G.R. No. 181836 , July 9, 2014
BANK OF THE PHILIPPINE ISLANDS, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS

Petitioner Bank of the Philippine Islands (BPI), successor-in-interest of Citytrust Banking Corporation, received Assessment No. FAS-5-85-89-000988 from the Bureau of Internal Revenue (BIR) on June 16, 1989, finding it liable for deficiency documentary stamp tax (DST) in the amount of P1,259,884.50 for the taxable year 1985 on its sales of foreign bills of exchange to the Central Bank. BPI filed a protest letter on June 23, 1989. The Commissioner of Internal Revenue denied the protest on August 4, 1998. BPI filed a petition for review before the Court of Tax Appeals (CTA), which ordered the cancellation of the assessment on February 12, 2001, ruling that neither BPI nor the tax-exempt Central Bank could be liable for the DST prior to the effectivity of Presidential Decree No. 1994 in 1986. The Court of Appeals reversed the CTA on May 29, 2007, reinstating the assessment. BPI elevated the case to the Supreme Court. In a Resolution dated August 5, 2013, the Supreme Court noted that the statute of limitations on the collection of the deficiency tax may have prescribed and required the parties to comment on the issue.

ISSUE

Whether or not the Bureau of Internal Revenue has a right to collect the assessed documentary stamp tax from BPI.

RULING

The Supreme Court denied the right of the BIR to collect the assessed DST on the ground of prescription. The Court held that the three-year prescriptive period for collection under the then applicable Section 319(c) of the National Internal Revenue Code of 1977, as amended, began to run from the date BPI received the assessment notice on June 16, 1989. The BIR had until June 15, 1992, to collect the tax by distraint, levy, or court proceeding. The earliest attempt to collect was the filing of an answer in the CTA on February 23, 1999, which was not the judicial action for collection contemplated by law at that time (as such actions fell under regular trial courts, not the CTA, before 2004). The Court further ruled that BPI’s protest letter dated June 23, 1989, was a request for reconsideration, not a request for reinvestigation. Under Revenue Regulations No. 12-85 and jurisprudence, only a request for reinvestigation, which involves the presentation of additional evidence, suspends the running of the prescriptive period for collection. Since BPI’s protest was a request for reconsideration based on existing records, it did not suspend the prescriptive period. Consequently, the right to collect the tax had prescribed. The Court reversed the Court of Appeals and ordered the cancellation of Assessment No. FAS-5-85-89-000988.