Facts:
In the instant case, Advertising Associates alleged that it sold in 1949 its advertisingagency business to Philippine Advertising Counsellors, that its business is limited to the making,construction and installation of billboards and electric signs and making and printing of posters,signs, handbills, etc. (101 tsn). It contends that it is a media company, not an advertisingcompany, It paid sales taxes for selling billboards, electric signs, calendars, posters, etc., realtydealer's tax for leasing billboards and electric signs and 3% contractor's tax for repairing electricsigns. The billboards and electric signs manufactured by it are either sold or leased, As already stated,the Commissioner of Internal Revenue subjected to 3% contractor's tax its rental income frombillboards and electric signs. The Commissioner required Advertising Associates to payP297,927.06 and P84,773.10 as contractor's tax for 1967-1971 and 1972, respectively, including25% surcharge (the latter amount includes interest) on its income from billboards and neon signs. The basis of the assessment is the fact that the taxpayer's articles of incorporation providethat its primary purpose is to engage in general advertising business. Its income tax returnsindicate that its business was advertising.Advertising Associates contested the assessments in its 'letters of June 25, 1973 (for the 1967-71deficiency taxes) and March 7, 1974 (for the 1972 deficiency). The Commissioner reiterated theassessments in his letters of July 12 and September 16,1974 (p. 3, Rollo). The taxpayer requested the cancellation of the assessments in its letters of September 13 andNovember 21, 1974 (p. 3, Rollo).
Inexplicably, for about four years there was no movement in the case. Then, on March 31, 1978, the Commissioner resorted to the summary remedy of issuing twowarrants of distraint, directing the collection enforcement division to levy on the taxpayer'spersonal properties as would be sufficient to satisfy the deficiency taxes (pp. 4, 29 and 30, Rollo). The warrants were served upon the taxpayer on April 18 and May 25, 1978.More than a year later, Acting Commissioner Efren I. Plana wrote a letter dated May 23, 1979 inanswer to the requests of the taxpayer for the cancellation of the assessments and the withdrawal of the warrants of distraint(Annex C of Petition, pp. 31-32, Rollo).
He justified the assessments by stating that the rental income of Advertising Associates frombillboards and neon signs constituted fees or compensation for its advertising services. Herequested the taxpayer to pay the deficiency taxes within ten days from receipt of the demand;otherwise, the Bureau would enforce the warrants of distraint. He closed his demand letter withthis paragraph: This constitutes our final decision on the matter. If you are not agreeable, you mayappeal to the Court of Tax Appeals within 30 days from receipt of this letter.Advertising Associates received that letter on June 18, 1979. Nineteen days later or on July 7, itfiled its petition for review. In its resolution of August 28, 1979, the Tax Court enjoined theenforcement of the warrants of distraint. The Tax Court did not resolve the case on the merits. It ruled that the warrants of distraint were the Commissioner's appealable decisions. Since Advertising Associates appealed from thedecision of May 23, 1979, the petition for review was filed out of time. It was dismissed. The taxpayer appealed to this Court.
Issues:
In the instant case, Advertising Associates alleged that it sold in 1949 its advertisingagency business to Philippine Advertising Counsellors, that its business is limited to the making,construction and installation of billboards and electric signs and making and printing of posters,signs, handbills, etc. (101 tsn). It contends that it is a media company, not an advertisingcompany, It paid sales taxes for selling billboards, electric signs, calendars, posters, etc., realtydealer's tax for leasing billboards and electric signs and 3% contractor's tax for repairing electricsigns. The billboards and electric signs manufactured by it are either sold or leased, As already stated,the Commissioner of Internal Revenue subjected to 3% contractor's tax its rental income frombillboards and electric signs. The Commissioner required Advertising Associates to payP297,927.06 and P84,773.10 as contractor's tax for 1967-1971 and 1972, respectively, including25% surcharge (the latter amount includes interest) on its income from billboards and neon signs. The basis of the assessment is the fact that the taxpayer's articles of incorporation providethat its primary purpose is to engage in general advertising business. Its income tax returnsindicate that its business was advertising.Advertising Associates contested the assessments in its 'letters of June 25, 1973 (for the 1967-71deficiency taxes) and March 7, 1974 (for the 1972 deficiency). The Commissioner reiterated theassessments in his letters of July 12 and September 16,1974 (p. 3, Rollo). The taxpayer requested the cancellation of the assessments in its letters of September 13 andNovember 21, 1974 (p. 3, Rollo).
Inexplicably, for about four years there was no movement in the case. Then, on March 31, 1978, the Commissioner resorted to the summary remedy of issuing twowarrants of distraint, directing the collection enforcement division to levy on the taxpayer'spersonal properties as would be sufficient to satisfy the deficiency taxes (pp. 4, 29 and 30, Rollo). The warrants were served upon the taxpayer on April 18 and May 25, 1978.More than a year later, Acting Commissioner Efren I. Plana wrote a letter dated May 23, 1979 inanswer to the requests of the taxpayer for the cancellation of the assessments and the withdrawal of the warrants of distraint(Annex C of Petition, pp. 31-32, Rollo).
He justified the assessments by stating that the rental income of Advertising Associates frombillboards and neon signs constituted fees or compensation for its advertising services. Herequested the taxpayer to pay the deficiency taxes within ten days from receipt of the demand;otherwise, the Bureau would enforce the warrants of distraint. He closed his demand letter withthis paragraph: This constitutes our final decision on the matter. If you are not agreeable, you mayappeal to the Court of Tax Appeals within 30 days from receipt of this letter.Advertising Associates received that letter on June 18, 1979. Nineteen days later or on July 7, itfiled its petition for review. In its resolution of August 28, 1979, the Tax Court enjoined theenforcement of the warrants of distraint. The Tax Court did not resolve the case on the merits. It ruled that the warrants of distraint were the Commissioner's appealable decisions. Since Advertising Associates appealed from thedecision of May 23, 1979, the petition for review was filed out of time. It was dismissed. The taxpayer appealed to this Court.
Issues:
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Whether the collection of the tax had already prescribed
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Whether the petition for review was filed within the reglementary period
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No. Section 332 of the 1939 Tax Code, now section 319 of the 1977 Tax Code,Presidential Decree No. 1158, effective on
June 3, 1977, provides that the tax may be collected bydistraint or levy or by a judicial proceeding begun 'within five years
after the assessment of thetax".The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments
herein. The warrants of distraint were served upon it on April 18 and may 25,1978 or within five years after the
assessment of the tax. Obviously, the warrants were issued to interrupt the five-year prescriptive period. Its enforcement
was not implemented because of the pending protests of the taxpayer and its requests for withdrawal of the warrants
which were eventually resolved in Commissioner Plana's letter of May 23, 1979.It should be noted that the Commissioner
did not institute any judicial proceeding to collect the tax. He relied on the warrants of distraint to interrupt the running of
the statute of limitations. He gave the taxpayer ample opportunity to contest the assessments but at the same time
safeguarded the Government's interest by means of the warrants of distraint.
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Yes. The reviewable decision is thatcontained in Commissioner Plana's letter of May 23, 1979 and not the warrants of
distraint.No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows,embodies the
Commissioner's final decision within the meaning of section 7 of Republic Act No.1125. The Commissioner said so. He
even directed the taxpayer to appeal it to the Tax Court. That was the same situation inSt. Stephen's Association and St.
Stephen's Chinese Girl's Schoolvs. Collector of Internal Revenue,104 Phil. 314, 317-318. The directive is in consonance with this Court's dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language
what constitutes his final determination of the disputed assessment. That procedure is demanded by the pressing need
for fair play, regularity and orderliness in administrative action.
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