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7 CIR V Phoenix

1. The Supreme Court ruled that the period to assess internal revenue taxes against Phoenix Assurance Co. for its 1952 income tax return should be counted from when it filed its amended return in 1955, not the original return in 1953. 2. This is because the amended return substantially modified the original by excluding various reinsurance transactions, thereby changing Phoenix's reported tax liability from a loss to taxes owed. 3. Counting from the amended return means the Commissioner's July 1958 assessment of deficiency taxes was still within the 5-year limit, so it had not prescribed. Counting from the original return would mean the assessment was too late.

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98 views1 page

7 CIR V Phoenix

1. The Supreme Court ruled that the period to assess internal revenue taxes against Phoenix Assurance Co. for its 1952 income tax return should be counted from when it filed its amended return in 1955, not the original return in 1953. 2. This is because the amended return substantially modified the original by excluding various reinsurance transactions, thereby changing Phoenix's reported tax liability from a loss to taxes owed. 3. Counting from the amended return means the Commissioner's July 1958 assessment of deficiency taxes was still within the 5-year limit, so it had not prescribed. Counting from the original return would mean the assessment was too late.

Uploaded by

Francesca Isabel Montenegro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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7. CIR v.

Phoenix Assurance ISSUE:


G.R. No. L-19727. May 20, 1965 1.Whether or not the right of the Commissioner of Internal Revenue to assess deficiency
By: KM income tax for the year 1952 against Phoenix Assurance Co., Ltd. has prescribed – NO.
Topic: Period to assess internal revenue taxes, Prescription
Petitioner: THE COMMISSIONER OF INTERNAL REVENUE, 2. Should the running of the prescriptive period commence from the filing of the original or
Respondent: PHOENIX ASSURANCE CO., LTD the amended return? – From the filing of the AMENDED return.
Ponente: J. Bengzon

DOCTRINE:. Where the deficiency assessment is based on an amended income tax return, RATIO:
which is substantially different from the original return, the period of prescription of the right
to issue deficiency assessment should be counted from the filing of the AMENDED, not the - The changes and alterations embodied in the AMENDED income tax return consisted of the
original, income tax return. To hold otherwise would pave the way for taxpayers to evade the exclusion of reinsurance premiums received from domestic insurance companies by Phoenix
payment of taxes by simply reporting in their original return heavy losses and amending the Assurance Co., Ltd.'s London head office, reinsurance premiums ceded to foreign reinsurers
same more than five years later when the Commissioner of Internal Revenue has lost his not doing business in the Philippines and various items of deduction attributable to such
authority to assess the proper tax thereunder. excluded reinsurance premiums, thereby substantially modifying the original return.
- Although the deduction for head office expenses allocable to Philippine business, whose
FACTS disallowance gave rise to the deficiency tax, was claimed also in the original return, the
- Phoenix Assurance Co., Ltd., a foreign insurance corporation organized under the Commissioner could not have possibly determined a deficiency tax thereunder because
laws of Great Britain, is licensed to do business in the Philippines with head office in Phoenix Assurance Co., Ltd. declared a loss of P199,583.93 therein which would have more
London. than offset such disallowance of P15,826.35.
- Through its head office, it entered, into worldwide reinsurance treaties with various foreign - Considering that the deficiency assessment was based on the amended return which is
insurance companies. It agreed to cede a portion of premiums received on original substantially different from the original return, the period of limitation of the right to issue
insurances underwritten by its head office, subsidiaries, and branch offices throughout the the same should be counted from the filing of the AMENDED income tax return.
world, in consideration for assumption by the foreign insurance companies of an equivalent - From August 30, 1955, when the amended return was filed, to July 24, 1958, when the
portion of the liability from such original insurances. deficiency assessment was issued, less than five years elapsed. (three years pa lang). Thus,
- Phoenix Assurance Co., Ltd. filed its income tax return for 1952 on April 1, 1953 showing a the right of the Commissioner to assess the deficiency tax on such amended return has NOT
LOSS of P199,583.93. prescribed.
- It amended said return on August 30, 1955 reporting a tax liability of P2,502 00. - To strengthen our opinion, we believe that to hold otherwise, we would be paving
- On July 24, 1958, after examination of the amended return, the Commissioner of Internal the way for taxpayers to evade the payment of taxes by simply reporting in their original
Revenue assessed deficiency income tax in the sum of P5,667.00. return heavy losses and amending the same more than five years later when the
- Phoenix Assurance Co., Ltd. protested against such assessment. However, the Commissioner of Internal Revenue has lost his authority to assess the proper tax
Commissioner of Internal Revenue denied such protest. thereunder. The object of the Tax Code is to impose taxes for the needs of the
- The Court of Tax Appeals found the right of the Commissioner of Internal Revenue barred Government, not to enhance tax avoidance to its prejudice.
by prescription, the same having been exercised more than five years from the date the
original return was filed.
- On the other hand, the Commissioner of Internal Revenue insists that his right to issue the WHEREFORE, the decision appealed from is modified. Phoenix Assurance Co., Ltd. is hereby
assessment has not prescribed inasmuch as the same was availed of before the 5-year period ordered to pay the Commissioner of Internal Revenue the amount of P75,966.42, P59,059.68
provided for in Section 331 of the Tax Code expired, counting the running of the period from and P48,812.32 as withholding tax for the years 1952, 1953 and 1954, respectively, and the
August 30, 1955, the date when the amended return was filed. sums of P5,667.00 and P2,847.00 as income tax for 1952 and 1954 or a total of P192,352.42.
SEC. 331. Period of limitation upon assessment and collection. — Except as provided in the The Commissioner of Internal Revenue is ordered to refund to Phoenix Assurance Co., Ltd.
succeeding section, internal-revenue taxes shall be assessed within five years after the return the amount of P20,180.00 as overpaid income tax for 1953, which should be deducted from
was filed, and no proceeding in court without assessment for the collection of such taxes shall the amount of P192,352.42. If the amount of P192,352.42 or a portion thereof is not paid
be begun after the expiration of such period. For the purposes of this section a return filed within thirty (30) days from the date this judgment becomes final, there shall be collected a
before the last day prescribed by law for the filing thereof shall be considered as filed on such surcharge and interest as provided for in Section 51 (e) (2) of the Tax Code. No costs. It is so
last day: Provided, That this limitation shall not apply to cases already investigated prior to ordered
the approval of this Code."

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