Rep VS Ker

MARIAM R.
PETILLA
LLB II- TAXATION
REPUBLIC OF THE PHILS VS KER & COMPANY LTD
FACTS: Ker & Co. Ltd, a domestic corp filed its income tax returns from 1947 to 1950. In 1953, the BIR
examined and audited Co. returns and books of accounts and subsequently issued assessments for
deficiency income tax w/c is due and demandable on dates indicated w/the notices of assessments. The
assessments for 1948 and 1950 carried a surcharge of 50% as authorized under Sec 72 of the Tax Code
for the filing of fraudulent returns.
On Mar 1, 1956, Ker & Co filed w/the Crt of Tax Appeals a petition for reviews w/prelim injunction.
No prelim injuction was issued bec the court dismissed the appeal for having been instituted beyond the
30 day period provided in Sec 11 RA 1125.
On Mar 15, 1962, the BIR demanded payment of the assessments together with a 5% surcharge for
late payment and interest at the rate of 1% monthly. Ker & Co refused to pay instead in its letters set up
the defense of prescription of the Commissioner’s right to collect the tax. Subsequently, The Rep of the
Phils filed a complaint w/the CFI seeking collection of the deficiency income tax from 1947 to 1950. The
complaint did not allege fraud in the filinf of any income tax returns but it prayed for the payment of 5%
surcharge for late payment & interest of 1% per month w/out specifying from what date interes started
to accrue.
The CFI dismiss the claim for the collection of deficiency income of 1947 but orders Ker & Co to pay
the deficiency income taxes from 1948 to 1950 plus 5% surcharge and 1% interest per month from
March 27, 1962 and until full payment.
The Rep of the Phils filed a mot for reconsideration contending the right of the Commsr of Internal
Rev to collect the deficiency assessment for 1947 has not prescribed by a lapse of merely 5 years & 3
months bec the taxpayer’s income was fraudulent in w/c case prescription sets in 10 years from the date
of discovery of fraud & that the payment of delinquency interest of 1% per month shld commence from
the date ot fell due as indicated in the assessment notices instead of on the date the complaint was
filed.
Ker & Co filed a motion for recon reiterating its assertion that the CFI did not acquire jurisdiction over
its person & maintaining that since the complaint was filed more than 9 years after the deficiency
assessments for 1948, 1949 & 1950 were made & since the filing of its pet for review in the Crt of Tax
Appwals did not stop the running of the period of limitations, the right of the Commsr of Int Rev to
collect the tax in question has prescribed.
The 2 motions for reconsideration were denied. Both parties appealed directly to this court.
IISSUES: 1) DID THE CFI ACQUIRE JURISDICTION OVER THE PERSON OF KER & CO LTD?
2) DID THE RIGHT OF THE COMMSR OF INT REV TO ASSESS DEFICIENCY INCOME FOR THE YEAR 1947
PRESCRIBE?
3) DID THE FILING A PETITION FOR REVIEW BY THE DEFENDANT IN THE CRT OF TAX APPEALS SUSPEND
THE RUNNING OF THE STATUTE OF LIMITATIONS TO COLLECT THE DEFICIENCY INCOME FROM 1948 TO
1950?
4) WHEN DID THE DELINQUNCY INTEREST ON THE DEFICIENCY INCOME TAX FROM 1948 TO 1950
ACCRUE?
HELD: 1) By interposing 2 motions to dismiss by the def on the basis of w/c it prayed the crt to resolve its
controversy in its favor and the court validly decide the said plea of the defendant, it necessarily had
acquired the jurisdiction upon the person, who being the proponent of the affirmative defense shld be
deemed to have abandoned its special appearance & voluntarily submitted itself to the jurisdiction of
the court.
2) YES. By its actuation, the Rep of the Phil should be considered to have waived its right to object to the
setting up of such defense. Ker & Com raised the defense of prescription in the proceedings below & the
Rep of the Phils, instead of questioning the right of the defendant to raise such defense,litigated on it &
submitted the issue for resolution of the crt.
3) YES. Under the circumstances, the Commisioner of Int Rev was in effect prohibited from collecting the
tax in question. The provisions of Sec 333 of the Tax Code will apply.
Sec 333. ‘Suspension of running statute. The running of the statute of limitations provided in Sec 331 or
332 on the making of assessments and the beginning of distraint or levy or a proceeding in court for
collection, in respect of any deficiency, shall be suspended for the period during w/c the Collector of
Internal Revenue is prohibited from making the assessment or beginning distraint or levy or a
proceeding in court & for 60 days thereafter.”
4) The delinquency interest at the rate of 1% per month shall be computed from March 15, 1953 for the
deficiency income tax for 1948 and 1949 and from Feb 15, 1954 for the deficiency income tax for 1950.

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MARIAM R.

REPUBLIC OF THE PHILS VS KER & COMPANY LTD

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