CTA Case No. 3683 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY LECA MEDICAL FOUNDATION, C.T.A. CASE NO. 3683 INC. ~ Petitio n er~ �- vet"' SUS -� COMMISSI ONER OF INTERNAL REVENUE ~ Hespo ncl ent . DE C I S I 0 N The case presents the question of whether or not petitioner i s e n titled to the refund of the final tax on i n terest on savings deposi t imposed in Section :? .l(d) of the Tax Code~ as amended~ by PD 17 39 and BP 135 which reads as follows: "I nterest from P h ilippine Currency Bank deposits and yield or any ot her monetary benefit fro m deposit substi tut es and from trust fund a n d si milar arrange ments wh et h er received b y citizens of the Philippines or by resident a li en individual s ~ sha ll be subject to the final tax as follows: ( a ) f i ft een per centum (.1 5% ) of the interest on savings depo sits~ and (b) twenty per ce ntum ( 20 %) o f interest on ti me deposit s and yield or any oth e r monetary benefit from d eposit substitutes and from trust fund and 295

.. DECISION CTA CASE NO. 3683 2 similar arrangements, which shall be collected and paid as provided in Sections 53 and 54 of this Code: Provided, That no tax shall be imposed if the aggregate amount of the interest on all Philippine Currency deposit accounts maintained by a depositor alone or together with another in any one bank at any time during the ta xa ble period does not exceed One thousand peso s (P1~000.00) a year or Two hundred fifty pesos (P250.00) per quarter: f::.r~_q_yj,_g_e._c;l_~l r t. h..�_r-_s_ ..�..J ha_L ..iL_tl~---'=-~-<;.1.-..n.!..~nJ;. 9...f.. . . 2.!-.-!~l.)______:i._r.:U;.f.'?_r.~~-2.t.._...!. ?____~!:f~.fllP.!:...........J ..r:::.Q.!J.l..........i._IJ_C.:..Q.f.Il.�. .!:..~l~9...t .l.:..9.r.:.l.�.s..�._[l_Q___......!:..~2:.:______2.t~~.l...!. ______~.�'___),..!!'.P.9_?.~.9.. an d that~ if the recipient is enjoying preferential income tax treatment~ then the preferential tax rates s o provided <:; ha 11. be imposed." ( Under� scor ing s upplied) Some o f the fa cts have been s tipul ated a nd are so �found. Petitioner is duly incorporated under the laws of the Philippines engaged in charitable activities as a non -s tock~ non - profit trust foundation no part of the income inures to the benefit of any private individual or me mber; likewise~ registered with the Government and Tax Exempt corporation Divi si on of the Bureau of Int. e:~ rnal Revenue as a donee institution in accor-dance with the NEDA--BIR Reg ulations relative to the application of Section 30 (h) of the Tax Code. On December 23~ 1981 petitioner received a P300~000.00 donation which i t deposited with the 29

DECISION CTA CASE NO. 3683 3 Citibank~ Greenhills branch~ Metro Manila~ earning for the year 1981 an interest of P787.50 from which the amount of P118.13 as fifteen per cent (15%) final tax was withheld. Pet.i t.ioner-� requested the refund of the withheld amount. under a claim dated May 19~ 1982~ invok .ing it.~; tax exempt. status under Section 27(e) of the Tax Code, but was denied by the respondent' s "lack of legal basis". Recon si dE~ra tion proved to no avail as the denial was reiterated by the respondent on Septembe~ 26, 1983~ ruling that peti t.ioner � s "inter-es t income from s avings deposit is subject. to income ta:�:." Petitioner instituted this present petition. Petitioner contends that it is income ta:�: exempt. under Section 27 (e) of the lax Code (i.e., Corporation organized for charitable or cultural pur�pnses no the net income inures to the benefit of an{ private stockholder or individual), consequently its interest earning from bank deposit is not. taxable as so provided, "That if the r-ec i pi en t of such is exempt from income taxation, no ta:�: s hall be imposed" (SE'c. 21~ 291

DECISION CTA CASE NO. 3683 -- 4 - Mor eover~ Section 5 ~5 ( e) ( 2) of the Tax Code as amended by PO 1 739 and BP 135~ also provides: In all cases where the depositor or placer/investor i s ta x exempt or is enjoying preferential income tax treatment under existi ng laws , the withholding tax imposed in this paragraph shall be refunded or credited as the case may be upon su bmi ssion to the Commissioner of Internal Revenue of proof that the said depos itor or placer is a tax exempt entity or enjoys a preferential income tax tn'?at.ment. Res pondent posits hi s denial essentially on the pr-oposi tic. �n that petitioner's intere s t. income on its bank deposit being income der-ived from per�son a l is subject to the final withh o lding ta:�: at the rate pr evai ling in 1982 r-egard 1 ess of the dispo sition made of such income pUI'"S Uant to the la st paragraph of the same Section 27 of the Tax Code~ to wit: Notwithstanding the provision s in the preceding paragraphs~ the income of whatever kind and character of the foregoing organization from any of their properties, real or personal~ or from any of their activities conducted for profit, regardless of the di s position made of such income~ shall be subject to tax imposed under� this Code. And~ "11-Jh.ile i t i s true that und er Sections 2 1 and 53(e)(2) of the Tax Code, as amended~ by PO .1. T59 and BP 1 35~ tax exempt depositors a re exempt 29 8

DECISION CTA CASE NO. 3683 f r��om the fin i. ~ withholding ta x o n intere s t i n co me o �f savinqc..;; depo s it, petitioner failed to consi d er that this exemption ho ld s true onl y with t .o those spr.:.>c: i 'fica 11 y e:-:e mpted under- e :-: .i ~; t .i n q 1 '"' \1-J s ~ e.q., the of t.he F'hil.:ippin f:.>S ~ but not with re s p ect to organizations Ol'- '"'~;s oc ia t.ions enumer-ated under- Sec tion 27 (e) o�f then an d now, are su bj ect to ta x on income d erived from a ny of their properties. Petitioner l ikewise failed to cnns.idPr that. the ini".E?I'"P.S t in co me o n bank \1-J aS s uh..i ec l'.E.?d t.o the wit.hh n ldin q ta:-: sc: h P rne under- PD 1.1. ~)6 \1-Jhich took e ff ect on June 3 ~ .1. 977. Said Decree a l s o contained the �7:\ho v e �-. quCJted provisi.CJn. Dn s.a me date, Section 27 (e) of the Tax Code already cCJntai n ed the of i::\ ll t.l�1e Ol'"!] <3f1iZ <"'tions enurn~?.r.. at.~? d thel'"e in de1r� ived from i"\ n y of th e .i r � prop er tie s ~ reqar dl ess of the di s p os .i.t.i.on m-'.'\d e o'f s uch i n c ome, .i. <::; su bj ect to incomP t.a:-:. Thel�- ea �f tel�- , this pr�o v iso became the of Section ~7 o f the Ta x Code under PO Jl J.57 ef ff:?C t.i VP .:Jur1P l l , .1. 97F.!, in or�del'"' that th e cou ld app ly to all the organizations enume rated in sa id Section . Thus , there i s a clea r

DECISION CTA CASE NO. 3683 -�- 6 --� .i.nd i c a t.ion that the organiz a tion s e num e r a ted in S e c tion 27 ( e ) s h a ll continue to b <::? s ubj ec t t o in c ome ta :-: with re s pect to th e in co me d e ri ve d from th e ir propertie s . Sa id in c ome inc l ud~:?s int e r-�es t in c ome on bank d e pos its ." Be that a s i t may , the s prouting impr ess i o n prec ipita tel y broac he d by the pe tition er tha t its int eres t i n co me f ro m b a n k s av ing s d e po si t i s wi th i n th e con te mpl a t i on of its exemp tio n und er Sect ion 27, .:i.J1__:j,_g_. , C: i":\n h a r-dl y b P a r-�pass ut�-� .i.nq pr-o s p ec t th at ca n r� ec on c .i.l e d wi th th e a ft .i li a t i nq s t.;" t. u.t.o r-�y l imita t io n s. Th e ta:-: pr-i v i. l e g e so accord e d b y s ai d sec ti o n cann ot be n a i v e l y v i ewed i'.l.s o f s u c h a t.:w oa d s p ect rum with o p e n e nd e d "feat. ur� e s a<::; ~~~o uld ~:;i. t��� e F.?ve r-y c o mminut e in c om e or g ;::~in ~�I h ie: h p e t .i. t i o n e r- may p r off e r t o a t tac h . Th e l a n q u ,':\gF~ u �f t.h P l as t p a r ag r a ph th ereof ex pli c i t l y states a nd c l ea rl y es t a bli s hes the metes a nd bo und s for th e e nj oy me nt. o f th e tax exe mp t i o n p r i v ileg e. Aq a in, We d o n o t h es i ta t e tu a ppl y , n o t th a t We are h e lpl es~ : y b e h o ld e n, th e rul e oft - quot e d and we ll f orti f ie d wi th r eas s urinq pn?ce d e n t s , i . e . , e xe mp tio n s a r e n eve r pr esu me d , t h e bu r d e n b e ing on th P c l a im a nt. to es t a bl is h c l e a r l y h is right s 300

DECISION CTA CASE NO. 3683 -- 7 --� ther-eto~ a.nd that an alleged gr-ant of e :-a ?. mp t ion will be s tr-ictly constr-ued and cannot be made out of infer-ence or- implication but must be beyond r-eas onable doubt. They have lost none of their- validity in the case at bar-. Since a undoubtedly par-takes of a natur-e of an exemption~ it cannot be allowed unless gr-anted in the most f?:-:pl.i.cit and categor-ical language. (Resins, Inc. v. Auditor General~ L �-.1.78BB~ October- 29~ .1.968~ 25 SCRA 754) . Petitioner- h as failed to "justify its exemption by wor-ds too plain to be mistaken and too cateqor�ic:al to be mi si nter-pr-eted." (Reagan v. Commissioner of Internal Revenue~ L - 26379~ Dece mb er- 27 ~ .1 969 ~ 3 0 . ': RA 969) . In this cir-cumstance We can sa y as a mat ter- of law that r-e s pondent's position compor-ts with the statutor-y intendment. WHEREFORE, the petition is her-eby dismissed at petitioner-'s costs. SO ORDERED. Que z on City, Metr-o Manila~ Mar-ch 30, 1988. 301

DECISION - CTA CASE NO. 3683 - 8 -- WE CONCUR: a::~i?-J F'residin . .Judge Judge CERT I F I C AT I 0 N I hereby certify that this decision was reached after due con sultation a mong the members of the Court of Tax Appeals in accordance with Section 13~ Article VIII of the Constitution. Presiding Judge Court of Tax Appeals 302