G.R. No. L-23123 September 30, 1969
Heald Lumber Company, petitioner, vs. Benjamin N. Tabios in his capacity as Commissioner of Internal Revenue, respondent

FACTS

On February 25, 1959, the respondent Commissioner of Internal Revenue originally assessed against the petitioner Heald Lumber Company the sum of P41,040.00 as deficiency income tax for the year 1953. Upon the petitioner’s request for reconsideration, the respondent issued a revised assessment on November 24, 1961, reducing the amount to P16,219.00, plus interest of P2,362.57. This interest was computed at 1/2% monthly from June 20, 1959, to November 24, 1961, pursuant to Section 51(d) of the National Internal Revenue Code, as amended by Republic Act No. 2343 , which took effect on June 20, 1959. The petitioner paid the principal deficiency tax of P16,219.00 but refused to pay the assessed interest, contending it was without legal basis. The respondent maintained the interest was legally imposed. The petitioner elevated the case to the Court of Tax Appeals, which rendered a decision on March 23, 1964, affirming the respondent’s assessment. The petitioner’s motion for reconsideration was denied, prompting this petition for review.

ISSUE

Whether the interest of 1/2% monthly, provided for in Section 51(d) of the National Internal Revenue Code as amended by Republic Act No. 2343 (effective June 20, 1959), is imposable on a deficiency income tax due on income earned prior to the effectivity of said Act but assessed after it.

RULING

Yes. The Supreme Court affirmed the decision of the Court of Tax Appeals, holding the petitioner liable for the interest. The Court ruled that the application of the amended Section 51(d) was not retroactive. The deficiency income tax was assessed and remained unpaid when Republic Act No. 2343 was already in force. The amended law expressly provides that interest on a deficiency shall be assessed at the same time as the deficiency. Furthermore, the respondent Commissioner imposed interest only from June 20, 1959 (the date of the law’s effectivity), not from the date the original tax for 1953 became due. This application actually operated in favor of the petitioner, as the amended law imposed a lower interest rate (1/2% monthly) compared to the old law’s rate (1% monthly interest from the time the tax became due). The Supreme Court found the material facts and legal issues in this case to be similar to its prior ruling in Central Azucarera de San Pedro vs. Court of Tax Appeals and Commissioner of Internal Revenue (G.R. Nos. L-23236 and 23254, May 31, 1967), which upheld the imposition of such interest under the same circumstances.