8/8/2019 Tax Recent RP SC Decisions

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Taxation

National Internal Revenue Code; irrevocability of option tocarry-over of excess income tax credits. It is undisputedthat taxpayer indicated in its 1997 income tax return (ITR)its option to carry-over as tax credit for the next year itstax overpayment. In its 1998 ITR, taxpayer again indicatedits preference to carry-over the excess income tax creditagainst the tax liabilities for the succeeding taxable years.Clearly, taxpayer chose to carry-over and apply theoverpaid tax against the income tax due in the succeedingtaxable years. Under section 76 of the National InternalRevenue Code of 1997, once the taxpayer exercises the

option to carry-over and apply the excess creditable taxagainst the income tax due for the succeeding taxableyears, such option is irrevocable. Thus, taxpayer can [inthe succeeding years, i.e., 1999] no longer claim a refundof its excess income tax credit in the taxable year 1997because it has already opted to carry-over the excessincome tax credit against the tax due in the succeedingtaxable years. Commissioner of Internal Revenue vs. ThePhilippine American Life and General InsuranceCompany, G.R. No. 175124, September 29, 2010.

Assessment; prescriptive period. The government mustassess internal revenue taxes within three years from the

last day prescribed by law for the filing of the tax returnor the actual date of filing of such return, whichevercomes later. An assessment notice issued after the three-year prescriptive period is no longer valid and effectiveunless falling under the exceptions. Commissioner ofInternal Revenue vs. Kudos Metal Corporation, G.R. No.178087, May 5, 2010.

Prescriptive period for assessment; exceptions. In the caseof a false or fraudulent return with intent to evade tax orof failure to file a return, the tax may be assessed at anytime 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 andthe taxpayer have agreed in writing to its assessment aftersuch time, the tax may be assessed within the periodagreed upon. The period so agreed upon may be extendedby subsequent written agreement made before theexpiration of the period previously agreed upon.Commissioner of Internal Revenue vs. Kudos MetalCorporation, G.R. No. 178087, May 5, 2010.

Prescriptive period for assessment; requirements for aproper waiver. RMO 20-90 and RDAO 05-01 lay down thefollowing procedures for the proper execution of the

waiver of the prescriptive period:

(1) the waiver must be in the proper form prescribed byRMO 20-90; the phrase but not after ___ 19____, whichindicates the expiry date of the period agreed upon toassess the tax after the regular three-year period ofprescription must be filled up;

(2) the waiver must be signed by the taxpayer himselfor his duly authorized representative; in the case of acorporation, the waiver must be signed by any of itsresponsible officials; if the authority is delegated by thetaxpayer 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 therevenue official authorized by him must sign the waiverindicating that the Bureau of Internal Revenue (BIR) hasaccepted and agreed to the waiver; the date of the BIRsacceptance should be indicated; before signing thewaiver, the CIR ort he revenue official authorized by himmust 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 dateof acceptance by the BIR should be before the expirationof the period of prescription or before the lapse of theperiod agreed upon in case a subsequent agreement isexecuted; and

(6) the waiver must be executed in three copies, theoriginal copy to be attached to the docket of the case, thesecond copy for the taxpayer and the third copy for theoffice accepting the waiver; the fact of receipt by thetaxpayer of his/her file copy must be indicated in the

original copy to show that the taxpayer was notified of theacceptance of the BIR and the perfection of theagreement. Commissioner of Internal Revenue vs. KudosMetal Corporation, G.R. No. 178087, May 5, 2010.

Prescriptive period; estoppel. The doctrine of estoppecannot be applied in this case as an exception to thestatute of limitations on the assessment of taxesconsidering that there is a detailed procedure for theproper execution of the waiver, which the BIR must strictlyfollow. Estoppel has its origin in equity, which is justiceaccording to natural law and right. Thus, it cannot givevalidity to an act that is prohibited by law or that is

against public policy. Unlike in the case of Collector ofInternal Revenue vs Suyoc Consolidated Mining Company,where the doctrine of estoppel prevented the taxpayerfrom raising the defense of prescription against thegovernments efforts to collect the assessed tax, theassessments were issued beyond the prescribed period andthere was no showing that the taxpayer made any requestto persuade the BIR to postpone the issuance of theassessments. Commissioner of Internal Revenue vsKudos Metal Corporation, G.R. No. 178087, May 5, 2010.

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