CTA Case No. 4722 (Decision)

\. REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FR. JESUS DIAZ, in his capacit y as executor of the estate of Fr. Sa�uel F. Escano S.J. Pet i t ione~~ , C.T.A ~ CASE N0 .4722 COMMISSIONER OF INTERNAL REVENUE. ;o 111 (93 He S p Otid ~ li 't:. X- - - - - - - - - - - - - - - N D� C t S I 0 N The petitioner h erein seek s for a r efun d of the 25~ surcharge amounting to P218,322.48, inclusive of intet~est, imposed f. o~~ the late payment of a n estate tax return. Petitione~� is the duly appointed executot~ of the estate of Ft'. Samuel Escano who died on Apt'i 1 14, 1'388 leaving pt'opet~t ies with a gt~o ss value of P1,82L~,722.11. The corresponding estate tax return wa s filed with the t'espondent on Ap~�il 30, � 19'30, ~r beyond the nin ty <'30> day . period then required under Sec. 83<b> of the Tax Code wi th the following declat�ations: Estate Tax Due late P608,582.72 25~ sm~charge <fot' fi 1 ing) 152, 1L�5. 68 Intet~est 304,2'31.36 P1,065,01'3. 76 Total Amount Due 1018

DECISION - C.T.A. CASE NO. 4722 - 2- Th e respondent, however, imposed anot h er 25% s ur chat~ge, in addition to the penalty for the la t e filing of the t~ et�.w n , this time fo r t h e l ate p a yment of the tax under Sec. 248 <a> <3> of t he Tax Co d e. Consequently, the petitionE:n~ , on July 26, 199 1 p ai d under protest the amount of P218,322.48 consti tuting the addit i on.;;tl and the co r t~espon ding inter~est the~~eon and subsequentl y f iled a t~e quest fat~ the refund of t h e said am oun t. To pr event prescription ft~om setting i n , it fi l ed the i nsta nt petition wit h out waiting fot~ the f i n al dec isio n of the r e spo n d ent . Th e crux of t he disagree men t l ies in the inte t~ p reta t io n of Sec . 2 4 8 of th e Tax Co d e, wh ic h p t~ov ides: Sec::. 248. Civil Penalties ~ <a> Thet~e shall be impo se d , in additi on to t he tax req u ired to be paid, penalty eq u iva l ent to twenty five percent <25'}{.) o f the a mo u nt d ue, in the following cases: <1> Fa:i.lt..n~e to file an y t~ett.n~n required under t h e g rov is i on s of t h e Code or reg ul ation s o n the date pres cri bed ; or <2 > Filing a return wi t h an internal revenue officer other than t h os e wi t h whom the ret ur n i s te q uired to be filed; or (3) Fai lur~~ to ~ Qc<\Y the ta x withi n the time prescribed for its pa y me n t; or �' 1 n '1 fi

DECI S ION - C.T.A. CASE NO. 4722 - 3- (4) Failure to pay t h e full amount of tax shown on any return required to b e filed under the provisions of this Code or regulations, m~ thew full amount of tax due for which no return is requi r ed to b e filed on or before the date prescribed for its payme n t (b) In case of willful neglect to file t~etut�n within the pet� i od pt�escribed by this Code ot~ t�egulations , or in case a false or fraudulent return is willfully made the penalty to be im p osed shall be fifty pet~ cent <50'1-> of the t ax a t~ of the deficiency tax, in case any payment has been made on the basis of such return befot�e the discovet~y of t h e falsity or ft'aLid <c> The penalt � es imp o sed he t�eundet~ ,J shall form part of the tax and the entire amount shall be s�.tbject to the interest prescribed in Sec. 249. XXX XXX X X X 11 <Underscoring supplied) It is the petitioner's conte n tion that the 25'1- surchat� ge undet~ the above-q�J oted provision is imposed once, of h ow many of t h e enumet�at ed acts c o mmitted by t h e delinquent t axpayet�. Accot�ding l y, it at~gue d t h a t t h e impositio n and payment of t h e 25,C. sm~charg e as d e c l ared i n its estate tax retur n CExh. D> p rec l u de s the additional imposition of an oth et" 25,C. sm~c h a rge f or its l ate payme n t.

DECISION - C.T.A. CASE NO. 4722 4- On the other~ hand, the r~espondent' s r~eject ion of the p e titioner's claim for ref und is based on its interpretation that Sec. 248 of the Tax Code i mposes a 25i(. penalty or~ stn~ ch;;:n~ge on each an d ever~y act co mmi t t e d by t h e t a>< p a y e t~. Thus, the responde nt concluded that th e petitioner~ is liable to pay an aggregate surcharge of SOK for its delay (1) in the filing of the retur n and <2 > payment of the estate tax due under~ <a> <1 > and <a> <3 > , r~ e s p e c t i v e 1 y, of the said provision. We agree with the petitioner . A sm~ char~ge is in the nature of a su,.~tax, an additiona l tax that a tax pa yer has to pay . It is a well-established principl e in our~ jt.wisdiction that if the intent or meaning of t he tax statute is not cle ar' , or is doubtful as to whether a taxpayer is covered by th e tax ob ligation, the �tax law s hall be con st r~�.1 ed against the becat.lse laws impose specia l burd e ns . CLu 2 on St vedo ring vs. Trinid ad 43 P hil 803) In this connection, th e Supreme Court has adopted the following related rules: 102 2

DECISION - C.T.A. CASE NO. 4722 - 5- II 'A statute will not be construed as imposing a tax unless it does so cl ear�l y, expr�e s sly and ttnambi guo us~�' (82 CJS '356) <Italics Supplied) XXX XXX XXX �It is an ancient pt�inciple that a tax can not be imposed without clear� and expr�ess wor�ds fot� that pm�pose � . Accot�dingly, the genet�al t�ule of requit�ing adher�ence to the letter� in constr�uing statutes applies 1-vith peculiar� str�ictness t o tax 1 a ws and the pr� o vi s i on s o f' a taxi n g act are not to be extended by implication.' <30 Am. Jm�. 153; also McQuillin on Municipal Cot�p. Vol. 16, p. 257; italics om�s) 11 <Mat� induque Iron Mine s Agents, Inc. vs. Municipal Council of the Municipality of Hin abangan, Samat�, 11 SCRA L�16) Nowhet�e in Sec. 248 (a) of the Tax Code can we clearly infet� that the 25~ stwtax or sut�chat�ge is imposable on each of the enumet�ated acts thet�ein. In the a bsence of an express provisio n to that effect, We cottld not give the said law an intet�pt�etation which will impose a heavier burden on the taxpayers. It must be emphasized that the legislative intent in imposing surcharges is to hasten tax payment s ot� to punish evasion or neglect of duty. The imposition of the surcharge provides more teeth to out� tax laws which helps attai n the pr.n�pose for ..~. 1 02:}

DECISION - C.T.A. CASE NO. 4722 - 6- which taxes are imposed <Aguinaldo I ndustries Corporation vs. CoMMissioner of Internal Revenue, 112 SCRA 136) . In othet' wot'd s, the s ut'chat'ge or penalty i s met' ely incidental to the imposition and collection of taxes. It does not see k to equal t he tax sought to be colle cte d since its purpose i~ not to reven ues. It instead be proportional to the po ssible harmful effects of the act in ham p t:n' i n g the pro pe t' and efficient enforcement or collection of much need ed revenues. It is not unl ikely to have a taxpayer who inadvet'ten t ly filed and paid the corresponding ta x beyond the time pre scr ibed by law to an improper revenue officer. If we are to follow the intet' pt'etation given by the respondent on Sec. 248 of the Tax Code, he will be chat"ged with an aggregate imposable sm~ chat'ge of 75'1- of th e amount due. �his m a ns that a tax pay t" who may have belatedly b�.rb 1..minte 11t ionally . com mitted the said act will be made liable to pay a surcha rge which is 25'1- more than the 50'1- surcharge under Sec. 248( b) impo sed on a taxpayer who fraudulent!~ attempted to deprive the government of much needed funds by 1 02 t

- DECISION - C.T.A. CASE NO. 4722 - 7- wilfully neglecting to file a t~etLn~ n or~ filing a false at~ ft~audulent retut~n undet~ (b) of the same pt~ovision. would consequently be subject to a 501- sm~chat~ge similcn~ly impo s ed on f t~a udulent retl..n~ns inasmuch as the late filing of a return not~mally entails the l ate payment of the t ax due. Such i s but a blatant repudiation of the jus t and equitable nature of our tax laws. Thus, to sustain the t~espondent' s view would give to ineq1..dtous, if not sit uations . Mo reover , We believe that a surcharge of 25~ of the amount due will serve the purpose for which such penalty is imposed. WHEREFORE, judgement is het~eby t~ end et~ed ordering the respondent to refund to th~ petitioner the amount of P218,322.48. SO ORDERED. Q�.tezon C ity, Mett~ o Manila, October~ 11, 1993 GRUBA Associate Judge ,I 10 26

DECISION - C.T.A. CASE NO. 4722 - a- WE CONCUR: CERTXF:J:CAT IDN I hereby certify th at this decision was reached after due consultation among the membe rs of the Cour t of Tax Appeals in accot'dance with Section 13 Articl e VII of the Constitution. ~~-~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 1 ()? fl