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G.R. No. 169103 March 16, 2011

On December 14, 1999, the CIR issued a PAN against the respondent for its deficiency
interna re!enue ta"es for the year 199#$ %he respondent agreed to a the assessments
issued against it e"cept to the amount representing deficiency documentary stamp ta"es on
its poicy premiums and penaties$ %hus, on &anuary 4, '(((, the petitioner issued against
the respondent a )orma *etter of Demand
+ith the corresponding Assessment Notices
%he ta" deficiency +as computed by incuding the increases in the ife insurance co!erage or
the sum assured by some of respondent,s ife insurance pans$ On )ebruary -, '(((, the
respondent fied its *etter of Protest
./IR0 contesting the assessment for deficiency
documentary stamp ta" on its insurance poicy premiums$ 1o+e!er, respondent,s Protest
+as not acted upon by the /IR +ithin the 12(3day period +ithin +hich to rue on the protest$
1ence, on October '4, '(((, the respondent fied a Petition for Re!ie+ +ith the C%A for the
canceation of Assessment Notice
%he respondent in!o5ed the C%A,s 6arch -(, 199- ruing in the simiar case of *incon
Phiippine *ife Insurance Company, Inc$ CIR,
+herein the C%A hed that the ta" base to be
used in computing the documentary stamp ta" is the !aue at the time the instrument is
issued because the documentary stamp ta" is e!ied and paid ony once, +hich is at the time
the ta"abe document is issued$
On Apri 4, '((', the C%A granted the respondents, Petition$ Aggrie!ed by the decision, the
petitioner +ent to the Court of Appeas on a Petition for Re!ie+
%he petitioner as5ed for
reconsideration of the abo!e Decision and cited this Court,s 6arch 19, '((' Decision in CIR
!$ *incon Phiippine *ife Insurance Company, Inc$,
the !ery same case the respondent
in!o5ed before the C%A$ %he petitioner argued that in *incon, this Court sustained the
!aidity of the deficiency documentary stamp ta" imposed on the increase in the sum insured
e!en though no ne+ poicy +as issued because the increase, by reason of the 7Automatic
Increase Cause,7 +as aready definite at the time the poicy +as issued$
On &uy '#, '((8, the Court of Appeas sustained its ruing, and stated that the *incon Case
+as not appicabe because the increase in the sum assured in *incon,s insurance poicy
+as definite and determinabe at the time such poicy +as issued as the automatic increase
cause, +hich ao+ed for the increase, formed an integra part of the poicy9 +hereas in the
respondent,s case, 7the ta" base of the disputed deficiency assessment +as not :a; definite
or determinabe increase in the sum assured$7
1$ Whether or not respondent is liable for deficiency documentary stamp tax on
increases in the life insurance coverage brought about by the Guaranteed Continuity
'$ Whether or not respondent is liable for the deficiency DST on the additional
premiums represented by the additional members of the same existing group
insurance policy.
1. I !h"s "ss#$, !h$ SC r#%$& " 'avor o' ($!"!"o$r
%he continuity of the poicy after its term +as not guaranteed as the decision to
rene+ it beonged to the insured, sub<ect to certain conditions$ Any increase in the
sum assured, as a resut of the cause, had to sur!i!e a ne+ agreement bet+een the
respondent and the insured$ The increase in the life insurance coverage was only
corollary to the new premium rate imposed based upon the insureds age at the time
the continuity clause was availed of. t was not automatic! was never guaranteed!
and was certainly neither definite nor determinable at the time the policy was issued.
%herefore, the increases in the sum assured brought about by the guaranteed
continuity cause cannot be sub<ect to documentary stamp ta" under =ection 12- as
insurance made upon the i!es of the insured$
2. I !h"s "ss#$, !h$ SC r#%$& " 'avor o' ($!"!"o$r
>hene!er a master poicy admits of another member, another ife is insured and
co!ered$ %his means that the respondent, by appro!ing the addition of another
member to its e"isting master poicy, is once more e"ercising its pri!iege to conduct
the business of insurance, because it is yet again insuring a ife$ It does not matter
that it did not issue another poicy to effect this change, the fact remains that
insurance on another ife is made and the reationship of insurer and insured is
created bet+een the respondent and the additiona member of that master poicy$ In
the respondent,s case, its group insurance pan is embodied in a contract +hich
incudes not ony the master poicy, but a documents subse?uenty attached to the
master poicy$50
%his Court +oud i5e to ma5e it cear that the assessment for deficiency documentary
stamp ta" is being uphed not because the additiona premium payments or an
agreement to change the sum assured during the effecti!ity of an insurance pan are
sub<ect to documentary stamp ta", but because documentary stamp ta" is e!ied on
e!ery document +hich estabishes that insurance +as made or rene+ed upon a ife$