Internal Revenue Case of Mr. & Mrs. Manuel Lopa, Sr.

July 10, 1959 BIR RULING NO. 344-59 3rd Indorsement Returned to the Regional Director, B.I.R. Regional District No. 3, Manila, the herein papers bearing on the internal revenue case of Mr. & Mrs. Manuel Lopa, Sr. It appears from the records of the case that on January 2, 1958 counsel for Mr. & Mrs. Manuel Lopa, Sr., filed with this Office a notice of the donation made by the latter in 1957 in favor of their children. Assessment notices based on said notice of donation were sent to taxpayers on January 7, 1958. On February 27, 1958, within the period prescribed in section 115(c) of the Tax Code, the donors and donees filed their donors' and donees' gift tax returns. No notice of assessment, based on the returns filed, was sent to the taxpayers but on October 2, 1958, this Office sent them a letter demanding payment of the taxes due as shown in the returns. This demand of October 2, 1958, in effect, superseded the assessment notices issued on January 7, 1958. It is to be noted, in this connection, that the assessment notices of January 7, 1958 were issued before the lapse of the period for filing of the donor's and donee's gift tax returns. On October 15, 1958, Mr. & Mrs. Manuel Lopa, Sr., paid the total amount of P4,448.00 representing donors' and donees' gift taxes, 1% monthly interest from May 15, 1958 to October 15, 1958 and compromise. However, the taxpayers refused to pay the 5% surcharge for late payment stating that no assessment notices were sent to them based on the returns filed. The gift taxes due were not paid on May 15, 1958. Such being the case, the collection of the tax proper, 1% monthly interest and compromise in the total amount of P4,448.00 was in order. The time of payment of the donor's and donee's gift tax returns, as provided for in section 116 of the Tax Code, is mandatory and a notice of assessment or demand is not necessary in order that the donor or donee concerned may be held liable to the tax. However, with regard to the question of imposition of the 5% surcharge for late payment, as prescribed in section 119(c) of the Tax Code, it is informed that the same is proper only when the amount due is not fully paid within thirty days after notice and demand. The records of the case show that a demand for payment of the taxes due, as shown on the returns filed, was sent to the taxpayers only on October 2, 1958. They paid in full their tax liability on October 15, 1958, which is within thirty days from the date of the demand. In view of the foregoing considerations, the 5% surcharge for late payment should not be imposed. (SGD.) JOSE ARAAS Commissioner of Internal Revenue