Commissioner of Internal Revenue v. Insular Life Assurance
REITERATIONFacts
The Antecedents: The respondent, The Insular Life Assurance Co., Ltd., a mutual life insurer, received an assessment notice from the Commissioner of Internal Revenue (CIR) for deficiency Documentary Stamp Tax (DST) on its premiums for calendar year 2002, amounting to P93,934,359.21. The respondent protested this assessment, asserting its status as a cooperative company exempt from DST. The CIR denied the protest, leading to further legal proceedings. Procedural History: The respondent filed a Petition for Review with the Court of Tax Appeals (CTA) after its protest was denied. The CTA's Second Division ruled in favor of the respondent, granting the exemption. The CIR's motion for reconsideration was denied, with the CTA citing the Supreme Court's ruling in Republic of the Philippines v. Sunlife Assurance Company of Canada. The CIR then appealed to the CTA en banc, which also denied the petition, affirming the previous decision. This denial prompted the CIR to file the present petition for review on certiorari with the Supreme Court. The Petition: The Commissioner of Internal Revenue filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, challenging the CTA en banc's decision. The petitioner contends that the respondent, not being registered with the Cooperative Development Authority (CDA), cannot be considered a cooperative company and is therefore not entitled to the DST exemption under Section 199(a) of the National Internal Revenue Code (NIRC) of 1997. The petitioner argues that registration with the CDA is a prerequisite for such exemption, a position contrary to the Supreme Court's precedent in Republic of the Philippines v. Sunlife Assurance Company of Canada.
Issue(s)
Whether or not the CTA en banc erred in ruling that respondent is a cooperative and is thus exempt from Documentary Stamp Tax. Whether or not registration with the Cooperative Development Authority (CDA) is a mandatory requirement for a cooperative company to claim exemption from Documentary Stamp Tax (DST) under Section 199(a) of the National Internal Revenue Code (NIRC) of 1997.
Ruling
The petition is DENIED. The Decision dated March 14, 2011 and Resolution dated June 13, 2011 of the Court of Tax Appeals en banc in CTA EB Case No. 585 (CTA Case No. 7292) are AFFIRMED.
Ratio Decidendi
On whether the CTA en banc erred in ruling that respondent is a cooperative and is thus exempt from Documentary Stamp Tax: The Supreme Court affirmed the CTA en banc's ruling. The Court reiterated its pronouncement in Republic of the Philippines v. Sunlife Assurance Company of Canada that registration with the CDA is not necessary for a cooperative to be exempt from DST under Section 199 of the NIRC. The Court found that the respondent sufficiently established that it conforms with the elements of a cooperative as defined in the NIRC of 1997, specifically that it is managed by members, operated with money collected from members, and its main purpose is the mutual protection of members, not for profit. The factual circumstances in the present case were found to be substantially the same as those in the Sunlife case, warranting the application of the doctrine of stare decisis. On whether registration with the Cooperative Development Authority (CDA) is a mandatory requirement for a cooperative company to claim exemption from Documentary Stamp Tax (DST) under Section 199(a) of the National Internal Revenue Code (NIRC) of 1997: The Court held that registration with the CDA is not a mandatory requirement. Firstly, the NIRC of 1997 itself does not require such registration for DST exemption under Section 199. While Revenue Memorandum Circular (RMC) No. 48-91 requires submission of a Certificate of Registration with the CDA for tax exemption certificates, this administrative issuance cannot prevail over the clear absence of such a requirement in the Tax Code itself. Secondly, the provisions of the Cooperative Code of the Philippines, particularly R.A. No. 6939, do not impose registration with the CDA as a condition precedent for claiming DST exemption. The Court noted that R.A. No. 6939 applies only to cooperatives formed or organized under it, and not to those organized under prior laws like P.D. No. 175, which the respondent was not required to register under. Thirdly, the Insurance Code, which primarily governs insurance contracts, does not mandate registration with the CDA for DST exemption. Therefore, the CIR cannot require registration under RMC No. 48-91, a mere circular, as a condition precedent for availing DST exemption when the law itself does not require it.
Main Doctrine
Registration with the Cooperative Development Authority (CDA) is not a prerequisite for a cooperative company to claim exemption from Documentary Stamp Tax (DST) under Section 199 of the National Internal Revenue Code (NIRC) of 1997, as amended, provided it meets the definition of a cooperative as defined in the NIRC.