G.R. No. L-44004. March 25, 1983.
CRISPIN PENID, VICENTE RAPADA, CATALINO TUMANGGUIL and RUFINO AGCAOILI, petitioners, vs. HON. CESAR VIRATA, in his capacity as SECRETARY OF FINANCE and HON. EFREN I. PLANA, in his capacity as COMMISSIONER OF INTERNAL REVENUE, respondents.

FACTS

Petitioners, as informers, filed a sworn statement (Confidential Information No. 28) with the Bureau of Internal Revenue (BIR) on March 8, 1962. They reported that 27 specified shipping companies were underpaying their common carrier’s tax by converting dollar earnings at the incorrect parity rate of P2.00 to US$1.00, instead of the higher Central Bank rate. During the subsequent BIR investigation, petitioners further revealed that this erroneous practice was common to all shipping companies, not just those listed. This led the BIR to investigate the entire industry.
The BIR assessed deficiency taxes against various shipping companies in December 1962. However, collection was delayed pending a test case (involving Royal Inter-ocean Lines) which ultimately reached the Supreme Court. The Court ruled in favor of the BIR’s position in 1970. Consequently, the BIR collected total deficiency taxes of P4,178,167.54, covering the period from 1957 to November 1965. This sum included P216,846.04 from Pan Fil Co., Inc., a company not named in petitioners’ original sworn statement.

ISSUE

1. Should the reward include the collection from Pan Fil Co., Inc., a firm not listed in the original information?
2. Should the reward be based on collections for the entire period from 1957 to 1965, or only for the period up to March 8, 1962?

RULING

The Supreme Court partially granted the petition. On the first issue, the Court ruled in favor of petitioners. The legal logic is grounded on a liberal interpretation of Republic Act No. 2338, which provides a reward for information leading to the discovery of tax fraud. The Court held that the discovery of Pan Fil Co.’s liability was a direct and proximate result of petitioners’ expanded disclosure during the BIR interview, which was initiated by their original sworn information. The law’s purpose is to encourage informers, and technicalities should not defeat its substantive aim. Therefore, the amount collected from Pan Fil Co. must be included in the base for computing the 25% reward.
On the second issue, the Court ruled against petitioners, upholding the respondent Secretary’s limitation. The Court reasoned that the direct consequence of petitioners’ information was the BIR’s assessment in December 1962. The subsequent collections for periods after 1962 (from March 9, 1962, to 1965) were not a direct result of the information but were delayed due to the pending protest case filed by a shipping company. Had no protest been filed, collections would have been completed in 1962. Petitioners cannot claim a reward for revenues whose collection was postponed by a separate legal process, as this would grant them a windfall beyond the law’s intent. Thus, the reward is properly limited to collections pertaining to the period up to the BIR’s official action on the information.