CIR v. CTA, GCL

G.R. No.
95022 March 23, 1992

COMMISSIONER OF INTERNAL REVENUE,vs.
THE HON. COURT OF APPEALS, THE COURT OF TAX APPEALS, GCL RETIREMENT
PLAN,
Facts:GCL Retirement Plan is an employees' trust maintained by the
employer, GCL Inc., to provide retirement, pension, disability and death
benefits to its employees. The approved and qualified
plan as exempt from income tax by Petitioner Commissioner of Internal
Revenue in accordance with Rep. Act No. 4917.In 1984, Respondent GCL
made investsments and earned therefrom interest income from which was
witheld the fifteen per centum (15%) final witholding tax imposed by Pres.
Decree No. 1959, which took effect on 15 October 1984GCL filed with
Petitioner a claim for refund in the amounts of P1,312.66 withheld
by Anscor Capital and Investment Corp., and P2,064.15 by Commercial Bank
of Manila.
On 12 February 1985, it filed a second claim for refund of the amount of
P7,925.00 withheld by Anscor, stating in both letters that it disagreed with
the collection of the 15%final withholding tax from the interest income as it is
an entity fully exempt from income tax as
provided under Rep. Act No. 4917 in relation to Section 56 (b)3 of the Tax
Code. CIR denied the refund, Petitioner elevated the matter to CTACTA ruled in favor of GCL, holding that employees' trusts are exempt from the
15%final withholding tax on interest income and ordering a refund of the tax
withheld.CA - upheld the CTA Decision. CIR s Contention
the exemption from withholding tax on interest on bank deposits previously
extended by Pres. Decree No. 1739 if the recipient (individual
ocorporation)of the interest income is exempt from income taxation, and the
imposition of the preferential tax rates if the recipient of the income is
enjoying preferential income tax treatment, were both abolished by Pres.
Decree No. 1959. Petitioner thus submits that the deletion of the exempting
and preferential tax treatment provisions under the old law is a clear
manifestation that the single 15% (now 20%) rate is impossible on all
interestincomes from deposits, deposit substitutes, trust funds and similar arr
angements, regardless of the tax status or character of the recipients thereof.
In short, petitioner's
position is that from 15 October 1984 when Pres. Decree No. 1959 was
promulgated, employees' trusts ceased to be exempt and thereafter became
subject to the final withholding tax.\GCL contention - the tax exempt status of
the employees' trusts applies to all kinds of taxes, including the final
withholding tax on interest income That exemption, according
to GCL, is derived from Section 56(b) and not from Section 21 (d) or 24 (cc) of
the TaxCode.
Issue: Whether GCL is exempted from Income Tax
Held:
GCL Plan was qualified as exempt from income tax by the Commissioner of
Internal Revenue in accordance with Rep. Act No. 4917 approved on 17 June
1967. In so far as employees' trusts are concerned, the foregoing provision
should be taken in relation
tothen Section 56(b) (now 53[b]) of the Tax Code, as amended by Rep. Act No
.1983,
supra, which took effect on 22 June 1957.The tax-exemption privilege of
employees' trusts, as distinguished from any other kind
of property held in trust, springs from the foregoing provision. It is unambiguo
us.Manifest therefrom is that the tax law has singled out employees' trusts fo
r taxexemption. And rightly so, by virtue of the raison de'etre behind the
creation of employees' trusts. Employees' trusts or benefit plans normally
provide economic assistance to employees upon the occurrence of certain
contingencies, particularly, old age retirement, death, sickness, or disability.
It provides security against certain hazards to which members of the Plan
may be exposed. It is an independent and additional source of protection
for the working group. What is more, it is established for their exclusive
benefit and for no other purpose. T
he deletion in Pres. Decree No. 1959 of the provisos regarding tax exemption
and preferential tax rates under the old law, therefore, cannot be deemed to
extent to employees' trusts.
Said Decree, being a general law, cannot repeal by implication specific
provision, Section 56(b) now 53 [b]) in relation to Rep. Act No. 4917 granting
exemption from income tax to employees' trusts. Rep. Act 1983, which except
edemployees' trusts in its Section 56 (b) was effective on 22 June 1957 while
Rep. Act No.4917 was enacted on 17 June 1967, long before the issuance of
Pres. Decree No. 1959on 15 October 1984. A subsequent statute, general in
character as to its terms and application, is not to be construed as repealing
a special or specific enactment, unless the legislative purpose to do so is
manifested.
This is so even if the provisions of the latter are sufficiently comprehensive to
include what was set forth in the special act( Villegas v. Subido, G.R. No. L31711, 30 September 1971, 41 SCRA 190).There can be no denying either
that the final withholding tax is collected from income in respect of which
employees' trusts are declared exempt (Sec. 56 [b], now 53 [b], TaxCode).
The application of the withholdings system to interest on bank deposits or
yield
from deposit substitutes is essentially to maximize and expedite the collectio
n of income taxes by requiring its payment at the source. If an employees'
trust like the GCL enjoys a tax-exempt status from income, we see no logic in
withholding a certain percentage of that income which it is not supposed to
pay in the first place Pres. Decree No. 1959 did not have the effect of
revoking the tax exemption enjoyed by employees' trusts, reliance on those
authorities is now misplaced. WHEREFORE, the Writ of Certiorari prayed for is
DENIED.

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G.R. No.

95022 March 23, 1992

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