CENTRAL AZUCARERA DON PEDRO vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL
REVENUE (f8)
G.R. Nos. L-23236 and L-23254 || May 31, 1967 || REYES, J.B.L., J.:
FACTS:
This is a consolidation of two cases filed by P:
Case #1:
P had been filing its income tax returns on the "fiscal year" basis ending August 31, of every year. For the fiscal year 1954,
it filed its ITR for which P paid P491,038.00. R-CIR assessed P167,935.00 as deficiency income tax but DID NOT assess
and impose any interest. P protested the deficiency assessment, which R modified to P10,062.00. Aside from modifying the
amount, R also added the sum of P1,509.30 as ½% monthly interest, pursuant to Section 51 (d) of the NIRC, as amended
by RA 2343 (effective June 20, 1959). The interest was computed from June 20, 1959 to December 20, 1961 which was the
date of the revised assessment.
P paid the P10,062.00 but objected to the first-time imposition of interest. R maintained that such was correct and valid. P
appealed to CTA, saying that the imposition of interest on income tax earned prior to the effectivity of the amendatory law
(Rep. Act 2343) will be tantamount to giving it retroactive application. CTA upheld R.
Case # 2:
P filed its ITR for the years 1955-1958. R assessed deficiency income taxes in the amount of P21,330.00 and interest of
P2,307.10, such interest imposed pursuant to the same provision above. P paid the deficiency and the interests but
subsequently claimed a refund of the P2,307, alleging the same grounds as in the first case.
R was not able to decided immediately the claim. Because the end of the two-year prescriptive period was already looming,
P filed a petition for review in CTA, disputing the legality and validity of the imposition of interest on taxable incomes
earned prior to, although assessed after, the effectivity of RA 2343.
CTA: Congress had power to impose interest on deficiency income tax due on income earned prior to the amendatory law,
but assessed after its enactment. The deficiency income tax was assessed after the effectivity of the new law (RA 2343), and
inasmuch as the interest imposed has been computed only from June 20, 1959 (which was the date of effectivity of said
law), RA 2343 is not being applied retroactively. It also ruled that the provision of Section 13 providing that its new tax
rates should apply to income earned in 1959, did not indicate that Congress intended to limit the applicability of the interest
prescribed in Section 51 (d) of the NIRC, to the deficiency income tax on income earned after the effectivity of the new
law, since said Section 51 (d) does not distinguish between taxable income earned prior to, or after, the effectivity of said
Republic Act No. 2343.
ISSUE:
W/N RA 2343 is ex post facto law and therefore unconstitutional - NO
RATIO:
Under the old Section 51 (a), the CIR was required to assess the tax due, based on the taxpayer's return, and notify the
taxpayer of said assessment. Under subsection (b) of the same old Section 51, the time prescribed for the payment of tax
was fixed, whether or not a notice of the assessment was given to the taxpayer. However, under the new provision, the time
of payment is also fixed and pre-determined (usually coinciding with the filing of the return) without the necessity of giving
notification of the assessment to the taxpayer by the Commissioner.
Under the old Section 51 (e), the interest on deficiency was imposed from the time the tax became due; while under the new
Section 51 (d), said interest is imposed on the deficiency from the date prescribed for the payment of the tax.
P's contention is that interest accrues only upon non-payment of the tax within the period prescribed. However, looking at
the new rules, such interest also accrues not only upon non-payment of the basic income tax but also on the deficiency tax,
since the deficiency was part and parcel of petitioner's income tax liability.
The new Section 51 (d) expressly provides that the interest on deficiency shall be assessed at the same time as the
deficiency income tax; and that R imposed and sought to collect the interest only from June 20, 1959, which was the date of
effectivity of said RA 2343; that the deficiency income taxes in question were assessed and unpaid when said Act was
already in force, CTA correctly held that said Section 51 (d), as amended, is not being applied retroactively as contended by
petitioner herein.
Also, such application of the new law worked in favor of P because instead of imposing the rate of 1% monthly interest as
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, R merely imposed the new ½% monthly interest from January 20, 1959, which interests, as computed,
are less than what would be due under the old law.
Re: RA 2343 as ex post facto law
It is to be noted that the collection of interest in these cases is not penal in nature, thus —
the imposition of . . . interest is but a just compensation to the state for the delay in paying the tax, and for the
concomitant use by the taxpayer of funds that rightfully should be in the government's hands. The fact that the
interest charged is made proportionate to the period of delay constitutes the best evidence that such interest is not
penal but compensatory.
and we had already held that —
This prohibition applies only to criminal or penal matters, and not to laws which concern civil matters or
proceedings generally, or which affect or regulate civil or private rights
Finally, section 13 of the amendatory Republic Act No. 2343 refers only to the basic tax rates, which are made applicable to
income received in 1959 onward, but does not affect the interest due on deficiencies, which are left to be governed by
section 51 (d).
