Novie Marie B.

Anit BSA-V

Tax Planning

Tues/Fri 08/14/2015

Assignment:
My Reflection

"The best things in life are tax free.

--- Joseph Bonkowski

When I started to learn more about taxes, I was a little confused and at the same
time amused by its existence. Though at some time, I see its imposition as too
much ike you need to pay taxes on intangible things like your right to buy, your
right sell or your right to enter into transactions. These are things that you can not
see, smell, taste or even eat, right? In fact, these are certain privelages that we
acquire from having free will. But then again, taxes are what we pay for
civilization ( Holmes, 1904 ).
The burden of paying taxes now is more evident on tax investigations and
litigations due to whether these things are proved to be exempted from tax or
these are punishable tax evasion cases. The case, Commissioner of Internal
Revenue vs. Traders Royal Revenue, all pointed out to documentary tax
deficiency. Before I would discussed some points about the case, I would first
define documentary stamp and its importance. What is documentary stamp tax?
A documtary stamp tax is a national tax levied upon a right or privelege primarily
for raising revenue for the government( Section 173, NIRC ). It is charge on
transactions evidenced by stamps required to be attached in corresponding
documents, instrumentalities and papers ( Valencia and Roxas, 2014 ).
The case started on the 27th day of July, 1998, when the BIR made tax
investigations regarding all the deposits of Traders Royal Bank, a dometic
corporation duly registered with the SEC and BSP. A pre-assessment notice and
a formal letter of Demand and Assessement were given thereafter on Nov. 10,
1999 and Dec. 27, 1999 respectively. The tax investigations resulted to a
discovery
documentary stamp tax deficiency regarding its Special Savings Deposit, Mega
Savings Deposit and Trust Fund Agreements. On January 7 the following year,
Vice-president of TRB, Bayani Navarro, protested the assessment of BIR saying
that the Special Savings Deposits and Trust Indenture Agreements were not
subject to DST for the very reason that those are merely existence of a trustortrustee relationship. CIR denied the protest on December 20, 2001 saying that
the Savings Dpeosit were subject to DST under Section 180 of the Tax Code of
1977. A Petition for Review was passed by TRB to the CTA. On April 4, 2004, the
CTA gave the two issues regarding the Special Savings Deposits to CIR and that

they are subject to documentary stamp tax while the Trust Indenture Agreements
of TRB were exempted from DST giving considerations to the protest made by
TRB. CIR filed a motion for Partial Reconsideration on May 24, 2004 while TRB
filed an Omnibus Motion for Substitution of Partners and Motion for
Reconsideration. The two motions were denied by the CTA in its resolution on
September 10, 2004. Petition for Review was dismissed on Feb. 2, 2005 and
TRB's Motion for Reconsideration was denied on a resoltuion dated Feb. 14,
2005. On Aug. 8, 2005, the petition in G.R. No.s 167134 and 168491 were
consolidated in the Final Court. A thorough examination of evidences leads to the
overlapping of the concepts written in Section 180 of NIRC of 1977, as amended,
Section X407 of 1993 MORB and the Articles of Civil Code but all leading to the
argument that TRB must present an documents evidencing its affirmative stand
that those Trust indenture agreements were only ''trust funds''. The Final Court
affirmed the decision of the CTA regarding the issue on the Special Savings
Deposit but the decision regarding the Trust Indenture Agreements was reverted
and set aside ordering Traders Royal Bank to pay the documentary stamp tax
deficiency.
CIR was more focussed with the substance over form concept where the content
prevails its nomenclature while that of TRB raise the defenses given in the
Manual of Regulations for Banks. The case all ended with who has the most
sufficient reliable evidence, CIR with its tax investigations documents or TRB who
filed only a copy of Section 173 and 179 of the MORB. My thoughts with this
case agreed with the argument raised by the CIR relating to the substance of the
Trust indenture agreements though TRB could really defend that there situation
was an exemption to the general rule but they were not able to present the
needed evidences. Obviously, TRB was hiding something maybe they're true
intent. I guess, TRB just proved that its much easier to complain about the
burden of taxes but the burden of proof lies still on the taxpayers hand.