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A case about DST

"The best things in life are tax free.


--- Joseph Bonkowski

When I started to learn more about taxes, I was a little confused and at the same time
amused by its existence. Though at some time, I see its imposition as too much like you
need to pay taxes on intangible things like your right to buy, your right to sell or your
right to enter into transactions. These are things that you cannot see, smell, taste or
even eat, right? In fact, these are certain privileges that we acquire from having free will.
But then again, taxes are what we pay for civilization (Holmes, 1904).
The burden of paying taxes now is more evident on tax investigations and litigations due
to whether these things are proved to be exempted from tax or these are punishable tax
evasion cases. The case, Commissioner of Internal Revenue vs. Traders Royal
Revenue, all pointed out to documentary tax deficiency. Before I would discussed some
points about the case, I would first define documentary stamp and its importance. What
is documentary stamp tax? A documentary stamp tax is a national tax levied upon a
right or privilege primarily for raising revenue for the government ( Section 173, NIRC ).
It is charge on transactions evidenced by stamps required to be attached in
corresponding documents, instrumentalities and papers (Valencia and Roxas, 2014).
The case started on the 27th day of July, 1998, when the BIR made tax investigations
regarding all the deposits of Traders Royal Bank, a domestic corporation duly registered
with the SEC and BSP. A pre-assessment notice and a formal letter of Demand and
Assessment were given thereafter on Nov. 10, 1999 and Dec. 27, 1999 respectively.
The tax investigations resulted to a discovery of documentary stamp tax deficiency
regarding its Special Savings Deposit, Mega Savings Deposit and Trust Fund
Agreements. On January 7 the following year, Vice-president of TRB, Bayani Navarro,
protested the assessment of BIR saying that the Special Savings Deposits and Trust
Indenture Agreements were not subject to DST for the very reason that those are
merely existence of a trustor-trustee relationship. CIR denied the protest on December
20, 2001 saying that the Savings Deposit were subject to DST under Section 180 of the
Tax Code of 1977. A Petition for Review was passed by TRB to the CTA. On April 4,
2004, the CTA gave the two issues regarding the Special Savings Deposits to CIR and
that they are subject to documentary stamp tax while the Trust Indenture Agreements of
TRB were exempted from DST giving considerations to the protest made by TRB. CIR
filed a motion for Partial Reconsideration on May 24, 2004 while TRB filed an Omnibus
Motion for Substitution of Partners and Motion for Reconsideration. The two motions
were denied by the CTA in its resolution on September 10, 2004. Petition for Review

was dismissed on Feb. 2, 2005 and TRB's Motion for Reconsideration was denied on a
resolution dated Feb. 14, 2005. On Aug. 8, 2005, the petition in G.R. No. s 167134 and
168491 were consolidated in the Final Court. A thorough examination of evidences
leads to the overlapping of the concepts written in Section 180 of NIRC of 1977, as
amended, Section X407 of 1993 MORB and the Articles of Civil Code but all leading to
the argument that TRB must present documents evidencing its affirmative stand that
those Trust indenture agreements were only ''trust funds''. The Final Court affirmed the
decision of the CTA regarding the issue on the Special Savings Deposit but the decision
regarding the Trust Indenture Agreements was reverted and set aside ordering Traders
Royal Bank to pay the documentary stamp tax deficiency.
CIR was more focused with the substance over form concept where the content prevails
its nomenclature while that of TRB raise the defenses given in the Manual of
Regulations for Banks. The case all ended with who has the most sufficient reliable
evidence, CIR with its tax investigations documents or TRB who filed only a copy of
Section 173 and 179 of the MORB. My thoughts with this case agreed with the
argument raised by the CIR relating to the substance of the Trust indenture agreements
though TRB could really defend that there situation was an exemption to the general
rule but they were not able to present the needed evidences. Obviously, TRB was hiding
something maybe they're true intent. I guess, TRB just proved that its much easier to
complain about the burden of taxes but the burden of proof lies still on the taxpayers
hands.