CTA Case No. 4208 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEA LS QUEZON CITY AMERICAN INTERNATIONAL UNDER - WRITERS (PHI LS. ), INC. , Petitioner, - versus - C.T.A. CASE NO. 4208 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - -X PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, Petitioner, - versu s- C.T .A. CASE NO. 4209 COMMISSIONER OF INTERNAL REVENUE, Respondent . X - - - '�- - - - - - - - - - - X PHILIPPINE AMERICAN ACCID ENT INSURANCE COMPANY, Petitioner, -ve rsu s- C.T.A. CASE NO. 4210 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - --X PHIL IP PINE HOME ASSURANCE CORPORATION, Petitione r, -versus- C.T.A. CASE NO. 4211 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - - X

�� r. DECIS ION - CTA CASES NOS . 4208, 4209, 4210 AND 4211 - 2- DE cI sI 0 N This is a conso lidated claim for refund by the above-mentioned petitioners involving s imil ar facts and same legal issue. The petitioners are dome stic corporations, organized and existing under and by virtue of the Philippine 1 a~Ts, engaged in the business of insurance. During the period of January to June 1986 , the petitioners paid the total amount of Pl0,456,067_.83, broken down as follows: (see Annex A) 1. AIUP (CTA 4208) P4,856,589.83 2. PhilAmGen (CTA 4209) 3,816,973.00 3. Ph ilAm Acc ident (CTA 4210) 68,046.00 4. PhilH ome (CTA 4211) ) I ?. ~ -~- /..4:.?..~ .:...9.9. T0 t a 1 P10,45 6,067 .8 3 representing their respective al legedly erroneous payments � of documentary stamp taxes on certain insurance policies issued by them and their brokers or agents which, according to them 1 never became insurance policies 1 legally speaking 1 because the .) 34Z,

DECISION - CTA CASES NOS. 4208, 4209, 4210 AND 4211 - 3 -� .) required premiums were never paid by the insurants . Hence, their claims for refund. On Augu st 4, 1987, petition e rs, through their common counsel, filed their respective claim with the respondent's Bureau (se e Exhibit A). Without the respondent's action thereon, petitioners filed their respective petitions for reviet-1 on December 29, 1987 in order to toll the running o f the prescriptive period. Whether or not documentary stamp taxes aff ixed on unpaid insurance policies are refundable is the principal issue in these cases. The applicable provisions under the National I Internal Revenue Code relative to documenta r y sta mp taxes on insurance poli6ies, provide: "Sec . 183 . ~ t. .?..mp T ax on L i f e J:f.:\~ .':l.E?..~ce Poli.C:. ~.'?. ~- - On all policies of insurance or other in s truments by whatever name the same may be called, whereby any insurance shall be mad e or renewed upon any lif e or lives, there shall be collected a documentary stamp tax of fifty centavos on each two hundred pesos or fractional part thereof, of the amount issued by any policy." and "Sec. 184. 1?...t:?.:'l:IP. ~ax _c:> .n .Poli cies .9. .~............:J: .l}. ~.':l.E.?..nS::t: . ......Y..P..9.~...........R.E.9J?.e.Ft..Y. - On a 11 policies of insurance or other

.- DECIS ION - CTA CASES NO S . 4208, 420 9 , 4210 AND 4211 - 4- instruments by whatev er name the same may be called, by which insuran ce s h all be made or renewed upon property of an y description , including rents 'or profit s , aga inst peri l by sea or OQ inl an d waters, .) or by fi r e or ligh t ning, there s h a ll be co llect ed a documentary sta mp tax of thirty cen tavos on each four pesos, or fractional pa rt thereof, of the amount of the prem ium charged: Provided , However, That n o documentary stamp tax shall be co llected o n reinsuran ce co ntr ac ts or on a ny in s �trument by wh ic h cession or ac cepta n ce of in sura nce risks under any re insuran ce agreement is effected or recorded." A document ary stamp tax is "in the nature of an excise tax. It is n o t impos ed upon the busi ne ss tr a n sac ted but is an exc i se up on the privi J e ge, opportunity� or fa ci lity o ffe red at exchanges f o r the transaction of the busine ss . It is a n excise upon the facilit ies used i n th e transaction of th e bu s in e s s .:?...~ .1?..?. .1::" ?..:t:.~.......... ~.11:9: ... ?.P ?,r_t from the business it self" (Aranas, Updated Nat ional Internal Revenue Cod e , 1988 Edition, p. 772; Und erscori ng supplied1. \'lhile it is true that a docum e n tary stamp tax is levied on the document and not on the property which it described, (Comm. v. Heald Lumber Co., 10 SCRA 372) the documentary stamp tax is not intended to be a tax on the document alone, rather, the law taxes the document because of the

---------- DECISION - CTA CASES NOS. 4208, 4209, 4210 AND 4211 - 5- tran sac tion. It is due and payRble ( Sec. 173, NIRC) at the time the tran sac tion is had or Rccomplished, (i .e. at the tim e of the issuance of the document). In the case of insurance, as in this case , the d ocumen tary stamp tax must b e affixed to the insurance policy, which is a contract in itself, betwee n the insurer and the insur e d whereby for an agr eed premium, the former undert a ke s to co mpensate the latter f or loss o n a specific subject by specific perils (Ohio Farmers Insurance Co., v. Cochran, 135 NE, 537, 539 \'lords a nd Phrases Permanent Edition, Vol. 21-A), o n the dat e it is issu e d even if nO. J?.. r.~m~~lm has been P".\~ .9. This is so b eca use th e stam p tax accrues the moment .......s....u......c.....h.... policy is is sue d (Ruling, BIR - No . 433). The pCiym e nt or n o n - payment of the pr emi um s by the in s u ra nts is immaterial si n ce do c umentary sta~p tax es are in the nature of an "excise upon the facilities used in the transaction of the business l?e. P. .".\1:"~ .!:~............~.t:l:.9....... dis! .~ .I.~.~.! from the business itself" (Underscoring supplied; Aranas, ibid.) Such being the case, there is wisdom in the BIR Ruling No. 433 by which this Court agree fully that "the

- DECISION - CTA CASES NOS . 4208, 4209, 4210 AND 4211 - 6- " s u bse quent cancellation of insHr a nce po licies i ssued will no t exempt th e issu er from the corresponding documentary stamp t ax ." And thus, "no refund can be allowed of the documentary stamp tax paid on insurance poli c ie s which for some reas on or another have been cancel l e d" (i bid ) or for tha t matt er, the premiums were unpaid. WHEREFORE, predicated on the a bove rea so ns, We her ~ by DEN Y the claims for refund by the pet it] on ers and their corresponding petitions for review are DISMISSED for lack of merit. SO ORDERED. / Quezon � City, Metro Manila, 26, 1 993. ~ 'l~~~ Rl\MON 0 . DE VE As soc iate cTud e WE CONC UR: Q~Q .. ~ ERN ESTO D. ACOSTA - ~U ing � MANUEL GRUBA .)

DECISION - CTA CASES NOS . 4208, 4209, 4210 AND 4211 - 7- C E RT I F I C AT I 0 N I hereby certify that this decision was reached after due consultation among the members of the Co urt of Tax Appeals in accordance with Secti o n 13 , Article VIII of the Constitution . .) ~~Q,.~ ERNESTO D. ACOSTA Pre s iding Judge Court of Tax Appeals