COMMISSIONER OF INTERNAL REVENUE versus HEALD LUMBER COMPANY

G.R. No. L-16340 February 29, 1964

EN BANC, REGALA, J

Facts: Heald Lumber's capital stock is divided into 1,000 shares of stock without par
value; that on the date of its incorporation on April 20, 1934, 250 shares of stock were
subscribed and that the remaining 750 shares of stock were subsequently subscribed
by and issued to Benguet Consolidated Mining Co. That at the time of the original
issuance by petitioner of the aforesaid 1,000 shares of stock without par value,
petitioner paid the documentary stamp tax based on the actual consideration it had
received from the subscribers. On the year 1950, Heald Lumber had an outstanding
surplus of over P300,000.00; that at a special meeting of its stockholders on
September 19, 1950, the following resolution was unanimously adopted that out of
the existing surplus of the Company available for dividends the sum of P300,000.00
be transferred from surplus account of the Company to the capital account thereof be
made available for the operations of the Company part of its capital without changing
the status or number of the 1,000 no par value shares now issued and outstanding,
and that the proper officers be and hereby are authorized, empowered and directed to
make and effect such transfer. On September 25, 1956, the Regional Director
Regional District No. 1, Bureau of Internal Revenue, in petitioner that it was liable to
pay an additional document stamp tax of P1.00 for each share of no par value stock or
total sum of P1,000.00 for the reasons that the increase of petitioner's capitalization
which was brought about by the transfer of the aforesaid sum of P300,000.00 from its
surplus to its capital account resulted in an increase of P300.00 share; that the
Regional Director also required petitioner to pay the sum of P300.00 as extrajudicial
settlement of its alleged violation of Section 212 of the National Revenue Code. Heald
Lumber elevated this case to the Collector of Internal Revenue in Manila; that on
October 8, 1957, petitioner received the decision of respondent, dated September 30,
1957, upholding the action taken by the Regional Director. Petitioner Heald Lumber
then filed with respondent a request for the reconsideration of his decision of
September 30, 1957; that on July 8, 1958, petitioner received respondent's letter
dated June 20, 1958, denying its request for reconsideration of his decision of
September 30, 1957. Hence the petition.
Issue: WON the petition is meritorious.
Ruling: Petitioner's claim is untenable and unmeritorious. Under the aforementioned
Section 212 of the Tax Code, the documentary stamp tax is collectible only from
"every original issue" of stock certificates, and that, as expressed in its proviso, "in
the case of the original issue of stock without par value the amount of the
documentary stamp tax ... shall be based upon the actual consideration received by
the association, company or corporation ... ." A documentary stamp tax is in the
nature of an excise tax. It is not imposed upon the business transacted but is an
excise upon the privilege, opportunity or facility offered at exchanges for the
transaction of the business. The Decision of the CIR was affirmed in full.
 MICHEL J. LHUILLER Pawnshop versus COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 166786, May 3, 2006
FIRST DIVISION, YNARES-SANTIAGO, J

Facts: Petitioner, a corporation engaged in the pawnshop business, received

Assessment Notice Nos. 81-VAT-13-97-99-12-118 and 81-DST-13-97-99-12-119, issued
by the Chief Assessment Division, Revenue Region No. 13, Cebu City, for deficiency
VAT in the amount of P19,961,636.09 and deficiency DST in the amount of
P13,142,986.02, for the year 1997. Petitioner filed a motion for reconsideration of said
assessment notices but was denied by respondent Commissioner of Internal Revenue.
On petition for review with the Court of Tax Appeals, the latter rendered decision in
favor of petitioner setting aside the assessment notices issued by the CIR. It ruled,
inter alia, that the subject of a DST under Section 195 of the National Internal
Revenue Code (NIRC) is the document evidencing the covered transaction. Holding
that a pawn ticket is neither a security nor a printed evidence of indebtedness, the tax
court concluded that such pawn ticket cannot be the subject of a DST. Respondent
filed a petition for review with the Court of Appeals which reversed the CTA decision
and sustained the assessments against petitioner. It ratiocinated, among others, that
a pawn ticket, per se, is not subject to DST; rather, it is the transaction involved,
which in this case is pledge, that is being taxed. Hence, petitioner was properly
assessed to pay DST. Respondent filed a motion for partial reconsideration praying
that petitioner be ordered to pay deficiency interest of 20% per annum for failure to
pay the same on January 2, 2000, as indicated in the notices. On December 29, 2004,
the Court of Appeals granted the motion and modified the June 29, 2004 decision. On
January 25, 2005, petitioner elevated the case to this Court. Subsequently, it filed a
motion to withdraw the petition with respect to the issue of VAT. Considering that
petitioner already paid the agreed amount of settlement, it prayed that the case be
decided solely on the issue of DST.
Issue: WON M.Lhuiller’s transaction is subject to documentary stamp tax
Ruling: Yes. It is clear from the foregoing provisions that the subject of a DST is not
limited to the document embodying the enumerated transactions. A DST is an excise
tax on the exercise of a right or privilege to transfer obligations, rights or properties
incident thereto. In general, documentary stamp taxes are levied on the exercise by
persons of certain privileges conferred by law for the creation, revision, or termination
of specific legal relationships through the execution of specific instruments. Examples
of such privileges, the exercise of which, as effected through the issuance of
particular documents, are subject to the payment of documentary stamp taxes are
leases of lands, mortgages, pledges and trusts, and conveyances of real property.
Pledge is among the privileges, the exercise of which is subject to DST. A pledge may
be defined as an accessory, real and unilateral contract by virtue of which the debtor
or a third person delivers to the creditor or to a third person movable property as
security for the performance of the principal obligation, upon the fulfillment of which
the thing pledged, with all its accessions and accessories, shall be returned to the
debtor or to the third person. This is essentially the business of pawnshops which are
defined under Section 3 of Presidential Decree No. 114, or the Pawnshop Regulation
Act, as persons or entities engaged in lending money on personal property delivered
as security for loans. In the instant case, there is no law specifically and expressly
exempting pledges entered into by pawnshops from the payment of DST. PETITION
DISMISSED
 COMPAGNIE FINANCIERE SUCRES ET DENREES versus COMMISSIONER OF
INTERNAL REVENUE
G.R. No. 133834 August 28, 2006
SECOND DIVISION, SANDOVAL-GUTIERREZ, J

Facts: Compagnie Financiere Sucres et Denrees, petitioner, is a non-resident private

corporation duly organized and existing under the laws of the Republic of France. On
October 21, 1991, petitioner transferred its eight percent (8%) equity interest in the
Makati Shangri-La Hotel and Resort, Incorporated to Kerry Holdings Ltd. (formerly
Sligo Holdings Ltd), as shown by a Deed of Sale and Assignment of Subscription and
Right of Subscription of the same date. On November 29, 1991, petitioner paid the
documentary stamps tax and capital gains tax on the transfer under protest. On
October 21, 1993, petitioner filed with the Commissioner of Internal Revenue, herein
respondent, a claim for refund of overpaid capital gains tax in the amount of
P107,869.00 and overpaid documentary stamps taxes in the sum of P951,830.00 or a
total of P1,059,699.00. Petitioner alleged that the transfer of deposits on stock
subscriptions is not a sale/assignment of shares of stock subject to documentary
stamps tax and capital gains tax. However, respondent did not act on petitioner’s
claim for refund. Thus, on November 19, 1993, petitioner filed with the Court of Tax
Appeals (CTA) a petition for review, docketed as CTA Case No. 5042. The CTA denied
petitioner’s claim for refund. The CTA held that it is clear from Section 176 of the Tax
Code that sales "to secure the future payment of money or for the future transfer of
any bond, due-bill, certificates of obligation or stock" are taxable. Furthermore,
petitioner admitted that it profited from the sale of shares of stocks. Such profit is
subject to capital gains tax. Petitioner filed a motion for reconsideration, but in a
Resolution dated December 26, 1995, the CTA denied the same. This prompted
petitioner to file with the Court of Appeals a petition for review, docketed as CA-G.R.
SP No. 39501. Court of Appeals denied the petition and affirmed the Decision of the
CTA. The appellate court ruled that a taxpayer has the onus probandi of proving
entitlement to a refund or deduction, following the rule that tax exemptions are
strictly construed against the taxpayer and liberally in favor of the State. Petitioner
failed to meet the requisite burden of proof to support its claim. Hence, petitioner’s
recourse to this Court by way of a Petition for Review on Certiorari.
Issue: WON the Court of Appeals erred in holding that the assignment of deposits on
stock subscriptions is subject to documentary stamps tax
Ruling: No. State cannot be deprived of this most essential power and attribute of
sovereignty by vague implications of law. Rather, being derogatory of sovereignty, the
governing principle is that tax exemptions are to be construed in strictissimi juris
against the taxpayer and liberally in favor of the taxing authority; and he who claims
an exemption must be able to justify his claim by the clearest grant of statute. In the
instant case, petitioner seeks a refund. Tax refunds are a derogation of the State’s
taxing power. Hence, like tax exemptions, they are construed strictly against the
taxpayer and liberally in favor of the State. Significantly, petitioner cannot point to
any specific provision of the National Internal Revenue Code authorizing its claim for
an exemption or refund.
 COMMISSIONER OF INTERNAL REVENUE versus FILINVEST DEVELOPMENT
CORPORATION
G.R. No. 163653, July 19, 2011
EN BANC, PEREZ, J

Facts: Filinvest Development Corp (FDC) is the owner of outstanding shares of both
Filinvest Alabang, Inc. (FAI) and Filinvest Land, Inc. (FLI) with 80% and 67.42%,
respectively. Sometime in 1996, FDC and FAI entered into a Deed of Exchange with
FLI where both transferred parcels of land in exchange for shares of stocks of FLI. As a
result, the ownership structure of FLI changed whereby FDC’s ownership decreased
from 67.42% to 61.03% meanwhile FAI now owned 9.96% of shares of FLI. FLI then
requested from the BIR a ruling to the effect that no gain or loss should be recognized
on said transfer and BIR issued Ruling No. S-34-046-97 finding the exchange falling
the NIRC FDC extended advances in favor of its affiliates during 1996 and 1997 duly
evidenced by instructional letters as well as cash and journal vouchers. Moreover, FDC
also entered into a shareholder’s agreement with Reco-Herrera PTE ltd. (RHPL) for the
formation of a Singapore-based joint venture company called Filinvest Asia Corp.
(FAC). The equity participation of FDC was pegged at 60% subscribing to P500.7M
worth of shares of FAC. On Jan 3, 2000, FDC received assessment notices for
deficiency income tax and deficiency stamp taxes. They raised the issue that pursuant
to BIR Ruling No. S-34-046-97, no taxable gain should have been assessed from the
deed of exchange and that the BIR cannot impute theoretical interests on the cash
advances of FDC in the absence of stipulation and that not being promissory notes
such are not subject to documentary stamp taxes. CIR, for its part, raised that the said
transfer of property resulted to a diminution of ownership by FDC of FLI rather than
gaining further control and as such should not be tax free. Also the CIR justified the
imposition of documentary stamp taxes on the instructional letters citing Sec. 180 of
the NIRC and RR No. 9-94 which provide that loan transactions are subject to tax
irrespective of whether or not they are evidenced by a formal agreement or by mere
office memo. Lastly, it reiterated that there was dilution of its shares as a result of its
shareholder’s agreement with RHPL.
Issue: WON the letters of instructions or cash vouchers are deemed loan agreements
subject to documentary stamp tax.
Ruling: Yes. The instructional letters as well as the journal and cash vouchers
evidencing the advances FDC extended to its affiliates in 1996 and 1997 qualified as
loan agreements upon which documentary stamp taxes may be imposed. apply them
would be prejudicial to the taxpayers. This rule does not apply: (a) where the taxpayer
deliberately misstates or omits material facts from his return or in any document
required of him by the Bureau of Internal Revenue; (b) where the facts subsequently
gathered by the Bureau of Internal Revenue are materially different from the facts on
which the ruling is based; or (c) where the taxpayer acted in bad faith. The principle
of non-retroactivity of BIR rulings does not apply in favor of FDR because it is not the
taxpayer who in the first place, sought the said BIR ruling from the CIR.
 PHILIPPINE BANKING CORPORATION versus COMMISSIONER OF INTERNAL
REVENUE
G.R. NO. 170574 January 30, 2009
FIRST DIVISION, CARPIO, J

Facts: Petitioner is a domestic corporation duly licensed as a banking institution. For

the taxable years 1996 and1997, petitioner offered its Special/Super Savings Deposit
Account (SSDA) to its depositors. On 10 January 2000, the Commissioner of Internal
Revenue (respondent) sent petitioner a Final Assessment Notice assessing deficiency
DST based on the outstanding balances of its SSDA, including increments, in the total
sum of P17,595,488.75 for1996 and P47,767,756.24 for 1997. Petitioner claims that
the SSDA is in the nature of a regular savings account. Petitioner maintains that the
tax assessments are erroneous because Section 180 of the 1977 NIRC does not
include deposits evidenced by a passbook among the enumeration of instruments
subject to DST. Petitioner also argues that even on the assumption that a passbook
evidencing the SSDA is a certificate of deposit, no DST will be imposed because only
negotiable certificates of deposits are subject to tax under Section 180 of the 1977
NIRC. Respondent avers that under Section 180 of the 1977 NIRC, certificates of
deposits deriving interest are subject to
the payment of DST. Petitioner’s passbook evidencing its SSDA is considered a
certificate of deposit, and being very similar to a time deposit account, it should be
subject to the payment of DST. Respondent further argues that Section 180 of the
1977 NIRC categorically states that certificates of deposit deriving interest are subject
to DST without limiting the enumeration to negotiable certificates of deposit.
Issue: WON petitioner’s product called Special/Super Savings Account is subject to
DST under Section 180 of the 1977 NIRC
Ruling: Yes. Documentary stamp tax is a tax on documents, instruments, loan
agreements, and papers evidencing the acceptance, assignment, sale or transfer of
an obligation, right or property incident thereto. A DST is actually an excise tax
because it is imposed on the transaction rather than on the document. A DST is also
levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the execution
of specific instruments. Hence, in imposing the DST, the Court considers not only the
document but also the nature and character of the transaction. Section 180 of the
1977 NIRC imposes a DST of P0.30 on each P200 of the face value of any certificate of
deposit drawing interest. As correctly observed by the CTA, a certificate of deposit is a
written acknowledgment by a bank of the receipt of a sum of money on deposit which
the bank promises to pay to the depositor, to the order of the depositor, or to some
other person or his order, whereby the relation of debtor or creditor between the bank
and the depositor is created. SSDA is a certificate of deposit drawing interest subject
to DST even if itis evidenced by a passbook and non-negotiable in character. A
document to be deemed a certificate of deposit requires no specific form as long as
there is some written memorandum that the bank accepted a deposit of a sum of
money from a depositor. What is important and controlling is the nature or meaning
conveyed by the passbook and not the particular label or nomenclature attached to it,
inasmuch as substance, not form, is paramount.
 Philacor Credit Corporation versus Commissioner of Internal Revenue
G.R. No. 169899 February 6, 2013
SECOND DIVISION, BRION, J

Facts: Both courts held that petitioner Philacor Credit Corporation (Philacor), as an
assignee of promissory notes, is liable for deficiency documentary stamp tax (DST) on
the issuance of promissory notes; and the assignment of promissory notes for the
fiscal year ended 1993.Philacor is a domestic corporation engaged in the business of
retail financing. Pursuant to Letter of Authority No. 17107,Revenue Officer Celestino
Mejia examined Philacor’s books of accounts and other accounting records for the
fiscal year August 1, 1992 to July 31, 1993. Philacor received tentative computations
of deficiency taxes for this year. Philacor’s Finance Manager, contested the tentative
computations of deficiency taxes (totaling P20,037,013.83) through a letter dated
April 17, 1995.Philacor protested the PANs, with a request for reconsideration and
reinvestigation. It alleged that the assessed deficiency income tax was erroneously
computed when it failed to take into account the reversing entries of the revenue
accounts and income adjustments, such as repossessions, write-offs and legal
accounts. Similarly, the Bureau of Internal Revenue (BIR) failed to take into account
the reversing entries of repossessions, legal accounts, and write-offs when it
computed the percentage tax; thus, the total income reported, that the BIR arrived at,
was not equal to the actual receipts of payment from the customers. As for
thedeficiency DST, Philacor claims that the accredited appliance dealers were
required by law to affix the documentary stamps on all promissory notes purchased
until the enactment of Republic Act No. 7660, otherwise known as An Act Rationalizing
Further the Structure and Administration of the Documentary Stamp Tax, which took
effect on January 15, 1994. . The CTA also ruled that Philacor is liable for the DST on
the issuance of the promissory notes and their subsequent transfer or assignment.
Noting that Philacor failed to prove that the DST on its promissory notes had been
paid for these two transactions, the CTA held Philacor liable for deficiency DST of
P673,633.88
Issue: WON Philacor is liable for the DST on the issuance of the PN
Ruling: Under Section 173 of the National Internal Revenue Code, the persons
primarily liable for the payment of DST are the persons (1) making; (2) signing; (3)
issuing; (4) accepting; or (5) transferring the taxable documents, instruments or
papers. Should these parties be exempted from paying tax, the other party who is not
exempt would then be liable. In this case, petitioner Philacor is engaged in the
business of retail financing. Through retail financing, a prospective buyer of home
appliance may purchase an appliance on installment by executing a unilateral
promissory note in favor of the appliance dealer, and the same promissory note is
assigned by the appliance dealer to Philacor. Thus, under this arrangement, Philacor
did not make, sign, issue, accept or transfer the promissory notes. It is the buyer of
the appliances who made, signed and issued the documents subject to tax while it is
the appliance dealer who transferred these documents to Philacor which likewise
indisputably received or “accepted” them. Acceptance, however, is an act that is not
even applicable to promissory notes, but only to bills of exchange. Under the
Negotiable Instruments Law, the act of acceptance refers solely to bills of exchange.
In a ruling adopted by the Bureau of Internal Revenue as early as 1995, “acceptance”
has been defined as having reference to incoming foreign bills of exchange which are
accepted in the Philippines by the drawees thereof, and not as referring to the
common usage of the word as in receiving. Thus, a party to a taxable transaction who
“accepts” any documents or instruments in the plain and ordinary meaning does not
become primarily liable for the tax.
 PHILIPPINE HEALTH CARE PROVIDERS versus COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 167330, September 18, 2009
SPECIAL FIRST DIVISION, CORONA, J

Facts: On January 27, 2000, the respondent CIR sent petitioner assessment of
deficiency taxes, both Value-Added Tax (VAT) and documentary stamp tax (DST) in
the total amount of P224,702,641.18 for taxable years 1996 and 1997. Petitioner
protested such assessment in a letter, but the respondent did not act on the protest
which led the petitioner to file a petition in the Court of Tax Appeals (CTA) seeking the
cancellation of said assessments. CTA partially granted the petition wherein the
petitioner is ordered to pay the deficiency VAT and set aside the DST deficiency tax.
Respondent appealed in Court of Appeals (CA) with regard to the cancellation of DST
assessment. CA granted the petition. The Court affirmed CA’s decision. Hence,
petitioner filed a motion for reconsideration.
Issue: WON the petitioner is liable to pay the DST on its health care agreement
pursuant to Sec.185 of the National Internal Revenue Code of 1997
Ruling: Petition granted. Petitioner is not contemplated to be included in “or other
branch insurance” covered by Section 185 of NIRC because it is a Health Maintenance
Organization (HMO) and not an insurance company. HMOs primary purpose is
rendering service to its member by lowering prices and reducing the cost rather than
the risk of medical health. On the other hand, insurance businesses undertakes for a
consideration to indemnify its clients against loss, damage or liability arising from
unknown or contingent event. The term “indemnify” therein presuppose that a liability
or claim has already been incurred. In HMOs, there is no indemnity precisely because
the member merely avails of medical services to be paid or already paid in advance at
a pre-agreed price under the agreements. Moreover, HMOs play an important role in
society as partners of the State in achieving its constitutional mandate of providing
citizens with affordable health services.
Also, the DST assessment of the petitioner for the years 1996 and 1997 became moot
and academic since it availed tax amnesty under RA 9480 on December 10, 2007.
Thus, petitioner is entitled to immunity from payment of taxes for taxable year 2005
and prior years.
 FULGENCIO M. DEL CASTILLO versus RUFINO MADRILENA
G.R. No. L-24788, December 17, 1926
EN BANC, JOHNSON, J.

Facts: The purpose of this action was to recover the sum of P1,795.20 together with
47 cavans of palay or their equivalent in the sum of P5 per cavan, and costs. The said
sum of the P1,795.20, as alleged by the plaintiff, was the amount due for merchandise
sold by the plaintiff to J. Pablo Garcia and his wife during his lifetime together with
certain sums of money loaned to them from time to time. The 47 cavans of palay was
the balance of a larger number sold by the plaintiff to the defendant. The defendant
interposed a general and special defense together with a counterclaim. After hearing
the evidence upon the issue presented by the petition and answer, the Honorable M.
L. de la Rosa, auxiliary judge, denied the contention of the plaintiff in re said 47
cavans of palay and also the special defense and counterclaim of the defendant as
well as part of the claim of the plaintiff for the said sum of P1,795.20, and rendered a
judgment in favor of the plaintiff and against the defendant for the sum of P1,774.55.
From that judgment the defendant appealed. Objection was made to the admissibility
of said vales upon the ground that an internal revenue stamp, as required by the
Administrative Code, had not been placed thereon in order to make them admissible
in evidence. The lower court found that some of the chits and proof presented by the
plaintiff did not sustain his contention, and refused to allow them as evidence of the
claim of indebtedness against the defendant. After the elimination of said chits the
lower court rendered a judgment in favor of the plaintiff and against the defendant for
the amount due upon the vales admitted in evidence amounting to P1,774.55. The
lower court further ordered that the plaintiff, in order to conform with the law, should
place the revenue stamps required by law upon the vales admitted in evidence, and
that no execution should be issued upon the judgment rendered until the plaintiff had
complied with that order. From that judgment the defendant appealed.
Issue: WON the lower court erred in its decision
Ruling: No. The lower court committed an error in admitting said vales as evidence
until they were stamped in accordance with the provisions of the law. However, the
error was cured by his refusal to allow an execution upon the judgment rendered until
said vales had been stamped. The rule requiring said vales to be stamped does not
contain any provision as to the time when they shall be stamped. The result is,
therefore, that they may be stamped at the time they are executed and delivered or
at the time they are presented in evidence. The lower court evidently recognized that
fact and admitted them in evidence without being stamped, erroneously, but gave the
plaintiff an opportunity to stamp them in order to obtain an execution upon his
judgment. Section 1459 provides that the tax shall be paid by the person making said
vales, by the person signing them, by the person issuing them, or by the person
accepting them or transferring them, and shall be paid at the time such act is done or
transaction had. However, the rule is well established that this tax may be paid at any
time either before or at the time said documents are presented in evidence. The lower
court committed no error, therefore, by requiring the plaintiff in order to secure an
execution of his judgment, to place the necessary stamps upon said vales.
COMMISSIONER OF INTERNAL REVENUE versus FIREMAN'S FUND INSURANCE
COMPANY and the COURT OF TAX APPEALS
G.R. No. L-30644 March 9, 1987
SECOND DIVISION, PARAS, J

Facts: aassvv