The document discusses two cases brought by Central Azucarera Don Pedro against the Commissioner of Internal Revenue regarding the imposition of interest on deficiency income taxes. The Tax Court ruled in favor of the Commissioner in both cases. The Supreme Court affirmed, holding that interest imposed under Section 51(d) of the National Internal Revenue Code, as amended by Republic Act 2343, can be imposed on deficiency income taxes due on income earned prior to the amendment taking effect, but assessed afterwards. The amendment clarified that interest is due from the date prescribed for tax payment, rather than only when payment is delayed.
The document discusses two cases brought by Central Azucarera Don Pedro against the Commissioner of Internal Revenue regarding the imposition of interest on deficiency income taxes. The Tax Court ruled in favor of the Commissioner in both cases. The Supreme Court affirmed, holding that interest imposed under Section 51(d) of the National Internal Revenue Code, as amended by Republic Act 2343, can be imposed on deficiency income taxes due on income earned prior to the amendment taking effect, but assessed afterwards. The amendment clarified that interest is due from the date prescribed for tax payment, rather than only when payment is delayed.
The document discusses two cases brought by Central Azucarera Don Pedro against the Commissioner of Internal Revenue regarding the imposition of interest on deficiency income taxes. The Tax Court ruled in favor of the Commissioner in both cases. The Supreme Court affirmed, holding that interest imposed under Section 51(d) of the National Internal Revenue Code, as amended by Republic Act 2343, can be imposed on deficiency income taxes due on income earned prior to the amendment taking effect, but assessed afterwards. The amendment clarified that interest is due from the date prescribed for tax payment, rather than only when payment is delayed.
The document discusses two cases brought by Central Azucarera Don Pedro against the Commissioner of Internal Revenue regarding the imposition of interest on deficiency income taxes. The Tax Court ruled in favor of the Commissioner in both cases. The Supreme Court affirmed, holding that interest imposed under Section 51(d) of the National Internal Revenue Code, as amended by Republic Act 2343, can be imposed on deficiency income taxes due on income earned prior to the amendment taking effect, but assessed afterwards. The amendment clarified that interest is due from the date prescribed for tax payment, rather than only when payment is delayed.
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EN BANC
G.R. Nos. L-23236 and L-23254
May 31, 1967
CENTRAL AZUCARERA DON PEDRO, petitioner,
vs. COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents. FACTS:
In G. R. No. L-23254 (CTA Case No. 1278
In G.R. No. L-23236 (CTA Case No. 1273),
Petitioner Central Azucarera Don Pedro had been filing its income tax returns on the "fiscal year" basis ending August 31, of every year. Within the period allowed it under Section 46 of the National Internal Revenue Code, petitioner filed, on October 24, 1954, with the Bureau of Internal Revenue, its income tax return for the fiscal year ending August 31, 1954, for which it paid the total sum of P491,038.00, as income tax, computed on the basis of said return. On October 15, 1959, Respondent Commissioner of Internal Revenue assessed against petitioner the amount of P167,935.00, as deficiency income tax for the abovementioned fiscal year, but he did not assess and impose any interest thereon. Petitioner protested, in a letter dated October 26, 1959, said deficiency income tax assessment and requested that the same be cancelled. Acting on the letter-protest, respondent finally ascertained and assessed, in a letter dated December 20, 1961, against petitioner the amount of P10,062.00, as deficiency income tax, to which was added the sum of P1,509.30 as % monthly interest thereon, Petitioner was satisfied with the revised assessment of said deficiency income tax proper and, accordingly, it paid, on January 16, 1962, the said amount of P10,062.00 to respondent; however, it objected, in a letter-protest dated January 18, 1962, to the demand and imposition of interest which was assessed and included for the first time in respondent's letter of December 20,1961. In due time petitioner went to the Tax Court in a petition for review, claiming that the imposition of % monthly interest on its deficiency tax for the fiscal year 1954, Pursuant to Section 51
(d) of the Revenue Code, as amended by Republic Act No. 2343,
is illegal, because the imposition of interest on efficiency income tax earned prior to the effectivity of the amendatory law (Rep. Act 2343) will be tantamount to giving it (Rep. Act No. 2343) retroactive application. On June 15, 1964, the Tax Court rendered its decision, upholding the ruling of respondent Commissioner.
The same petitioner (Central Azucarera Don Pedro) filed its income tax returns within the prescribed period for the succeeding fiscal years ending August 31 1955, 1956, 1957, and 1958, for which it paid the corresponding income taxes, based on said returns. After verification and examination of petitioner's income tax returns for the abovestated fiscal years, respondent Commissioner ascertained and assessed, for each of said fiscal years against petitioner, deficiency income taxes in the total amount of P21,330.00, and interest thereon in the total sum of P2,307.10, which interest were likewise imposed pursuant to Section 51 (d) of the Internal Revenue Code, as amended by Republic Act No. 2343. Petitioner paid said deficiency income taxes and interests within the period prescribed by respondent to pay the same; however, on January 19, 1962, it filed with the latter a claim for refund or tax credit of the aforesaid sum of P2,307.00, which was paid as interests, claiming that said payment was erroneous and the collection thereof by respondent was illegal, which contention is similar to that alleged in its previous protest (now CTA Case No. 1273).
ISSUE: Whether or not the interest provided for in Section 51 (d) of the National Internal Revenue Code, as amended by Republic Act No. 2343 (effective June 20, 1959) is imposable on deficiency income tax due on income earned prior to the effectivity of said Republic Act No. 2343, but assessed after it. HELD: YES. It is thus evident that petitioner's contention that "interest on such deficiency accrued only when the taxpayer failed to pay the tax within the period prescribed therefor by respondent (Commissioner of Internal Revenue)" is not correct; said interest was imposable in case of non-payment
on time, not only on the basic income tax, but also on the deficiency tax, since the deficiency was part and parcel of petitioner's income tax liability.
To any sum or sums due and unpaid after the
dates prescribed in subsections (b), (c) and (d) for the payment of the same, there shall be added the RATIO: sum of fiveper centum on the amount of tax unpaid and interest at the rate of one per centum a month The interest in this case is imposed on deficiency income tax due on income earned prior to the upon said tax from the time the same became due, amendment, but assessed after it. except from the estates of insane, deceased, or insolvent persons.1wph1.t TAX CODE BEFORE AMENDMENT TAX CODE AFTER Sec. 51. Assessment and payment of income tax.
(a) Assessment of Tax. All assessments shall be
made by the Collector of Internal Revenue and all persons and corporation subject to tax shall be notified of the amount for which the are respectively liable on or before the first day of May each successive year. (b) Time of payment. The total amount of tax imposed by this Title shall be paid on or before the fifteenth day of May following the close of the calendar year, by the person subject to tax, and in case of a corporation, by the president, vicepresident, or other responsible officer thereof. If the return is made on the basis of a fiscal year, the total amount of the tax shall be paid on or before the fifteenth day of the fifth month following the close of the fiscal year. xxx xxx xxx (d) Refusal or neglect to make returns; fraudulent returns, etc. In case(s) of . . . erroneous . . . returns, the Collector of Internal Revenue shall, upon discovery thereof, . . . make a return upon information obtained as provided for in this code or by existing law, or require the necessary corrections to be made, and the assessment made by the Collector of Internal Revenue thereon shall be paid by such person or corporation immediately upon notification of the amount of such assessment. (e) Surcharge and interest in case of delinquency.
centum per annum from the dat
payment of the tax (or, if the tax installments, from the date pres payment of the first installment) deficiency is assessed: Provide maximum amount that may be c on deficiency shall in no case e corresponding to a period of thr present provisions regarding pre contrary notwithstanding.
Sec. 51. Payment and Assessment of income tax
Sec. 46. Corporation returns. . . .
Sec. 46. Corporation returns. (a) Payment of tax. (1) In general (b) When to file. The return shall be rendered on (b) When to file. The return s amount of tax imposed by this Title shall be paid at or before the first day of March of each year for the before the fifteenth day of April the time the return is filed but not later than the preceding calendar year, or if the corporation has preceding calendar year, or if th fifteenth day of April following the close of the designated a fiscal year, then within sixty days after designated a fiscal year, on or b calendar year, or, if the return is made on the basis the close of such fiscal year. day of the fourth month followin of a fiscal year, then not later than the fifteenth day fiscal year. of the fourth month following the close of the fiscal From a perusal and comparison of the above quoted sections of the Tax year. Such tax shall be paid by the person subject Code, before and after its amendment, it will be observed that, although the thereto, and in the case of a corporation by the Commissioner (formerly Collector) of Internal Revenue, under the old President, Vice-President, or other responsible Section 51 (a) was required to assess the tax due, based on the officer thereof: Provided, That if in any preceding taxpayer's return, and notify the taxpayer of said assessment, still, year, the payer was entitled to a refund of any under subsection (b) of the same old Section 51, the time prescribed for amount thereof, if not yet refunded, it may be the payment of tax was fixed, whether or not a notice of the assessment deducted from the amount of tax to be paid. was given to the taxpayer. Under the new provision, the time of xxx xxx payment is also fixed and pre-determined (usually coinciding with the (b) Assessment and payment of deficiency tax filing of the return) without the necessity of giving notification of the After the return is filed, the Commissioner of assessment to the taxpayer by the Commissioner. Internal Revenue shall examine it and assess the correct amount of the tax. The tax or deficiency in It should further be observed that, under the old Section 51 (e), the tax so discovered shall be paid upon notice and interest on deficiency was imposed from the time the tax became due; demand from the Commissioner of Internal while under the new Section 51 (d), said interest is imposed on the Revenue. deficiency from the date prescribed for the payment of the tax. xxx xxx (d) Interest on deficiency. Interest upon the It is thus evident that petitioner's contention that "interest on such deficiency amount determined as a deficiency shall be accrued only when the taxpayer failed to pay the tax within the period assessed at the same time as the deficiency and prescribed therefor by respondent (Commissioner of Internal Revenue)" is shall be paid upon notice and demand from the not correct; said interest was imposable in case of non-payment on time, Commissioner of Internal Revenue; and shall be not only on the basic income tax, but also on the deficiency tax, since collected as a part of the tax, at the rate of six the deficiency was part and parcel of petitioner's income tax liability.
It appearing that the new Section 51 (d) under Republic Act 2343 expressly provides that the interest on deficiency shall be assessed at the same time as the deficiency income tax; and that respondent Commissioner of Internal Revenue imposed and sought to collect the interest only from June 20, 1959, which was the date of effectivity of said Republic Act No. 2343; that the deficiency income taxes in question were assessed and unpaid when said Act was already in force, the Tax Court correctly held that said Section 51 (d), as amended, is not being applied retroactively as contended by petitioner herein. Moreover, the application of said Section 51 (d), as amended, in the cases at bar, operated and worked in favor of petitioner-appellant, since instead of imposing the rate of one per centum (1%) monthly interest prescribed in the
old section 51 (e) from the time the tax became due, i.e., from January 15, 1955, 1956, 1957, 1958 and 1959, respectively, respondent Commissioner merely imposed the new % monthly interest from January 20, 1959, which interests, as computed, are less than what would be due under the old law. With respect to the petitioner's contention that the application of the amended provision (now Sec. 51-d of the Tax Code) to the cases at bar would run counter to the constitutional restriction against the enactment of ex post factolaws, it is to be noted that the collection of interest in these cases is not penal in nature,
