CTA Case No. 4338 (Decision)

) REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY LA SUERTE CIGAR & CIGARETTE FACTORY EMPLOYEES RETIREMENT PLAN, othe r wis e known as the LA SUERTE WORKMEN COMPENSATION FUND, P e t i t i o n f? t�� , - vet"'S lt s - C.T.A. CASE NO. 4338 COMMISSIONER OF INTERNAL REVENUE, x ----- r~ e s p o n de n t. ------x DE C s CJ N � P7~1, 2~ 9.92 r~presenttnq wit:hhnldinq t a >< CHI i. n t c.> t�� e s t i n co mc:- f Y' o m t h e f u n d P n t 1�� u s t e d h y 1r1 a y o f 1. o ~- n i n v e s t me 11 t s t o L. a � S u e t~ t e C :i q ;=:11�� K C i. q .:n~ e t t e r:>u~ i; IH~ y a 1 1 e q P d t o h a v e b e e n t.? 1 �, ... o n r> o u s l y an cf I o t~ i 1. .I. P r1 ,,., J. .t y w i t h h r-~ J d an d c o l l r> c t r:> cl b y ,. P s p o n d e 11 t i n t 'Jl:17. Ciqar ~ Ci~arettP Factory E mployee s Retirement P l an i s an e mp 1 o y f.l e s t t�� u 5 t 5 e t u p b y t h e e mp l o y e t"' f o t~ th e e >< c 1 us i. v e be ne f i. t o f it r:; �e mr, 1 o ye e s pt~ ov id in q retire me nt a n d separat ion b e n ef i ts. Th e Si'.\l d p l a n ,.1as i:l: pp t~ ovecl a nd q u a lified a s e >< e mpt ft-- om incom.e t a >< 1..' y t�� e s p o n cl e n t p tit' s 1..1 an t t o RP p u b J i c� ~) c t No � '� 9 1 7

DECISION - C.T.A. CASE NO. 4338 - 2- see E><hibits A, PP� CTA Cln Ma y 1 7' 1 984, petitione r and Citic o rp In vest ment Ph i 1 ippines <CITI CClf~ I ::O ) few shot~ t c~ntet~ecl in t o a n inv rst me nt man a qem e n t a~rpeme n t whereby CITlCO f~P was appointee:! t h e inves+:ment mnna q et~ of t h e f u n d <E >< h � D t o D - 5 , p p � 8 ~:i �� f:l. '3 , C T n t �' e c o t ' d s l � In 1 98 .7 petiti oner granted loan s to La Sue rte Ciq~r & Ciq arette Factory and ear n ed from the same intc�n ' es t in c ome ft' om which a. fin<:\l t<:.\>< of ;:;:~01.. ~., as ~"~ i t h h f? .L d p 1.�w s u an t t o S e c t i o n i?. l ( c ) ( l ) i T1 t~ P 1 at i o n to ElP.c. 5 1.(,"\) of the Ta>< Code. l h e invpe;t;ment, interest in come anrl the i n come ta>< withheld are as fo ll ows: CTA t'eC Ot' d S) A ount of Due Inte res t Withholding Tax Collected P.r. g�! ~~.or.Y . Note __Dat e..... In.co11e . Date____ .B!!ount p 4,455,000.00 02- 16-87 p 76,106. 25 02- 16-87 p 15,221. 25 32,157,000.00 02-20-87 543,348.75 02-20-87 103,867.75 04 -20- 87 70,166.25 04-20-87 14,033.25 4,455,000. 00 04-21-87 482,355. 00 04-21-87 %,471. 00 32,157,000.00 (1�- 19- 87 60,000. 00 06- 19-87 12,000.00 4,000,000. 00 06-20-87 482,355.00 06-20-87 96, 471.00 32,157,000.00 08-18- 87 70,000. 00 08-� 18-87 14,000.00 4,000,000.00 08- 19-87 562,747. 50 08- 19-87 112,543.50 32,157,000. 00 10-18- 87 70,000.00 10- 18-87 14,000.00 4,000,000. (10 10-19-87 562,747.50 10- 19-87 112,549.50 32,157,000. 00 12-07-87 77,333.33 12-07-87 15,466.67 4,000,000.00 12- 17-87 - �-� �~.~,JJQ. _QQ 12- 17-87 _g~, �.?.~.d!:9 32,157,000.00 ,e.J.~~~~?.~~ T 0 TAL ~3.~.!~.~~:.?~.2;,~~ Pe tit i onet' filed a Wt' i t ten clai m fot' t'e fund with respond e nt Co mmi ss ione r of Int ern a l Reven ue on 34_i .)

DECISION - C.T.A. CASE NO. 4338 - 3- .J 1 ~5, :1.'389 in the total amount of l.--Jit ho�Jt v.Jaitinq fot' t�'e s pond e nt to .:>- c t on the cl r.1: .im fot' t�' efund petitionel' filed the instant petitio n on to prevent thP runninq of pre scriptjvp period set r c (H' t h i n sect j 0 fl (:: '~ 3 0 f t h e T i":l>< 0 d f' � The on l y i s s ue t o be t' e f-; o 1 v P d i s 1-\th Pt. he t' o t' not pet i t i one t�� i s e ><em pt ft� om 1-'li t I! h n 1 cl i n q t a>< on i n c o mP. f t' o m J. n a n i n v e ~ t me n t D �-w s ' .l an l.: t o Re p u b 1 i c n e t 4917 as implement e d by Re venue Regulation :1. -68 e:\S .~ mended. I The case be e n submitted fot' de c i s ion ba s Pd on the rleadinq s and r e cord s of the ca sP. s a ns the memorandum of both pa rt ies. f~ e s p o n rJ e n t ma :i n t. c-\i n s t h ,, t t h P e >< e mp t i. o n f t' o m the fina l ta>< on inte1�� est on b a nk deposits and deposits substitute enjoyed by petitioner by virtue of the provision of Section 21(d) and 24 (cc) of the Ta>< Co de h as been amended by Pt�esidential Dect�ee No. 1959, whj c h tool< effect on Octobet' 15, 1.984 and h as f o t' i t s e f f e c t t h e d e 1 e t i o n o t' wi t h d t' a wa 1 o f the e><emption from ta>< enjoyed by petitioner under the ,3bove mPntioned Sect ion of the National

DEC I SI ON - C.T.A. CASE NO. 4 3 38 - 4- ne vP n!JP Code. [l n o th r-1 � p r~ l~ �i f.i.nn!�? l'' c .f. :,:, i. m ~? d th ,:\t t:t1 e in c < l nt ~"' <ll.. yi.re lr-1 d P l' ived "!:)EL:TIUN l. f-)ny pt�' o v i. s inn nf li�"'I 'AI to the rontr~ry notwith s t a nding, the Y' f."\ til�' PmPnt benefi.ts t''P.CeivP. cl bv offi. cio. l s <'Hlrl emplP y~;> e S Of rwi Vc"'.\ tP fil ' ms. ltlfl et flCT� i n ct i v i d u"' I. o t ' c o r� p o l�' at f:' , i n �'=' c��c 01�' r~ .~~ n r. e vd . th a "l�' ea s nn,"::ble pt' ivate benefit plan" m;~ i n t a i n P d h y t h e e mf"' J o y P. t ' s h "' 1 1 h t:> P.X~Ill. Pt f1 ' om a l l :tF\><P.s anr.l sh ,o\ 11 not be li."\tJJr> tn attachment, qAl �� rd s llm e nt, levy Ot' sei:nll '' E' by ot�' unclel ' c"\ny leqed 01 '' ' f? quit D. b I. e pl' o cess what so eve l '' ><><><. " <E mph a s i s s upplied) in 1 eJ ,"'.\tiorr to !:)Pction 51.db) Lnr)\'\1 Section ~s~:~(b ) ] of I "F)P c' tion 53 . Imposition of� T �"'~ >< . ( a ) n p p I i c c:\ t i o n o f t <'1 >< � T h e t �='� >< imp pr.; ed hy this l i t l e upon inrli v i.r.lu a l s s l~t:'\. J. 1 np r.ly to the> income of e s t a t t:>s m � o f ,:.~ny l<ind of pt'opet�'ty he:td :i. n tl ' l.\ f, t ' i.ncludinq .... ><><>< )( >< ){ }{)(}{ (b) E><cPnti.on. T h eta>< impor, prl by thi s Tit l e s h .=:d l not .:~p p ly to employee's tJ�' �.\st v1hic h fot" ms pat' t of a pens i o n , stoc ~< bon u s Ot' p t�ofi t -.. shat'ing p l ,"' n of a n e mp 1 o y e t' f o 1'' t h e b e n e f i t o f s o me o t' a 1 1 o f his emp l oyees xx x. " To further support its claim for exemption from the t a><, petitioner cited the

DECISION - C.T.A. CASE NO. 4338 - 5- t ' l? ~j n () n r:J P. n t cl a t ("' cl J IJ n fl. z~~ B ' 1. ':J0 3 ~ t ,.,1.~ j n q t h r-d .: t h e in co me of the f u nd from inv e ~ t m e nt s is ex e mp t fro m i n c n rn t? t; a>< ~t-l i t h i n l: h e c on t e mp 1 i'\ t j o 11 o f' Re p '�'�b J i c ~~ c t The q u P. ,, tion in vol ved in th :i <; c;::~s e i :-; not of fi rst i mpre ssio n . In th e v�~ 1 -�y t' ec en t car.~e l"l f Commissioner of Internal Revenue v. The Hon . Court of Appea ls, the Court of Tax Appeals, GCL Retire111ent Plan, represented by its Trustee-Director <2 07 SCRA 48 7, Co u r t de cid ed e n b a n e, t hat: " I n so f ;:;~. t' as em p J. o y P. e c; ' t l ' us t s i'H ' e r oncer n erl, t h e f o regoing p r o v isi on shou l rl b r~ t a 1<. en i n t' f.d a t i o n t; n t h e n Sect i on :=s c <b > ( n ow 5 3 [bJ ) o f thr> To >< Co d e, as ;:;~, mended hy Rep. Ac t No . 1'30 3, ?..'c.IP.t'j':\, v.�hic h tno l{ P.f f ect on 2 ;:::~ J �..n1 e 1. 9 ~i 7 . l h i s provisi on specifi c a ll y exe mr te d e mp 1 o y <�~ e s ' t t ' u s t s f t '' o m i n c o me t a >< an cl i s r' f? p e a t e d h e t ' P u n d f? t ' f o r�� e mph a s i s " 'Sp c . 5E. . Im po s ition of Ta><. ( a > () p p 1. i c a t i o n n f t a >< � �r h e t a >< e c:- impo s ed b y th is T it l e upo n ) ind ivid uols s h a ll apply to t h P in co me of es tate s or of a n y kind o f prope r ty h e ld in tru st. ) ( )( )( )()()( )()()( ' ( b ) Exce ption. The t a x impo s ed b y thi s Titl e s h a ll n o t a pply to e mp loy ee ' s t1 ' �.1s t ~�l hi c h form s par t of a pen s ion , st oc k bo nu s or profit - s h ar in g p l a n of a n e mpl o y e r f or t h e b e n efit o f so me o r all ' o f hi s e mpl o y ees><><>< .' " Th e L:t>< - e ><em ptio n p1�� j v j]eq e of f?rnp l oyee s ' t r' 'J s t s , a s d i s t i n q u j s h e d f y� n m ur:-' 4'.l

DECI SION - C.T.A. CASE NO. 4338 - 6- c.\ n y o t h e 1�� I ~ i Tl cl Cl f p 1�� o f' P. 1- t' ~, ! 1 r I cl i ll t t ' 1..\ r-:.t; , !~ fH ' inq s ft��ll m thr fpr �r>qoinq f1l ��� p v i~; i.on . It i �; un ;q mhiqqn �t s . M,""' ni fpr.;t thP.l �� pf J..�nm i s t: t 1 ,._, t �t- h r: t '"' '< 1 "' ~-~� h ''"' r.:. s :i 'i n ., P. ct out ,, mp l o y ~~ �J !3 ' t t' u 5 t 5 f o 1 � t r::~ >< r >< �? mr' t; i. 11 r 1 � "()nd l' i r:rhtJy, so? b y vi1 �� t;I.1P of the l' r1 i?..91l ...d .' etl_-_'P. behind t:h P cl �� p;:~ ti.nn of e mp l o y f:~ e s ' t r � u ,., t ~; . E mp l f1 y e P r.; ~ t 1�� 1. 1 ~; t; �~ o t ' h f> n e f j t p J .-:~ n ~- n o t ' ma l l y rw n v i cl e e c o n o mi c <�~ r.; s i 5 t an c P. to e mp l o y e e s '-'- r1n n t t1e " c �::: u r� J�' P. r lf-: P of c e t' t a i n co n t i n q en c i r c:, , p '"' t' t i c u .I. .:;n � .l v � o J. c1 '"' g e t t ' f.' i t..� P. m P n t 1 d e t:'l t h , s ickne ss , or dis~bility. I t provides s ''? c tit' i t y '"' '1 i:'\ i. n s t c e t ' t a i n h a z ;::~ ~ -- r1 s t o ~-~ h i c h mP mb e t' 5 o f t h e P 1 an ma y b e e >< p o s e d � I t i !; an i. nr!Pprndent anc:l ad dition al SOI\ l ' CP. n f p t ' �J �I; P. c t i. o n f o t ' t h P. !AIo 1��� I: :i n q r:p' o u p � l�JI1 a t i. s mrw e, i. t i. s est r.\ h J i. s h e d f cw t h t:>i l'' P. x c 1 1_1 �; i v P ben e f i t an cl f Dl ' no o t h e 1�' [JIJt��po 5 P.. ">< ><>< ){){){ )()()(. "I t is r>vident th a t t a>< -�� e><empt i on i.s .li. l<ew i.s P. tr> hr. enjoyed by the incomr of -t� h e p e n s i o n t r � u :-, t . 0 t h P t ' ~t-J i r.; P ~ t a ><-::'1 t i. n n o f t h n s P. e "'Y' n i n q s 11-J o u 1 r:l t ' e r:; u l t; i n a dimin 1..1t inn of acc umul ated i. n C'!>mf~ an d J�' ~duce 1-'J h ;:d;eve t' tiH� t1��� ust. bc>nr-d' ir.j ;n �' j r.s 1,-1 n 1_1 1 d t ' f' c P. i v e o u t o f t h e h ' 1.1s t f ' .Ill r.1 � !"his l,,,nq Jr.l t ' IJT1 af oul of thP. vet-y i. ntenrlm ent l} f t h e l alt~. " IN VIEW OF THE FORI,::GOI NG, t' e s pond en t Commissioner of Internal Rev e nue i s hereby o r dered to ref und to petitioner the sum of P74 1,259.92 represe nting the 201- final tax withheld. SO ORDERED. Ollezon City, Mett~o Manila, Apt~il 15, 1993 . ~ ERNESTOoD..~rCO.ST~A Pt' e s i d i n g J ud q e 34v

DECISION - C.T.A. CASE NO. 4338 -7- / WE CONCUR: l~'~7,~~ RAMON 0. DE VEY Associate .Judge CERTJ:FJ:CATJ:ON I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, nrticle VIII of the Constitution. ~~Q.. Q......,Jf.. ERNESTO D. ACOSTA Pt~ esiding Judge Court of Tax Appeals 34 G