tax 2 cases week 1

7/25/2019 TAX 2 CASES WEEK 1

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TAX 2 Week 1 CasesAtty. Bobby Lock

SECOND DIVISION

G.R. No. 178697 : November 17, 2010

COMMISSIONER OF INTERNA REVEN!E, Petitioner, v. SON" #$II##INES, INC., Respondent.

D E C I S I O N

MENDO%A, J.:

This petition for review on Certiorariseeks to set aside the May 17, 2007 Decision and the July 5, 2007 Resolution of

the ourt of Ta! "ppeals # $n %anc&1' (T"#$%), in *T*"* $% +o* 0, affir-in. the /ctoer 2, 200 Decision of the

T"#3irst Division&2' which, in turn, partially .ranted the petition for review of respondent 4ony hilippines, 6nc*

(4ony)*craThe T"#3irst Division decision cancelled the deficiency assess-ent issued y petitioner o--issioner

of 6nternal Revenue (6R) a.ainst 4ony for alue "dded Ta! ("T) ut upheld the deficiency assess-ent for

e!panded withholdin. ta! ($8T) in the a-ount of 1,095,:7*70 and the penalties for late re-ittance of internal

revenue ta!es in the a-ount of 1,2, 59*0*&9'cralaw

T;$ 3"T4in. certain revenue

officers to e!a-ine 4ony?s ooks of accounts and other accountin. records re.ardin. revenue ta!es for @the period

17 and unverified prior years*A /n Dece-er , 1, a preli-inary assess-ent for 17 deficiency ta!es and

penalties was issued y the 6R which 4ony protested* Thereafter, actin. on the protest, the 6R issued final

assess-ent notices, the for-al letter of de-and and the details of discrepancies*&' 4aid details of the deficiency

ta!es and penalties for late re-ittance of internal revenue ta!es are as follows


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1

DEFICIENC" E'#ANDED

IT$$ODING TA' (ET)

(A**e**me+ No. ST&ET&97&012/&2000)

%asic Ta! Due 1,1,7*0

"dd< enalties

6nterest up to 9#91#2000 550,:5*:2

o-pro-ise 25,000*00 575,:5*:2

Deficiency $8T Due 1,2,2*72

DEFICIENC" OF VAT ON

RO"AT" #A"MENTS

(A**e**me+ No. ST&R1&97&0126&2000)

%asic Ta! Due

"dd< enalties

4urchar.e 95,177*:0

6nterest up to 9#91#2000 :7,5:0*9

o-pro-ise 1,000*00 2,75:*1

enalties Due 2,75:*1


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ATE REMITTANCE OF FINAIT$$ODING TA'

(A**e**me+ No. ST&R2&97&0127&2000)

%asic Ta! Due

"dd< enalties

4urchar.e 1,72,0*71

6nterest up to 9#91#2000 50:,7:9*07

o-pro-ise 50,000*002,2::,79*7:

enalties Due 2,2::,79*7:

ATE REMITTANCE OFINCOME #A"MENTS

(A**e**me+ No. ST&R&97&0128&2000)

%asic Ta! Due

"dd< enalties

25 B 4urchar.e :,:5*9

6nterest up to 9#91#2000 5:*2

o-pro-ise 2,000*00 10,29*0


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enalties Due 10,29*0

GRAND TOTA 1/,89/,62.6/&5'

4ony sou.ht re#evaluation of the afore-entioned assess-ent y filin. a protest on 3eruary 2, 2000* 4ony su-itted

relevant docu-ents in support of its protest on the 1th of that sa-e -onth*&'cralaw

/n /ctoer 2, 2000, within 90 days after the lapse of 1:0 days fro- su-ission of the said supportin. docu-ents to

the 6R, 4ony filed a petition for review efore the T"*&7'cralaw

"fter trial, the T"#3irst Division disallowed the deficiency "T assess-ent ecause the susidi>ed advertisin.

e!pense paid y 4ony which was duly covered y a "T invoice resulted in an input "T credit* "s re.ards the $8T,

the T"#3irst Division -aintained the deficiency $8T assess-ent on 4ony?s -otor vehicles and on professional fees

paid to .eneral professional partnerships* 6t also assessed the a-ounts paid to sales a.ents as co--issions with

five percent (5B) $8T pursuant to 4ection 1(.) of Revenue Re.ulations +o* #:5* The T"#3irst Division, however,

disallowed the $8T assess-ent on rental e!pense since it found that the total rental deposit of 10,529,:21* was

incurred fro- January to March 1: which was a.ain eyond the covera.e of =/" 179* $!cept for the

co-pro-ise penalties, the T"#3irst Division also upheld the penalties for the late pay-ent of "T on royalties, for

late re-ittance of final withholdin. ta! on royalty as of Dece-er 17 and for the late re-ittance of $8T y so-e of

4ony?s ranches*&:' 6n su-, the T"#3irst Division partly .ranted 4ony?s petition y cancellin. the deficiency "T

assess-ent ut upheld a -odified deficiency $8T assess-ent as well as the penalties* Thus, the dispositive portionreads


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lus 20B delinFuency interest fro- January 17, 2000 until fully paid pursuant to 4ection 2()(9) of the

17 Ta! ode*

4/ /RD$R$D*&'cralaw

The 6R sou.ht a reconsideration of the aove decision and su-itted the followin. .rounds in support

thereof


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"4 T/ R$4/+D$+T?4 D$366$+C $I"+D$D 86T;;/=D6+ T"I 6+ T;$ "M/E+T /3

;1,2,2*72


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covered y the investi.ation* Thus, if 6R wanted or intended the investi.ation to include the year 1:, it should

have done so y includin. it in the =/" or issuin. another =/"*

Epon review, the T"#$% even added that the covera.e of =/" 179, particularly the phrase @and unverified prior

years,A violated 4ection of Revenue Me-orandu- /rder +o* 9#0 dated 4epte-er 20, 10, the pertinent

portion of which reads


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(") Rate and %ase of Ta!* # There shall e levied, assessed and collected on every sale, arter or

e!chan.e of .oods or properties, value#added ta! eFuivalent to ten percent (10B) of the .ross

sellin. price or .ross value in -oney of the .oods or properties sold, artered or e!chan.ed, such

ta! to e paid y the seller or transferor*

Thus, there -ust e a sale, arter or e!chan.e of .oods or properties efore any "T -ay e levied* ertainly, therewas no such sale, arter or e!chan.e in the susidy .iven y 464 to 4ony* 6t was ut a dole out y 464 and not in

pay-ent for .oods or properties sold, artered or e!chan.ed y 4ony*

6n the case of 6R v* ourt of "ppeals ("),&29' the ourt had the occasion to rule that services rendered for a fee

even on rei-urse-ent#on#cost asis only and without reali>in. profit are also suHect to "T* The case, however, is

not applicale to the present case* 6n that case, /M"4$R/ rendered service to its affiliates and, in turn, the

affiliates paid the for-er rei-urse-ent#on#cost which -eans that it was paid the cost or e!pense that it incurred

althou.h without profit* This is not true in the present case* 4ony did not render any service to 464 at all* The services

rendered y the advertisin. co-panies, paid for y 4ony usin. 464 dole#out, were for 4ony and not 464* 464 Hust

.ave assistance to 4ony in the a-ount eFuivalent to the latter?s advertisin. e!pense ut never received any .oods,

properties or service fro- 4ony*

Re.ardin. the deficiency $8T assess-ent, -ore particularly 4ony?s co--ission e!pense, the 6R insists that said

deficiency $8T assess-ent is suHect to the ten percent (10B) rate instead of the five percent (5B) citin. Revenue

Re.ulation +o* 2#: dated "pril 17, 1:*&2' The said revenue re.ulation provides that the 10B rate is applied when

the recipient of the co--ission inco-e is a natural person* "ccordin. to the 6R, 4ony?s schedule of 4ellin., eneral

and "d-inistrative e!penses shows the co--ission e!pense as @co--issiondealer sales-an incentive,A

e-phasi>in. the word sales-an*

/n the other hand, the application of the five percent (5B) rate y the T"#3irst Division is ased on 4ection 1(.) of

Revenue Re.ulations+o* #:5 which provides


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withholdin. ta! on rokers and a.ents was only increased to 10B -uch later or y the end of July 2001 under

Revenue Re.ulations +o* #2001*&27' Entil then, the rate was only 5B*

The ourt also affir-s the findin.s of oth the T"#3irst Division and the T"#$% on the deficiency $8T assess-ent

on the rental deposit* "ccordin. to their findin.s, 4ony incurred the suHect rental deposit in the a-ount of

10,529,:21* only fro- January to March 1:* "s stated earlier, in the asence of the appropriate =/" specifyin.the covera.e, the 6R?s deficiency $8T assess-ent fro- January to March 1:, is not valid and -ust e

disallowed*

3inally, the ourt now proceeds to the third .round relied upon y the 6R*

The 6R initially assessed 4ony to e liale for penalties for elated re-ittance of its 38T on royalties (i) as of

Dece-er 17G and (ii) for the period fro- January to March 1:* ".ain, the ourt a.rees with the T"#3irst

Division when it upheld the 6R with respect to the royalties for Dece-er 17 ut cancelled that fro- January to

March 1:*

The 6R insists that under 4ection 9&2:' of Revenue Re.ulations+o* 5#:2 and 4ections 2*57* and 2*5:(")(2)(a)&2'

of Revenue Re.ulations +o* 2#:, 4ony should also e -ade liale for the 38T on royalties fro- January to March

of 1:* "t the sa-e ti-e, it downplays the relevance of the Manufacturin. =icense ".ree-ent (M=") etween 4ony

and 4ony#Japan, particularly in the pay-ent of royalties*

The aove revenue re.ulations provide the -anner of withholdin. re-ittance as well as the pay-ent of final ta! on

royalty* %ased on the sa-e, 4ony is reFuired to deduct and withhold final ta!es on royalty pay-ents when the royalty

is paid or is payale* "fter which, the correspondin. return and re-ittance -ust e -ade within 10 days after the end

of each -onth* The Fuestion now is when does the royalty eco-e payaleL

Ender "rticle I(5) of the M=" etween 4ony and 4ony#Japan, the followin. ter-s of royalty pay-ents were a.reed

upon


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6n view of the fore.oin., the ourt finds no reason to distur the findin.s of the T"#$%*

8;$R$3/R$, the petition is D$+6$D*

SO ORDERED.

T$IRD DIVISION

G.R. No. 1281/. 3+e 29, 1999.4

COMMISSIONER OF INTERNA REVEN!E, Petitioner, v. #ASCOR REAT" AND DEVEO#MENT

COR#ORATION, ROGEIO A. DIO 5+ VIRGINIA S. DIO, Respondents.

D E C I S I O N

#ANGANIAN, J.:

"n assess-ent contains not only a co-putation of ta! liailities, ut also a de-and for pay-ent within a prescried

period* 6t also si.nals the ti-e when penalties and interests e.in to accrue a.ainst the ta!payer* To enale the

ta!payer to deter-ine his re-edies thereon, due process reFuires that it -ust e served on and received y the

ta!payer* "ccordin.ly, an affidavit, which was e!ecuted y revenue officers statin. the ta! liailities of a ta!payer and

attached to a cri-inal co-plaint for ta! evasion, cannot e dee-ed an assess-ent that can e Fuestioned efore the

ourt of Ta! "ppeals*chanrolesvirtuallawlirary


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"s found y the ourt of "ppeals, the undisputed facts of the case are as follows


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that there was no for-al assess-ent issued, is untenale*

K6t is the ourt?s honest elief, that the cri-inal case for ta! evasion is already an assess-ent* The co-plaint, -ore

particularly, the Joint "ffidavit of Revenue $!a-iners =a.-ay and 4avellano attached thereto, contains the details of

the assess-ent like the kind and a-ount of ta! due, and the period covered*

Ketitioners are ri.ht, in clai-in. that the provisions of Repulic "ct +o* 1125, relatin. to e!clusive appellate

Hurisdiction of this ourt, do not, -ake any -ention of Kfor-al assess-ent*? The law -erely states, that this ourt has

e!clusive appellate Hurisdiction over decisions of the o--issioner of 6nternal Revenue on disputed assess-ents,

and other -atters arisin. under the +ational 6nternal Revenue ode, other law or part ad-inistered y the %ureau of

6nternal Revenue ode*

K"s far as this ourt is concerned, the a-ount and kind of ta! due, and the period covered, are sufficient details

needed for an Kassess-ent? these details are -ore than co-plete, co-pared to the followin. definitions of the ter-

as Fuoted hereunder* Thus


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constituted an assess-ent* 4ince the assailed /rder of the T" was -erely interlocutory and devoid of .rave ause

of discretion, a petition for certioraridid not lie*chanroles lawlirary < rednad

6ssues

etitioners su-it for the consideration of this ourt the followin. issues


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True, as pointed out y the private respondents, an assess-ent infor-s the ta!payer that he or she has ta! liailities*

%ut not all docu-ents co-in. fro- the %6R containin. a co-putation of the ta! liaility can e dee-ed assess-ents*

To start with, an assess-ent -ust e sent to and received y a ta!payer, and -ust de-and pay-ent of the ta!es

descried therein within a specific period* Thus, the +6R i-poses a 25 percent penalty, in addition to the ta! due, in

case the ta!payer fails to pay the deficiency ta! within the ti-e prescried for its pay-ent in the notice of

assess-ent* =ikewise, an interest of 20 percent per annu-, or such hi.her rate as -ay e prescried y rules and

re.ulations, is to e collected fro- the date prescried for its pay-ent until the full pay-ent* 12

The issuance of an assess-ent is vital in deter-inin. the period of li-itation re.ardin. its proper issuance and the

period within which to protest it* 4ection 209 19 of the +6R provides that internal revenue ta!es -ust e assessed

within three years fro- the last day within which to file the return* 4ection 222, 1 on the other hand, specifies a

period of ten years in case a fraudulent return with intent to evade was su-itted or in case of failure to file a return*

"lso, 4ection 22: 15 of the sa-e law states that said assess-ent -ay e protested only within thirty days fro-

receipt thereof* +ecessarily, the ta!payer -ust e certain that a specific docu-ent constitutes an assess-ent*

/therwise, confusion would arise re.ardin. the period within which to -ake an assess-ent or to protest the sa-e, or

whether interest and penalty -ay accrue thereon*

6t should also e stressed that the said docu-ent is a notice duly sent to the ta!payer* 6ndeed, an assess-ent is

dee-ed -ade only when the collector of internal revenue releases, -ails or sends such notice to the ta!payer* 1

6n the present case, the revenue officers? "ffidavit -erely contained a co-putation of respondents? ta! liaility* 6t did

not state a de-and or a period for pay-ent* 8orse, it was addressed to the Hustice secretary, not to the ta!payers*

Respondents -aintain that an assess-ent, in relation to ta!ation, is si-ply understood to

-ean


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an assess-ent*

6n addition, what private respondents sent to the co--issioner was a -otion for a reconsideration of the ta! evasion

char.es filed, not of an assess-ent, as shown thuses

failure to file a return* They add that a ta! assess-ent should precede a cri-inal indict-ent* 8e disa.ree* To

reiterate, said 4ection 222 states that an assess-ent is not necessary efore a cri-inal char.e can e filed* This isthe .eneral rule* rivate respondents failed to show that they are entitled to an e!ception* Moreover, the cri-inal

char.e need only e supported y a pri-a facie showin. of failure to file a reFuired return* This fact need not e

proven y an assess-ent*chanroles law lirary < red

The issuance of an assess-ent -ust e distin.uished fro- the filin. of a co-plaint* %efore an assess-ent is issued,

there is, y practice, a pre#assess-ent notice sent to the ta!payer* The ta!payer is then .iven a chance to su-it

position papers and docu-ents to prove that the assess-ent is unwarranted* 6f the co--issioner is unsatisfied, an

assess-ent si.ned y hi- or her is then sent to the ta!payer infor-in. the latter specifically and clearly that an

assess-ent has een -ade a.ainst hi- or her* 6n contrast, the cri-inal char.e need not .o throu.h all these* The

cri-inal char.e is filed directly with the D/J* Thereafter, the ta!payer is notified that a cri-inal case had een fileda.ainst hi-, not that the co--issioner has issued an assess-ent* 6t -ust e stressed that a cri-inal co-plaint is

instituted not to de-and pay-ent, ut to penali>e the ta!payer for violation of the Ta! ode*

8;$R$3/R$, the petition is herey R"+T$D* The assailed Decision is R$$R4$D and 4$T "46D$* T" ase

+o* 5271 is likewise D64M644$D* +o costs*

4/ /RD$R$D*


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SECOND DIVISION

G.R. No. &81--6. A33* 18, 1988.4

ONIFACIA S" #O, Petitioner, v. $ONORAE CO!RT OF TA' A##EAS AND $ONORAECOMMISSIONER OF INTERNA REVEN!E, Respondents.

5*o E. D35b5+ ;or Petitioner.

S"A!S

1* R$M$D6"= ="8G $6D$+$G 36+D6+4 /3 3"T4 /3 T;$ /ERT /3 T"I "$"=4G $+T6T=$D T/ T;$;6;$4T R$4$T* P 4ettled is the rule that the factual findin.s of the ourt of Ta! "ppeals are indin. upon this;onorale ourt and can only e distured on appeal if not supported y sustantial evidence* The e!istence offraud as found y the respondents can not e li.htly set aside asent sustantial evidence presented y the petitionerto counteract such findin.* The findin.s of fact of the respondent ourt of Ta! "ppeals are entitled to the hi.hestrespect* 8e do not find anythin. in the Fuestioned decision that should distur this lon.#estalished doctrine*

2* T"I"T6/+G T"I "44$44M$+T4G R$4EM$D /RR$T "+D M"D$ 6+ //D 3"6T;* P Ta! assess-ents yta! e!a-iners are presu-ed correct and -ade in .ood faith* The ta!payer has the duty to prove otherwise* 6n theasence of proof of any irre.ularities in the perfor-ance of duties, an assess-ent duly -ade y a %ureau of 6nternal

Revenue e!a-iner and approved y his superior officers will not e distured* "ll presu-ptions are in favor of thecorrectness of ta! assess-ents*

D E C I S I O N

SARMIENTO, J.:

This is an appeal fro- the decision 1 of the respondent ourt of Ta! "ppeals, dated 4epte-er 90, 1:7, whichaffir-ed an earlier decision of the correspondent o--issioner of 6nternal Revenue in assess-ent letters dated

"u.ust 1, 172 and 4epte-er 2, 172, which ordered the pay-ent y the petitioner of deficiency inco-e ta! for1 to 170 in the a-ount of 7,15,:5*1 and deficiency specific ta! for January 2, 1 January 1, 172, in the

a-ount of 5,55,009*:*chanroles law lirary < red

8e adopt the respondent court?s findin. of facts, to wit


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+o* 19#70 dated 3eruary 1, 171 ($!h* 9, pp* 592#599, 3older 66, %6R rec*) to conduct the correspondin.investi.ation in a -e-orandu- dated "pril 2, 171 (p* 52:, 3older 66, %6R rec*)* "ccordin.ly, a letter and a supoenaduces tecu- dated "pril 19, 171 and May 9, 171, respectively, were issued a.ainst 4ilver up reFuestin.production of the accountin. records and other related docu-ents for the e!a-ination of the tea-* ($!h* 11, pp* 525#52, 3older 66, %6R rec*)* Mr* o %ien 4in. did not produce his ooks of accounts as reFuested ("ffidavit datedDece-er 2, 171 of Mr* eneroso Nuinain of the tea-, p* 525, 3older 66, %6R rec*)* This pro-pted the tea- withthe assistance of the o-pany, eu ity, to enter the factory ode.a of 4ilver up and sei>ed different rands,

consistin. of 1,555 cases of alcohol products* ($!h* 22, Me-orandu- Report of the Tea- dated June 5, 171, pp*1#2, 3older 66, %6R rec*)* The inventory lists of the sei>ed alcohol products are contained in olu-es 6, 66, 666, 6and ($!hiits 1, 15, 1, 17 and 1:, respectively, %6R rec*)* /n the asis of the tea-?s report of investi.ation, therespondent o--issioner of 6nternal Revenue assessed Mr* o %ien 4in. deficiency inco-e ta! for 1 to 170 inthe a-ount of 7,15, :5*1 ($!h* pp* 17#1, 3older 6, %6R rec*) and for deficiency specific ta! for January 2, 1to January 1, 172 in the a-ount of 5,55,009*: ($!h* :, p* 107, 3older 6, %6R rec*)*

etitioner protested the deficiency assess-ents throu.h letters dated /ctoer and /ctoer 90, 172 ($!hs* 7 and, pp* 27#2:G pp* 152#15, respectively, %6R rec*), which protests were referred for reinvesti.ation* The correspondin.report dated "u.ust 19, 1:1 ($!h* 10, pp* 955, 3older 6, %6R rec*)* reco--ended the reiteratin. of the assess-entsin view of the ta!payer?s persistent failure to present the ooks of accounts for e!a-ination ($!h* :, p* 107, 3older 6,%6R, rec*), co-pellin. respondent to issue warrants of distraint and levy on 4epte-er 10, 1:1 ($!h* 11, p* 91,3older 6, %6R rec*)*

The warrants were ad-ittedly received y petitioner on /ctoer 1, 1:1 (ar* 6I, etitionG ad-itted par* 2, "nswer),

which petitioner dee-ed respondent?s decision denyin. her protest on the suHect assess-ents* ;ence, petitioner?sappeal on /ctoer 2, 1:1* 2

The petitioner assi.ns the followin. errors


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() 3ailure to su-it reFuired returns, state-ents, reports and other docu-ents* P 8hen a report reFuired y law asa asis for the assess-ent of any national internal revenue ta! shall not e forthco-in. within the ti-e fi!ed y law orre.ulation or when there is reason to elieve that any such report is false, inco-plete, or erroneous, theo--issioner of 6nternal Revenue shall assess the proper ta! on the est evidence otainale*

6n case a person fails to file a reFuired return or other docu-ent at the ti-e prescried y law, or willfully orotherwise, files a false or fraudulent return or other docu-ents, the o--issioner shall -ake or a-ended the returnfro- his own knowled.e and fro- his own knowled.e and fro- such infor-ation as he can otain throu.h testi-onyor otherwise, which shall e pri-a facie correct and sufficient for all le.al purposes*

The law is specific and clear* The rule on the est evidence otainale applies when a ta! report reFuired y law forthe purpose of assess-ent is not availale or when the ta! report is inco-plete or fraudulent*

6n the instant case, the persistent failure of the late o %ien 4in. and the herein petitioner to present their ooks ofaccounts for e!a-ination for the ta!ale years involved left the o--issioner of 6nternal Revenue no other le.aloption e!cept to report to the power conferred upon hi- under 4ection 1 of the Ta! ode*

The ta! fi.ures arrived at y the o--issioner of 6nternal Revenue are y no -eans aritrary* 8e reproduce therespondent court?s findin.s, to wited and consu-ed in the -anufacture of co-poundedliFuours and other products 20,105 dru-s of alcohol as raw -aterials :1,2::,7:7 proof liters of alcohol* "sdeter-ined, the total specific ta! liaility of the ta!payer for 1 to 171 a-ounted to 5,59,009*: (($!h* $,petition, p* 10, T" rec*)

=ikewise, the tea- found due fro- 4ilver up deficiency inco-e ta!es for the years 1 to 170 inclusive in thea..re.ate su- of 7,15,:5*1, as follows


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Ta! assess-ents y ta! e!a-iners are presu-ed correct and -ade in .ood faith* The ta!payer has the duty to proveotherwise* 7 6n the asence of proof of any irre.ularities in the perfor-ance of duties, an assess-ent duly -ade y a%ureau of 6nternal Revenue e!a-iner and approved y his superior officers will not e distured* : "ll presu-ptionsare in favor of the correctness of ta! assess-ents*

/n the whole, we find that the fraudulent acts detailed in the decision under review had not een satisfactorilyreutted y the petitioner* There are indeed clear indications on the part of the ta!payer to deprive the overn-ent of

the ta!es due* The "ssistant 3actory 4uperintendent of 4ilver up, +elson o .ave the followin.testi-ony


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SECOND DIVISION

G.R. NO. 177982 : O


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June 25, 200 at the =e.al Division, Revenue Re.ion +o* :, Makati ity is nowhere to e found in the %6R Records

nor reflected in the Record %ook of the =e.al Division as nor-ally done y our receivin. clerk when she receive&s'

any docu-ent* The respondent, therefore, has le.al asis to collect the ta! liaility either y distraint and levy or civil

action*7(Emphasis and underscoring supplied)cralawlirary

The aforecited 4ection 222(a):of the 17 Ta! ode providesance of in the civil or cri-inal action for

the collection thereof* (Underscoring supplied)cralawlirary

The %ureau of 6nternal Revenue (%6R) in fact filed on March 10, 2005 a cri-inal co-plaint efore the Depart-ent of

Justice a.ainst the officers and accountant of petitioner for violation of the provisions of The +ational 6nternal

Revenue ode of 177, as a-ended,coverin. the ta!ale year 15* The cri-inal co-plaint was docketed as 6*4*

+o* 2005#209*

/n -otion of petitioner in T" ase +o* 710, a preli-inary hearin. on the issue of prescription10was conducted

durin. which petitioners for-er ookkeeper attested that a for-er collea.ue # certified pulic accountant =eonardo

4alan (4alan) # ille.ally took custody of petitioners accountin. records, invoices, and official receipts and turned

the- over to the %6R*11

/n petitioners reFuest, a supoena ad testificandu- was issued to 4alan for the hearin. efore the T" scheduled

on 4epte-er , 200 ut he failed to appear*12

etitioner thus reFuested for the issuance of another supoena adtestificandumto 4alan for the hearin. scheduled

on /ctoer 29, 200,19and of supoena duces tecumto the chief of the +ational 6nvesti.ation Division of the %6R for

the production of the "ffidavit of the 6nfor-er earin. on the assess-ent in Fuestion*1etitioners reFuests were

.ranted*15

Durin. the scheduled hearin. of the case on /ctoer 29, 200, on respondents counsels -anifestation that he was

not furnished a copy of petitioners -otion for the issuance of supoenaes, the T" ordered petitioner to file a -otion

for the issuance of supoenas and to furnish respondents counsel a copy thereof*1etitioner co-plied with the T"

order*17

6n a related -ove, petitioner su-itted written interro.atories addressed to 4alan and to ;enry 4ar-iento and

Marinella er-an, revenue officers of the +ational 6nvesti.ation Division of the %6R*1:

%y Re*o3o+1o; 5+35r? 1/, 2007, the T" denied petitioners Motion for 6ssuance of 4upoenas and disallowed

the su-ission y petitioner of written interro.atories to 4alan, who is not a party to the case, and the revenue

officers,20it findin. that the testi-ony, docu-ents, and ad-issions sou.ht are not relevant*21%esides, the T" found

that to reFuire 4alan to testify would violate 4ection 2 of Repulic "ct +o* 299:, as i-ple-ented y 4ection 12 of

3inance Depart-ent /rder +o* #, proscriin. the revelation of identities of infor-ers of violations of internalrevenue laws, e!cept when the infor-ation is proven to e -alicious or false*22

6n any event, the T" held that there was no need to issue a supoena duces tecumto otain the "ffidavit of the

6nfor-er as the sa-e for-ed part of the %6R records of the case, the production of which had een ordered y it*29

etitioners Motion for Reconsideration2of the T" Resolution of January 15, 2007 was denied,25hence, the present

etition for ertiorari2which i-putes .rave ause of discretion to the T"
http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt7http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt7http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt8http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt8http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt8http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt9http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt9http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt10http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt11http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt12http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt12http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt13http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt13http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt13http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt14http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt15http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt16http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt16http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt16http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt17http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt17http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt18http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt19http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt19http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt20http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt20http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt20http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt21http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt22http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt23http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt24http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt24http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt25http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt26http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt26http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt26http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt7http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt8http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt9http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt10http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt11http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt12http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt13http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt14http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt15http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt16http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt17http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt18http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt19http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt20http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt21http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt22http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt23http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt24http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt25http://www.chanrobles.com/cralaw/2008octoberdecisions.php?id=1218#fnt26


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6*

! ! ! in holdin. that the le.ality of the -ode of acFuirin. the docu-ents which are the ases of the aove discussed

deficiency ta! assess-ents, the suHect -atter of the etition for Review now pendin. in the ;onorale 4econd

Division, is not -aterial and relevant to the issue of prescription*

66*

! ! ! in holdin. that Mr* =eonardo 4alans testi-ony, if allowed, would violate R" 299: which prohiits the %6R to

reveal the identity of the infor-er since 1) the purpose of the supoena is to elicit fro- hi- the whereaouts of the

ori.inal accountin. records, docu-ents and receipts owned y the etitioner and not to discover if he is the infor-er

since the identity of the infor-er is not relevant to the issues raisedG 2) R" 299: cannot le.ally Hustify violation of the

etitioners property ri.hts y a person, whether he is an infor-er or not, since such R" cannot allow such invasion of

property ri.hts otherwise R" 299: would run counter to the constitutional -andate that no person shall e deprive&d'

of life, lierty or property without due process of law*

666*

! ! ! in holdin. that the issuance of supoena ad testificandu- would constitute a violation of the prohiition to revealthe identity of the infor-er ecause co-pliance with such prohiition has een rendered -oot and acade-ic y the

voluntary ad-issions of the Respondent hi-self*

6*

! ! ! in holdin. that the constitutional ri.ht of an accused to e!a-ine the witness a.ainst hi- does not e!ist in this

case* The etitioners liaility for ta! deficiency assess-ent which is the -ain issue in the etition for Review is

currently pendin. at the ;onorale 4econd Division* Therefore, it is a preHudicial Fuestion raised in the cri-inal case

filed y the herein Respondent a.ainst the officers of the etitioner with the Depart-ent of Justice*

*

! ! ! in dis-issin. the reFuest for supoena ad testificandu- ecause the /pposition thereto su-itted y the

Respondent was not pro-ptly filed as provided y the Rules of ourt thus, it is respectfully su-itted that,

Respondent has waived his ri.ht to oHect thereto*

6*

! ! ! when the ;onorale ourt of Ta! "ppeals ruled that the purpose of the etitioner in reFuestin. for written

interro.atories is to annoy, e-arrass, or oppress the witness ecause such rulin. has no factual asis since

Respondent never alle.ed nor proved that the witnesses to who- the interro.atories are addressed will e annoyed,

e-arrassed or oppressedG esides the only ovious purpose of the etitioner is to know the whereaouts of

accountin. records and docu-ents which are in the possession of the witnesses to who- the interro.atories are

directed and to ulti-ately .et possession thereof* rantin. without ad-ittin. that there is annoyance, e-arrass-ent

or oppressionG the sa-e is not unreasonale*

66*

! ! ! when it failed to rule that the %6R officers and e-ployees are not covered y the prohiition under R" 299: and

do not have the authority to withhold fro- the ta!payer docu-ents owned y such ta!payer*

666*


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! ! ! when it reFuired the clear and uneFuivocal proof of relevance of the docu-ents as a condition precedent for

the issuance of supoena duces tecu-*

6I*

! ! ! when it Fuashed the supoena duces tecu- as the ;onorale ourt had issued an outstandin. order to the

Respondent to certify and forward to the T" all the records of the case ecause up to the date of this etition the%6R records have not een su-itted yet to the T"*27

rave ause of discretion i-plies such capricious and whi-sical e!ercise of Hud.-ent as eFuivalent to lack of

Hurisdiction or, in other words, when the power is e!ercised in an aritrary or despotic -anner y reason of passion or

personal hostility, and it -ust e so patent and .ross as to a-ount to an evasion of positive duty or a virtual refusal of

duty enHoined or to act at all in conte-plation of law*2:

The ourt finds that the issuance y the T" of the Fuestioned resolutions was not tainted y aritrariness*

The fact that 4alan was not a party to the case aside, the testi-onies, docu-ents, and ad-issions sou.ht y

petitioner are not indeed relevant to the issue efore the T"* 3or in reFuestin. the issuance of the supoenas and

the su-ission of written interro.atories, petitioner sou.ht to estalish that its accountin. records and relateddocu-ents, invoices, and receipts which were the ases of the assess-ent a.ainst it were ille.ally otained* The

only issues, however, which surfaced durin. the preli-inary hearin. efore the T", were whether respondents

issuance of assess-ent a.ainst petitioner had prescried and whether petitioners ta! return was false or fraudulent*

%esides, as the T" held, the supoenas and answers to the written interro.atories would violate 4ection 2 of

Repulic "ct +o* 299: as i-ple-ented y 4ection 12 of 3inance Depart-ent /rder +o* #*

etitioner clai-s, however, that it only intended to elicit infor-ation on the whereaouts of the docu-ents it needs in

order to refute the assess-ent, and not to disclose the identity of the infor-er*2etitioners position does not

persuade* The interro.atories addressed to 4alan and the revenue officers show that they were intended to confir-

petitioners elief that 4alan was the infor-er* Thus the Fuestions for 4alan reader >5+ >e @er*o+ >o*e +er+5 reve+3e 5= 5b? *

*3bBe5v+ @o**e**o+,


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+o* 2005#209, the respondents in the latter proceedin. are the officers and accountant of petitioner#corporation, not

petitioner* 3ro- the co-plaint and supportin. affidavits in 6*4* +o* 2005#209, 4alan does not even appear to e a

witness a.ainst the respondents therein*9

"T "== $$+T4, issuance of supoena duces tecumfor the production of the docu-ents reFuested y the petitioner

# which docu-ents petitioner clai-s to e crucial to its defense95# is unnecessary in view of the T" order for

respondent to certify and forward to it all the records of the case*9

6f the order has not een co-plied with, the T"can enforce it y citin. respondent for indirect conte-pt*97

$EREFORE, in li.ht of the fore.oin. disFuisition, the petition is DISMISSED*

osts a.ainst petitioner*

SO ORDERED.

EN ANC

G.R. No. &1-/19. 3? 26, 1960.4

RE#!IC OF T$E #$II##INES, Plaintiff-Appellant, v. !IS G. AA%A, Defendant-Appellee.

A***5+ So


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the overn-ent and to its citi>ensG to the overn-ent ecause ta! officers would e oli.ed to act pro-ptly in the-akin. of assess-ent, and to citi>ens ecause after the lapse of the period of prescription citi>ens would have afeelin. of security a.ainst unscrupulous ta! a.ents who will always find an e!cuse to inspect the ooks of ta!payers,not to deter-ine the latter?s real liaility, ut to take advanta.e of every opportunity to -olest peaceful, law#aidin.citi>ens* 8ithout such a le.al defense ta!payers would further-ore e under oli.ation to always keep their ooksand keep the- open for inspection suHect to harass-ent y unscrupulous ta! a.ents*

2* 6D*G 6D*G 6D*G R$M$D6"= M$"4ER$G 6+T$RR$T"T6/+* P The law of prescription ein. a re-edial -easureshould e interpreted in a way conducive to rin.in. aout the eneficient purpose of affordin. protection to theta!payer within the conte-plation of the o--ission which reco--end the approval of the law*

D E C I S I O N

ARADOR, J.:

"ppeal fro- a Hud.-ent of the ourt of 3irst 6nstance of Manila, ;on* ar-elino * "lvendia, presidin., dis-issin. anaction instituted y the overn-ent to recover inco-e ta!es fro- the defendant#appellee correspondin. to the years15, 1, 17 and 1:*

The record discloses that on /ctoer 9, 151, the ollector of 6nternal Revenue assessed inco-e ta!es for the years15, 1, 17 and 1: on the inco-e ta! returns of defendant#appellee =uis * "la>a* The assess-ents total5,25*70 ($!hiit 6)* /n /ctoer 1, 151, the accountants for "la>a reFuested a reinvesti.ation of "la>a?s ta!liaility, on the .round that (1) the assess-ent is erroneous and inco-pleteG (2) the assess-ent is ased on third#party infor-ation and (9) neither the ta!payer nor his accountants were per-itted to appear in person ($!h* J)* Thepetition for reinvesti.ation was .ranted in a letter of the ollector of 6nternal Revenue, dated /ctoer 17, 151* /n/ctoer 90, 151, the accountants for "la>a a.ain sent another letter to the ollector of 6nternal Revenue su-ittin.a copy of their own co-putation ($!h* =)* /n /ctoer 29, 152, said accountants a.ain su-itted a supple-ental-e-orandu- ($!h* M)* /n March 10, 15, the accountants for "la>a sent a letter to the e!a-iner of accountsand collections of the %ureau of 6nternal Revenue, statin.a sent aletter to the ollector of 6nternal Revenue, dated May :, 157, protestin. the assess-ents, on the .round that theinco-e ta!es are no lon.er collectile for the reason that they have already prescried* "s the ollector did not a.reeto the alle.ed clai- of prescription, action was instituted y hi- in the ourt of 3irst 6nstance to recover the a-ountassessed* The ourt of 3irst 6nstance upheld the contention of "la>a that the action to collect the said inco-e ta!eshad prescried* ".ainst this decision the case was rou.ht here on appeal, where it is clai-ed y the overn-entthat the prescriptive period has not fully run at the ti-e of the assess-ent, in view especially of the letter of the

accountants of "la>a, dated March 10, 15, pertinent provisions of which are Fuoted aove*

6t is of course true that when on /ctoer 1, 151, "la>a?s accountants reFuested a reinvesti.ation of theassess-ent of the inco-e ta!es a.ainst hi-, the period of prescription of action to collect the ta!es was suspended*(4ec* 999, * "* +o* *) The provision of law on prescription was adopted in our statute ooks uponreco--endation of the ta! co--issioner of the hilippines which declares


27/56

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years fro- the date of assess-ent thereof* Just as the .overn-ent is interested in the staility of its collections, soalso are the ta!payers entitled to an assurance that they will not e suHected to further investi.ation for ta! purposesafter the e!piration of a reasonale period of ti-e* (ol* 66, Report of the Ta! o--ission of the hilippines, pp* 921#922)

The law prescriin. a li-itation of actions for the collection of the inco-e ta! is eneficial oth to the overn-ent andto its citi>ensG to the overn-ent ecause ta! officers would e oli.ed to act pro-ptly in the -akin. of assess-ent,

and to citi>ens ecause after the lapse of the period of prescription citi>ens would have a feelin. of security a.ainstunscrupulous ta! a.ents who will always find an e!cuse to inspect the ooks of ta!payers, not to deter-ine thelatter?s real liaility, ut to take advanta.e of every opportunity to -olest peaceful, law#aidin. citi>ens* 8ithout sucha le.al defense ta!payers would further-ore e under oli.ation to always keep their ooks and keep the- open forinspection suHect to harass-ent y unscrupulous ta! a.ents* The law on prescription ein. a re-edial -easureshould e interpreted in a way conducive to rin.in. aout the eneficient purpose of affordin. protection to theta!payer within the conte-plation of the o--ission which reco--end the approval of the law*

The Fuestion in the case at ar oils down to the interpretation of $!hiit , dated March 10, 15, Fuoted aove* 6fsaid letter e interpreted as a reFuest for further investi.ation or a new investi.ation, different and distinct fro- theinvesti.ation de-anded or prayed for in "la>a?s first letter, $!hiit =, then the period of prescription would continueto e suspended therey* %ut if the letter in Fuestion does not ask for another investi.ation, the result would e Hustthe opposite* 6n our opinion the letter in Fuestion, $!hiit , does not ask for another investi.ation* 6ts firstpara.raph Fuoted aove shows that the reinvesti.ation then ein. conducted was y virtue of its reFuest of /ctoer1, 151* "ll that the letter asks is that the ta!payer e furnished a copy of the co-putation* The reFuest -ay e

e!plained in this -anner< "s the reinvesti.ation was allowed on /ctoer 1, 151 and on /ctoer 1, 151, theta!payer supposed or e!pected that at that ti-e, March, 15 the reinvesti.ation was aout to e finished and hewanted a copy of the re#assess-ent in order to e prepared to ad-it or contest it* +owhere does the letter i-ply ade-and or reFuest for a different or new and distinct reinvesti.ation fro- that already reFuested and, therefore, thesaid letter -ay not e interpreted to authori>e or Hustify the continuance of the suspension of the period of li-itations*

8e find the appeal without -erit and we herey affir- the Hud.-ent of the lower court dis-issin. the action* 8ithoutcosts*

aras, C.J., %en.>on, Monte-ayor, %autista "n.elo, oncepcin, Reyes, J* %* =*, $ndencia, %arrera and utiUrre>David, JJ., concur*

FIRST DIVISION

G.R. NO. 1621// : A33* 28, 20074

COMMISSIONER OF INTERNA REVEN!E 5+ ART!RO V. #ARCERO + >* o;;


28/56

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This etition for Review on Certiorari1seeks to set aside the "u.ust 1, 2009 decision2of the ourt of "ppeals (") in"#*R* 4 +o* 7:2 and its 3eruary , 200 resolution denyin. reconsideration*9

/n March 11, 1, ilert Cap, vice chair of respondent ri-etown roperty roup, 6nc*, applied for the refund orcredit of inco-e ta! respondent paid in 17* 6n Caps letter to petitioner revenue district officer "rturo * arcero ofRevenue District +o* 0 (Makati) of the %ureau of 6nternal Revenue (%6R),he e!plained that the increase in the costof laor and -aterials and difficulty in otainin. financin. for proHects and collectin. receivales caused the real

estate industry to slowdown*5"s a conseFuence, while usiness was .ood durin. the first Fuarter of 17,respondent suffered losses a-ountin. to 71,:7,22: that year*

"ccordin. to Cap, ecause respondent suffered losses, it was not liale for inco-e ta!es*7+evertheless, respondentpaid its Fuarterly corporate inco-e ta! and re-itted creditale withholdin. ta! fro- real estate sales to the %6R in thetotal a-ount of 2,91:,9:*92*:Therefore, respondent was entitled to ta! refund or ta! credit*

/n May 19, 1, revenue officer $li>aeth C* 4antos reFuired respondent to su-it additional docu-ents to supportits clai-*10Respondent co-plied ut its clai- was not acted upon* Thus, on "pril 1, 2000, it filed a etition forReview 11in the ourt of Ta! "ppeals (T")*

/n Dece-er 15, 2000, the T" dis-issed the petition as it was filed eyond the two#year prescriptive period forfilin. a Hudicial clai- for ta! refund or ta! credit*126t invoked 4ection 22 of the +ational 6nternal Revenue ode(+6R)*

6n order to deter-ine the reasonaleness or unreasonaleness, there -ust e a asis* 8itness will have to answer

the Fuestion*

"* Ces*

x x x

N* "s of 4epte-er 90, 155 when the "yala 4ecurities orporation filed its inco-e ta! return, were the officers of

the "yala 4ecurities orporation and the "yala and o-pany housed in the sa-e uildin.L

"* Ces, sirG they were*

N* "nd also are the e-ployees of the "yala 4ecurities orporation and the "yala and o-pany the sa-e P-eanin. that the e-ployees of the "yala 4ecurities orporation are also the e-ployees of the "yala and o-panyL

"* "t the ti-e, if 6 re-e-er ri.ht, "yala and o-pany was the operatin. co-pany and the e-ployees were the

e-ployees of the "yala and o-panyG (t*s*n*, pp* 92#97)

"nother witness, Mr* 4alvador J* =orayes, the 4ecretary and head of the =e.al Depart-ent of the corporation, also

testified that


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Page38


another affiliate, no (t*s*n*, pp* 1#150)* * * * chanroles virtualawlirary chanroles*co-, uerrero and De astro, Q, JJ., concur*

Melencio#;errera, J., took no part*

EN ANC

G.R. No. &20601. Febr35r? 28, 1966.4

!T!AN SAMI, INC., Petitioner, v. CO!RT OF TA' A##EAS, ET A., Respondents.

D5v G. N5;5+ ;or >e @eo+er.

Soe re*@o+e+*.

S"A!S


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1* T"I"T6/+G 4"=$4 T"IG 4"=$4 /3 =/4 3*/*%*, "E4"+* P etitioner sold lo.s to Japanese fir-s at prices3/% ".usan* The 3/% feature of the sales indicated that the parties intended the title to pass to the uyer upondelivery of the lo.s in ".usan on oard the vessels that took the .oods to Japan* The sales ein. do-estic or local,they are suHect to sales ta! under the provision of 4ection 1: of the Ta! ode, as a-ended*

2* 6D*G 6D*G 6D*G //D4 D$=6$R"%=$ T/ /RD$R /3 4$==$R /R ;64 "$+T* P The specification in the ill ofladin. that the .oods are deliverale to the order of the seller or his a.ent does not necessarily ne.ate the passin. of

title to the .oods upon delivery to the carrier*

9* 6DG 6D*G R$4R6T6/+G 6+/M$ T"I R$TER+ +/T D$$M$D " R$TER+ 3/R 4"=$4 T"I* P 3or purposesof co-putin. the period of prescription under 4ection 991 of the Ta! ode, an inco-e ta! return cannot econsidered as a return for co-pensatin. ta!* The ta!payer -ust file a return for the particular ta! law*, 6f he does notfile such a return, an assess-ent -ay e -ade within ten years fro- and after the discovery of the o-ission to filethe return* (4ection 992(a) of the Ta! odeG %isaya =and Transportation o*, 6nc, v* ollector of 6nternal Revenue Vollector of 6nternal Revenue v* %isaya =and Transportation o*, 6nc* *R* +os* =#12100 V 11:12, May 2, 150)*

D E C I S I O N

RE"ES, ..., J.:

"ppeal fro- a decision of the ourt of Ta! "ppeals, in its T" ase +o* 5, orderin. petitioner herein, %utuan4aw-ill, 6nc*, to pay respondent o--issioner of 6nternal Revenue the su- of 9,107*7 as deficiency sales ta!and surchar.e due on its sales of lo.s to uyers in Japan fro- January 91, 151 to June :, 159*

The facts, as found and stated y the lower court in its decision, are in full accord with the evidences presentedthereinG hence, we Fuote hereunder


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/n the first issue, petitioner herein insists that the circu-stances enu-erated in the aove findin., which this ourthad, in previous decisions (f* 3ootnote &1'), considered as deter-inative of the place of transfer of ownership of thelo.s sold, for purposes of ta!ation, are not in the-selves evidentiary indications to show that the parties intended thetitle of the lo.s to pass to the Japanese uyers in Japan* Thus, it points out that the 3/% feature of the salescontract was -ade only to fi! its price and not to fi! the place of deliveryG that the reFuire-ent of certification ofFuality, Fuantity and -easure-ent specifications of the lo.s y local authorities was done to co-ply with local laws,

rules, and re.ulations and was not a part of the sales arran.e-entG that the pay-ent of frei.ht y the Japaneseuyers is not an unco--on feature of 3/% ship-entsG and that the pay-ent of prices y -eans of irrevocaleletters of credit is ut a co--on estalished usiness practice to secure pay-ent of the price to the seller* 6t alsoinsists that even assu-in. that the 3/% feature of the disputed sales deter-ines the situs of transfer of ownership,the sa-e is -erely a pri-a facie presu-ption which yields to contrary proof such as that the lo.s were -adedeliverale to the order of the shipper and the lo.s were shipped at the risk of the shipper, which circu-stances, ifconsidered, would ne.ate the aove i-plications* ;ence, petitioner herein contends that the disputed sales wereconsu--ated in Japan, and, therefore, not suHect to the ta!in. Hurisdiction of our overn-ent*

The aove contentions of petitioner were devoid of -erit* 6n a decided case with practically identical set of factsotainin. in the case at ar, this ourt declared


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contract*cralaw virtua1aw lirary

Moreover, it has een a settled rule that in petitions to review decisions of the ourt of Ta! "ppeals, only Fuestionsof law -ay e raised and -ay e passed upon y this ourt (utierre> v* ourt of "ppeals V ollector of 6nternalRevenue v* utierre>, *R* +os* =#79: V =#771, May 21, 157, cited in 4anche> v* o--issioner of usto-s,*R* +o* =#:55, 4epte-er 90, 157)G and it havin. een found that there is no proof to sustantiate the fore.oin.contention of petitioner, the sa-e should also e ruled as devoid of -erit*

/n the second issue, petitioner avers that the filin. of its inco-e ta! returns, wherein the proceeds of the disputedsales were declared, is sustantial co-pliance with the reFuire-ent of filin. a sales ta! return, and, if there should edee-ed a return filed, 4ection 991, and not 4ection 992, (a), of the Ta! ode providin. for a five year prescriptiveperiod within which to -ake an assess-ent and collection of the ta! in Fuestion fro- the ti-e the return was dee-edfiled, should e applied to the case at ar* 4ince petitioner filed its inco-e ta! returns for the year 151, 152 and159, and the assess-ent was -ade in 157 only, it further contends that the assess-ent of the sales ta!correspondin. to the years 151 and 152 has already prescried for havin. een -ade outside the five#year periodprescried in 4ection 991 of the Ta! ode and should, therefore, e deducted fro- the assess-ent of the deficiencysales ta! -ade y Respondent*

The aove contention has already een raised and reHected as not -eritorious in a previous case decided y thisourt* Thus, we held that an inco-e ta! return cannot e considered as a return for co-pensatin. ta! for purposes ofco-putin. the period of prescription under 4ection 991 of the Ta! ode, and that the ta!payer -ust file a return forthe particular ta! reFuired y law in order to avail hi-self of the enefits of 4ection 991 of the Ta! odeG otherwise, if

he does not file a return, an assess-ent -ay e -ade within the ti-e stated in 4ection 992(a) of the sa-e ode(%isaya =and Transportation o*, 6nc* v* ollector of 6nternal Revenue V ollector of 6nternal Revenue v* %isaya =andTransportation o*, 6nc* *R* +os* =#12100 V =#11:12* May 2, 15)* The principle enunciated in this last cited caseis applicale y analo.y to the case at ar*

6t ein. undisputed that petitioner failed to file a return for the disputed sales correspondin. to the year 151, 152and 159, and this o-ission was discovered only on 4epte-er 17, 157, and that under 4ection 992(a) of the Ta!ode assess-ent thereof -ay e -ade within ten (10) years fro- and after the discovery of the o-ission to file thereturn, it is evident that the lower court correctly held that the assess-ent and collection of the sales ta! in Fuestionhas not yet prescried*

8herefore, the decision appealed fro- should e, as it is herey, affir-ed, with costs a.ainst petitioner*

%en.>on, C.J., %autista "n.elo, oncepcion, %arrera, Di>on, Re.ala, Makalintal, %en.>on, J**, Saldivar and4anche>, JJ., concur*

EN ANC

G.R. No. &19727. M5? 20, 196/.4

T$E COMMISSIONER OF INTERNA REVEN!E, Petitioner, v. #$OENI' ASS!RANCE CO., TD.,Respondent.

G.R. No. &1990. M5? 20, 196/.4

#$OENI' ASS!RANCE CO., TD., Petitioner, v. COMMISSIONER OF INTERNA REVEN!E,Respondent.

So


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S?ed therein*

* 6D*G 6D*G 6T$M4 /3 6+/M$ +/T %$=/+6+ T/ ;6=66+$4 $I=ED$D 6+ D$T$RM6+6+ $I$+4$4"==/"%=$ T/ ;6=66+$4* P 4ince the ite-s of inco-e not elon.in. to its hilippine usiness are not ta!aleto its hilippine ranch, they should e e!cluded in deter-inin. the head office e!penses allocale to a hilippineranch of a forei.n corporation*

5* 6D*G 6D*G 6+T$R$4T /+ T"I$4 E+"6D DE$ T/ /MM6446/+$R?4 /6+6/+ 6M/4$D /+=C 3R/M3"6=ER$ T/ /M=C 86T; /ERT?4 36+"= JEDM$+T* P 8here the ta!payer?s failure to pay the withholdin.ta! was due to the o--issioner?s opinion that no withholdin. ta! was due, the ta!payer can e liale for thepay-ent of statutory penalties only upon its failure to co-ply with the ourt?s final Hud.-ent*

D E C I S I O N

ENG%ON, .#., J.:

3ro- a Hud.-ent of the ourt of Ta! "ppeals in * T* "* ases +os* 905 and 59, consolidated and Hointly heardtherein, these two appeals were taken* 4ince they involve the sa-e facts and interrelated issues, the appeals areherein decided to.ether*

hoeni! "ssurance o*, =td*, a forei.n insurance corporation or.ani>ed under the laws of reat %ritain, is licensed todo usiness in the hilippines with head office in =ondon* Throu.h its head office it entered, in =ondon, intoworldwide reinsurance treaties with various forei.n insurance co-panies* 6t a.reed to cede a portion of pre-iu-sreceived on ori.inal insurances underwritten y its head office, susidiaries, and ranch offices throu.hout the world,in consideration for assu-ption y the forei.n insurance co-panies of an eFuivalent portion of the liaility fro- suchori.inal insurances*

ursuant to such reinsurance treaties, hoeni! "ssurance o*, =td* ceded portions of the pre-iu-s it earned fro- its

underwritin. usiness in the hilippines, as follows


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ta!


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Page44


"-ount allowed 20,0:5*0 15,:2*95

PPPPP

+et inco-e per investi.ation 2:,997*

PPPPP

Ta! due thereon 5,7*00

WWWWWWWWW

15

+et inco-e per audited return 10,920*21

Enallowale deductions and additional inco-e


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the ta! unpaid, plus interest at the rate of 1B a -onth fro- the date of delinFuency to the date of pay-ent, providedthat the -a!i-u- a-ount that -ay e collected as interest shall not e!ceed the a-ount correspondin. to a period ofthree (9) years* 8ithout pronounce-ent as to costs*cralaw virtua1aw lirary

hoeni! "ssurance o*, =td* and the o--issioner of 6nternal Revenue have appealed to this ourt raisin. thefollowin. issues< (1) 8hether or not reinsurance pre-iu-s ceded to forei.n reinsurers not doin. usiness in thehilippines pursuant to reinsurance contracts e!ecuted aroad are suHect to withholdin. ta!G (2) 8hether or not the

ri.ht of the o--issioner of 6nternal Revenue to assess deficiency inco-e ta! for the year 152 a.ainst hoeni!"ssurance o*, =td* has prescriedG (9) 8hether or not the deduction clai-ed y hoeni! "ssurance o*, =td* as netaddition to reserve for the year 150 is e!cessiveG () 8hether or not the deductions clai-ed y hoeni! "ssuranceo*, =td* for head office e!penses allocale to hilippine usiness for the years 152, 159 and 15 are e!cessive*

The Fuestion of whether or not reinsurance pre-iu-s ceded to forei.n reinsurers not doin. usiness in thehilippines pursuant to contracts e!ecuted aroad are inco-e fro- sources within the hilippines suHect towithholdin. ta! under 4ection 59 and 5 of the Ta! ode has already een resolved in the affir-ative in %ritishTraders? 6nsurance o*, =td* v* o--issioner of 6nternal Revenue, =#20501, "pril 90, 15* 1

8e co-e to the issue of prescription* hoeni! "ssurance o*, =td* filed its inco-e ta! return for 152 on "pril 1, 159showin. a loss of 1,5:9*9* 6t a-ended said return on "u.ust 90, 155 reportin. a ta! liaility of 2,502 00* /nJuly 2, 15:, after e!a-ination of the a-ended return, the o--issioner of 6nternal Revenue assessed deficiencyinco-e ta! in the su- of 5,7*00* The ourt of Ta! "ppeals found the ri.ht of the o--issioner of 6nternalRevenue arred y prescription, the sa-e havin. een e!ercised -ore than five years fro- the date the ori.inal

return was filed* /n the other hand, the o--issioner of 6nternal Revenue insists that his ri.ht to issue theassess-ent has not prescried inas-uch as the sa-e was availed of efore the 5#year period provided for in 4ection991 of the Ta! ode e!pired, countin. the runnin. of the period fro- "u.ust 90, 155, the date when the a-endedreturn was filed*

4ection 991 of the Ta! ode, which li-its the ri.ht of the o--issioner of 6nternal Revenue to assess inco-e ta!within five years fro- the filin. of the inco-e ta! return, states


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sustantially different fro- the ori.inal return, the period of li-itation of the ri.ht to issue the sa-e should e countedfro- the filin. of the a-ended inco-e ta! return* 3ro- "u.ust 90, 155, when the a-ended return was filed, to July2, 15:, when the deficiency assess-ent was issued, less than five years elapsed* The ri.ht of the o--issionerto assess the deficiency ta! on such a-ended return has not prescried*

To stren.then our opinion, we elieve that to hold otherwise, we would e pavin. the way for ta!payers to evade thepay-ent of ta!es y si-ply reportin. in their ori.inal return heavy losses and a-endin. the sa-e -ore than five

years later when the o--issioner of 6nternal Revenue has lost his authority to assess the proper ta! thereunder*The oHect of the Ta! ode is to i-pose ta!es for the needs of the overn-ent, not to enhance ta! avoidance to itspreHudice*

8e ne!t consider hoeni! "ssurance o*, =td*?s clai- for deduction of 97,17*0 for 150 representin. net additionto reserve co-puted at 0B of the -arine insurance pre-iu-s received durin. the year* Treatin. said deduction toe e!cessive, the o--issioner of 6nternal Revenue reduced the sa-e to 25,97*7 which is eFuivalent to 100B ofall -arine insurance pre-iu-s received durin. the last three -onths of the year*

ara.raph (a) of 4ection 92 of the Ta! ode states


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(2) $!penses allowale to non#resident alien individuals and forei.n corporations* P 6n the case of a non#residentalien individual or a forei.n corporation, the e!penses deductile are the necessary e!penses paid or incurred incarryin. on any usiness or trade conducted within the hilippines e!clusively* (Emphasis supplied*)

onseFuently, the deficiency assess-ents for 152, 159 and 15, resultin. fro- partial disallowance of deductionrepresentin. head office e!penses, are sustained*

3inally, the o--issioner of 6nternal Revenue assails the dispositive portion of the Ta! ourt?s decision li-itin. the-a!i-u- a-ount of interest collectile for delinFuency to an account correspondin. to a period of three years* ;econtends that since such li-itation was incorporated into 4ection 51 of the Ta! ode y Repulic "ct 299 which tookeffect only on June 20, 15, it -ust not e applied retroactively on withholdin. ta! for the years 152, 159 and15*

The i-position of interest on unpaid ta!es is one of the statutory penalties for ta! delinFuency, fro- the pay-ents ofwhich the ourt of Ta! "ppeals asolved the hoeni! "ssurance o*, =td* on the eFuitale .round that the latter?sfailure to pay the withholdin. ta! was due to the o--issioner?s opinion that no withholdin. ta! was due*onseFuently, the ta!payer could e liale for the pay-ent of statutory penalties only upon its failure to co-ply withthe Ta! ourt?s Hud.-ent rendered on 3eruary 1, 12, after Repulic "ct 299 took effect* This part of the rulin. ofthe court ou.ht not to e distured*

8;$R$3/R$, the decision appealed fro- is -odified* hoeni! "ssurance o*, =td* is herey ordered to pay the

o--issioner of 6nternal Revenue the a-ount of 75,*2, 5,05*: and :,:12*92 as withholdin. ta! for theyears 152, 159 and 15, respectively, and the su-s of 5,7*00 and 2,:7*00 as inco-e ta! for 152 and15 or a total of 12,952*2* The o--issioner of 6nternal Revenue is ordered to refund to hoeni! "ssuranceo*, =td* the a-ount of 20,1:0*00 as overpaid inco-e ta! for 159, which should e deducted fro- the a-ount of12,952*2*

6f the a-ount of 12,952*2 or a portion thereof is not paid within thirty (90) days fro- the date this Hud.-enteco-es final, there shall e collected a surchar.e and interest as provided for in 4ection 51 (e) (2) of the Ta! ode*+o costs* 6t is so ordered*

%en.>on, C.J., %autista "n.elo, oncepcion, Reyes, J*%*=*, %arrera, aredes, Di>on, Re.ala, Makalintal andSaldivar, JJ., concur*

EN ANC

G.R. No. &19-9/. November 2-, 1966.4

COMMISSIONER OF INTERNA REVEN!E, Petitioner, v. IIA "!SA" GON%AES 5+ T$E CO!RT OF TA'A##EAS, Respondents.

Soe @eo+er.

R5mo+ A. Go+5e ;or re*@o+e+ 5 "3*5? Go+5e*.


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S"A!S

1* T"I"T6/+G D64ET$D "44$44M$+T4G "$"= 3R/M " D$646/+ T;$R$/+ T/ %$ %R/E;T T/ T;$/ERT /3 T"I "$"=4* P "n action involvin. a disputed assess-ent for internal revenue ta!es falls within thee!clusive appellate Hurisdiction of the ourt of Ta! "ppeals (4ec* 7&1', Rep* "ct 1125G %laFuera v* Rodri.ue>, =#1125,March 2, 15:)* 6t is in that foru- to the e!clusion of the ourt of 3irst 6nstance where the ta!payer can ventilate his

or her defense a.ainst the assess-ent*

2* 6D*G 6D*G 6D*G 90#D"C $R6/D T/ /MM$+$ 3R/M D"T$ /3 R$$6T /3 /MM6446/+$R /3 6+T$R+"=R$$+E$?4 D$646/+* P /n +ove-er 17, 15 =ilia Cusay disputed the le.ality of the assess-ent of 3eruary19, 15:* /n March 1, 10, =ilia Cusay received the decision of the o--issioner of 6nternal Revenue on adisputed assess-ent* /n "pril 19, 10 she filed her petition for review in the ourt of Ta! "ppeals* ;$=D< Theappeal was seasonaly interposed pursuant to 4ection 11 of Repulic "ct 1125* 8e already ruled in 4t* 4tephen?s

"ssociation v* ollector of 6nternal Revenue (=#1129:, "u.ust 21, 15:), that the countin. of the thirty days withinwhich to institute an appeal in the ourt of Ta! "ppeals should co--ence fro- the date of receipt of the decision ofthe o--issioner on the disputed assess-ent, not fro- the date the assess-ent was issued* "ccordin.ly, the thirty#day period should e.in runnin. fro- March 1, 10, the date =ilia Cusay received the appealale decision* 3ro-said date to "pril 19, 10, when she filed her appeal in the ourt of Ta! "ppeals, is e!actly thirty days* ;ence, theappeal was ti-ely*

9* 6D*G 6D*G R/%"T$ /ERT 86T;/ET JER64D6T6/+ T/ "DJED6"T$ T;$ 4"M$* P The settle-ent court is of

li-ited Hurisdiction* "nd under the Rules (Rules 7#2, now Rules 79#1, Rules of ourt), its authority relates only to-atters of estates and proate of wills of deceased persons* 4aid ourt has no Hurisdiction to adHudicate on Fuestionsof disputed ta! assess-ents*

* 6D*G T"I R$TER+4G 3R"ED 6+ T;$ M"X6+ T;$R$/3 ME4T %$ R/$D* P 3raud is a Fuestion of fact* Thecircu-stances constitutin. it -ust e alle.ed and proved in the court elow* "nd the findin. of said court as to itse!istence and non#e!istence is final unless clearly shown to e erroneous* (ere> v* ourt of Ta! "ppeals, =#79:,May 91, 157)* "s the court a Fuo found that no fraud was alle.ed and proved therein, we see no reason to entertainthe o--issioner?s assertion that the return was fraudulent*

5* 6D*G 6D*G R$NE6R$M$+T4 /3 4E%4T"+T6"= /M=6"+$ 86T; T;$ ="8* P " return need not e co-pletein all particulars* 6t is sufficient if it co-plies sustantially with the law* There is sustantial co-pliance (1) when thereturn is -ade in .ood faith and is not false or fraudulentG (2) when it covers the entire period involvedG and (9) whenit contains infor-ation as to the various ite-s of inco-e, deduction and credit with such definiteness as to per-it theco-putation and assess-ent of the ta!* (Jaco Mertens, Jr*, The =aw of 3ederal 6nco-e Ta!ation, 15: ed*, ol* 10,4ection 57*19*)

* 6D*G 6D*G $4T"T$ "+D 6+;$R6T"+$ T"I R$TER+ 6+ "4$ "T %"R 6+4E3366$+T* P Ta! return filed y Jose4* Cusay was sustantially defective* 3irst, it was inco-plete* 6t declared only ninety#three parcels of landrepresentin. aout 00 hectares and left out ninety# two parcels coverin. 509 hectares* 4aid hu.e under declarationcould not have een the result of an oversi.ht or -istake* 4econd, the return -entioned no heir* Thus, no inheritanceta! could e assessed* "s a -atter of law, on the asis of the return, there would e no occasion for the i-position ofestate and inheritance ta!es*

7* 6D*G 6D*G R$TER+4 M"D$ /+ T;$ 8R/+ 3/RMG R$4R6T6/+ D/$4 +/T RE+* P 8here the return was-ade on the wron. for-, the 4upre-e ourt of the Enited 4tates held that the filin. thereof did not start the runnin.of the period of li-itations* The return filed in this case was so deficient, that it prevented the o--issioner fro-co-putin. the ta!es due on the estate* 6t was as thou.h no return was -ade* The o--issioner had to deter-ineand assess the ta!es on data otained, not fro- the return, ut fro- other sources* 8e therefore hold the view that

the return in Fuestion was no return at all as reFuired in 4ection 9 of the Ta! ode* 6f the ta!payer failed to oservethe law, 4ection 992 of the +ational 6nternal Revenue ode which .rants the o--issioner 10 years period withinwhich to rin. an action for ta! collection applies* "s stated, the o--issioner ca-e to know of the identity of theheirs on 4epte-er 2, 159 and the hu.e under declaration in the .ross estate on July 12, 157* 3ro- the latterdate, 4ection of the Ta! ode oli.ated hi- to -ake a return or a-end one already filed ased on his ownknowled.e and infor-ation otained throu.h testi-ony or otherwise, and suseFuently to assess thereon the ta!esdue* The runnin. of the period of li-itations under 4ection 992(a) of the Ta! ode should therefore e reckoned fro-said date* 3ro- July 12, 157 to 3eruary 19, 15:, the date of the assess-ent now in dispute, less than ten yearshave elapsed* ;ence, prescription did not aate the o--issioner?s ri.ht to issue said assess-ent*

:* 6D*G 6D*G T"I"C$R?4 86==6++$44 T/ "C +/ %"R T/ R"64$ D$3$+4$4 ""6+4T T;$ T"I =$"=6TC* P


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o--issioner contends that =ilia Cusay is estopped fro- raisin. the defense of prescription ecause she failed toraise the sa-e in her answer to the -otion for allowance of clai- and for the pay-ent of ta!es filed in the settle-entcourt* ;eld< The ourt of 3irst 6nstance actin. as a settle-ent court is not the proper triunal to pass upon suchdefense, therefore it would e futile to raise it therein* Moreover, the Ta! ode does not ar the ri.ht to contest thele.ality of the ta! after a ta!payer pays it* Ender 4ection 90 thereof, he can pay the ta! and clai- a refund therefor*

" fortiori his willin.ness to pay the ta! is no waiver to raise defenses a.ainst the ta!?s le.ality*

D E C I S I O N

ENG%ON, .#., J.:

Matias Cusay, a resident of ototan, 6loilo, died intestate on May 19, 1:, leavin. two heirs, na-ely, Jose 4* Cusay,a le.iti-ate child, and =ilia Cusay on>ales, an acknowled.ed natural child* 6ntestate proceedin.s for the settle-entof his estate were instituted in the ourt of 3irst 6nstance of 6loilo (4pecial roceedin.s +o* 5)* Jose 4* Cusay wastherein appointed ad-inistrator*

/n May 11, 1 Jose 4* Cusay filed with the %ureau of 6nternal Revenue an estate and inheritance ta! returndeclarin. therein the followin. properties


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Page50


PPPP

Real properties


51/56

Page51


=and, 17 parcels

assessed at 92,77*21

%uildin.s ,500*00 92,27*21

PPPP PPPP

Total 95,*7

More than a year later particularly on July 12, 157, an a.ent of the %ureau of 6nternal Revenue apprised theo--issioner of 6nternal Revenue of the e!istence of said reco--ended proHect of partition* 8hereupon, the6nternal Revenue o--issioner caused the estate of Matias Cusay to e reinvesti.ated for estate and inheritance ta!liaility* "ccordin.ly, on 3eruary 19, 15: he issued the followin. assess-entale>, filed an answer to the proof of clai- alle.in.


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non#receipt of the assess-ent of 3eruary 19, 15:, the e!istence of two ad-inistrators, na-ely, 3lorencia iccioda* de Cusay who ad-inistered two#thirds of the estate, and =ilia Cusay, who ad-inistered the re-ainin. one#third,and her willin.ness to pay the ta!es correspondin. to her share, and prayin. for defer-ent of the resolution on the-otion for the pay-ent of ta!es until after a new assess-ent correspondin. to her share was issued*

/n +ove-er 17, 15 =ilia Cusay disputed the le.ality of the assess-ent dated 3eruary 19, 15:* 4he clai-edthat the ri.ht to -ake the sa-e had prescried inas-uch as -ore than five years had elapsed since the filin. of the

estate and inheritance ta! return on May 11, 1* 4he therefore reFuested that the assess-ent e declared invalidand without force and effect* This reFuest was reHected y the o--issioner in his letter dated January 20, 10,received y =ilia Cusay on March 1, 10, for the reasons, na-ely, (1) that the ri.ht to assess the ta!es in Fuestionhas not een lost y prescription since the return which did not na-e the heirs cannot e considered a true andco-plete return sufficient to start the runnin. of the period of li-itations of five years under 4ection 991 of the Ta!ode and pursuant to 4ection 992 of the sa-e ode he has ten years within which to -ake the assess-ent countedfro- the discovery on 4epte-er 2, 159 of the identity of the heirsG and (2) that the estate?s ad-inistrator waivedthe defense of prescription when he filed a surety ond on March 9, 155 to .uarantee pay-ent of the ta!es inFuestion and when he reFuested postpone-ent of the pay-ent of the ta!es pendin. deter-ination of who the heirsare y the settle-ent court*

/n "pril 19, 10 =ilia Cusay filed a petition for review in the ourt of Ta! "ppeals assailin. the le.ality of theassess-ent dated 3eruary 19, 15:* "fter hearin. the parties, said court declared the ri.ht of the o--issioner of6nternal Revenue to assess the estate and inheritance ta!es in Fuestion to have prescried and rendered thefollowin. Hud.-ent


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Moreover, the settle-ent court, where the o--issioner would wish =ilia Cusay to contest the assess-ent is ofli-ited Hurisdiction* "nd under the Rules, its authority relates only to -atters havin. to do with the settle-ent ofestates and proate of wills of deceased persons* 5 4aid court has no Hurisdiction to adHudicate the contentions inFuestion, which P assu-in. they do not co-e e!clusively under the Ta! ourt?s co.ni>ance P -ust e su-itted tothe ourt of 3irst 6nstance in the e!ercise of its .eneral Jurisdiction*

8e now co-e to the issue of prescription* =ilia Cusay clai-s that since the latest assess-ent was issued only on

3eruary 19, 15: or ei.ht years, nine -onths and two days fro- the filin. of the estate and inheritance ta! return,the o--issioner?s ri.ht to -ake it has e!pired* 4he would rest her stand on 4ection 991 of the Ta! ode whichli-its the ri.ht of the o--issioner to assess the ta! within five years fro- the filin. of the return*

The o--issioner clai-s that fraud attended the filin. of the returnG that this ein. so, 4ection 992(a) of the Ta!ode would apply* 7 6t -ay e well to note that the assess-ent letter itself ($!hiit 22) did not i-pute fraud in thereturn with intent to evade pay-ent of the ta!* recisely, no surchar.e for fraud was i-posed* 6n his answer to thepetition for review filed y =ilia Cusay in the ourt of Ta! "ppeals, the o--issioner alle.ed no fraud* 6nstead, heroached the insufficiency of the return as arrin. the co--ence-ent of the runnin. of the statute of li-itations* ;eraised the point of fraud for the first ti-e in the proceedin.s, only in his -e-orandu- filed with the Ta! ourtsuseFuent to restin. his case* 4aid ourt reHected the plea of fraud for lack of alle.ation and proof, and ruled thatthe return, althou.h not accurate, was sufficient to start the period of prescription*

3raud is a Fuestion of fact* : The circu-stances constitutin. it -ust e alle.ed and proved in the court elow* "ndthe findin. of said court as to its e!istence and none!istence is final unless clearly shown to e erroneous* 10 "s the

court a Fuo found that no fraud was alle.ed and proved therein, we see no reason to entertain the o--issioner?sassertion that the return was fraudulent*

The conclusion, however, that the return filed y Jose 4* Cusay was sufficient to co--ence the runnin. of theprescriptive period, under 4ection 991 of the Ta! ode rests on no solid .round*

ara.raph (a) of 4ection 9 of the Ta! ode lists the reFuire-ents of a valid return* 6t statesucarera deTarlac, =#1170#1, July 91, 15:, on the .round that the return was co-plete in itself althou.h inaccurate* To our


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-ind, it would not -ake -uch difference where a return is -ade on the correct for- prescried y the %ureau of6nternal Revenue if the data therein reFuired are not supplied y the ta!payer* Just the sa-e, the necessaryinfor-ation for the assess-ent of the ta! would e -issin.*

The return filed in this case was so deficient that it prevented the o--issioner fro- co-putin. the ta!es due on theestate* 6t was as thou.h no return was -ade* The o--issioner had to deter-ine and assess the ta!es on dataotained, not fro- the return, ut fro- other sources* 8e therefore hold the view that the return in Fuestion was no

return at all as reFuired in 4ection 9 of the Ta! ode*

The law i-poses upon the ta!payer the urden of supplyin. y the return the infor-ation upon which an assess-entwould e ased* 1 ;is duty co-plied with, the ta!payer is not ound to do anythin. -ore than to wait for theo--issioner to assess the ta!* ;owever, he is not reFuired to wait forever* 4ection 991 of the Ta! ode .ives theo--issioner five years within which to -ake his assess-ent* 15 $!cept, of course, if the ta!payer failed to oservethe law, in which case 4ection 992 of the sa-e ode .rants the o--issioner a lon.er period* +on#oservanceconsists in filin. a false or fraudulent return with intent to evade the ta! or in filin. no return at all*

"ccordin.ly, for purposes of deter-inin. whether or not the o--issioner?s assess-ent of 3eruary 19, 15: isarred y prescription, 4ection 992 (a) which is an e!ception to 4ection 991 of the Ta! ode finds application* 1 8eFuote 4ection 992(a)


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Respondent =ilia Cusay on>ales seeks reconsideration of our decision holdin. her liale for the pay-ent of7,729* as estate and inheritance ta!es plus delinFuency penalties as ad-inistratri! of the intestate estate ofMatias Cusay* The .rounds raised y her deserve this e!tended resolution*

3irstly, -ovant -aintains that the issue of whether or not the estate and inheritance ta! return filed y Jose Cusay on

May 19, 1 was sufficient to start the runnin. of the statute of li-itations on assess-ent, was neither raised in theourt of Ta! "ppeals nor assi.ned as error efore this ourt* The records in the ourt of Ta! "ppeals however showthe contrary* ara.raph 2 of the answer filed y the o--ission of 6nternal Revenue statesucarera de Tarlac,*R* +os* =#1170 and =#1171, July 91, 15:)*

3urther-ore, the failure to state the heirs in the return can e attriuted to the then unsettled conflict ra.in. eforethe proate court as to who are the heirs of the estate* 4uch failure could not have een a delierate atte-pt to-islead the .overn-ent in the assess-ent of the correct ta!es*cralaw virtua1aw lirary


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6n his appeal, the o--issioner of 6nternal Revenue assi.ned as third error of the ourt of Ta! "ppeals the findin.that the assess-ent in Fuestion was -ade eyond the five#year statutory period provided in 4ection 992(a) of theTa! ode, and that the ri.ht of the o--issioner of 6nternal Revenue to assess the estate and inheritance ta!es hasalready prescried* To sustain his side, the o--issioner ventilated in his rief, fraud in the filin. of the return,asence of certain data fro- the return which prevented hi- fro- assessin. thereon the ta! due and the pendency inthis ourt of =#1197 entitled 6ntestate $state of the late Cusay on>ales which alle.edly had the effect of

suspendin. the runnin. of the period of li-itations on assess-ent*

learly, therefore, it would e incorrect to say that the Fuestion of whether or not the return filed y Jose Cusay wassufficient to start the runnin. of the statute of li-itations to assess the correspondin. ta!, was not raised y theo--issioner in the ourt of Ta! "ppeals and in this ourt*

4econd* Movant contends that contrary to /ur rulin., the return filed y Jose Cusay was sufficient to start the statuteof li-itations on assess-ent* 6nas-uch as this Fuestion was a-ply discussed in /ur decision sou.ht to ereconsidered, and no new ar.u-ent was advanced, 8e dee- it unnecessary to pass upon the sa-e* There is noreason for any chan.e on /ur stand on this point*

Third* Movant insists that since she ad-inisters only one#third of the estate of Matias Cusay, she should not e lialefor the whole ta!* "nd she su..ests that 8e hold the intestate estate of Matias Cusay liale for said ta!es, one#thirdto e paid y =ilia Cusay on>ales and two#thirds to e paid y 3lorencia * da* de Cusay*

The fore.oin. su..estion to reFuire pay-ent of two#thirds of the totals ta!es y 3lorencia * da* de Cusay is notacceptale, for she (3lorencia * da* de Cusay) is not a party in this case*

6t should e pointed out that =ilia Cusay on>ales appealed the whole assess-ent to the ourt of Ta! "ppeals*Thereupon, the o--issioner of 6nternal Revenue Fuestioned her le.al capacity to institute the appeal on the .roundthat she ad-inistered only one# third of the estate of Matias Cusay* 6n opposition, she espoused the view, which wassustained y the Ta! ourt, that in co#ad-inistration, the ad-inistratrices are re.arded as one person and the acts ofone of the- in relation to the re.ular ad-inistration of the estate are dee-ed to e the acts of allG hence, eachad-inistratri! can represent the whole estate* 6n advancin. such proposition, =ilia Cusay on>ales represented thewhole estate and hoped to enefit fro- the favorale outco-e of the case* 3or the sa-e reason that she representedher co# ad-inistratri! and the whole estate of Matias Cusay, she risked ein. ordered to pay the whole assess-ent,should the assess-ent e sustained*

;er chan.e of stand adopted in the -otion for reconsideration to the effect that she should e -ade liale for onlyone#third of the total ta!, would ne.ate her aforesaid proposition efore the ourt of Ta! "ppeals* 4he is now

estopped fro- denyin. liaility for the whole ta!*

"t any rate, estate and inheritance ta!es are satisfied fro- the estate and are to e paid y the e!ecutor orad-inistrator* 1 8here there are two or -ore e!ecutors, all of the- are severally liale for the pay-ent of the estateta!* 2 The inheritance ta!, althou.h char.ed a.ainst the account of each eneficiary, should e paid y the e!ecutoror ad-inistrator* 9 3ailure to pay the estate and inheritance ta!es efore distriution of the estate would suHect thee!ecutor or ad-inistrator to cri-inal liaility under 4ection 107(c) of the Ta! ode*

6t is i--aterial therefore that =ilia Cusay on>ales ad-inisters only one#third of the estate and will receive as hershare only said portion, for her ri.ht to the estate co-es after ta!es* "s an ad-inistratri!, she is liale for the entireestate ta!* "s an heir, she is liale for the entire inheritance ta! althou.h her liaility would not e!ceed the a-ount ofher share in the estate* 5 The entire inheritance ta! which a-ounts to 9,17:*12 e!cludin. penalties is oviously-uch less than her distriutive share*

Motion for reconsideration denied*

oncepcion, C.J., Reyes, J*%*=*, Di>on, Re.ala, Makalintal, 4anche> and astro, JJ., concur*

Saldivar, J., did not take part*

tax 2 cases week 1

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