COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. LIMPAN INVESTMENT CORPORATION AND THE COURT OF TAX APPEALS, RESPONDENTS. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. LIMP…

These are sister cases, elevated to us from the Court of Tax
Appeals on petition for review by the Commissioner of Internal Revenue.

The Limpan Investment Corporation filed
income tax returns for the years 1959 and 1960, which became the bases a two
deficiency tax assessments flowing from deductions disallowed after
investigation and verification by the Bureau of Internal Revenue.

The assessments were disputed, and thereafter appeal was
seasonably lodged with the Court of Tax Appeals.

Decision was rendered in CTA case 1358 [L-28571] on September 20, 1967, reducing the
deficiency assessment to P26,137. 
Decision was rendered in CTA case 1397 [L-28644] on December 11, 1967, reducing the deficiency
assessment to P7,240.48.

The uniform dispositive part of the
decisions in both cases reads as follows:

“… If the deficiency income tax is not paid in full within thirty
(30) days from the date this decision becomes final and executory,
petitioner shall pay a surcharge of five per cent (5%) of the unpaid amount
plus interest at the rate of one per cent (1%) a month, computed from the
date this decision becomes final until paid, provided that the maximum
amount that may be collected as interest shall not exceed the amount
corresponding to a period of three (3) years …” (italics ours)

The present petitions for review are limited to the sole issue of
when payment by the Limpan Investment
Corporation of the 5% surcharge and the 1% monthly interest for delinquency did
legally accrue.

Resolving the issue thus posed, we hold that that portion of the
judgment of the CTA which has the effect of fixing a new date for the payment
of surcharges and interests is reversible error.

Section 51, paragraph (e) of the National Internal Revenue Code,
as amended by Republic Act No. 2343, provides:

“(e) Additions to the tax in case of nonpayment. —

“(1)    Tax shown on the
return. – Where the amount determined by the taxpayer as the tax imposed by
this Title or any installment thereof, or any part of such amount or
installment; is not paid on or before the date prescribed for its payment,
there shall be collected as part of the tax, interest upon such unpaid amount
at the rate of one per centum a month from the date prescribed for its payment
until it is paid:  Provided, That
the maximum amount that may be collected as interest on deficiency shall in no
case exceed the amount corresponding to a period of three years, the present
provisions regarding prescription to the contrary notwithstanding.

“(2)    Deficiency. –Where a
deficiency, or any interest assessed in connection therewith under paragraph
(d) of this section, or any addition to the taxes provided for in section
seventy-two of this Code is not paid in full within thirty days from the date
of notice and demand from the Commissioner of Internal revenue, there shall be
collected upon the unpaid amount, as part of the tax, interest at the rate of
one per centum a month from the date of such notice and demand until it is
paid:  Provided, That the maximum
amount that may be collected as interest on deficiency shall in no case exceed
the amount corresponding to a period of three years, the present provisions
regarding prescription to the contrary notwithstanding.

“(3)    Surcharge. — If any
amount of the tax included in the notice and demand from the Commissioner of
Internal Revenue is not paid in full within thirty days after such notice and
demand, there shall be collected in addition to the interest prescribed herein
and in paragraph (d) above and as part of the tax a surcharge of five per
centum of the amount of tax unpaid.”

It is a cardinal rule of statutory construction that where the
terms of the statute are clear and unambiguous, no interpretation is called
for, and the law is applied as written,^[1]
for application is the first duty of courts, and interpretation, only where
literal application is impossible or inadequate.^[2]

The above legal provision makes no distinctions nor does it establish
exceptions.  It directs the collection of
the surcharge and interest at the stated rates upon any sum or sums due and
unpaid after the dates prescribed in subsections (b), (c), and (d) of section
51 of the Act for the payment of the amounts due.  The provision therefore is mandatory in case
of delinquency.  The intention of the law
is precisely to discourage delay in the payment of taxes due to the State and,
in this sense, the surcharge and interest charged are not penal but
compensatory in nature.  They are
compensation to the State for the delay in payment, or for the concomitant use
of the funds by the taxpayer beyond the dates he should have paid them to the
State.^[3]

It is obvious that the interest and surcharge are invariably
considered as “part of the tax,” so that the rule governing payment
of taxes on the dates fixed by law would apply, and Would leave no room for
discretion on the part of revenue officials, or the Court of Tax Appeals for
that matter.^[4]

In L-28571, interest shall be computed from September 7, 1962, the date of notice and demand,
at 1% per month, for 3 years, no payment having been made within thirty days
from such notice and demand.  The
surcharge of 5% accrued on failure to pay the deficiency tax due within thirty
days from notice and demand.  In L-28644,
interest shall be computed from April
4, 1963, the date of notice and demand, at 1% per month, for 3
years, no payment having been made within thirty days from such notice and
demand.  The surcharge of 5% accrued on
failure to pay the deficiency tax due within thirty days from notice and
demand.

ACCORDINGLY, the judgments a quo are
modified in the sense that the respondent Limpan
Investment Corporation is hereby ordered (1) In L-28571, to pay to the
Commissioner of Internal Revenue 5% surcharge on the 1959 deficiency income tax
of P26,137, plus 1% monthly interest on the said deficiency tax from September
7, 1962 to September 6, 1965; and (2) in L-28644, 5% surcharge on the 1960
deficiency income tax of P7,240.48, plus 1% monthly interest on the said
deficiency tax, from April 4, 1963 to April 3, 1966.  As thus modified, the judgments a quo
are affirmed.  Costs in both instances
against the respondent Limpan Investment Corporation.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, and Villamor, JJ., concur.

Barredo, J., did not take part.

^[1] Luzon
Stevedoring Corp. v. CTA, L-21005, Oct. 22, 1966; POACO v. CBP, L-21881, Mar. 1, 1968.

^[2]
De Quito v. Lopez, L-27757, Mar.
28, 1968

^[3]
Castro v. Collector etc., Resolution on Motion for Reconsideration,
L-12174, Dec. 28, 1962.

^[4]
Cf. Commissioner of Internal Revenue v. Abad,
L-19627, June 27, 1968.