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Philippine Home Assurance Corporation Et Al. vs. Court of Appeals, G.R. No. 119446, Dated January 21, 1999

Petitioners are insurance corporations that paid over 10 million pesos in documentary stamp taxes under protest for various insurance policies issued. They claimed refund was due since premiums were not paid per Section 77 of the Insurance Code. Both the Bureau of Internal Revenue and the Court of Tax Appeals denied the refund claim. The Court of Appeals affirmed, holding documentary stamp tax is an excise tax on the privilege of conducting business. The Supreme Court ruled the claim was without merit, as documentary stamp taxes are imposed on the execution of legal instruments independently of the transaction status, and are due upon issuance regardless of subsequent enforceability. Therefore, the policies were subject to tax when issued, and non-payment of premiums did not affect the tax liability

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31 views2 pages

Philippine Home Assurance Corporation Et Al. vs. Court of Appeals, G.R. No. 119446, Dated January 21, 1999

Petitioners are insurance corporations that paid over 10 million pesos in documentary stamp taxes under protest for various insurance policies issued. They claimed refund was due since premiums were not paid per Section 77 of the Insurance Code. Both the Bureau of Internal Revenue and the Court of Tax Appeals denied the refund claim. The Court of Appeals affirmed, holding documentary stamp tax is an excise tax on the privilege of conducting business. The Supreme Court ruled the claim was without merit, as documentary stamp taxes are imposed on the execution of legal instruments independently of the transaction status, and are due upon issuance regardless of subsequent enforceability. Therefore, the policies were subject to tax when issued, and non-payment of premiums did not affect the tax liability

Uploaded by

rudilyn.palero9
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Philippine Home Assurance Corporation et al. vs. Court of Appeals, G.R. No.

119446, dated January 21, 1999


FACTS:
Petitioners are domestic corporations engaged in the insurance business. They paid
under protest a total amount of more than 10 million pesos as documentary stamp taxes
on various life and non-life insurance policies issued by them. Then petitioners filed a
separate claim of refund from the Bureau of Internal Revenue. They alleged that the
premiums on the insurance policies issued by them had not been paid thus, in
accordance with §77 of the Insurance Code, no documentary stamp taxes were due on
the policies. The Bureau failed to adhere on their claims, hence they filed an appeal
before the Court of Tax Appeals, which denied their claims. The CA affirmed the
decision and held that the respondent court correctly characterized a documentary
stamp tax as in the nature of an excise tax. As such, it is imposed on the privilege of
conducting a particular business or transaction and not on the business or transaction
itself.
ISSUE:
Whether or not since premiums on the insurance policies issued by petitioners had not
been paid then no documentary stamp taxes were due.
RULING:
No, the Court ruled that petitioners claim is without merit.
The Court stated sections 183 and 184 of the NIRC, or in general, documentary stamp
taxes are levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the execution of
specific instruments. Examples of such privileges, the exercise of which, as effected
through the issuance of particular documents, are subject to the payment of
documentary stamp taxes are leases of lands, mortgages, pledges, and trusts, and
conveyances of real property.
Documentary stamp taxes are thus levied on the exercise of these privileges through
the execution of specific instruments, independently of the legal status of the
transactions giving rise thereto. The documentary stamp taxes must be paid upon the
issuance of the said instruments, without regard to whether the contracts which gave
rise to them are rescissible, void, voidable, or unenforceable. As the Supreme Court of
the United States held in Du Pont v. United States:
The tax is not upon the business transacted but is an excise upon the privilege,
opportunity, or facility offered at exchanges for the transaction of the business. It is an
excise upon the facilities used in the transaction of the business separate and apart
from the business itself. In this view it is immaterial whether the transfer of the account
constituted a sale.
It is thus settled that the life and non-life insurance policies in question are subject to
documentary stamp taxes pursuant to §183 and §184 of the National Internal Revenue
Code by their mere issuance, and the fact that the policies have not become effective
for non-payment of the corresponding premiums as required by §77 of the Insurance
Code cannot affect petitioners’ liability for payment of documentary stamp taxes. Their
claim for refund was correctly denied.

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