Court of Tax Appeals
0Carnation Phils. 7 Inc. Now Merged with Nes-Tle Phi 1 S. 7 Inc. } 7 vs. Commissioner of Internal REVENUE7
REPUDL.rC OF 1'1/E f'//IL.lf'P1NES
COURT OF TAX APPEAI~S
QUEZON CITY
CARNATION PHILS.
7
INC.
(now merged with Nes-tle
Phi 1 s. 7
Inc. } 7
Petitioner,
-
versus -
C.T.A. CASE NO. 4263
COMMISSIONER OF INTERNAL
REVENUE7
Respondent.
X
-
-
-
-
-
X
D
E
c;
I
I
CJ
N
Pe-ti-tioner comes beFore this Court
pr~ying For
-the nulling and voiding oF -the asses5ments covering
its
alleged deFiciency income and sales taxes
For
-the -taxable year ending Sep-tember 30, 1981 7
in
-the
total
amount
oF
P19 7 5 35,183.44,
inclusive
oF
penal-tie~ and intPrest.
The
records oF the case, as well as
tha -t
oF
the
Bure~u oF Internal Revenue in connection
wi-th
the
same, evidence a clear Factual
bacl<gr ound
oF
the controversy at hand.
Petitioner,
a
duly
registered
Philippine
corporation,
Filed
its
Corporation/Partnership
1
!
I
J
DECISION --
C.T.~-
C~SE NO.
4 2 63
Rnnual
Income Tax Return
Fot ~ ta><abJ P
ending
Septembet~
30,
1981
(EHh.
"F";
CTR
RP c ot ~ds,
p.
113),
on
January
15,
1982 ;
anrl
its
ManuFacturers/Producers
Percentage TaH
Rer•tt~ n
Fot~
the
quartet~ ending Septembet~ 30,
1 9 81
( Euh.
"M";
CTR
Recot~ds, p. 114), on Novembe•~ i.=?O ,
1.981 .
On
October 13, 1986, March 16, 1987
and
May
18,
1987
petitioner,
tht~ough
its
S enior
Vice
President Jaime 0. Lardizabal, and in con s ideration
oF
the
approval by the Commissione r
or
Internal
R e v e n u e
o F pet i t i on e t~ ' s
r e q u e s t
F o t~
J ~ e i n v e s t i gat i on
And/or reco nsideration oF its internal revenue case
involving the assessments For the Fiscal year
1981
which
were
pending
at
the
time,
signed
three
"Waivers
OF The StatutP.
oF
Limitations
Undet~ The National
Intet~nal RevP.nue Code",
it:
"xxx
waives the
t~ unning
oF
the
prescriptive period
prnvided
For
in Sections 318 and
3 1 9
and
other
related provision5
o F
the
National Internal Revenu e Code and
consents
to
the
assessment
and
collection oF the taxes which
ma y
be Found due aFter reinvestigation
and
reconsideration a t
any
tim e
heFore
or aFter the lapse pF
the
pet~iod
oF
limitations
FiHed
by
said
Sections
318
and
319
and
I
DECISION --
C.T.R. CRSE NO. 4263
Neither
other
relevant
provision~ oF
the
National
Internal
Renenue
Code,
but
not aFter (13 Rpril 1987
For
the
earlier-executed
waiver
or
June
14,
1987
For
t,he
1 at et~
Wr'livet~ ,
ot~ July 30, 1987
Fo, ~
the
subsequent waiver, as the c~se m~y
be).
Hoc.\le vet~ ,
the
t ax P"" yet~
(petitioner herein) does not waive
any
prescription already
accrued
in its Favor."
CExhs.
"B" and "B-
1"
and
"B-2"; CTR
Records,
pp.
104- 106)
1..,ai ver
was
signed
by
Commissioner or any oF his agents.
On
Rugust
5.,
1987,
petit i onet~
t-espondent
t~espond ent' s
Letter
oF DemBnd
No.
FRS- 1B-81-87,
dated
J'-tl y 29, 1987 (Exh.
"~";
CTR
pp.
101-102),
asl<ing
petit i onet·•
to
pay
oF
P .t, 442, 586. 56,
P14,152,683. 85,
and
P.3,9.39,913.03
representi ng,
t~ espectively , its al..I e g ed
deFiciency
income tax, sales tax, and sales tax on
undeclared
sales For the year 1981, increments includ e d.
This
dem Bnd l et ter was accompanied by R sse ssment Notices
No.
FRS- 1 - 81-87-005824,
FRS-4-81 - 87-005825,
and
FRS-4 - 81-87-005826 CExhs. "R-1", "R-2", and
"R-3";
CTR Records, p. 103).
Petitioner Filed a basic protest CBIR Records,
pp. 46-47) with the BIR on August 20, 1987, therein
.)
D~CISION --
C.T.R.
Cn S E NO.
4263
-
4
-
disputing the assessments cov ere d by Dem~nrl Letter
No.
FRS-1 B-B 1 - 87.
This
supple mented
by
a
petitionPr's
protest dated SPptemhPt ~ ·=-a,
1987
and
received h'}' the BIR's Rece·vabl e
Recount~
Division
on
September 30, 1987 (BIR
pp. 266-287J.
Th ese
pt~ otests
were
denied by
rPspo ndent
in
a
letter
(Rnnex
"F",
"Petition
For~
Review";
CTR
Recor~ds.,
p.41J, dated March 15,
1 9 RB and
received
by
petitioner through counsel on M~rch
25,
which state s, in
pat~t, as Fallows:
"Please
be
inFormed
that
aFter reinv~stigation, this OFrice
did not Find any legal or
Factua l
justiFication to withdraw,
cancel
or even modiFy our above - mentioned
assessments.
"In
t,eque sf; ed
liabilities
view
thereoF,
it
is
that the aForpsairl
t~r
(petitioner
i. mmPdiatel y,
fJPnalties
payment.
or
your
cJipnf;
het~einJ
be
pai. d
inclusive
or
f;hp
incidPnt
to
1At P
" Th i s
i s
o u r
F i n a 1
d ec i s i o n •
IF
you at,e not ~menAbl e
thPt-e t o,
you may appeal to the Court oF Tax
Rppeals
within thirty
(30)
days
aFter
receipt
oF
this
letter,
otherwise,
your
client's
assessments
shall
become
Final,
executory and unappealable."
/~
I
1-9BB,
’
DECISION —
c.T.A. CASE NO. 4263 Consequently, on April 22, 1988, petitioner seasonably filed the instant petitian for review with this Court.
We must First settle the preliminary and prejudicial issue of prescription raised by petitioner in its pleadings.
Petitioner contends that the deficiency assessments ‘subject of thw Zyetank petition are barred by prescription, since they were issued beyond five years from the filing of the returns covering the internal revenue taxes assessed therein.
Respondent contrarily asserts that its right to assess petitioner for 1981 deficiency income and sales taxes has not yet prescribed for the reason that petitioner has, in the case at bar, Allegedly “oclearly and expressly waived the defense of prescription by its several requests ' For reinvestigation thru the execution of the written waiver of the statute of limitations duly filed with the Office of respondent" ("Answer", pe 33 CTA Records, p. 67). To this, petitioner responds that: ; A 4 : /
DECTSION -·
C.T.n.
C~SE NO. 4263 I...Je s 1b.}ec::t- - 6 - "Although the pet-iorl o1 prescription is waivable by c=tgt-·eement., thet, e must e List., however, two essential requi s ites For the waiver to be v Al ·r~:
First, the wai ver must be e n erPd into beFore expirat on oF thn timP prescribed For making an assessment ;
and second, thP Commissioner and the taxpc=tye r must have consented thereto in writin XXX
11 XXJ<
XXX
JC HX
"~ c t.tt, s o t, y e x a m i n c=t t- i on o F t h e waivers signed by the pPtition e J·· how that there is nothing in the A v~rs to indicate thAt the Commissioner ~the respondent-> c n n s en t P. d t h e t , e t o s i n c e n n t o n -=-
W A
S signed by h · m.
FJ- om the vP.t }' nat ,_,t·e oF the petit i nnet··" s condit-ion limiting the PctPnsion pPriod up t-o certain dates nnJy, the t-espondent-' s 21pp1, 0VA1 t-fH' t- eoF in writing mu 5 t be given to c omply ~"ith the t-equ·sites oF Je~w .
" ( "Memot,andum For ret-it- i oner", p.
7;
CTA Records, p.
176> agree with p et-itioner., and Find assessment-s were issued beyond t-hat the the Five - year prescriptive period allowed by the Tax Code. Secti on 318 oF the 1981 Ta< Code provides that-: "Sec.
limitation 3 18.
Period oF upon asses smen t and collection.
Except as provided in the i ntet,nal assessed succeeding section, revenue taxes shall be wit-hin Five years aFt-er / G
DEC TS ION -
C - T-R-
Cn S E NO.
4 ~6 3 - 7 - the t~etu r n was Fi 1 ed, and n o pl ·~ oceedi ng in court w j. tho nt a s sessment For the colle c tion o F s u c h taxes shall be b e gun Fte r the expiration oF ~uc~ p er i o d.
For the purposes oF thi s · s ection, a return Filed beFore th e la s t day prescribed by law For the Filing thereoF shall be consid e r e d as Filed on such last day: Provided, That this limitation shall not a pply to cases ~l r eady inv e stigated prior to the a pproval oF this Code.
established by petitione r ' s unco n t ,~ ad i ct ed evidenc e, it Filed it s annual i nco me tax and pet~cent a ge tax Fot~ the yeat~ ending Septemb e r 30 7 1981 on J a n uary 15,
1 9B2
and November 20,
1981 7
respectively.
Thet~ e Fore 7 in accot'dance with the abo ve - q•_tot P d pt~ ovision, petitioner's 19B1 income and sa1 Ps t axes co uld have b ee n validly ass essed by r e s ponde nt ort ly until Jan •. t a t~ y 1 4 , 19B7 and Nov e mb e t ~ 1 9 , 1 986 , 1 t~ espect i ve l y.
Cl e arly, the s ubject assessments, whi c h are all dated J~ly 29~ 19877 were all issued beyond the Five-year prescriptive period provided ·under the 1981 Tax Code . 1----------------------------------- ThE'SE' dates were co1puted by adding 1,825 days (or 365 days pet• year· x 5 year s) to th~ dates of filing, consider-ing in the pt•ocess that 1984 was a leap year. 'I I
DECISION -
C. T.A. CASE NO.
4263 - 8 - Respondent:
cannot seel< reFuge in 319(b) oF t:he 1981 Tax Code (now Section which reads as Follows: "Sec.
319. Exceptions as to period oF limitation oF assessment and collection oF taxes. x xx "(b) Where t:he expiration oF t:he time prescribed in t:he preceding section For t:he assessment oF t:he tax, both t:he Commissioner and t:he taxpayer have consented in writing to its ass essment aFter such time, t:he tax may be assessed at any time prior to the expiration oF t:he period agreed upon.
The pet~iod so agreed ~pon may be extended by subsequent agreements in writing made beFore t:he expiration oF t:he period previously agreed upon. "xxu >CHH" Notwithstanding the Fact: that the Section 223(b)) show that pet: it i oner, its Senior Vice Pt'esident: Ja.ime L.:.u~d .izaba1, signed t:ht,ee Na .ivers oF t:he s t: ~ t: u t: e o F 1 i m i t: a t: i o n s u n d e t~ t 11 P.
T a JC Code on separate dates (October March 1987, and May 18, 1987>.
We Find these "waivers" to be invalid and without any bivding eFFect on petitioner For the reason that there was no consent by the respondent and no period was set or agreed
DECISION - ·
C.T.R. CRSE NO.
4263 - 9 - upon For subsequent assesGment. Regarding this point., We the interpretatio~ which We gavP to ~hat is nnw Section 2 2 3 Cb) oF the Tax Code (Section 319Cb) oF the 1981 T~x Code) in t h e case oF Boise Cascade Phil ippines~ Inc.
vs. CoMmissione r oF Intern a l Reve n u e ., C. T. R.
Case No.
2 858 CMarch 30 ~ 1987) .
In said case~ We stat ed, in part, t h at: "The law is clear and e>Cplicit that a valid wa iv er oF the statut e oF limitation pt~ov ided For in the above-quoted provi sio n oF th e l a w ( reFerring to what was SPct.ion 3 1 9 Cb) oF the 1981 Ta>C Code a nd .is no"' Section 223 Cb) oF the TaH Code) requires that the said s tatute oF limita ti on must be in wri ting and must be both s ignrd by the Commiss·oner oF Irte~nal n e v en u e and t h e t ax pa }'' e t~.
J< x x.
"In the instant i":AGe 7 th~ l.~nguage oF sa .id statute of" limitation being plrlin anrl '-' n .=1 m b i g u o u s , i t c on v P y s a c 1. e a 1 • and deFinite mPa n.ing, and t h r::- t " e F o t~ e ., sa i d s t a t ( 1 t e m u s t;
s imply be applied an d never to be .in t et~pret ed.
Jc x x "In the case at bar~ the law is c lear and deFinite that it is o nl y the C ommi ss ioner o F In t et~nal Reve nu e , who i s spe cial l y named Q.y said p r o vision o F Sect io n 332Cb) (Sectio n 319Cb> oF the 1981 Tax I (_ 9 DECITSTON C.T-A. CASE NO. 4263 — 10 — Code and now Section meath)) of the Tax Code, as the one who can sign the waiver of the statute of limitation, and since the Commissioner has not signed the waiver, there is, therefore, no consummation or valid waiver which may suspend the running of the period within which to assess the tax in question. wre” (ARoise- 4 Cascade Phils. , Inc. VS. Commissioner of Internal Revenue, CTA Case Ne. 18A5A (1987), pp- 30- 32d (Underscoring Ours) Therefore, the Court finds thatk there is no wAatver of the statute of limitatians validly entered yntea by the petitioner and respondent.
Consequently, petitioner cannot he deemed estopped from raising the defense af prescription against the assessments on the ground af its signing of the tern "waivers" presented as Exhibits "RAR" and "A-1" in the case at bar.
Inasmuch as the assessments subject of the instant petition were all issued beyond the Five~ year prescriptive period allowed under the 1981 Tax Code, the Court Finds no need to delve into the ~~ other issues raised.
a4 ¢ / 10
DECISION —-
C.T.-A. CASE NO. 4263
WHEREFORE, the Court, finds the assessments for allegedly deficient income and sales taxes for petitioner’s fiscal year ending September 30, 1981 covered by Demand Letter No. FAS-—1B-81-87 and Assessment Notices No. FAS-1—-81-87-005824, FAS-—4— 81-87-005825, and FAS-—4-81-87-005826 (all dated July 29, 1987) in the total amount of P19, 535, 183. 44 to be NULL AND VOID for having been issued beyond the five-year prescriptive period provided by law.
No costs.
SO ORDERED
Quezon City, Metro Manila, January 26, 1993.
Ud Associate Judge
WE CONCUR =
Cuma Q C2 ERNESTO D. ACOSTA residing Judge MiP Binal, jean Oo. DE VEYVYRA Associate Judge •• DECISIOf'./ - C.T. n. cnSE NO.
4263 - 12 - CERTIFICATION I cet~t i Fy that this decision reached aFter due consultation among the members oF the Court oF Tax nppeals in accordance with Section 13 7 nrticle 0III oF the Constitution. 12.
~_:e:-Q"~ ERNeSTO D. ACOSTA Presiding Judge Court of Tax Appeals .)