Warrants of Distraint and Levy 5. More than a year later, Acting CIR Efren I.
5. More than a year later, Acting CIR Efren I. Plana wrote a letter dated May 23, 1979
G.R. No. L-59758 – Advertising Associates v. CA
Aquino, J.
AAI protested a deficiency assessment for contractor’s percentage tax to the CIR in 1974.
The CIR did not act on the letter-protest, and in 1978 issued warrants of distraint on AAI’s
personal property. In 1979, the CIR wrote a letter denying AAI’s letter-protest.
AAI filed its petition for review before the CTA 19 days after the CIR’s letter was received in
1979. The CTA denied the petition, saying that AAI should have filed its petition within 30
days from receipt of the warrants in 1978.
The SC reversed the CTA and agreed with AAI, ruling that the decision to be appealed from
(and thus, the reckoning point for the 30-day period to appeal) was the letter of 1979 where
the CIR denied AAI’s protest. Thus, AAI filed its petition for review on time.
DOCTRINE
This case discussed the reckoning point from which the 30-day period to appeal from the
CIR should be counted – from the date warrants of distraint were issued, or from the date
the CIR actually replied to the taxpayer’s letter-protest?
The SC ruled that it was the latter. The CIR even stated in the same letter that AAI could
appeal it to the CTA within 30 days (see 2nd bullet, Fact #5).
FACTS
1. Advertising Associates, lnc. (AAI) was assessed for a deficiency of P382,700.16 as 3%
contractor's percentage tax on its rental income from the lease of neon signs and
billboards imposed by Sec. 191 of the Tax Code (as amended by PD 69) on business
agents and independent contractors.
 The CIR required AAI to pay P297,927.06 and P84,773.10 as contractor's tax
for 1967-1971 and 1972, respectively, including 25% surcharge (the latter
amount includes interest) on its income from billboards and neon signs.
 The basis of the assessment was the fact that the taxpayer's articles of
incorporation provided that its primary purpose is to engage in general
advertising business.
2. AAI contested the assessments in two letters dated Jun. 25, 1973 (for the 1967-71
deficiency taxes) and Mar. 7, 1974 (for the 1972 deficiency). The CIR reiterated the
assessments.
3. AAI requested the cancellation of the assessments in its letters of Sept. 13 and Nov.
21, 1974. The CIR did not act on these letters. Inexplicably, for about four years there
was no movement in the case.
4. On Mar. 31, 1978, the CIR issued two warrants of distraint, directing the collection
enforcement division to levy on AAI’s personal properties as would be sufficient to
satisfy the deficiency taxes. The warrants were served upon AAI on Apr. 18 and
May 25, 1978.
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Sec. 7, RA 1125. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as
herein provided.
(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the
National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue;
in answer to AAI’s letters requesting for the cancellation of the assessments and
the withdrawal of the warrants of distraint (see #3).
 In the letter, he requested AAI to pay the deficiency tax within 10 days;
otherwise, the BIR would enforce the warrants of distraint.
 The same letter ended with this paragraph: “This constitutes our final decision
on the matter. If you are not agreeable, you may appeal to the Court of Tax
Appeals within 30 days from receipt of this letter.”
6. AAI received that letter on Jun. 18, 1979. On July 7 (19 days later), it filed its petition
for review before the Tax Court (CTA).
7. The CTA dismissed the petition and upheld the warrants of distraint. It ruled that the
warrants of distraint were the CIR's appealable decision, and since AAI filed its petition
for review on Jul. 7, 1978 (320 days from the date the warrants were served upon AAI,
see #4) said petition for review was filed out of time.
ISSUE with HOLDING
1. W/N the petition for review was filed on time – Yes.
 No amount of quibbling or sophistry can blink the fact that the letter received
by AAI on Jun. 18, 1979 (see Facts #5-6), as its tenor shows, embodies the
CIR's final decision within the meaning of Sec. 7, RA 11251.
o The Commissioner said so. He even directed the taxpayer to appeal
it to the Tax Court (see 2nd bullet, Fact #5). That was the same
situation in St. Stephen's Association and St. Stephen's Chinese
Girl's School vs. CIR.
 The directive is in consonance with the SC’s dictum that the CIR should
always indicate to the taxpayer in clear and unequivocal language what
constitutes his final determination of the disputed assessment. That
procedure is demanded by the pressing need for fair play, regularity and
orderliness in administrative action.
2. W/N AAI was liable for 3% contractor’s tax – Yes.
 AAI considered itself a media company, like a newspaper or a radio
broadcasting company, but not an advertising agency in spite of the purpose
stated in its AOI. It argued that its act of leasing its neon signs and billboards
did not make it a business agent or an independent contractor. It stressed that
it is a mere lessor of neon signs and billboards and does not perform
advertising services.
 However, neon signs and billboards are primarily designed for advertising.
AAI is a business agent and an independent contractor as contemplated in
Secs. 191 and 194(v) of the old Tax Code; thus, it is liable for the 3% tax.
DISPOSITIVE PORTION
Petition granted. CIR’s assessment is modified to delete only the 25% surcharge.
DIGESTER: Cristelle Elaine V. Collera
(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money
charges; seizure, detention or release of property affected fines, forfeitures or other penalties imposed in relation
thereto; or other matters arising under the Customs Law or other law or part of law administered by the Bureau of
Customs; and
(3) Decisions of provincial or city Boards of Assessment Appeals in cases involving the assessment and taxation of
real property or other matters arising under the Assessment Law, including rules and regulations relative thereto.
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