Facts: On December 19, 1974, Wyeth Suaco received notice of assessment from the BIR for its failure to remit withholding tax at source for the 4th quarter of 1973 on accrued royalties, remuneration for technical services paid abroad and cash dividends, including the deduction of non-deductible raw materials from its reports. The company, thru its tax consultant, SVG & co., sent BIR two letters dated January 17, 1975 and February 8, 1975 protesting the assessment and requesting their cancellation or withdrawal on the ground that said assessments lacked factual or legal basis. Also, there were letters from the company to the BIR to such effect. On September 12, 1975, the CIR offered to compromise but only resulted to a slight reduction of the tax as per the acting Commissioner’s decision on December 10, 1979. On January 18, 1980, Wyeth Suaco filed petition for review with the CTA, praying that CIR be enjoined from enforcing the assessments by reason of prescription and that assessments be declared null and void for lack of legal and factual basis. The CTA decided against the CIR holding that while the assessments for the deficiency taxes were made within the five-year period of limitation, the right of CIR to collect the same has already prescribed, in accordance with Sec. 319(c) of the NIRC.
Held: CTA is wrong. The letters of Wyeth Suaco interrupted the running of the five-year perspective period to collect the deficiency taxes. Settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of the assessment. Wyeth Suaco admitted that it was seeking reconsideration of the tax assessments as shown in a letter of its president and General Manager. Further, although the protest letters prepared by SGV & Co. did not categorically state or use the words “reinvestigation” and “reconsideration”, the same are to be treated as letters of reinvestigation and reconsideration.
As to Wyeth Suaco’s argument that withholding tax at source should only be remitted to the BIR once the incomes subject to withholding tax at source have actually been paid, the SC cited the lifeblood doctrine, the express provision of the law which requires the filing of monthly return and payment of taxes withheld at source within 10 days after the end of each month. Further, the company uses accrual method of accounting and therefore the effect of transactions and other events on assets and liabilities are recognized and reported in the time periods to which they relate rather than only when cash is received or paid.
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