Phil. Guaranty v. CIR digestTax 1 Week 1 Phil Guaranty v. CIR
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Transcript of Phil. Guaranty v. CIR digestTax 1 Week 1 Phil Guaranty v. CIR
Phil. Guaranty v. CIR(1965)- Bengzon, J.PPlaintif: Collector of Internal RevenueDefendants: The Commissioner of Internal Revenueand the Court of Tax AppealsConcept: Scope and Nature of TaxationBrief Facts: Phil. Guaranty entered into reinsurancecontracts with forein reinsurers not doin !usinessinthePhilippines. Itcededpremiumsin"#$%and"#$&' !ut did not withhold tax on them.Doctrine:The Tax Code su!(ects foreincorporations totaxontheir incomefromsourceswithin the Philippines. The word )sources) has !eeninterpretedas theactivity ivinrisetoincome'which is independent of the place of !usiness of thecorporation. Giventhat foreincorporations werea*orded protection !y the overnment and therecipient forein reinsurers exercised rihts andprivilees uaranteed !y our laws' such reinsurancepremiums and reinsurers should share the !urden ofmaintainin the state throuh taxes.FACTS: ". Phil. Guaranty entered into reinsurance contracts'on various dates' with forein insurance companiesnot doin !usiness in the Philippines. Phil. Guarantythere!yareedto cedeto theforein reinsurers aportion of the premiums on insurance it hasoriinally underwritten in the Philippines' inconsiderationfor theassumption!ythelatter oflia!ility on an e+uivalent portion of the ris,s insured.The reinsurance contracts were sined !y Phil.Guarantyin-anilaand!ytheforeinreinsurers'except for one contract with Swiss Reinsurance'which was sined !y !oth parties in Swit.erland./ .The reinsurance contracts made thecommencement of the reinsurers0 lia!ilitysimultaneous with that of Phil. Guaranty under theoriinal insurance. A proportionate amount of taxeson insurance premiums not recovered fromtheoriinalassured were to !e paid for !y the foreinreinsurers. The forein reinsurers further areed' inconsiderationfor manainor administerintheira*airs in the Philippines' to compensate thePhilippine Guaranty Co.' Inc.' in an amount e+ual to$1 of the reinsurance premiums.Premiums amountin to P2&/'&33.4" 5"#$%6 andP4/"'&4".2$ 5"#$&6 were ceded to the foreinreinsurersandwereexcludedfromPhil Guaranty7sross income when it 8led its income tax returns for"#$% and "#$&. 9urthermore' it did not withhold orpay tax on them.%. The CIR' via a letter dated April "%' "#$#'assessed aainst Phil. Guaranty withholdin tax onsaid premiums amountin to P/%:'34%.:: 5"#$%6andP/%&'%3&.::5"#$&6. Phil. Guarantyprotestedthe assessment on the round thatreinsurancepremiums ceded to forein reinsurers not doin!usiness in the Philippines are not su!(ect towithholdin tax. &. Theprotest wasdeniedandit appealedtotheCTA. TheCTAorderedPhil. Guarantytopaytheassessments issued !y the CIR. ISSUES:;