May 2010 Philippine Supreme Court Decisions on Tax Law

Here are May 2010 rulings of the Supreme Court of the Philippines on tax law:

Assessment; prescriptive period. The government must assess internal revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later. An assessment notice issued after the three-year prescriptive period is no longer valid and effective unless falling under the exceptions.     Commissioner of Internal Revenue vs. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010.

Prescriptive period for assessment; exceptions. In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed at any time within ten years after the discovery of the falsity, fraud or omission. If before the expiration of the time prescribed in the National Internal Revenue Code (NIRC) for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon.  Commissioner of Internal Revenue vs. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010.

Prescriptive period for assessment; requirements for a proper waiver. RMO 20-90 and RDAO 05-01 lay down the following procedures for the proper execution of the waiver of the prescriptive period:

(1)     the waiver must be in the proper form prescribed by RMO 20-90; the phrase “but not after ___ 19____,” which indicates the expiry date of the period agreed upon to assess the tax after the regular three-year period of prescription must be filled up;

(2)     the waiver must be signed by the taxpayer himself or his duly authorized representative; in the case of a corporation, the waiver must be signed by any of its responsible officials; if the authority is delegated by the taxpayer to a representative, such should be in writing and duly notarized;

(3)     the waiver should be duly notarized;

(4)     the Commissioner of Internal Revenue (CIR) or the revenue official authorized by him must sign the waiver indicating that the Bureau of Internal Revenue (BIR) has accepted and agreed to the waiver; the date of the BIR’s acceptance should be indicated;  before signing the waiver, the CIR ort he revenue official authorized by him must make sure that the waiver is in the prescribed form, duly notarized, and executed by the taxpayer or his duly authorized representative;

(5)     both the date of execution by the taxpayer and date of acceptance by the BIR should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed; and

(6)     the waiver must be executed in three copies, the original copy to be attached to the docket of the case, the second copy for the taxpayer and the third copy for the office accepting the waiver; the fact of receipt by the taxpayer of his/her file copy must be indicated in the original copy to show that the taxpayer was notified of the acceptance of the BIR and the perfection of the agreement.  Commissioner of Internal Revenue vs. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010.

Prescriptive period; estoppel. The doctrine of estoppel cannot be applied in this case as an exception to the statute of limitations on the assessment of taxes considering that there is a detailed procedure for the proper execution of the waiver, which the BIR must strictly follow. Estoppel has its origin in equity, which is justice according to natural law and right. Thus, it cannot give validity to an act that is prohibited by law or that is against public policy. Unlike in the case of Collector of Internal Revenue vs Suyoc Consolidated Mining Company, where the doctrine of estoppel prevented the taxpayer from raising the defense of prescription against the government’s efforts to collect the assessed tax, the assessments were issued beyond the prescribed period and there was no showing that the taxpayer made any request to persuade the BIR to postpone the issuance of the assessments. Commissioner of Internal Revenue vs. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010.


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