Lessons Applicable: Pecuniary Interest (Insurance)
FACTS:
- March 18, 1925: El Oriente, Fabrica de Tabacos, Inc. in order to protect itself against the loss that it might suffer by reason of the death of its manager, A. Velhagen, who had more than 35 years of experience in the manufacture of cigars in the Philippine Islands, and whose death would be a serious loss procured from the Manufacturers Life Insurance Co., of Toronto, Canada, thru its local agent E.E. Elser, an insurance policy on the life of A. Velhagen for $50,000
- designated itself as the sole beneficiary
- Upon the death of A. Velhagen in the year 1929, El Oriente received all the proceeds of the life insurance policy, together with the interests and the dividends accruing thereon, aggregating P104,957.88
- Collector of Internal Revenue assessed and levied the sum of P3,148.74 as income tax on the proceeds of the insurance policy which tax El Oriente paid
ISSUE: W/N proceeds of life insurance policies paid to corporate beneficiaries upon the death of the insured are also exempted
HELD: YES. reversed and favoring El Oriente
- In reality, what the plaintiff received was in the nature of an indemnity for the loss which it actually suffered because of the death of its manager and not taxable income
