GR 119446; (January, 1999) (Digest)
G.R. No. 119446 January 21, 1999
PHILIPPINE HOME ASSURANCE CORPORATION, PHILIPPINE AMERICAN ACCIDENT INSURANCE COMPANY, PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY and AMERICAN INTERNATIONAL UNDERWRITERS (Phils.), INC., petitioners, vs. COURT OF APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.
FACTS
Petitioners are domestic corporations engaged in the insurance business. From January to June 1986, they paid under protest the total amount of P10,456,067.83 as documentary stamp taxes on various life and non-life insurance policies issued by them. On August 4, 1987, they filed separate claims for refund with the Bureau of Internal Revenue, alleging that the premiums on the insurance policies had not been paid; thus, in accordance with Section 77 of the Insurance Code, no documentary stamp taxes were due on the policies. As the BIR failed to act, petitioners appealed to the Court of Tax Appeals, which denied their claims. The CTA held that the documentary stamp tax must be affixed to the insurance policy on the date it is issued even if no premium has been paid, and the subsequent cancellation or non-payment of premium does not exempt the issuer from the tax. The Court of Appeals affirmed the CTA decision.
ISSUE
Whether petitioners are entitled to a refund of the documentary stamp taxes paid on insurance policies where the premiums were not paid, rendering the policies ineffective under Section 77 of the Insurance Code.
RULING
No. The Supreme Court affirmed the decision of the Court of Appeals, denying the claim for refund. Documentary stamp taxes are levied on the exercise of certain privileges through the execution of specific instruments, such as insurance policies, independently of the legal status of the transactions giving rise to them. The tax is imposed on the privilege of conducting insurance business and accrues upon the issuance of the policy, without regard to whether the contract becomes effective or not. The fact that the policies did not become effective due to non-payment of premiums under Section 77 of the Insurance Code does not affect the liability for payment of documentary stamp taxes under Sections 183 and 184 of the National Internal Revenue Code. The tax is due upon issuance, and non-payment of the premium does not warrant a refund.