617 Phil. 522
PERALTA, J.:
For the year 1994 A. Reverse Repurchase AgreementsP 424,000,000.00 B. Special Savings Accounts2,142,305,326.67 ---------------------- Total2,566,305,326.67 Rate of Tax0.15% ----------------------3,849,457.98 Total Tax due thereon Add: 25% Surcharge962,364.50 Compromise Penalty25,000.00 987,364.50 ---------------- --------------------- Total Deficiency DST-Industry Issue P4,836,822.48[7] For the year 1995 A. Reverse Repurchase AgreementsP 9,773,000,000.00 B. Special Savings Accounts2,275,011,526.88 ---------------------- Total12,048,011,526.88 Rate of Tax0.15% ---------------------- Total Tax due thereonP 18,072,017.29 Add: 25% Surcharge4,518,004.32 Compromise Penalty25,000.00 4,543,004.32 ---------------- --------------------- Total Deficiency DST-Industry Issue P 22,615,021.61[8]
x x x xOn December 20, 1999, petitioner received a Preliminary Agreement Notice[11]dated December 17, 1999, assessing petitioner's deficiency documentary stamp taxes on its RRAs and SSDs covering the taxable years 1996 and 1997. Like in the first assessment, petitioner sent a letter[12] manifesting its disagreement thereto.
B. On the Special Savings Account:
With respect to the Savings Plus Deposit transactions, the latter is also not subject to documentary stamp tax because by the very nature of the transaction which is just a variation of the regular savings account, the same is not taxable under the aforequoted Section 180. Let us consider some salient features of the product that differentiates it from a Time Deposit Account:
1. The terms and conditions of the Savings Plus Deposit are provided for in the traditional passbook form as distinguished from a Time Deposit Account which is evidenced by a certificate of deposit.
2. In a time deposit, there is no partial withdrawal. The term is preterminated and the certificate of deposit is cancelled and surrendered and the entire amount is paid to the depositor. In the case of Savings Plus Deposit, however, there is partial withdrawal, which is posted in the passbook. The amount withdrawn is paid to the depositor and the passbook is returned to the depositor. In other words, the Savings Plus Deposit, contrary to the basis for assessment, represents a continuing fund which is open to deposits and withdrawals anytime, and therefore, falls under the category of certificates of deposit at sight or on demand which is exempt from documentary stamp tax.
3. When fifty percent (50%) of the term of a Time Deposit had lapsed, interest to be paid is fifty percent (50%) of the agreed rate. When less than fifty percent (50%) of the term had lapsed, interest to be paid is twenty- five percent (25%) of the agreed rate. In the case of a Savings Plus Deposit, however, amount withdrawn earns only the regular fixed savings rate of three percent (3%).
4. The features of the product in no way resemble that of a promissory note or a certificate of indebtedness, and
5. The intention, not any occasional error in the implementation of the product, should be the basis of taxation. A correctible error in the implementation does not convert a non-taxable product into a taxable one.
In view of all the foregoing reasons and considerations, we hereby request that subject assessment notice be recalled and/or reconsidered, the same not being due and demandable from China Bank, under the premises.[10]
IN VIEW WHEREOF, this Office do hereby resolved the following:
1. The protest of herein protestant bank on the deficiency stamp taxes on RRPs covering the years 1994, 1995 and 1996 under the following Assessment Notices, to wit:
Assessment Notice No. Amount YearST-DST-94-0054-99 P 820,000.00 1994ST-DST-95-0055-99 P18,349,375.00 1995ST-DST-96-0374-99 P 1,976,250.00 1996
are hereby withdrawn and cancelled and the same are considered closed and terminated.
2. The protest of herein protestant bank on the deficiency stamp tax on RRPs for 1997 under Assessment Notice No. ST-DST-97-0372-99 demanding payment of P3,523,600.00 is hereby affirmed and reiterated.
3. The protest of herein protestant bank on the deficiency stamp taxes on SSA covering the taxable years 1994, 1995, 1996 and 1997 under the following Assessment Notices, to wit:
Assessment Notice No. Amount YearST-DST-94-0054-99 P4, 041,822.48 1994ST-DST-95-0055-99 4,290,646.61 1995ST-DST-96-0371-99 1,633,750.00 1996
are hereby affirmed in all respects.
Consequently, the protestant bank is hereby ordered to pay the above- stated amounts plus interest that may have accrued thereon until actual payment to the Collection Service, BIR National Office, Diliman, Quezon City, within thirty (30) days from receipt hereof, otherwise, the collection thereof shall be effected through the summary remedies provided by law.
This constitutes the final decision of this Office on the matter.[18]
IN VIEW OF THE FOREGOING, the subject Petition for Review is hereby PARTIALLY GRANTED. Assessment Notice No. ST-DST-97-0372-99 for deficiency documentary stamp taxes on petitioner's Reverse Repurchase Agreement Transactions in the amount of P3,523,600.00 covering the taxable year 1997 is hereby CANCELLED AND WITHDRAWN. However, Assessment Notice Nos. ST-DST-94-0054-99, ST-DST-95-0055-99, ST-DST-96-0371-99, and ST-DST-96-0373-99 for deficiency documentary stamp taxes on petitioner's Special Savings Deposit Accounts for the taxable years 1994, 1995, 1996 and 1997, respectively, are UPHELD but in the following modified amounts:On November 9, 2004, petitioner filed a Motion for Partial Reconsideration,[22] specifically assailing the portion of the CTA Decision affirming the assessment of deficiency documentary stamp tax on its SSDs.
x x x x
Accordingly, petitioner is ORDERED TO PAY the above recomputed documentary stamp tax liabilities of P4,016,822.48, P4,265,646.61, P1,218,750.00 and P1,890,000.00 or in the total amount of P11,391,219.09, plus 20% delinquency interest from February 24, 2002 until full payment thereof pursuant to Section 249 (c) of the 1997 Tax Code.
SO ORDERED.[21]
WHEREFORE, the instant petition is hereby DENIED DUE COURSE, and accordingly, DISMISSED for the above-stated reasons. The assailed Decision and Resolution are hereby AFFIRMED.[26]
I
IN RENDERING THE QUESTIONED DECISION AND RESOLUTION (ANNEXES "A" AND "B"), THE HONORABLE COURT OF TAX APPEALS EN BANC, IN CLEAR DISREGARD OF THE BASIC RULES ON STATUTORY CONSTRUCTION, ERRONEOUSLY AND CAPRICIOUSLY INTERPRETED THE BANKING-INDUSTRYWIDE INNOVATIVE PRODUCT CALLED "SPECIAL SAVINGS DEPOSIT" AS A CERTIFICATE OF TIME DEPOSIT SUBJECT TO DOCUMENTARY STAMP TAX UNDER SECTION 180 OF THE THEN GOVERNING NATIONAL INTERNAL REVENUE CODE.II
THE HONORABLE COURT OF TAX APPEALS EN BANC GRAVELY ERRED IN NOT CONSIDERING THAT ITS ERRONEOUS INTERPRETATION OF THE "SPECIAL SAVINGS DEPOSIT" WAS ONLY RATIONALIZED AND EXPLICITLY PROVIDED FOR UNDER REPUBLIC ACT NO. 9243, OTHERWISE KNOWN AS "AN ACT RATIONALIZING THE PROVISIONS ON THE DOCUMENTARY STAMP TAX OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSE" WHICH WAS ENACTED INTO LAW ON FEBRUARY 7, 2004.[31]
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 the documentary stamp tax provided under this section.
1. Loan Agreements;From said enumeration, the CTA en banc held that petitioner's SSDs fall under the category of "certificates of deposit drawing interest."
2. Bills of Exchange;
3. Drafts;
4. Instruments and Securities issued by the Government or any of its instrumentalities;
5. Certificates of Deposit Drawing Interest;
6. Order for the payment of money otherwise that at sight or on demand;
7. Promissory Notes, whether negotiable or non-negotiable.[34]
Firstly, the law, as it may in pertinence, be scrutinized, specifically mentioned "certificates of deposits drawing interest" as subject to the documentary stamp tax. In the special savings deposit of petitioner, what is issued to a depositor is a passbook just like in regular savings deposit. The reason for this is that, as appreciated by the Honorable Court a quo itself --- the amount deposited in the special savings deposit is withdrawable any time. Partial or full withdrawal may be done by the depositor from this deposit. Not only this, the depositor may likewise deposit any amount he pleases anytime he wants. Hence, the fund in a special savings deposit is a continuing fund, just like regular savings account. The passbook then would be suitable and proper record of all the transactions made and to be made on the special savings deposit.This Court does not agree. Contrary to the claim of petitioner, the SSDs are in fact "certificates of deposits drawing interest" subject to documentary stamp tax as provided for in Section 180 of the 1997 NIRC.
Certificates of deposit, on the other hand, are issued to evidence a time deposit placement. Time deposits, to a tee, are certificates of indebtedness issued by a bank for fixed amounts which earn interest at fixed rates and payable at a fixed future date. These features do not attend foursquare on the special savings deposit. In the latter, just like in ordinary savings deposit, there is a minimum amount of deposit required, but it is never fixed or stipulated upon; the interest is assured at savings deposit rate but if the balance required is maintained for a certain period, the depositor is entitled to a prevailing market rate; and, special savings deposit has no maturity date and is a continuing concern. With the withdrawability of the amount deposited herein at any time, as the depositor may please, special savings deposit just like an ordinary savings account includes itself under the category of deposit payable at sight or on demand, read as "orders for the payment of any sum of money [otherwise] at sight or on demand" which is exempt from documentary stamp tax.[37]
| Savings Account | Time Deposit | SSDA |
Interest rate | Regular savings interest | Higher interest rate | Higher interest rate |
Period | None | Fixed Term | Fixed Term |
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, the distinct features of a certificate of deposit from a technical point of view are as follows:a. Minimum deposit requirement;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.
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
e. Early withdrawal penalty in the form of partial loss or total loss of interest in case of pre-termination.
The FSD, like a time deposit, provides for a higher interest rate when the deposit is not withdrawn within the required fixed period; otherwise, it earns interest pertaining to a regular savings deposit. Having a fixed term and the reduction of interest rates in case of pre-termination are essential features of a time deposit. Thus, explains the CTA En Banc:It is well-settled that certificates of time deposit are subject to the DST and that a certificate of time deposit is but a type of a certificate of deposit drawing interest. Thus, in resolving the issue before Us, it is necessary to determine whether petitioner's Savings Account-Fixed Savings Deposit (SA-FSD) has the same nature and characteristics as a time deposit. In this regard, the findings of fact stated in the assailed Decision [of the CTA Division] are as follows:In order for a depositor to earn the agreed higher interest rate in a SA-FSD, the amount of deposit must be maintained for a fixed period. Such being the case, We agree with the finding that the SA-FSD is a deposit account with a fixed term. Withdrawal before the expiration of said fixed term results in the reduction of the interest rate. Having a fixed term and reduction of interest rate in case of pre-termination are essentially the features of a time deposit. Hence, this Court concurs with the conclusion reached in the assailed Decision that petitioner's SA-FSD and time deposit are substantially the same. . . . (Italics in the original; underscoring supplied)
"In this case, a depositor of a savings deposit-FSD is required to keep the money with the bank for at least thirty (30) days in order to yield a higher interest rate. Otherwise, the deposit earns interest pertaining only to a regular savings deposit.
"The same feature is present in a time deposit. A depositor is allowed to withdraw his time deposit even before its maturity subject to bank charges on its pre[-]termination and the depositor loses his entitlement to earn the interest rate corresponding to the time deposit. Instead, he earns interest pertaining only to a regular savings deposit. Thus, petitioner's argument that the savings deposit-FSD is withdrawable anytime as opposed to a time deposit which has a maturity date, is not tenable. In both cases, the deposit may be withdrawn anytime but the depositor gets to earn a lower rate of interest. The only difference lies on the evidence of deposit, a savings deposit-FSD is evidenced by a passbook, while a time deposit is evidenced by a certificate of time deposit."
The findings and conclusions reached by the CTA which, by the very nature of its function, is dedicated exclusively to the consideration of tax problems and has necessarily developed an expertise on the subject, and unless there has been an abuse or improvident exercise of authority, and none has been shown in the present case, deserves respect.[38]
1. Amount deposited is withdrawable anytime[39]Based on the foregoing, the conclusion is certain in that petitioner's SSDs are "certificates of deposits drawing interest" as contemplated in Section 180 of the 1997 National Internal Revenue Code. Petitioner's "Savings Plus Deposit" is essentially the same as the "Savings Account-Fixed Savings Deposit" in International, as well as the "Special/Super Savings Account" in PBC wherein this Court ruled that said accounts are subject to documentary stamp tax.
2. The same is evidenced by a passbook[40]
3. The rate of interest offered is the prevailing market rate, provided the depositor would maintain his minimum balance in thirty (30) days at the minimum, and should he withdraw before the period, his deposit would earn the regular savings deposit rate.[41]
SEC. 5. Section 180 of the National Internal Revenue Code of 1997, as amended, is hereby renumbered as Section 179 and further amended to read as follows:SEC. 179. Stamp Tax on All Debt Instruments. - On every original issue of debt instruments, there shall be collected a documentary stamp tax of One peso (P1.00) on each Two hundred pesos (P200), or fractional part thereof, of the issue price of any such debt instruments: Provided, That for such debt instruments with terms of less than one (1) year, the documentary stamp tax to be collected shall be of a proportional amount in accordance with the ratio of its term in number of days to three hundred sixty-five (365) days: Provided, further, That only one documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to secure such loan.For purposes of this section, the term debt instrument shall mean instruments representing borrowing and lending transactions including but not limited to debentures, certificates of indebtedness, due bills, bonds, loan agreements, including those signed abroad wherein the object of contract is located or used in the Philippines, instruments and securities issued by the government of any of its instrumentalities, deposit substitute debt instruments, 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 interest and having a specific maturity date, orders for payment of any sum of money otherwise than at sight or on demand, promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation." (Underscoring supplied)