ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION, petitioner, vs.

COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF APPEALS, respondents. DECISION PANGANIBAN, J.: In Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue and Court of Appeals,i[1] the Court en banc unequivocally held that the tax refund under Republic Act No. 1435 is computed on the basis of the specific tax deemed paid under Sections 1 and 2 thereof, not on the increased rates actually paid under the 1977 NIRC. We adhere to such ruling.
The Case

Petitioner challenges, under Rule 45 of the Rules of Court, the March 30, 1995 Decision of the Court of Appealsii[2] in CA-GR SP No. 34081, which affirmed the December 24, 1991 Decisioniii[3] of the Court of Tax Appeals (CTA), which in turn denied the claim of the petitioner for refund/tax credit of 25 percent of the specific tax it actually paid for the petroleum products purchased for its mining operations.
The Facts

The antecedent facts are summarized by the Court of Appeals as follows:iv[4] (1) Petitioner is a domestic corporation engaged in the business of mining copper from its mineral land and concessions in Toledo City, Cebu. During the periods under review, beginning from September 1974 through July 1983, petitioner purchased from its suppliers, Petrophil Corporation and Mobil Oil Philippines, referred to hereinafter respectively as Petrophil and Mobil Oil, quantities of manufactured oil and other fuels, like diesel and coco-diesel. It actually used these oils and fuels in its mining operations to run various items of machinery and equipment, motors and vehicles; (2) Petrophil and Mobil Oil paid the specific taxes imposed by Sections 153 and 156 (formerly Section 142 and 145) of the 1977 National Internal Revenue Code (NIRC) on all the oils and fuels they manufactured from which was drawn the quantity sold to the petitioner for use in its operations; (3) On June 14, 1956, Republic Act No. 1435, [An Act to Provide Means for Increasing the Highway Discretionary Funds], granted in Section 5 thereof, a refund of 25% of the specific taxes paid on oil products used by miners and forest concessionaires in their operations, to wit: The proceeds of the additional tax on manufactured oils shall accrue to the road and bridges funds of the political subdivision for whose benefit the tax is collected; provided, however, that whenever any oils mentioned above are used by miners or forest concessionaires in their operations, twenty-five percentum (25%) of the specific tax paid thereon shall be refunded by the

Collector of Internal Revenue upon submission of proof of actual use of oils under similar conditions enumerated in subparagraphs one and two of Section one hereof, amending section one hundred forty-two of the Internal Revenue Code; Provided, further, that no new road shall be constructed unless the routes or location thereof shall have been approved by the Commissioner of Public Works and Highways after a determination that such road can be made part of an integral and articulated route in the Philippine Highway System, as required in section twenty-six of the Philippine Highway Act of 1953. (4) Invoking Section 5 of Republic Act 1435, petitioner filed with the Court of Tax Appeals several petitions seeking the refund of 15% of specific taxes paid on oil products which it purchased and used in its mining operations at various times in the following amounts: C.T.A. Case No. 2840 3091 3426 3696 Amount Claimed P 3,928,614.19 10,311,887.34 8,972,165.34 11,220,895.07 Total P34,433,563.94 (5) The aforecited cases were consolidated. On December 24, 1991, the Tax Court rendered a Decision denying the claims for refund on the basis of the Decision of the Supreme Court in Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corporation and Court of Tax Appeals, G.R. Nos. 83583-84, September 30, 1991, wherein it was held that the refund privilege granted by Section 5 of R.A. 1435 was impliedly repealed with the issuance of Presidential Decree No. 711, which took effect on July 1, 1975, abolishing all special and fiduciary funds; (6) Petitioner appealed the Tax Courts Decision to this Court under CA-G.R. Sp. No. 27676, entitled Atlas Consolidated Mining and Development Corp. vs. Commissioner of Internal Revenue and Court of Tax Appeals. On March 31, 1993, the Eleventh Division of this Court rendered a Decision setting aside the Tax Courts Decision and remanding the cases to the Tax Court for proper determination of the total amount of specific taxes paid and the corresponding tax refund or credit to which petitioner is entitled; (7) The decision of this Court was based on a Supreme Court Resolution dated March 25, 1992 and a Resolution dated June 15, 1992 modifying the Decision in Rio Tuba (supra), in that the refund privilege granted under Section 5 of R.A. 1435 was available up to 1985 since the Highway Special Fund was abolished only in 1986. Furthermore, said Resolutions ruled that the amount of specific taxes refundable should be computed on the basis of the rates of specific tax prescribed under Sections 1 and 2 of R.A. 1435 and not on the increased rates mandated under Sections 153 and 156 of the Tax Code: (8) Thus, this Court said: Period Covered Sept. 1974 - June 1976 May 1978 - Feb. 1980 March 1980 - Dec. 1981 Jan. 1982 - July 1983

Thus, the respondent courts decision of December 24, 1991 should be SET ASIDE. The instant tax cases should be remanded to the respondent court for proper evaluation of the petitioners evidence to determine the total amount of specific taxes and the 25% refund or tax credit based on the specific tax rates prescribed in Sections 1 and 2 of RA 1435 in view of the allegation of the petitioner in the instant petition that the respondent court failed to consider certain exhibits or cited wrong exhibits. (underscoring ours) (9) On April 29, 1993, an Entry of Judgment was issued in CA - G.R. SP No. 27676 stating that the Decision therein had already become final and executory; (10) On April 18, 1994, after hearing, the Tax Court issued a Resolution computing the 25% specific tax refund based on the rates of specific tax prescribed in Sections 1 and 2 of RA 1435 and came out with the following amounts refundable: 1) CTA Case No. 2840 - P208,129.57 2) CTA Case No. 3091 - 358,864.83 3) CTA Case No. 3426 - 270,369.02 4) CTA Case No. 3696 - 264,315.46 Total P1,101,678.88. As earlier noted, the Court of Appeals affirmed the CTA Decision. Hence, this petition for review.v[5]
The Ruling of the Court of Appeals

In affirming the Decision of the Court of Tax Appeals, Respondent Court relied on the Supreme Court ruling in CIR v. Rio Tubavi[6] that the refund should be computed on the basis of the rates deemed paid under RA 1435, not on the increased rates actually paid under the NIRC. Respondent Court ruled: Moreover, the latest ruling of the Supreme Court on the matter is its Decision dated May 10, 1994 in Commissioner of Internal Revenue vs. Hon. Court of Appeals and Atlas Consolidated Mining and Development Corporation, G.R. No. 106913. This case also involves petitioners claim for refund of 25% of specific taxes paid on oil products used in its mining operations for the periods July-December 1976, January-December 1977 and January-May 1978, pursuant to Section 5 of R.A. 1435. The Supreme Court, applying Rio Tuba, held: We rule, therefore, that since [Atlas] claims for refund cover specific taxes paid before 1985, it should be granted the refund based on the rates specified by Sections 1 and 2 of R.A. No. 1435 and not on the increased rates under Sections 153 and 156 of the Tax Code of 1977, provided the claims are not yet barred by prescription.

The case at bar is no different from Rio Tuba and the aforecited G.R. No. 106913. Hence, the instant petition is devoid of merit. Notably, therefore, the decision of the Supreme Court in Insular Lumber Co. vs. CTA (G.R. No. L-31057, 29 May 1981) and in Commissioner of Internal Revenue vs. Atlas Consolidated Mining and Development Corporation, et al. (G.R. No. 93631, 12 November 1990) have been superseded by the decision of the Supreme [C]ourt in Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corp. and the Court of Tax Appeals and Atlas Consolidated Mining and Development Corp. (G.R. No. 106913, dated May 10, 1994).vii[7]
The Issues

Petitioner argues that Respondent Court of Appeals committed the following errors: I Upholding the Tax Court decision and failing to apply the Supreme Courts En Banc decision in Insular Lumber Co. vs. CTA, thereby making as basis for its decision the Supreme Courts decision sitting in a division, in the Rio Tuba case. II Failing to apply the increase in rates imposed by succeeding amendatory laws, under which petitioner paid the specific taxes on manufactured oils and other fuels. III Unnecessarily interpreting Section 5 of Republic Act No. 1435, contrary to established legal principles. IV Failing to apply Sections 142 and 145 of the National Internal Revenue Code, as amended, making the decision contrary to existing law and jurisprudence, resulting [in] unfair, erroneous, arbitrary, inequitable and oppressive consequences. In sum, the main issue here is whether petitioner is entitled to the refund of 25 percent of specific taxes it actually paid on various refined and manufactured mineral oils and other oil products taxed under Sections 153 and 156 of the 1977 National Internal Revenue Code (Sections 142 and 145, respectively, of the 1939 NIRC).
The Courts Ruling

The petition is devoid of merit.

Issue: Computation of Tax Refund

Petitioner is a duly-licensed domestic corporation engaged in the business of mining copper from its concessions. Because the petroleum products it had purchased were used in its mining operations, it is entitled to claim a tax refund pursuant to RA 1435. The petroleum products were originally subject to specific tax under Sections 142 and 145 of the 1939 NIRC, which were amended by Sections 1 and 2 of RA 1435, respectively. At the time of the purchase of the petroleum products, Sections 142 and 145 were respectively renumbered Sections 153 and 156 of the 1977 NIRC, which imposed the higher rate of taxes petitioner paid. It is undisputed that the refund privilege existed at the date the entitlement was being availed of. Commissioner of Internal Revenue v. Rio Tuba Nickel Mining Corporationviii[8] held that the Highway Special Fund retained its status as a special fund up to 1985 or for 10 years after the effectivity of Presidential Decree 711, which mandated that all funds that had accrued from various special funds would be channeled to the general fund. PD 711, which took effect on July 1, 1975, was invoked in previous cases as having impliedly repealed RA 1435, thereby abolishing the refund privilege accorded to miners and loggers. Rio Tuba, however, ruled that the privilege existed until 1985. The only question in the present case, therefore, is the computation of the tax refund. As stated earlier, petitioner contends that the 25 percent refund should be based on the increased rates of specific tax it had actually paid under the 1977 NIRC, not on the prescribed rates under RA 1435. The issue presented before us is already settled. In Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue and Court of Appeals,ix[9] the Court en banc unanimously reiterated Rio Tuba and categorically held that the tax refund must be computed on the basis of the specific tax deemed paid under Sections 1 and 2 of RA 1435, not on the increased rates actually paid by the petitioners pursuant to Sections 153 and 156 of the NIRC. The Court held: A tax cannot be imposed unless it is supported by the clear and express language of a statute[;] on the other hand, once the tax is unquestionably imposed, [a] claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Since the partial refund authorized under Section 5, RA 1435, is in the nature of a tax exemption, it must be construed strictissimi juris against the grantee. Hence, petitioners claim of refund on the basis of the specific taxes it actually paid must expressly be granted in a statute stated in a language too clear to be mistaken. We have carefully scrutinized RA 1435 and the subsequent pertinent statutes and found no expression of a legislative will authorizing a refund based on the higher rates claimed by petitioner. The mere fact that the privilege of refund was included in Section 5, and not in Section 1, is insufficient to support petitioners claim. When the law itself does not explicitly provide that a refund under RA 1435 may be based on higher rates which were nonexistent at the time of its enactment, this Court cannot presume otherwise. A legislative lacuna cannot be filled by judicial fiat.

The issue is not really novel. In Commissioner of Internal Revenue vs. Court of Appeals and Atlas Consolidated Mining and Development Corporation (the second Atlas case), the CIR contended that the refund should be based on Sections 1 and 2 of RA 1435, not Sections 153 and 156 of the NIRC of 1977. In categorically ruling that Private Respondent Atlas Consolidated Mining and Development Corporation was entitled to a refund based on Sections 1 and 2 of RA 1435, the Court, through Mr. Justice Hilario G. Davide, Jr., reiterated our pronouncement in Commissioner of Internal Revenue vs. Rio Tuba Nickel and Mining Corporation: Our Resolution of 25 March 1992 modifying our 30 September 1991 Decision in the Rio Tuba case sets forth the controlling doctrine. In that Resolution, we stated: Since the private respondents claim for refund covers specific taxes paid from 1980 to July 1983 then we find that the private respondent is entitled to a refund. It should be made clear, however, that Rio Tuba is not entitled to the whole amount it claims as refund. The specific taxes on oils which Rio Tuba paid for the aforesaid period were no longer based on the rates specified by Sections 1 and 2 of R.A. No. 1435 but on the increased rates mandated under Sections 153 and 156 of the National Internal Revenue Code of 1977. We note however, that the latter law does not specifically provide for a refund to these mining and lumber companies of specific taxes paid on manufactured and diesel fuel oils. In Insular Lumber Co. v. Court of Tax Appeals, (104 SCRA 710 [1981]), the Court held that the authorized partial refund under Section 5 of R.A. No. 1435 partakes of the nature of a tax exemption and therefore cannot be allowed unless granted in the most explicit and categorical language. Since the grant of refund privileges must be strictly construed against the taxpayer, the basis for the refund shall be the amounts deemed paid under Sections 1 and 2 of R.A. No. 1435. ACCORDINGLY, the decision in G.R. Nos. 83583-84 is hereby MODIFIED. The private respondents CLAIM for REFUND is GRANTED, computed on the basis of the amounts deemed paid under Sections 1 and 2 of R.A. NO. 1435, without interest. We rule, therefore, that since Atlass claims for refund cover specific taxes paid before 1985, it should be granted the refund based on the rates specified by Sections 1 and 2 of R.A. No. 1435 and not on the increased rates under Sections 153 and 156 of the Tax Code of 1977, provided the claims are not yet barred by prescription. (Underscoring supplied.)x[10] Petitioner also calls attention to the apparent conflict between Insular Lumber v. Court of Appealsxi[11] and Commissioner of Internal Revenue v. Atlas Consolidated Mining and Development Corporationxii[12] (First Atlas Case), on the one hand, and Rio Tuba and the Second Atlas Case, on the other. This issue has been laid to rest by the Court in Davao Gulf: xxx. Neither Insular Lumber Co. nor the first Atlas case ruled on the issue of whether the refund privilege under Section 5 should be computed based on the specific tax deemed paid under Sections 1 and 2 of RA 1435, regardless of what was actually paid under the increased rates. Rio Tuba and the second Atlas case did.

Insular Lumber Co. decided a claim for refund on specific tax paid on petroleum products purchased in the year 1963, when the increased rates under the NIRC of 1977 were not yet in effect. Thus, the issue now before us did not exist at the time, since the applicable rates were still those prescribed under Sections 1 and 2 of RA 1435. On the other hand, the issue raised in the first Atlas case was whether the claimant was entitled to the refund under Section 5, notwithstanding its failure to pay any additional tax under a municipal or city ordinance. Although Atlas purchased petroleum products in the years 1976 to 1978 when the rates had already been changed, the Court did not decide or make any pronouncement on the issue in that case. Clearly, it is impossible for these two decisions to clash with our pronouncement in Rio Tuba and second Atlas case, in which we ruled that the refund granted be computed on the basis of the amounts deemed paid under Sections 1 and 2 of RA 1435. In this light, we find no basis for petitioners invocation of the constitutional proscription that no doctrine or principle of law laid down by the Court in a decision rendered en banc or in a division may be modified or reversed except by the Court sitting en banc. Likewise, Davao Gulf has already debunked petitioners argument that not applying Sections 142 and 145 of the NIRC rendered the CTA Decision unfair and arbitrary. The Court ruled: Finally, petitioner asserts that equity and justice demand that the computation of the tax refunds be based on actual amounts paid under Sections 153 and 156 of the NIRC. We disagree. According to an eminent authority on taxation, there is no tax exemption solely on the ground of equity. WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of Appeals is AFFIRMED. SO ORDERED. Davide Jr. (Chairman), Bellossillo, Vitug and Quisumbing, JJ., concur.

i[1] GR No. 117359, July 23, 1998. ii[2] Penned by J. Jorge S. Imperial, ponente and chairman; with the concurrence of JJ. Corona Ibay-Somera and Conrado M. Vazquez, Jr. iii[3] Penned by Associate Judge Ernesto D. Acosta, with the concurrence of Associate Judge Constante C. Roaquin.

iv[4] CA Decision, pp. 1-4; rollo, pp. 30-33. v[5] The case was deemed submitted for resolution on July 4, 1997, upon receipt by the Court of petitioners Memorandum. vi[6] 207 SCRA 549, March 25, 1992. vii[7] CA Decision, p. 9; rollo, p. 38. viii[8] Supra. ix[9] GR No. 117359, July 23, 1998, per Panganiban, J. x[10] Supra, pp. 15-17. xi[11] 104 SCRA 710, May 29, 1981. xii[12] GR No. 93631, November 12, 1990.

G.R. No. 170574

January 30, 2009

PHILIPPINE BANKING CORPORATION (NOW: GLOBAL BUSINESS BANK, INC.), Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. DECISION CARPIO, J.: The Case The Philippine Banking Corporation, now, Global Business Bank, Inc., (petitioner) filed this Petition for Review1 to reverse the Court of Tax Appeals Decision2 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). The Facts Petitioner is a domestic corporation duly licensed as a banking institution.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.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 1997.5 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 c. Both can have an Automatic Transfer Agreement (ATA) with the depositors current or checking account.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.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.8 Section 180 of the 1977 NIRC, as amended,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 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. (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.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 holding period. 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.11 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:12 Time Deposits 1. The holding period is fixed beforehand. SSDA 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. 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.

2. There is pre-termination because there is no partial withdrawal of a certificate. Pretermination results in the surrender and cancellation of the certificate of deposit.

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.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.14 Petitioner alleges that prior to the passage of Republic Act No. 924315 (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 interest and having a specific maturity date."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.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.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.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.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 on the definition of a certificate of deposit in Far East Bank and Trust Company v. Querimit,21 a certificate of deposit may or may not be negotiable, since it may be payable only to the depositor.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 petitioner is 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.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.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,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 depositor, or some other person or his order, whereby the relation of debtor and creditor between the bank and the depositor is created."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.27 The CTA emphasized that Section 180 of the 1977 NIRC imposes DST on documents, whether the documents are negotiable or non-negotiable.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.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)30 (Emphasis in the original) 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 before promissory 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.31 The CTA added that the applicable provision is Section 180 of the 1977 NIRC and not Section 217 of the old NIRC.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 nonnegotiable. Therefore, the DST is imposed on all certificates of deposit drawing interest without any qualification.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.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 are essentially the 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.35 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.36 On 14 December 2005, petitioner appealed to this Court the CTA decision.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 2004.38 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: 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. lavvphil.zw+(Boldfacing and underscoring supplied) In Far East Bank and Trust Company v. Querimit,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."40 The deposit operations of a bank as listed in the Bangko Sentral ng Pilipinas Manual of Regulations for Banks41 consist of the following: 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.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.43 3. Negotiable Order of Withdrawal Accounts are interest-bearing savings deposit which are withdrawable by means of Negotiable Orders of Withdrawal.44 4. Time Deposits are interest-bearing deposits with specific maturity dates and evidenced by certificates issued by the bank.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 Interest rate Period Evidenced by: Pre-termination Holding Period Withdrawal

Time Deposit

SSDA Higher interest rate Fixed Term Passbook With penalty Yes Allowed provided the minimum amount to earn the higher interest rate is maintained, otherwise, the regular savings interest rate will apply.

Regular savings interest Higher interest rate None Passbook None None Allowed Fixed Term Certificate of Time Deposit With penalty Yes Withdrawal amounts to pre-termination

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. 16-2003,46 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 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,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."48 Petitioner also argues that prior to the passage of RA 9243, there was no law subjecting SSDA to DST. In International Exchange Bank v. Commissioner of Internal Revenue,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 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... THE CHAIRMAN. Uh-huh. MR. ANDAYA. ...which is time, in effect, regardless of what form it takes should be subject to DST. 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... THE CHAIRMAN. Uh-huh. 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.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.51 Hence, in imposing the DST, the Court considers not only the document but also the nature and character of the transaction. 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.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.
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,54 we held 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. 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.lavvph!l.net 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 of and, the negotiable character of a certificate of deposit is immaterial in determining the imposition of DST.55 In Banco de Oro Universal Bank v. Commissioner of Internal Revenue,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 the 1997 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 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. xxx 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. xxx 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 Presidential Commission 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; 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. (Emphasis supplied) The Department of Finance (DOF) issued DOF Department Order No. 29-07 (DO 29-07).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. xxx 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).58 The pertinent provisions are: 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) The BIR also issued Revenue Memorandum Circular No. 69-2007 (RMC 69-2007).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,60 paid the amnesty tax and fully complied with all the requirements61 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. 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.62

The DST is one of the taxes covered by the Tax Amnesty Program under RA 9480.63 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,64 has duly complied with the requirements enumerated in RA 9480, as implemented by DO 29-07 and RMC 19-2008.65 Considering that the completion of these requirements shall be deemed full compliance with the tax amnesty program,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.67 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 RENATO C. CORONA Associate Justice CONCHITA CARPIO MORALES 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 assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO Associate Justice Acting Chairperson* CERTIFICATION 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. LEONARDO A. QUISUMBING Acting Chief Justice

Footnotes
*

Per Special Order No. 552-A. Designated member per Special Order No. 553. Designated member per Special Order No. 553.

**

***

Under Rule 45 of the Rules of Court.

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.
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 and Trust Company.
4

Rollo, p. 5. Id. Id. at 7. Id. at 8. Id. at 14.

The 1977 NIRC was amended by Republic Act No. 7660. An Act Rationalizing Further the 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).
10

Rollo, pp. 11-12. Id. at 13. Id. at 15-16. Id. at 16. Id. at 18.

11

12

13

14

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.
16

Rollo, pp. 22-23. Id. at 24. Id. at 429. Id. at 429-430. Id. at 430-431. 424 Phil. 721 (2002). Rollo, p. 433. Id. at 36-37. Id. at 42-43. Supra. Rollo, pp. 43-44. Id. at 44. Id.

17

18

19

20

21

22

23

24

25

26

27

28

29

Id. at 44-45. Id. at 45. Id. at 45-46. Id. at 46. Id. at 46-47. Id. at 47. Id. at 48-49. Id. at 49. Id. at 3. Id. at 7. Supra note 21 at 730. Websters Third New International Dictionary, Unabridged. Issued 1993 and amended in 2005. Part II- Deposit and Borrowing Operations.

30

31

32

33

34

35

36

37

38

39

40

41

42

BSP Manual of Accounts for Expanded Commercial Banks and Commercial Banks 21-02-02, p. 27.
43

Id., 2-1-02-04, at 28. Id., 2-1-02-06, at 28. Id., 2-1-02-08, at 29.

44

45

46

BIR Revenue Memorandum Circular No. 16-2003, Defining the Term "Certificate of Deposit" for the Purpose of Clarifying its Taxability Under Section 180 of the National Internal Revenue Code (Tax Code) of 1997, 18 February 2003.
47

G.R. No. 171266, 4 April 2007, 520 SCRA 688. Id. at 697. Id. at 701-703.

48

49

50

Sec. 173, 1997 NIRC. See De Leon and De Leon, The National Internal Revenue Code Annotated, 8th ed. Volume 2 (2003). See also Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of Internal Revenue, G.R. No. 166786, 3 May 2006, 489 SCRA 147, 152153.
51

Philippine Home Assurance Corporation v. Court of Appeals, 361 Phil. 368, 372-373 (1999).
52

Far East Bank and Trust Company v. Querimit, supra note 21. CTA En Banc rollo, pp. 61-62. Supra note 47 at 697. Id. at 697-698. G.R. No. 173602, 15 January 2007. Rules and Regulations to Implement Republic Act No. 9480 (15 August 2007).

53

54

55

56

57

58

Circularizing the Full Text of "A Basic Guide on the Tax Amnesty Act of 2007" for Taxpayers Who Wish to Avail of the Tax Amnesty Pursuant To Republic Act No. 9480 (Tax Amnesty Act of 2007). (22 February 2008).
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).
60

Rollo, pp. 510-512. Metrobank paid a total of P88,549,049.10 as Amnesty Tax. 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)

61

62

Commissioner of Internal Revenue v. Marubeni Corp., 423 Phil. 862, 874 (2001). RMC 69-2007. Q-1, A-1.

63

64

On the time of the availment of the tax amnesty program, this case is not subject of a final and executory judgment.
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 the Philippines that Metrobank has paid the Amnesty Tax).
66

Section 6, DO 20-07. Section 6, RA 9480. January 30, 2009

67

G.R. No. 170574

PHILIPPINE BANKING CORPORATION (NOW: GLOBAL BUSINESS BANK, INC.), Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. DECISION CARPIO, J.: The Case The Philippine Banking Corporation, now, Global Business Bank, Inc., (petitioner) filed this Petition for Review1 to reverse the Court of Tax Appeals Decision2 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). The Facts Petitioner is a domestic corporation duly licensed as a banking institution.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.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 1997.5

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 c. Both can have an Automatic Transfer Agreement (ATA) with the depositors current or checking account.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.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.8 Section 180 of the 1977 NIRC, as amended,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 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. (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.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 holding period. 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.11 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:12 Time Deposits 1. The holding period is fixed beforehand. SSDA 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. 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.

2. There is pre-termination because there is no partial withdrawal of a certificate. Pretermination results in the surrender and cancellation of the certificate of deposit.

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.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.14

Petitioner alleges that prior to the passage of Republic Act No. 924315 (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 interest and having a specific maturity date."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.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.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.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.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 on the definition of a certificate of deposit in Far East Bank and Trust Company v. Querimit,21 a certificate of deposit may or may not be negotiable, since it may be payable only to the depositor.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 petitioner is 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.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.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,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 depositor, or some other person or his order, whereby the relation of debtor and creditor between the bank and the depositor is created."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.27 The CTA emphasized that Section 180 of the 1977 NIRC imposes DST on documents, whether the documents are negotiable or non-negotiable.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.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)30 (Emphasis in the original) 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 before promissory 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.31 The CTA added that the applicable provision is Section 180 of the 1977 NIRC and not Section 217 of the old NIRC.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 nonnegotiable. Therefore, the DST is imposed on all certificates of deposit drawing interest without any qualification.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.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 are essentially the 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.35 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.36 On 14 December 2005, petitioner appealed to this Court the CTA decision.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 2004.38 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: 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. lavvphil.zw+(Boldfacing and underscoring supplied) In Far East Bank and Trust Company v. Querimit,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."40 The deposit operations of a bank as listed in the Bangko Sentral ng Pilipinas Manual of Regulations for Banks41 consist of the following: 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.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.43 3. Negotiable Order of Withdrawal Accounts are interest-bearing savings deposit which are withdrawable by means of Negotiable Orders of Withdrawal.44 4. Time Deposits are interest-bearing deposits with specific maturity dates and evidenced by certificates issued by the bank.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 Interest rate Period Evidenced by: Time Deposit SSDA Higher interest rate Fixed Term Passbook

Regular savings interest Higher interest rate None Passbook Fixed Term Certificate of Time Deposit

Pre-termination Holding Period Withdrawal

None None Allowed

With penalty Yes Withdrawal amounts to pre-termination

With penalty Yes 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. 16-2003,46 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 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,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."48 Petitioner also argues that prior to the passage of RA 9243, there was no law subjecting SSDA to DST. In International Exchange Bank v. Commissioner of Internal Revenue,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 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... THE CHAIRMAN. Uh-huh.

MR. ANDAYA. ...which is time, in effect, regardless of what form it takes should be subject to DST. 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... THE CHAIRMAN. Uh-huh. 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.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.51 Hence, in imposing the DST, the Court considers not only the document but also the nature and character of the transaction. 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.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.
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,54 we held 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. 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.lavvph!l.net 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 of and, the negotiable character of a certificate of deposit is immaterial in determining the imposition of DST.55 In Banco de Oro Universal Bank v. Commissioner of Internal Revenue,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 the 1997 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 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. xxx 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. xxx 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 Presidential Commission 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; 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. (Emphasis supplied) The Department of Finance (DOF) issued DOF Department Order No. 29-07 (DO 29-07).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. xxx 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).58 The pertinent provisions are: 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) The BIR also issued Revenue Memorandum Circular No. 69-2007 (RMC 69-2007).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,60 paid the amnesty tax and fully complied with all the requirements61 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. 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.62 The DST is one of the taxes covered by the Tax Amnesty Program under RA 9480.63 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,64 has duly complied with the requirements enumerated in RA 9480, as implemented by DO 29-07 and RMC 19-2008.65 Considering that the completion of these requirements shall be deemed full compliance with the tax amnesty program,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.67 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 RENATO C. CORONA Associate Justice CONCHITA CARPIO MORALES 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 assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Acting Chairperson* CERTIFICATION

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. LEONARDO A. QUISUMBING Acting Chief Justice

Footnotes
*

Per Special Order No. 552-A. Designated member per Special Order No. 553. Designated member per Special Order No. 553.

**

***

Under Rule 45 of the Rules of Court.

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.
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 and Trust Company.
4

Rollo, p. 5. Id. Id. at 7. Id. at 8. Id. at 14.

The 1977 NIRC was amended by Republic Act No. 7660. An Act Rationalizing Further the 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).
10

Rollo, pp. 11-12.

11

Id. at 13. Id. at 15-16. Id. at 16. Id. at 18.

12

13

14

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.
16

Rollo, pp. 22-23. Id. at 24. Id. at 429. Id. at 429-430. Id. at 430-431. 424 Phil. 721 (2002). Rollo, p. 433. Id. at 36-37. Id. at 42-43. Supra. Rollo, pp. 43-44. Id. at 44. Id. Id. at 44-45. Id. at 45. Id. at 45-46. Id. at 46.

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

Id. at 46-47. Id. at 47. Id. at 48-49. Id. at 49. Id. at 3. Id. at 7. Supra note 21 at 730. Websters Third New International Dictionary, Unabridged. Issued 1993 and amended in 2005. Part II- Deposit and Borrowing Operations.

34

35

36

37

38

39

40

41

42

BSP Manual of Accounts for Expanded Commercial Banks and Commercial Banks 21-02-02, p. 27.
43

Id., 2-1-02-04, at 28. Id., 2-1-02-06, at 28. Id., 2-1-02-08, at 29.

44

45

46

BIR Revenue Memorandum Circular No. 16-2003, Defining the Term "Certificate of Deposit" for the Purpose of Clarifying its Taxability Under Section 180 of the National Internal Revenue Code (Tax Code) of 1997, 18 February 2003.
47

G.R. No. 171266, 4 April 2007, 520 SCRA 688. Id. at 697. Id. at 701-703.

48

49

50

Sec. 173, 1997 NIRC. See De Leon and De Leon, The National Internal Revenue Code Annotated, 8th ed. Volume 2 (2003). See also Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of Internal Revenue, G.R. No. 166786, 3 May 2006, 489 SCRA 147, 152153.
51

Philippine Home Assurance Corporation v. Court of Appeals, 361 Phil. 368, 372-373 (1999).

52

Far East Bank and Trust Company v. Querimit, supra note 21. CTA En Banc rollo, pp. 61-62. Supra note 47 at 697. Id. at 697-698. G.R. No. 173602, 15 January 2007. Rules and Regulations to Implement Republic Act No. 9480 (15 August 2007).

53

54

55

56

57

58

Circularizing the Full Text of "A Basic Guide on the Tax Amnesty Act of 2007" for Taxpayers Who Wish to Avail of the Tax Amnesty Pursuant To Republic Act No. 9480 (Tax Amnesty Act of 2007). (22 February 2008).
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).
60

Rollo, pp. 510-512. Metrobank paid a total of P88,549,049.10 as Amnesty Tax. 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)

61

62

Commissioner of Internal Revenue v. Marubeni Corp., 423 Phil. 862, 874 (2001). RMC 69-2007. Q-1, A-1.

63

64

On the time of the availment of the tax amnesty program, this case is not subject of a final and executory judgment.
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 the Philippines that Metrobank has paid the Amnesty Tax).
66

Section 6, DO 20-07.

67

Section 6, RA 9480. January 30, 2009

G.R. No. 170574

PHILIPPINE BANKING CORPORATION (NOW: GLOBAL BUSINESS BANK, INC.), Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. DECISION CARPIO, J.: The Case The Philippine Banking Corporation, now, Global Business Bank, Inc., (petitioner) filed this Petition for Review1 to reverse the Court of Tax Appeals Decision2 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). The Facts Petitioner is a domestic corporation duly licensed as a banking institution.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.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 1997.5 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

c. Both can have an Automatic Transfer Agreement (ATA) with the depositors current or checking account.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.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.8 Section 180 of the 1977 NIRC, as amended,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 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. (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.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 holding period. 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.11 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:12 Time Deposits 1. The holding period is fixed beforehand. SSDA 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. 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.

2. There is pre-termination because there is no partial withdrawal of a certificate. Pretermination results in the surrender and cancellation of the certificate of deposit.

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.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.14 Petitioner alleges that prior to the passage of Republic Act No. 924315 (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 interest and having a specific maturity date."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.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.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.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.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 on the definition of a certificate of deposit in Far East Bank and Trust Company v. Querimit,21 a certificate of deposit may or may not be negotiable, since it may be payable only to the depositor.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 petitioner is 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.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.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,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 depositor, or some other person or his order, whereby the relation of debtor and creditor between the bank and the depositor is created."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.27 The CTA emphasized that Section 180 of the 1977 NIRC imposes DST on documents, whether the documents are negotiable or non-negotiable.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.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)30 (Emphasis in the original) 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 before promissory 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.31 The CTA added that the applicable provision is Section 180 of the 1977 NIRC and not Section 217 of the old NIRC.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 nonnegotiable. Therefore, the DST is imposed on all certificates of deposit drawing interest without any qualification.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.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 are essentially the 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.35 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.36 On 14 December 2005, petitioner appealed to this Court the CTA decision.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 2004.38 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: 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. lavvphil.zw+(Boldfacing and underscoring supplied)

In Far East Bank and Trust Company v. Querimit,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."40 The deposit operations of a bank as listed in the Bangko Sentral ng Pilipinas Manual of Regulations for Banks41 consist of the following: 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.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.43 3. Negotiable Order of Withdrawal Accounts are interest-bearing savings deposit which are withdrawable by means of Negotiable Orders of Withdrawal.44 4. Time Deposits are interest-bearing deposits with specific maturity dates and evidenced by certificates issued by the bank.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 Interest rate Period Evidenced by: Pre-termination Holding Period Time Deposit SSDA Higher interest rate Fixed Term Passbook With penalty Yes

Regular savings interest Higher interest rate None Passbook None None Fixed Term Certificate of Time Deposit With penalty 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. 16-2003,46 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 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,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."48 Petitioner also argues that prior to the passage of RA 9243, there was no law subjecting SSDA to DST. In International Exchange Bank v. Commissioner of Internal Revenue,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 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... THE CHAIRMAN. Uh-huh. MR. ANDAYA. ...which is time, in effect, regardless of what form it takes should be subject to DST. 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... THE CHAIRMAN. Uh-huh. 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.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.51 Hence, in imposing the DST, the Court considers not only the document but also the nature and character of the transaction. 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.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.
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,54 we held 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. 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.lavvph!l.net 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 of and, the negotiable character of a certificate of deposit is immaterial in determining the imposition of DST.55 In Banco de Oro Universal Bank v. Commissioner of Internal Revenue,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 the 1997 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 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. xxx 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. xxx 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 Presidential Commission 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; 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. (Emphasis supplied) The Department of Finance (DOF) issued DOF Department Order No. 29-07 (DO 29-07).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. xxx

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).58 The pertinent provisions are: 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) The BIR also issued Revenue Memorandum Circular No. 69-2007 (RMC 69-2007).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,60 paid the amnesty tax and fully complied with all the requirements61 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. 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.62 The DST is one of the taxes covered by the Tax Amnesty Program under RA 9480.63 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,64 has duly complied with the requirements enumerated in RA 9480, as implemented by DO 29-07 and RMC 19-2008.65 Considering that the completion of these requirements shall be deemed full compliance with the tax amnesty program,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.67

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 RENATO C. CORONA Associate Justice CONCHITA CARPIO MORALES 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 assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Acting Chairperson* CERTIFICATION 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. LEONARDO A. QUISUMBING Acting Chief Justice

Footnotes
*

Per Special Order No. 552-A. Designated member per Special Order No. 553. Designated member per Special Order No. 553.

**

***

Under Rule 45 of the Rules of Court.

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.
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 and Trust Company.
4

Rollo, p. 5. Id. Id. at 7. Id. at 8. Id. at 14.

The 1977 NIRC was amended by Republic Act No. 7660. An Act Rationalizing Further the 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).
10

Rollo, pp. 11-12. Id. at 13. Id. at 15-16. Id. at 16. Id. at 18.

11

12

13

14

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.
16

Rollo, pp. 22-23. Id. at 24. Id. at 429. Id. at 429-430. Id. at 430-431. 424 Phil. 721 (2002). Rollo, p. 433. Id. at 36-37. Id. at 42-43. Supra. Rollo, pp. 43-44. Id. at 44. Id. Id. at 44-45. Id. at 45. Id. at 45-46. Id. at 46. Id. at 46-47. Id. at 47. Id. at 48-49. Id. at 49.

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

Id. at 3. Id. at 7. Supra note 21 at 730. Websters Third New International Dictionary, Unabridged. Issued 1993 and amended in 2005. Part II- Deposit and Borrowing Operations.

38

39

40

41

42

BSP Manual of Accounts for Expanded Commercial Banks and Commercial Banks 21-02-02, p. 27.
43

Id., 2-1-02-04, at 28. Id., 2-1-02-06, at 28. Id., 2-1-02-08, at 29.

44

45

46

BIR Revenue Memorandum Circular No. 16-2003, Defining the Term "Certificate of Deposit" for the Purpose of Clarifying its Taxability Under Section 180 of the National Internal Revenue Code (Tax Code) of 1997, 18 February 2003.
47

G.R. No. 171266, 4 April 2007, 520 SCRA 688. Id. at 697. Id. at 701-703.

48

49

50

Sec. 173, 1997 NIRC. See De Leon and De Leon, The National Internal Revenue Code Annotated, 8th ed. Volume 2 (2003). See also Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of Internal Revenue, G.R. No. 166786, 3 May 2006, 489 SCRA 147, 152153.
51

Philippine Home Assurance Corporation v. Court of Appeals, 361 Phil. 368, 372-373 (1999).
52

Far East Bank and Trust Company v. Querimit, supra note 21. CTA En Banc rollo, pp. 61-62. Supra note 47 at 697. Id. at 697-698.

53

54

55

56

G.R. No. 173602, 15 January 2007. Rules and Regulations to Implement Republic Act No. 9480 (15 August 2007).

57

58

Circularizing the Full Text of "A Basic Guide on the Tax Amnesty Act of 2007" for Taxpayers Who Wish to Avail of the Tax Amnesty Pursuant To Republic Act No. 9480 (Tax Amnesty Act of 2007). (22 February 2008).
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).
60

Rollo, pp. 510-512. Metrobank paid a total of P88,549,049.10 as Amnesty Tax. 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)

61

62

Commissioner of Internal Revenue v. Marubeni Corp., 423 Phil. 862, 874 (2001). RMC 69-2007. Q-1, A-1.

63

64

On the time of the availment of the tax amnesty program, this case is not subject of a final and executory judgment.
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 the Philippines that Metrobank has paid the Amnesty Tax).
66

Section 6, DO 20-07. Section 6, RA 9480. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

67

G.R. No. 165109

December 14, 2009

MANUEL N. MAMBA, RAYMUND P. GUZMAN and LEONIDES N. FAUSTO, Petitioners, vs. EDGAR R. LARA, JENERWIN C. BACUYAG, WILSON O. PUYAWAN, ALDEGUNDO Q. CAYOSA, JR., NORMAN A. AGATEP, ESTRELLA P. FERNANDEZ, VILMER V. VILORIA, BAYLON A. CALAGUI, CECILIA MAEVE T. LAYOS, PREFERRED VENTURES CORP., ASSET BUILDERS CORP., RIZAL COMMERCIAL BANKING CORPORATION, MALAYAN INSURANCE CO., and LAND BANK OF THE PHILIPPINES, Respondents. DECISION DEL CASTILLO, J.: The decision to entertain a taxpayers suit is discretionary upon the Court. It can choose to strictly apply the rule or take a liberal stance depending on the controversy involved. Advocates for a strict application of the rule believe that leniency would open floodgates to numerous suits, which could hamper the government from performing its job. Such possibility, however, is not only remote but also negligible compared to what is at stake - "the lifeblood of the State". For this reason, when the issue hinges on the illegal disbursement of public funds, a liberal approach should be preferred as it is more in keeping with truth and justice. This Petition for Review on Certiorari with prayer for a Temporary Restraining Order/Writ of Preliminary Injunction, under Rule 45 of the Rules of Court, seeks to set aside the April 27, 2004 Order 1 of the Regional Trial Court (RTC), Branch 5, Tuguegarao City, dismissing the Petition for Annulment of Contracts and Injunction with prayer for the issuance of a Temporary Restraining Order/Writ of Preliminary Injunction, 2 docketed as Civil Case No. 6283. Likewise assailed in this Petition is the August 20, 2004 Resolution 3 of RTC, Branch 1, Tuguegarao City denying the Motion for Reconsideration of the dismissal. Factual Antecedents On November 5, 2001, the Sangguniang Panlalawigan of Cagayan passed Resolution No. 2001272 4 authorizing Governor Edgar R. Lara (Gov. Lara) to engage the services of and appoint Preferred Ventures Corporation as financial advisor or consultant for the issuance and flotation of bonds to fund the priority projects of the governor without cost and commitment. On November 19, 2001, the Sangguniang Panlalawigan, through Resolution No. 290-2001, 5 ratified the Memorandum of Agreement (MOA) 6 entered into by Gov. Lara and Preferred Ventures Corporation. The MOA provided that the provincial government of Cagayan shall pay Preferred Ventures Corporation a one-time fee of 3% of the amount of bonds floated.

On February 15, 2002, the Sangguniang Panlalawigan approved Resolution No. 2002-061-A 7 authorizing Gov. Lara to negotiate, sign and execute contracts or agreements pertinent to the flotation of the bonds of the provincial government in an amount not to exceed P500 million for the construction and improvement of priority projects to be approved by the Sangguniang Panlalawigan. On May 20, 2002, the majority of the members of the Sangguniang Panlalawigan of Cagayan approved Ordinance No. 19-2002, 8 authorizing the bond flotation of the provincial government in an amount not to exceed P500 million to fund the construction and development of the new Cagayan Town Center. The Resolution likewise granted authority to Gov. Lara to negotiate, sign and execute contracts and agreements necessary and related to the bond flotation subject to the approval and ratification by the Sangguniang Panlalawigan. On October 20, 2003, the Sangguniang Panlalawigan approved Resolution No. 350-2003 9 ratifying the Cagayan Provincial Bond Agreements entered into by the provincial government, represented by Gov. Lara, to wit: a. Trust Indenture with the Rizal Commercial Banking Corporation (RCBC) Trust and Investment Division and Malayan Insurance Company, Inc. (MICO). b. Deed of Assignment by way of security with the RCBC and the Land Bank of the Philippines (LBP). c. Transfer and Paying Agency Agreement with the RCBC Trust and Investment Division. d. Guarantee Agreement with the RCBC Trust and Investment Division and MICO. e. Underwriting Agreement with RCBC Capital Corporation. On even date, the Sangguniang Panlalawigan also approved Resolution No. 351-2003, 10 ratifying the Agreement for the Planning, Design, Construction, and Site Development of the New Cagayan Town Center 11 entered into by the provincial government, represented by Gov. Lara and Asset Builders Corporation, represented by its President, Mr. Rogelio P. Centeno. On May 20, 2003, Gov. Lara issued the Notice of Award to Asset Builders Corporation, giving to the latter the planning, design, construction and site development of the town center project for a fee of P213,795,732.39. 12 Proceedings before the Regional Trial Court On December 12, 2003, petitioners Manuel N. Mamba, Raymund P. Guzman and Leonides N. Fausto filed a Petition for Annulment of Contracts and Injunction with prayer for a Temporary Restraining Order/Writ of Preliminary Injunction 13 against Edgar R. Lara, Jenerwin C. Bacuyag, Wilson O. Puyawan, Aldegundo Q. Cayosa, Jr., Norman A. Agatep, Estrella P. Fernandez,

Vilmer V. Viloria, Baylon A. Calagui, Cecilia Maeve T. Layos, Preferred Ventures Corporation, Asset Builders Corporation, RCBC, MICO and LBP.1avvphi1 At the time of the filing of the petition, Manuel N. Mamba was the Representative of the 3rd Congressional District of the province of Cagayan 14 while Raymund P. Guzman and Leonides N. Fausto were members of the Sangguniang Panlalawigan of Cagayan. 15 Edgar R. Lara was sued in his capacity as governor of Cagayan, 16 while Jenerwin C. Bacuyag, Wilson O. Puyawan, Aldegundo Q. Cayosa, Jr., Norman A. Agatep, Estrella P. Fernandez, Vilmer V. Viloria, Baylon A. Calagui and Cecilia Maeve T. Layos were sued as members of the Sangguniang Panlalawigan of Cagayan. 17 Respondents Preferred Ventures Corporation, Asset Builders Corporation, RCBC, MICO and LBP were all impleaded as indispensable or necessary parties. Respondent Preferred Ventures Corporation is the financial advisor of the province of Cagayan regarding the bond flotation undertaken by the province. 18 Respondent Asset Builders Corporation was awarded the right to plan, design, construct and develop the proposed town center. 19 Respondent RCBC, through its Trust and Investment Division, is the trustee of the seven-year bond flotation undertaken by the province for the construction of the town center, 20 while respondent MICO is the guarantor. 21 Lastly, respondent LBP is the official depositary bank of the province. 22 In response to the petition, public respondents filed an Answer with Motion to Dismiss, 23 raising the following defenses: a) petitioners are not the proper parties or they lack locus standi in court; b) the action is barred by the rule on state immunity from suit and c) the issues raised are not justiciable questions but purely political. For its part, respondent Preferred Ventures Corporation filed a Motion to Dismiss 24 on the following grounds: a) petitioners have no cause of action for injunction; b) failure to join an indispensable party; c) lack of personality to sue and d) lack of locus standi. Respondent MICO likewise filed a Motion to Dismiss 25 raising the grounds of lack of cause of action and legal standing. Respondent RCBC similarly argued in its Motion to Dismiss 26 that: a) petitioners are not the real parties-in-interest or have no legal standing to institute the petition; b) petitioners have no cause of action as the flotation of the bonds are within the right and power of both respondent RCBC and the province of Cagayan and c) the viability of the construction of a town center is not a justiciable question but a political question. Respondent Asset Builders Corporation, on the other hand, filed an Answer 27 interposing special and affirmative defenses of lack of legal standing and cause of action. Respondent LBP also filed an Answer 28 alleging in the main that petitioners have no cause of action against it as it is not an indispensable party or a necessary party to the case. Two days after the filing of respondents respective memoranda on the issues raised during the hearing of the special and/or affirmative defenses, petitioners filed a Motion to Admit Amended Petition 29 attaching thereto the amended petition. 30 Public respondents opposed the motion for

the following reasons: 1) the motion was belatedly filed; 2) the Amended Petition is not sufficient in form and in substance; 3) the motion is patently dilatory and 4) the Amended Petition was filed to cure the defect in the original petition. 31 Petitioners also filed a Consolidated Opposition to the Motion to Dismiss 32 followed by supplemental pleadings 33 in support of their prayer for a writ of preliminary injunction. On April 27, 2004, the RTC issued the assailed Order denying the Motion to Admit Amended Petition and dismissing the petition for lack of cause of action. It ruled that: The language of Secs. 2 & 3 of Rule 10 of the 1997 Rules of Civil Procedure dealing on the filing of an amended pleading is quite clear. As such, the Court rules that the motion was belatedly filed. The granting of leave to file amended pleadings is a matter peculiarly within the sound discretion of the trial court. But the rule allowing amendments to pleadings is subject to the general but inflexible limitation that the cause of action or defense shall not be substantially changed or the theory of the case altered to the prejudice of the other party (Avecilla vs. Yatcvo, 103 Phil. 666). On the assumption that the controversy presents justiciable issues which this Court may take cognizance of, petitioners in the present case who presumably presented legitimate interests in the controversy are not parties to the questioned contract. Contracts produce effect as between the parties who execute them. Only a party to the contract can maintain an action to enforce the obligations arising under said contract (Young vs. CA, 169 SCRA 213). Since a contract is binding only upon the parties thereto, a third person cannot ask for its rescission if it is in fraud of his rights. One who is not a party to a contract has no rights under such contract and even if the contrary may be voidable, its nullity can be asserted only by one who is a party thereto; a third person would have absolutely no personality to ask for the annulment (Wolfson vs. Estate of Martinez, 20 Phil. 340; Ibaez vs. Hongkong & Shanghai Bank, 22 Phil. 572; Ayson vs. CA, G.R. Nos. L-6501 & 6599, May 21, 1955). It was, however, held that a person who is not a party obliged principally or subsidiarily in a contract may exercise an action for nullity of the contract if he is prejudiced in his rights with respect to one of the contracting parties and can show the detriment which would positively result to him from the contract in which he had no intervention (Baez vs. CA, 59 SCRA 15; Anyong Hsan vs. CA, 59 SCRA 110, 112-113; Leodovica vs. CA, 65 SCRA 154-155). In the case at bar, petitioners failed to show that they were prejudiced in their rights [or that a] detriment x x x would positively result to them. Hence, they lack locus standi in court. xxxx To the mind of the Court, procedural matters in the present controversy may be dispensed with, stressing that the instant case is a political question, a question which the court cannot, in any manner, take judicial cognizance. Courts will not interfere with purely political questions because of the principle of separation of powers (Taada vs. Cuenco, 103 Phil. 1051). Political questions are those questions which, under the Constitution, are to be decided by the people in

their sovereign capacity or in regard to which full discretionary authority has been delegated to the legislative or [to the] executive branch of the government (Nuclear Free Phils. Coalition vs. NPC, 141 SCRA 307 (1986); Torres vs. Gonzales, 152 SCRA 272; Citizens Alliance for Consumer Protection vs. Energy Regulatory Board, G.R. No. 78888-90, June 23, 1988). The citation made by the provincial government[, to] which this Court is inclined to agree, is that the matter falls under the discretion of another department, hence the decision reached is in the category of a political question and consequently may not be the subject of judicial jurisdiction (Cruz in Political Law, 1998 Ed., page 81) is correct. It is [a] well-recognized principle that purely administrative and discretionary functions may not be interfered with by the courts (Adm. Law Test & Cases, 2001 Ed., De Leon, De Leon, Jr.). The case therefore calls for the doctrine of ripeness for judicial review. This determines the point at which courts may review administrative action. The basic principle of ripeness is that the judicial machinery should be conserved for problems which are real and present or imminent and should not be squandered on problems which are future, imaginary or remote. This case is not ripe for judicial determination since there is no imminently x x x substantial injury to the petitioners. In other words, the putting up of the New Cagayan Town Center by the province over the land fully owned by it and the concomitant contracts entered into by the same is within the bounds of its corporate power, an undertaking which falls within the ambit of its discretion and therefore a purely political issue which is beyond the province of the court x x x. [Consequently, the court cannot,] in any manner, take judicial cognizance over it. The act of the provincial government was in pursuance of the mandate of the Local Government Code of 1991. xxxx Indeed, adjudication of the procedural issues presented for resolution by the present action would be a futile exercise in exegesis. What defeats the plea of the petitioners for the issuance of a writ of preliminary injunction is the fact that their averments are merely speculative and founded on conjectures. An injunction is not intended to protect contingent or future rights nor is it a remedy to enforce an abstract right (Cerebo vs. Dictado, 160 SCRA 759; Ulang vs. CA, 225 SCRA 637). An injunction, whether preliminary or final, will not issue to protect a right not in in esse and which may never arise, or to restrain an act which does not give rise to a cause of action. The complainants right on title, moreover, must be clear and unquestioned [since] equity, as a rule, will not take cognizance of suits to establish title and will not lend its preventive aid by injunction where the complainants title or right is doubtful or disputed. The possibility of irreparable damage, without proof of violation of an actual existing right, is no ground for injunction being a mere damnum, absque injuria (Talisay-Silay Milling Company, Inc. vs. CFI of Negros Occidental, et. al. 42 SCRA 577, 582).

xxxx For lack of cause of action, the case should be dismissed. The facts and allegations [necessarily] suggest also that this court may dismiss the case for want of jurisdiction. The rule has to be so because it can motu propio dismiss it as its only jurisdiction is to dismiss it if it has no jurisdiction. This is in line with the ruling in Andaya vs. Abadia, 46 SCAD 1036, G.R. No. 104033, Dec. 27, 1993 where the court may dismiss a complaint even without a motion to dismiss or answer. Upon the foregoing considerations, the case is hereby dismissed without costs. SO ORDERED. 34 Petitioners filed a Motion for Reconsideration 35 to which respondents filed their respective Oppositions. 36 Petitioners then filed a Motion to Inhibit, which the court granted. Accordingly, the case was re-raffled to Branch 1 of the RTC of Tuguegarao City. 37 On August 20, 2004, Branch 1 of the RTC of Tuguegarao City issued a Resolution denying petitioners plea for reconsideration. The court found the motion to be a mere scrap of paper as the notice of hearing was addressed only to the Clerk of Court in violation of Section 5, Rule 15 of the Rules of Court. As to the merits, the court sustained the findings of Branch 5 that petitioners lack legal standing to sue and that the issue involved is political. Issues Hence, the present recourse where petitioners argue that: A. The lower court decided a question of substance in a way not in accord with law and with the applicable decision of the Supreme Court, and B. The lower court has so far departed from the accepted and usual course of judicial proceedings as to call for an exercise of the power of supervision in that: I. It denied locus standi to petitioners; II. [It] determined that the matter of contract entered into by the provincial government is in the nature of a political question; III. [It] denied the admission of Amended Petition; and IV. [It] found a defect of substance in the petitioners Motion for Reconsideration.
38

Our Ruling The petition is partially meritorious. Petitioners have legal standing to sue as taxpayers A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that the public money is being deflected to any improper purpose, or that there is wastage of public funds through the enforcement of an invalid or unconstitutional law. 39 A person suing as a taxpayer, however, must show that the act complained of directly involves the illegal disbursement of public funds derived from taxation. 40 He must also prove that he has sufficient interest in preventing the illegal expenditure of money raised by taxation and that he will sustain a direct injury because of the enforcement of the questioned statute or contract. 41 In other words, for a taxpayers suit to prosper, two requisites must be met: (1) public funds derived from taxation are disbursed by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed and (2) the petitioner is directly affected by the alleged act. 42 In light of the foregoing, it is apparent that contrary to the view of the RTC, a taxpayer need not be a party to the contract to challenge its validity. 43 As long as taxes are involved, people have a right to question contracts entered into by the government. In this case, although the construction of the town center would be primarily sourced from the proceeds of the bonds, which respondents insist are not taxpayers money, a government support in the amount of P187 million would still be spent for paying the interest of the bonds. 44 In fact, a Deed of Assignment 45 was executed by the governor in favor of respondent RCBC over the Internal Revenue Allotment (IRA) and other revenues of the provincial government as payment and/or security for the obligations of the provincial government under the Trust Indenture Agreement dated September 17, 2003. Records also show that on March 4, 2004, the governor requested the Sangguniang Panlalawigan to appropriate an amount of P25 million for the interest of the bond. 46 Clearly, the first requisite has been met. As to the second requisite, the court, in recent cases, has relaxed the stringent "direct injury test" bearing in mind that locus standi is a procedural technicality. 47 By invoking "transcendental importance", "paramount public interest", or "far-reaching implications", ordinary citizens and taxpayers were allowed to sue even if they failed to show direct injury. 48 In cases where serious legal issues were raised or where public expenditures of millions of pesos were involved, the court did not hesitate to give standing to taxpayers. 49 We find no reason to deviate from the jurisprudential trend. To begin with, the amount involved in this case is substantial. Under the various agreements entered into by the governor, which were ratified by the Sangguniang Panlalawigan, the provincial government of Cagayan would incur the following costs: 50

Compensation to Preferred Ventures (3% of P205M) 51 Resolution No. 290-2001 Management and Underwriting Fees (1.5% of P205M) 52 Documentary Tax (0.75% of P205M) 53 Guarantee Fee 54 -

P 6,150,000.00

3,075,000.00

1,537,500.00

7,350,000.00

Construction and Design of town center 55 - 213,795,732.39 Total Cost P231,908,232.39

What is more, the provincial government would be shelling out a total amount of P187 million for the period of seven years by way of subsidy for the interest of the bonds. Without a doubt, the resolution of the present petition is of paramount importance to the people of Cagayan who at the end of the day would bear the brunt of these agreements. Another point to consider is that local government units now possess more powers, authority and resources at their disposal, 56 which in the hands of unscrupulous officials may be abused and misused to the detriment of the public. To protect the interest of the people and to prevent taxes from being squandered or wasted under the guise of government projects, a liberal approach must therefore be adopted in determining locus standi in public suits. In view of the foregoing, we are convinced that petitioners have sufficient standing to file the present suit. Accordingly, they should be given the opportunity to present their case before the RTC. Having resolved the core issue, we shall now proceed to the remaining issues. The controversy involved is justiciable A political question is a question of policy, which is to be decided by the people in their sovereign capacity or by the legislative or the executive branch of the government to which full discretionary authority has been delegated. 57 In filing the instant case before the RTC, petitioners seek to restrain public respondents from implementing the bond flotation and to declare null and void all contracts related to the bond flotation and construction of the town center. In the petition before the RTC, they alleged grave abuse of discretion and clear violations of law by public respondents. They put in issue the overpriced construction of the town center; the grossly disadvantageous bond flotation; the irrevocable assignment of the provincial governments annual regular income, including the

IRA, to respondent RCBC to cover and secure the payment of the bonds floated; and the lack of consultation and discussion with the community regarding the proposed project, as well as a proper and legitimate bidding for the construction of the town center. Obviously, the issues raised in the petition do not refer to the wisdom but to the legality of the acts complained of. Thus, we find the instant controversy within the ambit of judicial review. Besides, even if the issues were political in nature, it would still come within our powers of review under the expanded jurisdiction conferred upon us by Section 1, Article VIII of the Constitution, which includes the authority to determine whether grave abuse of discretion amounting to excess or lack of jurisdiction has been committed by any branch or instrumentality of the government. 58 The Motion to Admit Amended Petition was properly denied However, as to the denial of petitioners Motion to Admit Amended Petition, we find no reason to reverse the same. The inclusion of the province of Cagayan as a petitioner would not only change the theory of the case but would also result in an absurd situation. The provincial government, if included as a petitioner, would in effect be suing itself considering that public respondents are being sued in their official capacity. In any case, there is no need to amend the petition because petitioners, as we have said, have legal standing to sue as taxpayers. Section 5, Rule 15 of the Rules of Court was substantially complied with This brings us to the fourth and final issue. A perusal of the Motion for Reconsideration filed by petitioners would show that the notice of hearing was addressed only to the Clerk of Court in violation of Section 5, Rule 15 of the Rules of Court, which requires the notice of hearing to be addressed to all parties concerned. This defect, however, did not make the motion a mere scrap of paper. The rule is not a ritual to be followed blindly. 59 The purpose of a notice of hearing is simply to afford the adverse parties a chance to be heard before a motion is resolved by the court. 60 In this case, respondents were furnished copies of the motion, and consequently, notified of the scheduled hearing. Counsel for public respondents in fact moved for the postponement of the hearing, which the court granted. 61 Moreover, respondents were afforded procedural due process as they were given sufficient time to file their respective comments or oppositions to the motion. From the foregoing, it is clear that the rule requiring notice to all parties was substantially complied with. 62 In effect, the defect in the Motion for Reconsideration was cured. We cannot overemphasize that procedural rules are mere tools to aid the courts in the speedy, just and inexpensive resolution of cases. 63 Procedural defects or lapses, if negligible, should be excused in the higher interest of justice as technicalities should not override the merits of the case. Dismissal of cases due to technicalities should also be avoided to afford the parties the

opportunity to present their case. Courts must be reminded that the swift unclogging of the dockets although a laudable objective must not be done at the expense of substantial justice. 64 WHEREFORE, the instant Petition is PARTIALLY GRANTED. The April 27, 2004 Order of Branch 5 and the August 20, 2004 Resolution of Branch 1 of the Regional Trial Court of Tuguegarao City are hereby REVERSED and SET ASIDE insofar as the dismissal of the petition is concerned. Accordingly, the case is hereby REMANDED to the court a quo for further proceedings. SO ORDERED. MARIANO C. DEL CASTILLO Associate Justice WE CONCUR: ANTONIO T. CARPIO* Associate Justice Chairperson CONCHITA CARPIO MORALES** Associate Justice TERESITA J. LEONARDO-DE CASTRO*** Associate Justice

ROBERTO A. ABAD Associate Justice 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. ANTONIO T. CARPIO Associate Justice Chairperson, Second Division 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 had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice

Footnotes
*

Per Special Order No. 775 dated November 3, 2009.

**

In lieu of Justice Arturo D. Brion who is on leave per Special Order No. 807 dated December 7, 2009.
***

Additional member per Special Order No. 776 dated November 3, 2009.

Rollo, pp. 221-230; penned by Judge Elmo M. Alameda. Id. at 36-54. Id. at 256 -258; penned by Judge Jimmy H. F. Luczon, Jr. Id. at 55-56. Id. at 57-59. Id. at 60-63. Id. at 64-65. Id. at 66-68. Id. at 69-70. Id. at 71-72. Id. at 78-90. Id. at 440. Id. at 36-54. Id. at 36. Id. at 36-37. Id. at 37. Id.

10

11

12

13

14

15

16

17

18

Id. at 437. Id. Id. Id. Id. Id. at 126-141. Id. at 142-150. Id. at 179-189. Id. at 163-171. Id. at 151-162. Id. at 172-178. Id. at 98-100. Id. at 101-118. Id. at 119-125. Id. at 190-204. Id. at 205-215 and 216-220. Id. at 224-230. Id. at 231-241. Id. at 242-246 and 247-254. Id. at 718. Id. at 15.

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

Constantino, Jr. v. Cuisia, G.R. No. 106064, October 13, 2005, 472 SCRA 505, 518519.

40

Bayan (Bagong Alyansang Makabayan v. Zamora, 396 Phil. 623, 647 (2000).

41

Bugnay Construction and Development Corporation v. Judge Laron, 257 Phil. 245, 256 (1989).
42

Bagatsing v. San Juan, 329 Phil. 8, 13 (1996). Abaya v. Ebdane, Jr., G.R. No. 167919, February 14, 2007, 515 SCRA 720, 758. Rollo, p. 129; Answer with Motion to Dismiss of public respondents. Id. at 93-95. Id. at 215.

43

44

45

46

47

Garcillano v. House of Representatives Committees on Public Information, Public Order and Safety, National Defense and Security, Information and Communications Technology, and Suffrage and Electoral Reforms, G.R. Nos. 1708338 & 179275, December 23, 2008, 575 SCRA 170, 185.
48

David v. Macapagal-Arroyo, G.R. Nos. 171396, 171409, 171485, 171483, 171400, 171489 & 171424, May 3, 2006, 489 SCRA 160.
49

See Constantino, Jr. v. Cuisia, supra at note 39; Abaya v. Ebdane, Jr., supra at note 43; Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel on Ancestral Domain (GRP), G.R. Nos. 183591, 183752, 183893, 183951 & 183962, October 14, 2008, 568 SCRA 402; Garcillano v. House of Representatives Committees on Public Information, Public Order and Safety, National Defense and Security, Information and Communications Technology, and Suffrage and Electoral Reforms, supra at note 47.
50

See Rollo, p. 11. Id. at 58; Resolution No. 290-2001. Id. at 73; Underwriting Agreement, paragraph 7.1. Id. at 74; Underwriting Agreement, paragraph 7.3. Id. at 77; Guarantee Agreement, paragraph 3.1.

51

52

53

54

55

Id. at 83; Agreement for the Planning, Design, Construction and Site Development of the New Cagayan Town Center, paragraph 7.1.

56

Republic Act No. 7160, Section 2, otherwise known as the "Local Government Code of 1991".
57

Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. Nos. 78742, 79310, 79744 & 79777, July 14, 1989, 175 SCRA 343, 377.
58

Daza v. Singson, G.R. No. 86344, December 21, 1989, 180 SCRA 496, 507.

59

KKK Foundation, Inc. v. Calderon-Bargas, G.R. No. 163785, December 27, 2007, 541 SCRA 432, 441.
60

Vlason Enterprises Corporation v. Court of Appeals, 369 Phil. 269, 299 (1999). Rollo, p. 255.

61

62

See Philippine National Bank v. Paneda, G.R. No. 149236, February 14, 2007, 515 SCRA 639, 652.
63

Incon Industrial Corporation v. Court of Appeals, G.R. No. 161871, July 24, 2007, 528 SCRA 139, 144.
64

Tacloban II Neighborhood Association, Inc. v. Office of the President, G.R. No. 168561, September 26, 2008, 566 SCRA 493, 510.

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