First Lepanto Taisho Insurance Corp. v.

CIR
G.R. No. 197117. April 10, 2013
Third Division
Ponente: Justice Mendoza

Facts: Petitioner is a non-life insurance corporation and considered as a Large

Taxpayer under the pertinent revenue regulations. It was a regular taxpayer until it
received a Letter of Authority, and subsequent tax assessments from the CIR. It
protested the tax assessments, but both the CTA Second Division and CTA En Banc
affirmed such assessments. Petitioner contended, among others, that it was not liable
to pay Withholding Tax on Compensation on the P500,000 bonus to their directors
because they were not employees. The CTA En Banc, however, ruled that Section 5 of
Revenue Regulation No. 12-86 expressly identified a director to be an employee.

Issue: WON petitioner is liable to pay Withholding Tax on Compensation on the

bonus paid to their directors on the ground that they are not employees.

Held: The Court held that, for taxation purposes, a director is considered as
employee under Sec. 5 of Revenue Regulation No. 12-86, which provides that an
individual, performing services for a corporation, whether as a officer and director or
merely as a director whose duties are confined to attendance at and participation in the
meetings of the Board of Directors, is an employee.

The non-inclusion of the names of some petitioners directors in the

Companys Alpha List does not ipso facto create a presumption that they are not
employees of the corporation, because the imposition of withholding tax on
compensation hinges upon the nature of work performed by such individuals in the
company. Moreover, contrary to petitioners attestations, Revenue Regulation No. 2-98,
specifically, Section 2.57.2.A (9) thereof, cannot be applied to this case as the latter is a
later regulation while the accounting books examined were for taxable year 1997.
Hence, petitioner is liable to pay Withholding Tax on Compensation on the P500,000
Directors Bonus to their directors because they are employees.
 Rizal Commercial Banking Corporation v. CIR
G.R. No. 170257. September 7, 2011
Third Division
Ponente: Justice Mendoza

Facts: Rizal Commercial Banking Corporation (RCBC) is a corporation engaged in

general banking operations. On August 15, 1996, it received a Letter of Authority
issued by the CIR for the examination of books of account and other pertinent records
covering the period of January 1, 1994 to December 31, 1995. Subsequently, RCBC
received a Formal Letter of Demand together with Assessment Notices from the BIR,
the amount of which was later reduced. It paid its deficiency taxes but the foreign
currency deposit unit (FCDU) deficiency onshore tax and documentary stamp tax
contending that since the said onshore tax is collected in the form of a final withholding
tax, it is the borrower that is primarily liable for the remittance of the said tax.

Issue: WON RCBC, petitioner, can be held liable for deficiency FCDU onshore
tax.

Held: RCBC, petitioner, can be held liable for deficiency onshore tax. The
liability of the withholding agent is independent from that of the taxpayer. The former
cannot be made liable for the tax due because it is the latter who earned the income
subject to withholding tax. The withholding agent is liable only insofar as he failed to
perform his duty to withhold the tax and remit the same to the government. The
liability for the tax, however, remains with the taxpayer because the gain was realized
and received by him.

While the payor-borrower can be held accountable for its negligence in

performing its duty to withhold the amount of tax due on the transaction, RCBC, as the
taxpayer and the one which earned income on the transaction remains liable for the
payment of tax as the taxpayer shares the responsibility of making certain that the tax
is properly withheld by the withholding agent, so as to avoid any penalty that may arise
from the non-payment of the withholding tax due. RCBC cannot evade its liability for
FCDU onshore tax by shifting the blame on the payor-borrower as the withholding
agent.
 Supreme Transliner, Inc. v. BPI Family Savings Bank, Inc.
G.R. No. 165617. February 25, 2011
Third Division
Ponente: Justice Villarama, Jr.

Facts: On April 24, 1995, Supreme Transliner, Inc. obtained a loan from BPI
Family Savings with a 714- square meter lot as collateral. Due to non-payment of said
loan, the mortgage was extrajudicially foreclosed and the property was sold to the bank
as the highest bidder in the public auction conducted by the Provincial Sheriff of Lucena
City. Subsequently, the mortgagors exercised their right of redemption by paying the
total amount as billed by the bank. Unsatisfied, the mortgagors filed a suit against the
bank to recover the excessive charges including the payment of the capital gains tax
and documentary tax before the RTC of Lucena. The trial court dismissed the case,
which was later on reversed by the CA.

Issue: WON Revenue Regulation No. 4-99 may be given retroactive effect
considering that the subject foreclosure sale and redemption took place before its
effectivity.

Held: Revenue Regulation No. 4-99 may be given retroactive effect although the
subject foreclosure sale and redemption in this case took place before the effectivity of
said regulation. It provides for the non-imposition of both capital gains tax and
documentary tax in case the mortgagor exercises his right of redemption within one
year from the issuance of the certificate of sale.

Section 246 of the NIRC of 1997 explicitly laid down the general rule of
non-retroactivity of rulings. However, in this case, the retroactive application of RR no.
4-99 is more consistent with the policy of aiding the exercise of the right of redemption.
As the Court of Tax Appeals concluded in a case, RR No. 4-99 has curbed the inequity
of imposing capital gains tax even before the expiration of the redemption period
[since] there is yet no transfer of title and no profit or gain is realized by the mortgagor
at the time of foreclosure sale but only upon expiration of the redemption period.