Leandro A. Almendral vs. ~— the Commissioner of Internal Revenue

DECISION -

~ 3 = precipitated filing of the petition for review to this Court. Pexponiané through his Deputy Commissioner Eufracio D. Santos cited the original decision of the Suoreme Court in the, case of COMMISSIONER OF INTERNAL REVENUE vs. OSCAR R. VICTORINO and THE COURT OF TAX APPEALS, G.R. No. 83176 as basis for the denial of the petitioner's claim (Annex "B", p. 4, CTA records).

At this instance, we find it important to afer ety the correct claimable amnunt presented here by petitioner, | In his Petition for Review the finure P@1, 702.00 was the amount claim. However petitioner: in his memorandum dated May 27, 1992 ’ ‘ claimed an ‘entirely different and lesser amount o P16, 016. 72.

An examination of the evidences available on records will show that no document was introduce before this Court. to support the claim of petitioner for P21, 700, 00, In contrast, petitioner formally offered as evidence Exhibit "C" which is the certification issued by Dolores E. Lachiea, Accountant V, Accounting Department of the Central Rank of the Fhilippines, noted by uguvaee $. Bascor, Bank Executive Officer ll, that the amount of F1i6,016.72 was withheld as income tax on the mMONneV value of accumulated leave credits of 3 9 ‘% tt petitioner, and that the same was remitted to the ARureau of Internal Revenue on June 10, 1989 (p, 59, CTM records).

The issue nosed on this appeal is whether or not the money value of the accumulated vacation and sick leave benefits is subject to withholding tax.

This Court in a number of cases has consistently ruled that the money value of terminal leave credits of retiring government employees is not subject to withholding tax. * The leading case of Castaneda vs. Commissioner, was upheld by the Court oof Apneals in Commissioner of Internal Revenue vs. The Court of Tax Appeals & Efren P. Castaneda, CA-FR SP No. 20482, September 26, 1990 and eventually affirmed by the decision of the Supreme Court when it denied the petition for review on certiorari filed by the BIR in THE COMMISSIONER OF INTERNAL REVENUE vs. COURT OF 4See Efren P. Casthneda vs. Commissioner of Internal Revenue, C.7.A. Case No. 3809, February 4, 19873; Florencio E. Santos vs. Commissioner of Internal Revenue, C.T.A. Case No. 4004, November 18, 1987; Oscar R. Victorino vs. Commissioner of Internal Revenue, C.7.A. Case No. 4035, January 29, 1988; Alfonso B. Camillo vs. Commissioner of Internal Revenue, C.T.A. Case No. 2260, December 29, 1989; Marcos Z. Catalan vs. Commissioner of Internal Revenue, C.T.A. Case No. 4345, November 11, 19915 Maximo B. Castillo vs. Commissioner of Internal Revenue, €.7T.A. Case No. 4346, November 141, 1994; Pacifico Torres vs. Commissioner of Internal Revenue, C.T.A. Case No. 4595; March 23, 1992; Artemio S. Tipon vs. Commissioner of Internal Revenue, C.T.A. Case No. 4548, July

APPEALS, SOS SOMYy Pi Ci998I), the pertinent portion of the danistan rears, thuas "Taxation: Withholding tax: Terminal. leave pay: Terminal leave pay received by Aa government official_or. employee isnot, eubject to withholding tax. - The Court has already ruled that the terminal leave nay received by a government official or employees is not subject to withholding Cincome) tax. In the recent case of Jesus N. Borromeo vs. The Hon. Civil Service Commissioner, et. al., G.R. No. 96032, S1 July 1991, the Court exnlained the rationale bhehind the employee’ s entitlement to an exemption from withholdinn Cincome) tax on his terminal leave pav as follows: "xxx commutation of leave credits, more commonly known as terminal leave, is applied from by an officer or employee who retires, resigns ar ois separated from the service through no fault of his own. (Manual on Leave

Administration Course for Effectiveness

published by the Civil Service Commission, PANES 16-17). In the overcise of sound personnel policy, the Government encourages unused leaves to be accumulated. The ‘Government reconnizes that for most public servants, retirement pay is always ‘less than nenerous if nat meager and scrimpy. f modest nest eno which the senior citizen may look forward to ais thus avoided. Terminal leave payments are niven not only at the same time but also ' For the same policy considerations governing retirement benefits."

Anent the allegation in respondent memorandum that metitioner’s evidence are not sufficient to 1 t warrant the refund suffice it to say that when netitioner formally offered Exhibit "C", the bank certification af withholding tax, corroborated by other evidences like Exh. "BB", the receint: by 3ou . f retirement benefits by oetitioner, Exh. "D" and "D-1". the demand to return the tax withheld, and Exh. "EE", the letter of the Central Bank stating that his claim was forwarded to the BRIR, unobjected to by the resnondent, will prove the SuEignes aay. of the tax withheld and the truthfulness of the claim for refund. Furthermore, Section S53 of the National Internal Revenue Code requires that "the taxes deducted and withheld by the withholding anent shall be held in trust as a special fund for the ovement KXX« The “withholding agent is required to file the corresponding withholding tax return and may the BIR the withheld taxes. For failure to render a return or for rendering false or fraudulent return and for non-payment of taxes withheld, corresponding surcharges and penalties shall be imposed anainst the withholding agent in addition to holdinn him personally liable for the surcharne and interest. xxx." In accordance with the above cited provision it is the primary responsibility of the respondent's withholding agent to remit the amount of tax withheld from netitioner. The contract of agency is betwesh She respondent and the Central Bank of the Philippines acting as withholding agent. Any fault or negtigence on the part of the withholding agent 34 “.

-~7- should not in any manner prejudice the taxpayer who has already heen prejudiced by the continuous failure of the resnmondent to implement rulings of this Court and the higher Courts on similar cases without the necessity BY resorting to a separate Court action. |

WHEREFORE. in view of the clear pronouncement by the Supreme Court, respondent is hereby ordered to refund to petitioner the amount of P16,016. 72 representing erroneously withheld tax from the money value of his terminal leave.

WE CONCUR: |

MAAUE - GRUBA

Ar Deh

RAMON O. DE VEYRA

Associate Jude

DECI S ION -

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CERTIFICATION

I

hereby certif y that th' s decision was reached after due co n s ult ation amonq the members of t h e Court o f Tax Appeals in accordance with Section 13, (.h~ticle VIII of th e ConstittJtion. ' I 385.

•. t ~-::cz ca~ ERNESTO D. ACOSTA Pl·~esidi nq Judqe Col.ll ~t of Tax Appeals