Case Summary (G.R. No. 76281)
Findings of Tax Investigations
In 1974, an investigation led by Revenue Examiner Dante Kabigting revealed that Wyeth Suaco failed to remit withholding taxes on accrued royalties, remuneration for technical services, and cash dividends from the fourth quarter of 1973, leading to a deficiency withholding tax liability of P3,178,994.15. Additionally, it was found that the company incorrectly deducted costs from non-deductible raw materials, resulting in a deficiency sales tax of P60,855.21.
Tax Assessment Notifications
Wyeth Suaco received notices of assessment for these tax liabilities on December 19, 1974. Following receipt, Wyeth Suaco, through its tax consultant, submitted letters contesting the assessments on January 17 and February 8, 1975. The company argued that its obligations for withholding tax were contingent upon the actual remittance of royalties and dividends, which were restricted by Central Bank regulations.
Protest and Request for Reconsideration
In 1975, despite Wyeth Suaco's contestation of the assessments, the Bureau of Internal Revenue proposed a compromise settlement. The respondent agreed to a reduced payment contingent on the exclusion of additional surcharges. In December 1979, the Acting Commissioner of Internal Revenue revised the withholding tax liability to P1,973,112.86, while maintaining the sales tax assessment. Subsequently, Wyeth Suaco filed for a petition for review in the Court of Tax Appeals (CTA) contesting the validity of the assessments on grounds of prescription.
Court of Tax Appeals Proceedings
The CTA determined that although the assessments were made within the legally permissible five-year period, the right to collect them had already expired, pursuant to Section 319(c) of the National Internal Revenue Code of 1977, leading to a reversal of the earlier decision and a suspension of collection efforts by the Commissioner.
Prescription of Tax Collection
The primary legal contention revolved around whether the five-year prescriptive period for the collection of tax liabilities had been interrupted by Wyeth Suaco's protests. The petitioner argued that the submission of the protest letters constituted a request for reinvestigation, thereby tolling the prescriptive period. However, Wyeth Suaco contended that their communications were strictly for the cancellation of the assessments and did not request a reconsideration.
Legal Interpretation of Request for Reconsideration
The Supreme Court elaborated on legal precedents indicating that the filing of a request for reconsideration or reinvestigation does interrupt the prescriptive period. The Court found sufficient evidence that Wyeth Suaco had sought reconsideration through official communications, leading to an acknowledgment by the Bureau of Internal Revenue for further review of the assessments, thus validating the interruption of the prescriptive period.
Final Tax Liability Assessment
Upon serving the final assessment in January 1980
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Case Overview
- The case revolves around a petition for review on certiorari filed by the Commissioner of Internal Revenue against Wyeth Suaco Laboratories, Inc. concerning the collection of deficiency withholding tax and sales tax liabilities.
- The primary legal question is whether the right of the Commissioner to collect these taxes is barred by prescription.
Factual Background
- Wyeth Suaco Laboratories, Inc. is a domestic corporation involved in the manufacture and sale of pharmaceutical and nutritional products, with a fiscal year ending October 31.
- An investigation by Revenue Examiner Dante Kabigting revealed that Wyeth Suaco failed to remit withholding tax at source for the fourth quarter of 1973 and incurred deficiencies in sales tax, amounting to a total of P3,178,994.15 in withholding tax and P61,155.21 in sales tax.
- The Bureau of Internal Revenue (BIR) assessed these tax liabilities to Wyeth Suaco via notices dated December 16 and 17, 1974.
Taxpayer's Response
- Wyeth Suaco, through its tax consultant SGV & Co., protested the assessments, arguing that the taxes were not due as they had not been paid or remitted to foreign licensors and stockholders due to restrictions from the Central Bank.
- The corporation maintained that a withholding tax at source is only due upon actual payment of the income and contended that it was compliant with its