CIR v.

FIREMAN'S FUND
INSURANCE COMPANY
232 Phil. 292

PARAS, J.:

This is an appeal from the decision of the respondent Court

of Tax Appeals dated May 24, 1969, in C.T.A. Case No. 1629,
entitled "FIREMAN'S FUND INSURANCE COMPANY v.
COMMISSIONER OF INTERNAL REVENUE," which reversed
the decision of petitioner Commissioner of Internal Revenue
holding private respondent Fireman's Fund Insurance
Company liable for the payment of the amount of
P81,406.87 as documentary stamp taxes and compromise
penalties for the years 1952 to 1958.

Private respondent is a resident foreign insurance

corporation organized under the laws of the United States,
authorized and duly licensed to do business in the
Philippines. It is a member of the American Foreign
Insurance Association, through which its business is cleared
(Brief for Respondents, pp. 1-2).

The antecedent facts of this case are as follows:

From January, 1952 to December, 1958, herein private
respondent Fireman's Fund Insurance Company entered
into various insurance con;tracts involving casualty, fire and
marine risks, for which the corresponding insurance policies
were issued. From January, 1952 to 1956, documentary
stamps were bought and affixed to the monthly statements
of policies issued; and from 1957 to 1958 documentary
stamps were bought and affixed to the corresponding
pages of the policy register, instead of on the insurance
policies issued. On July 3, 1959, respon;dent company
discovered that its monthly statements of business and
policy register were lost. The loss was reported to the
Building Admi;nistration of Ayala Building and the National
Bureau of Investigation on July 6, 1959. Herein petitioner
was also informed of such loss by respondent company,
through the latter's auditors, Sycip, Gorres and Velayo, in a
letter dated July 14, 1959. After conducting an
inves;tigation of said loss, petitioner's examiner ascertained
that respond;ent company failed to affix the required
documentary stamps to the insurance policies issued by it
and failed to preserve its accounting records within the time
prescribed by Section 337 of the Revenue Code by using
loose leaf forms as registers of documentary stamps
without written authority from the Commissioner of Internal
Revenue as required by Section 4 of Revenue Regulations
No. V-1. As a consequence of these findings, petitioner, in a
letter dated December 7, 1962, assessed and demanded
from petitioner the payment of documentary stamp taxes
for the years 1952 to 1958 in the total amount of
P79,806.87 and plus compromise penalties, a total of
P81,406.87.

A breakdown of the amount of taxes due and collectible are

as follows:

YEAR AMOUNT
1952 P6,500.00

1953 9,977.72

1954 10,908.89

1955 P14,204.52

1956 12,108.26

1957 7,880.68

1958 16,257.60
Total stamp taxes due on
policies issued from 1952 to 1958 77,837.67

Add: Stamp taxes on monthly

statements during:
1957 - - - - - - - - - - - - - - - - - - - - - - - - - -
1,218.35
------
 1958 - - - - - - - - - - - - - - - - - - - - - - - - - -
3,264.39
------
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - -
P82,320.41
---

Less: Stamp taxes paid per voucher

shown:
1957 - - - - - - - - - - - - - - - - - P416.82
1958 - - - - - - - - - - - - - - - - - 2,096.72 2,513.54
AMOUNT DUE & COLLECTIBLE - - - - - - - P79,906.87
(CTA Decision, Rollo, pp. 16-17). ========

The compromise penalties consisted of the sum of

P1,000.00 as penalty for the alleged failure to affix
documentary stamps and the further sum of P600.00 as
penalty for an alleged violation of Revenue Regulations No.
V-1 otherwise known as the Bookkeeping Regulations (Brief
for Respondents, p. 4).

In a letter dated January 14, 1963, respondent company

contested the assessment. After petitioner denied the
protest in a decision dated March 17, 1965, respondent
company appealed to the respondent Court of Tax Appeals
on May 8, 1965. After hearing respondent court rendered
its decision dated May 24, 1969 (Rollo, pp. 16-21) reversing
the decision of the Commissioner of Internal Revenue. The
assailed decision reads in part:

''The affixture of documentary stamps to papers other

than those authorized by law is not tanta;mount to failure
to pay the same. It is true that the mode of affixing the
stamps as prescribed by law was not followed, but the
fact remains that the documentary stamps
corresponding to the various insurance policies were
purchased and paid by petitioner. There is no legal
justification for respondent to require petitioner to pay
again the documentary stamp tax which it had already
paid. To sustain respondent's stand would require
petitioner to pay the same tax twice. If at all, petitioner
should be proceeded against for failure to comply with
the requirement of affixing the documentary stamps to
the taxable insurance poli;cies and not for failure to pay
the tax. (See Sec. 239 and 332, Rev. Code).

"It should be observed that the law allows the affixture of

documentary stamps 'to such other paper as may be
indicated by law or regulations as the proper recipient of
the stamp.' It appears from this provision that
respondent has authority to allow documentary stamps
to be affixed to papers other than the documents or
instruments taxed. Although the practice adopted by
petitioner in affixing the documentary stamps to the
business statements and policy register was without
 specific permission from respondent but only on the
strength of his ruling given to Wise & Company (see
Peti;tioner's Memorandum, p. 176, CTA rec.; p. 24, t.s.n.),
one of the general agents of petitioner, however,
considering that petitioner actually purchased the
documentary stamps, affixed them to the business
statements and policy register and cancelled the stamps
by perforating them, we hold that petitioner cannot be
held liable to pay again the same tax.

"With respect to the 'compromise penalties' in the total

sum of P1,600.00, suffice it to say that penalties cannot
be imposed in the absence of a showing that petitioner
consented thereto. A compromise implies agreement. If
the offer is rejected by the taxpayer, as in this case,
respond;ent cannot enforce it except through a criminal
action. (See Comm. of Int. Rev. vs. Abad, L-19627, June
27, 1968.)" (CTA Decision, Rollo, pp. 20;-21).

Hence, this petition filed on June 26, 1969 (Rollo, pp. 1-8).

The petition is devoid of merit.

The principal issue in this case is whether or not respondent

company may be required to pay again the documentary
stamps it has actually purchased, affixed and cancelled.

The relevant provisions of the National Internal Revenue

Code provide:

"SEC. 210. Stamp taxes upon documents, instru;ments,

and papers. Upon documents, instruments, and papers,
and upon acceptances, assignments, sales, and
transfers of the obligation, right, or property incident
thereto, there shall be le;vied, collected and paid, for and
in respect of the transaction so had or accomplished, the
corres;ponding documentary stamp taxes prescribed in
the following sections of this Title, by the person making,
signing, issuing, accepting, or transfer;ring the same,
and at the same time such act is done or transaction
had." (Now. Sec. 222).

"SEC. 232. 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-five
centavos on each two hundred pesos or fractional part
thereof, of the amount issued by any such policy. (220)
(As amended by PD 1457)

"Insurance policies issued by a Philippine company to

persons in other countries are not subject to
documentary stamp tax. (Rev. Regs. No. 26)

"Medical certificate attached to an insurance policy is

not a part of the said policy. Insurance policy is subject
to Section 232 of the Tax Code while medical certificate
is taxable under Section 237 of the same Code.

"Insurance policies are issued in the place where

delivered to the person insured." (As amend;ed.)

"SEC. 221. Stamp tax on policies of insurance upon

property. On all policies of insurance or other
instruments by whatever name the same may be called,
by which insurance shall be made or renewed upon
property of any description, in;cluding rents or profits,
against peril by sea or on inland waters, or by fire or
lightning, there shall be collected a documentary stamp
tax of six centavos on each four persons, or fractional
part thereof, of the amount of premium charged." (Now
Sec. 233.)

"SEC. 237. Payment of documentary stamp tax.

Documentary stamp taxes shall be paid by the pur;chase
and affixture of documentary stamps to the document or
instrument taxed or to such other paper as may be
indicated by law or regulations as the proper recipient of
the stamp, and by the subsequent cancellation of same,
such cancellation to be accomplished by writing,
stamping, or per;forating the date of the cancellation
across the face of each stamp in such manner that part
of the writing, impression, or perforation shall be on the
 stamp itself and part on the paper to which it is attached;
Provided, That if the cancel;lation is accomplished by
writing or stamping the date of cancellation, a hole
sufficiently large to be visible to the naked eye shall be
punched, cut or perforated on both the stamp and the
document either by the use of a hand punch, knife,
perforating machine, scissors, or any other cutting
instrument; but if the cancellation is accomplished by
perforating the date of cancellation, no other hole need
be made on the stamp." (Now Sec. 249.)

"SEC. 239. Failure to affix or cancel documentary

stamps. Any person who fails to affix the correct amount
of documentary stamps to any taxable document,
instrument, or paper, or to cancel in the manner
prescribed by section 237 any documentary stamp
affixed to any document, instrument, or paper, shall be
subject to a fine of not less than twenty pess or more
than three hundred pesos. (Underscoring supplied.)
(Now Sec. 250.)

As correctly pointed out by respondent Court of Tax

Appeals, under the above-quoted provisions of law,
documentary tax is deemed paid by: (a) the purchase of
documentary stamps; (b) affixture of documentary stamps
to the document or instrument taxed or to such other paper
as may be indicated by law or regulations; and (c)
cancellation of the stamps as required by law (Rollo, p. 18).

It will be observed however, that the over-riding purpose of

these provisions of law is the collection of taxes. The three
steps above-mentioned are but the means to that end.
Thus, the purchase of the stamps is the form of payment
made; the affixture thereof on the document or instrument
taxed is to insure that the corresponding tax has been paid
for such document while the cancellation of the stamps is to
obviate the possibility that said stamps will be reused for
similar documents for similar purposes.

In the case at bar, there appears to be no dispute on the

fact that the documentary stamps corresponding to the
various policies were purchased and paid for by the
respondent Company. Neither is there any argument that
the same were cancelled as required by law. In fact such
were the findings of petitioner's examiner Amando B.
Melgar who stated as follows:

"Investigation disclosed that the subject insurance

company is a duly organized corporation doing business
in the Philippines. It keeps the necessary books of
accounts and other accounting records needed by the
business. Further verifica;tion revealed that it has, since
July, 1959, been using a 'HASLER' franking machine,
Model F-88, which stamps the documentary stamps on
the duplicates of the policies issued. Prior to the
acquisition of the said machine, the company buy its
stamps by allowing the Manager to issue a Manager's
check drawn against the National City Bank of New York
and payable to the City Treasurer of Manila. It was also
found out that during this period (1952 to 1958), the
total purchases of documentary stamps amounted to
P77,837.67, while the value of the used stamps lost
amounted to P65.901.11. Verification with the files
revealed that most of the monthly statements of
business and registers of documentary stamps
corresponding to insurance policies issued were missing
while some where the punched documentary stamps
affixed were small in amount are still intact.

"The taxpayer was found to be negligent in the

preservation and keeping of its records. Al;though the
loss was found by the company's private investigator
(see attached true copies of his reports) was not an
'Inside Job,' still the company should be held liable for its
negligence, it appearing that the said records were
placed in a bodega, where almost all patrons of the
coffee shop nearby could see them. The company also
viola;ted the provision of Section 221 of the National
Internal Revenue Code which provides that the
documentary stamps should be affixed and cancelled on
the duplicates of bonds and policies issued. In this case,
the said stamps were affixed on the register of
 documentary stamps. (pp. 35-36, BIR rec.;
Underscoring supplied.)" (CTA Decision, Rollo, pp. 18-
19.)

Such findings were confirmed by the Memorandum of

Acting Commissioner of Internal Revenue Jose B. Lingad,
dated November 7, 1962 to the Chief, Business Tax Division,
which states:

"The records show that the FIREMAN'S FUND

INSURANCE COMPANY allegedly paid P77,837.67 in
documentary stamp taxes for the policies of insu;rance
issued by it for the years 1952 to 1958 but could only
present as proof of payment P11,936.56 of said taxes as
the rest of the amount of P65,901.11 were lost due to
robbery. Upon veri;fication of this payment however it
was found that the FIREMAN'S FUND INSURANCE
COMPANY affixed the documentary stamps not on the
individual insurance policies issued by it but on a
monthly statement of business and a register of
documentary stamps, the use of which was not
authorized by this Office. It was claimed that the same
procedure was used in the case of the lost documentary
stamps aforementioned. As this practice is irregular and
the remaining records are not conclusive proofs of the
payment of the corresponding documentary stamp tax
on the policies, the FIREMAN'S FUND AND INSURANCE
 COMPANY is still liable for the payment of the
documentary stamp taxes on the policies found not
affixed with stamps." (Original BIR Record, p. 87).

Later, respondent Court of Tax Appeals correctly observed

that the purchase of documentary stamps and their being
affixed to the monthly statements of business and policy
registers were also admitted by counsel for the Government
as could clearly be gleaned from his Memorandum
submitted to the respondent Court. (Decision, CTA Rollo,
pp. 4-5).

Thus, all investigations made by the petitioner show the

same factual findings that respondent company purchased
documentary stamps for the various policies it has issued
for the period in question although it has attached the same
on documents not authorized by law.

There is no argument to petitioner's contention that the

insurance policies with the corresponding documentary
stamps affixed are the best evidence to prove payment of
said documentary stamp tax. This rule however does not
preclude the admissibility of other proofs which are
uncontradicted and of considerable weight, such as: copies
of the applications for manager's checks, copies of the
manager's check vouchers of the bank showing the
purchases of documentary stamps cor;responding to the
various insurance policies issued during the years 1952-
1958 duly and properly identified by the witnesses for
respondent company during the hearing and admitted by
the respondent Court of Tax Appeals (Brief for Respondent,
p. 15).

It is a general rule in the interpretation of statutes levying

taxes or duties, that in case of doubt, such statutes are to
be construed most strongly against the government and in
favor of the subjects or citizens, because burdens are not to
be imposed, nor presumed to be imposed beyond what
statutes expressly and clearly import (Manila Railroad Co. v.
Collector of Customs, 52 Phil. 950 [1929]).

There appears to be no question that the purpose of

imposing documentary stamp taxes is to raise revenue and
the corresponding amount has already been paid by
respondent and has actually become part of the revenue of
the government. In the same manner, it is evi;dent that the
affixture of the stamps on documents not authorized by law
is not attended by bad faith as the practice was adopted
from the authority granted to Wise & Company, one of
respondent's general agents (CTA Decision, Rollo, p. 20).
Indeed, petitioner argued that such authority was not given
to respondent company specifically, but under the general
principle of agency, where the acts of the agents bind the
principal, the conclusion is inescapable that the justifica;tion
for the acts of the agents may also be claimed for the acts
of the principal itself (Brief for the Respondents, pp. 12-13).

Be that as it may, there is no justification for the government

which has already realized the revenue which is the object
of the imposition of subject stamp tax, to require the
payment of the same tax for the same documents.
Enshrined in our basic legal principles is the time honored
doctrine that no person shall unjustly enrich himself at the
expense of another. It goes without saying that the
government is not exempted from the application of this
doctrine (Ramie Textiles, Inc. v. Mathay Sr., 89 SCRA 587
[1979]).

Under the circumstances, this court RESOLVED to DISMISS

this petition and to AFFIRM the assailed decision of the
Court of Tax Ap;peals.

Fernan, (Chairman), Gutierrez, Jr., Padilla, Bidin, and Cortes,

JJ., concur.

Alampay, J., on leave.