-
i. Adamson et al. v. CA and Chato,
AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de
los Reyes filed with the DOJ a motion to suspend proceedings on the
ground of prejudicial question, pendency of a civil case with the
Supreme Court, and pendency of their letter-request for
re-investigation with the Commissioner. After the preliminary
investigation, State Prosecutor Alfredo P. Agcaoili found probable
cause. The Motion for Reconsideration against the findings of
probable cause was denied by the prosecutor.
On April 29, 1994, Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes were charged before the
Regional Trial Court (RTC) of Makati, Branch 150 in Criminal Case
Nos. 94-1842 to 94-1846. They filed a Motion to Dismiss or Suspend
the Proceedings. They invoked the grounds that there was yet no
final assessment of their tax liability, and there were still
pending relevant Supreme Court and CTA cases. Initially, the trial
court denied the motion. A Motion for Reconsideration was however
filed, this time assailing the trial courts lack of jurisdiction
over the nature of the subject cases. On August 8, 1994, the trial
court granted the Motion. It ruled that the complaints for tax
evasion filed by the Commissioner should be regarded as a decision
of the Commissioner regarding the tax liabilities of Lucas G.
Adamson, Therese June D. Adamson and Sara S. de los Reyes, and
appealable to the CTA. It further held that the said cases cannot
proceed independently of the assessment case pending before the
CTA, which has jurisdiction to determine the civil and criminal tax
liability of the respondents therein.
On October 10, 1994, the Commissioner filed a Petition
for Review with the Court of Appeals assailing the trial
courts
-
dismissal of the criminal cases. She averred that it was not a
condition prerequisite that a formal assessment should first be
given to the private respondents before she may file the aforesaid
criminal complaints against them. She argued that the criminal
complaints for tax evasion may proceed independently from the
assessment cases pending before the CTA.
On March 21, 1995, the Court of Appeals reversed the
trial courts decision and reinstated the criminal complaints.
The appellate court held that, in a criminal prosecution for tax
evasion, assessment of tax deficiency is not required because the
offense of tax evasion is complete or consummated when the offender
has knowingly and willfully filed a fraudulent return with intent
to evade the tax.[9] It ruled that private respondents filed false
and fraudulent returns with intent to evade taxes, and acting
thereupon, petitioner filed an Affidavit of Complaint with the
Department of Justice, without an accompanying assessment of the
tax deficiency of private respondents, in order to commence
criminal action against the latter for tax evasion.[10]
Private respondents filed a Motion for Reconsideration,
but the trial court denied the motion on July 6, 1995. Thus,
they filed the petition in G.R. No. 120935, raising the following
issues:
1. WHETHER OR NOT THE RESPONDENT HONORABLE COURT OF APPEALS
ERRED IN APPLYING THE DOCTRINE IN UNGAB V. CUSI (Nos. L-41919-24,
May 30, 1980, 97 SCRA 877) TO THE CASE AT BAR.
-
2. WHETHER OR NOT AN ASSESSMENT IS REQUIRED UNDER THE SECOND
CATEGORY OF THE OFFENSE IN SECTION 253 OF THE NIRC.
3. WHETHER OR NOT THERE WAS A
VALID ASSESSMENT MADE BY THE COMMISSIONER IN THE CASE AT
BAR.
4. WHETHER OR NOT THE FILING OF A
CRIMINAL COMPLAINT SERVES AS AN IMPLIED ASSESSMENT ON THE TAX
LIABILITY OF THE TAXPAYER.
5. WHETHER OR NOT THE FILING OF THE
CRIMINAL INFORMATION FOR TAX EVASION IN THE TRIAL COURT IS
PREMATURE BECAUSE THERE IS YET NO BASIS FOR THE CRIMINAL CHARGE OF
WILLFULL INTENT TO EVADE THE PAYMENT OF A TAX.
6. WHETHER OR NOT THE DOCTRINES
LAID DOWN IN THE CASES OF YABES V. FLOJO (No. L-46954, July 20,
1982, 115 SCRA 286) AND CIR V. UNION SHIPPING CORP. (G.R. No.
66160, May 21, 1990, 185 SCRA 547) ARE APPLICABLE TO THE CASE AT
BAR.
7. WHETHER OR NOT THE COURT OF TAX
APPEALS HAS JURISDICTION OVER THE DISPUTE ON WHAT CONSTITUTES
THE PROPER TAXES DUE FROM THE TAXPAYER.
In parallel circumstances, the following events preceded
G.R. No. 124557:
-
On December 1, 1993, AMC, Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes filed a letter request for
re-investigation with the Commissioner of the Examiners Findings
earlier issued by the Bureau of Internal Revenue (BIR), which
pointed out the tax deficiencies.
On March 15, 1994 before the Commissioner could act
on their letter-request, AMC, Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes filed a Petition for Review with
the CTA. They assailed the Commissioners finding of tax evasion
against them. The Commissioner moved to dismiss the petition, on
the ground that it was premature, as she had not yet issued a
formal assessment of the tax liability of therein petitioners. On
September 19, 1994, the CTA denied the Motion to Dismiss. It
considered the criminal complaint filed by the Commissioner with
the DOJ as an implied formal assessment, and the filing of the
criminal informations with the RTC as a denial of petitioners
protest regarding the tax deficiency.
The Commissioner repaired to the Court of Appeals on
the ground that the CTA acted with grave abuse of discretion.
She contended that, with regard to the protest provided under
Section 229 of the NIRC, there must first be a formal assessment
issued by the Commissioner, and it must be in accord with Section 6
of Revenue Regulation No. 12-85. She maintained that she had not
yet issued a formal assessment of tax liability, and the tax
deficiency amounts mentioned in her criminal complaint with the DOJ
were given only to show the difference between the tax returns
filed and the audit findings of the revenue examiner.
-
The Court of Appeals sustained the CTAs denial of the
Commissioners Motion to Dismiss. Thus, the Commissioner filed the
petition for review under G.R. No. 124557, raising the following
issues:
1. WHETHER OR NOT THE INSTANT
PETITION SHOULD BE DISMISSED FOR FAILURE TO COMPLY WITH THE
MANDATORY REQUIREMENT OF A CERTIFICATION UNDER OATH AGAINST FORUM
SHOPPING;
2. WHETHER OR NOT THE CRIMINAL
CASE FOR TAX EVASION IN THE CASE AT BAR CAN PROCEED WITHOUT AN
ASSESSMENT;
3. WHETHER OR NOT THE COMPLAINT
FILED WITH THE DEPARTMENT OF JUSTICE CAN BE CONSTRUED AS AN
IMPLIED ASSESSMENT; and
4. WHETHER OR NOT THE COURT OF TAX
APPEALS HAS JURISDICTION TO ACT ON PRIVATE RESPONDENTS PETITION
FOR REVIEW FILED WITH THE SAID COURT.
The issues in G.R. No. 124557 and G.R. No. 120935
can be compressed into three: 1. WHETHER THE COMMISSIONER
HAS
A L R E A D Y R E N D E R E D A N A S S E S S M E N T ( F O R M
A L O R OTHERWISE) OF THE TAX LIABILITY OF AMC, LUCAS G. ADAMSON,
THERESE JUNE D. ADAMSON AND SARA S. DE LOS REYES;
-
2. WHETHER THERE IS BASIS FOR THE
CRIMINAL CASES FOR TAX EVASION TO PROCEED AGAINST AMC, LUCAS G.
ADAMSON, THERESE JUNE D. ADAMSON AND SARA S. DE LOS REYES; and
3. WHETHER THE COURT OF TAX
APPEALS HAS JURISDICTION TO TAKE COGNIZANCE OF BOTH THE CIVIL
AND THE CRIMINAL ASPECTS OF THE TAX LIABILITY OF AMC, LUCAS G.
ADAMSON, THERESE JUNE D. ADAMSON AND SARA S. DE LOS REYES.
The case of CIR v. Pascor Realty, et al.[11] is
relevant. In this case, then BIR Commissioner Jose U. Ong
authorized revenue officers to examine the books of accounts and
other accounting records of Pascor Realty and Development
Corporation (PRDC) for 1986, 1987 and 1988. This resulted in a
recommendation for the issuance of an assessment in the amounts of
P7,498,434.65 and P3,015,236.35 for the years 1986 and 1987,
respectively.
On March 1, 1995, the Commissioner filed a criminal
complaint before the DOJ against PRDC, its President Rogelio A.
Dio, and its Treasurer Virginia S. Dio, alleging evasion of taxes
in the total amount of P10,513,671.00. Private respondents filed an
Urgent Request for Reconsideration/Reinvestigation disputing the
tax assessment and tax liability.
The Commissioner denied the urgent request for
reconsideration/reinvestigation because she had not yet issued a
formal assessment.
-
Private respondents then elevated the Decision of the
Commissioner to the CTA on a petition for review. The
Commissioner filed a Motion to Dismiss the petition on the ground
that the CTA has no jurisdiction over the subject matter of the
petition, as there was yet no formal assessment issued against the
petitioners. The CTA denied the said motion to dismiss and ordered
the Commissioner to file an answer within thirty (30) days. The
Commissioner did not file an answer nor did she move to reconsider
the resolution. Instead, the Commissioner filed a petition for
review of the CTA decision with the Court of Appeals. The Court of
Appeals upheld the CTA order. However, this Court reversed the
Court of Appeals decision and the CTA order, and ordered the
dismissal of the petition. We held:
An assessment contains not only a computation of tax
liabilities, but also a demand for payment within a prescribed
period. It also signals the time when penalties and interests begin
to accrue against the taxpayer. To enable the taxpayer to determine
his remedies thereon, due process requires that it must be served
on and received by the taxpayer. Accordingly, an affidavit, which
was executed by revenue officers stating the tax liabilities of a
taxpayer and attached to a criminal complaint for tax evasion,
cannot be deemed an assessment that can be questioned before the
Court of Tax Appeals.
Neither the NIRC nor the revenue regulations governing the
protest of assessments[12] provide a specific definition or form of
an assessment. However, the NIRC defines the specific functions and
effects of an assessment. To consider the affidavit attached to the
Complaint as a proper assessment is to subvert the nature of an
assessment and to set a bad precedent that will prejudice innocent
taxpayers.
-
True, as pointed out by the private respondents, an assessment
informs the taxpayer that he or she has tax liabilities. But not
all documents coming from the BIR containing a computation of the
tax liability can be deemed assessments.
To start with, an assessment must be sent to and received by a
taxpayer, and must demand payment of the taxes described therein
within a specific period. Thus, the NIRC imposes a 25 percent
penalty, in addition to the tax due, in case the taxpayer fails to
pay the deficiency tax within the time prescribed for its payment
in the notice of assessment. Likewise, an interest of 20 percent
per annum, or such higher rate as may be prescribed by rules and
regulations, is to be collected from the date prescribed for its
payment until the full payment.[13]
The issuance of an assessment is vital in determining the period
of limitation regarding its proper issuance and the period within
which to protest it. Section 203[14] of the NIRC provides that
internal revenue taxes must be assessed within three years from the
last day within which to file the return. Section 222,[15] on the
other hand, specifies a period of ten years in case a fraudulent
return with intent to evade was submitted or in case of failure to
file a return. Also, Section 228[16] of the same law states that
said assessment may be protested only within thirty days from
receipt thereof. Necessarily, the taxpayer must be certain that a
specific document constitutes an assessment. Otherwise, confusion
would arise regarding the period within which to make an assessment
or to protest the same, or whether interest and penalty may accrue
thereon.
It should also be stressed that the said document is a notice
duly sent to the taxpayer. Indeed, an assessment is deemed made
only when the collector of internal revenue releases, mails or
sends such notice to the taxpayer.[17]
-
In the present case, the revenue officers Affidavit merely
contained a computation of respondents tax liability. It did not
state a demand or a period for payment. Worse, it was addressed to
the justice secretary, not to the taxpayers.
Respondents maintain that an assessment, in relation to
taxation, is simply understood to mean:
A notice to the effect that the amount therein stated is due as
tax and a demand for payment thereof.[18]
Fixes the liability of the taxpayer and ascertains the facts and
furnishes the data for the proper presentation of tax
rolls.[19]
Even these definitions fail to advance private respondents case.
That the BIR examiners Joint Affidavit attached to the Criminal
Complaint contained some details of the tax liabilities of private
respondents does not ipso facto make it an assessment. The purpose
of the Joint Affidavit was merely to support and substantiate the
Criminal Complaint for tax evasion. Clearly, it was not meant to be
a notice of the tax due and a demand to the private respondents for
payment thereof.
The fact that the Complaint itself was specifically directed and
sent to the Department of Justice and not to private respondents
shows that the intent of the commissioner was to file a criminal
complaint for tax evasion, not to issue an assessment. Although the
revenue officers recommended the issuance of an assessment, the
commissioner opted instead to file a criminal case for tax evasion.
What private respondents received was a notice from the DOJ that a
criminal case for tax evasion had been filed against them, not a
notice that the Bureau of Internal Revenue had made an
assessment.
-
Private respondents maintain that the filing of a criminal
complaint must be preceded by an assessment. This is incorrect,
because Section 222 of the NIRC specifically states that in cases
where a false or fraudulent return is submitted or in cases of
failure to file a return such as this case, proceedings in court
may be commenced without an assessment. Furthermore, Section 205 of
the same Code clearly mandates that the civil and criminal aspects
of the case may be pursued simultaneously. In Ungab v. Cusi,[20]
petitioner therein sought the dismissal of the criminal Complaints
for being premature, since his protest to the CTA had not yet been
resolved. The Court held that such protests could not stop or
suspend the criminal action which was independent of the resolution
of the protest in the CTA. This was because the commissioner of
internal revenue had, in such tax evasion cases, discretion on
whether to issue an assessment or to file a criminal case against
the taxpayer or to do both.
Private respondents insist that Section 222 should be read in
relation to Section 255 of the NIRC,[21] which penalizes failure to
file a return. They add that a tax assessment should precede a
criminal indictment. We disagree. To reiterate, said Section 222
states that an assessment is not necessary before a criminal charge
can be filed. This is the general rule. Private respondents failed
to show that they are entitled to an exception. Moreover, the
criminal charge need only be supported by a prima facie showing of
failure to file a required return. This fact need not be proven by
an assessment.
The issuance of an assessment must be distinguished from the
filing of a complaint. Before an assessment is issued, there is, by
practice, a pre-assessment notice sent to the taxpayer. The
taxpayer is then given a chance to submit position papers and
documents to prove that the assessment is unwarranted. If the
commissioner is unsatisfied, an
-
assessment signed by him or her is then sent to the taxpayer
informing the latter specifically and clearly that an assessment
has been made against him or her. In contrast, the criminal charge
need not go through all these. The criminal charge is filed
directly with the DOJ. Thereafter, the taxpayer is notified that a
criminal case had been filed against him, not that the commissioner
has issued an assessment. It must be stressed that a criminal
complaint is instituted not to demand payment, but to penalize the
taxpayer for violation of the Tax Code.
In the cases at bar, the Commissioner denied that she issued a
formal assessment of the tax liability of AMC, Lucas G. Adamson,
Therese June D. Adamson and Sara S. de los Reyes. She admits though
that she wrote the recommendation letter[22] addressed to the
Secretary of the DOJ recommending the filing of criminal complaints
against AMC and the aforecited persons for fraudulent returns and
tax evasion. The first issue is whether the Commissioners
recommendation letter can be considered as a formal assessment of
private respondents tax liability.
In the context in which it is used in the NIRC, an
assessment is a written notice and demand made by the BIR on the
taxpayer for the settlement of a due tax liability that is there
definitely set and fixed. A written communication containing a
computation by a revenue officer of the tax liability of a taxpayer
and giving him an opportunity to contest or disprove the BIR
examiners findings is not an assessment since it is yet
indefinite.[23]
We rule that the recommendation letter of the
Commissioner cannot be considered a formal assessment.
-
Even a cursory perusal of the said letter would reveal three key
points:
1. It was not addressed to the taxpayers. 2. There was no demand
made on the
taxpayers to pay the tax liability, nor a period for payment set
therein.
3. The letter was never mailed or sent to the taxpayers by the
Commissioner.
In fine, the said recommendation letter served merely as
the prima facie basis for filing criminal informations that the
taxpayers had violated Section 45 (a) and (d), and 110, in relation
to Section 100, as penalized under Section 255, and for violation
of Section 253, in relation to Section 252 9(b) and (d) of the Tax
Code.[24]
The next issue is whether the filing of the criminal complaints
against the private respondents by the DOJ is premature for lack of
a formal assessment.
Section 269 of the NIRC (now Section 222 of the Tax
Reform Act of 1997) provides: Sec. 269. Exceptions as to period
of limitation of assessment and collection of taxes.-(a) In the
case of a false or fraudulent return with intent to evade tax or of
failure to file a return, the tax may be assessed, or a proceeding
in court after the collection of such tax may be begun without
assessment, at any time within ten years after the discovery of the
falsity, fraud or omission: Provided, That in a fraud assessment
which has become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action for
collection thereof
-
The law is clear. When fraudulent tax returns are involved as in
the cases at bar, a proceeding in court after the collection of
such tax may be begun without assessment. Here, the private
respondents had already filed the capital gains tax return and the
VAT returns, and paid the taxes they have declared due therefrom.
Upon investigation of the examiners of the BIR, there was a
preliminary finding of gross discrepancy in the computation of the
capital gains taxes due from the sale of two lots of AAI shares,
first to APAC and then to APAC Philippines, Limited. The examiners
also found that the VAT had not been paid for VAT-liable sale of
services for the third and fourth quarters of 1990. Arguably, the
gross disparity in the taxes due and the amounts actually declared
by the private respondents constitutes badges of fraud.
Thus, the applicability of Ungab v. Cusi[25] is evident
to the cases at bar. In this seminal case, this Court ruled that
there was no need for precise computation and formal assessment in
order for criminal complaints to be filed against him. It quoted
Mertens Law of Federal Income Taxation, Vol. 10, Sec. 55A.05, p.
21, thus:
An assessment of a deficiency is not necessary to a criminal
prosecution for willful attempt to defeat and evade the income tax.
A crime is complete when the violator has knowingly and willfully
filed a fraudulent return, with intent to evade and defeat the tax.
The perpetration of the crime is grounded upon knowledge on the
part of the taxpayer that he has made an inaccurate return, and the
governments failure to discover the error and promptly to assess
has no connections with the commission of the crime.
This hoary principle still underlies Section 269 and related
provisions of the present Tax Code.
-
We now go to the issue of whether the CTA has no jurisdiction to
take cognizance of both the criminal and civil cases here at
bar.
Under Republic Act No. 1125 (An Act Creating the
Court of Tax Appeals) as amended, the rulings of the
Commissioner are appealable to the CTA, thus:
SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise
exclusive appellate jurisdiction to review by appeal, as herein
provided -
(1) Decisions of the Commissioner 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 laws or part of law administered by the Bureau of Internal
Revenue;
Republic Act No. 8424, titled An Act Amending the
National Internal Revenue Code, As Amended, And For Other
Purposes, later expanded the jurisdiction of the Commissioner and,
correspondingly, that of the CTA, thus:
SEC. 4. Power of the Commissioner to Interpret
Tax Laws and to Decide Tax Cases. The power to interpret the
provisions of this Code and other tax laws shall be under the
exclusive and original jurisdiction of the Commissioner, subject to
review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under this Code or other laws or
portions thereof administered by the Bureau of Internal Revenue is
vested in the Commissioner,
-
subject to the exclusive appellate jurisdiction of the Court of
Tax Appeals.
The latest statute dealing with the jurisdiction of the CTA
is Republic Act No. 9282.[26] It provides: SEC. 7. Section 7 of
the same Act is hereby amended to read as
follows: Sec. 7. Jurisdiction. The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as
herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue Code or other
laws administered by the Bureau of Internal Revenue, where the
National Internal Revenue Code provides a specific period of
action, in which case the inaction shall be deemed a denial;
(3) Decisions, orders or resolutions of the Regional Trial
Courts in local tax cases originally decided or resolved by them in
the exercise of their original or appellate jurisdiction;
x x x
-
(b) Jurisdiction over cases involving criminal offenses as
herein provided:
(1) Exclusive original jurisdiction over all criminal offenses
arising from violations of the National Internal Revenue Code or
Tariff and Customs Code and other laws administered by the Bureau
of Internal Revenue or the Bureau of Customs: Provided, however,
That offenses or felonies mentioned in this paragraph where the
principal amount of taxes and fees, exclusive of charges and
penalties, claimed is less than One million pesos (P1,000,000.00)
or where there is no specified amount claimed shall be tried by the
regular courts and the jurisdiction of the CTA shall be appellate.
Any provision of law or the Rules of Court to the contrary
notwithstanding, the criminal action and the corresponding civil
action for the recovery of civil liability for taxes and penalties
shall at all times be simultaneously instituted with, and jointly
determined in the same proceeding by the CTA, the filing of the
criminal action being deemed to necessarily carry with it the
filing of the civil action, and no right to reserve the filling of
such civil action separately from the criminal action will be
recognized.
(2) Exclusive appellate jurisdiction in criminal offenses:
(a) Over appeals from the judgments, resolutions or orders of
the Regional Trial Courts in tax cases originally decided by them,
in their respected territorial jurisdiction.
-
(b) Over petitions for review of the judgments, resolutions or
orders of the Regional Trial Courts in the exercise of their
appellate jurisdiction over tax cases originally decided by the
Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in their respective jurisdiction.
(c) Jurisdiction over tax collection cases as herein
provided:
(1) Exclusive original jurisdiction in tax collection cases
involving final and executory assessments for taxes, fees, charges
and penalties: Provided, however, That collection cases where the
principal amount of taxes and fees, exclusive of charges and
penalties, claimed is less than One million pesos (P1,000,000.00)
shall be tried by the proper Municipal Trial Court, Metropolitan
Trial Court and Regional Trial Court.
(2) Exclusive appellate jurisdiction in tax collection
cases:
(a) Over appeals from the judgments, resolutions or orders of
the Regional Trial Courts in tax collection cases originally
decided by
-
them, in their respective territorial jurisdiction.
(b) Over petitions for review of the judgments, resolutions or
orders of the Regional Trial Courts in the exercise of their
appellate jurisdiction over tax col lec t ion cases originally
decided by the M e t r o p o l i t a n T r i a l Courts, Municipal
Trial Courts and Municipal Circuit Trial Courts, in t h e i r r e s
p e c t i v e jurisdiction.
These laws have expanded the jurisdiction of the CTA. However,
they did not change the jurisdiction of the CTA to entertain an
appeal only from a final decision or assessment of the
Commissioner, or in cases where the Commissioner has not acted
within the period prescribed by the NIRC. In the cases at bar, the
Commissioner has not issued an assessment of the tax liability of
private respondents.
Finally, we hold that contrary to private respondents
stance, the doctrines laid down in CIR v. Union Shipping Co. and
Yabes v. Flojo are not applicable to the cases at bar. In these
earlier cases, the Commissioner already rendered an assessment of
the tax liabilities of the delinquent taxpayers, for which reason
the Court ruled that the filing of the civil suit for collection of
the taxes due was a final denial of the taxpayers request for
reconsideration of the tax assessment.
-
IN VIEW WHEREOF, premises considered, judgment is rendered:
1. In G.R. No. 120935, AFFIRMING the CA decision dated March 21,
1995, which set aside the Regional Trial Courts Order dated August
8, 1994, and REINSTATING Criminal Case Nos. 94-1842 to 94-1846 for
further proceedings before the trial court; and
2. In G.R. No. 124557, REVERSING
and SETTING ASIDE the Decision of the Court of Appeals dated
March 29, 1996, and ORDERING the dismissal of C.T.A. Case No.
5075.
No costs. SO ORDERED. !
CIR vs NLRC !
On January 12, 1984 the Commissioner of the Internal Revenue
sent two letters 3 of demand to the respondent Maritime Company of
the Philippines for deficiency common carrier's tax, fixed tax, 6%
Commercial Broker's tax, documentary stamp tax, income tax and
withholding taxes in the total amount of P17,284,882.45.
The assessment became final and executory as private respondent
did not contest it. But as private respondent did not pay its tax
liability either, the Commissioner of Internal Revenue issued
warrants of distraint of personal property and levy of real
property of private respondent. Copies of the warrants, both dated
January 23, 1985, were served on January 28, 1985 on Yoly T.
Petrache, private respondent's accountant. 4
-
On April 16, 1985 a "Receipt for Goods, Articles, and Things
Seized 5 under Authority of the National Internal Revenue Code" was
executed, covering, among other things, six barges identified as
MCP-1,2,3,4,5 and 6. This receipt is required by 303 (now 206) of
the NIRC as proof of the constructive distraint of property. It is
an undertaking by the taxpayer or person in possession of the
property covered that he will preserve the property and deliver it
upon order of the court or the Internal Revenue Commissioner.
The receipt was prepared by the BIR for the signature of a
representative of respondent Maritime Company of the Philippines,
but it was not in fact signed. Petitioner later explained that the
individuals who had possession of the barges had refused to sign
the receipt.
This circumstance has given rise to the question in this case as
it appears that four of the barges placed under constructive
distraint were levied upon execution by respondent deputy sheriff
of Manila on July 20, 1985 to satisfy a judgment for unpaid wages
and other benefits of employees of respondent Maritime Company of
the Philippines. More specifically, the question in this case is
the validity of the warrant of distraint served by the Revenue
Seizure Officer against the writ of execution subsequently levied
upon the same property by the deputy sheriff of Manila to satisfy
the claims of employees in NLRC Case No. NCR-12-4233-84 (Domingo C.
Niangar, et al. v. Maritime Company of the Philippines) for
P490,749.21.
The four barges were sold by respondent deputy sheriff at a
public auction on August 12, 1985. The highest bidder, Daniel C.
Sabino, subsequently sold them to private respondents Fernando S.
Tuliao and Tulmar Trading Corporation.
On September 4, 1985, petitioner asked the Labor Arbiter to
annul the sale and to enjoin the sheriff from disposing of the
proceeds of the sale or, in the alternative, to remit them to the
Bureau of Internal Revenue so that the amount could be applied to
the payment of private respondent Maritime Company's tax
liabilities.
In an order dated September 30, 1985, Labor Arbiter Ceferina
Diosana denied the motion on the ground that petitioner
Commissioner of Internal Revenue failed to show that the barges
which were levied upon in execution and sold at public auction had
been validly placed under constructive distraint. 6 The Labor
Arbiter likewise rejected petitioner's contention that the
government's claim for taxes was preferred under Art. 2247, in
relation to Art. 2241(1) of the Civil Code, on the ground that
under this provisions only taxes and fees which are due on specific
movables enjoy preference, whereas the taxes claimed by petitioner
were not due on the four barges in question.
-
The order was appealed to the NLRC, which in resolution dated
April 4, 1986, affirmed the denial of the Internal Revenue
Commissioner's motion. Hence this petition for certiorari.
For reasons to be presently stated, the petition is granted.
The National Internal Revenue Code provides for the collection
of delinquent taxes by any of the following remedies: (a) distraint
of personal property or levy of real property of the delinquent
taxpayer and (b) civil or criminal action.
With respect to the four barges in question, petitioner resorted
to constructive distraint pursuant to 303 (now 206) of the NLRC.
This provisions states:
Constructive distraint of the property of a taxpayer. To
safeguard the interest of the Government, the Commissioner of
Internal Revenue may place under constructive distraint the
property of a delinquent taxpayer or any taxpayer who, in his
opinion, is retiring from any business subject to tax, or intends
to leave the Philippines, or remove his property therefrom, or hide
or conceal his property, or perform any act tending to obstruct the
proceedings, for collecting the tax due or which may be due from
him.
The constructive distraint of personal property shall be
effected by requiring the taxpayer or any person having possession
or control of such property to sign a receipt covering the property
distrained and obligate himself to preserve the same intact and
unaltered and not to dispose of the same in any manner whatever
without the express authority of the Commissioner of Internal
Revenue.
In case the taxpayer or the person having the possession and
control of the property sought to be placed under constructive
distraint refuses or fails to sign the receipt herein referred to,
the revenue officer effecting the constructive distraint shall
proceed to prepare a list of such property and in the presence of
two witnesses leave a copy thereof in the premises where the
property distrained is located, after which the said property shall
be deemed to have been placed under constructive distraint..
Although the warrant of distraint in this case had been issued
earlier (January 23,1985) than the levy on execution in the labor
case on July 20, 1985, the Labor Arbiter nevertheless held that
there was no valid distraint of personal property on the ground
that the receipt of property distrained had not been signed by the
taxpayer as required above. In her order, which the NLRC affirmed
in toto, the Labor Arbiter said:
It is claimed by the Commissioner of the Internal Revenue that
on January 23, 1984, he issued a warrant of distraint of personal
property on respondent to satisfy the collection of the deficiency
taxes in the aggregate sum of
-
P17,284,882.45 and a copy of said warrant was served upon
Maritime Company on January 28, 1985 and pursuant to the warrant,
the Commissioner, through Revenue Seizure Agent Roland L. Bombay,
issued on April 16, 1985, to Maritime Company a receipt for goods,
articles and things seized pursuant to authority granted to him
under the National Internal Revenue Code. Such personal properties
seized includes, among others, "Six (6) units of barges MCI-6 . . .
" However, his own receipts for goods attached to his motions does
not show that it was received by Maritime; neither does it show any
signature of any of Maritime's Officers.
Apart from the foregoing, in his affidavit of 11 September 1985,
Sheriff Cachero stated that before he sold the subject four barges
at public auction, he conducted an investigation on the ownership
of the said four barges. In brief, he found out that the said four
barges were purchased by respondent through Makati Leasing and that
the whole purchase price has been paid by respondent. In fact, the
corresponding deed of sale has already been signed. He did not find
any lien or encumbrance on any of the said four barges. Thus it
cannot be true that the Commissioner effected a valid warrant of
distraint of personal property on the four barges in question.
7
However, this case arose out of the same facts involved in
Republic v. Enriquez, 8 in which we sustained the validity of the
distraint of the six barges, which included the four involved in
this case, against the levy on execution made by another deputy
sheriff of Manila in another case filed against Maritime Company.
Two barges (MCP-1 and MCP-4) were the subject of a levy in the
case. There we found that the "Receipt for Goods, Articles and
Things Seized under Authority of the National Internal Revenue
Code" covering the six barges had been duly executed, with the
Headquarters, First Coast Guard District, Farola Compound Binondo,
Manila acknowledging receipt of several barges, vehicles and two
(2) bodegas of spare parts belonging to Maritime Company of the
Philippines.
Apparently, what had been attached to the petitioner's motion
filed by the government with the Labor Arbiter in this case was a
copy, not the original one showing the rubber stamp of the Coast
Guard and duly signed by its representative. A xerox copy of this
signed receipt was submitted in the prior case. 9 This could be due
to the fact that, except for Solicitor Erlinda B. Masakayan, the
government lawyers who prepared the petition in the prior case were
different from those who filed the present petition. They admitted
that the receipt of property distrained had not been signed by the
taxpayer or person in possession of the taxpayer's property
allegedly because they had refused to do so. What apparently they
did not know is that the receipt had been acknowledged by the Coast
Guard which obviously had the barges in its possession.
In addition to the receipt duly acknowledged by the Coast Guard,
the record of the prior case also shows that on October 4, 1985,
the Commissioner of the Internal Revenue issued a "Notice of
Seizure of Personal Property"
-
stating that the goods and chattels listed on its reverse side,
among which were the four barges (MCP-2, MCP-3, MCP-5, and MCP-6),
had been distrained by the Commissioner of Internal Revenue. 10
The "Notice of Seizure of Personal Property," a copy of which
was received by Atty. Redentor R. Melo in behalf of Maritime
Company of the Philippines, together with the receipt of the Coast
Guard, belies the claim of respondent deputy sheriff that when he
levied upon the four barges there was no indication that the barges
had previously been placed under distraint by the Commissioner of
Internal Revenue.
Accordingly, what we said in the prior case 11 in upholding the
validity of distraint of two of the six barges (MCP Nos. 1 and 4),
fully applies in this case:
It is settled that the claim of the government predicated on a
tax lien is superior to the claim of a private litigant predicated
on a judgment. The tax lien attaches not only from the service of
the warrant of distraint of personal property but from the time the
tax became due and payable. Besides, the distraint on the subject
properties of the Maritime Company of the Philippines as well as
the notice of their seizure were made by petitioner, through the
Commissioner of the Internal Revenue, long before the writ of the
execution was issued by the Regional Trial Court of Manila, Branch
31. There is no question then that at the time the writ of
execution was issued, the two (2) barges, MPC-1 and MCP-4, were no
longer properties of the Maritime Company of the Philippines. The
power of the court in execution of judgments extends only to
properties unquestionably belonging to the judgment debtor.
Execution sales affect the rights of the judgment debtor only, and
the purchaser in an auction sale acquires only such right as the
judgment debtor had at the time of sale. It is also well-settled
that the sheriff is not authorized to attach or levy on property
not belonging to the judgment debtor.
Nor is there any merit in the contention of the NLRC that taxes
are absolutely preferred claims only with respect to movable or
immovable properties on which they are due and that since the taxes
sought to be collected in this case are not due on the barges in
question the government's claim cannot prevail over the claims of
employees of the Maritime Company of the Philippines which,
pursuant to Art. 110 of the Labor Code, "enjoy first
preference."
In Republic v. Peralta 12 this Court rejected a similar
contention. Through Mr. Justice Feliciano we held:
. . . [T]he claim of the Bureau of Internal Revenue for unpaid
tobacco inspection fees constitutes a claim for unpaid internal
revenue taxes which gives rise to a tax lien upon all the
properties and assets, movable or immovable, of the insolvent as
taxpayer. Clearly, under Articles 2241 No. 1,
-
2242 No. 1, and 2246-2249 of the Civil Code, this tax claim must
be given preference over any other claim of any other creditor, in
respect of any and all properties of the insolvent.
xxx xxx xxx
Article 110 of the Labor Code does not purport to create a lien
in favor of workers or employees for unpaid wages either upon all
of the properties or upon any particular property owned by their
employer. Claims for unpaid wages do not therefore fall at all
within the category of specially preferred claims established under
Articles 2241 and 2242 of the Civil Code, except to the extent that
such claims for unpaid wages are already covered by Article 2241,
number 6: "claims for laborer's wages, on the goods manufactured or
the work done," or by Article 2242, number 3: "claims of laborers
and other workers engaged in the construction, reconstruction or
repair of buildings, canals and other works, upon said buildings,
canals or other works." To the extent that claims for unpaid wages
fall outside the scope of Article 2241, number 6 and 2242, number
3, they would come with the ambit of the category of ordinary
preferred credits under Article 2244.
Applying Article 2241, number 6 to the instant case, the claims
of the Unions for separation pay of their members constitute liens
attaching to the processed leaf tobacco, cigars and cigarettes and
other products produced or manufactured by the Insolvent, but not
to other assets owned by the Insolvent. And even in respect of such
tobacco and tobacco products produced by the Insolvent, the claims
of the Unions may be given effect only after the Bureau of Internal
Revenue's claim for unpaid tobacco inspection fees shall have been
satisfied out of the products so manufactured by the Insolvent.
Article 2242, number 3, also creates a lien or encumbrance upon
a building or other real property of the Insolvent in favor of
workmen who constructed or repaired such building or other real
property. Article 2242, number 3, does not however appear relevant
in the instant case, since the members of the Unions to whom
separation pay is due rendered services to the Insolvent not (so
far as the record of this case would show) in the construction or
repair of buildings or other real property, but rather, in the
regular course of the manufacturing operations of the Insolvent.
The Unions' claims do not therefore constitute a lien or
encumbrance upon any immovable property owned by the insolvent, but
rather, as already indicated, upon the Insolvent's existing
inventory (if any) of processed tobacco and tobacco products.
In addition, we have held 13 that Art. 110 of the Labor Code
applies only in case of bankruptcy or judicial liquidation of the
employer. This is clear from the text of the law.
-
Art. 110. Worker preference in case of bankruptcy. In the event
of bankruptcy or liquidation of an employer's business, his workers
shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation,
any provision of law to the contrary notwithstanding. Unpaid wages
shall be paid in full before other creditors may establish any
claims to a share in the assets of the employer.
This case does not involve the liquidation of the employer's
business.
WHEREFORE, the petition for certiorari is GRANTED and the
resolution dated April 4, 1986 of respondent NLRC in NLRC Case No.
NCR-12-4233-84 is SET ASIDE insofar as it denies the government's
claim for taxes, and respondent deputy sheriff Carmelo V. Cachero
or his successor is ORDERED to remit the proceeds of the auction
sale to the Bureau of Internal Revenue to be applied as part
payment of respondent Maritime Company's tax liabilities.
SO ORDERED.
BANK OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.WENCESLAO TRINIDAD, Collector of Internal Revenue,
defendant-appellee.
Yeager and Armstrong for appellant. No appearance for
appellee.
JOHNSON, J.:
There is a practically no dispute about the facts in this case.
They are as follows:
On the 13th day of July, 1916, the defendant Collector of
Internal Revenue, through his duly authorized agent at Zamboanga,
seized and distrained certain personal property, consisting of
machinery for sawing lumber which is particularly enumerated and
described in paragraph 3 of the complaint, and advertised the same
for sale, to realize the sum of P2,159.79, alleged to be due to the
Government of the Philippine Islands from Pujalte and Co., as
forestry charges.
The defendant claimed that said personality belonged to the said
company, was used in the business on which the taxes were due, and
was liable to seizure to cover said taxes.
-
On the other hand, the plaintiff claimed to be the owner of said
property, and demanded its release. The demand being denied, the
plaintiff paid to the defendant the said sum of P2,159.79 under
protest to prevent the sale of said property, and immediately
brought the present action in the Court of First Instance of
Zamboanga to recover the said sum of P2,159.78 together with
interest and costs. The lower court, after due trial, dismissed the
plaintiff's complaint and absolved the defendant from all liability
thereunder. From that judgment the plaintiff appealed to this
court.
The property in question formerly belonged to the Taba Saw Mill
Co., a copartnership formed by Pujalte and Co. and one Ramon Murga.
In April, 1914, Ramon Murga sold all his rights, title, and
interest in and to the said copartnership to Pujalte and Co., which
thereby became the sole owner of the concern.
It appears from plaintiff's Exhibit AA, which was admitted in
evidence without objection on the part of the defendant, that on
the 26th day of September, 1912, the said Taba Saw Mill Co.
conveyed to the plaintiff bank, by way of chattel mortgage, the
property here in question together with other personalities, as
security for the payment to said bank of two certain promissory
notes for the sum of P180,000. Said chattel mortgage was duly
registered in the office of the register of deeds of Zamboanga on
the 26th day of December, 1912. On that date the property in
question was free from all tax liens; at least, the plaintiff
mortgagee had no notice thereof. On the 13th day of July, 1916,
when the amount here in question was found to be due to the
Government from Pujalte and Co. as forestry charges, and when the
property in question was seized by the defendant, the said chattel
mortgage was still subsisting. It is admitted that at the time of
its seizure the said property was being used in the sawmill of
Pujalte and Co.
Upon the foregoing facts the lower court absolved the defendant
from all liability under the plaintiff's complaint, for the
following reasons:
1. That the party who was liable to pay the taxes for which the
property in question was distrained was not the plaintiff but
Pujalte and Co.; and that the plaintiff having "voluntarily and
spontaneously" paid the debt of the latter, had no cause of action
against the defendant collector, and could only recover the sum so
paid by it from Pujalte and Co., under article 1158 of the Civil
Code (p. 15, B. of E.); that the plaintiff should have proceeded
under section 141 of Act No. 2339 (now sec. 1580 of Act No. 2711),
and not under section 140 of the said Act (sec. 1579 of Act No.
2711).
2. That "even supposing for a moment" that the plaintiff had a
right of action against the defendant to recover the sum paid by it
to the latter, yet this action must fail because the property in
question, having been used by Pujalte and
-
Co. in its business of cutting and sawing lumber, was liable to
seizure and distraint under section 149 of Act No. 2339.
We are of the opinion that neither of the foregoing reasons is
sound, and that the judgment of the lower court should be
revoked.
First. There is absolutely no basis for the finding of the trial
court that "the plaintiff bank had voluntarily and spontaneously
paid the debt of a third party, that is, that of the firm of
Pujalte and Co." (p. 15, B. of E.). Paragraph 7 of the plaintiff's
complaint alleges: "That thereupon, involuntarily and under due
protest in writing, the plaintiff bank made payment of the required
sum of P2,159.79 in order to secure the release of its seized
property." These allegations were specially admitted by the
defendant (par. 5, stipulation, Plaintiff's Exhibit G).
Section 140 of the Internal Revenue Law (Act No. 2339 provides
as follows:
SEC. 140. Recovery of tax paid under protest. When the validity
of any tax in questioned, or amount disputed, or other question
raised as to liability therefor, the person against whom or against
whose property the same is sought to be enforced shall pay the tax
under instant protest, or upon protest within ten days, and shall
thereupon request the decision of the Collector of Internal
Revenue. If the decision of the Collector of Internal Revenue is
adverse, or if no decision is made by him within six months from
the date when his decision was requested, the taxpayer may proceed,
at any time within two years after the payment of the tax, to bring
an action against the Collector of Internal Revenue for the
recovery of the sum alleged to have been illegally collected, the
process to be served upon him, upon the provincial treasurer, or
upon the officer collecting the tax.
Section 141 of the same Act provides:
SEC. 141. Action to contest forfeiture of chatted. In case of
the seizure of personal property under claim of forfeiture the
owner, desiring to contest the validity of the forfeiture, may at
any time before sale or destruction of the property bring an action
against the person seizing the property or having possession
thereof to recover the same, and upon giving proper bond may enjoin
the sale; or after the sale and within six months he may bring an
action to recover the net proceeds realized at the sale.
The lower court was of the opinion that the plaintiff should
have proceeded under the latter section above quoted and not under
the former. It cannot be maintained that the personal property here
in question was seized by the defendant "under claim of
forfeiture;" nor could it have been legally seized under claim of
forfeiture. It was seized to enforce an alleged tax lien, under
section 149 of Act No. 2339 (sec.
-
1588, Act No. 2711), which was quoted by the lower court in its
decision (p. 19 B. of E.) and which in no way provides for the
forfeiture of the property on which such a lien attaches.
Forfeiture is "the divestiture of property without compensation,
in consequence of an offense. The effect of such forfeiture is to
transfer the title to the specific thing from the owner to the
sovereign power." (12 R. C. L., 124.) There is a great difference
between a seizure under forfeiture and a seizure to enforce a tax
lien. In the former all the proceeds derived from the sale of the
thing forfeited are turned over to the Collector of Internal
Revenue (sec. 148, Act No. 2339) in the latter the residue of such
proceeds over and above what is required to pay the tax sought to
be realized, including expenses, is returned to the owner of the
property (second paragraph, sec. 152, Act No. 2339). Clearly, the
remedy applicable to the present case is that provided for in
section 140, above quoted, and which the plaintiff invoked. (See
Hongkong and Shanghai Banking Corporation vs. Rafferty, 39 Phil.,
145, 147.)
Second. At the time of the seizure of the property here in
question, the plaintiff held a valid and subsisting chattel
mortgage on the same, duly registered in the registry of deeds. "A
chattel mortgage is a conditional sale of personal property as
security for the payment of a debt, or the performance of some
other obligation specified therein, the condition being that the
sale shall be void upon the seller paying the purchaser a sum of
money or doing some other act named." (Sec. 3, Act No. 1508.)
"Therefore, so long as the mortgage exists, the dominion with
respect to the mortgaged personal property rests with the
creditor-pledgee from the time of the inscription of the mortgage
in the registry, and the furniture ceases to be the property of the
debtor for the reason that it has become the property of the
creditor, in like manner as the domination of a thing sold is
transferred to the purchaser and ceases to belong to the vendor
from the moment of the delivery thereof, as a result of the sale."
(Meyers vs. Thein, 15 Phil., 303, 303-309; see also Bachrach vs.
Mantel, 25 Phil., 410; In re Du Tec Chuan, 34 Phil., 488, 490.)
1awph!l.net
The chattel mortgage in question was registered in the registry
of deeds on the 26th day of December, 1912. The forest charges
sought to be collected by the defendant were found to be due from
Pujalte and Co. on the 13th day of July, 1916, and on that date the
property covered by said chattel mortgage was seized by the
defendant to enforce the payment of said forest charges. It is
clear from these facts and from the legal provisions and
jurisprudence above quoted that the plaintiff-mortgagee, and not
Pujalte and Co., the mortgagor, was, and had been for more than
three years, the legal owner of the property in question at the
time the same was seized by the defendant. And even granting,
without deciding, that the forest charges are a tax on
-
business or occupation within the meaning of section 149 of Act
No. 2339 (sec. 1588, Act No. 2711), yet we are of the opinion and
so decide that the mere fact that said property was used in the
business of Pujalte and Co. could not and did not make such
property liable for the payment of taxes due from said company,
said property belonging as it did to an innocent third party. "The
property used in the business or occupation," referred to in said
section 149, can only mean property belonging to the owner of the
business or occupation. Any other construction would be unwarranted
and unjust.
For the foregoing reasons the judgment appealed from is hereby
revoked, and it is hereby ordered and decreed that a judgment be
entered in favor of the plaintiff and against the defendant,
ordering the latter to refund to the former the sum of P2,159.79,
with interest thereon at the legal rate from the 13th day of July,
1916, until paid, and without any finding as to costs. So
ordered.
Araullo, Avancea and Villamor, JJ., concur.
! G.R. No. 44372BENITO GARCIA, plaintiff-appellee, vs.THE
COLLECTOR OF INTERNAL REVENUE, defendant-appellant.
Solicitor-General Hilado for appellant. Apolonio Suntay for
appellee.
CONCEPCION, J.:
The Collector of Internal Revenue, defendant herein, required
Benito Garcia to pay a specific tax of P204.08 after the latter had
been sentenced in a criminal case to pay a fine for having taken
six hundred and sixteen liters of alcohol from the distillery of
Jose B. Suntay for the purpose of removing the same to a distant
store without having previously paid the corresponding specific tax
therefor.
-
Appelle paid the tax under protest, filing afterwards a
complaint to recover its amount. The court decided the case in
favor of plaintiff, and the Collector of Internal Revenue appealed
from the decision to this court.
Appellant, in his brief, assigned the following as errors
committed by the lower court:
The lower court erred in holding that the Government had made a
claim against Benito Garcia for the amount of P204.08 as specific
tax, in criminal case No. 5922 of the Court of First Instance of
Bulacan, and that the court, in its decision, declined to award it
to the Government.
The lower court erred in holding that the manufacturer of
alcohol ordinarily pays the tax and that, as the manufacturer of
the alcohol in question was Jose B. Suntay, and Benito Garcia was a
mere employee, the latter cannot be made to pay the tax in
question.
The lower court erred in ordering the defendant to pay the
plaintiff the amount of P204.08, plus costs.
The lower court erred in denying the motion for new trial filed
by the defendant.
In the decision appealed from the court has proceeded upon the
assumption that in the criminal case filed against plaintiff
herein, the Government had sought payment from him of the amount of
P204.08 as specific tax; but that the court in its decision refused
to impose the same for the alleged reason that, as the alcohol in
question had been confiscated an as the value of the
-
same was probably greater than the amount of the tax, the
Government already has had an opportunity to recover it.
In truth, however, the payment of the tax was not sought in the
criminal case above referred to because the object of the
information was the imposition upon the offender of the
corresponding penalty for violation of section 2727 of the Revised
Administrative Code. The tax should have been recovered by the
Collector of Internal Revenue independently of the criminal action
instituted by the People of the Philippines against the accused
Benito Garcia. Therefore, the fact that in the judgment rendered in
said case no pronouncement whatsoever as regard said tax had been
made, was no bar to the Government's recovering it afterwards, a s
the Collector of Internal Revenue, appellant herein, has done in
his own name.
Furthermore, the confiscation in the criminal case was an
accessory penalty imposed by article 25 of the Revised Penal Code,
which is entirely different from the payment of the tax.
Another ground of the appealed decision, according t the
reasoning of the court, is that the payment of the tax is in
reality made by the consumer, although the distiller has to pay it
first, charging the same later in the price of the sale. In the
present case, says the court, the plaintiff Garcia never had the
opportunity to sell the alcohol and consequently would never be
reimbursed for the amount of the corresponding specific tax. All
this loses its apparent merit by the single consideration that one
who violates the law must suffer all the consequences the law is
confiscation.
-
According to section 1479 of the Revised Administrative Code,
the tax should be paid immediately before the removal of the
article from the place of production. The law does not say that the
tax may be paid immediately before the sale.
The second error committed by the court consists in holding that
the distiller of alcohol ordinarily is the one who pays the tax and
inasmuch as Jose B. Suntay was the distiller of the alcohol in
question, while Benito Garcia was mere employee, the latter could
not be compelled to pay tax referred to. This is an inaccurate
interpretation of the law. Section 1479 aforecited of the Revised
Administrative Code provides that the specific taxes on domestic
products shall be paid by the manufacturer, producer, owner or
person having possession of the same. It is a fact that the six
hundred and sixteen liters of alcohol were found in the possession
of plaintiff when he transferred them from the factory to a distant
store and there is neither allegation nor evidence that plaintiff
had taken the alcohol from the distillery to remove the same to the
store by order of his principal, Jose B. Suntay. In order to avoid
dispute and to determine easily the person who should pay the
specific tax, section 1479 of the Revised Administrative Code has
farsightedly provided that the manufacturer, producer, owner or
person having possession of the article shall pay the tax.
The judgment appealed from is reversed without a special
pronouncement as the costs. So ordered.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.WESTERN PACIFIC
CORPORATION, respondent.
Office of the Solicitor General for petitioner.R. Melo and A. S.
Velasquez for respondent.
-
PAREDES, J.:
On March 2, 1959, the respondent Western Pacific Corporation,
was assessed for P3,731.00, as deficiency income tax for the year
1953. This assessment was brought about by the disallowance of
P8,265.82, listed in respondent's return for 1953, as expense
items, and P10,387.50, as written off "bad debts." The assessment
was received by respondent on the same date (March 2, 1959). On
March 5, 1959, the Commissioner of Internal Revenue wrote the
respondent corporation a letter of demand for the payment of the
amount, including therein a breakdown of said assessment. Under
date of June 29, 1959, respondent corporation, thru Ruifino Melo
& Company, Consulting and Examining Auditors, requested for
non-assessment, claiming that there has been prescription in making
the assessment, that the expense items and bad debts were allowable
deduction. The letter was accompanied by a Resolution of the
corporation, dated February 2, 1954, where it was resolved to write
off the debts of the people appearing in another annex. The
Commissioner on July 30, 1959 replied to the request, denying the
same, and demanding the payment of the amount due within thirty
(30) days from receipt of said demand. On September 19, 1958,
respondent corporation requested that it be permitted until
September 25, 1959, to submit formal objections to the assessment.
The formal objections appearing in the letter of September 22,
1959, were identical to those of the June 29, 1959 communication,
reason for which the Commissioner did not give any favorable
action. The last letter of the Commissioner, dated October 28,
1959, among others, requested payment of the assessment within ten
(10) days from receipt thereof.
On December 18, 1959, respondent Western Pacific Corporation,
presented with the Court of Tax Appeals a petition for Review of
assessment made by the Commissioner, on three (3) counts, to
wit:
(1) whether or not the making of the assessment had
prescribed;
(2) whether expenses incurred in securing IGC Licenses are
capital expenditures, and, as such, not deductible from the income;
and
(3) whether the bad debts written off should likewise be
deducted.
When the issues were joined, by the filing of the Answer, and
after hearing, the CTA rendered judgment absolving the Western
Pacific Corporation from the assessment. It, however, ruled out
prescription, stating that March 2, 1959, was the last day of the
five (5) year period within which to make the assessment. On this
point, the CTA ruled:
However, we do not agree with petitioner that the assessment in
question was issued beyond the 5-year statutory limitation.
February 28, 1959 fell on a
-
Saturday. Pursuant to Republic Act No. 1880, as, implemented by
Executive Order No. 25, effective July 1, 1959, all bureaus and
offices of the government, except schools, court, hospitals and
health clinics, hold office only five days a week or from Monday to
Friday. Saturday and Sunday, are constituted public holidays or
days of exemption from labor or work as far as government offices,
including that of respondent Commissioner, are concerned. The
offices and bureaus concerned are officially closed on those days.
So that on February 28, 1959 and March 1, 1959, which were Saturday
and Sunday, respectively, the office of respondent was officially
closed. And where the last day for doing an act required by law
falls on a holiday, the act may be done on the next succeeding
business day. (Section 31, Revised Administrative Code.) Similarly,
in computing any period of time prescribed by statute, the day of
the act after which the designated period of time begins to run is
not included. But the last day of the period so computed is to be
included, unless it is a Sunday or a legal holiday, in which event
the time shall run until the end of the next day which is neither a
Sunday or a holiday (Section 1, Rule 28, Rules of Court).
Consequently, since February 28, 1959 was a Saturday and the next
day, March 1, 1959, a Sunday, respondent had until the next
succeeding business day, March 2, 1959, Monday, within which to
issue the deficiency assessment. The assessment in question having
been issued on March 2, 1959, it was, therefore, seasonably
made.
We concur in the above findings and conclusions, convinced as We
are, that they are actually and legally correct..
The above ruling notwithstanding, the Commissioner of Internal
Revenue appealed against the judgment which absolved respondent
Western Pacific Corporation from liability, alleging that the CTA
erred:.
(1) In taking cognizance of the case, notwithstanding lack of
jurisdiction; and
(2) Granting it had jurisdiction, in considering the expense
items and the written off bad debts as deductible.1wph1.t
Without going into the merits of the decision absolving the
respondent corporation of tax liability, We find that the
assessment made by the Commissioner should be maintained, for the
simple reason that when the petition for review was brought to the
CTA by the respondent corporation, the said Court no longer had
jurisdiction to entertain the same.
The assessment had long become final. A petition for review
should be presented, within the reglementary period, as provided
for in Section 11, Republic Act No. 1125, which is "thirty (30)
days from receipt of the assessment." The thirty (30) day period is
jurisdictional (Pangasinan Transportation Co. vs. Blaquera,
L-13101, April 29, 1960).
-
It will be noted that the assessment was received by the
respondent corporation on March 2, 1959. It was only on June 29,
1959, when said corporation formally assailed the assessment, on
the grounds of prescription in making the assessment and the
impropriety of the disallowance of the listed deductions. From
March 3 to June 29, 1959, manifestly more than thirty (30) days had
lapsed and the assessment became final, executory and demandable
(Ventanilla vs. Bd. of Tax Appeals, et al., L-7384, Dec. 19, 1955).
Of course, in the interim, a number of communications were
exchanged between the parties, the latest of which was dated
October 28, 1959. Even if this date is considered as the
commencement of the thirty (30) day period, still the petition for
review with the CTA was out of time, because it was only on
December 18, 1959, that said petition was presented. Failure to
comply with the thirty-day statutory period would bar appeal and
deprive the CTA of its jurisdiction to entertain and determine the
correctness of the assessment (Gibbs & Gibbs vs. Coll. of Int.
Rev. & CTA, L-13453, Feb. 29, 1960).
IN VIEW OF THE FOREGOING, the decision of the CTA is hereby set
aside for having been rendered without jurisdiction, the assessment
in question having been already final, executory and demandable
before the petition for review was presented; and another entered,
ordering respondent Western Pacific Corporation to pay the
assessment made by the Collector of Internal Revenue, and the
further amount of 5% surcharge and 1% monthly interest on the
amount assessed, from April 1, 1959 until date of full payment.
Costs against the respondent corporation.
!THE COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.PHOENIX
ASSURANCE CO., LTD., respondent.
-----------------------------
G.R. No. L-19903 May 20, 1965
PHOENIX ASSURANCE, CO., LTD., petitioner, vs.COMMISSIONER OF
INTERNAL REVENUE, respondent.
Office of the Solicitor General for petitioner-respondent
Commissioner of Internal Revenue.Sycip, Salazar, Luna &
Associates and A. S. Monzon, B. V. Abela & J. M. Castillo for
respondent-petitioner Phoenix Assurance Co., Ltd.
-
BENGZON, J.P., J.:
From a judgment of the Court of Tax Appeals in C.T.A. Cases Nos.
305 and 543, consolidated and jointly heard therein, these two
appeals were taken. Since they involve the same facts and
interrelated issues, the appeals are herein decided together.
Phoenix Assurance Co., Ltd., a foreign insurance corporation
organized under the laws of Great Britain, is licensed to do
business in the Philippines with head office in London. Through its
head office, it entered in London into worldwide reinsurance
treaties with various foreign insurance companies. It agree to cede
a portion of premiums received on original insurances underwritten
by its head office, subsidiaries, and branch offices throughout the
world, in consideration for assumption by the foreign insurance
companies of an equivalent portion of the liability from such
original insurances.1wph1.t
Pursuant to such reinsurance treaties, Phoenix Assurance Co.,
Ltd., ceded portions of the premiums it earned from its
underwriting business in the Philippines, as follows:
Year Amount Ceded
1952 P316,526.75
1953 P246,082.04
1954 P203,384.69
upon which the Commissioner of Internal Revenue, by letter of
May 6, 1958, assessed the following withholding tax:
Year Withholding Tax
1952 P 75,966.42
1953 59,059.68
1954 48,812.32
Total !P183,838.42
=============
-
On April 1, 1951, Phoenix Assurance Co., Ltd. filed its
Philippine income tax return for 1950, claiming therein, among
others, a deduction of P37,147.04 as net addition to marine
insurance reserve equivalent to 40% of the gross marine insurance
premiums received during the year. The Commissioner of Internal
Revenue disallowed P11,772.57 of such claim for deduction and
subsequently assessed against Phoenix Assurance Co., Ltd. the sum
of P1,884.00 as deficiency income tax. The disallowance resulted
from the fixing by the Commissioner of the net addition to the
marine insurance reserve at 100% of the marine insurance premiums
received during the last three months of the year. The Commissioner
assumed that "ninety and third, days are approximately the length
of time required before shipments reach their destination or before
claims are received by the insurance companies."
On April 1, 1953, Phoenix Assurance Co., Ltd. filed its
Philippine income tax return for 1952, declaring therein a
deduction from gross income of P35,912.25 as part of the head
office expenses incurred for its Philippine business, computed at
5% on its gross Philippine income.
On August 30, 1955 it amended its income tax return for 1952 by
excluding from its gross income the amount of P316,526.75
representing reinsurance premiums ceded to foreign reinsurers and
further eliminating deductions corresponding to the coded premiums.
The amended return showed an income tax due in the amount of
P2,502.00. The Commissioner of Internal Revenue disallowed
P15,826.35 of the claimed deduction for head office expenses and
assessed a deficiency tax of P5,667.00 on July 24, 1958.
On April 30, 1954, Phoenix Assurance Co., Ltd. filed its
Philippine income tax return for 1953 and claimed therein a
deduction from gross income of P33,070.88 as head office expenses
allocable to its Philippine business, equivalent to 5%, of its
gross Philippine income. On August 30, 1955 it amended its 1953
income tax return to exclude from its gross income the amount of
P246,082.04 representing reinsurance premiums ceded to foreign
reinsurers. At the same time, it requested the refund of P23,409.00
as overpaid income tax for 1953. To avoid the prescriptive period
provided for in Section 306 of the Tax Code, it filed a petition
for review on April 11, 1956 in the Court of Tax Appeals praying
for such refund. After verification of the amended income tax
return the Commissioner of Internal Revenue disallowed P12,304.10
of the deduction representing head office expenses allocable to
Philippine business thereby reducing the refundable amount to
P20,180.00.
On April 29, 1955, Phoenix Assurance Co., Ltd. filed its
Philippine income tax return for 1954 claiming therein, among
others, a deduction from gross income of P99,624.75 as head office
expenses allocable to its Philippine business, computed at 5% of
its gross Philippine income. It also excluded
-
from its gross income the amount of P203,384.69 representing
reinsurance premiums ceded to foreign reinsurers not doing business
in the Philippines.
On August 1, 1958 the Bureau of Internal Revenue released the
following assessment for deficiency income tax for the years 1952
and 1954 against Phoenix Assurance Co., Ltd.:
1952 Net income per audited return
P 12,511.61 Unallowable deduction & additional income:
Overclaimed Head Office expenses:
Amount claimed . . . . . . . . . . . . P 35,912.25
Amount allowed . . . . . . . . . . . . 20,085.90
P 15,826.35 Net income per investigation !
P 28,337.96 !Tax due thereon
P 5,667.00 ===========
1954 Net income per audited
P160,320.21 Unallowable deduction & additional income:
Overclaimed Head Office expenses:
Amount claimed . . . . . . . . . . . . P29,624.73
Amount allowed . . . . . . . . . . . . 19,455.50
10,16.23 Net income per investigation !
P170,489.41 !Tax due thereon
P 39,737.00 Less: amount already assessed
36,890.00 DEFICIENCY TAX DUE !
-
P 2,847.00 ===========
The above assessment resulted from the disallowance of a portion
of the deduction claimed by Phoenix Assurance Co., Ltd. as head
office expenses allocable to its business in the Philippines fixed
by the Commissioner at 5% of the net Philippine income instead of
5% of the gross Philippine income as claimed in the returns.
Phoenix Assurance Co., Ltd. protested against the aforesaid
assessments for withholding tax and deficiency income tax. However,
the Commissioner of Internal Revenue denied such protest.
Subsequently, Phoenix Assurance Co., Ltd. appealed to the Court of
Tax Appeals. In a decision dated February 14, 1962, the Court of
Tax Appeals allowed in full the decision claimed by Phoenix
Assurance Co., Ltd. for 1950 as net addition to marine insurance
reserve; determined the allowable head office expenses allocable to
Philippine business to be 5% of the net income in the Philippines;
declared the right of the Commissioner of Internal Revenue to
assess deficiency income tax for 1952 to have prescribed; absolved
Phoenix Assurance Co., Ltd. from payment of the statutory penalties
for non-filing of withholding tax return; and, rendered the
following judgment:
WHEREFORE, petitioner Phoenix Assurance Company, Ltd. is hereby
ordered to pay the Commissioner of Internal Revenue the respective
amounts of P75,966.42, P59,059.68 and P48,812.32, as withholding
tax for the years 1952, 1953 and 1954, and P2,847.00 as income tax
for 1954, or the total sum of P186,685.42 within thirty (30) days
from the date this decision becomes final. Upon the other hand, the
respondent Commissioner is ordered to refund to petitioner the sum
of P20,180.00 as overpaid income tax for 1953, which sum is to be
deducted from the total sum of P186,685.42 due as taxes.
If any amount of the tax is not paid within the time prescribed
above, there shall be collected a surcharge of 5% of the tax
unpaid, plus interest at the rate of 1% a month from the date of
delinquency to the date of payment, provided that the maximum
amount that may be collected as interest shall not exceed the
amount corresponding to a period of three (3) years. Without
pronouncement as to costs.
Phoenix Assurance Co., Ltd. and the Commissioner of Internal
Revenue have appealed to this Court raising the following issues:
(1) Whether or not reinsurance premiums ceded to foreign reinsurers
not doing business in the Philippines pursuant to reinsurance
contracts executed abroad are subject to withholding tax; (2)
Whether or not the right of the Commissioner of Internal Revenue to
assess deficiency income tax for the year 1952 against Phoenix
Assurance Co., Ltd., has prescribed; (3) Whether or not the
deduction of claimed by the Phoenix Assurance Co., Ltd.as net
addition to reserve for the year 1950 is excessive; (4) Whether or
not the deductions claimed by
-
Phoenix Assurance Co., Ltd. for head office expenses allocable
to Philippine business for the years 1952, 1953 and 1954 are
excessive.
The question of whether or not reinsurance premiums ceded to
foreign reinsurers not doing business in the Philippines pursuant
to contracts executed abroad are income from sources within the
Philippines subject to withholding tax under Sections 53 and 54 of
the Tax Code has already been resolved in the affirmative in
British Traders' Insurance Co., Ltd.v. Commisioner of Internal
Revenue, L-20501, April 30, 1965. 1
We come to the issue of prescription. Phoenix Assurance Co.,
Ltd. filed its income tax return for 1952 on April 1, 1953 showing
a loss of P199,583.93. It amended said return on August 30, 1955
reporting a tax liability of P2,502.00. On July 24, 1958, after
examination of the amended return, the Commissioner of Internal
Revenue assessed deficiency income tax in the sum of P5,667.00. The
Court of Tax Appeals found the right of the Commissioner of
Internal Revenue barred 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 assessment has not prescribed
inasmuch as the same was availed of before the 5-year period
provided for in Section 331 of the Tax Code expired, counting the
running of the period from August 30, 1955, the date when the
amended return was filed.
Section 331 of the Tax Code, which limits the right of the
Commissioner of Internal Revenue to assess income tax within five
years from the Filipino of the income tax return, states:
SEC. 331. Period of limitation upon assessment and collection.
Except as provided in the succeeding section internal revenue taxes
shall be assessed within five years after the return was filed, and
no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period. For
the purposes of this section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as
filed on such last day: Provided, That this limitation shall not
apply to cases already investigated prior to the approval of this
Code.
The question is: Should the running of the prescriptive period
commence from the filing of the original or amended return?
The Court of Tax Appears that the original return was a complete
return containing "information on various items of income and
deduction from which respondent may intelligently compute and
determine the tax liability of petitioner, hence, the prescriptive
period should be counted from the filing of said original return.
On the other hand, the Commissioner of Internal Revenue maintains
that:
-
"... the deficiency income tax in question could not possibly be
determined, or assessed, on the basis of the original return filed
on April 1, 1953, for considering that the declared loss amounted
to P199,583.93, the mere disallowance of part of the head office
expenses could not probably result in said loss being completely
wiped out and Phoenix being liable to deficiency tax. Not until the
amended return was filed on August 30, 1955 could the Commissioner
assess the deficiency income tax in question."
Accordingly, he would wish to press for the counting of the
prescriptive period from the filing of the amended return.
To our mind, the Commissioner's view should be sustained. The
changes and alterations embodied in the amended income tax return
consisted of the exclusion of reinsurance premiums received from
domestic insurance companies by Phoenix Assurance Co., Ltd.'s
London head office, reinsurance premiums ceded to foreign
reinsurers not doing business in the Philippines and various items
of deduction attributable to such excluded reinsurance premiums
thereby substantially modifying the original return. Furthermore,
although the deduction for head office expenses allocable to
Philippine business, whose disallowance gave rise to the deficiency
tax, was claimed also in the original return, the Commissioner
could not have possibly determined a deficiency tax thereunder
because Phoenix Assurance Co., Ltd. declared a loss of P199,583.93
therein which would have more than offset such disallowance of
P15,826.35. Considering that the deficiency assessment was based on
the amended return which, as aforestated, is substantially
different from the original return, the period of limitation of the
right to issue the same should be counted from the filing of the
amended income tax return. From August 30, 1955, when the amended
return was filed, to July 24, 1958, when the deficiency assessment
was issued, less than five years elapsed. The right of the
Commissioner to assess the deficiency tax on such amended return
has not prescribed.
To strengthen our opinion, we believe that to hold otherwise, we
would be paving the way for taxpayers to evade the payment of taxes
by simply reporting in their original return heavy losses and
amending the same more than five years later when the Commissioner
of Internal Revenue has lost his authority to assess the proper tax
thereunder. The object of the Tax Code is to impose taxes for the
needs of the Government, not to enhance tax avoidance to its
prejudice.
We next consider Phoenix Assurance Co., Ltd.'s claim for
deduction of P37,147.04 for 1950 representing net addition to
reserve computed at 40% of the marine insurance premiums received
during the year. Treating said said deduction to be excessive, the
Commissioner of Internal Revenue reduced the same to P25,374.47
which is equivalent to 100% of all marine insurance premiums
received during the last months of the year.
-
Paragraph (a) of Section 32 of the Tax Code states:
SEC. 32. Special provisions regarding income and deductions of
insurance companies, whether domestic or foreign. (a) Special
deductions allowed to insurance companies. In the case of insurance
companies, except domestic life insurance companies and foreign
life insurance companies doing business in the Philippines, the net
additions, if any, required by law to be made within the year to
reserve funds and the sums other than dividends paid within the
year on policy and annuity contracts may be deducted from their
gross income: Provided, however, That the released reserve be
treated as income for the year of release.
Section 186 of the Insurance Law requires the setting up of
reserves for liability on marine insurance:
SEC. 186. ... Provided, That for marine risks the insuring
company shall be required to charge as the liability for
reinsurance fifty per centum of the premiums written in the
policies upon yearly risks, and the full premiums written in the
policies upon all other marine risks not terminated (Emphasis
supplied.)
The reserve required for marine insurance is determined on two
bases: 50% of premiums under policies on yearly risks and 100% of
premiums under policies of marine risks not terminated during the
year. Section 32 (a) of the Tax Code quoted above allows the full
amount of such reserve to be deducted from gross income.
It may be noteworthy to observe that the formulas for
determining the marine reserve employed by Phoenix Assurance Co.,
Ltd. and the Commissioner of Internal Revenue 40% of premiums
received during the year and 100% of premiums received during the
last three months of the year, respectively do not comply with
Section 186. Said determination runs short of the requirement. For
purposes of the Insurance Law, this Court therefore cannot
countenance the same. The reserve called for in Section 186 is a
safeguard to the general public and should be strictly followed not
only because it is an express provision but also as a matter of
public policy. However, for income tax purposes a taxpayer is free
to deduct from its gross income a lesser amount, or not to claim
any deduction at all. What is prohibited by the income tax law is
to claim a deduction beyond the amount authorized therein.
Phoenix Assurance Co., Ltd.'s claim for deduction of P37,147.04
being less than the amount required in Section 186 of the Insurance
Law, the same cannot be and is not excessive, and should therefore
be fully allowed. *
We come now to the controversy on the taxpayer's claim for
deduction on head office expenses incurred during 1952, 1953, and
1954 allocable to its
-
Philippine business computed at 5% of its gross income in the
Philippines The Commissioner of Internal Revenue redetermined such
deduction at 5% on Phoenix Assurance Co., Ltd's net income thereby
partially disallowing the latter's claim. The parties are agreed as
to the percentage 5% but differ as to the basis of computation.
Phoenix Assurance Co. Lt. insists that the 5% head office expenses
be determined from the gross income, while the Commissioner wants
the computation to be made on the net income. What, therefore,
needs to be resolved is: Should the 5% be computed on the gross or
net income?
The record shows that the gross income of Phoenix Assurance Co.,
Ltd. consists of income from its Philippine business as well as
reinsurance premiums received for its head office in London and
reinsurance premiums ceded to foreign reinsurance. Since the items
of income not belonging to its Philippine business are not taxable
to its Philippine branch, they should be excluded in determining
the head office expenses allowable to said Philippine branch. This
conclusion finds support in paragraph 2, subsection (a), Section 30
of the Tax Code, quoted hereunder:
(2) Expenses allowable to non-resident alien individuals and
foreign corporations. In the case of a non-resident alien
individual or a foreign corporation, the expenses deductible are
the, necessary expenses paid or incurred in carrying on any
business or trade conducted within the Philippines exclusively.
(Emphasis supplied.)
Consequently, the deficiency assessments for 1952, 1953 and
1954, resulting from partial disallowance of deduction representing
head office expenses, are sustained.
Finally, the Commissioner of Internal Revenue assails the
dispositive portion of the Tax Court's decision limiting the
maximum amount of interest collectible for deliquency of an amount
corresponding to a period of three years. He contends that since
such limitation was incorporated into Section 51 of the Tax Code by
Republic Act 2343 which took effect only on June 20, 1959, it must
not be applied retroactively on withholding tax for the years 1952,
1953 and 1954.
The imposition of interest on unpaid taxes is one of the
statutory penalties for tax delinquency, from the payments of which
the Court of Tax Appeals absolved the Phoenix Assurance Co., Ltd.
on the equitable ground that the latter's failure to pay the
withholding tax was due to the Commissioner's opinion that no
withholding tax was due. Consequently, the taxpayer could be held
liable for the payment of statutory penalties only upon its failure
to comply with the Tax Court's judgment rendered on February 14.
1962, after Republic Act 2343 took effect. This part of the ruling
of the lower court ought not to be disturbed.
-
WHEREFORE, the decision appealed from is modified, Phoenix
Assurance Co., Ltd. is hereby ordered to pay the Commissioner, of
Internal Revenue the amount of P75,966.42, P59,059.68 and
P48,812.32 as withholding tax for the years 1952, 1953 and 1954,
respectively, and the sums of P5,667.00 and P2,847.00 as income tax
for 1952 and 1954 or a total of P192,352.42. The Commissioner of
Internal Revenue is ordered to refund to Phoenix Assurance Co.,
Ltd. the amount of P20,180.00 as overpaid income tax for 1953,
which should be deducted from the amount of P192,352.42.
If the amount of P192,352.42 or a portion thereof is not paid
within thirty (30) days from the date this judgment becomes final,
there should be collected a surcharge and interest as provided for
in Section 51(c) (2) of the Tax Code. No costs. It is so
ordered.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L.,
Barrera, Paredes, Dizon, Regala, Mak