COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. CONSTRUCTION RESOURCES OF ASIA, INC.

,
and THE COURT OF TAX APPEAL, respondents G.R. No. L-68230 November 25, 1986

Facts: Petitioner is a domestic corporation, duly registered with the Overseas Construction Board as an
overseas contractor. In July, 1977, it entered into a contract with the Malaysian government for the
construction of a road at Sabah. In connection therewith, petitioner incurred foreign loans in the
amount of $3,900,000.00 at 9-1/16% interest per annum. For the period from December 7, 1977 to June
5, 1978, petitioner paid the sum of $179,156.25 to the foreign creditors as interest on its loan.

In an investigation conducted by respondent's examiners, it was ascertained that petitioner failed to file
withholding tax return and to withhold 15% tax on interest on foreign loans remitted abroad. It was also
ascertained that petitioner failed to purchase and affix the corresponding documentary and science
stamps on the stock certificates issued by it covering P17,880,000.00 worth of shares pursuant to
Sections 222 and 224 of the Tax Code.

Thus, two demand letters dated January 25, 1980 and March 5, 1980, respondent sought payment of
withholding tax-at-source and documentary stamp tax in the amount of P300,170.46 and P89,400.00,
respectively.

Petitioner filed a protest which was denied, prompting the former to file an appeal with the CTA. CTA
ruled that the subject transaction was not subject to Documentary Stamp Tax.

Issue: Whether or not the liability to pay documentary and science stamps taxes attaches upon the
issuance of certificates of stocks or upon delivery thereof.

Held: YES. The delivery of the certificates of stocks to the private respondent's stockholders whether
actual or constructive, is not essential for the documentary and science stamps taxes to attach. What is
taxed is the privilege of issuing shares of stockand, therefore, the taxes accrue at the time the shares are
issued. The only question before us is whether or not said private respondents issued the certificates of
stock covering the paid-in-capital of P17,880,000.00.

When the private respondent first received the petitioner's letter of assessments, it only disputed the
withholding tax-at-source assessment. In its letter dated November 7, 1979, it did not dispute or
question the assessment on documentary and science stamps taxes. Likewise, in its letter of February
15, 1980, the private respondent only requested for a reinvestigation with regard to the assessment of
the interests and surcharges on its foreign loan and the surcharges and penalties thereof. Even in its
appeal before the respondent court, the private respondent merely stated that "due to the difficulty
inthe formal transfer of the contributed capital of the stockholders to the petitioner corporation, the
bulk of them being in capital equipment and capital assets, the petitioner (now private respondent) is
unable up to the present to issue thecorresponding certificates of stocks; consequently, the
corresponding documentary and science stamps taxes have not as yet been affixed on the certificates of
stocks;" and in its prayer, the private respondent only asked for further time to be allowed to settle the
documentary and science stamps taxes as it is now undertaking the speedy transfer of the ownershipof
the assets to its capital base. In other words, the private respondent never disputed the amount of the
documentary and science stamps taxes assessment but only asked that it be given more time to be able
to pay them after it had formally transferred in its favor the contributed capital of its stockholders. It has
also not denied, until now, that it received a paid-in-capital in the amount of P17,880,000.00. This
belated denial of the private respondent and the fact that it did not initially dispute either the amount of
assessment or the act of levy itself lend more credence to the report of petitioner's examiners that upon
investigation, they found that the private respondent received a paid-in-capital of P17,880,000.00 for
which certificates of stock were issued but that the documentary and science stamps taxes thereof were
not paid. Furthermore, we agree with the petitioner that the respondent court should have given more
weight to the findings and assessments of the petitioner's examiners rather than the mere certification
of the acting corporate secretary of the private respondent that it has not issued the certificates of
stocks yet because of the difficulty in the formal transfer of the contributed capital of its stockholders to
its corporate assets.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. FIRST EXPRESS PAWNSHOP COMPANY, INC.,
Respondent, G.R. Nos. 172045-46 June 16, 2009

Facts: Petitioner issued four (4) assessment notices against First Express Pawnshop Company, Inc.
Respondent received the assessment notices on 3 January 2002. On 1 February 2002, respondent filed
its written protest on the above assessments. Since petitioner did not act on the protest during the 180-
day period, respondent filed a petition before the CTA on 28 August 2002.

Respondent contended that petitioner did not consider the supporting documents on the interest
expenses and donations which resulted in the deficiency income tax.10 Respondent maintained that
pawnshops are not lending investors whose services are subject to VAT, hence it was not liable for
deficiency VAT. Respondent also alleged that no deficiency DST was due because Section 180 of the
National Internal Revenue Code (Tax Code) does not cover any document or transaction which relates to
respondent. Respondent also argued that the issuance of a pawn ticket did not constitute a pledge
under Section 195 of the Tax Code.

CTA partially granted the petition which resulted to both parties filing a Motion for Reconsideration. CTA
En Banc ruled in favor of respondent stating that deposit on subscription is not subject to DST in the
absence of proof that an equivalent amount of shares was subscribed or issued in consideration for the
deposit.

Issue: Whether or not respondent is liable to pay P12,328.45 as DST on deposit on subscription of
capital stock.

Held: NO. DST is a tax on documents, instruments, loan agreements, and papers evidencing the
acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. DST is
actually an excise tax because it is imposed on the transaction rather than on the document. DST is also
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.

The Government stands to lose nothing in imposing the documentary stamp tax only on those stock
certificates duly issued, or wherein the stockholders can freely exercise the attributes of ownership and
with value at the time they are originally issued. As regards those certificates of stocks temporarily
subject to suspensive conditions they shall be liable for said tax only when released from said
conditions, for then and only then shall they truly acquire any practical value for their owners.

Clearly, the deposit on stock subscription as reflected in respondent’s Balance Sheet as of 1998 is not a
subscription agreement subject to the payment of DST. There is no P800,000 worth of subscribed capital
stock that is reflected in respondent’s GIS. The deposit on stock subscription is merely an amount of
money received by a corporation with a view of applying the same as payment for additional issuance of
shares in the future, an event which may or may not happen. The person making a deposit on stock
subscription does not have the standing of a stockholder and he is not entitled to dividends, voting
rights or other prerogatives and attributes of a stockholder. Hence, respondent is not liable for the
payment of DST on its deposit on subscription for the reason that there is yet no subscription that
creates rights and obligations between the subscriber and the corporation.
COMMISSIONER OF INTERNAL REVENUE, Petitioner vs. MANILA BANKERS LIFE INSURANCE
CORPORATION, Respondent G.R. No. 169103 March 16, 2011

Facts: Petitioner Commissioner of Internal Revenue issued Letter of Authority authorizing a special team
of Revenue Officers to examine the books of accounts and other accounting records of respondent for
taxable year 1997 & unverified prior years.

Based on the findings of the Revenue Officers, the petitioner issued a Preliminary Assessment Notice
against the respondent for its deficiency internal revenue taxes for the year 1997. The respondent
agreed to all the assessments issued against it except to the amount of P2,351,680.90 representing
deficiency documentary stamp taxes on its policy premiums and penalties. Thus, the petitioner issued
against the respondent a Formal Letter of Demand with the corresponding Assessment Notices attached
one of which was Assessment Notice pertaining to the documentary stamp taxes due on respondents
policy premiums. The tax deficiency was computed by including the increases in the life insurance
coverage or the sum assured by some of respondents life insurance plans.

On February 3, 2000, the respondent filed its Letter of Protest with the Bureau of Internal Revenue (BIR)
contesting the assessment for deficiency documentary stamp tax on its insurance policy premiums. The
respondents Protest was not acted upon by the BIR within the 180-day period given to it by Section 228
of the 1997 National Internal Revenue Code (NIRC) within which to rule on the protest. Hence, on
October 26, 2000, the respondent filed a Petition for Review with the CTA for the cancellation of
Assessment Notice. The respondent invoked the CTAs March 30, 1993 ruling in the similar case of
Lincoln Philippine Life Insurance Company, Inc. (now Jardine-CMA Life Insurance Company, Inc.) v.
Commissioner of Internal Revenue, wherein the CTA held that the tax base to be used in computing the
documentary stamp tax is the value at the time the instrument is issued because the documentary
stamp tax is levied and paid only once, which is at the time the taxable document is issued.

CTA ruled in favor of Manila Bankers Life and ordering the cancellation of the Assessment Notice. On
petition for review, the CTA En Banc uphold the decision of the CTA.

Issue: Whether or not the imposition of documentary stamp tax on increases in the coverage or sum
assured by existing life insurance policies, even without the issuance of new policies.

Held: YES. Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident
thereto. It is in the nature of an excise tax because it is imposed 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 distinct and separate from the business itself.

To elucidate, documentary stamp tax is levied on the exercise of certain privileges granted by law for the
creation, revision, or termination of specific legal relationships through the execution of specific
instruments. Examples of these privileges, the exercise of which are subject to documentary stamp tax,
are leases of lands, mortgages, pledges, trusts and conveyances of real property. Documentary stamp
tax is thus imposed 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 tax
must be paid upon the issuance of these instruments, without regard to whether the contracts which
gave rise to them are rescissible, void, voidable, or unenforceable.

Accordingly, the documentary stamp tax on insurance policies, though imposed on the document itself,
is actually levied on the privilege to conduct insurance business. Under Section 173, the documentary
stamp tax becomes due and payable at the time the insurance policy is issued, with the tax based on the
amount insured by the policy as provided for in Section 183.
SUPREME TRANSLINER, INC., MOISES C. ALVAREZ and PAULITA S. ALVAREZ, Petitioners, vs. BPI
FAMILY SAVINGS BANK, INC., Respondent, G.R. No. 165617, February 25, 2011

Facts: Supreme Transliner, Inc. represented by its Managing Director, Moises C. Alvarez, and Paulita S.
Alvarez, obtained a loan in the amount of P9,853,000.00 from BPI Family Savings Bank with a 714-square
meter lot covered by Transfer Certificate of Title No. T-79193 in the name of Moises C. Alvarez and
Paulita S. Alvarez, as collateral.

For non-payment of the loan, the mortgage was extrajudicially foreclosed and the property was sold to
the bank as the highest bidder in the public auction conducted by the Office of the Provincial Sheriff of
Lucena City. On August 7, 1996, a Certificate of Sale was issued in favor of the bank and the same was
registered on October 1, 1996.

Issue: Whether or not the mortgagee-bank liable to pay the capital gains tax upon the execution of the
certificate of sale and before the expiry of the redemption period?

Held: There is no legal basis for the inclusion of this charge in the redemption price. Under Revenue
Regulations (RR) No. 13-85 (December 12, 1985), every sale or exchange or other disposition of real
property classified as capital asset under Section 34(a) of the Tax Code shall be subject to the final
capital gains tax. The term sale includes pacto de retro and other forms of conditional sale. Section 2.2
of Revenue Memorandum Order (RMO) No. 29-86 (as amended by RMO No. 16-88 and as further
amended by RMO Nos. 27-89 and 6-92) states that these conditional sales "necessarily include mortgage
foreclosure sales (judicial and extrajudicial foreclosure sales)." Further, for real property foreclosed by a
bank on or after September 3, 1986, the capital gains tax and documentary stamp tax must be paid
before title to the property can be consolidated in favor of the bank.

Under Section 63 of Presidential Decree No. 1529 otherwise known as the Property Registration Decree,
if no right of redemption exists, the certificate of title of the mortgagor shall be cancelled, and a new
certificate issued in the name of the purchaser. But where the right of redemption exists, the certificate
of title of the mortgagor shall not be cancelled, but the certificate of sale and the order confirming the
sale shall be registered by brief memorandum thereof made by the Register of Deeds upon the
certificate of title. In the event the property is redeemed, the certificate or deed of redemption shall be
filed with the Register of Deeds, and a brief memorandum thereof shall be made by the Register of
Deeds on the certificate of title.

It is therefore clear that in foreclosure sale, there is no actual transfer of the mortgaged real property
until after the expiration of the one-year redemption period as provided in Act No. 3135 and title
thereto is consolidated in the name of the mortgagee in case of non-redemption. In the interim, the
mortgagor is given the option whether or not to redeem the real property. The issuance of the
Certificate of Sale does not by itself transfer ownership.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. PILIPINAS SHELL PETROLEUM CORPORATION,
Respondent. G.R. No. 188497 April 25, 2012

Facts: Respondent filed with the Large Taxpayers Audit & Investigation Division II of the Bureau of
Internal Revenue (BIR) a formal claim for refund or tax credit in the total amount of P28,064,925.15,
representing excise taxes it allegedly paid on sales and deliveries of gas and fuel oils to various
international carriers during the period October to December 2001. Subsequently, on October 21, 2002,
a similar claim for refund or tax credit was filed by respondent with the BIR covering the period January
to March 2002 in the amount of P41,614,827.99. Again, on July 3, 2003, respondent filed another formal
claim for refund or tax credit in the amount of P30,652,890.55 covering deliveries from April to June
2002. Since no action was taken by the petitioner on its claims, respondent filed petitions for review
before the CTA.

CTA’s First Division ruled that respondent is entitled to the refund of excise taxes in the reduced amount
of P95,014,283.00. Petitioner elevated the case to the CTA En Banc which upheld the ruling of the First
Division. The CTA pointed out the specific exemption mentioned under Section 135 of the National
Internal Revenue Code of 1997 (NIRC) of petroleum products sold to international carriers such as
respondent’s clients.

Issue: Whether or not a manufacturer or producer of petroleum products is exempt from the payment
of excise tax on such petroleum products it sold to international carriers.

Held: NO. Excise taxes, as the term is used in the NIRC, refer to taxes applicable to certain specified
goods or articles manufactured or produced in the Philippines for domestic sales or consumption or for
any other disposition and to things imported into the Philippines. These taxes are imposed in addition to
the value-added tax (VAT).

An excise tax is basically an indirect tax. Indirect taxes are those that are demanded, in the first instance,
from, or are paid by, one person in the expectation and intention that he can shift the burden to
someone else. Stated elsewise, indirect taxes are taxes wherein the liability for the payment of the tax
falls on one person but the burden thereof can be shifted or passed on to another person, such as when
the tax is imposed upon goods before reaching the consumer who ultimately pays for it. When the seller
passes on the tax to his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the
purchaser as part of the price of goods sold or services rendered.

Because an excise tax is a tax on the manufacturer and not on the purchaser, and there being no express
grant under the NIRC of exemption from payment of excise tax to local manufacturers of petroleum
products sold to international carriers, and absent any provision in the Code authorizing the refund or
crediting of such excise taxes paid, the Court holds that Sec. 135 (a) should be construed as prohibiting
the shifting of the burden of the excise tax to the international carriers who buys petroleum products
from the local manufacturers. Said provision thus merely allows the international carriers to purchase
petroleum products without the excise tax component as an added cost in the price fixed by the
manufacturers or distributors/sellers. Consequently, the oil companies which sold such petroleum
products to international carriers are not entitled to a refund of excise taxes previously paid on the
goods.