Philippine National Oil Company v CA; G.R. No. 109976; 26 Apr 2005

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After being informed through the sworn statement of private respondent of the failure of the Philippine National Bank (PNB) to withhold the 15% final tax on interest earnings and/or yields from the money placements of petitioner with the said bank, the BIR conducted its audit and investigation of petitioner’s internal revenue tax liabilities. Subsequently, the BIR in a letter dated 08 August 1986 requested petitioner to settle its liability for taxes on the interests earned by its money placements with PNB and which PNB did not withhold.

Petitioner repeatedly made an offer to compromise its tax liability all of which were unacceptable to the BIR. Finally, its 09 June 1987 proposal to pay 30% of its basic tax deficiency was accepted by then BIR Commissioner.

Whether or not PNOC’s tax liability could be compromised.

NO. PNOC’s tax liability could not be considered a delinquent account since (1) it was not self-assessed, because the BIR conducted an investigation and assessment of PNOC and PNB after obtaining information regarding the non-withholding of tax from private respondent Savellano; and (2) the demand letter, issued against it on 08 August 1986 could not have been a deficiency assessment that became final and executory by 31 December 1985.

Neither was the assessment against PNOC an assessment that could have been disputed or protested on or before 31 December 1985, having been issued on a later date.

Given that PNOC’s tax liability did not constitute a delinquent account or a disputed assessment as of 31 December 1985, then it could not be compromised under E.O. No. 44.

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