Bank of the Philippine Islands v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: Petitioner, Bank of the Philippine Islands (BPI), sought a review of the Court of Tax Appeals (CTA) Decision and Resolution holding BPI liable for deficiency documentary stamp tax (DST) on its cabled instructions to its foreign correspondent bank and that prescription had not yet set in against the government. The Commissioner of Internal Revenue (CIR) issued a pre-assessment notice (PAN) in 1986. BPI requested details, and in 1989, the CIR issued assessment/demand notices for deficiency withholding tax and DST for the years 1982 to 1986. BPI filed protests. BPI submitted Swap Contracts with the Central Bank in 1994. BPI executed waivers of the statute of limitations, the last effective until December 31, 1994. On August 9, 2002, the CIR withdrew the withholding tax assessment but reiterated the deficiency DST assessment of P24,587,174.63. BPI received this decision on January 15, 2003, and filed a Petition for Review. Procedural History: The CTA denied BPI's Petition for Review, ordering payment of the deficiency DST plus interest. BPI's Motion for Reconsideration was denied. BPI filed a Motion for Extension of Time to File Petition for Review with the Court En Banc, which was granted. BPI then filed the instant Petition for Review. The Petition: BPI argued that the government's right to collect the DST had prescribed due to the CIR's failure to act on its protest letters within the prescriptive period. BPI also contended that the cabled instructions on SWAP transactions were not subject to DST.
Issue(s)
Whether the collection of the deficiency DST is barred by prescription. Whether BPI is liable for DST on its SWAP loan transactions.
Ruling
The petition is GRANTED. The Decision of the Court of Tax Appeals dated 15 August 2006 and its Resolution dated 5 October 2006, are REVERSED and SET ASIDE. No pronouncement as to costs.
Ratio Decidendi
On the issue of prescription: The Court held that the government's right to collect the deficiency DST had prescribed. The CIR had three years from April 7, 1989, when the assessment notices were issued, to collect the tax, which expired on April 6, 1992. The CIR's final decision on the protest was issued only on August 9, 2002. The Court clarified that for the running of the statute of limitations to be suspended under Section 320 of the Tax Code of 1977, a request for reinvestigation must be granted by the Commissioner. The burden of proof that the request was granted lies with the CIR. In this case, there was no evidence, express or implied, that the CIR granted BPI's request for reinvestigation; instead, the records showed inaction. The Court distinguished this case from Commissioner of Internal Revenue v. Wyeth Suaco Laboratories, Inc., where the BIR actually conducted a review and reinvestigation. The Court also found the Collector of Internal Revenue v. Suyoc Consolidated Mining Company, et al. case inapplicable, as BPI's actions did not induce the CIR to delay collection in the same manner as in Suyoc. The prolonged delay by the CIR in acting on BPI's request and in collecting the tax resulted in the prescription of the government's right to collect. On the issue of DST liability: Given the prescription of the government's claim, the Court deemed it unnecessary to pass upon the validity of the assessment and BPI's liability for DST on SWAP loan transactions.
Main Doctrine
The filing of a protest and submission of additional documents by a taxpayer does not automatically toll the prescriptive period for collection of taxes unless the Commissioner of Internal Revenue expressly grants the request for reinvestigation. The burden of proof that the request was granted lies with the Commissioner.