Internal Revenue Tax Case of the Philippine Electrical Company, Inc.

August 18, 1960 BIR RULING NO. 383-60 The Regional Director B.I.R. Regional District No. 4 Quezon City S i r : There is returned herewith the entire docket bearing on the internal revenue tax case of the Philippine Electrical Company, Inc., 73 Quezon City Boulevard, Quezon City, involving the sum of P2,190.00 as deficiency income tax for the year 1952, with the following information. aisadc On December 4, 1952, Philippine Electrical Company, Inc., a domestic corporation, filed its income tax return for the fiscal period ending August 31, 1952, showing an income tax liability in the amount of P10,548.00. Upon investigation, Examiner Silverio M. Valdez discovered some discrepancies resulting in this Bureau's assessment on October 23, 1953 of the deficiency income tax of P2,190.00. The manager of the Philippine Electrical Company, Inc., in his letter dated February 14, 1955 protested and disputed all the discrepancies reported by Examiner Valdez and requested for a reinvestigation of the case. As a pre-requisite to such reinvestigation, on July 25, 1956, the corporation filed a waiver of the statute of limitations as prescribed in Section 332 of the Tax Code. This waiver covered the period from July 25, 1956 to December 31, 1958. The reinvestigation was accordingly conducted by Examiner Valdez and a report of its result was made on March 29, 1957, reiterating the original deficiency assessment of P2,190.00. Aside from the several letters of demand which were subsequently issued to the taxpayer on January 26, 1960, a warrant of distraint and levy was also issued to and duly received by the corporation, but the latter vehemently protested the said assessment and refused to pay the amount demanded, putting up the defense of prescription. Finally, on February 15, 1960, it paid the amount of P3,953.10 under protest. This case, therefore, been submitted to this Office for a ruling on the question of whether or not the right of the government to assess and collect the aforementioned tax liability has already prescribed. Assessment and collection of internal revenue taxes by distraint or levy and by judicial action may be pursued by the Collector of Internal Revenue within the periods of limitation provided in sections 331 and 332 of the Tax Code. Suspension of the running of the statute of limitations is allowed only in two instances, to wit: (1) where before the expiration of the time prescribed for the assessment or collection of the tax, both the Collector (now Commissioner) of Internal Revenue and the taxpayer agreed in writing to its assessment or collection or both after such time (Sec. 332 pars. (b) and (c), Tax Code); and (2) where the Commissioner of Internal Revenue is prohibited from making the assessment or beginning distraint or levy or a proceeding in court, and for sixty days thereafter. (Sec. 333, Id), (Sison, et al. vs. Collector of Internal Revenue, CTA Case No. 337, promulgated February 28, 1958). A reinvestigation made by the Commissioner upon the request of the taxpayer suspends the running of the statutes of limitations. (Suyoc Consolidated Mining Co. vs. Collector of Internal Revenue, G.R. No. L-115277). The request for reinvestigation made by the taxpayer in this case as well as the waiver filed by it covering the period from July 25, 1956 to December 31, 1958, had the effect of Suspending the running of the 5-year period prescribed by Sections 331 and 332 of the Tax Code. Computing the time commencing from the date of assessment which was October 23, 1953, even up to the present, and deducting from it the period covered by the waiver, the five-year period of prescription has run only for 4 years and 5 months. In the light of the foregoing, the taxpayer's defense of prescription is therefore untenable. The right of the government to assess and collect has been exercised well within the period of prescriptions provided for in the Tax Code. In view thereof, the request of the Philippine Electrical Company, Inc. for the refund of the amount of P3,953.10 paid by it on February 15, 1960 should be denied. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue