Prescription EWT

Commissioner of Internal Revenue vs. Philippine Airlines, Inc., CTA EB No.

648, December 15, 2010

there are two (2) types of "returns " that need to be filed by a withholding agent, under the
old and new law, viz : (1) a monthly return , which is immediately filed after and near the
date when the taxes are deducted and withheld , and (2) an annual information return ,
which is filed at the end of the year. As stated , the former is filed on or before the 1 01h
day after the end of each month except taxes withheld for December which shall be filed
on or before January 25 of the following year; while the latter is filed on or before
March 1 of the year following the year for which the annual report is being submitted. Since
Section 203 of the NIRC of 1997 does not specify as to which of the said two (2) returns
should be used in computing the three-year period , the pivotal question is : to which of
the filing of the said two returns should the three-year period be reckoned?

Admittedly, the law is silent as to which of the said returns should be used . However, to
guide Us in choosing one either of the two returns , We look unto the purpose of the statute
of limitation under the said Section 203 . Existing jurisprudence establishes that it is to
safeguard the interest of the taxpayer against unreasonable investigation . Unreasonable
investigation contemplates cases where the period for assessment extends indefinitely
because this deprives the taxpayer of the assurance that it will no longer be subjected to
further investigation for taxes after the expiration of a reasonable period of time . Thus, the
law on prescription , being a remedial measure, should be liberally construed in order to
afford such protection . In other words , to give effect to the legislative intent, the provisions
on the statute of limitations on assessment and collection of taxes shall be construed and
applied in favor of the taxpayer and strictly against the Government. Such being the case,
since the said monthly return is filed earlier than the annual information return , and
accordingly, earlier in time to be subject to the three-year prescriptive period under
Section 203 of the NIRC of 1997, the counting of such three-year period should be
reckoned from the filing of the same monthly return required under Section 58(A) of the
NIRC of 1997 in relation to Section 2.58(2)(a) of RR 2-98 , insofar as the assessment of
withholding taxes are concerned .

Prescription VAT

CTA recognizes that the counting of the prescription for VAT is from the filing of the quarterly
returns

JVC (Philippines), Inc. v. Commissioner of Internal Revenue

CTA Case No. 8646, July 03, 2017

The instant case involves assessments for deficiency income tax, EWT, FBT, FWT, VAT,
and DST for the fiscal year ending March 31, 2007. The dates of filing of petitioner's
relevant returns and the corresponding dates within which respondent should assess
petitioner for deficiency taxes for the above-stated period under the aforequoted Section
203, are the following:

xxx

Period (fiscal year Date filed Last day to file Return Last day to Assess
ending March 31, under Section 203
2007
1st Quarter July 22, 2006 July 25, 2006 July 25, 2009
nd
2 Quarter October 23, 2006 October 25, 2006 October 25, 2009
3rd Quarter January 25, 2007 January 25, 2007 January 25, 2010
th
4 Quarter April 24, 2007 April 25, 2007 April 25, 2010

Xxx

Be that as it may, notwithstanding this Court's finding that there are certain periods which
have prescribed, petitioner has not shown as to which portion of the assessments pertain to
the prescribed period. In light however of the doctrine that all presumptions are in favor
of the correctness of tax assessments, this Court is constrained to treat all of the subject tax
assessments as referring to the unprescribed portions.

Unaccounted cost and expenses

JVC (Philippines), Inc. v. Commissioner of Internal Revenue

CTA Case No. 8646, July 03, 2017

Unaccounted balance- P5,610,096.60

Respondent found that there is discrepancy in professional fees, as that declared per
ITR/FS and that per BIR Form No. 1601-E. Hence, the unaccounted balance, as shown
below, was assessed and subjected to income tax, pursuant to Section 27(A) of the NIRC
of 1997, as amended, to wit:

Professional fees per ITR/FS 3,664,743.00

Professional fees per BIR Form No. 1601-E 9,274,839.60
Discrepancy- unaccounted balance 5,610,096.60

Respondent is certainly mistaken.

The three (3) elements on the imposition of income tax are: (1) there must be gain or
profit, (2) that the gain or profit is realized or received, actually or constructively, and (3)
it is not exempted by law or treaty from income tax.

Income tax is assessed on income received from any property, activity or service.
Such being the case, in the imposition or assessment of income tax, it is not when there
is an "unaccounted balance" of an expense, but only when there was an income, and
such income was received or realized by the taxpayer.

In this case, said elements are not present. The BIR merely imposed income tax on
petitioner simply because there was an "unaccounted balance" of professional fees, nothing
more. It must be emphasized that for income tax purposes, a taxpayer is free to deduct from its
gross income a lesser amount, or not claim any deduction at all. What is prohibited by the
income tax law is to claim a deduction beyond the amount authorized therein. Hence,
even granting that there is an "unaccounted balance" of professional fees, the same is not
prohibited by law.

The Court finds that respondent's imposition or assessment of the income tax thereto does not
hold water as he simply relied on the fact that there was an "unaccounted balance" of
professional fees,. Being so, the deficiency income tax assessment pertaining to the
"unaccounted balance" of professional fees in the amount of P5,61 0,096.60 shall be
cancelled.