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Republic of the Philippines

Supreme Court

Manila

SECOND DIVISION

JOSE C. GO,

Petitioner,

- versus -

BANGKO SENTRAL NG PILIPINAS,

Respondent.

G.R. No. 178429

Present:

QUISUMBING, J., Chairperson,

*CARPIO,

CARPIO MORALES,

BRION, and

ABAD,JJ.

Promulgated:

October 23, 2009

x ------------------------------------------------------------------------------------------x

D E C I S I O N

BRION,J.:

Through the present petition for review on certiorari,1[1] petitioner Jose C. Go (Go) assails the October

26, 2006 decision2[2] of the Court of Appeals (CA) in CA-G.R. SP No. 79149, as well as its June 4, 2007

* Designated additional Member of the Second Division in lieu of Associate Justice Mariano C.

Del Castillo, per Special Order No. 757 dated October 12, 2009.

1[1] Under Rule 45 of the Rules of Court; rollo, pp. 9-26


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resolution.3[3] The CA decision and resolution annulled and set aside the May 20, 20034[4] and June 30, 20035[5]

orders of the Regional Trial Court (RTC), Branch 26, Manila which granted Gos motion to quash the Information

filed against him.

THE FACTS

On August 20, 1999, an Information6[6] for violation of Section 83 of Republic Act No. 337 ( RA 337) or the

General Banking Act, as amended by Presidential Decree No. 1795, was filed against Go before the RTC. The charge

reads:

That on or about and during the period comprised between June 27, 1996 and

September 15, 1997, inclusive, in the City of Manila, Philippines, the said accused, being then

the Director and the President and Chief Executive Officer of the Orient Commercial Banking

Corporation (Orient Bank), a commercial banking institution created, organized and existing

under Philippines laws, with its main branch located at C.M. Recto Avenue, this City, and taking

advantage of his position as such officer/director of the said bank, did then and there wilfully,

unlawfully and knowingly borrow, either directly or indirectly, for himself or as the

representative of his other related companies, the deposits or funds of the said banking

institution and/or become a guarantor, indorser or obligor for loans from the said bank to

others, by then and there using said borrowed deposits/funds of the said bank in facilitating

and granting and/or caused the facilitating and granting of credit lines/loans and, among

others, to the New Zealand Accounts loans in the total amount of TWO BILLION AND SEVEN

HUNDRED FIFTY-FOUR MILLION NINE HUNDRED FIVE THOUSAND AND EIGHT HUNDRED FIFTY-

SEVEN AND 0/100 PESOS, Philippine Currency, said accused knowing fully well that the same

has been done by him without the written approval of the majority of the Board of Directors of

said Orient Bank and which approval the said accused deliberately failed to obtain and enter the

same upon the records of said banking institution and to transmit a copy of which to thesupervising department of the said bank, as required by the General Banking Act.

CONTRARY TO LAW. [Emphasis supplied.]

On May 28, 2001, Go pleaded not guilty to the offense charged.

2[2] Penned by Associate Justice Regalado Maambong (retired), with Associate Justice Marina

Buzon and Associate Justice Japar Dimaampao, concurring; id., pp. 28-44.

3[3]Id., pp. 46-47.

4[4] Penned by Judge Oscar Barrientos; id., pp. 65-69.

5[5]Id., pp. 80-81.

6[6]Id., pp. 49-50.


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After the arraignment, both the prosecution and accused Go took part in the pre-trial conference where

the marking of the voluminous evidence for the parties was accomplished. After the completion of the marking,

the trial court ordered the parties to proceed to trial on the merits.

Before the trial could commence, however, Go filed on February 26, 20037[7] a motion to quash the

Information, which motion Go amended on March 1, 2003.8[8] Go claimed that the Information was defective,

as the facts charged therein do not constitute an offense under Section 83 of RA 337which states:

No director or officer of any banking institution shall either directly or indirectly, for

himself or as the representative or agent of another, borrow any of the deposits of funds of such

banks, nor shall he become a guarantor, indorser, or surety for loans from such bank, to others,or in any manner be an obligor for money borrowed from the bank or loaned by it, except with

the written approval of the majority of the directors of the bank, excluding the director

concerned. Any such approval shall be entered upon the records of the corporation and a copy

of such entry shall be transmitted forthwith to the appropriate supervising department. The

office of any director or officer of a bank who violates the provisions of this section shall

immediately become vacant and the director or officer shall be punished by imprisonment of not

less than one year nor more than ten years and by a fine of not less than one thousand nor more

than ten thousand pesos.

The Monetary Board may regulate the amount of credit accommodations that may be

extended, directly or indirectly, by banking institutions to their directors, officers, or

stockholders. However, the outstanding credit accommodations which a bank may extend to

each of its stockholders owning two percent (2%) or more of the subscribed capital stock, its

directors, or its officers, shall be limited to an amount equivalent to the respective outstanding

deposits and book value of the paid-in capital contribution in the bank. Provided, however, that

loans and advances to officers in the form of fringe benefits granted in accordance with rules and

regulations as may be prescribed by Monetary Board shall not be subject to the preceding

limitation. (As amended by PD 1795)

In addition to the conditions established in the preceding paragraph, no director or a

building and loan association shall engage in any of the operations mentioned in said paragraphs,

except upon the pledge of shares of the association having a total withdrawal value greater than

the amount borrowed. (As amended by PD 1795)

7[7]Id., pp. 51-57.

8[8]Id., pp. 58-64.


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In support of his motion to quash, Go averred that based on the facts alleged in the Information, he was

being prosecuted for borrowing the deposits or funds of the Orient Bank and/or acting as a guarantor, indorser or

obligor for the banks loans to other persons. The use of the word and/or meant that he was charged for being

either a borrower or a guarantor, or for being both a borrower and guarantor. Go claimed that the charge was not

only vague, but also did not constitute an offense. He posited that Section 83 of RA 337 penalized only directors

and officers of banking institutions who acted either as borrower or as guarantor, but not as both.

Go further pointed out that the Information failed to state that his alleged act of borrowing and/or

guarantying was not among the exceptions provided for in the law. According to Go, the second paragraph of

Section 83 allowed banks to extend credit accommodations to their directors, officers, and stockholders, provided

it is limited to an amount equivalent to the respective outstanding deposits and book value of the paid -in capital

contribution in the bank. Extending credit accommodations to bank directors, officers, and stockholders is not

per se prohibited, unless the amount exceeds the legal limit. Since the Information failed to state that the amount

he purportedly borrowed and/or guarantied was beyond the limit set by law, Go insisted that the acts so charged

did not constitute an offense.

Finding Gos contentions persuasive, the RTC granted Gos motion to quash the Information on May 20,

2003. It denied on June 30, 2003 the motion for reconsideration filed by the prosecution.

The prosecution did not accept the RTC ruling and filed a petition for certiorarito question it before the

CA. The Information, the prosecution claimed, was sufficient. The word and/or did not materially affect the

validity of the Information, as it merely stated a mode of committing the crime penalized under Section 83 of RA

337. Moreover, the prosecution asserted that the second paragraph of Section 83 (referring to the credit

accommodation limit) cannot be interpreted as an exception to what the first paragraph provided. The second

paragraph only sets borrowing limits that, if violated, render the bank, not the director-borrower, liable. A

violation of the second paragraph of Section 83 under which Go is being prosecuted is therefore separate and

distinct from a violation of the first paragraph. Thus, the prosecution prayed that the orders of the RTC quashing

the Information be set aside and the criminal case against Go be reinstated.


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On October 26, 2006, the CA rendered the assailed decision granting the prosecutions petition for

certiorari.9[9] The CA declared that the RTC misread the law when it decided to quash the Information against

Go. It explained that the allegation that Go acted either as a borrower or a guarantor or as both borrower and

guarantor merely set forth the different modes by which the offense was committed. It did not necessarily mean

that Go acted both as borrower and guarantor for the same loan at the same time. It agreed with the

prosecutions stand that the second paragraph of Section 83 of RA 337 is not an except ion to the first paragraph.

Thus, the failure of the Information to state that the amount of the loan Go borrowed or guaranteed exceeded the

legal limits was, to the CA, an irrelevant issue. For these reasons, the CA annulled and set aside the RTCs orders

and ordered the reinstatement of the criminal charge against Go. After the CAs denial of his motion for

reconsideration,10[10] Go filed the present appeal by certiorari.

THE PETITION

In his petition, Go alleges that the appellate court legally erred in overturning the trial courts orders. He

insists that the Information failed to allege the acts or omissions complained of with sufficient particularity to

enable him to know the offense being charged; to allow him to properly prepare his defense; and likewise to allow

the court to render proper judgment.

Repeating his arguments in his motion to quash, Go reads Section 83 of RA 337 as penalizing a director or

officer of a banking institution for either borrowing the deposits or funds of the bank, or guaranteeing or indorsing

loans to others, but not for assuming both capacities. He claimed that the prosecutions shotgun approach in

alleging that he acted as borrower and/or guarantor rendered the Information highly defective for failure to

specify with certainty the specific act or omission complained of. To petitioner Go, the prosecutions approach

was a clear violation of his constitutional right to be informed of the nature and cause of the accusation against

him.

9[9]Supra note 2.

10[10]Supra note 3.


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Additionally, Go reiterates his claim that credit accommodations by banks to their directors and officers

are legal and valid, provided that these are limited to their outstanding deposits and book value of the paid-in

capital contribution in the bank. The failure to state that he borrowed deposits and/or guaranteed loans beyond

this limit rendered the Information defective. He thus asks the Court to reverse the CA decision to reinstate the

criminal charge.

In its Comment,11[11] the prosecution raises the same defenses against Gos contentions. It insists on

the sufficiency of the allegations in the Information and prays for the denial of Gos petition.

THE COURTS RULING

The Court does not find the petition meritorious and accordingly denies it.

The Accuseds Right to be Informed

Under the Constitution, a person who stands charged of a criminal offense has the right to be informed of

the nature and cause of the accusation against him.12[12] The Rules of Court, in implementing the right,

specifically require that the acts or omissions complained of as constituting the offense, including the qualifying

and aggravating circumstances, must be stated in ordinary and concise language, not necessarily in the language

used in the statute, but in terms sufficient to enable a person of common understanding to know what offense is

being charged and the attendant qualifying and aggravating circumstances present, so that the accused can

11[11]Rollo, pp. 229-244.

12[12] CONSTITUTION, Article III, Section 14 (1).


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properly defend himself and the court can pronounce judgment.13[13] To broaden the scope of the right, the

Rules authorize the quashal, upon motion of the accused, of an Information that fails to allege the acts constituting

the offense.14[14] Jurisprudence has laid down the fundamental test in appreciating a motion to quash an

Information grounded on the insufficiency of the facts alleged therein. We stated in People v. Romualdez15[15]

that:

The determinative test in appreciating a motion to quash xxx is the sufficiency of the averments

in the information, that is, whether the facts alleged, if hypothetically admitted, would establish

the essential elements of the offense as defined by law without considering matters aliunde. As

Section 6, Rule 110 of the Rules of Criminal Procedure requires, the information only needs to

state the ultimate facts; the evidentiary and other details can be provided during the trial.

To restate the rule, an Information only needs to state the ultimate facts constituting the

offense, not the finer details of why and how the illegal acts alleged amounted to undue injury

or damage matters that are appropriate for the trial. [Emphasis supplied]

The facts and circumstances necessary to be included in the Information are determined by reference to the

definition and elements of the specific crimes. The Information must allege clearly and accurately the elements

of the crime charged.16[16]

Elements of Violation of

Section 83 of RA 337

Under Section 83, RA 337, the following elements must be present to constitute a violation of its first

paragraph:

1. the offender is a director or officer of any banking institution;

2. the offender, either directly or indirectly, for himself or as representative or agent of another, performs

any of the following acts:

a. he borrows any of the deposits or funds of such bank; or

b. he becomes a guarantor, indorser, or surety for loans from such bank to others, or

c. he becomes in any manner an obligor for money borrowed from bank or loaned by it;

13[13] RULES OF COURT, Rule 110, Section 9.

14[14]Id., Rule 117, Section 3 (a).

15[15] G.R. No. 166510, July 23, 2008.

16[16]Lazarte v. Sandiganbayan, G.R. No. 180122, March 13, 2009.


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3. the offender has performed any of such acts without the written approval of the majority of the directors

of the bank, excluding the offender, as the director concerned.

A simple reading of the above elements easily rejects Gos contention that the law penalizes a bank

director or officer only either for borrowing the banks deposits or funds or for guarantying loans by the bank, but

not for acting in both capacities. The essence of the crime is becoming an obligor of the bank without securing

the necessary written approval of the majority of the banks directors.

The second element merely lists down the various modes of committing the offense. The third mode, by

declaring that [no director or officer of any banking institution shall xxx] in any manner be an obligor for money

borrowed from the bank or loaned by it, in fact serves a catch-all phrase that covers any situation when a

director or officer of the bank becomes its obligor. The prohibition is directed against a bank director or officer

who becomes in any manner an obligor for money borrowed from or loaned by the bank without the written

approval of the majority of the banks board of directors. To make a distinction between the act of borrowing

and guarantying is therefore unnecessary because in either situation, the director or officer concerned becomes an

obligor of the bank against whom the obligation is juridically demandable.

The language of the law is broad enough to encompass either act of borrowing or guaranteeing, or both.

While the first paragraph of Section 83 is penal in nature, and by principle should be strictly construed in favor of

the accused, the Court is unwilling to adopt a liberal co nstruction that would defeat the legislatures intent in

enacting the statute. The objective of the law should allow for a reasonable flexibility in its construction. Section

83 of RA 337, as well as other banking laws adopting the same prohibition,17[17] was enacted to ensure that loans

by banks and similar financial institutions to their own directors, officers, and stockholders are above board.18[18]

Banks were not created for the benefit of their directors and officers; they cannot use the assets of the bank for

their own benefit, except as may be permitted by law. Congress has thus deemed it essential to impose

restrictions on borrowings by bank directors and officers in order to protect the public, especially the

depositors.19[19] Hence, when the law prohibits directors and officers of banking institutions from becoming in

17[17] Supra note 15; See Section 5 of RA 7353 (An Act Providing For The Creation,

Organization And Operation Of Rural Banks, And For Other Purposes) and Presidential DecreeNo. 264, as amended by RA 6848 (An Act Creating the Philippine Amanah Bank); See also

Section 18 of RA 1300 (Revised Charter of the Philippine National Bank) and Section 16 of RA3518 (An Act Creating The Philippine Veterans' Bank, And For Other Purposes).

18[18] SeeRamos v. Court of Appeals, G.R. No. 117416, December 8, 2000, 347 SCRA 463.

19[19] See People v. Knapp, 28 N.Y.Crim.R. 285, 206 N.Y. 373, 99 N.E. 841.


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any manner an obligor of the bank (unless with the approval of the board), the terms of the prohibition shall be

the standards to be applied to directors transactions such as those involved in the present case.

Credit accommodation limit is not an exception nor is it an

element of the

offense

Contrary to Gos claims, the second paragraph of Section 83, RA 337 does not provide for an exception to

a violation of the first paragraph thereof, nor does it constitute as an element of the offense charged. Section 83

of RA 337 actually imposes three restrictions: approval, reportorial, and ceiling requirements.

The approval requirement (found in the first sentence of the first paragraph of the law) refers to the

written approval of the majority of the banks board of directors required before bank directors and officers can in

any manner be an obligor for money borrowed from or loaned by the bank. Failure to secure the approval renders

the bank director or officer concerned liable for prosecution and, upon conviction, subjects him to the penalty

provided in the third sentence of first paragraph of Section 83.

The reportorial requirement, on the other hand, mandates that any such approval should be entered

upon the records of the corporation, and a copy of the entry be transmitted to the appropriate supervising

department. The reportorial requirement is addressed to the bank itself, which, upon its failure to do so, subjects

it to quo warranto proceedings under Section 87 of RA 337.20[20]

The ceiling requirement under the second paragraph of Section 83 regulates the amount of credit

accommodations that banks may extend to their directors or officers by limiting these to an amount equivalent to

the respective outstanding deposits and book value of the paid-in capital contribution in the bank. Again, this is a

requirement directed at the bank. In this light, a prosecution for violation of the first paragraph of Section 83, such

as the one involved here, does not require an allegation that the loan exceeded the legal limit. Even if the loan

involved is below the legal limit, a written approval by the majority of the banks directors is still required;

20[20] Section 87. Unless otherwise herein provided, the violation of any of the provisions of the

Act shall be punished by a fine of not more than two thousand pesos or by imprisonment for notmore than two years, or by both. If the violation is committed by a corporation, the same

shall, upon such violation being proved, be dissolved by quo warranto proceedings

instituted by the Solicitor General: Provided, that nothing in this section shall be construed asrepealing the other causes for the dissolution of corporations prescribed by existing law, and the

remedy provided for in this section shall be considered as additional to the remedies already

existing. [Emphasis supplied.]


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2007. The Regional Trial Court, Branch 26, Manila is directed to PROCEED with the hearing of Criminal Case No.

99-178551. Costs against the petitioner.

SO ORDERED.

ARTURO D. BRION

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING

Associate Justice

Chairperson

ANTONIO T. CARPIO

Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

ROBERTO A. ABAD

Associate Justice


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ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was

assigned to the writer of the opinion of the Courts Division.


Associate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is

hereby certified that the conclusions in the above Decision were reached in consultation before the case was


REYNATO S. PUNO

Chief Justice


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COMMISSIONER OF

INTERNAL REVENUE,

Respondent.

Promulgated:

January 30, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

CARPIO, J.:

The Case

The Philippine Banking Corporation, now, Global Business Bank, Inc., (petitioner) filed this Petition for

Review22[1] to reverse the Court of Tax Appeals Decision23[2] dated 23 November 2005 in CTA EB No. 63 (C.T.A.

Case No. 6395). In the assailed decision, the Court of Tax Appeals En Banc ordered petitioner to pay

P17,595,488.75 and P47,767,756.24 as deficiency documentary stamp taxes for the taxable years 1996 and 1997,

respectively, on its bank product called Special/Super Savings Deposit Account (SSDA).

22[1] Under Rule 45 of the Rules of Court.

23[2] Penned by Associate Justice Juanito C. Castaeda, Jr. with Presiding Justice Ernesto D.Acosta, Associate Justices Lovell R. Bautista, Erlinda P. Uy, Olga Palance-Enriquez,

concurring and Associate Justice Caesar A. Casanova, dissenting.


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The Facts

Petitioner is a domestic corporation duly licensed as a banking institution.24[3] For the taxable years

1996 and 1997, petitioner offered its SSDA to its depositors. The SSDA is a form of a savings deposit evidenced by a

passbook and earning a higher interest rate than a regular savings account. Petitioner believes that the SSDA is not

subject to Documentary Stamp Tax (DST) under Section 180 of the 1977 National Internal Revenue Code (NIRC), as

amended.25[4]

On 10 January 2000, the Commissioner of Internal Revenue (respondent) sent petitioner a Final

Assessment Notice assessing deficiency DST based on the outstanding balances of its SSDA, including increments,

in the total sum of P17,595,488.75 for 1996 and P47,767,756.24 for 1997. These assessments were based on the

outstanding balances of the SSDA appearing in the schedule attached to petitioners audited financial statements

for the taxable years 1996 and 1997.26[5]

Petitioner claims that the SSDA is in the nature of a regular savings account since both types of accounts

have the following common features:

a. They are both evidenced by a passbook;

b. The depositors can make deposits or withdrawals anytime which are not subject to penalty; and

24[3] Philippine Banking Corporation was merged with the Global Business Bank, Inc. On 4

September 2002, Global Business Bank, Inc. was changed into a holding company under the

name Global Business Holdings, Inc. On 11 October 2002, the banking business of Global

Business Bank, Inc. was subsequently transferred and absorbed by Metropolitan Bank andTrust Company.

25[4] Rollo, p. 5.

26[5] Id.


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c. Both can have an Automatic Transfer Agreement (ATA) with the depositors current or checking

account.27[6]

Petitioner alleges that the only difference between the regular savings account and the SSDA is that the

SSDA is for depositors who maintain savings deposits with a substantial average daily balance, and as an incentive,

they are given higher interest rates than regular savings accounts. These deposits are classified separately in

petitioners financial statements in order to maintain a separate record for savings deposits with substantial

balances entitled to higher interest rates.28[7]

Petitioner maintains that the tax assessments are erroneous because Section 180 of the 1977 NIRC does

not include deposits evidenced by a passbook among the enumeration of instruments subject to DST. Petitioner

asserts that the language of the law is clear and requires no interpretation.29[8] Section 180 of the 1977 NIRC, as

amended,30[9] provides:

Sec. 180. Stamp tax on all loan agreements, promissory notes, bills of exchange,

drafts, instruments and securities issued by the government or any of its instrumentalities,

certificates of deposit bearing interest and others not payable on sight or demand. On all

loan agreements signed abroad wherein the object of the contract is located or used in thePhilippines; bills of exchange (between points within the Philippines), drafts, instruments and

securities issued by the Government or any of its instrumentalities or certificates of deposits

drawing interest, or orders for the payment of any sum of money otherwise than at the sight or

on demand, or on all promissory notes, whether negotiable or non-negotiable, except bank notes

issued for circulation, and on each renewal of any such note, there shall be collected a

documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos, or fractional part

thereof, of the face value of any such agreement, bill of exchange, draft, certificate of deposit, or

27[6] Id. at 7.

28[7] Id. at 8.

29[8] Id. at 14.

30[9] The 1977 NIRC was amended by Republic Act No. 7660. An Act Rationalizing Furtherthe Structure and Administration of the Documentary Stamp Tax, Amending for the

Purpose Certain Provisions of the National Internal Revenue Code, as Amended,

Allocating Funds for Specific Programs, and For Other Purposes (23 December 1993).


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note: provided, that only one documentary stamp tax shall be imposed on either loan

agreement, or promissory note issued to secure such loan, whichever will yield a higher tax:

provided, however, that loan agreements or promissory notes the aggregate of which does not

exceed Two hundred fifty thousand pesos (P250,000) executed by an individual for his purchase

on installment for his personal use or that of his family and not for business, resale, barter or hire

of a house, lot, motor vehicle, appliance or furniture shall be exempt from the payment of the

documentary stamp tax provided under this section. (Boldfacing supplied)

Petitioner insists that the SSDA, being issued in the form of a passbook, cannot be construed as a

certificate of deposit subject to DST under Section 180 of the 1977 NIRC. Petitioner explains that the SSDA is a

necessary offshoot of the deregulated interest rate regime in bank deposits.31[10] Petitioner elucidates:

With the removal of the respective interest rate ceilings on savings and time deposit,

banks are enabled to legitimately offer higher rates on savings account which may even be at par

with rates on time deposit. Practically, the distinction between a savings and a time deposit was

removed insofar as interest rates are concerned. This being so, and for the legitimate purpose of

further enticing deposits for savings account, banks have evolved a product the Super/Special

Savings Account which offers the flexibility of a savings deposit but does away with the rigidity

of a time deposit account and with interest rate at par with the latter. This is offered as an

incentive for depositors who maintain or who wish to maintain deposits with substantial average

daily balance. Such depositors will be entitled to an attractive interest rate, a rate higher than

that to which the regular savings account is entitled. Just like an ordinary savings, Super/Special

Savings Deposits can be withdrawn anytime. Of course, to be entitled to preferential interest

rate, such account must conform to a stated minimum deposit balance within a specified holdingperiod. Otherwise, the depositor will lose the incentive of a higher interest rate and the account

will revert to an ordinary savings account and be entitled only to prevailing rates of interest

applicable to regular savings account. And unlike a time deposit account, the Super/Special

Savings Account comes in the form of a passbook, hence need not be formally renewed in the

manner that a time deposit certificate has to be formally surrendered and renewed upon

maturity.32[11]

31[10] Rollo, pp. 11-12.

32[11] Id. at 13.


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Petitioner argues that the DST is imposed on the basis of a mere inference or perceived implication of

what the SSDA is supposed to be and not on the basis of what the law specifically states. Petitioner points out the

differences between the SSDA and time deposits:33[12]

TIME DEPOSITS SSDA

1. The holding period is fixed beforehand. 1. The holding period floats at the option of the

depositor. It can be 30, 60, 90 or 120 days or more

and as an incentive for maintaining a longer holding

period, the depositor earns higher interest.

2. There is pre-termination because there is no

partial withdrawal of a certificate. Pre-termination

results in the surrender and cancellation of the

certificate of deposit.

2. No pre-termination and the passbook account is

simply reverted to an ordinary savings status in

case of early or partial withdrawal or if the required

holding period is not met.

Petitioner also argues that even on the assumption that a passbook evidencing the SSDA is a certificate of

deposit, no DST will be imposed because only negotiable certificates of deposits are subject to tax under Section

180 of the 1977 NIRC.34[13] Petitioner reasons that a savings passbook is not a negotiable instrument and it

cannot be denied that savings passbooks have never been taxed as certificates of deposits.35[14]

Petitioner alleges that prior to the passage of Republic Act No. 924336[15] (RA 9243), there was no law

subjecting SSDA to DST during the taxable years 1996 and 1997. The amendatory provision in RA 9243 now

specifically includes certificates or other evidences of deposits that are either drawing interest significantly higher

than the regular savings deposit taking into consideration the size of the deposit and the risks involved or drawing

33[12] Id. at 15-16.

34[13] Id. at 16.

35[14] Id. at 18.

36[15] An Act Rationalizing the Provisions of the Documentary Stamp Tax of the National

Internal Revenue Code of 1997, as Amended and for other Purposes. Promulgated on 17

February 2004.


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interest and having a specific maturity date.37[16] Petitioner admits that with this new taxing clause, its SSDA is

now subject to DST. However, the fact remains that this provision was non-existent during the taxable years 1996

and 1997 subject of the assessments in the present case.38[17]

Respondent, through the Office of the Solicitor General, contends that the SSDA is substantially the same

and identical to that of a time deposit account because in order to avail of the SSDA, one has to deposit a

minimum of P50,000 and this amount must be maintained for a required period of time to earn higher interest

rates.39[18] In a time deposit account, the minimum deposit requirement is P20,000 and this amount must be

maintained for the agreed period to earn the agreed interest rate. If a time deposit is pre-terminated, a penalty

will be imposed resulting in a lower interest income. In a regular savings account, the interest rate is fixed and

there is no penalty imposed for as long as the required minimum balance is maintained. Thus, respondent asserts

that the SSDA is a time deposit account, albeit in the guise of a regular savings account evidenced by a

passbook.40[19]

Respondent explains that under Section 180 of the 1977 NIRC, certificates of deposits deriving interest are

subject to the payment of DST. Petitioners passbook evidencing its SSDA is considered a certificate of deposit, and

being very similar to a time deposit account, it should be subject to the payment of DST.41[20]

Respondent also argues that Section 180 of the 1977 NIRC categorically states that certificates of deposit

deriving interest are subject to DST without limiting the enumeration to negotiable certificates of deposit. Based

37[16] Rollo, pp. 22-23.

38[17] Id. at 24.

39[18] Id. at 429.

40[19] Id. at 429-430.

41[20] Id. at 430-431.


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on the definition of a certificate of deposit in Far East Bank and Trust Company v. Querimit,42[21] a certificate of

deposit may or may not be negotiable, since it may be payable only to the depositor.43[22]

The Ruling of the Court of Tax Appeals

On 23 November 2005, the Court of Tax Appeals En Banc (CTA) affirmed the Decision and Resolution of

the CTAs Second Division. The dispositive portion reads:

WHEREFORE, the instant petition is DENIED for lack of merit. Accordingly, the petitioneris hereby ORDERED to PAY the amounts of P17,595,488.75 and P47,767,756.24 as deficiency

documentary stamp taxes for the taxable years 1996 and 1997, plus 25% surcharge for late

payment and 20% annual delinquency interest for late payment from January 20, 2002 until fully

paid pursuant to Sections 248 and 249 of the Tax Code.44[23]

The CTA ruled that a deposit account with the same features as a time deposit, i.e., a fixed term in order

to earn a higher interest rate, is subject to DST imposed in Section 180 of the 1977 NIRC.45[24] It is clear that

certificates of deposit drawing interest are subject to DST. The CTA, citing Far East Bank and Trust Company v.

Querimit,46[25] defined a certificate of deposit as a written acknowledgment by a bank or banker of the receipt

of a sum of money on deposit which the bank or banker promises to pay to the depositor, to the order of the

42[21] 424 Phil. 721 (2002).

43[22] Rollo, p. 433.

44[23] Id. at 36-37.

45[24] Id. at 42-43.

46[25] Supra.


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depositor, or some other person or his order, whereby the relation of debtor and creditor between the bank and

the depositor is created.47[26]

The CTA pointed out that this Court neither referred to a particular form of deposit nor limited the

coverage to time deposits only. This Court used the term written acknowledgment which means that for as long

as there is some written memorandum of the fact that the bank accepted a deposit of a sum of money from a

depositor, the writing constitutes a certificate of deposit. The CTA held that a passbook representing an interest-

earning deposit account issued by a bank qualifies as a certificate of deposit drawing interest.48[27]

The CTA emphasized that Section 180 of the 1977 NIRC imposes DST on documents, whether the

documents are negotiable or non-negotiable.49[28] The CTA held that petitioners argument that Section 180 of

the 1977 NIRC imposes the DST only on negotiable certificates of deposit as implied from the old tax provision is

erroneous.50[29] Section 217 of Commonwealth Act No. 466, as amended (old NIRC) reads:

Sec. 217. Stamp tax on negotiable promissory notes, bills of exchange, drafts,

certificate of deposit bearing interest and others not payable on sight or demand. - On all bills

of exchange (between points within the Philippines), drafts or certificates of deposit drawing

interest, or orders for the payment of any sum of money otherwise than at sight or on demand,

or all negotiable promissory notes, except bank notes issued for circulation, and on each

renewal of any such note, there shall be collected a documentary stamp tax of four centavos on

each two hundred pesos, or fractional part thereof, of the face value of any such bill of exchange,draft, certificate of deposit, or note. (As amended by Sec. 6, Republic Act No. 40)51[30]

(Emphasis in the original)

47[26] Rollo, pp. 43-44.

48[27] Id. at 44.

49[28] Id.

50[29] Id. at 44-45.

51[30] Id. at 45.


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The CTA observed that the requirement of negotiability pertains to promissory notes only. Such intention

is disclosed by the fact that the word negotiable was written beforepromissory notes followed by a comma, hence,

the word negotiable modifies promissory notes only. Therefore, with respect to all other documents mentioned in

Section 217 of the old NIRC, the attribute of negotiability is not required.52[31] The CTA added that the applicable

provision is Section 180 of the 1977 NIRC and not Section 217 of the old NIRC.53[32] Section 180 of the 1977 NIRC

provides that the following are subject to DST, to wit: (1) Loan Agreements; (2) Bills of Exchange; (3) Drafts; (4)

Instruments and Securities issued by the Government or any of its instrumentalities; (5) Certificates of Deposits

drawing interest; (6) Orders for the payment of any sum of money otherwise than at sight or on demand; and (7)

Promissory Notes, whether negotiable or non-negotiable. Therefore, the DST is imposed on all certificates of

deposit drawing interest without any qualification.54[33]

The CTA held that a certificate of time deposit, a type of a certificate of deposit drawing interest, is

subject to DST. The CTA observed that the SSDA has the same nature and characteristics as a time deposit.55[34]

The CTA discussed the similarities of a time deposit account with an SSDA:

In order for the depositor to earn the agreed higher interest rate in a Special/Super

Savings Account, the required minimum amount of deposit must not only be met but should also

be maintained for a definite period. Thus, the Special/Super Savings Account is a deposit with a

fixed term. Withdrawal before the expiration of said fixed term results to the reduction of the

interest rate. The fixed term and reduction of interest rate in case of pre-termination areessentiallythe features of a time deposit. Hence, this Court concurs with the conclusion reached

in the assailed Decision that petitioners Special/Super Savings Deposits and certificates of time

deposit are substantially the same, if not one and the same product, and therefore both are

subject to the DST on certificates of deposit.56[35]

52[31] Id. at 45-46.

53[32] Id. at 46.

54[33] Id. at 46-47.

55[34] Id. at 47.

56[35] Id. at 48-49.


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The CTA stated that the fact that the SSDA is evidenced by a passbook is immaterial because in

determining whether certain instruments are subject to DST, substance would control over form and labels.57[36]

On 14 December 2005, petitioner appealed to this Court the CTA decision.58[37]

The Issue

Petitioner submits this sole issue for our consideration: whether petitioners product called Special/Super

Savings Account is subject to DST under Section 180 of the 1977 NIRC prior to the passage of RA 9243 in

2004.59[38]

The Ruling of the Court

The issue in the present case is whether petitioners SSDAs are certificates of deposits drawing interest

as used in Section 180 of the 1977 NIRC. If they are, then the SSDAs are subject to DST. If not, then they are merely

regular savings account which concededly are not subject to DST. So what are certificates of deposits drawing

interest, and how do they differ from a regular savings account?

Section 180 of the 1977 NIRC, as amended, provides:

57[36] Id. at 49.

58[37] Id. at 3.

59[38] Id. at 7.


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Sec. 180. Stamp tax on all loan agreements, promissory notes, bills of exchange,

drafts, instruments and securities issued by the government or any of its instrumentalities,

certificates of deposit bearing interest and others not payable on sight or demand . On all

loan agreements signed abroad wherein the object of the contract is located or used in the

Philippines; bills of exchange (between points within the Philippines), drafts, instruments and

securities issued by the Government or any of its instrumentalities or certificates of deposits

drawing interest, or orders for the payment of any sum of money otherwise than at the sight or

on demand, or on all promissory notes, whether negotiable or non- negotiable, except bank

notes issued for circulation, and on each renewal of any such note, there shall be collected a

documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos, or fractional part

thereof, of the face value of any such agreement, bill of exchange, draft, certificate of deposit, or

note: provided, that only one documentary stamp tax shall be imposed on either loan

agreement, or promissory note issued to secure such loan, whichever will yield a higher tax:

provided, however, that loan agreements or promissory notes the aggregate of which does not

exceed Two hundred fifty thousand pesos (P250,000) executed by an individual for his purchase

on installment for his personal use or that of his family and not for business, resale, barter or hire

of a house, lot, motor vehicle, appliance or furniture shall be exempt from the payment of thedocumentary stamp tax provided under this section. (Boldfacing and underscoring supplied)

In Far East Bank and Trust Company v. Querimit,60[39] the Court defined a certificate of deposit as a

written acknowledgment by a bank or banker of the receipt of a sum of money on deposit which the bank or

banker promises to pay to the depositor, to the order of the depositor, or to some other person or his order,

whereby the relation of debtor and creditor between the bank and the depositor is created. A certificate of

deposit is also defined as a receipt issued by a bank for an interest-bearing time deposit coming due at a specified

future date.61[40]

The deposit operations of a bank as listed in the Bangko Sentral ng Pilipinas Manual of Regulations for

Banks62[41] consist of the following:

60[39] Supra note 21 at 730.

61[40] Websters Third New International Dictionary, Unabridged.

62[41] Issued 1993 and amended in 2005. Part II- Deposit and Borrowing Operations.


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1. Demand Deposits are deposits, subject to withdrawal either by check or thru the automated

tellering machines which are otherwise known as current or checking accounts. The Bank may or may not pay

interest on these accounts.63[42]

2. Savings Deposits are interest-bearing deposits which are withdrawable either upon presentation of a

properly accomplished withdrawal slip together with the corresponding passbook or thru the automated tellering

machines.64[43]

3. Negotiable Order of Withdrawal Accounts are interest-bearing savings deposit which are

withdrawable by means of Negotiable Orders of Withdrawal.65[44]

4. Time Deposits are interest-bearing deposits with specific maturity dates and evidenced by

certificates issued by the bank.66[45]

Petitioner treats the SSDA as a regular savings deposit account since it is evidenced by a passbook and

allows withdrawal. Respondent treats the SSDA as a time deposit account because of the higher interest rates and

holding period. It is then significant to differentiate a regular savings deposit and a time deposit vis--vis the SSDA

to determine if the SSDA is a certificate of deposit drawing interest referred to in Section 180 of the 1977 NIRC. A

comparison of a savings account, time deposit account, and SSDA is shown in the table below:

Savings Account Time Deposit SSDA

Interest rate Regular savings

interest

Higher interest

rate

Higher interest

rate

Period None Fixed Term Fixed Term

63[42] BSP Manual of Accounts for Expanded Commercial Banks and Commercial Banks 2-1-

02-02, p. 27.

64[43] Id., 2-1-02-04, at 28.

65[44] Id., 2-1-02-06, at 28.

66[45] Id., 2-1-02-08, at 29.


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Evidenced by: Passbook Certificate of

Time Deposit

Passbook

Pre-termination None With penalty With penalty

Holding Period None Yes Yes

Withdrawal Allowed Withdrawal amounts to

pre-

termination

Allowed provided the

minimum

amount to earn

the higher interest rate is

maintained, otherwise,

the

regular savings

interest rate will

apply.

Based on the definition and comparison, it is clear that a certificate of deposit drawing interest as used in

Section 180 of the 1977 NIRC refers to a time deposit account. As the Bureau of Internal Revenue (BIR) explained in

Revenue Memorandum Circular No. 16-2003,67[46] the distinct features of a certificate of deposit from a technical

point of view are as follows:

a. Minimum deposit requirement;

b. Stated maturity period;

c. Interest rate is higher than the ordinary savings account;

d. Not payable on sight or demand, but upon maturity or in case of pre-termination, prior notice is

required; and

67[46] BIR Revenue Memorandum Circular No. 16-2003, Defining the Term Certificate ofDeposit for the Purpose of Clarifying its Taxability Under Section 180 of the National

Internal Revenue Code (Tax Code) of 1997, 18 February 2003.


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e. Early withdrawal penalty in the form of partial loss or total loss of interest in case of pre-termination.

The SSDA is for depositors who maintain savings deposits with substantial average daily balance and

which earn higher interest rates. The holding period of an SSDA floats at the option of the depositor at 30, 60, 90,

120 days or more and for maintaining a longer holding period, the depositor earns higher interest rates. There is

no pre-termination of accounts in an SSDA because the account is simply reverted to an ordinary savings status in

case of early or partial withdrawal or if the required holding period is not met. Based on the foregoing, the SSDA

has all of the distinct features of a certificate of deposit.

Petitioner argues that a deposit account evidenced by a passbook cannot be construed as a certificate of

deposit subject to DST under Section 180 of the 1977 NIRC. In International Exchange Bank v. Commissioner of

Internal Revenue,68[47] this Court categorically ruled that a passbook representing an interest earning deposit

account issued by a bank qualifies as a certificate of deposit drawing interest and should be subject to DST. The

Court added that a document to be deemed a certificate of deposit requires no specific form as long as there is

some written memorandum that the bank accepted a deposit of a sum of money from a depositor.69[48]

Petitioner also argues that prior to the passage of RA 9243, there was no law subjecting SSDA to DST. InInternational Exchange Bank v. Commissioner of Internal Revenue ,70[49] the Court held that the amendment to

include other evidences of deposits that are drawing interest significantly higher than the regular savings deposit

was intended to eliminate the ambiguity. The Court explained:

If at all, the further amendment was intended to eliminate precisely the scheme used by

banks of issuing passbooks to cloak its time deposits as regular savings deposits. This is

reflected from the following exchanges between Mr. Miguel Andaya of the Bankers Association

68[47] G.R. No. 171266, 4 April 2007, 520 SCRA 688.

69[48] Id. at 697.

70[49] Id. at 701-703.


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of the Philippines and Senator Ralph Recto, Senate Chairman of the Committee on Ways and

Means, during the deliberations on Senate Bill No. 2518 which eventually became RA 9243:

MR. MIGUEL ANDAYA (Bankers Association of the Philippines). Just to clarify.

Savings deposit at the present is not subject to DST.

THE CHAIRMAN. Thats right.

MR. ANDAYA. Time deposit is subject. I agree with you in principle that if we are

going to encourage deposits, whether savings or time...

THE CHAIRMAN. Uh-huh.

MR. ANDAYA. ...its questionable whether we should tax it with DST at all, even the

question of imposing final withholding tax has been raised as an issue.

THE CHAIRMAN. If I had it my way, I'll cut it by half.

MR. ANDAYA. Yeah, but I guess concerning the constraint of government revenue,

even the industry itself right now is not pushing in that direction, but in the long

term, when most of us in this room are gone, we hope that DST will disappear from

the face of this earth, no.

Now, I think the move of the DOF to expand the coverage of or to add that phrase,

Other evidence of indebtedness, it just removed ambiguity. When we testified

earlier in the House on this very same bill, we did not interpose any objections if

only for the sake of avoiding further ambiguity in the implementation of DST on

deposits. Because of what has happened so far is, we don't know whether the

examiner is gonna come in and say, This savings deposit is not savings but its time

deposit. So, I think what DOF has done is to eliminate any confusion. They said

that a deposit that has a maturity...


MR. ANDAYA. ...which is time, in effect, regardless of what form it takes should be

subject to DST.


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THE CHAIRMAN. Would you include savings deposit now?

MR. ANDAYA. So that if we cloaked a deposit as savings deposit but it has got a

fixed maturity...


MR. ANDAYA. ..that would fall under the purview. (Italics in the original)

DST is imposed on Certificates of Deposits Bearing Interest

including a special savings account evidenced by a passbook.

Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers evidencing the

acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. A DST is actually an

excise tax because it is imposed on the transaction rather than on the document.71[50] A DST is also levied on the

exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal

relationships through the execution of specific instruments.72[51] Hence, in imposing the DST, the Court considers

not only the document but also the nature and character of the transaction.

71[50] Sec. 173, 1997 NIRC. See DE LEON and DE LEON, THE NATIONAL INTERNALREVENUE CODE ANNOTATED, 8th ed. Volume 2 (2003). See also Michel J. LhuillierPawnshop, Inc. v. Commissioner of Internal Revenue, G.R. No. 166786, 3 May 2006, 489 SCRA

147, 152-153.

72[51] Philippine Home Assurance Corporation v. Court of Appeals, 361 Phil. 368, 372-373

(1999).


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Section 180 of the 1977 NIRC imposes a DST of P0.30 on each P200 of the face value of any certificate of

deposit drawing interest. As correctly observed by the CTA, a certificate of deposit is a written acknowledgment by

a bank of the receipt of a sum of money on deposit which the bank promises to pay to the depositor, to the order

of the depositor, or to some other person or his order, whereby the relation of debtor or creditor between the

bank and the depositor is created.73[52]

Petitioners SSDA has the following features:

1. Although the money placed in the SSDA can be withdrawn anytime, the money is subject to a

holding period in order to earn a higher interest rate. Otherwise, in case of premature

withdrawal, the depositor will not earn the preferred interest ranging from 8% or higher but only

the normal interest rate on regular savings deposit.

2. In order to qualify for an SSDA, the depositor must place a substantial amount of money of not

less than P50,000. This amount is even larger than what is needed to open a time deposit which

is P20,000. Aside from the substantial amount of money required, this amount must be

maintained within a certain period just like a time deposit.

3. On the issue of penalty, in an SSDA, if the depositor withdraws the money and the balance falls

below the minimum balance of P50,000, the interest is reduced. This condition is identical to

that imposed on a time deposit that is withdrawn before maturity. 74[53]

Based on these features, it is clear that the SSDA is a certificate of deposit drawing interest subject to DST

even if it is evidenced by a passbook and non-negotiable in character. In International Exchange Bank v.

Commissioner of Internal Revenue,75[54] we held that:

73[52] Far East Bank and Trust Company v. Querimit, supra note 21.

74[53] CTA En Banc rollo, pp. 61-62.

75[54] Supra note 47 at 697.


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A document to be deemed a certificate of deposit requires no specific form as long as

there is some written memorandum that the bank accepted a deposit of a sum of money from a

depositor. What is important and controlling is the nature or meaning conveyed by the passbook

and not the particular label or nomenclature attached to it, inasmuch as substance, not form, is

paramount.

Moreover, a certificate of deposit may be payable to the depositor, to the order of the depositor, or to some other

person or his order. From the use of the conjunction or, instead ofand, the negotiable character of a certificate of

deposit is immaterial in determining the imposition of DST.76[55]

In Banco de Oro Universal Bank v. Commissioner of Internal Revenue,77[56] this Court upheld the CTAs

decision and ruled:

The CTA en banc likewise declared that in practice, a time deposit transaction is covered

by a certificate of deposit while petitioner's Investment Savings Account (ISA) transaction is

through a passbook. Despite the differences in the form of any documents, the CTA en banc

ruled that a time deposit and ISA have essentially the same attributes and features. It explained

that like time deposit, ISA transactions bear a fixed term or maturity because the bank

acknowledges receipt of a sum of money on deposit which the bank promises to pay the

depositor, bearer or to the order of a bearer on a specified period of time. Section 180 of the1997 NIRC does not prescribed the form of a certificate of deposit. It may be any 'written

acknowledgment by a bank of the receipt of money on deposit.' The definition of a certificate of

deposit is all encompassing to include a savings account deposit such as ISA . (Emphasis

supplied)

Availment of the Tax Amnesty Program

76[55] Id. at 697-698.

77[56] G.R. No. 173602, 15 January 2007.


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On 24 May 2007, during the pendency of this case before this Court, Republic Act No. 9480 or An Act

Enhancing Revenue Administration and Collection by Granting an Amnesty on All Unpaid Internal Revenue Taxes

Imposed by the National Government for Taxable Year 2005 and Prior Years (RA 9480), lapsed into law.

The pertinent provisions of RA 9480 are:

Section 1. Coverage. There is hereby authorized and granted a tax amnesty which shall

cover all national internal revenue taxes for the taxable year 2005 and prior years, with or

without assessments duly issued therefor, that have remained unpaid as of December 31, 2005:

Provided, however, That the amnesty hereby authorized and granted shall not cover persons or

cases enumerated under Section 8 hereof.

x x x

Sec. 6. Immunities and Privileges. Those who availed themselves of the tax amnesty

under Section 5 hereof, and have fully complied with all its conditions shall be entitled to the

following immunities and privileges:

1. The taxpayer shall be immune from the payment of taxes, as well as

addition thereto, and the appurtenant civil, criminal or administrative penalties under

the National Internal Revenue Code of 1997, as amended, arising from the failure to

pay any and all internal revenue taxes for taxable year 2005 and prior years.

x x x

Sec. 8. Exceptions. The tax amnesty provided in Section 5 hereof shall not extend to the

following persons or cases existing as of the effectivity of this Act:

1. Withholding agents with respect to their withholding tax liabilities;

2. Those with pending cases falling under the jurisdiction of the PresidentialCommission on Good Government;

3. Those with pending cases involving unexplained or unlawfully acquired

wealth or under the Anti-Graft and Corrupt Practices Act;

4. Those with pending cases filed in court involving violation of the Anti-Money

Laundering Law;


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5. Those with pending criminal cases for tax evasion and other criminal

offenses under Chapter II of Title X of the National Internal Revenue Code of 1997, as

amended, and the felonies of frauds, illegal exactions and transactions, and

malversation of public funds and property under Chapters III and IV of Title VII of the

Revised Penal Code; and

6. Tax cases subject of final and executory judgment by the courts. (Emphasissupplied)

The Department of Finance (DOF) issued DOF Department Order No. 29-07 (DO 29-07).78[57] Section 6

of DO 29-07 provides:

SEC. 6. Method of Availment of Tax Amnesty. -

1. Forms/Documents to be filed. - To avail of the general tax amnesty, concerned

taxpayers shall file the following documents/requirements:

a. Notice of Availment in such form as may be prescribed by the BIR;

b. Statements of Assets, Liabilities and Networth (SALN) as of December 31, 2005 in such

form, as may be prescribed by the BIR;

c. Tax Amnesty Return in such form as may be prescribed by the BIR.

x x x

The Acceptance of Payment Form, the Notice of Availment, the SALN, and the Tax

Amnesty Return shall be submitted to the RDO, which shall be received only after complete

payment. The completion of these requirements shall be deemed full compliance with the

provisions of RA 9480. (Emphasis supplied)

The BIR issued Revenue Memorandum Circular No. 19-2008 (RMC 19-2008).79[58] The pertinent

provisions are:

78[57] Rules and Regulations to Implement Republic Act No. 9480 (15 August 2007).


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Who may avail of the amnesty?

The following taxpayers may avail of the Tax Amnesty Program:

P Individuals

P Estates and Trusts

P Corporations

P Cooperatives and tax-exempt entities that have become taxable as of

December 31, 2005

P Other juridical entities including partnerships.

Fiscal year taxpayers may likewise avail of the tax amnesty using their Financial

Statement ending in any month of 2005.

EXCEPT:

Q Withholding agents with respect to their withholding tax liabilities

Q Those with pending cases:

Q Under the jurisdiction of the PCGG

Q Involving violations of the Anti-Graft and Corrupt Practices Act

Q Involving violations of the Anti-Money Laundering Law

Q For tax evasion and other criminal offenses under the NIRC and/or the

RPC

Q Issues and cases which were ruled by any court (even without

finality) in favor of the BIR prior to amnesty availment of the taxpayer. (e.g.

Taxpayers who have failed to observe or follow BOI and/or PEZA rules on

entitlement to Income Tax Holiday Incentives and other incentives)

Q Cases involving issues ruled with finality by the Supreme Court prior

to the effectivity of RA 9480 (e.g. DST on Special Savings Account)

Q Taxes passed on and collected from customers for remittance to the

BIR

Q Delinquent Accounts/Accounts Receivable considered as assets of the

BIR/Government, including self-assessed tax. (Emphasis supplied)

79[58] Circularizing the Full Text of A Basic Guide on the Tax Amnesty Act of 2007 forTaxpayers Who Wish to Avail of the Tax Amnesty Pursuant To Republic Act No. 9480 (Tax

Amnesty Act of 2007). (22 February 2008).


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The BIR also issued Revenue Memorandum Circular No. 69-2007 (RMC 69-2007).80[59] The pertinent

portion provides:

Q-32 May surviving or new corporations avail of the tax amnesty in behalf of the

corporations absorbed or dissolved pursuant to a merger or consolidation that took effect prior

to Taxable Year 2005? Can they avail of the Tax Amnesty?

A-32 Yes, these companies can avail of the tax amnesty for purposes of obtaining tax

clearances for the dissolved or absorbed corporations. (Emphasis supplied)

On 21 September 2007, Metropolitan Bank and Trust Company (Metrobank), the surviving entity that

absorbed petitioners banking business, filed a Tax Amnesty Return,81[60] paid the amnesty tax and fully complied

with all the requirements82[61] of the Tax Amnesty Program under RA 9480. Petitioner alleges that by virtue of

this availment, petitioner is now deemed immune from the payment of taxes as well as additions thereto, and is

statutorily discharged from paying all internal revenue tax liabilities for the taxable year 2005 and prior years.

Petitioner contends that the availment includes all deficiency tax assessments of the BIR subject of this petition.

80[59] Clarification of Issues Concerning The Tax Amnesty Program Under Republic Act No.

9480 as Implemented by Department Order No. 29-07 (5 November 2007).

81[60]Rollo, pp. 510-512. Metrobank paid a total of P88,549,049.10 as Amnesty Tax.

82[61] Under RMC 19-2008, the requisites are as follows:

Forms to be submitted are:

- Notice of Availment of Tax Amnesty

- Statement of Assets, Liabilities and Networth (SALN)

- Tax Amnesty Return (BIR Form No. 2116)

- Payment Form (BIR Form No. 0617)


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A tax amnesty is a general pardon or the intentional overlooking by the State of its authority to impose

penalties on persons otherwise guilty of violation of a tax law. It partakes of an absolute waiver by the government

of its right to collect what is due it and to give tax evaders who wish to relent a chance to start with a clean slate. A

tax amnesty, much like a tax exemption, is never favored nor presumed in law. The grant of a tax amnesty, similar

to a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing

authority.83[62]

The DST is one of the taxes covered by the Tax Amnesty Program under RA 9480.84[63] As discussed

above, petitioner is clearly liable to pay the DST on its SSDA for the years 1996 and 1997. However, petitioner, as

the absorbed corporation, can avail of the tax amnesty benefits granted to Metrobank.

Records show that Metrobank, a qualified tax amnesty applicant,85[64] has duly complied with the

requirements enumerated in RA 9480, as implemented by DO 29-07 and RMC 19-2008.86[65] Considering that the

completion of these requirements shall be deemed full compliance with the tax amnesty program,87[66] the law

mandates that the taxpayer shall thereafter be immune from the payment of taxes, and additions thereto, as well

as the appurtenant civil, criminal or administrative penalties under the NIRC of 1997, as amended, arising from the

failure to pay any and all internal revenue taxes for taxable year 2005 and prior years.88[67]

83[62] Commissioner of Internal Revenue v. Marubeni Corp., 423 Phil. 862, 874 (2001).

84[63] RMC 69-2007. Q-1, A-1.

85[64] On the time of the availment of the tax amnesty program, this case is not subject of a

final and executory judgment.

86[65] Rollo, p. 508 (Notice of Availment of Tax Amnesty), p. 509 (SALN), p. 510 (BIR Form

No. 2116 and BIR Form No. 0617), and p. 512 (Certificate from Development Bank of thePhilippines that Metrobank has paid the Amnesty Tax).

87[66] Section 6, DO 20-07.

88[67] Section 6, RA 9480.


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The BIRs inclusion of issues and cases which were ruled by any court (even without finality) in favor of

the BIR prior to amnesty availment of the taxpayer as one of the exceptions in RMC 19-2008 is misplaced. RA

9480 is specifically clear that the exceptions to the tax amnesty program include tax cases subject of final and

executory judgment by the courts. The present case has not become final and executory when Metrobank availed

of the tax amnesty program.

WHEREFORE, we GRANT the petition, and SET ASIDE the Court of Tax Appeals Decision dated 23

November 2005 in CTA EB No. 63 solely in view of petitioners availment of the Tax Amnesty Program.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice

WE CONCUR:

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice


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RENATO C. CORONA CONCHITA CARPIO MORALES

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was


ANTONIO T. CARPIO

Associate Justice

Acting Chairperson

CERTIFICATION


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Pursuant to Section 13, Article VIII of the Constitution, and the Division Acting Chairpersons Attestation, I

certify that the conclusions in the above Decision had been reached in consultation before the case was assigned

to the writer of the opinion of the Courts Division.


Acting Chief Justice