GR 76281; (September, 1991) (Digest)
G.R. No. 76281 September 30, 1991
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. WYETH SUACO LABORATORIES, INC. and THE COURT OF TAX APPEALS, respondents.
FACTS
The Commissioner of Internal Revenue (CIR) assessed Wyeth Suaco Laboratories, Inc. for deficiency withholding tax at source and sales tax for fiscal periods ending 1972 and 1973. The assessments, dated December 16 and 17, 1974, were received by Wyeth on December 19, 1974. Wyeth protested these assessments in letters dated January 17, 1975, and February 8, 1975, arguing they lacked legal and factual basis. The CIR rendered a final decision on December 10, 1979, modifying the assessment. Wyeth filed a petition for review with the Court of Tax Appeals (CTA) on January 18, 1980, arguing the CIR’s right to collect was already barred by prescription.
The CTA ruled in favor of Wyeth, holding that the CIR’s right to collect had prescribed. The CTA reasoned that the five-year prescriptive period for collection, under Section 332(c) of the National Internal Revenue Code, commenced from the date the return was required to be filed. Since the taxes pertained to 1973, the period allegedly lapsed before the CIR’s final decision in 1979 and the subsequent judicial action. The CIR elevated the case to the Supreme Court.
ISSUE
Whether the right of the Commissioner of Internal Revenue to collect the assessed deficiency taxes from Wyeth Suaco Laboratories, Inc. is barred by prescription.
RULING
No, the right to collect has not prescribed. The Supreme Court reversed the CTA decision. The legal logic centers on the proper application of the prescriptive period for tax collection. Under Section 332(c) of the Tax Code, the five-year period for collecting a tax by distraint, levy, or court proceeding begins to run from the date of the assessment. Crucially, any protest or request for reinvestigation by the taxpayer, if granted by the CIR, suspends the running of the prescriptive period.
Here, Wyeth’s letters of January and February 1975 constituted a valid protest and request for reinvestigation of the December 1974 assessments. The CIR’s act of evaluating these protests and subsequently issuing a final decision on December 10, 1979, constituted a grant of the reinvestigation. Consequently, the prescriptive period was tolled from the time Wyeth filed its protest until the CIR rendered its final decision. The period resumed from the date of that final decision. The CIR’s issuance of warrants of distraint and levy in February 1980, and the filing of its answer in the CTA in May 1980, were well within the remaining period. Therefore, the collection action was timely initiated.