GR L 21257; (April, 1968) (Digest)
G.R. No. L-21257 April 30, 1968
THE INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. THE COURT OF TAX APPEALS and THE COMMISSIONER OF INTERNAL REVENUE, respondents.
FACTS
Petitioner Insular Life Assurance Co., Ltd., a domestic life insurance company, filed its income tax return for 1958, reporting 100% of the dividends it received from domestic corporations liable to tax and from domestic corporations engaged in new and necessary industries. It paid an income tax of P148,650.00. Believing it committed an error, petitioner filed an amended return on July 21, 1960, reporting only 25% of said dividends, pursuant to Section 24(A) of the National Internal Revenue Code, as amended. This reduced the tax due to P113,983.03, and petitioner claimed a refund of P34,667.22 as overpayment. The Commissioner of Internal Revenue failed to act on the claim. Presuming a denial, petitioner filed a petition for review with the Court of Tax Appeals. The CTA dismissed the petition, holding that life insurance companies are governed by Section 24(B) of the Tax Code, which, unlike Section 24(A), contains no proviso allowing the return of only 25% of dividends, and thus must report dividends in full.
ISSUE
Whether a domestic life insurance company is entitled to return only 25% of its income from dividends received from domestic corporations liable to tax or engaged in new and necessary industries under Section 24 of the National Internal Revenue Code, as amended by Republic Act 1855.
RULING
Yes. The Supreme Court reversed the decision of the Court of Tax Appeals. It ruled that the proviso in Section 24(A) of the Tax Code, which states that “only twenty-five per centum thereof shall be returnable for purposes of the tax imposed by this Section,” applies to domestic life insurance companies. The Court, citing its precedent in Filipinas Life Assurance Co. vs. The Court of Tax Appeals and the Commissioner of Internal Revenue (G.R. No. L-21258), held that a review of the legislative history of the 1957 amendment (Republic Act 1855) showed no intention to withdraw the dividend exclusion benefit previously enjoyed by life insurance companies. The amendment’s purpose was to change the tax base to investment income and lower the tax to encourage the growth of life insurance companies. The haphazard placement of the proviso in subsection (A) did not indicate a legislative intent to exclude life insurance companies from its benefit. Therefore, petitioner is entitled to the refund of P34,667.22.