Court of Tax Appeals
0CTA Case No. 4346
REPUB L I C OF
THE PH I L I P PI NE S
COURT OF TAX APPEALS
QUEZON C I TY
MAXIMINO B. CASTILLO,
Petitioner·~
-··· vet-sus ·--
C.T.A. CASE NO. 4 346
COMMISSIONER OF INTERNAL
REVENUE,
Respondent.
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This is a judicial action for the refund of
the
sum
of
P8~869.34 deducted
from
the total
money value o ·f
petitioner-'s accumulated unused
vacation and sick
le <'='V l~ credits as employee of
the Philippine National
Bank~ Tarlac Branch.
Petitioner
was
formally
employed
by
the
Phi l.i.ppine
Nationa l
Bank
as
Attor-ney
of
th~?
Branch at Tarlac
until
he
retired
under
the
provisi on of Republic: Act No . 1616 as amended.
Upon
his
r·eti remen t ~
petitioner
entitl<;?d
to
the
payment
of
his
accumulated
unused vacation and s ick leave credits amounting
to
F'83~578.74.
Of
this
amount
of
unused
vac.:.:\tion
ancl sick leave
cl·-edits
~
the amount of
F'8 ~ 869. ::: A
~"as wi thhe 1 d
·for
income ta;:
and was
remitted
to
the
Bureau
of
Intern a l
Revenue~
<:::>vidE~ncf:?d by
a
cer·ti·f icatipn elated ,January
26
~
DECISION
CTA CASE NO. 4346 - 2 - 1989 issued by Senior Assistant Manager Roberto F. Melo of t he Philippine National Bank. CJn M.::~.l '·· ch 2~ 1989~ petitioner for-mally ·filed with respondent Commis~ioner of Internal Revenue <~ c:l;::tim "fol'" refund of the l-'lithheld ta:-:
in the amount of P8~869.34 as refundable to him. The lJnl y ·issue in this case i s ~··Jhether or n ot petitioner is entitled to the refund of the s um of P8~869.34.
We hold that petitioner is entitlr::?d to the reft..tncJ cJf ,the SL\fn <Jf F'B, 869.34 as incocne ta~·~ withheld from out of the unused vacation and sick leave credits of petitioner. Thi s ~-.Ja £;
the holding in the c .ase of Eft-en P.
Castaneda Commi ssionet- of Internal l~eve~ nue, CTA Case . No.
3809~ decid e d by the Cour-t o ·f Ta :-:
Appea l s dated September· 26 ~ 1990 ~ affir me d in the dec i sion on appeal by the Court of Appeals, and finally sustained by the Supreme Cour-t crf the Phi 1 ppines ~ on appe;"' 1 in G. R. No.
96016, dated October 17~ 1991 where~in it held that:
"The (Supreme) Cout-t has a 1 ready n .. ll ed· that the terrnina l 1 eave pay r .. eceived by a goverTlmEmt o·fficial or employee is not s ubject to wi thholding (income) ta )-: .
In the recent case of
DECISION —
CTA CASE NO. 4346 PENIS « od July 19971, the Court explained the rationale behind the employee ’s entitlement to an exemption from withholding (income) tax on his terminal leave pay as follows:"
"su oe cammutatian of leave credits more cammanly known as terminal leave, is applied far by an officer or employee wha | retires, resigns or is separated fram the service through na fault af his awn, (Manual an Leave Administration Course for Effectiveness published lny the Civil Service Cammissian, pages 14-17). Th the axercise of the sound persannel] policy, the Government encourages unused leaves ta be accumulated. The Government recagnizes that. for most public servants, retirement pay is always less than generous if not meager and scrimpy. A modest nest eaq which the senior citizen my laok forward ta is thus avoided. Terminal leave payments are given mat anly at the same time but also far the Same policy cansideratians qoverning retirement henefites."
"In fine, mat being part af the & salary ar income of a government afficial ar employee but a retirement henefit, terminal leave pay is not gubject to incame tax."
WHEREFORE, petitioner is entitied to refund of the sum of F8,869.24, for which OR?
DECISION CTA CASE NO. 4346 - 4 - respondent is hereby ordered to so immediately upon receipt of this decision. Without pronoucement as to cost.
SO ORDERED.
WE CONCUR:
P!'·es .i.d .i ng Judge ~~a..Q~ ERNESTO D. ACOSTA (.)s<:;oc: ir:~ te Judge C E R T I F I C A T I 0 N refund I h e reby cer·ti -t' y th ;::~.t this dec ision v-1as reac h ed a ft er due con s ultation a mong the members Sr;;>c::tion 13 ~ A r ti e le t./I I I of thr:~ Con s titution . ~~ F'r·es.idinq Juclg f..?