CTA Case No. 3683

DECISION

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 xable period does not exceed One thousand pesos (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 facts 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 Divisi on of the Bureau of Int. e:~ rnal Revenue as a donee institution in accor-dance with the NEDA--BIR Regulations relative to the application of Section 30 (h) of the Tax Code. On December 23~ 1981 petitioner received a P300~000.00 donation which it deposited with the 29

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

-- 4 - Mor eover~ Section 5 ~5 ( e) ( 2) of the Tax Code as amended by PO 1739 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 existing laws , the withholding tax imposed in this paragraph shall be refunded or credited as the case may be upon su bmission 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 interes t. income on its bank deposit being income der-ived from per·son a l is subject to the final withho lding ta:·:

at the rate prevai ling in 1982 r-egard 1 ess of the disposition made of such income pUI'"SUant to the last 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 it i s true that under 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 298 f r··om the fin i.

~ withholding ta x o n interes t i n come o ·f savinqc..;;

depos 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:-:empted 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 res pect 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 income o n bank \1-JaS s uh..i ec l'.E.?d t.o the wit.hhn ldin q ta:-:

sc: hP 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:\hov e ·-.. quCJted provisi.CJn.

Dn s.ame 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 the .i r· prop er tie s ~ reqardl ess of the di s pos .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 ll, .1. 97F.!, in or·del'"' that the cou ld app ly to all the organizations enume rated in said Section . Thus , there i s a clea r

DECISION ~-

indication that the organizations enumerated in Section 27(e) shall continue to be subject to income tax with respect to the income derived from their properties. Said income includes interest income on hank deposits.”

Be that as it may, the sprouting impression precipitately broached by the petitioner that its interest income from bank savings deposit is within the contemplatian af its exemption under Section 27, ibid.. can hardly be a reassuring prospect that can easily be recanciled with the affiliating statutory limitations. The tax privilege so accorded by said section cannot be naively viewed as of such aio broad spectrum with open ended features woule ire every camminute income or gain which petitioner may proffer to attach. The language of the last paraqraph thereof explicitly states and clearly establishes the metes and bounds for the enjoyment of the tax exemption privilege. Again, We do not hesitate to apply, mot that We are helpless y beholden, the rule oft-quoted and well forkified with reassuring precedents, L.@as exemptions are never presumed, the burden being on the claimant to establish clearly his rights SOy Oulu

-- 7 --· ther-eto~ a.nd that an alleged gr-ant of e :-a ?.m p 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- has failed to "justify its exemption by wor-ds too plain to be mistaken and too cateqor·ic:al to be misi nter-pr-eted." (Reagan v.

Commissioner of Internal Revenue~ L - 26379~ December- 27 ~ .1 969 ~ 3 0 . ': RA 969) . In this cir-cumstance We can say as a mat ter- of law that r-es pondent's position compor-ts with the statutor-y intendment.

WHEREFORE, the petition is her-eby dismissed at petitioner-'s costs.

WE CONCUR:

a::~i?-J F'residin . .Judge Judge C E R T I F I C A T I 0 N I hereby certify that this decision was reached after due consultation a mong the members of the Court of Tax Appeals in accordance with Section 13~ Article VIII of the Constitution. 302 Presiding Judge Court of Tax Appeals