Facts:
On December 19, 1974, Wyeth Suaco received notice ofassessment from the BIR for its failure toremit withholding tax at source for the 4th quarter of 1973 on accrued royalties, remuneration fortechnical services paid abroad and cash dividends, including the deduction of non-deductible rawmaterials from its reports. The company, thru its tax consultant, SVG & co., sent BIR two letters dated January 17, 1975 and February 8, 1975 protesting theassessment and requesting their cancellationor withdrawal on the ground that said assessments lacked factual or legal basis. Also, there were lettersfrom the company to the BIR to such effect. On September 12, 1975, the CIR offered to compromise butonly resulted to a slight reduction of the tax as per the acting Commissioner’s decision on December 10,1979. On January 18, 1980, Wyeth Suaco filed petition for review with the CTA, praying that CIR beenjoined from enforcing the assessments by reason of prescription and that assessments be declarednull and void for lack of legal and factual basis. The CTA decided against the CIR holding that while theassessments for the deficiency taxes were made within the five-year period of limitation, the right of CIRto collect the same has already prescribed, in accordance with Sec. 319(c) of the NIRC.
Issue:
Whether or not the right of CIR to collect has already prescribed
Ruling:
No. CTA is wrong. The letters of Wyeth Suaco interrupted the running of the five-year perspectiveperiod to collect the deficiency taxes. Settled is the rule that the prescriptive period provided by law tomake a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer requestsfor reinvestigation or reconsideration of the assessment. Wyeth Suaco admitted that it was seekingreconsideration of the tax assessments as shown in a letter of its president and General Manager.Further, although the protest letters prepared by SGV & Co. did not categorically state or use the wordsreinvestigationand reconsideration, the same are to be treated as letters of reinvestigation andreconsideration.
As to Wyeth Suaco’s argument that withholding tax at source should only be remitted to the BIR oncethe incomes subject to withholdingtax at source have actually been paid, the SC cited the lifeblooddoctrine, the express provision of the law which requires the filing of monthly return and payment of taxes withheld at source within 10 days after the end of each month. Further, the company uses accrualmethod of accounting and therefore the effect of transactions and other events on assetsand liabilities are recognized and reported in the time periods to which they relate rather than onlywhen cash is received or paid.
On December 19, 1974, Wyeth Suaco received notice ofassessment from the BIR for its failure toremit withholding tax at source for the 4th quarter of 1973 on accrued royalties, remuneration fortechnical services paid abroad and cash dividends, including the deduction of non-deductible rawmaterials from its reports. The company, thru its tax consultant, SVG & co., sent BIR two letters dated January 17, 1975 and February 8, 1975 protesting theassessment and requesting their cancellationor withdrawal on the ground that said assessments lacked factual or legal basis. Also, there were lettersfrom the company to the BIR to such effect. On September 12, 1975, the CIR offered to compromise butonly resulted to a slight reduction of the tax as per the acting Commissioner’s decision on December 10,1979. On January 18, 1980, Wyeth Suaco filed petition for review with the CTA, praying that CIR beenjoined from enforcing the assessments by reason of prescription and that assessments be declarednull and void for lack of legal and factual basis. The CTA decided against the CIR holding that while theassessments for the deficiency taxes were made within the five-year period of limitation, the right of CIRto collect the same has already prescribed, in accordance with Sec. 319(c) of the NIRC.
Issue:
Whether or not the right of CIR to collect has already prescribed
Ruling:
No. CTA is wrong. The letters of Wyeth Suaco interrupted the running of the five-year perspectiveperiod to collect the deficiency taxes. Settled is the rule that the prescriptive period provided by law tomake a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer requestsfor reinvestigation or reconsideration of the assessment. Wyeth Suaco admitted that it was seekingreconsideration of the tax assessments as shown in a letter of its president and General Manager.Further, although the protest letters prepared by SGV & Co. did not categorically state or use the wordsreinvestigationand reconsideration, the same are to be treated as letters of reinvestigation andreconsideration.
As to Wyeth Suaco’s argument that withholding tax at source should only be remitted to the BIR oncethe incomes subject to withholdingtax at source have actually been paid, the SC cited the lifeblooddoctrine, the express provision of the law which requires the filing of monthly return and payment of taxes withheld at source within 10 days after the end of each month. Further, the company uses accrualmethod of accounting and therefore the effect of transactions and other events on assetsand liabilities are recognized and reported in the time periods to which they relate rather than onlywhen cash is received or paid.
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