7. PHIL BANKING CORP VS CIR, G.R. NO.

170574, JANUARY 30, 1009

Facts: Petitioner Philippine Banking Corporation, a domestic corporation duly licensed
as a banking institution, offered its SSDA to its depositors. SSDA is a form of a
savings deposit evidenced by a passbook and earning a higher interest rate than a
regular savings account. Petitioner believes that the SSDA is not subject to
Documentary Stamp Tax (DST) under Section 180 of the 1977 National Internal
Revenue Code (NIRC), as amended.
CIR sent a Final assessment notice (FAN) to petitioner assessing deficiency DST based
on the outstanding balances of its SSDA. Petitioner claims that the SSDA is in the
nature of regular savings account since both types of accounts have the following
common features: They are both evidenced by a passbook; and the depositors can
make deposits or withdrawals anytime which are not subject to penalty; and both can
have a Automatic Transfer Agreement with the depositors current or checking
account.
Petitioner alleges that the only difference between the regular savings account and
the SSDA is that the SSDA is for depositors who maintain savings deposits with a
substantial average daily balance, and as an incentive, they are given higher interest
rates than regular savings accounts. These deposits are classified separately in
petitioner's financial statements in order to maintain a separate record for savings
deposits with substantial balances entitled to higher interest rates.
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 asserts that the language of
the law is clear and requires no interpretation. Section 180 of the 1977 NIRC, as
amended, provides: xx
Petitioner insists that the SSDA, being issued in the form of a passbook, cannot be
construed as a certificate of deposit subject to DST under Section 180 of the 1977
NIRC.
Petitioner argues that the DST is imposed on the basis of a mere inference or
perceived implication of what the SSDA is supposed to be and not on the basis of
what the law specifically states.
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.
Petitioner reasons that a savings passbook is not a negotiable instrument and it
cannot be denied that savings passbooks have never been taxed as certificates of
deposits.
Petitioner alleges that prior to the passage of R.A 9243, there was no law subjecting
SSDA to DST during the taxable years of 1996 and 1997. The amendatory provision in
RA 9243 now specifically includes "certificates or other evidences of deposits that are
either drawing interest significantly higher than the regular savings deposit taking

into consideration the size of the deposit and the risks involved or drawing interest
and having a specific maturity date." Petitioner admits that with this new taxing
clause, its SSDA is now subject to DST. However, the fact remains that this provision
was non-existent during the taxable years 1996 and 1997 subject of the assessments
in the present case.
Respondent contended that the SSDA is substantially the same and identical to that
of a time deposit account; 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 also 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. Based on the definition of a
certificate of deposit in Far East Bank and Trust Company v. Querimit, a certificate of
deposit may or may not be negotiable, since it may be payable only to the depositor.
The CTA ruled that the petitioner should pay the DST.
Issue: WON the SSDA is subject to DST under Section 180 of the 1977 NIRC prior to
the passage of RA 9243 in 2004
Held: Section 180 of the 1977 NIRC, as amended, provides:
Sec. 180. Stamp tax on all loan agreements, promissory notes,
bills of exchange, drafts, instruments and securities issued by
the government or any of its instrumentalities, certificates of
deposit bearing interest and others not payable on sight or
demand. On all loan agreements signed abroad wherein the
object of the contract is located or used in the Philippines; bills
of exchange (between points within the Philippines), drafts,
instruments and securities issued by the Government or any of
its instrumentalities or certificates of deposits drawing
interest, or orders for the payment of any sum of money
otherwise than at the sight or on demand, or on all promissory
notes, whether negotiable or non-negotiable, except bank
notes issued for circulation, and on each renewal of any such
note, there shall be collected a documentary stamp tax of
Thirty centavos (P0.30) on each Two hundred pesos, or
fractional part thereof, of the face value of any such
agreement, bill of exchange, draft, certificate of deposit, or
note: provided, that only one documentary stamp tax shall be
imposed on either loan agreement, or promissory note issued
to secure such loan, whichever will yield a higher tax:
provided, however, that loan agreements or promissory notes
the aggregate of which does not exceed Two hundred fifty
thousand pesos (P250,000) executed by an individual for his
purchase on installment for his personal use or that of his

family and not for business, resale, barter or hire of a house,

lot, motor vehicle, appliance or furniture shall be exempt from
the payment of the documentary stamp tax provided under
this section. (Boldfacing and underscoring supplied)
In Far East Bank and Trust Company v. Querimit, the Court defined a certificate of
deposit as "a written acknowledgment by a bank or banker of the receipt of
a sum of money on deposit which the bank or banker 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 and creditor between the bank and
the depositor is created." A certificate of deposit is also defined as "a receipt
issued by a bank for an interest-bearing time deposit coming due at a specified
future date.
Petitioner treats the SSDA as a regular savings deposit account since it is evidenced
by a passbook and allows withdrawal. Respondent treats the SSDA as a time deposit
account because of the higher interest rates and holding period. It is then significant
to differentiate a regular savings deposit and a time deposit vis--vis the SSDA to
determine if the SSDA is a certificate of deposit drawing interest referred to in Section
180 of the 1977 NIRC. A comparison of a savings account, time deposit account, and
SSDA is shown in the table below: (table very confusing)
Based on the definition and comparison, it is clear that a certificate of deposit
drawing interest as used in Section 180 of the 1977 NIRC refers to a time deposit
account. As the Bureau of Internal Revenue (BIR) explained in Revenue Memorandum
Circular No. 16-2003, the distinct features of a certificate of deposit from a technical
point of view are as follows:
a. Minimum deposit requirement;
b. Stated maturity period;
c. Interest rate is higher than the ordinary savings account;
d. Not payable on sight or demand, but upon maturity or in case of pretermination, prior notice is required; and
e. Early withdrawal penalty in the form of partial loss or total loss of
interest in case of pre-termination.
The SSDA is for depositors who maintain savings deposits with substantial
average daily balance and which earn higher interest rates. The holding
period of an SSDA floats at the option of the depositor at 30, 60, 90, 120
days or more and for maintaining a longer holding period, the depositor
earns higher interest rates. There is no pre-termination of accounts in an
SSDA because the account is simply reverted to an ordinary savings status
in case of early or partial withdrawal or if the required holding period is not
met. Based on the foregoing, the SSDA has all of the distinct
features of a certificate of deposit.
Petitioner argues that a deposit account evidenced by a passbook cannot be
construed as a certificate of deposit subject to DST under Section 180 of the 1977
NIRC. In International Exchange Bank v. Commissioner of Internal Revenue, this Court
categorically ruled that a passbook representing an interest earning deposit

account issued by a bank qualifies as a certificate of deposit drawing

interest and should be subject to DST. The Court added that "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."
Petitioner also argues that prior to the passage of RA 9243, there was no law
subjecting SSDA to DST. In International Exchange Bank v. Commissioner of Internal
Revenue, the Court held that the amendment to include "other evidences of deposits
that are drawing interest significantly higher than the regular savings deposit" was
intended to eliminate the ambiguity. The Court explained:
If at all, the further amendment was intended to eliminate
precisely the scheme used by banks of issuing passbooks to
"cloak" its time deposits as regular savings deposits. This is
reflected from the following exchanges between Mr. Miguel
Andaya of the Bankers Association of the Philippines and
Senator Ralph Recto, Senate Chairman of the Committee on
Ways and Means, during the deliberations on Senate Bill No.
2518 which eventually became RA 9243:
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.
Petitioner's SSDA has the following features:
1. Although the money placed in the SSDA can be withdrawn anytime,
the money is subject to a holding period in order to earn a higher
interest rate. Otherwise, in case of premature withdrawal, the
depositor will not earn the preferred interest ranging from 8% or
higher but only the normal interest rate on regular savings deposit.
2. In order to qualify for an SSDA, the depositor must place a
substantial amount of money of not less than P50,000. This amount
is even larger than what is needed to open a time deposit which is
P20,000. Aside from the substantial amount of money required, this
amount must be maintained within a certain period just like a time

3.

deposit.
On the issue of penalty, in an SSDA, if the depositor withdraws the
money and the balance falls below the "minimum balance" of
P50,000, the interest is reduced. This condition is identical to that
imposed on a time deposit that is withdrawn before maturity.

Based on these features, it is clear that the SSDA is a certificate of deposit

drawing interest subject to DST even if it is evidenced by a passbook and
non-negotiable in character. In International Exchange Bank v. Commissioner of
Internal Revenue, we held that:
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.
Moreover, a certificate of deposit may be payable to the depositor, to the order of
the depositor, or to some other person or his order. From the use of the conjunction
or, instead of and, the negotiable character of a certificate of deposit is immaterial
in determining the imposition of DST.
In Banco de Oro Universal Bank v. Commissioner of Internal Revenue, this Court
upheld the CTA's decision and ruled:
The CTA en banc likewise declared that in practice, a time
deposit transaction is covered by a certificate of deposit while
petitioner's Investment Savings Account (ISA) transaction is
through a passbook. Despite the differences in the form of any
documents, the CTA en banc ruled that a time deposit and ISA
have essentially the same attributes and features. It explained
that like time deposit, ISA transactions bear a fixed term or
maturity because the bank acknowledges receipt of a sum of
money on deposit which the bank promises to pay the
depositor, bearer or to the order of a bearer on a specified
period of time. Section 180 of the 1997 NIRC does not
prescribe the form of a certificate of deposit. It may be any
'written acknowledgment by a bank of the receipt of money on
deposit.' The definition of a certificate of deposit is all
encompassing to include a savings account deposit such as
ISA. (Emphasis supplied)
(There were further discussions on tax amnesty which I no longer included)

8. FORT BONIFACIO DEVELOPMENT VS CIR, G.R NO. 164155 AND 175543,

FEB 25 2014
Facts: Congress enacted RA 7227 creating the Bases Conversion Development

Authority (BCDA) for the purpose of raising funds through sale to private investors of
military camps. To do this, the BCDA established the FBDC, Fort Bonifacio
Development Corporation for the purpose of enabling it to develop a 440 hectare
area in Fort Bonifacio for mixed residential, commercial, business, institutional,
recreational, tourism, and other purposes. At the time of its incorporation, FBDC was
a wholly-owned subsidiary of BCDA.
The Republic of the Philippines transferred by land grant to FBDC through a special
patent a 214 hectare land as part of its scheme that would enable BCDA to raise
funds through FBDC. FBDC in turn executed a promissory note in favor of the republic
who assigned such promissory note to BCDA which assigned it back t FBDC as full
and complete payment of BCDAs subscription to FBDCs authorized capital stock.
The Republic executed a deed of absolute sale with quitclaim in favor of FBDC. The
Register of deeds issued an OCT replacing the special patent and in the same month,
the Congress enacted R.A. 7917, declaring exempt from all forms of taxes the
proceeds of the Government sale of the Fort Bonifacio land. Subsequently,
fulfilling its task of raising funds for specified government projects, BCDA sold at
public bidding 55% of its shares to FBDS to private investors, retaining ownership of
the remaining 45%.
More than 3 years later, CIR issued a Letter of Authority providing for the examination
of FBDCs books and other accounting records. The CIR issued a final assessment
notice to FBDC for deficiency of documentary stamp tax based on the Republics
1995 sale to it of the Fort Bonifacio land. FBDC protested the assessment and wrote a
letter to the CIR invoking RA 7917 which exempted the proceeds of the sale of the
Fort Bonifacio land from all forms of taxes. When CIR failed to act on the request for
tax exemption despite the lapse of the 180 day period, the FBDC filed a petition for
review with the CTA.
CTA denied FBDCs petition and affirmed the CIRs DST assessment. The CTA treated
the Republics issuance of the Special patent separate and distinct from the deed of
absolute sale that it executed. The former, said the CTA, was tax exempt but that
latter was not. The CA affirmed the CTAs decision.
During the pendency of the petitions, FBDC informed the court that the disputed
assessment had already been paid through a Special allotment release order issued
by the DBM and that such amount covered the payment of DST, transfer fees, 5%
withholding tax and registration fees relative to the sale of portion of the Fort
Bonifacio, chargeable against the Military camp sale proceeds funds. The CIR claimed
that the payment was illegal since it breached the scope of the tax exemption
provided in Section 8 of RA 7917 and since BCDA paid the tax for the benefit of FBDC,
a private corporation.
Issue: WON CA erred in ruling that FBDC was liable for the payment of the DST and a
20% delinquency interest on the deed of absolute sale of the Fort Bonifacio land that
the republic executed in FBDCs favor

Held: The CTA ruled that, while the Special Patent that the Republic issued to FBDC in
consideration of P71.2 billion plus was exempt from the payment of DST, the Deed of
Absolute Sale that the Republic subsequently executed in FBDCs favor covering the
same land is not.
Section 196 of the NIRC, as amended by Republic Act 7660, provides:
Sec. 196. Stamp tax on deeds of sale and conveyance of real
property. On all conveyances, deeds, instruments, or
writings, other than grants, patents, or original certificates of
adjudication issued by the Government, whereby any lands,
tenements or other realty sold shall be granted, assigned,
transferred, or otherwise conveyed to the purchaser or
purchasers, or to any other person or persons designated by
such purchaser or purchasers, there shall be collected a
documentary stamp tax at the following rates: x x x.
(Emphasis supplied)
But the two documentsthe Special Patent and the Deed of Absolute Salecovered
the Republics conveyance to FBDC of the same Fort Bonifacio land for the same
price that the FBDC paid but once. It is one transaction, twice documented.
On February 7, 1995 the Republic through the President, issued Special Patent 3596
to FBDC pursuant to an Act of Congress or R.A. 7227. That legislative act removed
the public character of the Fort Bonifacio land and allowed the President to cede
ownership of the same to FBDC, then a wholly-owned government corporation under
the BCDA, for the price of P71.2 billion plus, covered by a negotiable promissory note.
The Republic could not just spend or use the money it received from the sale without
authority from Congress. In this case, the basis for appropriation is found also in R.A.
7227 which earmarked the proceeds of the sale of the Fort Bonifacio land for use in
capitalizing the BCDA. Section 6 of R.A. 7227 thus provides:
Section 6. Capitalization. The Conversion Authority [BCDA]
shall have an authorized capital of One hundred billion pesos
(P100,000,000,000) which may be fully subscribed by the
Republic of the Philippines and shall either be paid up
from the proceeds of the sales of its land assets as
provided for in Section 8 of this Act or by transferring to
the Conversion Authority properties valued in such amount.
(Emphasis supplied)
At the time the sale subject of this case was entered into, FBDC was a wholly-owned
subsidiary of the BCDA pursuant to Section 16 of R.A. 7227. Notably, the Republic
sold the Fort Bonifacio land to FBDC and the latter paid for it with a promissory note.
When the Republic in turn assigned that promissory note to BCDA, not only did it
comply with its obligation under the above provision to capitalize BCDA from the
proceeds of the sales of its land assets but it also enabled the latter to fully and
completely pay for its subscription to FBDCs authorized capital stock.
Consequently, to tax the proceeds of that sale would be to tax an
appropriation made by law, a power that the Commissioner of Internal

Revenue does not have.

The Republics subsequent execution of a Deed of Absolute Sale cannot be
regarded as a separate transaction subject to the payment of DST . The
Republics sale of the land to FBDC under the Special Patent was a complete and
valid sale that conveyed ownership of the land to the buyer. Notably, FBDC paid for
the land with a negotiable promissory note. Indeed, paragraph 4 of the Deed of
Absolute Sale acknowledges the absolute and irrevocable nature of the sale made
under the special patent. Thus, the pertinent portion of paragraph 4 states:
4. To implement the transfer and registration of the Subject
Property in the name of the Buyer [FBDC], the Seller [Republic]
has issued or shall hereafter cause to be issued, a Special
Patent which will absolutely and irrevocably grant and
convey the legal and beneficial title to the Subject
Property to and in favor of the Buyer. x x x. (Emphasis
supplied)
Clearly, in acknowledging that the Republic has issued x x x a Special Patent
which will absolutely and irrevocably grant and convey the legal title over
the land to FBDC, the Republic in effect admitted that the Deed of Absolute Sale
was only a formality, not a vehicle for conveying ownership, that it thought
essential for the issuance of an Original Certificate of Title (OCT) covering
the land. The issuance of the OCT lent itself to unrestricted commercial use that
helped attain the laws objective of raising through the BCDA and its subsidiaries the
funds needed for specified government projects.
DST is by nature, an excise tax since it is levied on the exercise by persons of
privileges conferred by law. These privileges may cover the creation, modification
or termination of contractual relationships by executing specific documents like
deeds of sale, mortgages, pledges, trust and issuance of shares of stock. The sale of
Fort Bonifacio land was not a privilege but an obligation imposed by law
which was to sell lands in order to fulfill a public purpose. To charge DST on
a transaction which was basically a compliance with a legislative mandate
would go against its very nature as an excise tax .
Besides, it is clear from Section 8 of R.A. 7227 that the capital of BCDA, which shall
come from the sales proceeds and/or transfers of certain Metro Manila military
camps, was not intended to be diminished by the payment of DST. Section 8 states:
SEC. 8. Funding Scheme. The capital of the Conversion
Authority shall come from the sales proceeds and/or
transfers of certain Metro Manila military camps,
including all lands covered by Proclamation No. 423,
series of 1957, commonly known as Fort Bonifacio and
Villamor (Nichols) Air Base, namely: x x x x x x x
The President is hereby authorized to sell the above lands, in
whole or in part, which are hereby declared alienable and
disposable pursuant to the provisions of existing laws and

regulations governing sales of government properties:

Provided, That no sale or disposition of such lands will be
undertaken until a development plan embodying projects for
conversion shall be approved by the President in accordance
with paragraph (b), Section 4, of this Act. However, six (6)
months after approval of this Act, the President shall
authorize the Conversion Authority to dispose of
certain areas in Fort Bonifacio and Villamor as the
latter so determines. The Conversion Authority shall provide
the President a report on any such disposition or plan for
disposition within one (1) month from such disposition or
preparation of such plan. The proceeds from any sale,
after deducting all expenses related to the sale, of
portions of Metro Manila military camps as authorized
under this Act, shall be used for the following purposes
with their corresponding percent shares of proceeds: x
x x (Emphasis supplied)
Had FBDC paid the amount on February 8, 1995 when it was supposed to be due,
such payment would have resulted in diminishing the proceeds of the sale that the
Republic received and turned over to BCDA to capitalize it. The above-quoted
provision of Section 8 clearly exempted the proceeds of the sale of the Fort
Bonifacio land from all forms of taxes, including DST.
As it developed, while this case was pending before this Court, the BCDA paid the
DST assessment for the benefit of FBDC through a government release of funds from
the national treasury, chargeable against the Military Camps Sale Proceeds Fund.
Clearly, by allowing such payment, the government acknowledges that it made the
private investors who submitted bids to acquire 55% of the capital stock of FBDC
believe that the proceeds of the governments sale of the land that capitalized FBDC
was exempt from all forms of taxes as the law provides. Indeed, the government
warranted under the Deed of Absolute Sale it executed in FBDCs favor that [T]here
are no x x x taxes due and owing on or in respect of the subject property or the
transfer thereof in favor of the buyer.
With the Courts above ruling, it would be useless to resolve the further issue of
whether or not the case has been rendered moot and academic by BCDAs payment
of the DST assessment.

9. CIR VS MANILA BANKERS' LIFE INSURANCE CORP, G.R. NO. 169103,

MARCH 16, 2011
Facts: Respondent Manila Bankers life insurance corporation is a duly organized
domestic corporation primarily engaged in the life insurance business. Petitioner CIR
issued a Letter of Authority authorizing a special team to examine Respondents
books of accounts and other accounting records. Petitioner issued a preliminary
assessment notice for deficiency internal revenue taxes to which respondent agreed
to except to the amount representing the documentary stamp tax on its policy

premiums and penalties.

Petitioner issued a formal letter of demand and one of the assessment notices
pertained to the DST due on respondents policy premiums. The Respondent filed its
protest with the BIR but since the latter did not act upon on the protest, the
respondent filed with the CTA a cancellation of assessment notice invoking similar
cases of Jardine-CMA life insurance vs CIR wherein the CTA held that the tax base to
be used in computing the DST is the value at the time the instrument is issued
because the DST is levied and paid only once, which is at the time the taxable
document is issued.
CTA granted the respondents petition and ordered the cancellation and withdrawal of
the assessment. The CA upheld that decision of the CTA. Court of Appeals sustained
its ruling, and stated that the Lincoln Case was not applicable because the increase
in the sum assured in Lincoln's insurance policy was definite and determinable at the
time such policy was issued as the automatic increase clause, which allowed for the
increase, formed an integral part of the policy; whereas in the respondent's case,
"the tax base of the disputed deficiency assessment was not [a] definite or
determinable increase in the sum assured.
Issue: WON Manila Bankers is to pay for the deficiency DST on the increase the
coverage premium policies
Held: As can be gleaned from the facts, the deficiency documentary stamp tax was
assessed on the increases in the life insurance coverage of two kinds of policies : the
"Money Plus Plan," which is an ordinary term life insurance policy; and the group life
insurance policy. The increases in the coverage of the life insurance policies were
brought about by the premium payments made subsequent to the issuance of the
policies. The Money Plus Plan is a 20-year term ordinary life insurance plan with a
"Guaranteed Continuity Clause" which allowed the policy holder to continue the
policy after the 20-year term subject to certain conditions. Under the plan, the policy
holders paid their premiums in five separate periods, with the premium payments,
after the first period premiums, to be made only upon reaching a certain age. The
succeeding premium payments translated to increases in the sum assured. Thus, the
petitioner believed that since the documentary stamp tax was affixed on the policy
based only on the first period premiums, then the succeeding premium payments
should likewise be subject to documentary stamp tax. In the case of respondent's
group insurance, the deficiency documentary stamp tax was imposed on the
premiums for the additional members to already existing and effective master
policies. The petitioner concluded that any additional member to the group of
employees, who were already insured under the existing mother policy, should
similarly be subjected to documentary stamp tax.
The resolution of this case hinges on the validity of the imposition of
documentary stamp tax on increases in the coverage or sum assured by
existing life insurance policies, even without the issuance of new policies.
In view of the fact that the assessment for deficiency documentary stamp tax

covered the taxable year 1997, the relevant and applicable legal provisions are those
found in the 1977 National Internal Revenue Code (Tax Code) as amended, to wit:
Section 173. Stamp Taxes Upon Documents, Loan Agreements,
Instruments and Papers. Upon documents, instruments, loan
agreements and papers, and upon acceptances, assignments,
sales and transfers of the obligation, right or property incident
thereto, there shall be levied, collected and paid for, and in
respect of the transaction so had or accomplished, the
corresponding documentary stamp taxes prescribed in the
following sections of this Title, by the person making, signing,
issuing, accepting, or transferring the same wherever the
document is made, signed, issued, accepted, or transferred
when the obligation or right arises from Philippine sources or
the property is situated in the Philippines, and the same time
such act is done or transaction had: Provided, That whenever
one party to the taxable document enjoys exemption from the
tax herein imposed, the other party who is not exempt shall be
the one directly liable for the tax.
Section 183. Stamp Tax on Life Insurance Policies. On all
policies of insurance or other instruments by whatever name
the same may be called, whereby any insurance shall be
made or renewed upon any life or lives, there shall be
collected a documentary stamp tax of fifty centavos on
each two hundred pesos or fractional part thereof, of the
amount insured by any such policy. (Emphases ours.)
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. It is in the
nature of an excise tax because it is imposed upon the privilege,
opportunity or facility offered at exchanges for the transaction of the
business. It is an excise upon the facilities used in the transaction of the
business distinct and separate from the business itself.
To elucidate, documentary stamp tax is levied on the exercise of certain privileges
granted by law for the creation, revision, or termination of specific legal relationships
through the execution of specific instruments. Examples of these privileges, the
exercise of which are subject to documentary stamp tax, are leases of lands,
mortgages, pledges, trusts and conveyances of real property. Documentary stamp
tax is thus imposed on the exercise of these privileges through the execution of
specific instruments, independently of the legal status of the transactions giving rise
thereto. The documentary stamp tax must be paid upon the issuance of
these instruments, without regard to whether the contracts which gave rise
to them are rescissible, void, voidable, or unenforceable.
Accordingly, the documentary stamp tax on insurance policies, though
imposed on the document itself, is actually levied on the privilege to

conduct insurance business. Under Section 173, the documentary stamp tax
becomes due and payable at the time the insurance policy is issued, with
the tax based on the amount insured by the policy as provided for in
Section 183.
Documentary Stamp Taxon the "Money Plus Plan"
The petitioner would have us reverse both the CTA and the Court of Appeals based on
our decision in Commissioner of Internal Revenue v. Lincoln Philippine Life Insurance
Company, Inc.
The Lincoln case has been invoked by both parties in different stages of this case.
The respondent relied on the CTA's ruling in the Lincoln case when it elevated its
protest there; and when we reversed the CTA's ruling therein, the petitioner called
the Court of Appeals' attention to it, and prayed for a decision upholding the
assessment for deficiency documentary stamp tax just like in the Lincoln case.
It is therefore necessary to briefly discuss the Lincoln case to determine its
applicability, if any, to the case now before us. Prior to 1984, Lincoln Philippine Life
Insurance Company, Inc. (Lincoln) had been issuing its "Junior Estate Builder Policy," a
special kind of life insurance policy because of a clause which provided for an
automatic increase in the amount of life insurance coverage upon attainment of a
certain age by the insured without the need of a new policy. As Lincoln paid
documentary stamp taxes only on the initial sum assured, the CIR issued a deficiency
documentary stamp tax assessment for the year 1984, the year the clause took
effect. Both the CTA and the Court of Appeals found no basis for the deficiency
assessment. As discussed above, however, this Court reversed both lower courts and
sustained the CIR's assessment.
This Court ruled that the increase in the sum assured brought about by the
"automatic increase" clause incorporated in Lincoln's Junior Estate Builder Policy was
still subject to documentary stamp tax, notwithstanding that no new policy was
issued, because the date of the effectivity of the increase, as well as its
amount, were already definite and determinable at the time the policy was
issued. As such, the tax base under Section 183, which is "the amount fixed
in the policy," is "the figure written on its face and whatever increases will
take effect in the future by reason of the 'automatic increase clause. This
Court added that the automatic increase clause was "in the nature of a conditional
obligation under Article 1181, by which the increase of the insurance coverage shall
depend upon the happening of the event which constitutes the obligation."
Since the Lincoln case, wherein the then CIR's arguments for the BIR are very similar
to the petitioner's arguments herein, was decided in favor of the BIR, the petitioner is
now relying on our ruling therein to support his position in this case. Although the two
cases are similar in many ways, they must be distinguished by the nature of the
respective "clauses" in the life insurance policies involved, where we note a major
difference. In Lincoln, the relevant clause is the " Automatic Increase Clause"
which provided for the automatic increase in the amount of life insurance coverage
upon the attainment of a certain age by the insured, without any need for another

contract. In the case at bar, the clause in contention is the " Guaranteed Continuity
Clause" in respondent's Money Plus Plan, which reads:
GUARANTEED CONTINUITY
We guarantee the continuity of this Policy until the Expiry Date
stated in the Schedule provided that the effective premium is
consecutively paid when due or within the 31-day Grace
Period.
We shall not have the right to change premiums on your Policy
during the 20-year Policy term.
At the end of each twenty-year period, and provided that you
have not attained age 55, you may renew your Policy for a
further twenty-year period. To renew, you must submit proof of
insurability acceptable to MBLIC and pay the premium due
based on attained age according to the rates prevailing at the
time of renewal.
A simple reading of respondent's guaranteed continuity clause will show
that it is significantly different from the "automatic increase clause " in
Lincoln. The only things guaranteed in the respondent's continuity clause were: the
continuity of the policy until the stated expiry date as long as the premiums were
paid within the allowed time; the non-change in premiums for the duration of the 20year policy term; and the option to continue such policy after the 20-year period,
subject to certain requirements. In fact, even the continuity of the policy after its
term was not guaranteed as the decision to renew it belonged to the insured, subject
to certain conditions. Any increase in the sum assured, as a result of the
clause, had to survive a new agreement between the respondent and the
insured. The increase in the life insurance coverage was only corollary to
the new premium rate imposed based upon the insured's age at the time
the continuity clause was availed of . It was not automatic, was never
guaranteed, and was certainly neither definite nor determinable at the time
the policy was issued.
Therefore, the increases in the sum assured brought about by the guaranteed
continuity clause cannot be subject to documentary stamp tax under Section 183 as
insurance made upon the lives of the insured.
However, it is clear from the text of the guaranteed continuity clause that what the
respondent was actually offering in its Money Plus Plan was the option to renew the
policy, after the expiration of its original term. Consequently, the acceptance of this
offer would give rise to the renewal of the original policy.
The petitioner avers that these life insurance policy renewals make the respondent
liable for deficiency documentary stamp tax under Section 198. Section 198 of the
old Tax Code reads:
Section 198. Stamp Tax on Assignments and Renewals of
Certain Instruments. Upon each and every assignment or

transfer of any mortgage, lease or policy of insurance, or the

renewal or continuance of any agreement, contract, charter, or
any evidence of obligation or indebtedness by altering or
otherwise, there shall be levied, collected and paid a
documentary stamp tax, at the same rate as that imposed on
the original instrument.
Section 198 speaks of assignments and renewals. In the case of insurance policies,
this section applies only when such policy was assigned or transferred. The provision
which specifically applies to renewals of life insurance policies is Section 183:
Section 183. Stamp Tax on Life Insurance Policies. On all
policies of insurance or other instruments by whatever name
the same may be called, whereby any insurance shall be
made or renewed upon any life or lives, there shall be
collected a documentary stamp tax of fifty centavos on
each two hundred pesos or fractional part thereof, of the
amount insured by any such policy. (Emphasis ours.)
Section 183 is a substantial reproduction of the earlier documentary stamp tax
provision, Section 1449 (j) of the Administrative Code of 1917. Regulations No. 26, or
The Revised Documentary Stamp Tax Regulations, provided the implementing rules
to the provisions on documentary stamp tax under the Administrative Code of 1917.
Section 54 of the Regulations, in reference to what is now Section 183, explicitly
stated that the documentary stamp tax imposed under that section is also collectible
upon renewals of life insurance policies, viz.:
Section 54.Tax also due on renewals. The tax
under this section is collectible not only on the
original policy or contract of insurance but
also upon the renewal of the policy or
contract of insurance.
To argue that there was no new legal relationship created by the availment of the
guaranteed continuity clause would mean that any option to renew, integrated in the
original agreement or contract, would not in reality be a renewal but only a discharge
of a pre-existing obligation. The truth of the matter is that the guaranteed continuity
clause only gave the insured the right to renew his life insurance policy which had a
fixed term of twenty years. And although the policy would still continue with
essentially the same terms and conditions, the fact is, its maturity date, coverage,
and premium rate would have changed. We cannot agree with the CTA in its
holding that "the renewal, is in effect treated as an increase in the sum
assured since no new insurance policy was issued." The renewal was not
meant to restore the original terms of an old agreement, but instead it was
meant to extend the life of an existing agreement, with some of the
contract's terms modified. This renewal was still subject to the acceptance and to
the conditions of both the insured and the respondent. This is entirely different from a
simple mutual agreement between the insurer and the insured, to increase the
coverage of an existing and effective life insurance policy.

It is clear that the availment of the option in the guaranteed continuity

clause will effectively renew the Money Plus Plan policy, which is
indisputably subject to the imposition of documentary stamp tax under
Section 183 as an insurance renewed upon the life of the insured.
Documentary Stamp Taxon Group Life Insurance
The petitioner is also asking this Court to sustain his deficiency documentary stamp
tax assessment on the additional premiums earned by the respondent in its group life
insurance policies.
This Court, in Pineda v. Court of Appeals has had the chance to a discuss the concept
of "group insurance," to wit:
In its original and most common form, group insurance
provides life or health insurance coverage for the employees of
one employer.
The coverage terms for group insurance are usually stated in a
master agreement or policy that is issued by the insurer to a
representative of the group or to an administrator of the
insurance program, such as an employer. The employer acts as
a functionary in the collection and payment of premiums and
in performing related duties. Likewise falling within the ambit
of administration of a group policy is the disbursement of
insurance payments by the employer to the employees. Most
policies, such as the one in this case, require an employee to
pay a portion of the premium, which the employer deducts
from wages while the remainder is paid by the employer. This
is known as a contributory plan as compared to a noncontributory plan where the premiums are solely paid by the
employer.
Although the employer may be the titular or named insured,
the insurance is actually related to the life and health of the
employee. Indeed, the employee is in the position of a real
party to the master policy, and even in a non-contributory
plan, the payment by the employer of the entire premium is a
part of the total compensation paid for the services of the
employee. Put differently, the labor of the employees is the
true source of the benefits, which are a form of additional
compensation to them. (Emphasis ours.)
When a group insurance plan is taken out, a group master policy is issued with the
coverage and premium rate based on the number of the members covered at that
time. In the case of a company group insurance plan, the premiums paid on the
issuance of the master policy cover only those employees enrolled at the time such
master policy was issued. When the employer hires additional employees during the
life of the policy, the additional employees may be covered by the same group
insurance already taken out without any need for the issuance of a new policy.

The respondent claims that since the additional premiums represented the additional
members of the same existing group insurance policy, then under our tax laws, no
additional documentary stamp tax should be imposed since the appropriate
documentary stamp tax had already been paid upon the issuance of the master
policy. The respondent asserts that since the documentary stamp tax, by its nature, is
paid at the time of the issuance of the policy, "then there can be no other imposition
on the same, regardless of any change in the number of employees covered by the
existing group insurance.
To resolve this issue, it would be instructive to take another look at Section 183: On
all policies of insurance or other instruments by whatever name the same may be
called, whereby any insurance shall be made or renewed upon any life or lives.
The phrase "other instruments" as also found in the earlier version of Section 183,
i.e., Section 1449 (j) of the Administrative Code of 1917, was explained in Regulations
No. 26, to wit:
Section 52."Other instruments" defined. The term "other
instruments" includes any instrument by whatever name the
same is called whereby insurance is made or renewed, i.e., by
which the relationship of insurer and insured is created or
evidenced, whether it be a letter of acceptance, cablegrams,
letters, binders, covering notes, or memoranda. (Emphasis
ours.)
Whenever a master policy admits of another member, another life is insured and
covered. This means that the respondent, by approving the addition of another
member to its existing master policy, is once more exercising its privilege
to conduct the business of insurance, because it is yet again insuring a life .
It does not matter that it did not issue another policy to effect this change, the fact
remains that insurance on another life is made and the relationship of insurer and
insured is created between the respondent and the additional member of that master
policy. In the respondent's case, its group insurance plan is embodied in a
contract which includes not only the master policy, but all documents
subsequently attached to the master policy. Among these documents are the
Enrollment Cards accomplished by the employees when they applied for membership
in the group insurance plan. The Enrollment Card of a new employee, once registered
in the Schedule of Benefits and attached to the master policy, becomes evidence of
such employee's membership in the group insurance plan, and his right to receive
the benefits therein. Everytime the respondent registers and attaches an Enrollment
Card to an existing master policy, it exercises its privilege to conduct its business of
insurance and this is patently subject to documentary stamp tax as insurance made
upon a life under Section 183.
The respondent would like this Court to ignore the petitioner's argument that
renewals of insurance policies are also subject to documentary stamp tax for being
raised for the first time. This Court was faced with the same dilemma in
Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing

Corporation, when the petitioner also raised an issue therein for the first time in the
Supreme Court. In addressing the procedural lapse, we said:
As clearly ruled by Us "To allow a litigant to assume a different
posture when he comes before the court and challenges the
position he had accepted at the administrative level," would be
to sanction a procedure whereby the Court which is
supposed to review administrative determinations would not
review, but determine and decide for the first time, a question
not raised at the administrative forum. Thus it is well settled
that under the same underlying principle of prior exhaustion of
administrative remedies, on the judicial level, issues not raised
in the lower court cannot generally be raised for the first time
on appeal. . . . .
However, in the same case, we also held that:
Nonetheless it is axiomatic that the State can never be in
estoppel, and this is particularly true in matters involving
taxation. The errors of certain administrative officers should
never be allowed to jeopardize the government's financial
position. (Emphasis ours.)
Along with police power and eminent domain, taxation is one of the three basic and
necessary attributes of sovereignty. Taxes are the lifeblood of the government and
their prompt and certain availability is an imperious need. It is through taxes that
government agencies are able to operate and with which the State executes its
functions for the welfare of its constituents. It is for this reason that we cannot let the
petitioner's oversight bar the government's rightful claim.
This Court would like to make it clear that the assessment for deficiency
documentary stamp tax is being upheld not because the additional premium
payments or an agreement to change the sum assured during the effectivity of an
insurance plan are subject to documentary stamp tax, but because documentary
stamp tax is levied on every document which establishes that insurance was made or
renewed upon a life.

10. H. TAMBUNTING PAWNSHOP VS CIR, G.R. NO. 171138, APRIL 7, 2009

Facts: The CIR issued a pre-assessment notice against Tambunting, among others, for
DST. Thereafter, the CIR issued an assessment notice with the corresponding demand
letters for the payment of the DST and the corresponding compromise penalty.
Tambunting filed a written protest to the assessment alleging that it was not subject
to DST under Section 195 of the NIRC because DST were applicable only to pledge
contract, and the pawnshop business did not involve contracts of pledge.
When the written protest was not acted upon by the CIR, Tambunting filed a petition
with the CTA who partially granted the petition and ordered petitioner to pay
deficiency VAT but was not subjected to pay DST. But the CA reversed the decision
and ordered Tambunting to pay the DST.

Issue: WON CA erred in finding petitioner liable for the DST on pawn tickets?
Held: Petitioner contends that it is the document evidencing a pledge of personal
property which is subject to the DST. A pawn ticket is defined under Section 3 of
Presidential Decree No. 114 as "the pawnbroker's receipt for a pawn [and] is
neither a security nor a printed evidence of indebtedness". Petitioner argues
that since the document taxable under Section 195 must show the existence of a
debt, a pawn ticket which is merely a receipt for a pawn is not subject to DST.
Petitioner further contends that the DST is imposed on the documents issued, not the
"transactions so had or accomplished". It insists that the document to be taxed under
the transaction contemplated should be the pledge agreement, if any is issued, not
the pawn ticket.
On the other hand, the CIR, through the Office of the Solicitor General, argues that
Section 195 of the NIRC expressly provides that a documentary stamp tax shall be
collected on every pledge of personal property as a security for the fulfillment of the
contract of loan. Since the transactions in a pawnshop business partake of the nature
of pledge transactions, then pawn transactions evidenced by pawn tickets, are
subject to documentary stamp taxes. The CIR further argues that the pawn ticket is
the pledge contract itself and thus, it is subject to documentary stamp tax.
After considering the submission of the parties, we find that the instant petition lacks
merit.
First, on the subject of pawn tickets, the Bangko Sentral ng Pilipinas Manual of
Regulations for Non-Bank Financial Institutions provides:
Sec. 4322P. Pawn Ticket. Pawnshops shall at the time of the
loan, deliver to each pawner a pawn ticket which shall contain
the following:
a. Name and residence of the pawner;
b. Date the loan is granted;
c. Amount of the principal loan;
d. Interest rate in percent;
e. Period of maturity;
f. Description of the pawn;
g. Expiry date of redemption period;
h. Signature of the pawnshop's authorized representative;
i. Signature or thumbmark of the pawner or his authorized
representative; and
j. Such other terms and conditions as may be agreed upon
between the pawnshop and the pawner.
Notably, a pledge is 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 fulfillment of which
the thing pledged, with all its accessions and accessories, shall be returned to the
debtor or to the third person. The pawn ticket is required to contain the same

essential information that would be found in a pledge agreement . Only the

nomenclature of the requirements in the pawn ticket is changed to refer to the
specific kind of pledge transactions undertaken by pawnshops. The property or
thing pledged is referred to as the pawn, the creditor (pledgee) is referred
to as the pawnee and the debtor (pledgor) is referred to as the pawner.
Petitioner's explanations fail to dissuade us from recognizing the pawn ticket as the
document that evidences the pledge. True, the pawn ticket is neither a security
nor a printed evidence of indebtedness. But, precisely being a receipt for a
pawn, it documents the pledge. A pledge is a real contract, hence, it is
necessary in order to constitute the contract of pledge, that the thing
pledged be placed in the possession of the creditor, or of a third person by
common agreement. Consequently, the issuance of the pawn ticket by the
pawnshop means that the thing pledged has already been placed in its
possession and that the pledge has been constituted.
Second, on the subject of documentary stamp tax, the NIRC provides:
SEC. 173.Stamp Taxes Upon Documents, Loan Agreements,
Instruments and Papers. Upon documents, instruments, loan
agreements and papers, and upon acceptances, assignments,
sales and transfers of the obligation, right or property incident
thereto, there shall be levied, collected and paid for, and in
respect of the transaction so had or accomplished, the
corresponding documentary stamp taxes prescribed in the
following Sections . . . (Emphasis supplied.)
SEC. 195.Stamp Tax on Mortgages, Pledges and Deeds of
Trust. On every mortgage or pledge of lands, estate, or
property, real or personal, heritable or movable, whatsoever,
where the same shall be made as a security for the payment of
any definite and certain sum of money lent at the time or
previously due and owing or forborne to be paid, being
payable, and on any conveyance of land, estate, or property
whatsoever, in trust or to be sold, or otherwise converted into
money which shall be and intended only as security,
either by express stipulation or otherwise, there shall
be collected a documentary stamp tax at the following
rates:
a. When the amount secured does not exceed Five thousand
pesos (P5,000), Twenty pesos (P20.00).
b. On each Five thousand pesos (P5,000), or fractional part
thereof in excess of Five thousand pesos (P5,000), an
additional tax of Ten pesos (P10.00). (Emphasis supplied.)
xxx xxx xxx
The law imposes DST on documents issued in respect of the specified
transactions, such as pledge, and not only on papers evidencing
indebtedness. Therefore, a pawn ticket, being issued in respect of a pledge

transaction, is subject to documentary stamp tax.

Third, the issue in this case is not novel. The question of whether pawnshop
transactions evidenced by pawn tickets are subject to documentary stamp taxes has
been answered in the affirmative in Michel J. Lhuillier Pawnshop, Inc. v. Commissioner
of Internal Revenue. There the Court held:
xxx xxx xxx
Section 195 of the National Internal Revenue Code (NIRC)
imposes a DST on every pledge regardless of whether
the same is a conventional pledge governed by the Civil
Code or one that is governed by the provisions of P.D.
No. 114. All pledges are subject to DST, unless there is
a law exempting them in clear and categorical
language. . . .
xxx xxx xxx
. . . No law on legal hermeneutics could change the fact that
the entries contained in a pawnshop ticket spell out a contract
of pledge and that the exercise of the privilege to conclude
such a contract is taxable under Section 195 of the NIRC.
Even so, we note that the present case was filed with the Supreme Court before
September 11, 2006, when the Court resolved for the first time the matter of
surcharges and interest for failure to pay documentary stamp taxes on pledge
transactions in Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of Internal Revenue.
Hence, as in the said case, we can still ascribe good faith to petitioner. Consequently,
the imposition of surcharges and interest in the present case must also be deleted.

11. CIR VS LINCOLN PHILIPPINE LIFE INSURANCE, G.R. NO. 119176, MARCH
19, 2002
Facts: Lincoln Philippine Life insurance co. is a domestic corporation engaged in the
life insurance business. In the years prior to 1984, private respondent issued a
special kind of life insurance policy known as the Junior Estate Builder Policy, the
distinguishing feature of which is a clause providing for an automatic increase in the
amount of life insurance coverage upon attainment of a certain age by the insured
without the need of issuing a new policy. DST due on the policy were paid by
petitioner only on the initial sum assured.
In 1984, private respondent also issued 50,000 shares of stock dividends with a par
value of P100.00 per share or a total par value of P5,000,000.00. The actual value of
said shares, represented by its book value, was P19,307,500.00. Documentary stamp
taxes were paid based only on the par value of P5,000,000.00 and not on the book
value.
Subsequently, petitioner issued a deficiency DST assessment for the year 1984
corresponding to the amount of automatic increase of the sum assured on the policy
issued by respondent corresponding to the book value in excess of the par value of

the stock dividends.

The deficiency assessment was questioned by private respondent and sought their
cancellation in a petition filed in the CTA who found no valid basis for the deficiency
assessment on the stock dividends as well as on the insurance policy. The CA
affirmed the decision.
Issue: WON the CA erred in imposing no deficiency DST on the increases of the
amounts? Yes
Held: Section 173 of the National Internal Revenue Code on documentary stamp
taxes provides:
Sec. 173. Stamp taxes upon documents, instruments and
papers. Upon documents, instruments, loan agreements,
and papers, and upon acceptances, assignments, sales, and
transfers of the obligation, right or property incident thereto,
there shall be levied, collected and paid for, and in respect of
the transaction so had or accomplished, the corresponding
documentary stamp taxes prescribed in the following section
of this Title, by the person making, signing, issuing, accepting,
or transferring the same wherever the document is made,
signed, issued, accepted, or transferred when the obligation or
right arises from Philippine sources or the property is situated
in the Philippines, and at the same time such act is done or
transaction had: Provided, That whenever one party to the
taxable document enjoys exemption from the tax herein
imposed, the other party thereto who is not exempt shall be
the one directly liable for the tax. (As amended by PD No.
1994)
The basis for the value of documentary stamp taxes to be paid on the insurance
policy is Section 183 of the National Internal Revenue Code which states in part:
Sec. 183. Stamp tax on life insurance policies. On all
policies of insurance or other instruments by whatever
name the same may be called, whereby any insurance shall
be made or renewed upon any life or lives, there shall
be collected a documentary stamp tax of thirty (now 50c)
centavos on each Two hundred pesos per fractional part
thereof, of the amount insured by any such policy.
Petitioner claims that the "automatic increase clause" in the subject insurance policy
is separate and distinct from the main agreement and involves another transaction;
and that, while no new policy was issued, the original policy was essentially re-issued
when the additional obligation was assumed upon the effectivity of this "automatic
increase clause" in 1984; hence, a deficiency assessment based on the additional
insurance not covered in the main policy is in order.
The Court of Appeals sustained the CTA's ruling that there was only one transaction

involved in the issuance of the insurance policy and that the "automatic increase
clause" is an integral part of that policy.
The petition is impressed with merit.
Section 49, Title VI of the Insurance Code defines an insurance policy as the written
instrument in which a contract of insurance is set forth. Section 50 of the same Code
provides that the policy, which is required to be in printed form, may contain any
word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to
complete the contract of insurance. It is thus clear that any rider, clause, warranty or
endorsement pasted or attached to the policy is considered part of such policy or
contract of insurance.
The subject insurance policy at the time it was issued contained an "automatic
increase clause." Although the clause was to take effect only in 1984, it was
written into the policy at the time of its issuance. The distinctive feature of the
"junior estate builder policy" called the "automatic increase clause" already formed
part and parcel of the insurance contract, hence, there was no need for an
execution of a separate agreement for the increase in the coverage that
took effect in 1984 when the assured reached a certain age.
It is clear from Section 173 that the payment of documentary stamp taxes is
done at the time the act is done or transaction had and the tax base for the
computation of documentary stamp taxes on life insurance policies under
Section 183 is the amount fixed in policy, unless the interest of a person
insured is susceptible of exact pecuniary measurement. What then is the
amount fixed in the policy? Logically, we believe that the amount fixed in the
policy is the figure written on its face and whatever increases will take
effect in the future by reason of the "automatic increase clause" embodied
in the policy without the need of another contract.
Here, although the automatic increase in the amount of life insurance
coverage was to take effect later on, the date of its effectivity, as well as
the amount of the increase, was already definite at the time of the issuance
of the policy. Thus, the amount insured by the policy at the time of its issuance
necessarily included the additional sum covered by the automatic increase clause
because it was already determinable at the time the transaction was entered into and
formed part of the policy.
The "automatic increase clause" in the policy is in the nature of a conditional
obligation under Article 1181, by which the increase of the insurance coverage shall
depend upon the happening of the event which constitutes the obligation. In the
instant case, the additional insurance that took effect in 1984 was an obligation
subject to a suspensive obligation, but still a part of the insurance sold to which
private respondent was liable for the payment of the documentary stamp
tax.
The deficiency of documentary stamp tax imposed on private respondent is

definitely not on the amount of the original insurance coverage, but on the
increase of the amount insured upon the effectivity of the "Junior Estate
Builder Policy."
Finally, it should be emphasized that while tax avoidance schemes and arrangements
are not prohibited, tax laws cannot be circumvented in order to evade the payment of
just taxes. In the case at bar, to claim that the increase in the amount insured (by
virtue of the automatic increase clause incorporated into the policy at the time of
issuance) should not be included in the computation of the documentary stamp taxes
due on the policy would be a clear evasion of the law requiring that the tax be
computed on the basis of the amount insured by the policy.

12. JAKA INVESTMENT CORP VS CIR, G.R. NO. 147629, JULY 28, 2010
Facts: Petitioner Jaka investment sought to invest in Jaka equities corporation (JEC),
which was then planning to undertake an IPO and listing of its shares with the PSE.
JEC increased its authorized capital stock to which petitioner proposed to subscribe a
portion of the increase in the authorized capital stock through a tax-free exchange
under section 34 (c) (2) of the NIRC which was effected by the execution of a
Subscription agreement and deed of assignment of property in payment of
subscription. Under this agreement, as payment for its subscription, petitioner will
assign and transfer to JEC following shares of stock: xx (shares of stocks in 4
corporations)
The intended IPO and listing of shares of JEC did not materialize but JEC still decided
to proceed with the increase in its authorized capital stock and petitioner agreed to
subscribe thereto, but under different ters of payment. Thus, petitioner and JEC
executed an amended subscription agreement wherein shares of stocks in 3
corporations were transferred to JEC and in lieu of the 4 th corporation; it paid the
subscription in cash.
Petitioner paid DST and a 25% surcharge for the late payment but petitioner
concluded that it had overpaid the DST so it sought for a refund. Petitioner filed a
refund in the CTA was this was denied. The CA sustained the CTAs decision.
Issue: WON petitioner is entitled to the claim of refund of the DST?
Held: Petitioner's main contention in this claim for refund is that the tax base for the
documentary stamp tax on the Amended Subscription Agreement should have been
only the shares of stock in RGHC, PGCI, and UCPB that petitioner had transferred to
JEC as payment for its subscription to the JEC shares, and should not have included
the cash portion of its payment, based on Section 176 of the National Internal
Revenue Code of 1977, as amended by Republic Act No. 7660, or the New
Documentary Stamps Tax Law (the 1994 Tax Code), the law applicable at the time of
the transaction. Petitioner argues that the cash component of its payment for its
subscription to the JEC shares, totaling Three Hundred Seventy Million Seven Hundred
Sixty-Six Thousand Pesos (P370,766,000.00) should not have been charged any
documentary stamp tax. Petitioner claims that there was overpayment because the

tax due on the transferred shares was only Five Hundred Ninety-Three Thousand Five
Hundred Twenty-Eight and 15/100 Pesos (P593,528.15), as indicated in the
certifications issued by RDO Esquivias. Petitioner alleges that it is entitled to a refund
for the overpayment, which is the difference in the amount it had actually paid
(P1,003,895.65) and the amount of documentary stamp tax due on the transfer of
said shares (P593,528.15), or a total of Four Hundred Ten Thousand Three Hundred
Sixty-Seven Pesos (P410,367.00).
Petitioner contends that both the Court of Appeals and the Court of Tax Appeals
erroneously relied on respondent's (Commissioner of Internal Revenue's) assertions
that it had paid the documentary stamp tax on the original issuance of the shares of
stock of JEC under Section 175 of the 1994 Tax Code.
Petitioner explains that in this instance where shares of stock are used as
subscription payment, there are two documentary stamp tax incidences, namely, the
documentary stamp tax on the original issuance of the shares subscribed (the JEC
shares), which is imposed under Section 175; and the documentary stamp tax on the
shares transferred in payment of such subscription (the transfer of the RGHC, PGCI
and UCPB shares of stock from petitioner to JEC), which is imposed under Section 176
of the 1994 Tax Code. Petitioner argues that the documentary stamp tax imposed
under Section 175 is due on original issuances of certificates of stock and is
computed based on the aggregate par value of the shares to be issued; and that
these certificates of stock are issued only upon full payment of the subscription price
such that under the Bureau of Internal Revenue's (BIR's) Revised Documentary Stamp
Tax Regulations, it is stated that the documentary stamp tax on the original issuance
of certificates of stock is imposed on fully paid shares of stock only. Petitioner alleges
that it is the issuing corporation which is primarily liable for the payment of the
documentary stamp tax on the original issuance of shares of stock. Petitioner further
argues that the documentary stamp tax on Section 176 of the 1994 Tax Code is
imposed for every transfer of shares or certificates of stock, computed based on the
par value of the shares to be transferred, and is due whether a certificate of stock is
actually issued, indorsed or delivered pursuant to such transfer. It is the transferor
who is liable for the documentary stamp tax on the transfer of shares.
Petitioner claims that the documentary stamp tax under Section 175 attaches to the
certificate/s of stock to be issued by virtue of petitioner's subscription while the
documentary stamp tax under Section 176 attaches to the Amended Subscription
Agreement, since it is this instrument that evidences the transfer of the RGHC, PGCI
and UCPB shares from petitioner to JEC.
Petitioner contends that at the time of the execution of the Amended Subscription
Agreement, the JEC shares or certificates subscribed by petitioner could not have
been issued by JEC because the same were yet to be sourced from the increase in
authorized capital stock of JEC, which in turn had yet to be approved by the Securities
and Exchange Commission (SEC). Petitioner thus reasons that the documentary
stamp tax under Section 175 could not have accrued at the time the
Amended Subscription Agreement was executed because no right to the
shares had neither been nor could be established in favor of the petitioner

at such time. Petitioner theorizes that the earliest time that the subscription could
actually be executed would be when the SEC approves the increase in the authorized
capital stock of JEC. On the other hand, upon the execution of the Amended
Subscription Agreement, the assignment or the transfer of RGHC, PGCI and UCPB
shares in favor of JEC (which is evidenced by said agreement), is deemed
immediately enforceable as this is a necessary requirement of the SEC.
Petitioner points out that Section 175 of the 1994 Tax Code imposes a documentary
stamp tax on every original issuance of certificates of stock, whereas Republic Act
No. 8424, the Tax Reform Act of 1997 (the 1997 Tax Code), amended this provision
and imposed a documentary stamp tax on the original issuance of shares of stock.
Petitioner argues that under Section 175 of the 1994 Tax Code, there was no
documentary stamp tax due on the mere execution of a subscription agreement to
shares of stock, and the tax only accrued upon issuance of the certificates of stock. In
this case, the change in wording introduced by the 1997 Tax Code cannot be made
applicable to the Amended Subscription Agreement, which was executed in 1994,
because it is a well-settled doctrine in taxation that a law must have prospective
application.
Lastly, petitioner alleges that it is entitled to refund under the NIRC.
In his Comment (To Petition for Review), respondent avers that the lower courts did
not err in denying petitioner's claim for refund, and that petitioner is raising issues in
this petition which were not raised in the lower courts.
Respondent maintains that the documentary stamp tax imposed in this case is on the
original issue of certificates of stock of JEC on the subscription by the petitioner of the
P508,806,200.00 shares out of the increase in the authorized capital stock of the
former pursuant to Section 175 of the NIRC. The documentary stamp tax was not
imposed on the shares of stock owned by petitioner in RGHC, PGCI, and UCPB, which
merely form part of the partial payment of the subscribed shares in JEC. Respondent
avers that the amounts indicated in the Certificates of RDO Esquivias are the
amounts of documentary stamp tax representing the equivalent of each group of
shares being applied for payment. Considering that the amount of documentary
stamp tax represented by the shares of stock in the aforementioned companies
amounted only to P593,528.15, while the basic documentary stamp tax for the entire
subscription of P508,806,200.00 was computed by respondent's revenue officers to
the tune of P803,116.72, exclusive of the penalties, leaving a balance of
P209,588.57, is a clear indication that the payment made with the shares of stock is
insufficient.
Respondent claims that the certifications were issued by RDO Esquivias purposely to
allow the registration of transfer of the shares of stock used in payment of the
subscribed shares in the name of JEC from petitioner by the Corporate Secretary of
the UCPB and are not evidence of the payment of the documentary stamp tax on the
issuance of the increased shares of stocks of JEC.
Respondent argues that the documentary stamp tax attaches upon acceptance by

the corporation of the stockholder's subscription in the capital stock of the

corporation, and that the term "original issue" of the certificate of stock means "the
point at which the stockholder acquires and may exercise attributes of ownership
over the stocks." 14 Respondent further argues that the stocks can be alienated; the
dividends or fruits derived therefrom can be enjoyed; and they can be conveyed,
pledged, or encumbered; that the certificate, irrespective of whether or not it is in the
actual constructive possession of the stockholder, is considered issued because it is
with value and, hence, the documentary stamp tax must be paid; and concludes that
a person may own shares of stock without possessing a certificate of stock.
Respondent cites Commissioner of Internal Revenue v. Construction Resources of
Asia, Inc., where the Court held:
The delivery of the certificates of stocks to the private
respondent's stockholders whether actual or constructive, is
not essential for the documentary and science stamps taxes to
attach. What is taxed is the privilege of issuing shares of stock
and, therefore, the taxes accrue at the time the shares are
issued. The only question before us is whether or not said
private respondents issued the certificates of stock covering
the paid-in-capital of P17,880,000.00.
Respondent claims that it is well-settled as a general rule of Corporation Law that a
subscriber for stock in a corporation or purchaser of stock becomes a stockholder as
soon as his subscription is accepted by the corporation whether a certificate of stock
is issued to him or not, and although he may have no certificate, he is thereupon
entitled to all the rights and is subject to all the liabilities of a stockholder.
Respondent argues, based on the above, that the contention of petitioner that the
documentary stamp tax under Section 175 of the 1994 Tax Code could not have
accrued at the time the Amended Subscription Agreement was executed since the
increase in capital stock of JEC had yet to be approved by the SEC was inaccurate. He
states that it is evident from the Amended Subscription Agreement that the
subscribed shares from the increase in JEC's stock were fully paid through cash and
shares of stock.
Respondent submits that the change in wording, from "certificates" to "shares" of
stock, introduced to Section 175 by the 1997 Tax Code, was a mere clarification and
codification of the foregoing principle or policy.
Respondent stresses that the documentary stamp tax can be levied or collected from
the person making, signing, issuing, accepting, or transferring the obligation or
property, as provided in Section 173 of the Tax Code.
In its Reply to Respondent's Comment to the Petition, petitioner contends that
respondent erroneously insists that the documentary stamp tax sought to be
refunded is the one imposed on the subscription by petitioner to P508,806,200.00
new shares of JEC. Petitioner further contends that since the documentary stamp tax
due on the issuance of new shares or on original shares is P2.00 for every P200 under
Section 175 of the Tax Code, then the documentary stamp tax on petitioner's

subscription to JEC shares should amount to P5,088,062.00, which is much higher

than the P803,116.72 basic documentary stamp tax paid under ATAP No. 1511920.
Petitioner argues that at the time the documentary stamp tax was paid, before a
taxpayer was allowed to pay the taxes due, a BIR revenue officer would first compute
the tax due and then issue an authority to accept payment (ATAP) and it was very
unlikely that the revenue officer could have made such a glaring mistake.
Petitioner alleges that there is no BIR certification requirement prior to the issuance
of original shares of stock; and that it is only upon the regular annual audit of the
books of a corporation that the BIR determines if the documentary stamp tax on new
or original issuances of shares, if any were issued, had in fact been paid. If not, then
a deficiency assessment, with penalties and surcharges, would then be made by the
BIR. Petitioner further alleges that, on the other hand, before the transfer of issued
and outstanding shares to a new owner is recorded in the books of a corporation, the
capital gains tax thereon and the documentary stamp tax on the transfer must first
be paid, and a BIR certification must be presented to the Corporate Secretary
authorizing the corporation to record the transfer, otherwise, the corporate secretary
shall be subjected to penalties.
Petitioner claims that the three BIR certifications in this case specifically allow the
registration of the UCPB, RGHC, and PGCI shares in the name of JEC, the transferee,
and that said certifications evidence payment of the taxes due on the transfer of the
shares from petitioner to JEC, not on the original issuance of shares of JEC.
The parties' respective memoranda contained reiterations of the allegations raised in
their respective pleadings as discussed above.
The sole issue to be resolved is whether petitioner is entitled to a partial refund of the
documentary stamp tax and surcharges it paid on the execution of the Amended
Subscription Agreement.
In claims for refund, the burden of proof is on the taxpayer to prove entitlement to
such refund. As we held in Compagnie Financiere Sucres Et Denrees v. Commissioner
of Internal Revenue
Along with police power and eminent domain, taxation is one
of the three basic and necessary attributes of sovereignty.
Thus, the 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.
. . . 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. Consequently,
he who claims a refund or exemption from taxes has the
burden of justifying the exemption by words too plain to be

mistaken and too categorical to be misinterpreted. . . . .

It was thus incumbent upon petitioner to show clearly its basis for claiming that it is
entitled to a tax refund. This, to our mind, the petitioner failed to do.
The Court of Tax Appeals construed the claim for exemption strictly against petitioner
and held that:
The focal issue which is presented for our consideration is
whether or not the transfer of the 1,313,176 FEBTC shares
under the "Amended Subscription Agreement and Deed of
Assignment of Property in Payment of Subscription" should be
excluded in the taxable base for the computation of DST, thus
entitling petitioner to the refund of the amount of P410,367.00.
We find nothing ambiguous nor obscure in the language of Section 173, taken in
relation to Section 175 of the 1994 Tax Code . . . insofar as the same is brought to
bear upon the circumstances in the instant case. These provisions furnish the
best means of their own exposition that a documentary stamp tax (DST) is
due and payable on documents, instruments, loan agreements and papers,
acceptances, assignments, sales and transfers which evidenced the
transaction agreed upon by the parties and should be paid by the person
making, signing, issuing, accepting or transferring the property, right or
obligation.
Sec. 173.Stamp taxes upon documents, instruments, and papers. Upon
documents, instruments, and papers, and upon acceptances, assignments, sales, and
transfers of the obligation, or property incident thereto, there shall be levied,
collected and paid for, and in respect of the transaction so had or accomplished, the
corresponding documentary stamp taxes prescribed in the following sections of this
Title, by the person making, signing, issuing, accepting, or transferring the same,
whenever the document is made, signed, issued, accepted or transferred when the
obligation or right arises from Philippine sources or the property is situated in the
Philippines, and at the same time such act is done or transaction had: Provided, That
whenever one party to the taxable document enjoys exemption from the tax herein
imposed, the other party thereto who is not exempt shall be the one directly liable for
the tax. (as amended by R.A. No. 7660) xxx xxx xxx
Understood to mean what it plainly expressed, the DST imposition is
essentially addressed and directly brought to bear upon the DOCUMENT
evidencing the transaction of the parties which establishes its rights and
obligations.
In the case at bar, the rights and obligations between petitioner JAKA Investments
Corporation and JAKA Equities Corporation are established and enforceable at the
time the "Amended Subscription Agreement and Deed of Assignment of
Property in Payment of Subscription" were signed by the parties and their
witness, so is the right of the state to tax the aforestated document
evidencing the transaction. DST is a tax on the document itself and

therefore the rate of tax must be determined on the basis of what is

written or indicated on the instrument itself independent of any adjustment
which the parties may agree on in the future . . . . The DST upon the taxable
document should be paid at the time the contract is executed or at the time
the transaction is accomplished. The overriding purpose of the law is the
collection of taxes. So that when it paid in cash the amount of P370,766,000.00 in
substitution for, or replacement of the 1,313,176 FEBTC shares, its payment of
P1,003,835.65 documentary stamps tax pursuant to Section 175 of NIRC is in order.
Thus, applying the settled rule in this jurisdiction that, a claim for refund is in the
nature of a claim for exemption, thus, should be construed in strictissimi juris against
the taxpayer (Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244
SCRA 332) and since the petitioner failed to adduce evidence that will show that it is
exempt from DST under Section 199 or other provision of the tax code, We rule the
focal issue in the negative. (Emphases ours.)
In the questioned Decision, the Court of Appeals concurred with the findings of the
Court of Tax Appeals and we quote with approval the relevant portions below:
Petitioner alleges, though, that considering that the
assessment of payment of documentary stamp tax was made
payable only to the aforesaid issuances of certificates of
[stock] exclusive of that of FEBTC shares of stock which were
paid in cash, and that it has paid a total of Php1,003,895.65
inclusive of surcharges for late payment, the petitioner is
entitled to a refund of Php410,367.00. This argument does not
hold water. As discussed earlier, a documentary stamp is
levied upon the privilege, the opportunity and the facility
offered at exchanges for the transaction of the business. This
being the case, and as correctly found by the tax court, the
documentary stamp tax imposition is essentially
addressed and directly brought to bear upon the
document evidencing the transaction of the parties
which establishes its rights and obligations, which in
the case at bar, was established and enforceable upon
the execution of the Amended Subscription Agreement
and Deed of Assignment of Property in Payment of
Subscription.
Moreover, the documentary stamp tax is imposed on
the entire subscription (i.e., subscribed capital stock)
which is the amount of the capital stock subscribed
whether fully paid or not. It connotes an original
subscription contract for the acquisition by a subscriber
of unissued shares in a corporation, which in this case is
equivalent to a total par value of Php508,806,200.00.
Besides, a tax cannot be imposed unless it is supported by the
clear and express language of a statute; on the other hand,

once the tax is unquestionably imposed, a claim of exemption

from tax payments must be clearly shown and based on
language in the law too plain to be mistaken. And since a claim
for refund is in the nature of a claim for exemption the same is
likewise construed in strictissimi juris against the taxpayer.
Furthermore, it is a basic rule in taxation that the factual
findings of the Court of Tax Appeals, when supported by
substantial evidence, will not be disturbed on appeal unless it
[is] shown that the said court committed gross error in the
appreciation of facts. In this case, the tax court did not deviate
from this rule.
We find no error in the above pronouncements of the Court of Appeals.
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. It is an excise upon the facilities
used in the transaction of the business separate and apart from the business itself.
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.
Thus, we have held that documentary stamp taxes are levied independently
of the legal status of the transactions giving rise thereto. The documentary
stamp taxes must be paid upon the issuance of the said instruments, without regard
to whether the contracts which gave rise to them are rescissible, void, voidable, or
unenforceable.
The relevant provisions of the Tax Code at the time of the transaction are quoted
below:
Sec. 175.Stamp tax on original issue of certificates of stock.
On
every
original
issue,
whether
on
organization,
reorganization or for any lawful purpose, of certificates of stock
by any association, company, or corporations, there shall be
collected a documentary stamp tax of Two pesos (P2.00) on
each two hundred pesos, or fractional part thereof, of the par
value of such certificates: Provided, That in the case of the
original issue of stock without par value the amount of the
documentary stamp tax herein prescribed shall be based upon
the actual consideration received by the association, company,
or corporation for the issuance of such stock, and in the case
of stock dividends on the actual value represented by each
share.
Sec. 176.Stamp tax on sales, agreements to sell, memoranda
of sales, deliveries or transfer of due-bills, certificates of
obligation, or shares or certificates of stock. On all sales, or
agreements to sell, or memoranda of sales, or deliveries, or

transfer of due-bills, certificates of obligation, or shares or

certificates of stock in any association, company or
corporation, or transfer of such securities by assignment in
blank, or by delivery, or by any paper or agreement, or
memorandum or other evidences of transfer or sale whether
entitling the holder in any manner to the benefit of such duebills, certificates of obligation or stock, or to secure the future
payment of money, or for the future transfer of any due-bill,
certificates of obligation or stock, there shall be collected a
documentary stamp tax of One peso (P1.00) on each two
hundred pesos, or fractional part thereof, of the par value of
such due-bill, certificates of obligation or stock: Provided, That
only one tax shall be collected on each sale or transfer of stock
or securities from one person to another, regardless of whether
or not a certificate of stock or obligation is issued, endorsed, or
delivered in pursuance of such sale or transfer: and Provided,
further, That in the case of stock without par value the amount
of the documentary stamp herein prescribed shall be
equivalent to twenty-five per centum of the documentary
stamp tax paid upon the original issue of said stock: Provided,
furthermore, That the tax herein imposed shall be increased to
One peso and fifty centavos (P1.50) beginning 1996.
We find our discussion in the case of Commissioner of Internal Revenue v. First
Express Pawnshop Company, Inc. 22 regarding these same provisions of the Tax Code
to be instructive, and we quote:
In Section 175 of the Tax Code, DST is imposed on the
original issue of shares of stock. The DST, as an excise tax,
is levied upon the privilege, the opportunity and the facility of
issuing shares of stock. In Commissioner of Internal Revenue v.
Construction Resources of Asia, Inc., this Court explained that
the DST attaches upon acceptance of the stockholder's
subscription in the corporation's capital stock regardless of
actual or constructive delivery of the certificates of stock.
Citing Philippine Consolidated Coconut Ind., Inc. v. Collector of
Internal Revenue, the Court held:
The documentary stamp tax under this provision of the
law may be levied only once, that is upon the original
issue of the certificate. The crucial point therefore, in the
case before Us is the proper interpretation of the word 'issue'.
In other words, when is the certificate of stock deemed 'issued'
for the purpose of imposing the documentary stamp tax? Is it
at the time the certificates of stock are printed, at the time
they are filled up (in whose name the stocks represented in the
certificate appear as certified by the proper officials of the
corporation), at the time they are released by the corporation,
or at the time they are in the possession (actual or
constructive) of the stockholders owning them?
xxx xxx xxx

Ordinarily, when a corporation issues a certificate of stock

(representing the ownership of stocks in the corporation to
fully paid subscription) the certificate of stock can be utilized
for the exercise of the attributes of ownership over the stocks
mentioned on its face. The stocks can be alienated; the
dividends or fruits derived therefrom can be enjoyed, and they
can be conveyed, pledged or encumbered. The certificate as
issued by the corporation, irrespective of whether or
not it is in the actual or constructive possession of the
stockholder, is considered issued because it is with
value and hence the documentary stamp tax must be
paid as imposed by Section 212 of the National Internal
Revenue Code, as amended.
In Section 176 of the Tax Code, DST is imposed on the sales,
agreements to sell, memoranda of sales, deliveries or transfer
of shares or certificates of stock in any association, company,
or corporation, or transfer of such securities by assignment in
blank, or by delivery, or by any paper or agreement, or
memorandum or other evidences of transfer or sale whether
entitling the holder in any manner to the benefit of such
certificates of stock, or to secure the future payment of money,
or for the future transfer of certificates of stock. In Compagnie
Financiere Sucres et Denrees v. Commissioner of Internal
Revenue, this Court held that under Section 176 of the Tax
Code, sales to secure the future transfer of due-bills,
certificates of obligation or certificates of stock are subject to
documentary stamp tax.
Revenue Memorandum Order No. 08-98 (RMO 08-98) provides
the guidelines on the corporate stock documentary stamp tax
program. RMO 08-98 states that:
All existing corporations shall file the Corporation Stock DST
Declaration, and the DST Return, if applicable when DST is still
due on the subscribed share issued by the corporation, on or
before the tenth day of the month following publication of this
Order.
xxx xxx xxx
All existing corporations with authorization for increased
capital stock shall file their Corporate Stock DST Declaration,
together with the DST Return, if applicable when DST is due on
subscriptions made after the authorization, on or before the
tenth day of the month following the date of authorization.
(Boldfacing supplied)
RMO 08-98, reiterating Revenue Memorandum Circular No. 47-

97 (RMC 47-97), also states that what is being taxed is the

privilege of issuing shares of stock, and, therefore, the taxes
accrue at the time the shares are issued. RMC 47-97 also
defines issuance as the point in which the stockholder acquires
and may exercise attributes of ownership over the stocks.
As pointed out by the CTA, Sections 175 and 176 of the Tax
Code contemplate a subscription agreement in order for a
taxpayer to be liable to pay the DST. A subscription contract is
defined as any contract for the acquisition of unissued stocks
in an existing corporation or a corporation still to be formed. A
stock subscription is a contract by which the subscriber agrees
to take a certain number of shares of the capital stock of a
corporation, paying for the same or expressly or impliedly
promising to pay for the same. (Emphases ours.)
Petitioner claims overpayment of the documentary stamp tax but its basis for such is
not clear at all. While insisting that the documentary stamp tax it had paid for was
not based on the original issuance of JEC shares as provided in Section 175 of the
1994 Tax Code, petitioner failed in showing, even through a mere basic computation
of the tax base and the tax rate, that the documentary stamp tax was based on the
transfer of shares under Section 176 either. It would have been helpful for
petitioner's cause had it submitted proof of the par value of the shares of stock
involved, to show the actual basis for the documentary stamp tax computation. For
comparison, the original Subscription Agreement ought to have been submitted as
well.
All that petitioner submitted to back up its claim were the certifications issued by
then RDO Esquivias. As correctly pointed out by respondent, however, the amounts in
the RDO certificates were the amounts of documentary stamp tax representing the
equivalent of each group of shares being applied for payment. The purpose for
issuing such certifications was to allow registration of transfer of shares of stock
used in partial payment for petitioner's subscription to the original issuance of JEC
shares. It should not be used as evidence of payment of documentary stamp
tax. Neither should it be the lone basis of a claim for a documentary stamp tax
refund.
The fact that it was petitioner and not JEC that paid for the documentary stamp tax
on the original issuance of shares is of no moment, as Section 173 of the 1994 Tax
Code states that the documentary stamp tax shall be paid by the person making,
signing, issuing, accepting or transferring the property, right or obligation.