Case Summary (G.R. No. 260990)
Petitioner
China Banking Corporation
Respondent
Commissioner of Internal Revenue
Key Dates
• Taxable years under review: 1982–1986
• Assessment issued and received: April 19, 1989
• Protest letter filed: May 8, 1989
• CIR decision on protest: December 6, 2001
• CTA Second Division decision: February 23, 2005
• CTA En Banc decision: December 1, 2005; Resolution denying reconsideration: March 20, 2006
• Supreme Court Rule 45 petition resolution: February 4, 2015
Applicable Law
• 1987 Philippine Constitution (governing Supreme Court review)
• National Internal Revenue Code of 1977, Sections 318–320, as amended by Batas Pambansa Blg. 700 (three-year collection period)
• Republic Act No. 9282 (expanded CTA jurisdiction effective April 23, 2004)
Factual Background
Between 1982 and 1986, CBC executed SWAP transactions—sales of foreign bills of exchange to the Central Bank—but did not file or pay the corresponding documentary stamp tax (DST). On April 19, 1989, the BIR assessed a deficiency DST of ₱11,383,165.50 plus increments. CBC protested on May 8, 1989, alleging double taxation, incorrect liability allocation (tax falls on buyer), due process violations, lack of factual basis in the assessment, and DST exemptions under then-existing presidential decrees. CBC requested reinvestigation. The CIR did not resolve the protest until December 6, 2001, upholding the assessment. CBC filed for review with the CTA on January 18, 2002; after adverse rulings at both CTA levels, CBC elevated the matter via Rule 45 to the Supreme Court, this time asserting prescription of the BIR’s collection right.
Issue
Whether the Bureau of Internal Revenue’s right to collect the assessed deficiency documentary stamp tax from CBC is barred by the three-year prescriptive period under Section 319(c) of the 1977 Tax Code, as amended.
Ruling on Prescription
Under Section 319(c) of the 1977 Tax Code, once an internal revenue tax assessment is mailed or released, the BIR must collect by distraint, levy, or judicial proceeding within three years. The latest feasible mailing date is April 19, 1989—the date CBC received the assessment. No distraint or levy warrant was served, nor was any collection case filed in court within three years thereafter. The BIR’s filing of an Answer in the CTA on March 11, 2002—almost thirteen years later—did not satisfy the legal requirement for a collection case. Consequently, prescription has extinguished the BIR’s right to collect the assessed DST.
Effect of Reinvestigation Request
Section 320 provides that the prescriptive period suspends only when a taxpayer requests reinvestigation and the Commissioner grants it. CBC’s protest and request for reinvestigation went unacted upon until the CIR’s 2001 decision; there is no evidence the request was ever granted. Thus, the mere submission of a protest did not toll the three-year collection period.
Failure to Raise Prescription and Waiver
Although CBC raised prescription for the first time before the Supreme Court, Rule 9, Se
...continue readingCase Syllabus (G.R. No. 260990)
Procedural History
- Petition under Rule 45 assailing the Court of Tax Appeals (CTA) En Banc Decision (1 December 2005) and Resolution (20 March 2006) in CTA EB Case No. 109.
- CTA En Banc had affirmed the CTA Second Division Decision (23 February 2005) in CTA Case No. 6379, which upheld BIR Assessment Nos. FAS-5-82/85-89-000586 and FAS-5-86-89-00587.
- CBC filed Letter of Protest (8 May 1989), followed by prolonged inaction by the BIR.
- CBC elevated the matter to the CTA (Petition for Review, 18 January 2002), which denied relief at Second Division and En Banc levels.
- CBC filed Rule 45 Petition with the Supreme Court (Rollo pp. 16–53), raising the defense of prescription for the first time.
Facts
- Petitioner China Banking Corporation (CBC) is a universal bank organized under Philippine law.
- From 1982 to 1986, CBC engaged in foreign exchange “SWAP” transactions with the Central Bank of the Philippines.
- CBC neither filed documentary stamp tax (DST) returns nor paid DST on those SWAP transactions.
BIR Assessment and Protest
- On 19 April 1989, BIR issued assessments totaling ₱11,383,165.50 (deficiency DST plus surcharge) for taxable years 1982–1986.
- On 8 May 1989, CBC’s vice-president protested, advancing grounds of double taxation, absence of liability, due process violation, lack of factual basis, and claimed statutory exemptions.
- CBC requested a reinvestigation; no formal grant or action by the CIR appears in the record.
CTA Proceedings
- CIR Decision on Protest (6 December 2001) reaffirmed the assessments and demanded payment within 30 days.
- Petition for Review filed with CTA Second Division (18 January 2002); CIR filed Answer demanding payment (11 March 2002).
- CTA Second Division Decision (23 February 2005) upheld DST liability on SWAP as telegraphic transfer.
- CTA En Banc Decision (1 December 2005) and Resolution (20 March 2006) denied CBC’s appeals; CBC then filed this Rule 45 Petition.
Issue Presented
- Whether the BIR’s right to collect the assessed deficiency DST from CBC is barred by prescription under the National Inter