Dumaguete Cathedral vs CIR

8/12/2019 Dumaguete Cathedral vs CIR

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Republic of the PhilippinesSupreme Court

Manila

SECOND DIVISION

DUMAGUETE CATHEDRAL G.R. No. 182722

CREDIT COOPERATIVE

[DCCCO], Represe!e" #$

%e&'('")" L. R*'+, '!s Geer)&M))er,

Petitioner,

-versus-

COMMISSIONER O%

INTERNAL REVENUE, Promulgated:

Respondent. January 22, 2010x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

DEL CASTILLO,J.-

The clashing interests of the State and the taxpayers are again pitted against each

other. To !asic principles, the State"s inherent poer of taxation and its declared policy

of fostering the creation and groth of cooperati#es come into play. $oe#er, the one

that em!odies the spirit of the la and the true intent of the legislature pre#ails.


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This Petition for %e#ie on Certiorariunder Section 11 of %epu!lic &ct '%&(

)o. *2+2,1in relation to %ule / of the %ules of ourt, sees to set aside the ecem!er

1+, 2003 ecision2of the ourt of Tax &ppeals 'T&(, ordering petitioner to pay

deficiency ithholding taxes on interest from sa#ings and time deposits of its mem!ers

for taxa!le years 1*** and 2000, pursuant to Section 2'4('1( of the )ational 5nternal

%e#enue ode of 1**3 ')5%(, as ell as the delin6uency interest of 207 per annum

under Section 2*'( of the same ode. 5t also assails the &pril 11,

200+ %esolution8denying petitioner"s 9otion for %econsideration.

Factual Antecedents

Petitioner umaguete athedral redit ooperati#e '( is a credit

cooperati#e duly registered ith and regulated !y the ooperati#e e#elopment

&uthority '&(. 5t as esta!lished on ;e!ruary 13, 1* and '8( to

extend loans to mem!ers for pro#ident and producti#e purposes. to contract inde!tedness> and to secure the

same ith a mortgage or deed of trust, or pledge or lien on any or all of its real and

personal properties.3

n )o#em!er 23, 2001, the 4ureau of 5nternal %e#enue '45%( perations @roupeputy ommissioner, Ailian 4. $efti, issued Aetters of &uthority )os.


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Proceedings before the BIR Regional Office

n June 2


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deficiency ithholding taxes, inclusi#e of penalties, for the years 1*** and 2000 in the

amounts of P1,+*,0


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n July 8, 2003, petitioner filed a Petition for %e#ie ith the T& En Banc,1*interposing the lone issue of hether or not petitioner is lia!le to pay the deficiency

ithholding taxes on interest from sa#ings and time deposits of its mem!ers for taxa!le

years 1*** and 2000, and the conse6uent delin6uency interest of 207 per annum.20

;inding no re#ersi!le error in the ecision dated ;e!ruary as such, it should

ha#e ithheld the corresponding 207 final tax on the interest from the deposits of its

mem!ers.

Iss*e

$ence, the present recourse, here petitioner raises the issue of hether or not it is

lia!le to pay the deficiency ithholding taxes on interest from sa#ings and time deposits

of its mem!ers for the taxa!le years 1*** and 2000, as ell as the delin6uency interest of

207 per annum.

Petitioners Arguments

Petitioner argues that Section 2'4('1( of the )5% hich reads in part, to it:

SFT5) 2. Income Tax Rates. K

x x x x
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'4( %ate of Tax on ertain Passi#e 5ncome: K

'1( 5nterests, %oyalties, Pri?es, and ther Ginnings. K & final tax at the

rate of tenty percent '207( is here!y imposed upon the amount of interest from any

currency !an deposit and yield or any other monetary !enefit from deposit su!stitutesand from trust funds and similar arrangements> x x x

applies only to !ans and not to cooperati#es, since the phrase Isimilar arrangements is

preceded !y terms referring to !aning transactions that ha#e deposit

peculiarities. Petitioner thus posits that the sa#ings and time deposits of mem!ers of

cooperati#es are not included in the enumeration, and thus not su!=ect to the 207 final

tax. To !olster its position, petitioner cites 45% %uling )o. //1-+++28and 45% %uling

&-/*1-200


7/13

The petition has merit.

Petitioners invocation o! BIR Ruling

"o# $$%-&&&, reiterated in BIR Ruling

'()-$*%-+., is proper#

n )o#em!er 1


8/13

prescri!ed !y Section 21'a( in relation to section 31, hapter L, Title 55, of the same

ode as amended !y 4atas Pam!ansa 4lg. 18/ and implemented !y %e#enue

%egulations )o.


9/13

Ge disagree.

There is nothing in the ruling to suggest that it applies only hen deposits are

maintained in a !an. %ather, the ruling clearly states, ithout any 6ualification, that

since interest from any Philippine currency !an deposit and yield or any other monetary

!enefit from deposit su!stitutes are paid !y !ans, cooperati#es are not re6uired to

ithhold the corresponding tax on the interest from sa#ings and time deposits of their

mem!ers. This interpretation as reiterated in 45% %uling &-/*1-200


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8embers o! cooperatives deserve a

pre!erential tax treatment pursuant to R)

*9&, as amended b1 R) *$+#

@i#en that petitioner is a credit cooperati#e duly registered ith the ooperati#ee#elopment &uthority '&(, Section 2'4('1( of the )5% must !e read together

ith %&


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hand, ould !e consistent ith the intent of the legislature. Thus, although the tax

exemption only mentions cooperati#es, this should !e construed to include the mem!ers,

pursuant to &rticle 12< of %&


12/13

ithin the letter> and a thing hich is ithin the letter of the statute is not

ithin the statute unless ithin the intent of the lamaers.

'Mnderscoring ours(

5t is also orthy to note that the tax exemption in %&


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Section 2'4('1( of the )5% is more in eeping ith the letter and spirit of our

onstitution.

&ll told, e hold that petitioner is not lia!le to pay the assessed deficiency

ithholding taxes on interest from the sa#ings and time deposits of its mem!ers, as ell

as the delin6uency interest of 207 per annum.

5n closing, cooperati#es, including their mem!ers, deser#e a preferential tax

treatment !ecause of the #ital role they play in the attainment of economic de#elopment

and social =ustice. Thus, although taxes are the life!lood of the go#ernment, the State"s

poer to tax must gi#e ay to foster the creation and groth of cooperati#es. To !orro

the ords of Justice 5sagani &. ru?: IThe poer of taxation, hile indispensa!le, is nota!solute and may !e su!ordinated to the demands of social =ustice.8

HERE%ORE, the Petition is here!y GRANTED.The assailed ecem!er 1+,

2003 ecision of the ourt of Tax &ppeals and the &pril 11, 200+ %esolution

are REVERSEDand SET ASIDE. &ccordingly, the assessments for deficiency

ithholding taxes on interest from the sa#ings and time deposits of petitioner"s mem!ers

for the taxa!le years 1*** and 2000 as ell as the delin6uency interest of 207 per

annum are here!y CANCELLED.

SO ORDERED.
http://sc.judiciary.gov.ph/jurisprudence/2010/january2010/182722.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2010/january2010/182722.htm#_ftn34

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Dumaguete Cathedral vs CIR