Laws Applicable: Section 173,Section 183 of the National Internal Revenue Code, Section 49,Section 50 Title VI of the Insurance Code
FACTS:
- Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.) issued a special kind of life insurance policy known as the "Junior Estate Builder Policy" with a distinguishing feature. It had a "automatic increase clause" upon attainment of a certain age by the insured.
- Commissioner of Internal Revenue issued deficiency documentary stamps tax assessment for the year 1984 pertaining to the amount in the automatic increase clause
- Lincoln questioned the deficiency assessments
- Court of Tax Appeals: found no valid basis and cancelled it
- CA: affirmed CTA
- CIR claims that "automatic increase clause" in the subject insurance policy is separate
ISSUE: W/N the "automatic increase clause" should not be taxed with the main policy
HELD: NO. CA set aside
- Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in which a contract of insurance is set forth
- Section 50 of the same Code provides that the policy, which is required to be in printed form, may contain any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance.
- any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy or contract of insurance
- Section 173 that the payment of documentary stamp taxes is done at the time the act is done or transaction had and the tax base for the computation of documentary stamp taxes on life insurance policies under Section 183 is the amount fixed in policy, unless the interest of a person insured is susceptible of exact pecuniary measurement
- the amount fixed in the policy is the figure written on its face and whatever increases will take effect in the future by reason of the "automatic increase clause" embodied in the policy without the need of another contract
- the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy
- to claim that the increase in the amount insured (by virtue of the automatic increase clause incorporated into the policy at the time of issuance) should not be included in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax be computed on the basis of the amount insured by the policy