GSIS vs. City Treasurer and City Assessor of Manila

Facts:Petitioner GSIS owns or used to own two parcels of lands, one at Katigbak 25 th

St., Bonifacio Drive, Manila and the other at Concepcion cor. Arroceros Sts., Manila. The latter was transferred in favor of the Court, while the Katigbak property was under lease. On September 13, 2002, City Treasurer of Manila assessed GSIS of unpaid real property taxes due on the said properties for years 1992 to 2002, threatening seizure and sale in case of failure to pay. After writing herein respondents emphasizing the GSIS exemption from all kinds of taxes under RA 8291, GSIS filed a petition for certiorari and prohibition before the RTC, which denied the petition. GSIS sought but was denied reconsideration per the assailed Order dated January 7, 2009. Thus, the instant petition for review on pure question of law.

Issues:1. Whether GSIS under its charter is exempt from real property taxation; 2. Whether GSIS is liable for real property taxes for its properties leased to

a taxable entity

Held: 1. Yes, GSIS under its charter is exempt from real property taxation. Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax exemption from real estate taxes, among other tax burdens, until January 1, 1992 when the LGC took effect and withdrew exemptions from payment of real estate taxes privileges granted under PD 1146; (2) RA 8291 restored in 1997 the tax exempt status of GSIS by reenacting under its Sec. 39 what was once Sec. 33 of P.D. 1146; and (3) If any real estate tax is due to the City of Manila, it is, following City of Davao, only for the interim period, or from 1992 to 1996, to be precise. Moreover, Section 39 of RA 8291 contains a condoning proviso which, for all intents and purposes, considered as paid any assessment against the GSIS as of the approval of this Act. Also, GSIS is not a GOCC as its capital is not divided into unit shares. Being an instrumentality of the government, it is outside the purview of local government taxation.

Held: 2. Yes, GSIS is liable for real estate tax on properties leased to a taxable entity. A close reading of Section 234 (a) and Section 133 of RA 7160 shows that the provisions allow the Republic to grant the beneficial use of its property to an agency or instrumentality of the national government. Such grant does not necessarily result in the loss of the tax exemption. The tax exemption the property of the Republic or its

instrumentality carries ceases only if, as stated in Sec. 234(a) of the LGC of 1991, beneficial use thereof has been granted, for a consideration or otherwise, to a taxable person. GSIS, as a government instrumentality, is not a taxable juridical person under Sec. 133(o) of the LGC. GSIS, however, lost in a sense that status with respect to the Katigbak property when it contracted its beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax assessment of PhP 54,826,599.37 covering 1992 to 2002 over the subject Katigbak property is valid insofar as said tax delinquency is concerned as assessed over said property. However, the taxable person who has actual or beneficial use and possession of such taxable property shall be the one liable for RPT.

Sps. Wong vs. City of Iloilo

Facts: Subject property of this controversy was sold to petitioners Francisco and Joaquin Wong, who were never able to register the property in their name. Due to delinquency in RPT payment, the subject property was sold in a public auction to Melanie Uy, the highest bidder. Such sale was contested by petitioners Wong in a complaint for annulment of sale against City Government of Iloilo and Uy. They asserted that said tax sale was void for failure of City Treasurer to inform them. RTC ruled in favor of herein respondents and upheld the validity of the sale, which was overturned after a motion for reconsideration was filed by herein petitioners. Upon appeal to CA, the latter ruled that the tax sale was valid, saying petitioners failed to pay the required payment of amount of tax sale, which is a jurisdictional requirement. Hence this petition to hold that CA erred in upholding the validity of the sale.

Issue: Whether or not tax sale was valid for failure of petitioners to deposit the amount for which the property was sold.

Held: Yes, the tax sale was valid. First, Section 83 of PD 464 states that the RTC shall not entertain any complaint assailing the validity of a tax sale of real property unless the complainant deposits with the court the amount for which the said property was sold plus interest equivalent to 20% per annum from the date of sale until the institution of the complaint. This provision was adopted in Section 267 of the Local Government Code, albeit the increase in the prescribed rate of interest to 2% per month. Also, the case of National Housing Authority v. Iloilo City holds that the deposit required under Section 267 of the Local Government Code is a jurisdictional requirement, the nonpayment of which warrants the dismissal of the action. Because petitioners in this case did not make such deposit, the RTC never acquired jurisdiction over the complaints.

City of Iloilo vs. Smart

Facts: SMART received a letter of assessment dated February 12, 2002 from petitioner requiring it to pay deficiency local franchise and business taxes (in the amount of P764,545.29, plus interests and surcharges) which it incurred for the years 1997 to 2001. SMART protested the assessment by sending a letter dated February 15, 2002 to the City Treasurer. It claimed exemption from payment of local franchise and business taxes based on Section 9 of its legislative franchise under Republic Act (R.A.) No. 7294 (SMARTs franchise). Under SMARTs franchise, it was required to pay a franchise tax equivalent to 3% of all gross receipts, which amount shall be in lieu of all taxes. SMART contends that the in lieu of all taxes clause covers local franchise and business taxes. SMART similarly invoked R.A. No. 7925 or the Public Telecommunications Policy Act (Public Telecoms Act) whose Section 23 declares that any existing privilege, incentive, advantage, or exemption granted under existing franchises shall ipso facto become part of previously granted-telecommunications franchise. SMART contends that by virtue of Section 23, tax exemptions granted by the legislature to other holders of telecommunications franchise may be extended to and availed of by SMART.

Issue: Whether or not SMART is exempt from local franchise tax based on Section 9 of SMART’s franchise and Section 23 of RA 7925.

Held: No, SMART is not exempt. Section 193 of LGC which withdraws the tax exemption privileges enjoyed or granted to all persons, including GOCCs applies only to tax exemptions already existing during its time of effectivity. Tax exemption granted after such time remain in force. Since SMART’s franchise was only enacted on March 27, 1992, more than two months since LGC’s effectivity on January 1, 1992. Such tax-exempt status has not been revoked. However, a close scrutiny of Section 9 of SMART’s franchise revealed that such exemption applies only to national taxes and not to local taxes. SMARTs claim for exemption from local business and franchise taxes based on Section 9 of its franchise is therefore unfounded. Also, Section 23 of RA 7925 does not grant tax-exemption, but rather exemption from certain regulatory or reporting requirements imposed by government agencies such as the National Telecommunications Commission. The thrust of the Public Telecoms Act is to promote the gradual deregulation of entry, pricing, and operations of all public

telecommunications entities, and thus to level the playing field in the telecommunications industry.

Davao Oriental Electric Cooperative vs. Province of Davao Oriental

Facts: Petitioner, a cooperative organized under PD 269, was assessed by the Provincial Assessor of Davao Oriental with RPT on October 8, 1985. Two years thereafter, in 1987, Pres. Aquino restored the tax and duty exemption privileges of electric cooperatives under PD 269. In May 1990, respondent filed a complaint for collection of delinquent real property taxes against petitioner from 1984 to 1989. Petitioner contends however that the restoration of tax and duty privileges of electric cooperatives retroacts to the date of withdrawal of the said exemptions. RTC ruled in favor of petitioner, whose decision was overturned by the Court of Appeals. Hence this appeal.

Issue:1. Whether or not the restoration of the petitioner’s tax and duty exemption retroacts to the date of effectivity of PD 1955.

2. Whether or not assessment of petitioner’s real properties are proper.

Held: 1. No, the restoration of such exemption does not retroact to the date of effectivity of PD 1955. A cursory reading of the resolution, quoted above, bares no indicia of retroactivity of its application. FIRB Resolution No. 24-87 is crystal clear in stating that the tax and duty exemption privileges of electric cooperatives granted under the terms and conditions of Presidential Decree No. 269 . . . are restored effective July 1, 1987. There is no other way to construe it. The language of the law is plain and unambiguous. When the language of the law is clear and unequivocal, the law must be taken to mean exactly what it says.

Held: 2. Yes, assessment of the petitioner’s real properties are proper. Petitioner does not deny having duly received the two Notices of Assessment dated October 8, 1985 on October 10, 1985. It also admits that it did not file a protest before the Board of Assessment Appeals to question the assessment. Petitioner failed to exhaust its administrative remedies, and the consequence for such failure is clear the tax assessment, as computed and issued by the Office of the Provincial Assessor, became final. Petitioner is deemed to have admitted the correctness of the assessment of its properties. In addition, Section 64 of PD No. 464 requires that the taxpayer must first pay under protest the tax assessed against him before he could seek recourse from the courts to assail its validity.

Surigao Electric Co., Inc vs. CTA

Facts: Surigao Electric Co., a grantee of legislative franchise, received a warrant of distraint and levy from CIR for payment of deficiency franchise tax. Petitioner contested this assessment, saying it did not have a franchise in Mainit, Surigao. Thereafter, petitioner took up the matter with the General Auditing Office, followed by an exchange of correspondence between petitioner and the CIR and Auditor General. The controversy ended in a revised assessment dated April 29, 1963 (received by petitioner on May 8, 1963) representing deficiency franchise tax and surcharges from April 1, 1956 to June 30, 1959. Petitioner requested recomputation, which was denied by CIR in a letter dated June 28, 1963 (received by petitioner on July 16, 1963). Petitioner appealed in the CTA, which dismissed the appeal for being filed beyond the 30-day period on October 1, 1965.

Issue: Whether or not the petitioner's appeal to the Court of Tax Appeals should be based letter dated April 29, 1963 of the Commissioner.

Held: Yes, the appeal should be based on the letter dated April 29, 1963 of the CIR. A close reading of the numerous letters exchanged between the petitioner and the Commissioner clearly discloses that the letter of demand issued by the Commissioner on April 29, 1963 and received by the petitioner on May 8, 1963 constitutes the definite determination of the petitioner's deficiency franchise tax liability or the decision on the disputed assessment and, therefore, the decision appealable to the tax court. Moreover, the letter of demand dated April 29, 1963 unquestionably constitutes the final action taken by the Commissioner on the petitioner's several requests for reconsideration and recomputation. In this letter, the Commissioner not only in effect demanded that the petitioner pay the amount of P11,533.53 but also gave warning that in the event it failed to pay, the said Commissioner would be constrained to enforce the collection thereof by means of the remedies provided by law. The tenor of the letter, specifically, the statement regarding the resort to legal remedies, unmistakably indicates the final nature of the determination made by the Commissioner of the petitioner's deficiency franchise tax liability. The revised assessment embodied in the Commissioner's letter dated April 29, 1963 being, in legal contemplation, the final ruling reviewable by the tax court, the thirty-day appeal period should be counted from May 8, 1963 (the day the petitioner received a copy of the said letter). From May 8, 1963 to June 7, 1963 (the day the petitioner, by

registered mail, sent to the Commissioner its letter of June 6, 1963 requesting for further recomputation of the amount demanded from it) saw the lapse of thirty days. The June 6, 1963 request for further recomputation, partaking of a motion for reconsideration, tolled the running of the thirty-day period from June 7, 1963 (the day the petitioner sent its letter by registered mail) to July 16, 1963 (the day the petitioner received the letter of the Commissioner dated June 28, 1963 turning down its request). The prescriptive period commenced to run again on July 16, 1963. The petitioner filed its petition for review with the tax court on August 1, 1963 — after the lapse of an additional sixteen days. The petition for review having been filed beyond the thirty-day period, we rule that the Court of Tax Appeals correctly dismissed the same.

Silkair PTE vs. CIR

Facts: Petitioner Silkair, a foreign corporation licensed by SEC to do business in the Philippines as on-line international carrier, bought aviation fuel from Petron from July 1, 1998 to December 31, 1998, excise tax of which was paid by Silkair. On October 20, 1999, petitioner claimed refund for the excise taxes it paid, as based on Sec. 135 of the 1997 Tax Code, which provides that petroleum products sold to international carriers shall be exempt from payment of excise taxes. It also invoked Article 42 of the Air Transport Agreement of Philippines and Singapore, granting allegedly excise tax-exemption from such products. Due to CIR’s inaction, Silkair filed a petition for review with the CTA which dismissed such petition. Upon elevation to CA, the said court dismissed the case again on the ground that petitioner is not the proper party to seek refund, prompting petitioner to filed a petition with SC.

Issue: Whether or not petitioner is the proper party to ask for refund.

Held: No, Silkair is not the proper party to seek refund. In Contex Corporation v. Commissioner of Internal Revenue, we held that while it is true that petitioner corporation should not have been liable for the VAT inadvertently passed on to it by its supplier since their transaction is a zero-rated sale on the part of the supplier, the petitioner is not the proper party to claim such VAT refund. Rather, it is the petitioner’s suppliers who are the proper parties to claim the tax credit and accordingly refund the petitioner of the VAT erroneously passed on to the latter. The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides that “[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production.” Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore. Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser.

Republic of the Philippines vs. Enriquez

Facts: Commissioner of the Internal Revenue served a Warrant of Distraint of Personal Property on the Maritime Company of the Philippines to satisfy various deficiency taxes of said company. The First Coast Guard District acknowledged receipt from the Commissioner of several barges, vehicles and 2 bodegas of spare parts belonging to taxpayer Maritime. Ramon Enriquez (Deputy Sheriff of Manila) levied on 2 barges of Maritime pursuant to a writ of execution issued in a Civil Case involving Maritime where the aforesaid company lost. Enriquez then scheduled a public auction sale including the aforementioned properties.

The Commissioner wrote the sheriff informing him that the barges were no longer owned by Maritime as the said barges had been distrained and seized by the BIR in satisfaction of the deficiency taxes. This letter was filed on June 19, 1986 at the office of the sheriff.

On June 23, 1986, the sheriff sold the 2 barges and issued certificates of sale to the highest bidder which was the levying creditor. On June 24, 1986, Commissioner filed a petition for prohibition praying that the respondent be ordered to desist and refrain from further proceedings in connection with the execution and that respondent’s notice of levy be null and void. The CA dismissed the petition holding that the sheriff did not commit grave abuse of discretion.

ISSUE: Whether or not the BIR Warrant of Distraint prevails over the writ of execution issued by an RTC.

HELD: BIR Warrant of Distraint prevails. It is well settled that the claim of the government prevails on a tax lien superior to the claim of a private litigant predicated on a judgment. The tax lien attached not only from the service of warrant of distraint but from the time the tax became due and payable.

In the case, the Distraint was made by the Commissioner long before the writ of execution was issued by the RTC. There is no question that at the time of the writ of execution, the 2 barges were no longer properties of Maritime. The power of the court in execution of judgments extends only to properties unquestionable belonging to the judgment debtor. Execution sale 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. There is no further need for petitioner to establish his rights over the 2 barges as evidence clearly proves that the barges are under distraint and in fact seized by the Commisssioner.

Roxas y Cia vs. CTA

Facts: Pedro Roxas and Carmen Ayala transmitted to their grandchildren agricultural lands in Nasugbu, a residential house in Malate, and shares of stocks in different corporations. To manage such properties, the heirs forms a partnership called Rozas y Compania. The agricultural lands, later on, was subjected to land redistribution to the farmers, as a consequence of which the land was bought by the government. House rentals were also received by the petitioner thru the rental payments paid by Jose Roxas. On June 17, 1958, CIR assessed petitioner, among other, income tax for sale of the Nasugbu farms, which the brothers protested but was denied. Thus, they instituted an appeal to the CTA on January 9, 1961.

Issue: Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable?

Held: Yes, it is 100% taxable. The Commissioner of Internal Revenue contends that Roxas y Cia could be considered a real estate dealer because it engaged in the business of selling real estate. The business activity alluded to was the act of subdividing the Nasugbu farm lands and selling them to the farmers-occupants on installment.

The proposition of the Commissioner of Internal Revenue cannot be favorably accepted by us in this isolated transaction with its peculiar circumstances in spite of the fact that there were hundreds of vendees. Although they paid for their respective holdings in installment for a period of ten years, it would nevertheless not make the vendor Roxas y Cia. a real estate dealer during the ten-year amortization period.

In fine, Roxas y Cia cannot be considered a real estate dealer for the sale in question. Hence, pursuant to Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from the sale thereof is capital gain, taxable only to the extent of 50%.

CIR vs. Reyes

Facts:

Decedent Tancinco left a 1,292 square-meter residential lot and an old house thereon. The heirs of the decedent received a final estate tax assessment notice and a demand letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge and interest. The CIR issued a preliminary collection letter to Reyes, followed by a Final Notice Before Seizure. Subsequently, a Warrant of Distraint and/or Levy was served upon the estate. Reyes initially protested the notice of levy but then the heirs proposed a compromise settlement of P1,000,000.00. The CIR rejected Reyes’s offer, pointing out that since the estate tax is a charge on the estate and not on the heirs, the latter’s financial incapacity is immaterial as, in fact, the gross value of the estate amounting to P32,420,360.00 is more than sufficient to settle the tax liability. As the estate failed to pay its tax liability within the deadline, BIR notified Reyes that the subject property would be sold at public auction on August 8, 2000. Reyes filed a protest with the BIR Appellate Division. Assailing the scheduled auction sale, she asserted that the assessment, letter of demand, and the whole tax proceedings against the estate are void ab initio. She offered to file the corresponding estate tax return and pay the correct amount of tax without surcharge or interest.

Without acting on Reyes’ protest and offer, CIR proceeded with auction sale. Consequently, Reyes filed a Petition for Review with the CTA.

 On July 17, 2000, Reyes filed a Motion for the Issuance of a Writ of Preliminary Injunction or Status Quo Order, which was granted by the CTA. CTA ordered the CIR to desist and refrain from proceeding with the auction sale of the subject property. 

 During the pendency of the Petition for Review with the CTA, however, the BIR issued Revenue Regulation (or RR) No. 6-2000 and Revenue Memorandum Order (or RMO) No. 42-2000 offering certain taxpayers with delinquent accounts and disputed assessments an opportunity to compromise their tax liability.

 On November 25, 2000, Reyes filed an application with the BIR for the compromise settlement of the assessment against the estate Reyes filed an Ex-Parte Motion for Postponement of the hearing before the CTA scheduled on January 9, 2001, citing her pending application for

compromise with the BIR. The motion was granted and the hearing was reset to February 6, 2001.

 On January 29, 2001,Reyes moved for postponement of the hearing set on February 6, 2001, this time on the ground that she had already paid the compromise amount of P1,062,778.20 but was still awaiting approval of the National Evaluation Board (or NEB). The CTA granted the motion and reset the hearing to February 27, 2001.

 On February 19, 2001, Reyes filed a Motion to Declare Application for the Settlement of Disputed Assessment as a Perfected Compromise. In said motion, she alleged that the CIR had not yet signed the compromise, because of procedural red tape requiring the initials of four Deputy Commissioners on relevant documents before the compromise is signed by the CIR. Reyes posited that the absence of the requisite initials and signatures on said documents does not vitiate the perfected compromise.

 CIR countered that, without the approval of the NEB, Reyes’ application for compromise with the BIR cannot be considered a perfected or consummated compromise.

 On March 9, 2001, the CTA denied Reyes’ motion, prompting her to file a Motion for Reconsideration Ad Cautelam. In a Resolution dated April 10, 2001, the CTA denied the Motion for Reconsideration with the suggestion that, Reyes should file a Supplemental Petition for Review, setting forth the new issue of whether there was already a perfected compromise.

 On May 2, 2001, Reye] filed a Supplemental Petition for Review with the CTA, followed on June 4, 2001 by its Amplificatory Arguments (for the Supplemental Petition for Review), raising the following issues: 

1. Whether or not an offer to compromise by the CIR, with the acquiescence by the Secretary of Finance, of a tax liability pending in court, that was accepted and paid by the taxpayer, is a perfected and consummated compromise. 2. Whether this compromise is covered by the provisions of Section 204 of the Tax Code (CTRP) that requires approval by the BIR NEB. 

Answering the Supplemental Petition, CIR averred that an application for compromise of a tax liability under RR No. 6-2000 and RMO No. 42-2000 requires the evaluation and approval of either the NEB or the Regional Evaluation Board (or REB), as the case may be.

 

On June 14, 2001, Reyes filed a Motion for Judgment on the Pleadings; the motion was granted on July 11, 2001. After submission of memoranda, the case was submitted for decision.

 On June 19, 2002, the CTA rendered a decision, which denied its petition. In arriving at its decision, the CTA ratiocinated that there can only be a perfected and consummated compromise of the estates tax liability, if the NEB has approved Reyes’ application for compromise.

Anent the validity of the assessment notice and letter of demand against the estate, the CTA stated that at the time the questioned assessment notice and letter of demand were issued, the heirs knew very well the law and the facts on which the same were based. It also observed that the petition was not filed within the 30-day reglementary period provided under Sec. 11 of Rep. Act No. 1125 and Sec. 228 of the Tax Code.

Issue: 1. Whether petitioner’s assessment against the estate is valid. 2. Whether or not the compromise is valid.

Held: 1. No, the assessment against the estate is not valid. In the present case, Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former Section 229 prior to its amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

The second paragraph of Section 228 of the Tax Code is clear and mandatory. It provides as follows:

 Sec. 228. Protesting of Assessment. -- x x x x x x x x x The taxpayers shall be informed in writing of the law and the facts on which the assessment is made: otherwise, the assessment shall be void.

To be simply informed in writing of the investigation being conducted and of the recommendation for the assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of correctly assessing a taxpayer. The act

cannot be taken to mean that Reyes already knew the law and the facts on which the assessment was based. It does not at all conform to the compulsory requirement under Section 228. Moreover, the Letter of Authority received by respondent on March 14, 1997 was for the sheer purpose of investigation and was not even the requisite notice under the law.

Held: 2. The compromise is invalid. It would be premature for this Court to declare that the compromise on the estate tax liability has been perfected and consummated, considering the earlier determination that the assessment against the estate was void. Nothing has been settled or finalized. Under Section 204(A) of the Tax Code, where the basic tax involved exceeds one million pesos or the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the NEB composed of the petitioner and four deputy commissioners. Finally, as correctly held by the appellate court, this provision applies to all compromises, whether government-initiated or not. 

RCBC vs. CIR

Facts: On July 5, 2001, petitioner Rizal Commercial Banking Corporation received a Formal Letter of Demand dated May 25, 2001 from the respondent Commissioner of Internal Revenue for its tax liabilities which it duly protested on July 20,2001. As the protest was not acted upon by the respondent, petitioner filed on April 30, 2002 a petition for review with the CTA for the cancellation of the assessments which was docketed as C.T.A. Case No. 6475.

CTA dismissed the case for being filed beyond the 180-day period. Failing to file a motion for reconsideration, decision became final and executor. Petitioner later on filed a petition for relief from judgment due to failure of its counsel to send the files, arguing that it was denied due process when it was not given the opportunity. CTA dismissed the case and denied the petition of RCBC, hence this petition in the Supreme Court.

Issue: Whether or not it is denied due process after it failed to move for reconsideration due to negligence of its counsel.

Held: No, RCBC was not denied due process. It is basic that as long as a party is given the opportunity to defend his interests in due course, he would have no reason to complain, for it is this opportunity to be heard that makes up the essence of due process. After the CTA Second Division dismissed the petition for relief from judgment in a Resolution dated May 3, 2004, petitioner filed a motion for reconsideration and the court further required both parties to file their respective memorandum. Indeed, petitioner was not denied its day in court considering the opportunities given to argue its claim. Relief cannot be granted on the flimsy excuse that the failure to appeal was due to the neglect of petitioners counsel. Otherwise, all that a losing party would do to salvage his case would be to invoke neglect or mistake of his counsel as a ground for reversing or setting aside the adverse judgment, thereby putting no end to litigation.

CIR vs. Fireman’s Fund Insurance Company

Facts: Respondent, a resident foreign insurance corporation organized under the laws of US, from January, 1952 to 1958, private respondent Fireman's Fund Insurance Co. entered into various insurance contracts 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 issues; 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.

In 1959, respondent company discovered that its monthly statements of business and policy register were lost and reported such to the NBI and the CIR. The CIR through its examiner, after conducting an investigation of said loss, ascertained that respondent 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 Sec. of the Revenue Code by using loose leaf forms as registers of documentary stamps without written authority from the CIR. As a consequence of these findings, petitioner assessed and demanded from petitioner the payment of documentary stamp taxes for the years 1952 to 1958 in the total amount of P 79,806.87 and plus compromise penalties, a total of P 81,406.87.

This assessment was contested by respondent in a letter dated January 14, 1963, which protest was denied by CIR in a decision dated March 17, 1965. The case was appealed to CTA which reversed the decision of CIR, which ruled that The affixture of documentary stamps to papers other than those authorized by law is not tantamount 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. Hence this petition before the SC.

Issue: Whether or not respondent company may be required to pay again the documentary stamps it has actually purchased, affixed and cancelled.

Held: No, the respondent company is no longer required to pay again. As correctly pointed out by respondent Court of Tax Appeals, Sections 221, 237, and 239 of NIRC,

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.

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.

Mambulao Lumber Co. vs. Republic

Facts: In an examination conducted by BIR in 1957 in the book of accounts of herein petitioner to determine its forest charges and percentage tax liabilities due on 1949, BIR assessed deficiency sales tax, forest charges and surcharges through a letter dated August 29, 1958. Mambulao requested for reinvestigation on October 18, 1958. CIR, however, demanded that within 20 days from receipt of the letter on July 8, 1959, Mambulao must submit the result of its verification of payments, otherwise, abandonment of request for reinvestigation shall be construed. For failure of Mambulao to comply, CIR instituted a complaint for collection in th CFI of Manila, which decided in CIR’s favor.CA affirmed such decision. Hence the instant appeal of petitioner to the SC, asserting that the right to collect of CIR from Mambulao for forest charges for the year 1949 has already prescribed.

Issue: Whether or not the right of plaintiff (respondent herein) to file a judicial action for the collection of the amount of P15,443.55 as forest charges and surcharges due from the petitioner Mambulao Lumber Company for the year 1949 has already prescribed.

Held: No, the action has not yet prescribed. The letter of demand of the Acting Commissioner of Internal Revenue dated August 29, 1958 was the basis of respondent's complaint filed in this case and not the demand letter of the Bureau of Forestry dated January 15, 1949. This must be so because forest charges are internal revenue taxes 6 and the sole power and duty to collect the same is lodged with the Bureau of Internal Revenue 7 and not with the Bureau of Forestry. The computation and/or assessment of forest charges made by the Bureau of Forestry may or may not be adopted by the Commissioner of Internal Revenue and such computation made by the Bureau of Forestry is not appealable to the Court of Tax Appeals. 8Therefore, for the purpose of computing the five-year period within which to file a complaint for collection, the demand or even the assessment made by the Bureau of Forestry is immaterial.

In the case at bar, the commencement of the five-year period should be counted from August 29, 1958, the date of the letter of demand of the Acting Commissioner of Internal Revenue 9 to petitioner Mambulao Lumber Company. It is this demand or assessment that is appealable to the Court of Tax Appeals. The complaint for

collection was filed in the Court of First Instance of Manila on August 25, 1961, very much within the five-year period prescribed by Section 332 (c) of the Tax Code. Consequently, the right of the Commissioner of Internal Revenue to collect the forest charges and surcharges in the amount of P15,443.55 has not prescribed.

Furthermore, it is not disputed that on October 18, 1958, petitioner requested for a reinvestigation of its tax liability. In reply thereto, respondent in a letter dated July 8, 1959, gave petitioner a period of twenty (20) days from receipt thereof to submit the results of its verification of payments and failure to comply therewith would be construed as abandonment of the request for reinvestigation. Petitioner failed to comply with this requirement. Neither did it appeal to the Court of Tax Appeals within thirty (30) days from receipt of the letter dated July 8, 1959, as prescribed under Section 11 of Republic Act No. 1125, thus making the assessment final and executory.