance owing on the sales taxes in the
amount of P 4,789,279.85 plus 28% surcharge. The CTA
granted the CIRs motion. The CIR claims that the refund
should be charged against the tax deficiency of the
private respondent on the sales of cement under
Section 186 of the Tax Code. His position is that cement
is a manufactured and not a mineral product and
therefore not exempt from sales taxes. The petitioner
also denies that the sales tax assessments have already
prescribed because the prescriptive period should be
counted from the filing of the sales tax returns, which
had not yet been done by the private respondent.
Meanwhile, the private respondent disclaims liability for
the sales taxes, on the ground that cement is not a
manufactured product but a mineral product. As such, it
was exempted from sales taxes. Also, the alleged sales
tax deficiency could not as yet be enforced against it
because the tax assessment was not yet final, the same
being still under protest and still to be definitely
resolved on the merits. Besides, the assessment had
already prescribed, not having been made within the
reglementary five-year period from the filing of the tax
returns.
ISSUE: Whether or not sales tax was properly imposed
upon private respondent.
HELD: Yes, because cement has always been considered
a manufactured product and not a mineral product. This
matter was extensively discussed and categorically
resolved in Commissioner of Internal Revenue v.
Republic Cement Corporation, decided on August 10,
1983, stating that cement qua cement was never
considered as a mineral product within the meaning of
Section 246 of the Tax Code, notwithstanding that at
least 80% of its components are minerals, for the simple
reason that cement is the product of a manufacturing

process and is no longer the mineral product


contemplated in the Tax Code (i.e.; minerals subjected
to simple treatments) for the purpose of imposing the
ad valorem tax. The argument that the assessment
cannot as yet be enforced because it is still being
contested loses sight of the urgency of the need to
collect taxes as "the lifeblood of the government." If the
payment of taxes could be postponed by simply
questioning their validity, the machinery of the state
would grind to a halt and all government functions
would be paralyzed.
Philex Mining Corporation v CIR (1998)
FACTS: BIR sent a letter to Philex asking it to settle its
tax liabilities amounting to P124 million. Philex
protested the demand for payment stating that it has
pending claims for VAT input credit/refund amounting to
P120 million. Therefore, these claims for tax
credit/refund should be applied against the tax
liabilities. In reply the BIR found no merit in Philexs
position. On appeal, the CTA reduced the tax liability of
Philex.
ISSUES: Whether legal compensation can properly take
place between the VAT input credit/refund and the
excise tax liabilities of Philex Mining Corp;
Whether the BIR has violated the NIRC which requires
the refund of input taxes within 60 days Whether the
violation by BIR is sufficient to justify non-payment by
Philex
RULING: No, legal compensation cannot take place. The
government and the taxpayer are not creditors and
debtors of each other. Yes, the BIR has violated the
NIRC. It took five years for the BIR to grant its claim for
VAT input credit. Obviously, had the BIR been more
diligent and judicious with their duty, it could have

granted the refund No, despite the lethargic manner by


which the BIR handled Philexs tax claim, it is a settled
rule that in the performance of government function,
the State is not bound by the neglect of its agents and
officers. It must be stressed that the same is not a valid
reason for the non-payment of its tax liabilities.
BASILAN ESTATES, INC. v. CIR G.R. No. L-22492
September 5, 1967 Bengzon, J.P., J.
Doctrine:
The income tax law does not authorize the depreciation
of an asset beyond its acquisition cost. Hence, a
deduction over and above such cost cannot be claimed
and allowed. The reason is that deductions from gross
income are privileges, not matters of right. They are not
created by implication but upon clear expression in the
law.
Facts:
Basilan Estates, Inc. claimed deductions for the
depreciation of its assets on the basis of their
acquisition cost. As of January 1, 1950 it changed the
depreciable value of said assets by increasing it to
conform with the increase in cost for their replacement.
Accordingly, from 1950 to 1953 it deducted from gross
income the value of depreciation computed on the
reappraised value.
CIR disallowed the deductions claimed by petitioner,
consequently assessing the latter of deficiency income
taxes.
Issue:
Whether or not the depreciation shall be determined on
the acquisition cost rather than the reappraised value of
the assets
Held:
Yes. The following tax law provision allows a deduction
from gross income for depreciation but limits the

recovery to the capital invested in the asset


being depreciated:

Commissioner of Internal Revenue vs. Phoenix


Assurance Co., Ltd. (May 20, 1965)

(1)In general. A reasonable allowance for


deterioration of property arising out of its use or
employment in the business or trade, or out of its
not being used: Provided, That when the
allowance authorized under this subsection shall
equal the capital invested by the taxpayer . . . no
further allowance shall be made. . . .

Facts: Phoenix Assurance Co., Ltd., a foreign insurance


corporation organized under the laws of Great Britain, is
licensed to do business in the Philippines with head
office in London. On April 1, 1953, Phoenix
Assurance Co., Ltd. filed its Philippine income tax
return for 1952, declaring therein a deduction from
gross income as part of the head office expenses
incurred for its Philippine business. On August 30,
1955 it amended its income tax return for 1952 by
excluding from its gross income the amount
representing reinsurance premiums ceded to
foreign reinsurers and further eliminating deductions
corresponding
to
the
ceded
premiums.
The
Commissioner of Internal Revenue disallowed a
portion of the claimed deduction for head office
expenses and assessed a deficiency tax on July
24, 1958. On August 1, 1958 the Bureau of Internal
Revenue released the assessment for deficiency income
tax for the years 1952 and 1954 against Phoenix
Assurance Co, Ltd. which the latter protested. However,
the Commissioner of Internal Revenue denied such
protest. Subsequently, Phoenix Assurance Co., Ltd.
appealed to the Court of Tax Appeals. The Court of Tax
Appeals declared the right of the Commissioner of
Internal Revenue to assess deficiency income tax for
1952 to have prescribed.

The income tax law does not authorize the depreciation


of an asset beyond its acquisition cost. Hence, a
deduction over and above such cost cannot be claimed
and allowed. The reason is that deductions from gross
income are privileges, not matters of right. They are not
created by implication but upon clear expression in the
law [Gutierrez v. Collector of Internal Revenue, L-19537,
May 20, 1965].
Depreciation is the gradual diminution in the useful
value of tangible property resulting from wear and tear
and normal obsolescense. It commences with the
acquisition of the property and its owner is not bound to
see his property gradually waste, without making
provision out of earnings for its replacement.
The recovery, free of income tax, of an amount more
than the invested capital in an asset will transgress the
underlying purpose of a depreciation allowance. For
then what the taxpayer would recover will be, not only
the acquisition cost, but also some profit. Recovery in
due time thru depreciation of investment made is the
philosophy behind depreciation allowance; the idea of
profit on the investment made has never been the
underlying reason for the allowance of a deduction for
depreciation.

ISSUE: Whether the right of the Commissioner of


Internal Revenue to assess deficiency income tax has
prescribed
HELD: The Court of Tax Appeals found the right of the
Commissioner
of
Internal
Revenue
barred
by
prescription, the same having been exercised more
than five years from the date the original return

was filed. On the other hand, the Commissioner of


Internal Revenue insists that his right to issue the
assessment has not prescribed inasmuch as the same
was availed of before the 5year period provided for in
Section 331 of the Tax Code expired, counting the
running of the period from August 30, 1955, the date
when the amended return was filed. The question is:
Should the running of the prescriptive period
commence from the filing of the original or
amended return? The Court of Tax Appeals ruled
that the original return was a complete return
containing information on various items of income
and deduction from which respondent may intelligently
compute
and
determine
the
tax
liability
of
petitioner, hence, the prescriptive period
should be counted from the filing of said original
return. On the other hand, the Commissioner of
Internal Revenue maintains that: xxx the deficiency
income tax in question could not possibly be
determined, or assessed, on the basis of the original
return filed n April 1, 1953, for considering that the
declared loss amounted to P199,583.93, the mere
disallowance of part of the head office expenses could
not possibly result in said loss being completely wiped
out and Phoenix being liable to deficiency tax. Not until
the amended return was filed on August 30, 1955
could the Commissioner assess the deficiency
income tax in question. Accordingly, he would wish
to press for the counting of the prescriptive period from
the filing of the amended return. To our mind, the
Commissioners view should be sustained. The
changes and alterations embodied in the amended
income tax return consisted of the exclusion of
reinsurance
premiums
received
from
domestic
insurance companies by Phoenix Assurance Co.,
Ltd.s London head office, reinsurance premiums
ceded to foreign reinsurers not doing business in the
Philippines and various items of deduction attributable

to such excluded reinsurance premiums thereby


substantially modifying the original return. Furthermore,
although the deduction for head office expenses
allocable to Philippine business, whose disallowance
gave rise to the deficiency tax, was claimed also in the
original return, the Commissioner could not have
possibly determined a deficiency tax there under
because Phoenix Assurance Co., Ltd. declared a loss of
P199,583.93 therein which would have more than offset
such disallowance of P15,826.35. Considering that the
deficiency assessment was based on the amended
return which, as aforestated, is substantially different
from the original return, the period of limitation of the
right to issue the same should be counted from the
filing of the amended income tax return. From August
30, 1955, when the amended return was filed, to July
24, 1958, when the deficiency assessment was issued,
less than five years elapsed. The right of the
Commissioner to assess the deficiency tax on such
amended return has not prescribed.
Butuan Sawmill vs. Court of Tax Appeals
Facts: During the period from 31 January 1951 to 8 June
1953, the Butuan Sawmill Inc. sold logs to Japanese
firms at prices FOB Vessel Magallanes, Agusan (in some
cases FOB Vessel, Nasipit also in Agusan). The FOB
prices included costs of loading wharfage stevedoring
and other costs in the Philippines. The quality, quantity
and measurement specifications of the logs were
certified by the Bureau of Forestry. That the freight was
paid by the Japanese buyers, and the payments of the
logs were effected by means of irrevocable letters of
credit in favor of Butuan Sawmill and payable through
the Philippine National Bank (PNB) or any other bank
named by it. Upon investigation by the Bureau of
Internal Revenue (BIR), it was ascertained that no sales
tax return was filed by Butuan Sawmill and neither did it
pay the corresponding tax on the sales. On the basis of

agent Antonio Moles report dated 17 September 1957,


the Commissioner of Internal Revenue on 27 August
1958, determined against Butuan Sawmill the sum of
P40,004.01 representing sales tax, surcharge and
compromise penalty of its sales [tax, surcharge and
compromise penalty of its sales] of logs from January
1951 to June 1953 pursuant to section 183, 186 and 209
of the National Internal Revenue Code (NIRC). In
consequence of a reinvestigation, the Commissioner, on
6 November 1958, amended the amount of the previous
assessment to P38,917.74. Subsequent requests for
reconsideration of the amended assessment having
been denied, Butuan Sawmill filed a petition for review
on 7 November 1960. The Court of Tax Appeals upheld
the upheld the legality and correctness of the amended
assessment of the sales tax and surcharge.
The imposition of the compromise penalty was,
however, eliminated therefrom for want of agreement
between the taxpayer and the Collector (now
Commissioner) of Internal Revenue. A motion to
reconsider said decision having been denied, Butuan
Sawmill interposed an appeal before the Supreme
Court. The Supreme Court affirmed the decision
appealed from, with costs against Butuan Sawmill.
agreed price was F.O.B. Agusan, thus indicating,
although prima facie, that the parties intended the title
to pass to the buyer upon delivery of the log in Agusan,
on board the vessels that took the goods to Japan.
Moreover, said prima facie proof was bolstered up by
the following circumstances, namely: (1) Irrevocable
Taxation Law II, 2005 ( 4 ) Haystacks (Berne Guerrero)
letters of credit were opened by the Japanese buyers in
favor of the petitioners. (2) Payment of freight charges
of every shipment by the Japanese buyers. (3) The
Japanese buyers chartered the ships that carried the
logs they purchased from the Philippines to Japan. (4)
The Japanese buyers insured the shipment of logs and
collected the insurance coverage in case of loss in

transit. (5) The petitioner collected the purchase price of


every shipment of logs by surrendering the covering
letter of credit, bill of lading, which was indorsed in
blank, tally sheet, invoice and export entry, to the
corresponding bank in Manila of the Japanese agent
bank with whom the Japanese buyers opened letters of
credit. (6) In case of natural defects in logs shipped to
the buyers discovered in Japan instead of returning such
defective logs, accepted them, but were granted a
corresponding credit based on the contract price. (7)
The logs purchased by the Japanese buyers were
measured by a representative of the Director of Forestry
and such measurement was final, thereby making the
Government of the Philippines a sort of agent of the
Japanese buyers, and upon the authority of Bislig Bay
Lumber Co., Inc. vs. Collector Internal Revenue, (G.R.
No. L-13186 January 28, 1961) Misamis Lumber Co., Inc.
vs. Collector of Internal Revenue (56 Off. Gaz. 517) and
Western Mindanao Lumber Development Co., Inc. vs.
Court of Tax Appeals, et al. (G.R. No. L-11710, June 30,
1958), it is clear that said export sales had been
consummated in the Philippines and were accordingly,
subject to sales tax therein.
An income tax return cannot be considered as a return
for compensating tax for purposes of computing the
period of prescription under Section 331 of the Tax
Code, and that the taxpayer must file a return for the
particular tax required by law in order to avail himself of
the benefits of Section 331 of the Tax Code; otherwise, if
he does not file a return, an assessment may be made
within the time stated in Section 332(a) of the same
Code (Bisaya Land Transportation Co., Inc. vs. Collector
of Internal Revenue & Collector of Internal Revenue vs.
Bisaya Land Transportation Co., Inc. G.R. Nos. L-12100 &
L-11812. May 29, 1959).
10 year prescription for failure to file return for
disputed sales As Butuan Sawmill failed to file a

return for the disputed sales corresponding to the year


1951, 1952 and 1953, and this omission was discovered
only on September 17, 1957, and that under Section
332(a) of the Tax Code assessment thereof may be
made within ten (10) years from and after the discovery
of the omission to file the return, the assessment and
collection of the sales tax in question has not yet
prescribed.
CIR v.Primetown, GR 162155, August 28, 2007
FACTS: Gilbert Yap, Vice Chair of Primetown applied on
March 11, 1999 for a refund or credit of income tax
which Primetown paid in 1997. He claimed that they are
entitled for a refund because they suffered losses that
year due to the increase of cost of labor and materials,
etc. However, despite the losses, they still paid their
quarterly
income tax and remitted creditable
withholding tax from real estate sales to BIR. Hence,
they were claiming for a refund. On May 13, 1999,
revenue officer Elizabeth Santos required Primetown to
submit additional documents to which Primetown
complied with. However, its claim was not acted upon
which prompted it to file a petition for review in CTA
on April 14, 2000. CTA dismissed the petition as it was
filed beyond the 2-year prescriptive period for filing a
judicial claim for tax refund according to Sec 229 of
NIRC. According to CTA, the two-year period is
equivalent to 730 days pursuant to Art 13 of NCC. Since
Primetown filed its final adjustment return on April 14,
1998 and that year 2000 was a leap year, the petition
was filed 731 days after Primetown filed its final
adjusted return. Hence, beyond the reglementary
period. Primetown appealed to CA. CA reversed the
decision of CTA. Hence, this appeal.
ISSUE: W/N petition was filed within the two-year period

HELD: Pursuant to EO 292 or the Administrative Code of


1987, a year shall be understood to be 12 calendar
months. The SC defined a calendar month as a month
designated in the calendar without regard to the
number of days it may contain. The court held that
Administrative Code of 1987 impliedly repealed Art 13
of NCC as the provisions are irreconcilable. Primetown is
entitled for the refund since it is filed within the 2-year
reglementary period.

Aznar vs. Court of Tax Appeals GR No. 20569, 23


August 1974
Facts: Petitioner, as administrator of the estate of the
deceased, Matias H. Aznar, seeks a review and
nullification of the decision of the Court of Tax Appeals

ordering the petitioner to pay the government the sum


of P227,691.77 representing deficiency income taxes for
the years 1946 to 1951. An investigation by the
Commissioner of Internal Revenue (CIR) ascertained the
assets and liabilities of the taxpayer and it was
discovered that from 1946 to 1951, his net worth had
increased every year, which increases in net worth was
very much more than the income reported during said
years. The findings clearly indicated that the taxpayer
did not declare correctly the income reported in his
income tax returns for the aforesaid years. Petitioner
avers that according to the NIRC, the right of the CIR to
assess deficiency income taxes of the late Aznar for the
years 1946, 1947, and 1948 had already prescribed at
the time the assessment was made on November 28,
1952; there being a five year limitation upon
assessment and collection from the filing of the returns.
Meanwhile, respondents believe that the prescription
period in the case at bar that is applicable is under Sec.
332 of the NIRC which provides that: "(a) In the case of
a false or fraudulent return with intent to evade tax or of
a 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 ten years
after the discovery of the falsity, fraud or omission".
Petitioner argues said provision does not apply because
the taxpayer did not file false and fraudulent returns
with
intent
to
evade
tax.
Issue: Whether or not the deceased Aznar filed false or
fraudulent income tax returns and subsequently,
whether
the
action
has
not
prescribed.
Held: The
petition
is
without
merit.
The respondent CTA concluded that the very
"substantial under declarations of income for six
consecutive years eloquently demonstrate the falsity or
fraudulence of the income tax returns with an intent to

evade the payment of tax." The ordinary period of


prescription of 5 years within which to assess tax
liabilities under Sec. 331 of the NIRC should be
applicable to normal circumstances, but whenever the
government is placed at a disadvantage so as to
prevent its lawful agents from proper assessment of tax
liabilities due to false returns, fraudulent return
intended to evade payment of tax, or failure to file
returns, the period of ten years from the time of the
discovery of the falsity, fraud or omission even seems to
be inadequate. There being undoubtedly false tax
returns in this case, We affirm the conclusion of the
respondent Court of Tax Appeals that Sec. 332 (a) of the
NIRC should apply and that the period of ten years
within which to assess petitioner's tax liability had not
expired at the time said assessment was made.

COLLECTOR V GOODRICH
Facts: The Government appeals from the CTA decision,
which set aside the CIR assessments for deficiency
income taxes allegedly due from Goodrich International
Rubber Company for years 1951 and 1952

The assessments were based on disallowed


deductions, claimed by Goodrich, consisting of
several alleged bad debts and representation
expenses allegedly incurred in 1952. Goodrich
had appealed to CTA, which initially rendered a
decision allowing the deduction for bad debts
only but on MR, allowed said deductions for
representation expenses.

The claim for deduction thereof is based upon receipts


issued, not by the entities in which the alleged expenses
had been incurred, but by the officers of Goodrich who
allegedly paid them.

Issue:
W/N deductions made for bad debts for 1951 were
proper

Held: Partly yes and no.

The claim must be rejected. If the expenses had really


been incurred, receipts or chits would have been issued
by the entities to which the payments had been made,
and it would have been easy for Goodrich or its officers
to produce such receipts. These issued by said officers
merely attest to their claim that they had incurred and
paid said expenses. They do not establish payment of
said alleged expenses to the entities in which the same
are said to have been incurred. The Court of Tax Appeals
erred, therefore, in allowing the deduction thereof.
The claim for deduction of the ten (10) debts should be
rejected. Goodrich has not established either that the
debts are actually worthless or that it had reasonable
grounds to believe them to be so in 1951. Our statute
permits the deduction of debts actually ascertained to
be worthless within the taxable year, obviously to
prevent arbitrary action by the taxpayer, to unduly
avoid tax liability.
The requirement of ascertainment of worthlessness
requires proof of two facts: (1) that the taxpayer did in
fact ascertain the debt to be worthlessness, in the year
for which the deduction is sought; and (2) that, in so
doing, he acted in good faith.
Good faith on the part of the taxpayer is not enough. He
must show, also, that he had reasonably investigated
the relevant facts and had drawn a reasonable inference
from the information thus obtained by him.Respondent
herein has not adequately made such showing.
The payments made, some in full, after some of the
foregoing accounts had been characterized as bad

debts, merely stresses the undue haste with which the


same had been written off. At any rate, respondent has
not proven that said debts were worthless. There is no
evidence that the debtors cannot pay them. It should be
noted also that, in violation of Revenue Regulations No.
2, Section 102, respondent had not attached to its
income tax returns a statement showing the propriety of
the deductions therein made for alleged bad debts.
However, some accounts were properly written off
(mostly because debtors had no properties to be
attached or insolvent). The deduction of these 8
accounts as bad debts should be allowed. Decision
modified.

Republic v AcebedoG.R No. L-20477March 29,


1968
Facts
: A suit for collection of deficiency tax was filed against
herein respondent Felix Acebedoin the amount of
P5,962 for the year 1948. A notice of assessment was
issued on September 24,1949. The respondent filed a
motion to dismiss on the ground of prescription. He
claimed thatthe notice of levy/distraint was filed beyond
the 5 year limitation from the assessment. Themotion
was granted by the lower court and the same dismissed
the case.Hence, the petitioner Republic filed an appeal
with this court, contending that the variousrequests for
reinvestigation made by the respondent suspended the
5 year period prescriptionperiod and that the waiver of
statute of limitations duly executed in 1959 was
sufficient tofurther suspend period of prescription.
Issue
: Whether or not a request for a reinvestigation
suspends the running of the period forfiling an action for

collection?Whether or not the waiver of limitations


suspended the period?
Held
: No. The court is aware that it was held in
Commissioner of Internal Revenue, vs.Consolidated
Mining Company that a taxpayer may be prevented
from setting up the defenseof prescription even if he
has not previously waived it in writing when by his
repeated requestsor positive acts the Government has
been, for good reasons, persuaded to postpone
collection to make him feel that the demand was not
unreasonable or that no harassment or injustice ismeant
by the Government. However, when a taxpayer asks for
a reinvestigation of the tax assessment issued to him
and such reinvestigation is made, on the basis of which
theGovernment makes another assessment, the fiveyear period with which an action forcollection may be
commenced should be counted from this last
assessment. In this case, even after the request for
reinvestigation was made, the petitioner did notact
upon it, hence, the request for reinvestigation did not
suspend the running of the period forfiling an action for
collection. Moreover, up to October 4, 1955 the delay in
collection could not be attributed to the defendant at
all. His requests in fact had been unheeded until then,
and there was nothing toimpede enforcement of the tax
liability by any of the means provided by law. By
October 4,1955, more than five years had elapsed since
assessment in question was made, making subsequent
events in connection with the said assessment
irrelevant. Even the written waiverof the statute signed
by the defendant on December 17, 1959 could no
longer revive the rightof action, for under the law such
waiver must be executed within the original five-year
periodwithin which suit could be commenced.

Philippine Journalists, Inc. v. Commissioner of


Internal Revenue, G.R. No. 162852, 16
December 2004
FACTS: The Revenue District Office of the Bureau of
Internal Revenue (BIR) issued Letter of Authority for
Revenue Officer Federico de Vera, Jr. and Group
Supervisor Vivencio Gapasin to examine petitioners
books of account and other accounting records for
internal revenue taxes. Revenue District Officer Jaime
Concepcion invited petitioner to send a representative
to an informal conference for an opportunity to object
and present documentary evidence relative to the
proposed
assessment.
Petitioners
Comptroller,
LorenzaTolentino, executed a Waiver of the Statute of
Limitation Under the National Internal Revenue Code
(NIRC). Records show that, it did not bear the date of
acceptance, that petitioner was not furnished a copy of
the waiver, and the waiver was signed only by the
Revenue District Officer. The tax liability exceeds One
Million Pesos (P1,000,000.00).
ISSUE: Whether the waiver is in accordance with RMO
No. 20-90 to validly extend the three-year prescriptive
period under the NIRC.
HELD NO. The waiver document is incomplete and
defective and thus the three-year prescriptive period
was not tolled or extended and continued to run.
Consequently, the Assessment/Demand was invalid
because it was issued beyond the three (3) year period.
In the same manner, Warrant of Distraint and/or Levy
which petitioner received thereafter is also null and void
for having been issued pursuant to an invalid
assessment.

The NIRC, under Sections 203 and 222, provides for a


statute of limitations on the assessment and collection
of internal revenue taxes in order to safeguard the
interest of the taxpayer against unreasonable
investigation. Unreasonable investigation contemplates
cases where the period for assessment extends
indefinitely because this deprives the taxpayer of the
assurance that it will no longer be subjected to further
investigation for taxes after the expiration of a
reasonable period of time.
A waiver of the statute of limitations under the NIRC, to
a certain extent, is a derogation of the taxpayers right
to security against prolonged and unscrupulous
investigations and must therefore be carefully and
strictly construed. xxx Thus, the law on prescription,
being a remedial measure, should be liberally construed
in order to afford such protection.
The waiver is also defective from the government side
because it was signed only by a revenue district officer,
not the Commissioner, as mandated by the NIRC and
RMO No. 20-90. The waiver is not a unilateral act by the
taxpayer or the BIR, but is a bilateral agreement
between two parties to extend the period to a date
certain. The conformity of the BIR must be made by
either the Commissioner or the Revenue District Officer.
This case involves taxes amounting to more than One
Million Pesos (P1,000,000.00) and executed almost
seven months before the expiration of the three-year
prescription period. For this, RMO No. 20-90 requires the
Commissioner of Internal Revenue to sign for the BIR

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