CASTRO - v - CIR
G.R. No. L-12174, April
26, 1962 REYES, J.B.L., J.:
Facts:
1. Petitioner Maria B.
Castro, who is authorized to manage her own property, is a duly licensed
merchant.
2. Pursuant to the
provisions of Section 4 (b) and (c) of Republic Act No. 55, she filed with the BIR
in 1947, her war profits tax returns which showed a net worth in 1945 in the
amount of P431,884.00 and a net worth in 1941 in the sum of P409,581.57.
Although there is indicated an increase in net worth in the amount of
P22,302.43, she is totally exempted from paying any war profits tax therefor as
the deduction of six per centum (6%) per annum of the net worth in 1941
therefrom would show only a taxable increase in net worth in the amount of
P5,574.61 which is not taxable under the
said law.
3. In 1947, however,
Criminal Case was filed against her in the CFI Manila for violation of Section
4, in connection with Section 8, of the War
Profits Tax Law, for allegedly defrauding the Republic of the
Philippines in the total amount of P1,048,687.76.
4. Petitioner through
counsel filed a motion to quash the criminal action against her and during the
pendency of the same, she amended, her original war profits tax returns making
it to appear that her true net worth in 1945 was P315,438.32 while her net worth
in 1941 was left unchanged at P409,581.57. According to the amended return,
there was therefore a decrease in net worth in the amount of P94,143.25 instead
of an increase of P22,302.43 as originally reported. In 1948, the motion of
petitioner to quash the information was denied by the CFI Manila.
5. In 1949, the City
Fiscal of Manila manifested in open court that after a re-investigation of the
case "the amount of the tax due and for which the accused stands charged
for evading payment is only about P700,000.00, instead of P1,048,687.76 as
stated in the information." However,
at the continuation of the hearing of the case in 1950, Supervising Examiner
Aquino of the BIR who testified for the prosecution, declared in answer to
questions propounded by the City Fiscal "that
as a result of a detailed reinvestigation conducted by his office, it was found
out that no war profits tax was due from the accused in connection with the
present case." Whereupon, City Fiscal Angeles moved for the dismissal
of the case. CFI Manila, in an Order dismissed Criminal Case against
petitioner.
6. After the dismissal
of the Criminal Case, another report was submitted by the same Supervising
Examiner Aquino to his superiors wherein he changed his previous stand taken
before the CFI Manila, on the basis of which report another letter of demand
for P2,008,293.53 as war profits tax was issued against petitioner in 1950. The
case was again referred to the City Fiscal's Office for another prosecution
based on the earlier demand but the same was again dropped.
7. Following insistent
requests of petitioner for reinvestigation of her case, the then Secretary of
Finance Pedrosa created a committee to review or re-examine the assessment for
war profits tax issued against the petitioner.
8. After a thorough
investigation of the case, the Pedrosa Committee on submitted its report, recommending
the collection of the amount of P3,593,950.78 as war profits tax due from
petitioner inclusive of surcharge and interests. The findings and
recommendations of the Pedrosa Committee were forwarded to the President of the
Philippines for approval and the President approved the same in toto.
9. Accordingly, the
respondent demanded from the petitioner Maria B. Castro the payment of the
total amount of P3,593,950.78 as war profits tax .
10. In order to enforce
collection of this last mentioned assessment the respondent caused to be
advertised sale at public auction of various real properties of petitioner to
satisfy the war profits tax assessed against her.
11. The petitioner, in
order to stop the scheduled sale at public auction filed before the CFI Manila
a petition for preliminary injunction against the CIR, praying, among
others, that an order be issued enjoining said official from proceeding with
the collection by summary methods of the war profits tax demanded.
12. Over the objection of
respondent that CFI had no jurisdiction to entertain the complaint nor to issue
a writ of injunction, the said Court entered an order declaring that it had
authority proceed with the case but denied the petition for preliminary
injunction.
13. Inasmuch as no
preliminary injunction was issued by the Court, respondent proceeded with the
distraint and levy and sale at public auction of the properties of petitioner. For
lack of bidders on the scheduled dates of sale, the properties were forfeited
to the Government under Section 328 of the National Internal Revenue Code
14. The petitioner has
not exercised her right of legal redemption
15. Supreme Court in a
decision promulgated in 1951 declared the lower court is without jurisdiction
to proceed with the trial on preliminary injunction.
16. In 1951, an
additional war profits tax was assessed against the petitioner. After due
hearing and reception of evidence, the Tax Court annulled the last tax sale (Manila
buildings) on account of irregularities in the notices of sale; but for the
rest, it found against petitioner and assessed her tax liability.
17. From this decision,
Maria Castro appealed to this Court.
Issue: Whether or not cash in banks was
part of the assets of taxpayer.
Held: No.
Ruling:
- Petitioner alleged
that under Republic Act No. 55, only "cash in banks" is expressly
mentioned as taxable, and appellant infers that cash on hand not so deposited
was not intended to be subject to war profits tax. This thesis appears unmeritorious.
- Cash held by the
taxpayer in 1945 clearly falls under the description of "assets,
including real and personal property" that section 2 of the Act expressly
order included in determining the taxable net worth.
- If "cash in
banks" is expressly mentioned by the Act, it is not because cash on hand
was intended to be excluded, but because "cash in banks" is not,
strictly, speaking, part of the assets of the taxpayer, but assets of the banks
where the cash is deposited.
- It is well
established that a so-called "bank
deposit" is in reality a loan to the bank, the latter acquiring title to
the amount "deposited", subject to its withdrawal (or recall of the
loan) on the dates specified.
- Taxpayer's
"assets", therefore, would not per se include cash deposited in banks
by the taxpayer; and its inclusion had to be expressly prescribed by the
statute in order to remove all doubt as to its taxability.
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