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G.R. No.

195147 July 11, 2016

Commissioner of Internal Revenue, petitioner v. Philippine National Bank,

Bersamin, J.:


On 23 March 2000, the books and other accounting records of PNB in

relation to its internal revenue taxes were examined. It indicated that the
PNB had deficiency payments of documentary stamp taxes, withholding
taxes on compensation, and expanded withholding taxes for taxable year
1997. The petitioner (CIR) issued a formal assessment notice, directing the
PNB to pay their deficiencies, to which the PNB paid under protest. The CIR
denied the PNBs protest. Upon denial, the PNB filed a petition for review
on the Court of Tax Appeals. The CTA partially grants the petition and
reduced the amount of the payment of the PNB of the documentary stamp
tax on PNBs interbank call loans from P41, 724, 935.75 to P14, 688 ,
Dissatisfied, both the CIR and PNB filed a motion for reconsideration.
The CIR wanted the previous amount, while the PNB wanted to cancel the
payment altogether, but the decision was affirmed. Hence, this petition.

Whether or not the Philippine National Banks interbank call loans for
taxable year 1997 are subject to documentary stamp tax?

NEGATIVE. The CIR contends that the PNBs interbank call loans were
included in the concept of loan agreements, hence, the interbank call loans
were subject to DST under Sec 3(b) of Revenue Regulations No. 9-94, but
the CTA held that this argument lacks merit. The maturity of PNBs
interbank loans was irrelevant in determining its DST liability for taxable
year 1997. The applicable law was the National Internal Revenue Code of
1997, as amended by P.D. 1959 and RA No. 7660. It states thatxxx debt
instruments issued for interbank call loans with maturity of not
more than five (5) days to cover deficiency in reserves against
deposit liabilities, including those between or among banks and
quasi-banks, shall not be considered as deposit substitute debt
The provisions of the NIRC cannot be given retroactive effect to the
prejudice of PNB. This is because tax laws are prospective in application, it
means from the moment they are in effect, it cannot apply to past
The CTA further held that an interbank call loan is considered as a
deposit substitute transaction by a bank performing quasi-banking functions
to cover reserve deficiencies. It does not fall under the definition of a loan
agreement, contrary to the contention of CIR. Even if it does, the DST
liability of PNB will only attach if the loan agreement was signed abroad but
the object of the contract is located or used in the Philippines, which was
not the case in regard to PNBs interbank call loans.
In accordance with Sec 180 of the 1997 NIRC, as amended by RA
7660, it can be readily discerned that the DST of P0.30 on each P200.00 or
fractional part thereof can only be imposed on the face value of:
(1)Loan agreements
(2)Bills of exchange
(4)Instruments and securities issued by the Government and any of its
(5) Certificates of deposits drawing interest
(6)Orders for the payment of any sum of money otherwise than at
sight or on demand, and
(7)Promissory notes whether negotiable or non-negotiable, except
bank notes issued for circulation, and on each renewal of such
It may be noticed that interbank call loans are not expressly included
among the taxable instruments listed in Section 180, which is the applicable
law, hence they may not be held taxable. What the law does not include, it
automatically excludes. The principle of law is that a tax cannot be imposed
without clear and express words.

The cancellation of the Assessment is upheld, PNB is not liable. The petition
is hereby denied.