CTA Case No. 4585 (Decision)

REPUB L IC OF THE PHI L IPPINES COURT OF TAX APPEALS QUEZON CITY FLORENTINO VISITACION~ JR.~ F'et.i tion e t- ~ C.T.A. CASE NO. 4585 THE COMMISSIONER OF INTERNAL ti l~ REVENUE~ ~< ~- - � -�- - DEC I I0N Thi s is a sirnplc0 claim �for-� n ::d ' und in v olving the amount of F'1.5~'i~401. .23 ta:-:es ~'ii thheld fl-- orn the morH-::> y v alue of the unused le a ve o �f' petition e r� 1-- etin.:?d the gove rnment s erv i ce . It a ppear s from the record that petitioner was �f' o r� me ,.-� 1 y <":\r 1 Assi s t a nt Provincial Iloilo und e r� the DerJar�trnent of Ju s tice until hi s c ornpu l s c:H�y on Nov ember 1. 9t39. F' e t. i t ion e r� r� e t i n :.> d under� Repub 1 i c {k t No. 1.6.16 ~ as amend e d and in a ccord a nce with the s aid law~ h e was entitled to the paym e nt o �f the mone y value of his accumulat e d unused v a ca tion and sick leave cre dits in the amount of F'60 :::~~ ~)~5 0.8 3 . Th t.~ Depat-- t.mF.~ nt o f Ju s ti ce withhe l d fr o m the s aid mone y v alue of leave c: r� e d.i.t s the? ,:\ mount o f P.1.5~5~401.2 3 a s incom e ta:: pa y me nt a nd r e mitt e d to the Bur ea u of Internal 550

DECISION CTA CASE NO. 4585 - 2- F<evenu e under- PNB Check No. 800381 dated Febr-uar-y 9, 1990 which was acknowledged by the BIR under- CB Confir-mation Re ceipt No. B- 1891 2 254 and BIR Payment Or-der- No. C- 67407 89 both d a ted Febr-uar-y 27, 1990. Howe v er-, vJhe n petitioner- came to know of the de cisi on o �f th e S upr-eme Cour-t in the ca s e of fttt.Y-~. . ~.�'T.0..9.T.99... ..F...~.......f..J.~.L<::: .:!:. t..�., Adm i ni s tr-ative Matter- No. 90- 6 - 015-SC ~ holding the money va 1ue of the ter-mina 1 leave c r-edits of Atty. Zialcita e xempt fr-om payment of income ta x , petitioner- wr-ote r-espondent a letter- dated September- 18, 1990~ r-eceived by him on Nove mber- 14, 1990, claiming r-efund of the amount of P155,401.25 t-Jithheld income t .:.u:. On Febr-uar-y 22, 199 1, petitioner- r-eceived a letter- dated Januar-y 3 1, 1991 fr-om the BIR Deputy Commiss ioner- Eufr-acio D. Santos denying hi s claim for- r-efund on the gr-ound that the Zialcita case applies only to e mployees of the Judi c iar-y. Res pondent likewise r- a .i s ed the ca s e of Q.�.<::..�C_ J~ ..~.........YJ.<::. t .9..r.J.�..r.l.R. ~ G � R � 8 3 1 7 6 , August 10~ 1989 as applicable in the instant case. The sole issue submitted to this cour-t for- r-es o 1u tion is vJhether- petitioner-'s ter-mina 1 1eave pay cr-edits r-eceived upon r-etir-ement fr-om gover-nment s er-vice i s subject to withholding tax. 55l

DECISION CTA CASE NO. 4585 - 3- This court had occasioned to pass upon similar cases~ namely: ~.f..r: g-_!l.............E:..! -. ........... b:.Sl:.?..1 .Sl:.0.~.9.9..............._Y?.. ~................T..h..~ G.P..f.T.l.f.T.l..!: !?.?..J.pr::u:;'.r:__..___g_t ...... _I.o_t�?.[_l'l.9_1 ...........R~.Y.~.O..!::t~ ~ CTA Ca s e No. ~.!.809 ~ February 4, 1987; f.J. P..r.::.~o.~.J.9.. . . ~. ! ......J:19D. t.9..?..........Y. ?..~ .... . Ib~ 4004~ � November 18, 1987 and most recently the case of !:':1.Sl:..C.G. 9..?.... . f...~.. ____G9.:1::..9 .L9.1_l .........Y..s � I .h.~.......GPmm.:t;;_=.;_.t..P.o.~.r::: ..........P.f .to..t.~.r:.D..Sl:.l.......R..~_ygn,q~, CTA Case No. 4345, dated November 11, 1991. The first two cases mentioned were affirmed by the Supreme Court in the cas es of B.P..P.~.�.1?.. .......9D.9........E.:.::f..r:.~.D.........G.9. ?. t.Sl:D.~.Q.Sl:, G. R. No. 96016 dated October 17, 1 9 9 1 and G.9_f!lf!l_!:_?.?...t9..0.?..L..... .....9.J.............l.o..t~.r:.IJ..9.1 B.~.Y.?..Q\.,,\g .,, _, Y.?. .~...........GP.\::\C.t ........P..f .........B.p_pg,�:J.?._..___�..IJ..Q............ E .t9..r.:gn.~..!..9.. ... r::.:..~- p_~n..t..P.?.. , G.R. No. 83162 dated July 4~ 1988. In all these cas e s the courts held that the money value of the ter�mina 1 1eave credits of retiring government employe e s are e xempted from income tax pursuant to Commonwealth Ac t No. 186, as amended by R.A. 1616, Pres idential Decree No. 220 and Section 29(b)(7) of the Nat i onal Internal Revenue Code (now Section 28 (b) ( 9) ) � The Castaneda Case as affirmed by the Supr e me Court erases any doubt in the mind of the res pondent that the doctrine in the case of 5 !1?

DEC ISION CTA CASE NO . 4 585 - 4- Zialcita 11-Jill apply not only to employees of the judiciary but to other government employees as \1-Je 1 1 . Efren Castaneda was formerly an official of the Bureau of Internal Revenue. It is likewise in the case of Zialcita that the Supreme Court clarified and differentiated the case o �f Q?.C:::e.r.:: _...I-3..~ ... Y.:i.:..C:::. t.R.C.J.~IJ.Q �from the Zia 1 ci ta. In the case of 'Victoriano~ the Supreme Court decided to s u bject to 11-Ji thho 1 d ing ta}: his ter mina 1 1 eave pay because when he applied for optiona l retirement the terminal leave pay he received had been converted into vacation and sick leave 11-Ji th commutation of salary which forms part of his regular salary subject to income .T h e con version and commutation were done because before the effectivity of his optional retirement on December 31, 1982, he was appointed Acting Co mmissioner of the Land Registration Commission on November 17, 1982. WHEREFORE, in view of thi s clear and c onsistent pronouncement by the Supreme Court, respondent is hereby ordered to refund to petitioner the amount of P155 , 401.23 representing erroneous! y withheld tax from the money value of his terminal leave.

DECISION CTA CASE NO. 4585 - 5- SO ORDERED. Quezon City~ Metro Manila~ November 26~ 1991. . ~~~ ~ ERNESTO D. ACOSTA Assoc iate Judge I CONCUR: .......__ C. ROAQUIN Judge CERTIFICATION I hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals in accordance with Section 1 3 ~ Article VIII of the Constitution. --. ROAQUIN Judge Appeals