CTA Case No. 3874 (Decision)

REPUBLI C OF TilE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FILIPINAS LIFE ASSURANCE C.T .A . CASE NO. 3874 COMPANY, Pet oner, - ve �u s - COMMISSIONER OF INTERNAL REVF:NUF:, RP.l'tonden X- - - - - - - - - - - X F. c J s r o N fn in t h e ~mount of P376,5 6.22 allegedly epres nt in g erroneously paid prem iu m t.ax. Petitioner, a corporation duly organized and existing und er the laws of t h e Philippines, was assessed in 1982 by the Bureau of Internal Revenue for premium tax deficiency for 1976 as follows: Net Premium Earned P133,360,935 .71 Premium Tax Due Thereof: p 5,334,437.42 4% of P133,360,935.71 5,026,881.00 less: amount paid per Return p 307,556.42 Balance Payable 76,889.10 25% Surcharge 300.00 Compromise Penalty P- 384,745.52 Balance Collectible which was paid per RTR# 1043476 and CR#B0021515 dated Dec. 16 '82 and paid said amount on De� mb r 16, 1982 ( see Exhs. B and 81) Subsequently, petitioner discovered that the exAmin ers includ e d premium deposits and deferred

DECISION - C.T.A. CASE NO. 3874 - 2- premiums in the computation of the tax deficiency. Said inclusion was, however, acco rding to the petitioner , without legal basis since pre mium deposits a nd deferred premiums are exclu ded by law and jurisp ud nee from th e c verage of the premium ax. hene , add d the p titio. er, the true de i i e ncy "houl mpu ~ ~ ~s allows: ,I E'rem � unt:; Co cted ourin9 h~ Y~a. o n Dire~ Busin ess (F r~ Ye r} P 42,992,483.79 Premiums Co le �t. d Dtt. ing the Y0.ar on DJ n�r:t Businf"lsA ( R~nP.wal ) ___?2 836 ,527.40 Amou nt S ubj ect to P e m urn T ax 125,829 , 011.19 Rate of Tax X 4 '}; Bi"'lance P <=~ y a bl ~ p 5 ,033 ,160 .44 Lr.~:s : 1\monnt. paid p er return 5 0 26 ,881.00 Bal<=~n ce Payable p 6,279.44 25'(. Surcharge 1, 569 .86 Compromise Penal ty ---=300.00 Correct Premium 'T'ax Defi('�ienc y i n 1976==P====8~1 =14=9==.==30 With t h e alleged erroneous inclusion of premium deposits and d eferred premium in the above deficiency assessment, the pa ym e nt acc ording to bhe p~tit.:i.o ner was erroneous in the a moun t of P 3 7(, , 59G. 22. II f.i lH. ~ , a c 1 a :1. 11 (. o r t:lt ~ c e d i t o f t he s aid amount was i n stitu ted by the petiti o n e r on April 4, 1983 (Exh D). Said claim for tax credit rem a ined unacted until petitioner filed this petition for review on De cember 17, 1984 in order to toll the running of the pr escrip ti~e period. Asid e tra m the ma i n issue of whether or not petitioner is entitled to t he claim of refu nd 1 n �) ~

DECISION - C.T.A. CASE NO. 3874 - 3- sought, respondent corollarily raised the issue of prescription. We find both issues for the petitioner. On th issue o prescrip on, the petition for revi w HI 'c h w s on D. mber 17, 1984 was well within th p es tive p 'od o two years since December 16, 198 2 , wh' c h was exac l y two y ears after paym nt, f 11 on ~ � und y. Th rul "'f ~.he last day is Sunday o 1 g hol y " e, wh e n he time refers to a peri d . ibe d or allow ~ by the Rule s of Cou rt , by ~ n o d ~ f the c our t, or by other <1 p p 1 i ("a b l P. r; t n t u t e , .i t i s 1n <1P. � Fl t o d t h ,.. t t h e 1 a s t day shou ld rea lly b e t h e next dRy, rovided that the s<1 id dRy i r: not o l so "'S 11ncli'ly or l e gr~l h o l iday. - (ple ase see Sec. 31, RAC, re Pretermission of H o lidr~y) li enee, pur sua nt to existing l<'lw and jurisprudence, the last day of filing the subject petition for review was on December 17, 1984, the day it was precisely filed. As to the main issue, the applica ble provision of law ia qto � � , thLBly: Sec. 263. Tax on Insu rance Premiu m - There shall b e co ll ected fro m every person , company or corporation (except purely cooperative companies or assoc~ations ) doing Insurance bu s in ess of any sort in the Philippines a tax of four per cen tum of the total premiums �~}--~cted , Hhether such premiums are paid in mo ney, note s , c redits or a ny substitute for money ... (und ersco rin g s uppli e d; 1984 Tax Code)

DECISION - C.T.A. CASE NO. 3874 - 4- Therefore, "the 4 % premium tax payable by an insurance company is computed and assessed on the net premiums received on poli cies issued, that is, gross premiu ms received less ret urned premiums on account of rejection of risk or for other reason a nd reinsurance premiums ceded, whether such premiums are paid i n money, note s , credits or any substitute for money." (Un derscoring supp lied; ARANAS, Annot atio ns and Jurisp udence on the National Internal Revenue Code of 1977 (A s Amended) Vol. II, 1978 ed. ) "Pre mium Deposits" are sum of money� deposited by poli cyh o lders to guarantee future premium payments (K e lly v. Am er ic an Mine Owners' Casu a lty Corporation 170 S.E. 580, 582, 161 Va 206 ). However, until such time of payment has arrived, they cannot be considered, for tax purposes, as h avi ng been "received" or already "collected" by the insurance company. Thus, premium deposits and deferred premiums should not be subjected to premium tax. It was in fact, no le ss than the respondent Commissioner of Internal Revenue himself who made such ruling in a letter to herein petitioner on November 26, 1981, that "prn m~� m deposits and deferred premiums a �ot subject to the premium tax." (p. 1 BIR Records ). "Accordingly", he concluded, "the asses sme nts pertaining to the

DECISION - C.T.A. CASE NO. 3874 - 5- payment of s id prem urn ax is hereby withdrawn and cancelled." (ibid.) Pursua nt to the above ruling of the re. ondent, h x min r who re-in v estigate d and assessed pet't' o n e r in the amount of P384,745.52 has then "r e omm e nd e I that th e req ue st for a tax credit be g n ed in the reduced amount of P252, 697 . 38 "(Exh. G.2) co mput d as follows : Fi s P . m tun ~ n :r. tion s, Rn t Bus'ne s~a p 45,470,460.29 1m cmd Consi on � , 8 82,836,527.40 'fota Pl28,306,987.69 X 4% P e mium T x Due p 5,132,279.51 5,026 ,881. 00 Less: Prem�um Tax Pa d pe Return p 105,398.51 Balance Pay ble 26,349.63 25'}. Surcha rge 300.00 Compromise Penalty p 132,048.14 CORRECT PREMIUH TAX DEFICIENCY The Correct Amount to be issued as tax credit should be: Amount Erroneously Paid P 384,745.52 le ss : Amount that s hould have been paid~--~1~3~2,~0~4~8~.1~4. N10UNT TO BE ISSUED AS TAX CREDIT =P====:::2:::5:=2::,=6=9=7=.=3=8 (Exh. G) of which "petitioner has already signifi ed its willingn ess to acc . pt th re u ed ~mou nt of tax credit as against the original claim of P376,596.22" (see Urgent Motion for Reconsideration p. 86 CTA Records). In fact, the r~ason why this case was dragg ed for so long, it was because herein petitioner was already waiting for the issuance of

--- DECISION - C.T.A. CASE NO . 387 4 - 6- the t ax credit memo as early as 1989 yet but until now has not been i ss u ed in its favor . We c annot let he petitioner wait any fur th e r fo r a ight it truly d erves. ACCO RD NGLY, n a 1 th e foregoing, petitioner's claim o efund i s hereb y GRANTED ordering t h e respondent to s u a dit o r r ef und in fa v o r of petitione n he reduced a rno n of P252,697 . 38 b ased on the r c mm n a ion of t h e examiners whic h is pres umed . o b e or ect and whi ch petitioner also willingly ace pted . SO ORDERED . Quezon Ci y, Met r o Hani a , Oc tober 15 , 1993 . . ~ \Q . ~.. ERNESTO D. ACOS TA GRUBA ( 1; .. r Judge P 2 J // !~I ' RAMON 0. DE ~ ~/\.A,- Associate Judb' 103 2

DECISION - C.T.A. CASE NO. 3874 - 7- CERT I F I CATI 0 N I hereby certify that the decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Art i c le VIII of the Constitution. ~ bl.~ G.cA. ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals _I 10 33