Facts:

The case involves the Bank of the Philippine Islands (BPI) as the petitioner and the Commissioner of Internal Revenue as the respondent. The legal dispute arose from a Decision of the Court of Appeals dated August 11, 1999, which reversed a prior ruling by the Court of Tax Appeals (CTA) on February 2, 1999. The case relates to Assessment No. FAS-5-85-89-002054, which mandated BPI to pay a deficiency documentary stamp tax (DST) amounting to P28,020.00 for the taxable year 1985.

The factual background indicates that BPI, a commercial banking institution organized under Philippine law, sold $1,000,000 to the Central Bank of the Philippines in two transactions—$500,000 on June 6, 1985, and another $500,000 on June 14, 1985. On October 10, 1989, the Bureau of Internal Revenue (BIR) assessed BPI for deficiency DST due to these sales. The BIR determined that the taxable amount for the deficit was based on the total sales amount, yielding a calculated tax of P27,720.00, plus a compromi

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Facts:

Transactional Background

• Petitioner Bank of the Philippine Islands (BPI), a commercial banking corporation, engaged in two separate sales of United States dollars:
• On June 6, 1985, BPI sold US$500,000.00 to the Central Bank of the Philippines.
• On June 14, 1985, BPI conducted another sale of US$500,000.00, making the total sale amount US$1,000,000.00.
• The transactions involved the sale of foreign bills of exchange without the affixing of documentary stamps, based on the understanding that under established market practice the buyer is normally responsible for the documentary stamp tax (DST), and that the Central Bank was exempt from such tax during the relevant period.

Issuance of Assessment and Initial Protest

• On October 10, 1989, the Bureau of Internal Revenue (BIR) issued Assessment No. FAS-5-85-89-002054 finding BPI liable for deficiency DST on the foreign currency sales in taxable year 1985.
• The amount computed included the base tax computed at P0.30 per peso, resulting in a tax due of P27,720.00, plus a compromise penalty of P300.00, totalling P28,020.00.
• BPI received the Assessment and its attached Notice on October 20, 1989.
• BPI, through its counsel, protested the Assessment by filing a protest letter on November 16, 1989, which was then filed with the BIR on November 17, 1989.
• The protest argued that under prevailing market practices the DST should be borne by the buyer, especially since the Central Bank was exempt from the tax during the period.

Subsequent BIR Actions and Communications

• Despite the protest, the BIR did not issue an immediate response.
• On October 15, 1992, the BIR issued a Warrant of Distraint/Levy for the P27,720.00 (excluding the compromise penalty) and served it on BPI on October 23, 1992.
• On August 13, 1997, the BIR, through then Commissioner Liwayway Vinzons-Chato, sent a letter (received by counsel on September 11, 1997) denying BPI’s protest and maintaining that industry practice is not binding on the BIR.
• BPI subsequently filed a Petition for Review with the Court of Tax Appeals (CTA) on October 10, 1997, which raised two primary issues:
• The effect of the protest on the running of the prescriptive period for collection.
• Whether the sales of US$1,000,000.00 were subject to DST given the tax-exempt status of the Central Bank during 1985.

Decisions in Lower Courts

• The CTA ruled on February 2, 1999, that:
• The prescriptive period for the collection had not prescribed because the protest (deemed as a request for reconsideration) suspended the running of the limit period.
• The sales were not subject to DST since the Central Bank enjoyed tax exemption privileges for 1985.
• The Court of Appeals, in its August 11, 1999 decision, sustained the CTA’s finding on the suspension of the prescriptive period but reversed the tax-exemption issue by adopting the BIR’s view that the transactions were subject to DST.
• BPI then elevated the issue to the Supreme Court through a Petition for Review on Certiorari.

Core Factual and Procedural Dispute

• At issue was the controversy over two distinct legal questions:
• Whether the right of the BIR to collect the deficiency DST had prescribed due to the lapse of its statutory collection period.
• Whether the transactions (sales of foreign currency) were subject to DST considering the statutory exemption of the Central Bank and the implications of the protest letter’s nature.
• The timeline of events revealed that, although the Assessment was issued on October 10, 1989 and received on October 20, 1989, subsequent collection efforts (like the service of the warrant on October 23, 1992 and later communications) occurred well beyond the three-year statutory period starting from the receipt date.

Issue:

Prescription Issue

• Whether the BIR’s right to collect the deficiency DST under Assessment No. FAS-5-85-89-002054 had prescribed given the three-year orbit prescribed by law.
• Whether the filing of BPI’s protest letter (interpreted as a request for reconsideration rather than for reinvestigation) was sufficient to suspend the running of the prescriptive period for collection.

Tax Liability Issue

• Whether the sales of US$1,000,000.00 (conducted on June 6 and 14, 1985) by BPI to the Central Bank were subject to DST.
• Whether the statutory provisions shifting DST liability to the seller (which came into effect starting January 1, 1986) were applicable to transactions executed in 1985 given the Central Bank’s tax exemption during that period.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)