GR 197192; (June, 2014) (Digest)
G.R. No. 197192 , June 4, 2014
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. THE INSULAR LIFE ASSURANCE CO. LTD., Respondent.
FACTS
The Commissioner of Internal Revenue (CIR) assessed The Insular Life Assurance Co. Ltd. for deficiency Documentary Stamp Tax (DST) on its premiums for calendar year 2002. Insular Life protested, claiming it is a cooperative company exempt from DST under Section 199(a) of the National Internal Revenue Code (NIRC) of 1997. The CIR denied the protest, arguing that registration with the Cooperative Development Authority (CDA) is a prerequisite for the exemption. Insular Life filed a Petition for Review before the Court of Tax Appeals (CTA). The CTA’s Second Division ruled in favor of Insular Life, holding it is a cooperative and exempt from DST, and that registration with the CDA is not essential for the exemption, citing the Supreme Court’s ruling in Republic v. Sunlife Assurance Company of Canada. The CIR’s motion for reconsideration was denied. The CTA en banc affirmed the division’s decision. The CIR filed the present petition, contending that the CTA en banc erred in ruling that Insular Life is a cooperative exempt from DST without being registered with the CDA.
ISSUE
Whether or not the CTA en banc erred in ruling that respondent is a cooperative and is thus exempt from Documentary Stamp Tax.
RULING
The Supreme Court denied the petition and affirmed the CTA en banc’s decision. The Court applied the doctrine of stare decisis, finding the factual circumstances substantially the same as in Republic v. Sunlife Assurance Company of Canada. The Court held that registration with the CDA is not necessary for a mutual life insurance company to be considered a cooperative and claim exemption from DST under Section 199(a) of the NIRC. The NIRC defines a cooperative company as one “conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit.” Insular Life sufficiently established it conforms to this definition. The Court reiterated the justifications from Sunlife: (1) the NIRC does not require CDA registration for the DST exemption, unlike other tax provisions which expressly require it; (2) Insular Life was organized and converted to a mutual life insurance company under the Insurance Code prior to the effectivity of the Cooperative Code ( R.A. No. 6938 ), and the non-impairment clause of the Constitution protects its vested rights; and (3) the CDA’s regulatory power under R.A. No. 6939 does not impose registration as a condition for the tax exemption. An administrative issuance (Revenue Memorandum Circular) requiring CDA registration cannot prevail over the clear absence of such a requirement in the Tax Code.