BIR Ruling No. 459-11

November 24, 2011 BIR RULING NO. 459-11 Secs. 248 & 249 NIRC; Jamora vs. Meer, 74 Phil. 22; Castro vs. Collector of Internal Revenue, G.R. No. L-12174; BIR Ruling No. 122-99 City Legal Office-City of Valenzuela 3rd Flr. Mayor's Office Executive Bldg. Mc Arthur Hi-way, Karuhatan Valenzuela City Attention: Atty. Vicente S. Bonaobra II Acting City Legal Officer Gentlemen : This refers to your letter dated January 22, 2009, received by this Office on August 25, 2011 by way of indorsement from Revenue District Office No. 24, Valenzuela City, requesting the waiver of assessment for interests, surcharges and compromise penalty on the late payment of capital gains tax (CGT) and documentary stamp tax (DST). It is represented that the City Government of Valenzuela purchased, using the fund of the Local School Board, a parcel of land intended for the construction of the Canumay East National High School in order to address the needs of the growing student population in the surrounding area; that the City Government of Valenzuela assumed the responsibility to pay the corresponding CGT and DST due on the sale; that, however, the aforesaid taxes were not paid on time, thus, the City Government was assessed of interest amounting to Php180,000.00, surcharge in the amount of Php45,000.00, and compromise penalty of Php12,000.00 for the CGT; and that an interest amounting to Php45,225.00, surcharge in the amount of Php11,250.00, and compromise penalty of Php6,000.00, were assessed against the City Government for DST. Thus, this request for the waiver of the above assessments. In reply, please be informed that under Sections 248 and 249 of the Tax Code of 1997, as amended, the imposition of the surcharge and interest on delinquency is mandatory. Strong reasons of policy support a strict observance of the rule regarding the payment of tax. The laws imposing penalties for delinquencies are clearly intended to hasten tax payments or punish evasions or neglect of duty in respect thereof. If delays in tax payments are to be condoned for light reasons, the law imposing penalties for delinquencies would be rendered nugatory and the maintenance of the government and its multifarious activities would be as precarious as taxpayers are willing or unwilling to pay their obligations to the state on time. (Jamora vs. Meer, 74 Phil. 22). The Supreme Court, in the case of Castro vs. Collector of Internal Revenue, G.R. No. L-12174 , dated April 26, 1962, had the occasion to rule that this mandatory imposition of interest and surcharge on delinquency is justified because the intention of the law is precisely to discourage delay in the payment of taxes due to the State and, in this sense, the surcharge and interest charged are not penal but compensatory in nature. They are compensation to the State for the delay in payment or for the concomitant use of the funds by the taxpayer beyond the date he is supposed to have paid them to the State. ( BIR Ruling No. 122-99 dated August 11, 1999 ) Accordingly, your request for the waiver of the assessments for interests, surcharges and compromise penalty are hereby denied for lack of legal merit. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue