Prudential Bank v. Commissioner of Internal Revenue
REITERATIONFacts
1. The Antecedents: Prudential Bank received a Final Assessment Notice and Demand Letter from the Commissioner of Internal Revenue (CIR) for deficiency Documentary Stamp Tax (DST) for the taxable year 1995. The assessment, totaling ₱18,982,734.38, was based on the bank's Repurchase Agreement with the Bangko Sentral ng Pilipinas (BSP), its Purchase of Treasury Bills from the BSP, and its Savings Account Plus (SAP) product. Prudential Bank protested the assessment, arguing that these transactions were not subject to DST, but the CIR denied the protest. 2. Procedural History: Prudential Bank filed a Petition for Review with the Court of Tax Appeals (CTA), which was initially heard by its First Division. The CTA First Division partially granted the petition, affirming the DST assessment on the SAP product but cancelling the assessments on the repurchase agreement and treasury bills. This resulted in a reduced assessment of ₱6,355,340.63 plus delinquency interest. Prudential Bank's motion for partial reconsideration was denied. Subsequently, the bank appealed to the CTA En Banc, which denied the appeal, affirming that the SAP is a certificate of deposit bearing interest subject to DST. The CTA En Banc later denied Prudential Bank's motion to withdraw its petition and its motion for reconsideration, citing non-compliance with the Improved Voluntary Assessment Program (IVAP) requirements. 3. The Petition: Prudential Bank filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, raising two main issues: (1) whether its SAP, with its higher interest, is subject to DST, and (2) whether the CTA En Banc erred in not allowing the withdrawal of the petition and/or cancellation of the DST assessment on the SAP, given its alleged substantial compliance with the IVAP. The bank argued that its SAP is not a certificate of deposit subject to DST as it is evidenced by a passbook, payable on demand, and not a fixed deposit. It also contended that its payment under the IVAP constituted substantial compliance, despite the respondent's refusal to issue necessary documents for abatement.
Issue(s)
Whether Petitioner's Savings Account Plus (SAP) is subject to Documentary Stamp Tax (DST). Whether the Court of Tax Appeals (CTA) En Banc erred in denying petitioner's motion to withdraw its petition and/or cancel the DST assessment on its SAP, considering its alleged substantial compliance with the Improved Voluntary Assessment Program (IVAP).
Ruling
The petition is denied. The assailed Decision and Resolution of the Court of Tax Appeals are affirmed with modification that petitioner Prudential Bank's payment be considered as partial payment of its tax liability.
Ratio Decidendi
On the taxability of the Savings Account Plus (SAP): The Supreme Court affirmed the CTA En Banc's ruling that the petitioner's SAP is subject to Documentary Stamp Tax (DST) under Section 180 of the old National Internal Revenue Code (NIRC), as amended. The Court clarified that a certificate of deposit is a written acknowledgment by a bank of a sum of money on deposit which the bank promises to pay. It held that a passbook issued by a bank, even if the deposit is payable anytime and the interest rate is reduced upon withdrawal before 30 days, qualifies as a certificate of deposit drawing interest. The Court cited previous rulings in China Banking Corporation v. Commissioner of Internal Revenue, Philippine Banking Corporation v. Commissioner of Internal Revenue, and International Exchange Bank v. Commissioner of Internal Revenue which established that similar accounts, evidenced by passbooks and offering interest, are subject to DST. The Court emphasized that a document need not be in a specific form to be considered a certificate of deposit drawing interest. On the denial of the motion to withdraw under IVAP: The Supreme Court found the CTA En Banc's denial of petitioner's motion to withdraw the petition proper. To avail of the IVAP, a taxpayer must pay 100% of the basic tax of the original assessment or the CTA Decision, whichever is higher, and submit a letter of termination and authority to cancel assessment signed by the respondent. Petitioner failed to submit the required letter of termination and authority to cancel assessment, and the respondent found its payment not in accordance with Revenue Memorandum Circular (RMC) No. 66-2006. The Court reiterated that tax amnesty must be construed strictly against the taxpayer and liberally in favor of the taxing authority, thus mere payment without the supporting documents does not constitute substantial compliance. However, the amount paid by petitioner was considered a partial payment of its tax liability.
Main Doctrine
A passbook issued by a bank for an interest-earning deposit account qualifies as a certificate of deposit drawing interest, and is therefore subject to Documentary Stamp Tax (DST) under Section 180 of the National Internal Revenue Code, as amended. Compliance with tax amnesty programs must be strictly construed against the taxpayer.