[TAX II] VIII.A.6.c.
Extraordinary Prescription: Suspension of Prescriptive Period 92
Continental Micronesia, Inc. - Phil. Branch v. CIR
C.T.A. CASE NO. 6191 | March 22, 2006| Casanova, C., J.:
Petitioners: CONTINENTAL MICRONESIA, INC. PH BRANCH
Respondents: COMMISSIONER OF INTERNAL REVENUE
FACTS
Petitioner is a Philippine branch of a non-resident foreign
corp incorporated in Delaware, U.S.A., engaged in the
operation of air transportation in international traffic.
December 12, 1996: Petitioner received a Letter of
Authority authorizing Revenue Officer Dosado, and
Group Supervisor Batoon, to examine petitioner's books
of accounts and other accounting records for all internal
revenue taxes for the period January to December 1995
Respondent informed petitioners of proposed
assessments for Deficiency of Gross Philippine Billings,
Common Carrier's Tax, Withholding Tax on Compensation
and Expanded Withholding Tax
In a conference, Petitioner expressed its willingness to
settle the deficiency gross Philippine billings and
common carrier's tax but would protest the remaining
deficiency taxes upon receipt of the assessment notice.
May 5, 1998: Petitioner paid deficiency gross Phil. Billings
and common carriers tax.
May 15, 1998: A PAN was issued for the remaining
deficiency taxes. This was received by petitioner on
October 8, 1998. In it, petitioner was invited to a
conference to hear its side or to present its evidence
within 15 days from receipt thereof.
October 15, 1998: Petitioner, however, opted to file its
objection to the PAN.
Thus, it resulted to a reinvestigation of the case.
December 10, 1999: another PAN was issued based on
the report of reinvestigation. Petitioner was still held to be
liable for the deficiency taxes.
Shortly thereafter, respondent, issued Assessment
Notices on December 29, 1999 covering the deficiency
taxes aforementioned, in the increased amounts of
P2,501,523.64 and P93,193.66, respectively. This was
received by petitioner on January 5, 2000 together with
their corresponding demand letters.
February 4, 2000: Petitioner filed an administrative
protest seeking the cancellation and withdrawal thereof
due to prescription and lack of factual and legal bases.
October 31, 2000: Petitioner filed the instant Petition for
Review with this [CTA] Court pursuant to Sec 228.
*Petitioner insists that the present assessments were
already barred by prescription, the same having been
issued beyond the three-year period provided for by Sec.
203 of the NIRC
Petitioner points out that under Sec. 5 of RR. 6-85, the
filing of the annual return of income tax withheld at
source shall be made on or before the 1st day of March
of the following year in which the payments were made.
However, petitioner filed its annual information returns
for the year 1995 on earlier dates of January 30, 1996
and February 26, 1996, respectively.
STEPHANIE PUA
Applying Sec. 203, the counting of the three-year
period commences on the last day prescribed by law
for the filing of return, that is, March 1, 1996 in this
case, because the information returns were filed before
the last day prescribed by law for its payment.
Accordingly, respondent had three (3) years from March
1, 1996 or up to March 1, 1999 within which to assess the
withholding tax liability of petitioner for the year 1995.
Respondent issued the subject Assessment Notices and
Formal Letters of Demand all on December 29, 1999,
which petitioner received on January 5, 2000.
Therefore, the formal deficiency assessments were made
and issued beyond the three-year prescriptive period
prescribed by law within which respondent can legally
assess the petitioner of deficiency withholding taxes.
Thus, the assessments are barred by prescription.
ISSUE(S)
W/N the assessments are barred by prescription [YES,
MOSTLY but not for petitioners reasoning see below]
RULING
At this juncture, We would like to correct the notion of
petitioner with respect to prescriptive period.
Based on the law, rules & regulations, and jurisprudence,
the counting of the prescriptive period is reckoned
from the last day required by law for the filing of the
monthly remittance return, which is ten (10) days after
the end of each calendar month (save December) and
twenty-five (25) days after the end of December for taxes
withheld from the last compensation/income payment for
the said month.
[See Notes 2 for tables on Petitioners case]
Applying now the rule on prescription, the final
assessment notice should be issued on the below
respective last days to assess. Inasmuch as the
assessment notices for both deficiency withholding tax on
compensation and expanded withholding tax were issued
only on December 29, 1999, it would appear that both
subject deficiency assessments are time barred.
However, since petitioner requested a reinvestigation on
October 15, 1998, and which request was granted by
respondent in the letter dated November 9, 1998, 27 the
running of the three-year period to assess was
suspended pursuant to the Section 223 of the NIRC.
Settled is the rule that when the taxpayer requests for a
reinvestigation of an assessment which is granted by
respondent, the running of the period to assess under
Section 203 and 222 is suspended.
While We have noted that the request for reinvestigation
which was granted by the respondent in the case at bar
was on the Preliminary Assessment Notice and not on the
Final Assessment Notice or Assessment Notice, still,
Section 223 applies.
Section 223 of the Code makes no distinction as to
whether the request for reinvestigation of an assessment
against the taxpayer is on a preliminary assessment notice
or final assessment notice. It is a well-known maxim in
statutory construction that where the law does not
distinguish, We should not distinguish.
 [TAX II] VIII.A.6.c. Extraordinary Prescription: Suspension of Prescriptive Period 92
STEPHANIE PUA
It is further worthy to stress that the suspension of the member of his household with sufficient discretion, and no
running of Statute of Limitations provided in Sections 203 property could be located; and when the taxpayer is out of the
and 222 refers to the phrase "on the making of Philippines.
assessment" which phrase refers to the three-year or ten
year period, as the case may be, which includes the 2. Tables of Pertinent dates of this case
issuance of a preliminary assessment notice.
a. Dates when petitioner filed its Monthly Remittance
Returns of Income Taxes Withheld (covering
As interpreted by the Supreme Court in several cases, withholding tax on compensation and expanded
requests for investigation which had the effect of withholding tax) for the months of January to December
suspending the period of limitation refers to 1995 as well as the corresponding dates within which
reinvestigation of a prior assessment paving the way for respondent is allowed to assess petitioner:
a new or revised assessment. Such period spent
reinvestigating is deducted from the total period Period in Date Filed Last Date to Last Day to
prescribed by law. 1995 File Return Assess
The above pronouncements are clear, the period spent for January Feb 7 1995 Feb 10 1995 Feb 9 1998
reinvestigation should be deducted from the three-year February Mar 7 1995 Mar 10 1995 Mar 9 1998
period to issue another assessment. March Apr 5 1995 Apr 10 1995 Apr 9 1998
Based on the foregoing, the following deficiency April May 4 1995 May10 1995 May11 1998
withholding tax on compensation and expanded May Jun 9 1995 Jun 12 1995 Jun 11 1998
withholding taxes for the months of January 1995 to June Jul 7 1995 Jul 10 1995 Jul 9 1998
September of 1995 are time-barred [See notes 2] July Aug 7 1995 Aug 10 1995 Aug 10 1998
What remains for review by the Court are the August Sept 6 1995 Sep 11 1995 Sep 10 1998
deficiency assessments for the months of October, September Oct 5 1995 Oct 10 1995 Oct 9 1998
November and December of 1995 October Nov 9 1995 Nov 10 1995 Nov 9 1998
November Dec 6 1995 Dec 11 1995 Dec 10 1998
DISPOSITIVE PORTION December Jan 9 1996 Jan 25 1996 Jan 24 1999
WHEREFORE, the Petition for Review is PARTIALLY GRANTED. *on dates other than 10 for last date to file a return, it is
The assessments for deficiency withholding tax on because the 10th day fell on a Saturday or Sunday
compensation and expanded withholding tax for the months ** on dates other than 9 for last date to assess, it is because
of January 1995 to September 1995 are hereby the 9th day fell on a Saturday or Sunday
declared VOID for having been issued out of time. However,
the deficiency assessments for the months of October, b. The following deficiency withholding tax on
compensation and expanded withholding taxes for
November and December 1995 are UPHELD
the months of January 1995 to September 1995 are
time-barred, to wit:
***NOTES***
1. NIRC PROVISIONS Period in Last Day to Suspension Date of
1995 Assess Date of Issuance of
SEC. 203. Period of Limitation Upon Assessment and Issuance of Assessment
Collection. Except as provided in Section 222, internal Assessment Notice
revenue taxes shall be assessed within three (3) years after the January Feb 9 1998 Oct 15 1998 Dec 29 1999
last day prescribed by law for the filing of the return , and no February Mar 9 1998 Oct 15 1998 Dec 29 1999
proceeding in court without assessment for the collection of such March Apr 9 1998 Oct 15 1998 Dec 29 1999
taxes shall be begun after the expiration of such period:
April May11 1998 Oct 15 1998 Dec 29 1999
Provided, That in a case where a return is filed beyond the period
May Jun 11 1998 Oct 15 1998 Dec 29 1999
prescribed by law, the three (3)-year period shall be counted
from the day the return was filed. For purposes of this Section, a June Jul 9 1998 Oct 15 1998 Dec 29 1999
return filed before the last day prescribed by law for the filing July Aug 10 1998 Oct 15 1998 Dec 29 1999
thereof shall be considered as filed on such last day." August Sep 10 1998 Oct 15 1998 Dec 29 1999
September Oct 9 1998 Oct 15 1998 Dec 29 1999
SEC. 223. Suspension of Running of Statute of Limitations.
The running of the Statute of Limitations provided in Sections 3. Other Issues
203 and 222 on the making of assessment and the beginning of
distraint or levy or a proceeding in court for collection, in respect a. Deficiency Withholding Tax on compensation
of any deficiency, shall be suspended for the period during which The deficiency withholding tax on compensation allegedly
the Commissioner is prohibited from making the assessment or arose from petitioner's failure to withhold income tax on its
beginning distraint or levy or a proceeding in court and for sixty payments for housing rentals of its expatriate for 1995.
(60) days thereafter; when the taxpayer requests for a We do not agree with petitioner that the rental value of the
reinvestigation which is granted by the Commissioner; when the house should not form part of the compensation of its
taxpayer cannot be located in the address given by him in the expatriates under the "benefit-of-the-employer" rule as It
return filed upon which a tax is being assessed or collected: does not conform with the standard stated under Section
Provided, That, if the taxpayer informs the Commissioner of any 2.33(B)(1)(g) of RR 3-98.
change in address, the running of the Statute of Limitations will However, We agree with petitioner that the tax based should
not be suspended; when the warrant of distraint or levy is duly be 50% of the rental value pursuant to RAMO 1-87
served upon the taxpayer, his authorized representative, or a
 [TAX II] VIII.A.6.c. Extraordinary Prescription: Suspension of Prescriptive Period 92
STEPHANIE PUA

b. Deficiency Expanded Withholding Tax

We noted that in its protest letter to the respondent,
petitioner did not pose any objection to the alleged deficiency
withholding except on commission income.
Failure to present proof of error in the assessment will justify
judicial affirmance of said assessment. Hence, except for
deficiency expanded withholding tax on commission income,
the rest of the deficiency withholding taxes are presumed to
be proper.
The deficiency in withholding tax on commission income
stemmed from petitioner's failure to withhold 5% creditable
withholding tax from its sales agents and travel agencies'
commissions in selling its airplane tickets.

c. BIR records are part of the official records of the

case
We do not concur with petitioner's position that respondent
failed to support the subject deficiency assessments with
factual evidence. While it is true that respondent did not
formally offer his entire marked documentary exhibits,
however, what We have considered in the disposition of the
case were all found in the BIR records.
The Court has ruled that the documents found in the BIR
records, although not formally offered, forms part of the
official records of the case pursuant to Section 2 Rule 7 of the
Rules of the Court of Tax Appeals.