Phil. Guaranty v CIR, 13 SCRA 775

THE PHILIPPINE GUARANTY CO., INC., PETITIONER, VS. THE COMMISSIONER OF INTERNAL REVENUE AND THE COURT OF TAX APPEALS, RESPONDENTS;

G.R. No. L-22074, April 30, 1965; REYES, J.B.L., J

Facts:

The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance contracts with foreign insurance companies not doing business in the Philippines, thereby ceding to the foreign reinsurers a portion of the premiums on insurances it has originally underwritten in the Philippines.  Philippine Guaranty Co., Inc. ceded to the foreign reinsurers the premiums for 1953 and 1954. Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it filed its income tax returns for 1953 and 1951. Furthermore, it did not withhold or pay tax on them. Consequently,  the Commissioner of Internal Revenue assessed Philippine Guaranty Co., Inc. against withholding tax on the ceded reinsurance premiums. Philippine Guaranty Co., Inc. protested the assessment on the ground that the premiums are not subject to tax for the premiums did not constitute income from sources within the Philippines because the foreign reinsurers did not engage in business in the Philippines,and CIR's previous rulings did not require insurance companies to withhold income tax due from foreign companies.

ISSUE: Are insurance companies required to withhold tax on reinsurance premiums ceded to foreign insurance companies?

Ruling:

Yes. The reinsurance contracts however show that the transactions or activities that constituted the undertaking to reinsure Philippine Guaranty Co., Inc. against losses arising from the original insurances in the Philippines were performed in the Philippines. The reinsurance premiums were income created from the undertaking of the foreign reinsurance companies to reinsure Philippine Guaranty Co., Inc. against liability for loss under original insurances. Such undertaking, as explained above, took place in the Philippines. These insurance premiums therefore came from sources within the Philippines and, hence, are subject to corporate income tax.

The power to lax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvements designed for the enjoyment of the citizenry and those which come within the State's territory, and facilities and protection which a government is supposed to provide. Considering that the reinsurance premiums in question were afforded protection by the government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the state.

Hilado v CIR 100 Phil 288

EMILIO Y. HILADO, PETITIONER, VS. THE COLLECTOR OF INTERNAL REVENUE                                      AND THE COURT OF TAX APPEALS, RESPONDENTS;  G.R. No. L-9408,                                             October 31, 1956;Bautista Angelo J

Facts:

On March 31, 1952, petitioner filed his income tax return for 1951 with the treasurer of Bacolod City wherein he claimed, among other things, the amount of P12,837.65 as a deductible item from his gross income pursuant to General Circular No. V-123 issued by the Collector of Internal Revenue. On the basis of said return, an assessment notice demanding the payment of P9,419 was sent to petitioner, who paid the tax in monthly installments, the last payment having been made on January 2, 1953.

Meanwhile, on August 30, 1952, the Secretary of Finance, through the Collector of Internal Revenue, issued General Circular No. V-139 which not only revoked and declared void his general Circular No. V-123 but laid down the rule that losses of property which occurred during the period of World War II from fires, storms, shipwreck or other casualty, or from robbery, theft, or embezzlement are deductible in the year of actual loss or destruction of said property.  The  deduction was disallowed and the CIR demanded from him P3,546 as deficiency income tax for said year. The petition for reconsideration filed by petitioner was denied so he filed a petition for review with the CTA.  The SC affirmed the assessment made by the CIR. Hence, this appeal.

Issue:  1. Whether Hilado can claim compensation during the war; and

           2. Whether the internal revenue laws can been enforced during  the war

Ruling:

1. No.  Assuming that said amount represents a portion of the 75% of his war damage claim which was not paid, the same would not be deductible as a loss in 1951 because, according to petitioner, the last installment he received from the War Damage Commission, together with the notice that no further payment would be made on his claim, was in 1950. In the circumstance, said amount would at most be a proper deduction from his 1950 gross income.  In the second place, said amount cannot be considered as a "business asset" which can be deducted as a loss in contemplation of law because its collection is not enforceable as a matter of right, but is dependent merely upon the generosity and magnanimity of the U. S. government. As of the end of 1945, there was absolutely no law under which petitioner could claim compensation for the destruction of his properties during the battle for the liberation of the Philippines. And under the Philippine Rehabilitation Act of 1946, the payments of claims by the War Damage Commission merely depended upon its discretion to be exercised in the manner it may see lit, but the non-payment of which cannot give rise to any enforceable right.

2.  Yes.  It is well known that our internal revenue laws are not political in nature and as such were continued in force during the period of enemy occupation and in effect were actually enforced by the occupation government. As a matter of fact, income tax returns were filed during that period and income tax payment were effected and considered valid and legal. Such tax laws are deemed to be the laws of the occupied territory and not of the occupying enemy.

CIR v Pineda, 21 SCRA 105

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.

G.R. No. L-22734  September 15, 1967; BENGZON, J.P., J

Facts:

Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Manuel B. Pineda, a lawyer. The estate was divided among  the heirs  and Manuel B. Pineda's share amounted to about P2,500.00. After the estate proceedings were closed, the BIR investigated the income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were not filed. The representative of the Collector of Internal Revenue filed said returns for the estate and issued an assessment. Manuel B. Pineda, who received the assessment, contested the same. He appealed to the Court of Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to him as one of the heirs."  The Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the payment corresponding to his share of the taxes. The Commissioner of Internal Revenue has appealed to the SC and has proposed to hold Manuel B. Pineda liable for the payment of all the taxes found by the Tax Court to be due from the estate instead of only for the amount of taxes corresponding to his share in the estate. Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due the estate only up to the extent of and in proportion to any share he received.

Issue: Can BIR collect the full amount of estate taxes from an heir's inheritance

Ruling:

Yes. The Government can require Atty. Pineda to pay the full amount of the taxes assessed. Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he received from the inheritance. His liability, however, cannot exceed the amount of his share.    As a holder of property belonging to the estate, Pineda is liable for he tax up to the amount of the property in his possession. The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his share in the inheritance, for unpaid income taxes a for which said estate is liable.

          All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received.    Another remedy, is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due, the estate. This second remedy is the very avenue the Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of government and their prompt and certain availability is an imperious need. And as afore-stated in this case the suit seeks to achieve only one objective: payment of the tax. The adjustment of the respective shares due to the heirs from the inheritance, as lessened by the tax, is left to await the suit for contribution by the heir from whom the Government recovered said tax.

        

Sison v Ancheta 130 Scra 654

ANTERO M. SISON, JR., PETITIONER, VS. RUBEN B. ANCHETA;

G.R. No. L-59431, July 25, 1984; FERNANDO, C.J.

Facts:

Section 1 of BP Blg 135 amended the Tax Code and petitioner Antero M. Sison, as taxpayer, alleges that, "he would be unduly discriminated against by the impo­sition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers." He characterizes the above section as arbitrary amounting to class legislation, oppressive and capricious in character.For petitioner, therefore, there is a transgression of both the equal protection and due process clauses of the Constitution as well as of the rule requiring uniformity in taxation.

Issue:

Whether or not Section 1 of BP Blg 135 violates the due process and equal protection clauses of the Constitution, while also violating the rule that taxes must be uniform and equitable

Ruling:

1. No.  Assuming that said amount represents a portion of the 75% of his war damage claim which was not paid, the same would not be deductible as a loss in 1951 because, according to petitioner, the last installment he received from the War Damage Commission, together with the notice that no further payment would be made on his claim, was in 1950. In the circumstance, said amount would at most be a proper deduction from his 1950 gross income.  In the second place, said amount cannot be considered as a "business asset" which can be deducted as a loss in contemplation of law because its collection is not enforceable as a matter of right, but is dependent merely upon the generosity and magnanimity of the U. S. government. As of the end of 1945, there was absolutely no law under which petitioner could claim compensation for the destruction of his properties during the battle for the liberation of the Philippines. And under the Philippine Rehabilitation Act of 1946, the payments of claims by the War Damage Commission merely depended upon its discretion to be exercised in the manner it may see lit, but the non-payment of which cannot give rise to any enforceable right.

2.  Yes.  It is well known that our internal revenue laws are not political in nature and as such were continued in force during the period of enemy occupation and in effect were actually enforced by the occupation government. As a matter of fact, income tax returns were filed during that period and income tax payment were effected and considered valid and legal. Such tax laws are deemed to be the laws of the occupied territory and not of the occupying enemy.