CTA Case No. 3874

DECISION -

- 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:

E'rem · unt:; Co cted ourin9 h~ Y~a.

on Dire~ Business (F r~ Ye Premiums Co le ·t. d Dtt. ing the Y0.ar on DJ n•r:t Businf"lsA ( R~nP.wal ) Amount Subject to P em urn Tax Rate of Tax Bi"'lance P <=~ y a bl ~ L r.~:s :

1\monnt. paid per return Bal<=~n ce Payable 25'(. Surcharge Compromise Penalty r} P 42,992,483.79 __ _?2 836 ,527.40 125,829 ,011.19 X 4 '};

p 5 ,033 ,160 .44 5 0 26 ,881.00 p 6,279.44 1, 569 .86 ---=300.00 Correct Premium 'T'ax Defi('·iency 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 according 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 •) ~ ,I

- 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 years 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 ourt, or by other <1 p p 1 i ("a b l P. r; t n t u t e , .i t i s 1 n <1 P. • 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 applicable 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 iness of any sort in the Philippines a tax of four per cen tum of the total premiums £~}--~cted , Hhether such premiums are paid in money, note s , c redits or a ny substitute for money ...

(und ersco rin g s uppli e d; 1984 Tax Code)

- 4 - Therefore, "the 4 % premium tax payable by an insurance company is computed and assessed on the net premiums received on policies issued, that is, gross premiums received less returned 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."

(Underscoring supp lied;

ARANAS, Annotatio 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.

Americ 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 - 5 - payment of s id prem urn ax is hereby withdrawn and cancelled." (ibid.)

Pursu a nt to the above ruling of the re. ondent, h x min r who re-in vestigate d and assessed pet't' o n e r in the amount of P384,745.52 has then "re 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 R n 'fota P .m tun ~ n t Bus'ne s~a 1m cmd Consi 8 P emium T x Due :r. tions, on · , p 45,470,460.29 82,836,527.40 Pl28,306,987.69 X 4% Less: Prem·um Tax Pa d pe Return p 5,132,279.51 5,026 ,881. 00 p 105,398.51 26,349.63 300.00 Balance Pay ble 25'}. Surcha rge Compromise Penalty

CORRECT PREMIUH TAX DEFICIENCY

p 132,048.14 The Correct Amount to be issued as tax credit should be: Amount Erroneously Paid P 384,745.52 less : Amount that s hould have been paid~--~1~3~2~ ,0~4~8~ .1~4 .

N10UNT TO BE ISSUED AS TAX CREDIT

P 252,697.38 =====:::::::=::====== (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 . 3874 - 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 hereby 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 based on the r c mm n a ion of t he examiners whic h is pres umed .o b e or ect and whi ch petitioner also willingly ace pted .

~ \Q

. ~ ..

ERNESTO D. ACOSTA ( 1;

.. r

- 7 - C E R T I F I C A T I 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. 1033 ~ bl.~ G.cA.

ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals _I