CTA Case No. 4585

DECISION

Revenue under FNE Check No. 800281 dated February 9, 1990 which was acknowledged by the BIR under CB Confirmation Receipt No. B-18912254 and BIR Fayment Order No. C-6740789 both dated February 27, 1990. However, when petitioner came to know of the decision of the Supreme Court in the case of Atty. Bernardo F..Zialcita, Administrative Matter No. 9O- 6-015-SC, holding the money value of the terminal leave credits of Atty. Zialcita exempt from payment of income tax, petitioner wrote respondent a letter dated September 18, 1990, received by him on November 14, 1990, claiming refund of the amount of P155,401.25 withheld income tax. Qn February 22, 1991, petitioner received a letter dated January 21, 19971 from the BIR Deputy Commissioner Eufracio D. Santos denying his claim for refund on the ground that the Zialcita case applies only to employees of the Judiciary. Respondent likewise raised the case of Oscar W. Victoriano, G.R. 83176, August 10, 1989 as applicable in the instant case. The sole issue submitted to this court for resolution is whether petitioner’s terminal leave pay credits received upon retirement from government service is subject to withholding tax.

‘am ake) This court had occasioned to pass upon similar cases, namely: Efren. FP. Castaneda. ovs. The Commissioner of Internal Revenue, CTA Case No. 2809, February 4, 1987; Florencio —. Santos vs. The Commissioner of. Internal Revenue, CTA Case No. 4004, November 18, 1987 and most recently the case of Marcos Ff. Catalan. vs... The Commissioner of Internal Revenue, CTA Case No. 4245, dated November Ji, 1991. The first two cases mentioned were affirmed by the Supreme Court in the cases of ommissioner of Internal Revenue vs. The Court sf Appeals and Efren Castaneda, G.R. No. 96016 dated October 17, 1991 and Commissioner. of Internal Revenue vs. Court of Appeals and Florencio €. Santos, G.R. No. 82162 dated July 4, 19688. In all these cases the courts held that the money value of the terminal leave credits of retiring government employees are exempted from income tax pursuant to Commonwealth Act No. 186, as amended by R.A. 1616, Fresidential Decree No. 220 and Section 29(b)(7) of the National Internal Revenue Code (now Section 28(b)(9)). The Castaneda Case as affirmed by the Supreme Court erases any doubt in the mind of the respondent that the doctrine in the case of on?

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 Z ia 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 termina 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 .The conversion and commutation were done because before the effectivity of his optional retirement on

December

31, 1982, he was appointed

Acting

Commissioner of the Land Registration Commission on

November 17, 1982.

WHEREFORE, in view of this 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.

- 5 -

I CONCUR:

.......__ C. ROAQUIN

Judge

~~~ .. ~ ERNESTO D. ACOSTA Assoc iate 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