ALEXANDER HOWDEN & CO., LTD., H. G.
nor defined by the law itself, should mean income and
CHESTER & OTHERS, ETAL., petitioners,vs.THE
COLLECTOR (NOW COMMISSIONER) of
INTERNALREVENUE,respondent.
Taxation;Insurance;Reinsurance premiums remitted
to foreign insurance companies taxable within the
Philippines.The portions of premiums earned from
insurances locally underwritten by domestic corporations,
cededtoandreceivedbynonresidentforeignreinsurance
companies, through a nonresident foreign insurance
broker, pursuant to reinsurance contracts signed by the
reinsurersabroadbutsignedbythedomesticcorporationin
thePhilippines,aresubjecttoincometaxlocally.
Same;Same;Subject to withholding tax.The
reinsurance premiums remitted by local insurance
companiestoforeignreinsurancecompaniesaresubjectto
withholdingtaxonincomeunderSections53and54ofthe
NationalInternalRevenueCode.
Same;Income from sources within the
Philippines;Reinsurance premiums.Reinsurance
premiumsremittedbydomesticinsurancecorporationsto
foreignreinsurancecompaniesareconsideredincomeofthe
latterderivedfromsourceswithinthePhilippines.
Same;Premiums under Section 53 of Tax Code
includesallpremiumsconstitutingincome.SinceSection
53 of the Tax Code subjects to withholding tax various
specified income, among them, premium, the generic
connotation of each and every word or phrase composing
the enumeration in Subsection (b) thereof is income.
Perforce,thewordpremiums,whichisneitherqualified
shouldincludeallpremiumsconstitutingincome,whether
theybeinsuranceorreinsurancepremiums.
Same;Reinsurancepremiumsconsidereddeterminable
andperiodicalincome.UnderSection53oftheTaxCode,
reinsurance premiums are determinate and periodical
income: determinable, because they can be calculated
accurately on the basis of the reinsurance contracts;
periodical, inasmuch as they were earned and remitted
fromtimetotime.
Same;Principle of legislative reenactment;When not
applicable.Theprincipleoflegislativereenactmentisnot
applicablewherethesectionsofthelawinquestionwere
notreenactedbutmerelyamendedandtheadministrative
rulingsweremerelycontainedinletterstotaxpayersand
neverpublished,andwerenotregulationstoimplementa
lawbutonlyopinionsonqueriessubmitted.
Courts;Appeals;Disqualificationoftrialjudgemaynot
be raised for first time on appeal.Where appellants,
instead of asking for the trial judges disqualification by
raising their objection in the lower court, are content to
raiseitforthefirsttimebeforetheSupreme Court,itis
heldthattheymaynotbeheardtocomplainonthispoint
afterthetrialjudgehasgivenhisopiniononthemeritsof
thecase.
APPEALfromajudgmentoftheCourtofTaxAppeals.
ThefactsarestatedintheopinionoftheCourt.
Sycip,Salazar,Luna&AssociatesandLichauco,
Picazo&Agcaoiliforpetitioners.
 SolicitorGeneralforrespondent.
BENGZON,J.P.,J.:
In1950theCommonwealthInsuranceCo.,adomestic
corporation,enteredintoreinsurancecontractswith32
Britishinsurancecompaniesnotengagedintradeor
business in the Philippines, whereby the former
agreedtocedetothemaportionofthepremiumson
insurances on fire, marine and other risks it has
underwritteninthePhilippines.AlexanderHowden&
Co., Ltd., also a British corporation not engaged in
business in this country, represented the aforesaid
British insurance companies. The reinsurance
contracts were prepared and signed by the foreign
reinsurers in England and sent to Manila where
CommonwealthInsuranceCo.signedthem.
Pursuant to the aforesaid contracts, Commonwealth
Insurance Co., in 1951, remitted P798,297.47 to
Alexander Howden & Co., Ltd., as reinsurance
premiums.InbehalfofAlexanderHowden&Co.,Ltd.,
Commonwealth Insurance Co.filedin April 1952 an
incometaxreturndeclaringthesumofP798,297.47,
with accrued interest thereon in the amount of
P4,985.77, as Alexander Howden & Co., Ltd.s gross
incomeforcalendaryear1951.ItalsopaidtheBureau
ofInternalRevenueP66,112.00incometaxthereon.
On May 12, 1954, within the twoyear period
provided for by law, Alexander Howden & Co., Ltd.
filedwiththeBureauofInternalRevenueaclaimfor
refundoftheP66,112.00,laterreducedtoP65,115.00,
becauseAlexanderHowden&Co.,Ltd.agreedtothe
payment of P977.00 as income tax on the P4,985.77
accrued interest. A ruling of the Commissioner of
Internal Revenue, dated December 8, 1953, was
invoked,statingthatitexemptedfromwithholdingtax
reinsurance premiums received from domestic
insurancecompaniesbyforeign insurance companies
not authorized to do business in the Philippines.
Subsequently, Alexander Howden & Co., Ltd.
institutedanactionintheCourtofFirstInstanceof
Manila for the recovery of the aforesaid amount
claimed.PursuanttoSection22ofRepublicAct1125
thecasewascertifiedtotheCourtofTaxAppeals.On
November24,1961theTaxCourtdeniedtheclaim.
Plaintiffs have appealed, thereby squarely raising
the following issues: (1) Are portions of premiums
earned from insurances locally underwritten by a
domestic corporation, ceded to and received by non
resident foreign reinsurance companies, thru a non
resident foreign insurance broker, pursuant to
reinsurancecontractssignedbythereinsurersabroad
but signed by the domestic corporation in the
Philippines,subjecttoincometaxornot?(2)Ifsubject
thereto,mayormaynottheincometaxonreinsurance
premiumsbewithheldpursuanttoSections53and54
oftheNationalInternalRevenueCode?
Section24oftheNationalInternalRevenueCode
subjects to tax a nonresident foreign corporations
incomefromsourceswithinthePhilippines.Thefirst
issue therefore hinges on whether or not the
reinsurancepremiumsinquestioncamefromsources
withinthePhilippines.
AppellantswouldimpressuponthisCourtthatthe
reinsurancepremiumscamefromsourcesoutsidethe
Philippines, for these reasons: (1) The contracts of
reinsurance, out of which the reinsurance premiums
wereearned,werepreparedandsignedabroad,sothat
their situs lies outside the Philippines; (2) The
reinsurers, not being engaged in business in the
Philippines, received the reinsurance premiums as
incomefromtheirbusiness,conductedinEnglandand,
assuch,taxableinEngland;and,(3)Section37ofthe
TaxCode,enumeratingwhatareincomefromsources
within the Philippines, does not include reinsurance
premiums.
Thesourceofanincomeistheproperty,activityor
service that produced the income. The reinsurance
1
premiums remitted to appellants by virtue of the
reinsurancecontracts,accordingly,hadfortheirsource
the undertaking to indemnify Commonwealth
Insurance Co. against liability. Said undertaking is
theactivitythatproducedthereinsurancepremiums,
andthesametookplaceinthePhilippines.Inthefirst
place, the reinsured, the liabilities insured and the
risks originally underwritten by Commonwealth
InsuranceCo.,uponwhichthereinsurancepremiums
and indemnity were based, were all situated in the
Philippines.Secondly,contrarytoappellantsview,the
reinsurance contracts were perfected in the
Philippines,forCommonwealthInsuranceCo.signed
them last in Manila. The American cases cited are
inapplicable to this case because in all of them the
reinsurance contracts were signed outside the
jurisdiction of the taxing State. And, thirdly, the
parties to the reinsurance contracts in question
evidentlyintendedPhilippinelawtogovern.Article11
thereofprovidedforarbitrationinManila,accordingto
the laws of the Philippines, of any dispute arising
betweenthepartiesinregardtotheinterpretationof
saidcontractsorrightsinrespectofanytransaction
involved.Furthermore,thecontractsprovidedforthe
useofPhilippinecurrencyasthemediumofexchange
andforthepaymentofPhilippinetaxes.
Appellants should not confuseactivitythat creates
incomewithbusinessinthecourseofwhichanincome
is realized. An activity may consist of a single act;
whilebusinessimpliescontinuityoftransactions. An 2
income may be earned by a corporation in the
Philippines although such corporation conducts all
itsbusinessesabroad.Precisely,Section24oftheTax
Code does not require a foreign corporation to be
engagedinbusinessinthePhilippinesinorderforits
income from sources within the Philippines to be
taxable. It subjects foreign corporations not doing
business in the Philippines to tax for income from
sourceswithinthePhilippines.Ifbysourceofincome
is meant the business of the taxpayer, foreign
corporations not engaged in business in the
Philippines would be exempt from taxation on their
incomefromsourceswithinthePhilippines.
Furthermore, as used in our income tax law,
incomereferstotheflowofwealth. Suchflow,inthe
3
instant case, proceeded from the Philippines. Such
income enjoyed the protection of the Philippine
Government.Aswealthflowingfromwithinthetaxing
jurisdictionofthePhilippinesandinconsiderationfor
protectionaccordeditbythePhilippines,saidincome
shouldproperlysharetheburdenofmaintainingthe
government.
Appellants further contend that reinsurance
premiumsnotbeingamongthosementionedinSection
37oftheTaxCodeasincomefromsourceswithinthe
Philippines,thesameshouldnotbetreatedassuch.
Section 37, however, is not an allinclusive
enumeration. It states that the following items of
gross income shall be treated as gross income from
sources within the Philippines. It does not state or
implythatanincomenotlistedthereinisnecessarily
fromsourcesoutsidethePhilippines.
As to appellants contention that reinsurance
premiumsconstitutegrossreceiptsinsteadofgross
income, not subject to income tax, suffice it to say
that, as correctly observed by the Court of Tax
Appeals, gross receipts of amounts that do not
constitute return of capital, such as reinsurance
premiums,arepartofthegrossincomeofataxpayer.
Atanyrate,thetaxactuallycollectedinthiscasewas
computednotonthebasisofgrosspremiumreceipts
but on the net premium income, that is, after
deducting general expenses, payment of policies and
taxes.
The reinsurance premiums in question being
taxable,weturntotheissuewhetherornottheyare
subjecttowithholdingtaxunderSection54inrelation
toSection58oftheTaxCode.
Subsection(b)ofSection53subjectstowithholding
taxthefollowing: interest,dividends,rents,salaries,
wages,premiums,annuities, compensations,
remunerations, emoluments,or other fixed or
determinableannualorperiodicalgains,profits,and
incomeof any nonresident alien individual not
engaged in trade or business within the Philippines
andnothavinganyofficeorplaceofbusinesstherein.
Section 54, by reference, applies this provision
toforeign corporations not engaged in trade or
businessinthePhilippines.
Appellants maintain that reinsurance premiums
are not premiums at all as contemplated by
Subsection(b)ofSection53;thattheyarenotwithin
the scope of other fixed or determinable annual or
periodicalgains,profits,andincome;that,therefore,
they are not items of income subject to withholding
tax.
Theargumentofappellantsisthatpremiums,as
usedinSection53(b),isprecededbyrents,salaries,
wages and followed by annuities, compensations,
remunerations which connote periodical income
payabletotherecipientonaccountofsomeinvestment
orforpersonalservicesrendered.Premiumsshould,
therefore, in appellants view, be given a meaning
kindredtotheothertermsintheenumerationandbe
understood in its broadest sense as a reward or
recompenseforsomeactdone;abonus;compensation
for the use of money; a price for a loan; a sum in
additiontointerest.
We disagree with the foregoing proposition. Since
Section 53 subjects to withholding tax various
specified income, among them, premiums, the
genericconnotationofeachandeverywordorphrase
composingtheenumerationinSubsection(b)thereofis
income. Perforce, the word premiums, which is
neitherqualifiednordefinedbythelawitself,should
mean income and should include all premiums
constituting income, whether they be insurance or
reinsurancepremiums.
Assuming that reinsurance premiums are not
withinthewordpremiumsinSection53,stillthey
may be classified asdeterminable and periodical
incomeunderthesameprovisionoflaw.Section199of
the Income Tax Regulations defines fixed,
determinable,annualandperiodicalincome:
Incomeisfixedwhenitistobepaidinamountsdefinitely
predetermined. On the other hand, it is determinable
whenever there is a basis of calculation by which the
amounttobepaidmaybeascertained.
The income need not be paid annually if it is paid
periodically:thatistosay,fromtimetotime,whetheror
not at regular intervals. That the length of time during
whichthepayments aretobemademaybeincreasedor
diminishedinaccordancewithsomeoneswillorwiththe
happeningofaneventdoesnotmakethepaymentsanythe
lessdeterminableorperiodical.xxx.
Reinsurance premiums, therefore, are determinable
andperiodicalincome:determinable,becausetheycan
be calculated accurately on the basis of the
reinsurance contracts; periodical, inasmuch as they
wereearnedandremittedfromtimetotime.
Appellants claim for refund, as stated, invoked a
rulingoftheCommissionerofInternalRevenuedated
December8,1953.Appellantsbriefalsocitedrulings
ofthesameofficial,datedOctober13,1953,February
7,1955andFebruary8,1955,aswellasthedecision
of the defunct Board of Tax Appeals in the case of
FranklinBakerCo., therebyattemptingtoshowthat
4
the prevailing administrative interpretation of
Sections 53 and 54 of the Tax Code exempted from
withholdingtaxreinsurancepremiumscededtonon
residentforeigninsurancecompanies.Itisasrserted
thatsinceSections53and54weresubstantiallyre
enacted by Republic Acts 1065 (approved June 12,
1954),1291(approvedJune15,1955),1505(approved
June 16, 1956) and 2343 (approved June 20, 1959)
when the said administrative rulings prevailed, the
rulings should te given the force of law under the
principleoflegislativeapprovalbyreenactment.
The principle of legislative approval by re
enactmentmaybrieflybestatedthus:Whereastatute
issusceptibleofthemeaningplaceduponitbyaruling
of the government agency charged with its
enforcement andtheLegislaturethereafterreenacts
theprovisionswithoutsubstantialchange,suchaction
istosomeextentconfirmatorythattherulingcarries
outthelegislativepurpose. 5
Theaforestatedprinciple,however,isnotapplicable
to this case. Firstly, Sections 53 and 54 were never
reenacted. Republic Acts 1065, 1291, 1505 and 2343
weremerely amendments in respect to the rate of
taximposed in Sections 53 and 54. Secondly, the
administrativerulingsoftheCommissionerofInternal
Revenue relied upon by the taxpayers were only
containedinletterstotaxpayersandneverpublished,
sothattheLegislatureisnotpresumedtoknowsaid
rulings. Thirdly, in the case on which appellants
rely,InterprovincialAutobusCo.,Inc. vs.Collectorof
InternalRevenue,L674I,January31,1956,whatwas
declaredtohaveacquiredtheforceoreffectoflawwas
aregulationpromulgatedtoimplementalaw;whereas,
inthiscase,whatappellantswouldseektohavethe
forceoflawareopinionsonqueriessubmitted.
Itmaynotbeamisstonotethatin1963,afterthe
TaxCourt rendered judgment inthiscase,Congress
enacted Republic Act 3825, as an amendment to
Sections24and54oftheTaxCode,exemptingfrom
income taxes and withholding tax, reinsurance
premiums received by foreign corporations not
engaged inbusinessinthePhilippines.RepublicAct
3825in effect took outfrom Sections 24 and 54
somethingwhichformedapartofthesubjectmatter
therein, thereby affirming the taxability of
6
reinsurance premiums prior to the aforestated
amendment.
Finally,appellantwouldarguethatJudgeAugusto
M.Luciano,whopennedthedecisionappealedfrom,
was disqualified to sit in this case since he had
appearedascounselfortheCommissionerofInternal
Revenueand,assuch,answeredplaintiffscomplaint
beforetheCourtofFirstInstanceofManila.
TheRulesofCourtprovidesthatnojudgeshallsit
inanycaseinwhichhehasbeencounselwithoutthe
writtenconsentofallthepartiesininterest,signedby
themandenteredupontherecord.Thepartyobjecting
to the judges competency may file, in writing, with
such judge his objection stating therein the grounds
forit.Thejudgeshallthereuponproceedwiththetrial
orwithdrawtherefrom,buthisactionshallbemadein
writingandmadepartoftherecord. 7
Appellants, instead of asking for Judge Lucianos
disqualificationbyraisingtheirobjectionintheCourt
ofTaxAppeals,arecontenttoraiseitforthefirsttime
beforethisCourt,Suchbeingthecasetheymaynot
nowbeheardtocomplainonthispoint,whenJudge
Luciano has given his opinion on the merits of the
case.Alitigantcannotbepermittedtospeculateupon
theactionofthecourtandraiseanobjectionofthis
natureafterdecisionhasbeenrendered. 8
 WHEREFORE, the judgment appealed from is
herebyaffirmedwithcostsagainstappellants.Itisso
ordered.
Bengzon, C.J.,Bautista
Angelo,Concepcion,Reyes,
J.B.L.,Barrera,MakalintalandZaldivar,JJ.,concur.
Paredes,DizonandRegala,JJ.,tooknopart.

Judgmentaffirmed.