G.R. No. L-21258, October 31, 1967
FILIPINAS LIFE ASSURANCE COMPANY, petitioner, vs. THE COURT OF TAX APPEALS and THE COMMISSIONER OF INTERNAL REVENUE, respondents.

FACTS

Petitioner Filipinas Life Assurance Company, a domestic life insurance company, filed its 1958 income tax return reporting its gross income from dividends in full (P57,105.29) and paid a tax of P3,378.00. It later filed an amended return, reporting only 25% of its dividend income (P15,242.55) and claiming a refund of P2,721.00, contending that under Section 24 of the National Internal Revenue Code, as amended, only 25% of dividends received from domestic corporations should be returnable for tax purposes. The Commissioner of Internal Revenue did not act on the claim, prompting the petitioner to file an action with the Court of Tax Appeals. The Tax Court denied the claim, ruling that the proviso allowing the 25% returnability of dividends is found in subsection (A) of Section 24, which applies to corporations in general, while life insurance companies are specifically treated under a separate subsection (B). The Tax Court applied the rule of statutory construction that a proviso applies only to the immediately preceding clause or provision.

ISSUE

Whether domestic and resident foreign life insurance companies are entitled to return only 25% of their income from dividends under the proviso in Section 24(A) of the National Internal Revenue Code, as amended.

RULING

Yes. The Supreme Court reversed the decision of the Court of Tax Appeals. The Court held that a purely syntactical approach is not a safe guide to statutory interpretation; legislative history is more important. A review of the legislative amendments to Section 24 reveals that the proviso regarding the 25% returnability of dividends has been a consistent feature since the original enactment in 1939, applicable to all domestic and resident foreign corporations. When subsection (B) was introduced to provide a separate tax scheme for life insurance companies based on investment income, the proviso was not removed or altered to exclude them. The legislative intent was to maintain the dividend exclusion benefit for all corporations, including life insurance companies. The separate treatment in subsection (B) pertains only to the tax rate and base (investment income), not to the exclusion of dividends from the taxable base. Therefore, life insurance companies are entitled to report only 25% of dividends received from domestic corporations for tax purposes. The petitioner’s claim for refund was granted.