BPI vs. CIR

BPI vs. CIR, G.R. No.
181836, July 09, 2014
BPI, successor-in-interest of Citytrust Banking Corporation, is a commercial banking corporation

organized and existing under the laws of the Philippines.
On 19 May 1989, the BIR issued an Assessment finding BPI liable for deficiency DST on its sales
of foreign bills of exchange to the Central Bank.
On June 16, 1989, BPI received the assessment notice and demand letter from the BIR.
On June 23, 1989, the BPI, through its counsel, filed a protest letter requesting for the
reinvestigation and/or reconsideration of the assessment for lack of legal and factual bases. The
BPI alleged that it should not be liable for the assessed DST because: (i) DST was for the
account of the buyer; (ii) neither the tax-exempt entity nor the other party shall be liable for
the payment of DST before the effectivity of Presidential Decree No. (PD) 1994; (iii) the
document was exempt from DST; and (4) the assessed DST was the same assessment made by
the BIR for DST swap transaction covering taxable years 1982-1986.
In a letter dated 4 August 1998, then Commissioner of Internal Revenue (CIR) Beethoven L.

Rualo denied the "request for reconsideration." The CIR held that BPI’s arguments were legally
untenable. Its decision is based on the BIR Ruling that the liability to pay DST was shifted to
the other party, who was not exempt from the tax. As for being taxed twice, the CIR found that
such allegation was unsubstantiated by BPI.
BPI filed a petition for review before the CTA. the CIR filed his answer with a demand for BPI to
pay the assessed DST.
The CTA ordered the cancellation of the assessed DST on BPI. The CTA ruled that neither BPI
nor Central Bank, which was tax-exempt, could be liable for the payment of the assessed DST .
The CTA reasoned out that before PD 1994 took effect in 1986, there was no law that shifted
the liability to the other party, in case the party liable to pay the DST was tax exempt.
Subsequently, the CIR appealed to the CA.
The CA reversed the CTA decision and held that BIR Unnumbered Ruling dated 30 May 1977
was more in accord with the general principles of law and the intent for the enactment of the
provisions on DST. According to the CA, BPI further failed to justify its claim for exemption from
tax.
Issue: whether the period to collect the assessed DST for the year 1985 has prescribed.
The Court ruled that in order to determine prescription, what is essential only is that the facts
demonstrating the lapse of the prescriptive period were sufficiently and satisfactorily apparent
on the record either in the allegations of the plaintiff’s complaint, or otherwise established by
the evidence. Under the then applicable Section 319(c) [now, 222(c)] 20 of the National Internal
Revenue Code (NIRC) of 1977, as amended, any internal revenue tax which has been assessed
within the period of limitation may be collected by distraint or levy, and/or court proceeding
within three years following the assessment of the tax. The assessment of the tax is deemed
made and the three-year period for collection of the assessed tax begins to run on the date the
assessment notice had been released, mailed or sent by the BIR to the taxpayer.
In the present case, although there was no allegation as to when the assessment notice had
been released, mailed or sent to BPI, still, the latest date that the BIR could have released,
mailed or sent the assessment notice was on the date BPI received the same on 16 June
1989. Counting the three-year prescriptive period from 16 June1989, the BIR had until 15 June
1992 to collect the assessed DST. But despite the lapse of 15 June 1992, the evidence
established that there was no warrant of distraint or levy served on BPI’s properties, or any
judicial proceedings initiated by the BIR.
The earliest attempt of the BIR to collect the tax was when it filed its answer in the CTA on 23
February 1999, which was several years beyond the three-year prescriptive period. However,
the BIR’s answer in the CTA was not the collection case contemplated by the law.- the judicial
action to collect internal revenue taxes fell under the jurisdiction of the regular trial courts, and
not the CTA. Evidently, prescription has set in to bar the collection of the assessed DST.
protest letter of petitioner BPI was in the nature of a request for reconsideration , hence,
Section 224 of the Tax Code of 1977, as amended, on the suspension of the running of the statute
of limitations should not apply.
Granted that there was a request for re-investigation, it was noted by the Court that there was
nothing in the records which showed that the BIR granted such request reinvestigation.

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BPI vs. CIR, G.R. No.

181836, July 09, 2014

BPI, successor-in-interest of Citytrust Banking Corporation, is a commercial banking corporation

In a letter dated 4 August 1998, then Commissioner of Internal Revenue (CIR) Beethoven L.

Subsequently, the CIR appealed to the CA.

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