G.R. No. L-30644. March 09, 1987
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. FIREMAN’S FUND INSURANCE COMPANY AND THE COURT OF TAX APPEALS, RESPONDENTS.
PARAS, J.:
This is an appeal from the decision of the respondent Court
of Tax Appeals dated May 24, 1969, in C.T.A. Case No. 1629, entitled
“FIREMAN’S FUND INSURANCE COMPANY v. COMMISSIONER OF INTERNAL REVENUE,”
which reversed the decision of petitioner Commissioner of Internal Revenue
holding private respondent Fireman’s Fund Insurance Company liable for the
payment of the amount of P81,406.87 as
documentary stamp taxes and compromise penalties for the years 1952 to
1958.
Private respondent is a resident foreign insurance
corporation organized under the laws of the
United
States, authorized and duly
licensed to do business in the
Philippines.
It is a member of the American Foreign Insurance Association, through
which its business is cleared (Brief for Respondents, pp.
1-2).
The antecedent facts of this case are as
follows:
From January, 1952 to December, 1958, herein private
respondent Fireman’s Fund Insurance Company entered
into various insurance con;tracts involving casualty,
fire and marine risks, for which the corresponding insurance policies were
issued. From January, 1952 to 1956,
documentary stamps were
bought and affixed to the monthly statements of policies issued; and from 1957
to 1958 documentary stamps were bought and affixed to the corresponding pages of
the policy register, instead of on the insurance policies issued.
On July 3,
1959, respon;dent company discovered that its monthly
statements of business and policy register were
lost. The loss was reported to the Building Admi;nistration of
Ayala Building and the National Bureau of Investigation on July 6, 1959.
Herein petitioner was also informed of such loss by respondent company,
through the latter’s auditors, Sycip, Gorres and Velayo, in a letter
dated July 14,
1959. After conducting an inves;tigation
of said loss, petitioner’s examiner ascertained that respond;ent company failed
to affix the required documentary stamps to the
insurance policies issued by it and failed to preserve its accounting records
within the time prescribed by Section 337 of the
Revenue Code by using loose leaf forms as registers of
documentary stamps without written authority from the Commissioner of Internal
Revenue as required by Section 4 of Revenue Regulations No. V-1. As a consequence of
these findings, petitioner, in a letter dated December
7, 1962, assessed and demanded from petitioner the
payment of documentary stamp taxes for the years 1952
to 1958 in the total amount of P79,806.87
and plus compromise penalties, a total of
P81,406.87.
A breakdown of the
amount of taxes due and collectible
are as follows:
1952
P6,500.00
1953
9,977.72
1954
10,908.89
1955
P14,204.52
1956
12,108.26
1957
7,880.68
1958
Total stamp taxes due on policies issued from 1952 to
1958Add: Stamp taxes on monthly statements during: 1957 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
–1958 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Total – – – – – – – – – – – – – – – – – – – – – – –
– – – – – – – –Less: Stamp taxes paid per voucher shown: 1957 – – – – – – – – – – – – – – – – – P416.82 1958 – – – – – – – – – – – – – – – – –
2,096.72AMOUNT DUE & COLLECTIBLE – – – – – – – (CTA Decision, Rollo, pp.
16-17).
========
The compromise penalties consisted of the sum of P1,000.00 as penalty for the alleged failure to affix
documentary stamps and the further sum of P600.00 as
penalty for an alleged violation of Revenue Regulations No. V-1 otherwise known as the Bookkeeping Regulations (Brief for
Respondents, p. 4).
In a letter dated January 14, 1963, respondent company
contested the assessment. After petitioner denied the protest in a
decision dated March 17,
1965, respondent company appealed to the respondent
Court of Tax Appeals on May
8, 1965. After hearing respondent court
rendered its decision dated May 24, 1969 (Rollo, pp. 16-21) reversing the decision of the
Commissioner of Internal Revenue. The
assailed decision reads in part:
”The affixture of documentary stamps to papers other than those
authorized by law is not tanta;mount to failure to pay the same.
It is true that the mode of affixing the stamps as prescribed by law was
not followed, but the fact remains that the documentary stamps corresponding to
the various insurance policies were purchased and paid by petitioner.
There is no legal justification for respondent to require petitioner to
pay again the documentary stamp tax which it had already paid. To
sustain respondent’s stand would require petitioner to pay the same tax
twice. If at all, petitioner should be proceeded against for
failure to comply with the requirement of affixing the documentary stamps to the
taxable insurance poli;cies and not for failure to pay the tax.
(See Sec. 239 and 332, Rev. Code).
“It should be observed that the law allows the affixture of
documentary stamps ‘to such other paper as may be indicated by law or
regulations as the proper recipient of the stamp.’ It appears from this
provision that respondent has authority to allow
documentary stamps to be affixed to papers other than the documents or
instruments taxed. Although the practice adopted by petitioner in
affixing the documentary stamps to the business statements and policy register
was without specific permission from respondent but only on the strength of his
ruling given to Wise & Company (see Peti;tioner’s Memorandum, p. 176, CTA
rec.; p. 24, t.s.n.), one of the general agents of
petitioner, however, considering that petitioner actually purchased the
documentary stamps, affixed them to the business statements and policy register
and cancelled the stamps by perforating them, we hold that petitioner cannot be
held liable to pay again the same tax.
“With respect to the ‘compromise penalties’ in the total sum of
P1,600.00, suffice it to say that penalties cannot be
imposed in the absence of a showing that petitioner consented thereto.
A compromise implies agreement. If the offer is rejected by
the taxpayer, as in this case, respond;ent cannot enforce it except through a
criminal action. (See Comm. of Int. Rev. vs.
Abad, L-19627, June 27, 1968.)” (CTA Decision, Rollo, pp. 20;-21).
Hence, this petition filed on June 26, 1969 (Rollo, pp. 1-8).
The petition is devoid of merit.
The principal issue in this case is whether or not
respondent company may be required to pay again the documentary stamps it has
actually purchased, affixed and cancelled.
The relevant provisions of the National Internal Revenue
Code provide:
“SEC. 210. Stamp taxes
upon documents, instru;ments, and papers. — Upon documents,
instruments, and papers, and upon acceptances, assignments, sales, and transfers
of the obligation, right, or property incident thereto, there shall be le;vied,
collected and paid, for and in respect of the transaction so had or
accomplished, the corres;ponding documentary stamp taxes prescribed in the
following sections of this Title, by the person making, signing, issuing,
accepting, or transfer;ring the same, and at the same time such act is done or
transaction had.” (Now. Sec.
222).
“SEC. 232. Stamp tax on life
insurance policies. — On all policies of insurance or other
instruments by whatever name the same may be called, whereby any
insurance shall be made or renewed upon any life or lives, there shall be
collected a documentary stamp tax of thirty-five centavos on each two hundred
pesos or fractional part thereof, of the amount issued by any such
policy. (220) (As amended by PD 1457)
“Insurance policies issued by a Philippine company to persons in
other countries are not subject to documentary stamp tax. (Rev.
Regs. No. 26)
“Medical certificate attached to an insurance policy is not a part
of the said policy. Insurance policy is subject to Section 232 of
the Tax Code while medical certificate is taxable under Section 237 of the same
Code.
“Insurance policies are issued in the place where delivered to the
person insured.” (As
amend;ed.)
“SEC. 221. Stamp tax on
policies of insurance upon property. — On all policies of insurance or
other instruments by whatever name the same may be called, by which insurance
shall be made or renewed upon property of any description, in;cluding rents or
profits, against peril by sea or on inland waters, or by fire or lightning,
there shall be collected a documentary stamp tax of six centavos on each four
persons, or fractional part thereof, of the amount of premium charged.” (Now Sec. 233.)
“SEC. 237. Payment of documentary stamp tax. — Documentary
stamp taxes shall be paid by the pur;chase and affixture of documentary stamps
to the document or instrument taxed or to such other paper as may be indicated
by law or regulations as the proper recipient of the stamp, and by the
subsequent cancellation of same, such cancellation to be accomplished by
writing, stamping, or per;forating the date of the cancellation across the
face of each stamp in such manner that part of the writing, impression,
or perforation shall be on the stamp itself and part on the paper to which it is
attached; Provided, That if the cancel;lation is accomplished by
writing or stamping the date of cancellation, a hole sufficiently large to be
visible to the naked eye shall be punched, cut or perforated on both the stamp
and the document either by the use of a hand punch, knife,
perforating machine, scissors, or any other cutting instrument; but if the
cancellation is accomplished by perforating the date of
cancellation, no other hole need be made on the
stamp.” (Now Sec. 249.)
“SEC. 239. Failure to affix or cancel documentary
stamps. — Any person who fails to
affix the correct amount of documentary stamps to any taxable
document, instrument, or paper, or to cancel in the manner prescribed by section
237 any documentary stamp affixed to any document, instrument, or
paper, shall be subject to a fine of not less than twenty pess or
more than three hundred pesos. (Underscoring supplied.)
(Now Sec.
250.)
As correctly pointed out by respondent Court of Tax Appeals, under
the above-quoted provisions of law, documentary tax is deemed paid by:
(a) the purchase of documentary stamps; (b) affixture of documentary
stamps to the document or instrument taxed or to such other paper as may
be indicated by law or regulations; and (c) cancellation of the
stamps as required by law (Rollo, p. 18).
It will be observed however, that the over-riding purpose of these
provisions of law is the collection of taxes. The three steps
above-mentioned are but the means to that end. Thus, the purchase
of the stamps is the form of payment made; the affixture thereof on the document
or instrument taxed is to insure that the corresponding tax has been paid for
such document while the cancellation of the stamps is to obviate the possibility
that said stamps will be reused for similar documents for similar purposes.
In the case at bar, there appears to be no dispute on the fact
that the documentary stamps corresponding to the various policies were purchased
and paid for by the respondent Company. Neither is there any
argument that the same were cancelled as required by law.
In fact such were the findings of petitioner’s examiner Amando B. Melgar who stated as
follows:
“Investigation disclosed that the subject insurance company is a
duly organized corporation doing business in the
Philippines.
It keeps the necessary books of accounts and other accounting
records needed by the business. Further verifica;tion
revealed that it has, since July, 1959, been using a ‘HASLER’ franking
machine, Model F-88, which stamps the documentary stamps on the duplicates of
the policies issued. Prior to the acquisition of the said
machine, the company buy its stamps by allowing the Manager to issue a
Manager’s check drawn against the National City Bank of
New York and payable to the City
Treasurer of Manila. It was also
found out that during this period (1952 to 1958), the total purchases of
documentary stamps amounted to P77,837.67, while the value of the used stamps
lost amounted to P65.901.11. Verification with the files
revealed that most of the monthly statements of business and registers of
documentary stamps corresponding to insurance policies issued were missing while
some where the punched documentary stamps affixed were small in amount are still
intact.
“The taxpayer was found to be negligent in the preservation and
keeping of its records. Al;though the loss was found by the
company’s private investigator (see attached true copies of his reports) was not
an ‘Inside Job,’ still the company should be held liable for its negligence, it
appearing that the said records were placed in a bodega, where almost all
patrons of the coffee shop nearby could see them. The company also
viola;ted the provision of Section 221 of the National Internal Revenue Code
which provides that the documentary stamps should be affixed and cancelled on
the duplicates of bonds and policies issued. In this case, the
said stamps were affixed on the register of documentary stamps.
(pp. 35-36, BIR rec.; Underscoring supplied.)” (CTA
Decision, Rollo, pp.
18-19.)
Such findings were confirmed by the Memorandum of Acting
Commissioner of Internal Revenue Jose B. Lingad,
dated November
7, 1962 to the
Chief, Business Tax Division, which
states:
“The records show that the FIREMAN’S FUND INSURANCE COMPANY
allegedly paid P77,837.67 in documentary stamp taxes for the policies of
insu;rance issued by it for the years 1952 to 1958 but could only present as
proof of payment P11,936.56 of said taxes as the rest of the amount of
P65,901.11 were lost due to robbery. Upon veri;fication of this
payment however it was found that the FIREMAN’S FUND INSURANCE COMPANY affixed
the documentary stamps not on the individual insurance policies issued by
it but on a monthly statement of business and a register of documentary
stamps, the use of which was not authorized by this Office.
It was claimed that the same procedure was used in the case of the lost
documentary stamps aforementioned. As this practice
is irregular and the remaining records are not conclusive proofs of the payment
of the corresponding documentary stamp tax on the policies, the
FIREMAN’S FUND AND INSURANCE COMPANY is still liable
for the payment of the documentary stamp taxes on the policies
found not affixed with stamps.” (Original BIR Record, p.
87).
Later, respondent Court of Tax Appeals correctly
observed that the purchase of documentary stamps and their being affixed to the
monthly statements of business and policy registers were also admitted by
counsel for the Government as could clearly be gleaned from his Memorandum
submitted to the respondent Court. (Decision,
CTA Rollo, pp.
4-5).
Thus, all investigations made by the petitioner show the same
factual findings that respondent company purchased documentary stamps for
the various policies it has issued for the period in
question although it has attached the same on
documents not authorized by law.
There is no argument to petitioner’s contention that the insurance
policies with the corresponding documentary stamps affixed are the best
evidence to prove payment of said documentary stamp
tax. This rule however does not preclude the admissibility of
other proofs which are uncontradicted and
of considerable weight, such as: copies of the applications for
manager’s checks, copies of the manager’s check vouchers of the bank showing the
purchases of documentary stamps cor;responding to the various insurance policies
issued during the years 1952-1958 duly and properly identified by
the witnesses for respondent company during the hearing and admitted by
the respondent Court of Tax Appeals (Brief for Respondent,
p. 15).
It is a general rule in the interpretation of statutes
levying taxes or duties, that in case of doubt, such statutes are to be
construed most strongly against the government and in favor of the subjects or
citizens, because burdens are not to be imposed, nor presumed to be imposed
beyond what statutes expressly and clearly import (Manila Railroad Co. v.
Collector of Customs, 52 Phil. 950 [1929]).
There appears to be no question that the purpose of imposing
documentary stamp taxes is to raise revenue and the corresponding amount has
already been paid by respondent and has actually become part of the
revenue of the government. In the same manner, it is evi;dent that
the affixture of the stamps on documents not authorized by law is not attended
by bad faith as the practice was adopted from the authority granted
to Wise & Company, one of respondent’s general agents (CTA
Decision, Rollo, p. 20).
Indeed, petitioner argued that such authority was not given to respondent
company specifically, but under the general principle of agency, where the acts
of the agents bind the principal, the conclusion is inescapable that the
justifica;tion for the acts of the agents may also be claimed for
the acts of the principal itself (Brief for the Respondents, pp. 12-13).
Be that as it may, there is no
justification for the government which has already realized the
revenue which is the object of the imposition of subject stamp tax, to require
the payment of the same tax for the same documents. Enshrined in
our basic legal principles is the time honored doctrine that no person shall
unjustly enrich himself at the expense of another. It
goes without saying that the government is not exempted from the application of
this doctrine (Ramie Textiles, Inc. v. Mathay
Sr., 89 SCRA 587 [1979]).
Under the circumstances, this court RESOLVED to DISMISS this
petition and to AFFIRM the assailed decision of the Court of Tax
Ap;peals.
Fernan,
(Chairman), Gutierrez, Jr., Padilla, Bidin, and Cortes, JJ.,
concur.
Alampay, J., on leave.