Facts:

The case involves Bank of the Philippine Islands (BPI), formerly known as Far East Bank and Trust Company, as the petitioner, and the Commissioner of Internal Revenue (CIR) as the respondent. The case was decided by the Supreme Court on March 7, 2008, and stems from events and assessments between 1982 and 2002 concerning a deficiency in documentary stamp tax (DST). BPI, a corporation duly registered in the Philippines with its principal office located at Ayala Avenue, corner Paseo de Roxas Ave., Makati City, was issued a pre-assessment notice (PAN) by the CIR on November 26, 1986. Following this, BPI requested details regarding the alleged deficiency taxes on November 29, 1986.

On April 7, 1989, the respondent issued assessment notices for deficiency withholding tax and DST amounting to approximately P215 million. BPI protested against this assessment on April 20, 1989, and submitted additional documents related to swap transactions in subsequent communications, including a requ

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Facts:

Parties and Institutional Background

• Petitioner: Bank of the Philippine Islands (BPI) – a corporation duly created under Philippine law, which evolved from a merger with Far East Bank and Trust Company.
• Respondent: Commissioner of Internal Revenue (CIR), representing the Bureau of Internal Revenue.

Timeline and Procedural Posture

• Pre-assessment and Initial Communications
• On November 26, 1986, CIR issued a Pre-Assessment Notice (PAN) to BPI concerning deficiency taxes for the years 1982–1986.
• BPI responded via a letter dated November 29, 1986 requesting details of the alleged deficiency taxes.
• Issuance of Assessment and Subsequent Protests
• On April 7, 1989, respondent issued assessment/demand notices:
• FAS-1-82 to 86/89-000 for deficiency withholding tax relating to Swap Transactions, amounting to P190,752,860.82.
• FAS-5-82 to 86/89-000 for deficiency documentary stamp tax (DST) on cabled instructions, amounting to P24,587,174.63.
• BPI filed its initial protest on April 20, 1989 and a supplemental protest on May 8, 1989.
• On March 12, 1993, BPI requested an opportunity to present additional documents regarding the Swap Transactions with the Central Bank.
• Additional documentation (i.e., Swap Contracts) was submitted on June 17, 1994, during the reinvestigation of the assessment.
• Waiver of the Statute of Limitations
• BPI executed several waivers covering the statute of limitations, with the last waiver being valid until December 31, 1994.
• Developments in the Collection and Resolution Process
• On August 9, 2002, respondent rendered a final decision on the protest:
• The deficiency withholding tax assessment of P190,752,860.82 was withdrawn and cancelled.
• The deficiency DST assessment of P24,587,174.63 was reiterated with an order to pay within thirty (30) days.
• BPI received the aforementioned decision on January 15, 2003.
• Initiation of Judicial Review
• On January 24, 2003, BPI filed a Petition for Review with the Court challenging the CTA’s rulings.
• On August 31, 2004, the CTA denied the petition, ordering BPI to pay the stipulated DST deficiency plus 20% interest from February 14, 2003.
• A Motion for Reconsideration filed on September 21, 2004 was denied on February 14, 2005.
• A motion for an extension of time to file the Petition for Review was granted on March 16, 2005, leading to the filing of the instant Petition for Review on March 28, 2005.
• Assignment of Errors in the Petition
• BPI contended that:
• The tax court overlooked the significance of the waiver valid until December 31, 1994.
• The tax court erred in holding that the DST collection had not prescribed.
• There was a procedural due process violation in the issuance of the assessment notice.
• The memorandum of the Legal Service Chief did not vest any rights to BPI.
• BPI was not liable for DST on its SWAP transactions during 1982–1986.

Administrative and Evidentiary Considerations

• The CTA synthesized the issues into two main points:
• Whether the collection of the deficiency DST was barred by prescription.
• Whether BPI was liable for DST on its SWAP loan transactions.
• BPI argued that the government’s right to collect the DST had prescribed because the CIR failed to act promptly on its reinvestigation requests.
• The Office of the Solicitor General (OSG), on behalf of the CIR, maintained that the filing of protest letters had tolled the prescriptive period.

Issue:

Prescription of the Deficiency Documentary Stamp Tax (DST)

• Whether the collection of the deficiency DST is barred by prescription given that the CIR failed to grant or act upon BPI’s request for reinvestigation in a timely manner.
• Whether the filing of protest letters by BPI automatically tolls the prescriptive period under Section 320 of the Tax Code, considering the requisite condition that the reinvestigation be granted.

Taxability of SWAP Loan Transactions

• Whether BPI’s cabled instructions to its foreign correspondent bank, which resulted in remittances in dollars to the Federal Reserve Bank and were credited to the Central Bank’s account, are subject to DST under Section 195 of the Tax Code.
• The significance of the absence of an explicit provision in the Tax Code of 1977 regarding cabled instructions on SWAP transactions.

Procedural Due Process in the Issuance of the Assessment Notice

• Whether the manner and timing of the issuance of the assessment notice violated BPI’s right to due process.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)