Commissioner of Internal Revenue vs. Union Shipping Corporation (GR 66160, 21 May 1990)
Second Division, Paras (J): 4 concur
Facts: In a letter dated 27 December 1974, the Commissioner of Internal Revenue assessed against Yee Fong Hong, Ltd. and/or Union Shipping Corporation, the total sum of P583,155.22 as deficiency income taxes due for the years 1971 and 1972. Said letter was received on 4 January 1975, and in a letter dated 10 January 1975, received by the Commissioner on 13 January 1975, the Company protested the assessment. The Commissioenr, without ruling on the protest, issued a Warrant of Distraint and Levy, which was served on the Company’s counsel, Clemente Celso, on 25 November 1976. In a letter dated 27 November 1976, received by the Commissioner on 29 November 1976, the Company reiterated its request for reinvestigation of the assessment and for the reconsideration of the summary collection thru the Warrant of Distraint and Levy. The Commissioner, again, without acting on the request for reinvestigation and reconsideration of the Warrant of Distraint and Levy, filed a collection suit before Branch XXI of the then Court of First Instance of Manila (Civil Case 120459) against the Company. Summons in the said collection case was issued to the Company on 28 December 1978.
On 10 January 1979, the Company filed with the Court of Tax Appeals its Petition for Review of the Commissioner’s assessment of its deficiency income taxes in a letter dated 27 December 1974 (CTA Case 2989), wherein it prays that after hearing, judgment be rendered holding that it is not liable for the payment of the income tax herein involved, or which may be due from foreign shipowner Yee Fong Hong, Ltd. The Tax Court, in a decision dated 9 December 1983, ruled in favor of the Company, reversing the decision of the Commissioner which assessed against and demanded from the Company the payment of deficiency income tax, inclusive of 50% surcharge, interest and compromise penalties, in the amounts of P73,958.76 and P583,155.22 for the years 1971 and 1972, respectively.
The Commissioner filed a Petition for Certiorari with the Supreme Court. The Supreme Court dismissed the petition and affirmed the assailed decision of the Court of Tax Appeals.
1. Final determination of disputed assessment must be indicated in clear and unequivocal language; Purpose
The Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment, as contemplated by sections 7 and 11 of Republic Act 1125, as amended. On the basis of this statement indubitably showing that the Commissioner’s communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues. This rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment – and, consequently, the collection of the amount demanded as taxes – by repeated requests for recomputation and reconsideration. On the part of the Commissioner, this would encourage his office to conduct a careful and thorough study of every questioned assessment and render a correct and definite decision thereon in the first instance. This would also deter the Commissioner from unfairly making the taxpayer grope in the dark and speculate as to which action constitutes the decision appealable to the tax court. Of greater import, this rule of conduct would meet a pressing need for fair play, regularity, and orderliness in administrative action.
2. Present case: Taxpayer left in the dark as to which is the appealable decision
Herein, the Commissioner did not rule on the Company’s motion for reconsideration but, left the Company in the dark as to which action of the Commissioner is the decision appealable to the Court of Tax Appeals. Had he categorically stated that he denies the Company’s motion for reconsideration and that his action constitutes his final determination on the disputed assessment, the Company without needless difficulty would have been able to determine when his right to appeal accrues and the resulting confusion would have been avoided.
3. Reviewable decision contained in letter of Commissioner, not in warrants of distraint
The reviewable decision of the Bureau of Internal Revenue is that contained in the letter of its Commissioner, that such constitutes the final decision on the matter which may be appealed to the Court of Tax Appeals and not the warrants of distraint (Advertising Associates, Inc. v. Court of Appeals, 133 SCRA 769 [1984]). The procedure enunciated is demanded by the pressing need for fair play, regularity and orderliness in administrative action.
4. Reckoning period of prescriptive period of appeal
Under the circumstances, the Commissioner of Internal Revenue, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Thus, it was only when the Company received the summons on the civil suit for collection of deficiency income on 28 December 1978 that the period to appeal commenced to run. The request for reinvestigation and reconsideration was in effect considered denied by the Commissioner when the latter filed a civil suit for collection of deficiency income. So that on 10 January 1979 when the Company filed the appeal with the Court of Tax Appeals, it consumed a total of only 13 days well within the thirty day period to appeal pursuant to Section 11 of RA 1125.
5. Union Shipping is the husbanding agent of vessel Yee Fong Hong Ltd.
Union Shipping is actually and legally the husbanding agent of the vessel of Yee Fong Hong, Ltd. as (1) it neither performed nor transacted any shipping business, for and in representation, of Yee Fong Hong, Ltd. or its vessels or otherwise negotiated or procured cargo to be loaded in the vessels of Yee Fong Hong, Ltd.; (2) it never solicited or procured cargo or freight in the Philippines or elsewhere for loading in said vessels of Yee Fong Hong, Ltd.; (3) it had not collected any freight income or receipts for the said Yee Fong Hong Ltd.; (4) it never had possession or control, actual or constructive, over the funds representing payment by Philippine shippers for cargo loaded on said vessels; it never remitted to Yee Fong Hong, Ltd. any sum of money representing freight incomes of Yee Fong Hong, Ltd.; and (5) that the freight payments made for cargo loaded in the Philippines for foreign destination were actually paid directly by the shippers to the said Yee Fong Hong, Ltd. upon arrival of the goods in the foreign ports.
6. Husbanding agent not liable for income tax due from foreign shipowners and withholding tax
The corporation being merely a husbanding agent is not liable for the payment of the income taxes due from the foreign ship owners loading cargoes in the Philippines. Neither can the Company be liable for withholding tax under Section 53 of the Internal Revenue Code since it is not in possession, custody or control of the funds received by and remitted to a non-resident taxpayer. If an individual or corporation, like Union Shipping herein, is not in the actual possession, custody, or control of the funds, it can neither be physically nor legally liable or obligated to pay the so-called withholding tax on income claimed by the non-resident taxpayer, herein Yee Fong Hong, Ltd.
7. Factual findings of the CTA binding upon the Supreme Court
The factual findings of the Court of Tax Appeals are binding on the Supreme Court. It is well-settled that in passing upon petitions for review of the decisions of the Court of Tax Appeals, the Court is generally confined to questions of law. The findings of fact of said Court are not to be disturbed unless clearly shown to be unsupported by substantial evidence.
