dcco v cir

7/17/2019 Dcco v Cir

http://slidepdf.com/reader/full/dcco-v-cir 1/3

DUMAGUETE CATHEDRAL CREDIT COOPERATIVE (DCCO) VS.

COMMISSIONER OF INTERNAL REVENUE (CIR)

SHORT STORY: DCCO is a credit cooperative. In 2001, BIR examined their books for years 1999-2000

and required them to pay withholding taxes for honorarium of their Board of Directors, security and janitorial

services, legal and professional fees, and interest on time savings and deposits of their members. DCCOprotested the payment of taxes on time savings and deposits at the BIR Regional Office, elevating it to the

Commissioner of Internal Revenue, then the Court of Tax Appeals, and finally the Supreme Court. The SC

held that DCCO is not liable to pay the taxes given that banks pay interest on such, and that cooperatives

are given preferential tax treatment. Cooperatives are also protected by the 1987 Constitution.

FACTS

1. TIMELINE

a. 27 Nov 2001 – BIR Ops Group commissioner Lilian Hefti issued Letters of

ut!orit" #Lo$

i. Lo aut!ori%ed BIR O&cers 'omas Ra(u"on and 'arcisio )u(illan to

e*amine +))O,s (oo-s and accountin records for ta*a(le "ears 1///

2000

(. roceedins (efore BIR Reional O&ce

i. 2 3une 2002 – +))O received notices for de4cienc" 5it!!oldin ta*es

6for Board of +irectors !onorarium securit" and 8anitorial services leal

and professional fees and interest on savins and time deposits$

ii. 29 3ul" 2002 – +))O protested notices

iii. 1 Oct 2002 – +))O received 2 more notices

iv. 22 Oct 2002 – +))O informed BIR Reional +irector #R+$ :onia ;lores it

5ould onl" pa" ta* on ever"t!in <=)<' interest and time savins>

5ould avail of ?oluntar" ssessment and (atement roram #?$

v. 2/ Nov 2002 – +))O availed of ? paid 10@@7A.2 #1///$ and

1A97.2A #2000$

vi. 2A pril 2009 – +))O received Letters of +emand from BIR R+ ;lores to

pa" 1A/[email protected] #1///$ and 1A2AA./0 #2000$.

c. roceedins (efore )IR

i. / Ca" 2009 – protested Letters of +emand

ii. )IR failed to act on protest 5it!in 10 da"s

iii. 9 +ec 2009 – +))O 4led petition for revie5 (efore t!e )ourt of 'a*

ppealsd. roceedins (efore )' 1st +ivision

i. ;e( 2007 – etition partially granted assessment for !onorarium leal

and professional securit" and 8anitorial services cancelled. ssessment

for 5it!!oldin ta*es on interests afrmed.

e. roceedins (efore )' en (anc

i. )' denied petition for revie5 and +))O,s Cotion for Reconsideration

ii. Held :ection @7 of National Internal Revenue )ode reDuirin 5it!!oldin

of ta* at source

iii. +))O,s (usiness falls under Esimilar arranementsF – +))O s!ould !ave

5it!!eld 20 4nal ta* on interest from mem(ers, deposits

ISSUE + RATIO:



ON +))O I: LIBL< 'O +<;I)I<N) I'HHOL+ING '=<: ;OR <R: 1///2000 N+

+<LINJK<N) IN'<R<:' O; 20 <R NNKC – NO

1. +))O,s invocation of BIR Rulin @@1 is proper

a. 1 Nov 1/ – BIR declared t!at cooperatives are not reDuired to 5it!!old ta*es

on interest from savins and time deposits

(. Interest from an" H currenc" (an- deposit and "ield or an" ot!er monetar"

(ene4t from deposit su(stitutes paid (" (an-s

c. Note interpretations of administrative aencies enforcinMimplementin la5siven reat 5ei!t (" courts

2. Cem(ers of cooperatives deserve preferential ta* treatment as per R /9 as

amended (" R /@20

a. +eclared polic" of :tate to foster creation and ro5t! of cooperatives as a

practical ve!icle for promotin selfreliance for economic development and

social 8ustice

(. Leislative intent to ive preferential ta* treatment apparent in rticles 1 and

2 of R /9

i. rt 1 – E s!all not (e su(8ect to an" ovt ta*es and fees imposed undert!e Internal Revenue )ode and ot!er ta* la5s. )ooperatives not fallin

under t!is article s!all (e overned (" succeedin section.F

ii. rt 2 – Es!all not (e su(8ect to ta* on t!eir transactions to mem(ers.

Not5it!standin provision of an" la5 or reulation to t!e contrar" suc!

cooperatives dealin 5it! nonmem(ers s!all en8o" t!e follo5in ta*

e*emptionsF

c. Limitin ta* e*emption to cooperatives against t!e ver" purpose of

cooperatives. <*tendin e*emption to cooperative mem(ers – consistent 5it!

leislature,s intent

i. rt 12 – in case of dou(t s!ould (e resolved in favor of cooperatives and

mem(ers

d. lon%o v. Intermediate ppellate )ourt

i. :pirit of a statute determines its construction – statute must (e read

accordin to its intent

ii. t!in 5!ic! is 5it!in t!e intent of t!e la5ma-er is as muc! 5it!in t!e

statute as if 5it!in t!e letter

e. : 1@ rt =II of 1/7 )onstitution uarantees protection of cooperatives

i. : 10 rt II – polic" of :tate to promote social 8ustice in national

development

ii. : 2 rt =III – promotion of social 8ustice includes commitment to create

economic opportunities (ased on freedom of initiative and selfreliance

HELD:

Petition GRANTED. CTA 2007 Decision and 2008 Resolution SET ASIDE and REVERSED.

DCCO isnot liableto pay assessed deficiency withholding taxes on interests from savings and time

deposits of its members, and delinquency interest of 20% per annum.

Dumaguete Catheda! Ced"t C##$eat"%e (e&ta'!"&hed 1 Fe' 1*+$

a. O(8ectives and purposes

i. Increase income and purc!asin po5er of mem(ers

ii. ool resources (" encourain savins and capital formation

iii. <*tend loans to mem(ers

(. o5ers

i. +ra5 ma-e accept endorse uarantee e*ecute issue promissor"



notes mortaes (ills of e*c!ane drafts 5arrants certi4cates and all

-inds of o(liations

ii. Issue (onds de(entures ot!er o(liations

dcco v cir

Documents