CTA Case No. 4640 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FLORENCIO S. JIMENEZ Petitioner, - versus - C.T .A. CASE NO. 4640 THE COMMISSIONER OF INTERNAL REVENUE, Respondent . X- - - -X DEC I s I 0 The instant petition prays :for the refund of the s um of P56,512.68 which was allegedly erroneously deducted and withheld :from petit i oner's termi na l leave pay in the amount of P235 ,469.50. The following :facts do not appear to be disputed: Petitioner was Assistant Vice-President of the Legal Department, Land Bank of the Philippines, who optionally retired on April 30, 1990. He received his terminal leave pay in the amount of P235,469.50 :from which P56,512.68, representing 25'l. withholding tax was deducted. The withheld tax was remitted to 1 the Bureau of Internal Revenue ( BIR) on June 8, 1990 <ExhibitS! "A", "B" and component parts>. Petitioner filed a claim :for re:fund with the respondent in a letter, dated June 20, 1990, 502

., DECISION - CTA CASE NO. 4640 -2- received on June 22, 1990, contending that his terminal leave pay is exempt from income tax. The request was not acted upon, so he reiterated the same in another letter, dated September- 21, 1990. The second request was similarly ignored. Hence, the instant petition was filed to toll the 2-year prescriptive period. Respondent filed an answer disclaiming the right of petitioner to the refund, but failed to present evidence. The only issue herein is whether or not the petitioner's terminal leave pay o:f P235, 459. 50 is subject to withholding income tax in the amount o:f P55, 512. 58. The court :finds :for petitioner. 1. The Supreme Court already resolved on August 23, 1990 in Administrative Hatter 9-0-6-015- SC - RE: Request of Atty. Bernardo F. Zialcita for Reconsideration of the action o:f the Financial and Budget O:f:fice, that terminal leave pay is not subject to income tax. The pertinent portion is quoted: "An eY.ami nat ion o:f the records convinces the Court that the posture o:f Atty. Zialcita is impressed with merits . In the case of Justice Vi~toriano, the terminal leave pay he received when he applied for optional retirement had been converted into vacation and sick leave 503

DECISION - CTA CASE NO. 4640 -3- with commutation of salary which forms part of his regular salary subject to income tax, considering that be:fore the effectivity of his optional retirement on December 31, 1982 he was appointed Acting Commissioner of the Land Registration Commission on November 19, 1982. On the other hand, "��.the terminal leave pay that Atty. Zialcita received by virtue of his compulsory retirement can rr.ey_~e Q.Q.rt s i r,:l~!' eQ_~___p_~_x.:_!;__Q.!_____h.!.~_? a -!...i!.!'..Y____�~_Q.j_ec t :~.Q___!:l~- payment of incqm~. tax but falls under the phrase � 9t~er simila.r bel_!~fi t~ received by retiring employees and workes', within the meaning of Sec. 1 of PD. No. 220 and is thus exempt from the payment of income tax. That the money value of his accrued leave credits is not a part of his salary is further but tressed by Sec. 3 of P. D. No. 985, otherwise known as ' 'The Budgetary Reform Decree on Compensation and Position Classification of 1976' particularly Sec. 3(a) thereof, which makes it clear that the actual service is 'the period of time for which pay has been received, excluding the period covered by terminal leave." <Emphasis supplied.> 2. In Borromeo v. Civil Service Commission et. al. <199 SCRA 911 [19911>, the Supreme Court reiterated the ~-~.1-c:h._t;__~- ruling by holding that terminal leave pay which is the cash value of the accumulated leave credits should not be treated as compensation for services rendered at the time (of the retirement>, considering that t.~r..:.!Jl_~.!.!.<!.=l.____j,_E;'SV~ 504

DECISION �CTA CASE NO. 4640 - 4- particular office. Not being part of gross salary or income, but a retirement benefit, the terminal leave pay of a government official or employee is . not subject� to income tax. - <Commissioner of Internal . Revenue v. Court of Appeals, et. al. ~203 SCRA 72 [ 19911 .> . -. l. evidence, component 3. T~e ,,_petitioner's documentary specifically Exhibits �A� and �a� and parts, as well/ as Exhibit �c�, are public documents which are presumed to have been regularly issued. Respondent has �not presented any evidence to refute the same. Hence, they are admitted. 4. _The exemption applies to terminal leave pay received out of an optional or compulsory retirement, no distinction having been made in the cited decisions/rulings. WHEREFORE, judg.ent is hereby rendered in favor of petitioner ~and against �respondent, directing the latter to refund to petitioner the of P36,512.68 which vas erroneous.ly co.l.lected. SO - ORDERED~ Quezon City, Metro Manila, July 14, 1992. s Acting Associate Judg 505

DECISION - CTA CASE NO. 4640 - 5- I CONCUR: ~ .. t:;Q.. ~ ERNESTO D. ACOSTA Presiding Judge C E RT I F I C AT I 0 N I hereby certify that this decision vas reached after due consultation between the members of the Court of Tax Appeals in accordance vith Section 13, Article VIII of the Constitution. ~~ Q,G?a.cJ\. . ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 506