G.R. No. 118176 ; April 12, 2000
Protector’s Services, Inc., petitioner, vs. Court of Appeals and Commissioner of Internal Revenue, respondents.

FACTS

Petitioner Protector’s Services, Inc. (PSI), a security agency contractor, was assessed deficiency percentage taxes for 1983, 1984, and 1985 after a BIR audit. The Commissioner sent demand letters via registered mail on December 7, 1987. PSI claimed it received only the 1983 and 1984 assessments on December 10, 1987, and denied receipt of the 1985 notice. It filed a protest on January 2, 1988, contesting the inclusion of security guards’ salaries and employer’s SSS, SIF, and Medicare contributions in the taxable gross receipts. The BIR, without formally acting, sent a follow-up demand in July 1988. PSI filed a second protest on July 22, 1988, now including the 1985 assessment. The Commissioner denied the protests with finality on November 9, 1990.
PSI filed a petition for review with the Court of Tax Appeals (CTA) on December 5, 1990, raising issues on prescription and the correctness of the tax base. The CTA dismissed the petition for lack of jurisdiction, ruling the assessments became final and unappealable as PSI’s initial protest was filed 33 days after receipt, beyond the 30-day reglementary period. The Court of Appeals affirmed. PSI elevated the case, arguing the CTA had jurisdiction since the assessments became final only upon the Commissioner’s final denial in 1990.

ISSUE

The primary issue is whether the CTA correctly dismissed PSI’s petition for lack of jurisdiction due to the finality of the tax assessments.

RULING

The Supreme Court affirmed the Court of Appeals, upholding the CTA’s dismissal. The legal logic centers on the mandatory and jurisdictional nature of the 30-day period to protest an assessment under Section 270 of the 1977 Tax Code. The Court ruled that the taxpayer’s failure to file a protest within 30 days from receipt of the assessment renders the assessment final, executory, and demandable. This finality deprives the CTA of jurisdiction to review the merits of the assessment. PSI’s receipt of the demand letters on December 10, 1987, was established, making its protest filed on January 12, 1988, indisputably late. The subsequent actions of the Commissioner, including the 1990 denial, did not revive the right to appeal or confer jurisdiction upon the CTA. The period for collection had not prescribed, as the right to collect arises once an assessment becomes final, and the prescriptive period for collection is counted from such finality. On the substantive issue, the Court also ruled that the salaries of security guards and mandatory employer contributions form part of the gross receipts subject to contractor’s tax, as they constitute compensation for services rendered by the agency, not merely funds held in trust.