G.R. No. L-19378 March 27, 1968
ACOJE MINING COMPANY, INC., petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.

FACTS

Petitioner Acoje Mining Company, Inc. was allowed by the Bureau of Internal Revenue (BIR) until April 30, 1958, to file its income tax return for 1957, on condition that 50% of the tax due be paid on or before May 15, 1958; otherwise, the 5% surcharge and 1% monthly interest would accrue on the whole tax due from May 16, 1958, pursuant to Section 51(e) of the National Internal Revenue Code. Petitioner filed its return on April 24, 1958, but failed to pay any amount on May 15, 1958. On May 24, 1958, petitioner received an assessment notice from the BIR giving it the option to pay in two equal installments: the first on or before June 15, 1958, and the second on or before August 15, 1958. Petitioner still failed to pay. On March 16, 1959, it paid P1,303,693.98, representing the tax, surcharge, interest, and compromise penalty. The Commissioner of Internal Revenue demanded an additional P17,218.77, asserting that interest should be paid on the entire tax due from May 16, 1958, to March 16, 1959. Petitioner contended that without notice or demand from the Commissioner, the second installment did not become due until August 15, 1958. The Court of Tax Appeals ruled that the entire tax was due on May 15, 1958, and interest was due on the whole amount from that date, as petitioner did not effectively elect to pay by installments.

ISSUE

Whether the petitioner’s failure to pay the first installment of its income tax on May 15, 1958, automatically made the whole amount of the tax due and liable for interest from that date, without need of notice or demand from the Commissioner of Internal Revenue.

RULING

Yes. The Supreme Court affirmed the decision of the Court of Tax Appeals. The Court held that under Section 51(c) of the National Internal Revenue Code, as originally enacted, if any installment is not paid on the date fixed, the whole amount of the tax unpaid shall be paid upon notice and demand from the Collector (Commissioner) of Internal Revenue. However, public policy requires that the grant of an extension of time to pay or the privilege to pay by installments should not be left to the discretion of the Commissioner in a way that could lead to uncertainty or uneven application of the law. The Court found that the parties understood the obligation was to be paid in two installments, but the petitioner’s failure to pay the first installment on May 15, 1958, made the entire obligation due. Notice and demand are not necessary to make the whole tax due and subject to interest from the date of default. Interest accrues on the entire tax from the date the first installment was due but unpaid. The Court also noted that the issue of whether there was an effective election to pay in installments was properly considered, as it was intimately related to the main issue.