BANK OF THE PHILIPPINE ISLANDS vs.

COMMISSIONER OF INTERNAL
REVENUE

G.R. No. 139736 October 17, 2005

Chico-Nazario, J.:

FACTS:

On June 6 and 14, 1985, BPI sold $500,000.00 to the Central Bank, for the total sale amount of
$1M.

October 10, 1989: BIR issued deficiency assessment for DST in the amount of 28,020.00 for the
said sales.

October 20,1989, petitioner received the Assessment Notice and consequently filed a protest in
November 17,1989. In its protest, the BIR claims that; under the established market practice, the
DST on sale of foreign exchange is paid by the buyer. Thus, when BPI sells to any party, the cost
of DST is added to the total price or charge to the buyer and the seller affixes the corresponding
DST on the document. Since the Central Bank is exempt from paying DST under Resolution No.
35-85 of the Fiscal Incentive Review Board, no DST was affixed by the BPI.

Petitioner did not receive a reply but soon after, October 15, 1992, BIR issued a Warrant of
distraint, and finally in August 13, 1997, BPI received a letter denying its request for
reconsideration.

BPI alleged that the right of BIR to enforce collection of the assessed DST is already prescribed.
The BIR only had 3 years to collect the deficiency DST. It took them 7 years and 9 months to
deny the protest and issue the warrant of distraint.

CA sustained the decision of the CTA with regards to the prescription period.

ISSUE:

Whether or not the right of BIR to collect from the petitioner BPI the alleged deficiency DST for
taxable year 1985 had already prescribed.

RULING:

Under Section 203 of the Tax Code, the BIR has 3 years assessment period, counted from the
date of actual filling of the return or from the last date prescribed by law for the filing of such
return, whichever comes later. In cases of false or fraudulent returns with intent to evade tax of
the failure to file any return at all, the prescriptive period for assessment of the tax due shall be
10 years from the discovery by the BIR of the falsity, fraud, or omission. When the BIR validly
issues an assessment, within either the 3 or 10 year period, then the BIR has another 3 years after
the assessment within which to collect the national internal revenue tax due thereon by distraint,
levy and/or court proceeding.

Counting the 3 year prescriptive period from October 20, 2989 (when the assessment notice was
received by BPI), the BIR only had until October 19, 1992 within which to collect the
assessment deficiency DST.

Since the warrant of distraint was only received by BPI on October 23, 1992, the right of the BIR
to collect has already prescribed.

A waiver of the prescriptive period is provided in Section 223, paragraphs (b) and (d) required it
to be:
In writing
Agreed by both the Commissioner and the taxpayer
Before the expiration of the ordinary prescriptive periods of assessment and collection, and
For a definite period beyond the ordinary prescriptive periods for assessment and collection

However, BPI executed no waiver of the Statute of Limitations, thus it did not suspend running
of the prescription. The protest of the BPI is to be construed as a REQUEST FOR
RECONSIDERATION and not a request for reinvestigation that would suspend the running of
the prescriptive period under Section 224.

The statute of limitations for collection “against BPI had expired; none of the conditions from
the statute of limitations on collection exists herein.”