Butuan Sawmill vs. CTA

Butuan Sawmill vs.
CTA (1966) section 186 of the Tax Code, as amended by Republic

Acts Nos. 588 and 594; and that the assessment thereof
J. JBL Reyes
was made well within the ten year period prescribed by
TOPIC Period of Limitation to Assess; In Section 332 (a) of the same Code since petitioner herein
General omitted to file its sales tax returns for the years 1951, 1952
DOCTRINE For purposes of computing the and 1953, and this omission was discovered only on
period of prescription under Section September 17, 1957.
331 of the Tax Code, an income tax
II. ISSUE
return cannot be considered as a
return for compensating tax. The Whether the assessment thereof was made within the
taxpayer must file a return for the prescriptive period provided by law therefor? YES.
particular tax law., If he does not file
such a return, an assessment may
be made within ten years from and III. RATIONALE
after the discovery of the omission to
file the return. Petitioner avers that the filing of its income tax returns,
wherein the proceeds of the disputed sales were
declared, is substantial compliance with the
I. FACTS requirement of filing a sales tax return, and, if there should
During the period from January 1951 to June 1953, be deemed a return filed, Section 331, and not Section
Butuan Sawmill sold logs to Japanese firms at prices 332, (a), of the Tax Code providing for a five year
Free-On-Board (FOB) Vessel Magallanes, that the FOB prescriptive period within which to make an assessment
prices included costs of loading wharfage stevedoring and and collection of the tax in question from the time the
other costs in the Philippines; that the freight was paid by return was deemed filed, should be applied to the case at
the Japanese buyers; and the payments of the logs were bar.
effected by means of irrevocable letters of credit in favor Since petitioner filed its income tax returns for the year
of petitioner and payable through the Philippine National 1951, 1952 and 1953, and the assessment was made in
Bank or any other bank named by it. 1957 only, it further contends that the assessment of the
Upon investigation by the Bureau of Internal Revenue, it sales tax corresponding to the years 1951 and 1952 has
was ascertained that no sales tax return was filed by the already prescribed for having been made outside the five-
petitioner and neither did it pay the corresponding tax on year period prescribed in Section 331 of the Tax Code and
the sales. BIR determined against petitioner the sum of should, therefore, be deducted from the assessment of
P40,004.01 representing sales tax, surcharge and the deficiency sales tax made by respondent.
compromise penalty of its sales [tax, surcharge and The Court held that the contention is not meritorious. In a
compromise penalty of its sales] of logs from January previous case, the Court held that an income tax return
1951 to June 1953 pursuant to section 183, 186 and 209 cannot be considered as a return for compensating tax for
of the National Internal Revenue Code. purposes of computing the period of prescription under
And in consequence of a reinvestigation, respondent, on Section 331 of the Tax Code, and that the taxpayer must
November 6, 1958, amended the amount of the previous file a return for the particular tax required by law in order
assessment to P38,917.74. to avail himself of the benefits of Section 331 of the Tax
Code; otherwise, if he does not file a return, an
On the bases of the above-quoted findings and assessment may be made within the time stated in
circumstances, the lower court upheld the legality and Section 332(a) of the same Code.
correctness of the amended assessment of the sales tax
and surcharge, ruling that the sales in question, in the light This principle is applicable, by analogy, at the case at bar.
of our previous decisions, were domestic or "local" sales,
and, therefore, subject to sales tax under the provision of
It being undisputed that petitioner failed to file a return for
the disputed sales corresponding to the year 1951, 1952
and 1953, and this omission was discovered only on
September 17, 1957, and that under Section 332(a) of the
Tax Code assessment thereof may be made within ten
(10) years from and after the discovery of the omission to
file the return, it is evident that the lower court correctly
held that the assessment and collection of the sales tax in
question has not yet prescribed.
IV. DISPOSITIVE
PETITION DISMISSED.
V. NOTES

Butuan Sawmill vs. CTA

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Butuan Sawmill vs.

CTA (1966) section 186 of the Tax Code, as amended by Republic

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