Decision
Philippine Guaranty Co v. Revenue
G.R. No. L-22074 · 1965-04-30 · J.P, J. · LawPhil
THE PHILIPPINE GUARANTY CO., INC., petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents. Josue H. Gustilo and Ramirez and Ortigas for petitioner. Office of the Solicitor General and Attorney V.G. Saldajena for respondents. BENGZON
J.P., J.:
The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance contracts, on various dates, with foreign insurance companies not doing business in the Philippines namely: Imperio Compañia de Seguros, La Union y El Fenix Español, Overseas Assurance Corp., Ltd., Socieded Anonima de Reaseguros Alianza, Tokio Marino & Fire Insurance Co., Ltd., Union Assurance Society Ltd., Swiss Reinsurance Company and Tariff Reinsurance Limited. Philippine Guaranty Co., Inc., thereby agreed to cede to the foreign reinsurers a portion of the premiums on insurance it has originally underwritten in the Philippines, in consideration for the assumption by the latter of liability on an equivalent portion of the risks insured. Said reinsurrance contracts were signed by Philippine Guaranty Co., Inc. in Manila and by the foreign reinsurers outside the Philippines, except the contract with Swiss Reinsurance Company, which was signed by both parties in Switzerland.
The reinsurance contracts made the commencement of the reinsurers' liability simultaneous with that of Philippine Guaranty Co., Inc. under the original insurance. Philippine Guaranty Co., Inc. was required to keep a register in Manila where the risks ceded to the foreign reinsurers where entered, and entry therein was binding upon the reinsurers. A proportionate amount of taxes on insurance premiums not recovered from the original assured were to be paid for by the foreign reinsurers.
The foreign reinsurers further agreed, in consideration for managing or administering their affairs in the Philippines, to compensate the Philippine Guaranty Co., Inc., in an amount equal to 5% of the reinsurance premiums. Conflicts and/or differences between the parties under the reinsurance contracts were to be arbitrated in Manila. Philippine Guaranty Co., Inc. and Swiss Reinsurance Company stipulated that their contract shall be construed by the laws of the Philippines.
Pursuant to the aforesaid reinsurance contracts, Philippine Guaranty Co., Inc. ceded to the foreign reinsurers the following premiums: 1953 . . .
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P842,466.71 1954 . . .
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721,471.85 Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it file its income tax returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them. Consequently, per letter dated April 13, 1959, the Commissioner of Internal Revenue assessed against Philippine Guaranty Co., Inc. withholding tax on the ceded reinsurance premiums, thus: 1953 Gross premium per investigation .
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P768,580.00 Withholding tax due thereon at 24% . . .
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. . P184,459.00 25% surcharge .
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. 46,114.00 Compromise for non-filing of withholding income tax return . .
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. . 100.00 TOTAL AMOUNT DUE & COLLECTIBLE .
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