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January 2010 - Philippine Supreme Court Decisions/Resolutions

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January 2010 Decisions >
[G.R. No. 182722 : January
22, 2010] DUMAGUETE CATHEDRAL CREDIT
COOPERATIVE [DCCCO], REPRESENTED BY FELICIDAD L.
RUIZ, ITS GENERAL MANAGER, PETITIONER, VS.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
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SECOND DIVISION

[G.R. No. 182722 : January 22, 2010]


DUMAGUETE CATHEDRAL CREDIT COOPERATIVE
[DCCCO], REPRESENTED BY FELICIDAD L. RUIZ,
ITS GENERAL MANAGER, PETITIONER, VS.
COMMISSIONER OF INTERNAL REVENUE,
RESPONDENT.

D E C I S I O N

DEL CASTILLO, J.:

The clashing interests of the State and the taxpayers are

again pitted against each other. Two basic principles, the
State's inherent power of taxation and its declared policy
of fostering the creation and growth of cooperatives
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come into play. However, the one that embodies the
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spirit of the law and the true intent of the legislature

prevails.

This Petition for Review on Certiorari under Section 11 of

Republic Act (RA) No. 9282,[1] in relation to Rule 45 of

the Rules of Court, seeks to set aside the December 18,

2007 Decision[2] of the Court of Tax Appeals (CTA),

ordering petitioner to pay deficiency withholding taxes
on interest from savings and time deposits of its
members for taxable years 1999 and 2000, pursuant to
Section 24(B)(1) of the National Internal Revenue Code
of 1997 (NIRC), as well as the delinquency interest of
20% per annum under Section 249(C) of the same Code.

It also assails the April 11, 2008 Resolution[3] denying

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petitioner's Motion for Reconsideration.

Lecture Series

Factual Antecedents

Petitioner Dumaguete Cathedral Credit Cooperative

(DCCCO) is a credit cooperative duly registered with and
regulated by the Cooperative Development Authority

(CDA).[4] It was established on February 17, 1968[5]

with the following objectives and purposes: (1) to

increase the income and purchasing power of the
members; (2) to pool the resources of the members by
encouraging savings and promoting thrift to mobilize
capital formation for development activities; and (3) to
extend loans to members for provident and productive

purposes.[6] It has the power (1) to draw, make, accept,

endorse, guarantee, execute, and issue promissory
notes, mortgages, bills of exchange, drafts, warrants,
certificates and all kinds of obligations and instruments
in connection with and in furtherance of its business
operations; and (2) to issue bonds, debentures, and
other obligations; to contract indebtedness; and to
secure the same with a mortgage or deed of trust, or
pledge or lien on any or all of its real and personal

properties.[7]

On November 27, 2001, the Bureau of Internal Revenue

(BIR) Operations Group Deputy Commissioner, Lilian B.
Hefti, issued Letters of Authority Nos. 63222 and 63223,
authorizing BIR Officers Tomas Rambuyon and Tarcisio
Cubillan of Revenue Region No. 12, Bacolod City, to
examine petitioner's books of accounts and other
accounting records for all internal revenue taxes for the

taxable years 1999 and 2000.[8]

Proceedings before the BIR Regional Office

On June 26, 2002, petitioner received two Pre-

Assessment Notices for deficiency withholding taxes for
taxable years 1999 and 2000 which were protested by

petitioner on July 23, 2002.[9] Thereafter, on October 16,

2002, petitioner received two other Pre-Assessment
Notices for deficiency withholding taxes also for taxable

years 1999 and 2000.[10] The deficiency withholding

taxes cover the payments of the honorarium of the
Board of Directors, security and janitorial services, legal
and professional fees, and interest on savings and time
deposits of its members.

On October 22, 2002, petitioner informed BIR Regional

Director Sonia L. Flores that it would only pay the
deficiency withholding taxes corresponding to the
honorarium of the Board of Directors, security and
janitorial services, legal and professional fees for the
year 1999 in the amount of P87,977.86, excluding

penalties and interest.[11]

In another letter dated November 8, 2002, petitioner

also informed the BIR Assistant Regional Director,
Rogelio B. Zambarrano, that it would pay the withholding
taxes due on the honorarium and per diems of the Board
of Directors, security and janitorial services,
commissions and legal & professional fees for the year
2000 in the amount of P119,889.37, excluding penalties
and interest, and that it would avail of the Voluntary
Assessment and Abatement Program (VAAP) of the BIR

under Revenue Regulations No. 17-2002.[12]

On November 29, 2002, petitioner availed of the VAAP

and paid the amounts of P105,574.62 and

P143,867.24[13] corresponding to the withholding taxes

on the payments for the compensation, honorarium of
the Board of Directors, security and janitorial services,
and legal and professional services, for the years 1999
and 2000, respectively.

On April 24, 2003, petitioner received from the BIR

Regional Director, Sonia L. Flores, Letters of Demand
Nos. 00027-2003 and 00026-2003, with attached
Transcripts of Assessment and Audit Results/Assessment
Notices, ordering petitioner to pay the deficiency
withholding taxes, inclusive of penalties, for the years
1999 and 2000 in the amounts of P1,489,065.30 and

P1,462,644.90, respectively.[14]

Proceedings before the Commissioner of Internal

Revenue

On May 9, 2003, petitioner protested the Letters of

Demand and Assessment Notices with the Commissioner

of Internal Revenue (CIR).[15] However, the latter failed

to act on the protest within the prescribed 180-day
period. Hence, on December 3, 2003, petitioner filed a
Petition for Review before the CTA, docketed as C.T.A.

Case No. 6827.[16]

Proceedings before the CTA First Division

The case was raffled to the First Division of the CTA

which rendered its Decision on February 6, 2007,
disposing of the case in this wise:

IN VIEW OF ALL THE FOREGOING, the

Petition for Review is hereby PARTIALLY
GRANTED. Assessment Notice Nos. 00026-
2003 and 00027-2003 are hereby MODIFIED
and the assessment for deficiency
withholding taxes on the honorarium and per
diems of petitioner's Board of Directors,
security and janitorial services, commissions
and legal and professional fees are hereby
CANCELLED. However, the assessments for
deficiency withholding taxes on interests are
hereby AFFIRMED.

Accordingly, petitioner is ORDERED TO PAY

the respondent the respective amounts of
P1,280,145.89 and P1,357,881.14
representing deficiency withholding taxes on
interests from savings and time deposits of
its members for the taxable years 1999 and
2000. In addition, petitioner is ordered to pay
the 20% delinquency interest from May 26,
2003 until the amount of deficiency
 withholding taxes are fully paid pursuant to
Section 249 (C) of the Tax Code.

SO ORDERED.[17]

Dissatisfied, petitioner moved for a partial

reconsideration, but it was denied by the First Division in

its Resolution dated May 29, 2007.[18]

Proceedings before the CTA En Banc

On July 3, 2007, petitioner filed a Petition for Review

with the CTA En Banc,[19] interposing the lone issue of

whether or not petitioner is liable to pay the deficiency
withholding taxes on interest from savings and time
deposits of its members for taxable years 1999 and
2000, and the consequent delinquency interest of 20%

per annum.[20]

Finding no reversible error in the Decision dated

February 6, 2007 and the Resolution dated May 29, 2007
of the CTA First Division, the CTA En Banc denied the

Petition for Review[21] as well as petitioner's Motion for

Reconsideration.[22]

The CTA En Banc held that Section 57 of the NIRC

requires the withholding of tax at source. Pursuant
thereto, Revenue Regulations No. 2-98 was issued
enumerating the income payments subject to final
withholding tax, among which is "interest from any peso
bank deposit and yield, or any other monetary benefit
from deposit substitutes and from trust funds and similar
arrangements x x x". According to the CTA En Banc,
petitioner's business falls under the phrase "similar
arrangements;" as such, it should have withheld the
corresponding 20% final tax on the interest from the
 deposits of its members.

Issue

Hence, the present recourse, where petitioner raises the

issue of whether or not it is liable to pay the deficiency
withholding taxes on interest from savings and time
deposits of its members for the taxable years 1999 and
2000, as well as the delinquency interest of 20% per
annum.

Petitioner's Arguments

Petitioner argues that Section 24(B)(1) of the NIRC

which reads in part, to wit:

January-2010
Jurisprudence            SECTION 24. Income Tax Rates. --

     

x x x x

[G.R. No. 177152 :

January 06, 2010] (B) Rate of Tax on Certain Passive Income: --

PEOPLE OF THE

PHILIPPINES, (1) Interests, Royalties, Prizes, and Other

PLAINTIFF-APPELLEE, Winnings. -- A final tax at the rate of twenty

VS. MANUEL BAGOS, percent (20%) is hereby imposed upon the

ACCUSED-APPELLANT. amount of interest from any currency bank

deposit and yield or any other monetary

[G.R. No. 177295 : benefit from deposit substitutes and from

January 06, 2010] trust funds and similar arrangements; x x x

PEOPLE OF THE

PHILIPPINES,
applies only to banks and not to cooperatives, since the
PLAINTIFF-APPELLEE,
phrase "similar arrangements" is preceded by terms
VS. MARLON
referring to banking transactions that have deposit
BARSAGA ABELLA,
peculiarities. Petitioner thus posits that the savings and
ACCUSED-APPELLANT.
time deposits of members of cooperatives are not

included in the enumeration, and thus not subject to the

[G.R. No. 187635 :
20% final tax. To bolster its position, petitioner cites BIR
January 11, 2010]
MATEO R. NOLLEN, Ruling No. 551-888[23] and BIR Ruling [DA-591-2006]
JR., PETITIONER, VS. [24] where the BIR ruled that interests from deposits
COMMISSION ON
maintained by members of cooperative are not subject
ELECTIONS AND
to withholding tax under Section 24(B)(1) of the NIRC.
SUSANA M.
Petitioner further contends that pursuant to Article XII,
CABALLES,
Section 15 of the Constitution[25] and Article 2 of
RESPONDENTS.
Republic Act No. 6938 (RA 6938) or the Cooperative

Code of the Philippines,[26] cooperatives enjoy a

[G.R. No. 189034 :
preferential tax treatment which exempts their members
January 11, 2010]
from the application of Section 24(B)(1) of the NIRC.

CELESTINO A.

MARTINEZ III,
Respondent's Arguments

PETITIONER, VS.

HOUSE OF
As a counter-argument, respondent invokes the legal
REPRESENTATIVES
maxim "Ubi lex non distinguit nec nos distinguere
ELECTORAL TRIBUNAL
debemos" (where the law does not distinguish, the
AND BENHUR L.
courts should not distinguish). Respondent maintains
SALIMBANGON,
that Section 24(B)(1) of the NIRC applies to cooperatives
RESPONDENTS.
as the phrase "similar arrangements" is not limited to

banks, but includes cooperatives that are depositaries of

[G.R. No. 157095 :
their members. Regarding the exemption relied upon by
January 15, 2010]
petitioner, respondent adverts to the jurisprudential rule
MA. LUISA G. DAZON,
that tax exemptions are highly disfavored and construed
PETITIONER, VS.
strictissimi juris against the taxpayer and liberally in
KENNETH Y. YAP AND
favor of the taxing power. In this connection, respondent
PEOPLE OF THE
likewise points out that the deficiency tax assessments
PHILIPPINES,
were issued against petitioner not as a taxpayer but as a
RESPONDENTS.
withholding agent.

[G.R. No. 178318 :

Our Ruling

January 15, 2010]

PEOPLE OF THE
The petition has merit.

PHILIPPINES,

APPELLEE, VS.
Petitioner's invocation of BIR
EDGARDO ESTRADA,
Ruling No. 551-888, reiterated in

APPELLANT.
BIR Ruling [DA-591-2006], is proper.

[G.R. No. 172287 :

January 15, 2010]

WELFREDO CENEZE, On November 16, 1988, the BIR declared in BIR Ruling
PETITIONER, VS. No. 551-888 that cooperatives are not required to
FELICIANA RAMOS, withhold taxes on interest from savings and time
RESPONDENT. deposits of their members. The pertinent BIR Ruling

reads:

[G.R. No. 167874 :

January 15, 2010]

November 16, 1988

SPOUSES CARMEN S.
BIR RULING NO. 551-888

TONGSON AND JOSE

24 369-88 551-888

C. TONGSON

SUBSTITUTED BY HIS
Gentlemen:

CHILDREN NAMELY:

JOSE TONGSON, JR.,

This refers to your letter dated September 5,
RAUL TONGSON, TITA
1988 stating that you are a corporation
TONGSON, GLORIA
established under P.D. No. 175 and duly
TONGSON ALMA
registered with the Bureau of Cooperatives
TONGSON,
Development as full fledged cooperative of
PETITIONERS, VS.
good standing with Certificate of Registration
EMERGENCY
No. FF 563-RR dated August 8, 1985; and
PAWNSHOP BULA,
that one of your objectives is to provide and
INC. AND DANILO R.
strengthen cooperative endeavor and extend
NAPALA,
assistance to members and non-members
RESPONDENTS.
through credit scheme both in cash and in

kind.

[G.R. No. 168970 :

January 15, 2010]

Based on the foregoing representations, you
CELESTINO BALUS,
now request in effect a ruling as to whether
PETITIONER, VS.
or not you are exempt from the following:

SATURNINO BALUS

AND LEONARDA
1. Payment of sales tax

BALUS VDA. DE
2. Filing and payment of income tax

CALUNOD,
3. Withholding taxes from compensation of
RESPONDENTS.
employees and savings account and time

deposits of members. (Underscoring ours)

[G.R. No. 164436 :

January 15, 2010]

In reply, please be informed that Executive
LITTIE SARAH A.
Order No. 93 which took effect on March 10,
AGDEPPA, LYNN
1987 withdrew all tax exemptions and
SARAH A. AGDEPPA,
LOUELLA JEANNE A. preferential privileges e.g., income tax and
AGDEPPA, AND sales tax, granted to cooperatives under P.D.
LALAINE LILIBETH A. No. 175 which were previously withdrawn by
AGDEPPA, P.D. No. 1955 effective October 15, 1984 and
PETITIONERS, VS. restored by P.D. No. 2008 effective January 8,
HEIRS OF IGNACIO 1986. However, implementation of said
BONETE, Executive Order insofar as electric,
REPRESENTED BY agricultural, irrigation and waterworks
DOROTEA BONETE, cooperatives are concerned was suspended
HIPOLITO BONETE, until June 30, 1987. (Memorandum Order No.
MILAGROS BONETE, 65 dated January 21, 1987 of the President)
MAURICIO BONETE, Accordingly, your tax exemption privilege
FERNANDO BONETE, expired as of June 30, 1987. Such being the
AND OPHELIA case, you are now subject to income and
BONETE, sales taxes.

RESPONDENTS.

Moreover, under Section 72(a) of the Tax

[G.R. No. 165408 : Code, as amended, every employer making
January 15, 2010] payment of wages shall deduct and withhold
JAIME T. TORRES, upon such wages a tax at the rates
PETITIONER, VS. prescribed by Section 21(a) in relation to
CHINA BANKING section 71, Chapter X, Title II, of the same
CORPORATION, Code as amended by Batas Pambansa Blg.
RESPONDENT. 135 and implemented by Revenue

Regulations No. 6-82 as amended.

[G.R. No. 163271 : Accordingly, as an employer you are required
January 15, 2010] to withhold the corresponding tax due from
SPOUSES PATRICIO the compensation of your employees.

AND MYRNA

BERNALES, Furthermore, under Section 50(a) of the Tax

PETITIONERS, VS. Code, as amended, the tax imposed or
HEIRS OF JULIAN prescribed by Section 21(c) of the same Code
SAMBAAN, NAMELY: on specified items of income shall be withheld
EMMA S. FELICILDA, by payor-corporation and/or person and paid
ANITA S. SAMBAAN, in the same manner and subject to the same
VIOLETA S. conditions as provided in Section 51 of the
DADSANAN, ABSALON Tax Code, as amended. Such being the case,
S. SAMBAAN, and since interest from any Philippine
AGUSTINE S. currency bank deposit and yield or any other
SAMBAAN, EDITHA S. monetary benefit from deposit substitutes are
MANGUIRAN, GRACE paid by banks, you are not the party required
S. NITCHA. to withhold the corresponding tax on the
CLODUALDO S. aforesaid savings account and time deposits
SAMBAAN, GINA S. of your members. (Underscoring ours)

SAMBAAN AND FE S.

YAP, RESPONDENTS. Very truly yours,

(SGD.) BIENVENIDO A. TAN, JR.

[G.R. No. 179761 : Commissioner

January 15, 2010]

CATMON SALES
The CTA First Division, however, disregarded the above
INTERNATIONAL
quoted ruling in determining whether petitioner is liable
CORPORATION,
to pay the deficiency withholding taxes on interest from
PETITIONER, VS.
the deposits of its members. It ratiocinated in this wise:

ATTY. MANUEL D.

YNGSON, JR., AS
LIQUIDATOR OF This Court does not agree. As correctly
CATMON SALES pointed out by respondent in his
INTERNATIONAL Memorandum, nothing in the above quoted
CORPORATION, resolution will give the conclusion that
RESPONDENT. savings account and time deposits of

members of a cooperative are tax-exempt.

[G.R. No. 164673 : What is entirely clear is the opinion of the
January 15, 2010] Commissioner that the proper party to
SAMUEL U. LEE AND withhold the corresponding taxes on certain
MAYBELLE LEE LIM, specified items of income is the payor-
PETITIONERS, KBC corporation and/or person. In the same way,
BANK N.V., in the case of interests earned from Philippine
RESPONDENT. currency deposits made in a bank, then it is

the bank which is liable to withhold the

[G.R. No. 188561 : corresponding taxes considering that the
January 15, 2010] bank is the payor-corporation. Thus, the
PEOPLE OF THE ruling that a cooperative is not the proper
PHILIPPINES, party to withhold the corresponding taxes on
APPELLEE, VS. FELIPE the aforementioned accounts is correct.
AYADE Y PULOD, However, this ruling does not hold true if the
APPELLANT. savings and time deposits are being

maintained in the cooperative, for in this

case, it is the cooperative which becomes the
 [G.R. No. 167891 : payor-corporation, a separate entity acting no
January 15, 2010] more than an agent of the government for
SPOUSES JESUS the collection of taxes, liable to withhold the
FAJARDO AND EMER corresponding taxes on the interests earned.
FAJARDO, [27] (Underscoring ours)
PETITIONERS, VS.

ANITA R. FLORES,
The CTA En Banc affirmed the above-quoted Decision
ASSISTED BY HER
and found petitioner's invocation of BIR Ruling No. 551-
HUSBAND,
88 misplaced. According to the CTA En Banc, the BIR
BIENVENIDO FLORES,
Ruling was based on the premise that the savings and
RESPONDENT.

time deposits were placed by the members of the

[G.R. No. 175319 : cooperative in the bank.[28] Consequently, it ruled that

January 15, 2010] the BIR Ruling does not apply when the deposits are
PEOPLE OF THE maintained in the cooperative such as the instant case.

PHILIPPINES,

APPELLEE, VS. We disagree.

JOSELITO NOQUE Y

GOMEZ, APPELLANT. There is nothing in the ruling to suggest that it applies

only when deposits are maintained in a bank. Rather, the

[G.R. No. 176831 : ruling clearly states, without any qualification, that since

January 15, 2010] UY interest from any Philippine currency bank deposit and

KIAO ENG, yield or any other monetary benefit from deposit

PETITIONER, VS. substitutes are paid by banks, cooperatives are not
NIXON LEE, required to withhold the corresponding tax on the

RESPONDENT. interest from savings and time deposits of their

members. This interpretation was reiterated in BIR

[G.R. No. 185112 : Ruling [DA-591-2006] dated October 5, 2006, which was
January 18, 2010] issued by Assistant Commissioner James H. Roldan upon
DEPARTMENT OF the request of the cooperatives for a confirmatory ruling

LABOR AND on several issues, among which is the alleged exemption

EMPLOYMENT (DOLE) of interest income on members' deposit (over and above

AND NATIONAL the share capital holdings) from the 20% final
MARITIME withholding tax. In the said ruling, the BIR opined that:

POLYTECHNIC (NMP),

PETITIONERS, VS.
x x x x

RUBEN Y. MACEDA,

RESPONDENT.
3. Exemption of interest income on members'

 [A.M. No. RTJ-08- deposit (over and above the share capital
2152 (Formerly A.M. holdings) from the 20% Final Withholding
OCA IPI No. 08-2846- Tax.

RTJ) : January 18,

2010] LUMINZA The National Internal Revenue Code states

DELOS REYES, that a "final tax at the rate of twenty percent
COMPLAINANT, VS. (20%) is hereby imposed upon the amount of
JUDGE DANILO S. interest on currency bank deposit and yield or
CRUZ AND AND any other monetary benefit from the deposit
CLERK OF COURT V substitutes and from trust funds and similar
GODOLFO R. arrangement x x x" for individuals under
GUNDRAN, OF THE Section 24(B)(1) and for domestic
REGIONAL TRIAL corporations under Section 27(D)(1).
COURT, BRANCH 152, Considering the members' deposits with the
PASIG CITY, cooperatives are not currency bank deposits
RESPONDENTS. nor deposit substitutes, Section 24(B)(1) and

Section 27(D)(1), therefore, do not apply to

[G.R. No. 185121 : members of cooperatives and to deposits of
January 18, 2010] primaries with federations, respectively.

LIMANCH-O HOTEL

AND LEASING
It bears stressing that interpretations of administrative
CORPORATION AND
agencies in charge of enforcing a law are entitled to
CONRADO TIU,
great weight and consideration by the courts, unless
PETITIONERS, VS.
such interpretations are in a sharp conflict with the
CITY OF OLONGAPO,
governing statute or the Constitution and other laws.[29]
ATTY. MA. ELLEN
AGUILAR, ENGR. In this case, BIR Ruling No. 551-888 and BIR Ruling
[DA-591-2006] are in perfect harmony with the
RAMON ZAVALLA,
Constitution and the laws they seek to implement.
ENGR. ANDREW
Accordingly, the interpretation in BIR Ruling No. 551-888
DAYOT, AND ENGR.
REYNALDO EDRAISA, that cooperatives are not required to withhold the
corresponding tax on the interest from savings and time
RESPONDENTS.
deposits of their members, which was reiterated in BIR

Ruling [DA-591-2006], applies to the instant case.

[G.R. No. 164506 :

January 19, 2010]

PAULINO M. ALECHA Members of cooperatives deserve

a preferential tax treatment

AND PRECIOSO M.
pursuant to RA 6938, as amended

TAPITAN,
by RA 9520.

PETITIONERS, VS.
ELMER BEN V.

PASION, RODOLFO M. Given that petitioner is a credit cooperative duly

ELMAN, ANTONIO E. registered with the Cooperative Development Authority
VALENZUELA, MAYOR (CDA), Section 24(B)(1) of the NIRC must be read
ULYSSES D. PEREZ, together with RA 6938, as amended by RA 9520.

VICE MAYOR

STEWART R. Under Article 2 of RA 6938, as amended by RA 9520, it

PADAYHAG, SB[1] is a declared policy of the State to foster the creation
MEMBER PABLO and growth of cooperatives as a practical vehicle for
MANTOS SR., SB promoting self-reliance and harnessing people power
MEMBER CASIMERO towards the attainment of economic development and
BAOBAO, SB MEMBER social justice. Thus, to encourage the formation of
FILOMENO cooperatives and to create an atmosphere conducive to
ROSILLOSA, SB their growth and development, the State extends all
MEMBER FELICIANO forms of assistance to them, one of which is providing
OLING, SB MEMBER cooperatives a preferential tax treatment.

NORBERTO RAMOS,

SB MEMBER LUIS The legislative intent to give cooperatives a preferential

PALONGPALONG, SB tax treatment is apparent in Articles 61 and 62 of RA
MEMBER ROGELIO 6938, which read:

BUGTAY, SB MEMBER

OSCAR ATAY, ABC[2]

ART. 61. Tax Treatment of Cooperatives. --
PRESIDENT
Duly registered cooperatives under this Code
PRIMITIVO VERDAD,
which do not transact any business with non-
JR., SKF CHAIRMAN
members or the general public shall not be
JACKSON PADAYHAG,
subject to any government taxes and fees
ABC PRESIDENT
imposed under the Internal Revenue Laws
SERGIO DAGOLDOL,
and other tax laws. Cooperatives not falling
SFK[3] CHAIRMAN
under this article shall be governed by the
TRISTAN B. BAGUIO,
succeeding section.

MUN. SECRETARY

PROTACIO
ART. 62. Tax and Other Exemptions. --
ELMIDULAN, JR.,
Cooperatives transacting business with both
MPDC VICENTE
members and nonmembers shall not be
LLESIS, CIVIL
subject to tax on their transactions to
REGISTRAR MEDARDO
members. Notwithstanding the provision of
COLITA, BUDGET
any law or regulation to the contrary, such
OFFICER RAMONITA
B. BAGUIO, MUN.
ENGR. SEGUNDO cooperatives dealing with nonmembers shall
ARANDID, JR., MUN. enjoy the following tax exemptions; x x x.
ASSESSOR WILFREDO

FLORES, MAO
This exemption extends to members of cooperatives. It
ALEJANDRO JIMENEZ,
must be emphasized that cooperatives exist for the
MUN. ACCOUNTANT
benefit of their members. In fact, the primary objective
AVELINO DEDORO
of every cooperative is to provide goods and services to
AND DSWD[4]
its members to enable them to attain increased income,
[OFFICER] SUSAN
savings, investments, and productivity.[30] Therefore,
MAGO,
limiting the application of the tax exemption to
RESPONDENTS.
cooperatives would go against the very purpose of a

credit cooperative. Extending the exemption to members

[A.M. No. RTJ-07-
of cooperatives, on the other hand, would be consistent
2045 : January 19,
with the intent of the legislature. Thus, although the tax
2010] OFFICE OF THE
COURT exemption only mentions cooperatives, this should be
construed to include the members, pursuant to Article
ADMINISTRATOR,
126 of RA 6938, which provides:

COMPLAINANT, VS.

JUDGE HARUN B.
ISMAEL,
ART. 126. Interpretation and Construction. -
RESPONDENT. In case of doubt as to the meaning of any

provision of this Code or the regulations

[G.R. No. 185710 :
issued in pursuance thereof, the same shall
January 19, 2010]
be resolved liberally in favor of the
PEOPLE OF THE
cooperatives and their members.
PHILIPPINES,
APPELLEE, VS.

ROMULO TUNIACO, We need not belabor that what is within the spirit is

JEFFREY DATULAYTA within the law even if it is not within the letter of the law

AND ALEX ALEMAN, because the spirit prevails over the letter.[31] Apropos is
ACCUSED. ALEX the ruling in the case of Alonzo v. Intermediate Appellate
ALEMAN, APPELLANT. Court,[32] to wit:

[G.R. No. 185222 :

But as has also been aptly observed, we test
January 19, 2010]
a law by its results; and likewise, we may
JESUS M. CALO,
add, by its purposes. It is a cardinal rule that,
PETITIONER, VS.
in seeking the meaning of the law, the first
COMMISSION ON
concern of the judge should be to discover in
ELECTIONS AND
RAMON "MONCHING its provisions the intent of the lawmaker.
RMC" M. CALO, Unquestionably, the law should never be
RESPONDENTS. interpreted in such a way as to cause

injustice as this is never within the legislative

[G.R. No. 180764 : intent. An indispensable part of that intent, in
January 19, 2010] fact, for we presume the good motives of the
TITUS B. legislature, is to render justice.

VILLANUEVA,

PETITIONER, VS. Thus, we interpret and apply the law not

EMMA M. ROSQUETA, independently of but in consonance with
RESPONDENT. justice. Law and justice are inseparable, and

we must keep them so. To be sure, there are

[G.R. No. 177727 : some laws that, while generally valid, may
January 19, 2010] seem arbitrary when applied in a particular
HAROLD V. TAMARGO, case because of its peculiar circumstances. In
PETITIONER, VS. such a situation, we are not bound, because
ROMULO AWINGAN, only of our nature and functions, to apply
LLOYD ANTIPORDA them just the same, [is] slavish obedience to
AND LICERIO their language. What we do instead is find a
ANTIPORDA, JR., balance between the word and the will, that
RESPONDENTS. justice may be done even as the law is

obeyed.

[G.R. No. 174198 :

January 19, 2010] As judges, we are not automatons. We do not

THE PEOPLE OF THE and must not unfeelingly apply the law as it
PHILIPPINES, is worded, yielding like robots to the literal
PLAINTIFF-APPELLEE, command without regard to its cause and
VS. ZAIDA KAMAD Y consequence. "Courts are apt to err by
AMBING, ACCUSED- sticking too closely to the words of a law," so
APPELLANT. we are warned, by Justice Holmes again,

"where these words import a policy that goes

[A.M. No. P-05- beyond them." While we admittedly may not
2085 : January 20, legislate, we nevertheless have the power to
2010] GERARDO Q. interpret the law in such a way as to reflect
FERRERAS, the will of the legislature. While we may not
COMPLAINANT, VS. read into the law a purpose that is not there,
RUDY P. ECLIPSE, we nevertheless have the right to read out of
UTILITY WORKER I, it the reason for its enactment. In doing so,
REGIONAL TRIAL we defer not to "the letter that killeth" but to
COURT, BRANCH 66, "the spirit that vivifieth," to give effect to the
BALER, AURORA, lawmaker's will.

RESPONDENT.

The spirit, rather than the letter of

[G.R. No. 169741 :
a statute determines its
January 20, 2010]
construction, hence, a statute
GREENHILLS EAST
must be read according to its
ASSOCIATION, INC.,
spirit or intent. For what is within
REPRESENTED BY ITS
the spirit is within the statute
PRESIDENT JOSEFINA
although it is not within the letter
J. CASTILLO,
thereof, and that which is within
PETITIONER, VS. E.
the letter but not within the spirit
GANZON, INC.,
is not within the statute. Stated
REPRESENTED BY ITS
differently, a thing which is within
PRESIDENT EULALIO
the intent of the lawmaker is as
GANZON,
much within the statute as if
RESPONDENT.
within the letter; and a thing

which is within the letter of the

[G.R. No. 174356 :
statute is not within the statute
January 20, 2010]
unless within the intent of the
EVELINA G. CHAVEZ
lawmakers. (Underscoring ours)
AND AIDA CHAVEZ-
DELES, PETITIONERS,

VS. COURT OF It is also worthy to note that the tax exemption in RA

APPEALS AND ATTY. 6938 was retained in RA 9520. The only difference is
FIDELA Y. VARGAS, that Article 61 of RA 9520 (formerly Section 62 of RA
RESPONDENTS. 6938) now expressly states that transactions of

members with the cooperatives are not subject to any

[G.R. No. 184122 : taxes and fees. Thus:

January 20, 2010]

BANK OF THE
ART. 61. Tax and Other Exemptions.
PHILIPPINE ISLANDS,
Cooperatives transacting business with both
INC., PETITIONER,
members and non-members shall not be
SPS. NORMAN AND
subjected to tax on their transactions with
ANGELINA YU AND
members. In relation to this, the transactions
TUANSON BUILDERS
of members with the cooperative shall not be
CORPORATION
subject to any taxes and fees, including but
REPRESENTED BY
not limited to final taxes on members'
PRES. NORMAN YU, deposits and documentary tax.
RESPONDENTS. Notwithstanding the provisions of any law or

regulation to the contrary, such cooperatives

[A.M. No. 06-3-07- dealing with nonmembers shall enjoy the
SC : January 21, following tax exemptions: (Underscoring
2010] RE: REQUEST ours)

FOR APPROVAL OF

THE REVISED x x x x

QUALIFICATION

STANDARD FOR
This amendment in Article 61 of RA 9520, specifically
PROJECT
providing that members of cooperatives are not subject
DEVELOPMENT
to final taxes on their deposits, affirms the interpretation
OFFICER V AND
of the BIR that Section 24(B)(1) of the NIRC does not
HUMAN RESOURCE
apply to cooperatives and confirms that such ruling
MANAGEMENT
carries out the legislative intent. Under the principle of
OFFICER III IN THE
legislative approval of administrative interpretation by
PROGRAM
reenactment, the reenactment of a statute substantially
MANAGEMENT
unchanged is persuasive indication of the adoption by
OFFICE.

Congress of a prior executive construction.[33]

[G.R. No. 188360 :

Moreover, no less than our Constitution guarantees the
January 21, 2010]
protection of cooperatives. Section 15, Article XII of the
SPS. HEBER &
Constitution considers cooperatives as instruments for
CHARLITA EDILLO,
social justice and economic development. At the same
PETITIONERS, VS.
time, Section 10 of Article II of the Constitution declares
SPS. NORBERTO &
that it is a policy of the State to promote social justice in
DESIDERIA DULPINA,
all phases of national development. In relation thereto,
RESPONDENTS.

Section 2 of Article XIII of the Constitution states that

the promotion of social justice shall include the
[G.R. No. 183810 :
commitment to create economic opportunities based on
January 21, 2010]
freedom of initiative and self-reliance. Bearing in mind
FARLEY FULACHE,
the foregoing provisions, we find that an interpretation
MANOLO JABONERO,
exempting the members of cooperatives from the
DAVID CASTILLO,
imposition of the final tax under Section 24(B)(1) of the
JEFFREY LAGUNZAD,
NIRC is more in keeping with the letter and spirit of our
MAGDALENA MALIG-
Constitution.

ON BIGNO,
FRANCISCO CABAS,

All told, we hold that petitioner is not liable to pay the

JR., HARVEY PONCE
AND ALAN C. assessed deficiency withholding taxes on interest from
ALMENDRAS, the savings and time deposits of its members, as well as
PETITIONERS, VS. the delinquency interest of 20% per annum.

ABS-CBN

BROADCASTING In closing, cooperatives, including their members,

CORPORATION, deserve a preferential tax treatment because of the vital
RESPONDENT. role they play in the attainment of economic

development and social justice. Thus, although taxes are

[G.R. No. 185240 : the lifeblood of the government, the State's power to tax
January 21, 2010] must give way to foster the creation and growth of
SPS. MANUEL AND cooperatives. To borrow the words of Justice Isagani A.
VICTORIA Cruz: "The power of taxation, while indispensable, is not
SALIMBANGON, absolute and may be subordinated to the demands of
PETITIONERS, VS. social justice."[34]

SPS. SANTOS AND

ERLINDA TAN, WHEREFORE, the Petition is hereby GRANTED. The

RESPONDENTS. assailed December 18, 2007 Decision of the Court of Tax

Appeals and the April 11, 2008 Resolution are

[G.R. No. 181591 : REVERSED and SET ASIDE. Accordingly, the
January 21, 2010] assessments for deficiency withholding taxes on interest
PEOPLE OF THE from the savings and time deposits of petitioner's
PHILIPPINES, members for the taxable years 1999 and 2000 as well as
APPELLEE, VS. the delinquency interest of 20% per annum are hereby
CHRISTOPHER DE CANCELLED.

JESUS, APPELLANT.

SO ORDERED.

[G.R. No. 181083 :

January 21, 2010] Carpio, (Chairperson), Brion, Abad, and Perez, JJ.,
PEOPLE OF THE concur.

PHILIPPINES,
Endnotes:

PLAINTIFF-APPELLEE,
VS. HERMINIGILDO
[1] An Act Expanding the Jurisdiction of the
SALLE SOBUSA,
ACCUSED-APPELLANT. Court of Tax Appeals (CTA), Elevating its

Rank to the Level of a Collegiate Court with

[G.R. No. 179868 : Special Jurisdiction and Enlarging its

January 21, 2010] Membership, Amending for the Purpose

RIZALDY M. Certain Sections of Republic Act No. 1125, As

QUITORIANO, Amended, otherwise known as the Law

PETITIONER, VS. Creating the Court of Tax Appeals, and for
JEBSENS MARITIME, Other Purposes.

INC./ MA. THERESA

GUTAY AND/OR ATLE [2] Rollo, pp. 45-64; penned by Associate

JEBSENS Justice Olga Palanca-Enriquez and concurred
MANAGEMENT A/S,[1] in by Presiding Justice Ernesto D. Acosta and
RESPONDENTS. Associate Justices Juanito C. Castañeda, Jr.,

Lovell R. Bautista, Erlinda P. Uy and Caesar A.

[G.R. No. 179343 : Casanova.

January 21, 2010]

FISHWEALTH [3] Id. at 80-81.

CANNING

CORPORATION,
[4] Id. at 47.

PETITIONER, VS.

COMMISSIONER OF
[5] Id. at 7.

INTERNAL REVENUE,

RESPONDENT.
[6] Id. at 57.

[G.R. No. 179085 :

[7] Id.

January 21, 2010]

TAMBUNTING

PAWNSHOP, INC., [8] Id. at 118.

PETITIONER, VS.

COMMISSIONER OF [9] Id. at 48.

INTERNAL REVENUE,

RESPONDENT. [10] Id.

[G.R. No. 177114 :

[11] Id. at 48-49.

January 21, 2010]

MANOLO A.
[12] Id. at 49.

PEÑAFLOR,
PETITIONER, VS.

[13] Id. at 49-50.

OUTDOOR CLOTHING
MANUFACTURING

CORPORATION, [14] Id. at 50-51.

NATHANIEL T. SYFU,

PRESIDENT, [15] Id. at 51.

MEDYLENE M.

DEMOGENA, FINANCE
MANAGER, AND PAUL [16] Id.

U. LEE, CHAIRMAN,

RESPONDENTS. [17] Id. at 46-47.

[G.R. No. 169438 :

[18] Id. at 51.

January 21, 2010]

ROMEO D. MARIANO,
[19] Id. at 11.

PETITIONER, VS.

PETRON
[20] Id. at 52.

CORPORATION,
RESPONDENT.

[21] Id. at 63.

[G.R. No. 167976 :

January 21, 2010] [22] Id. at 80-81.

ROSARIO T.

FLORENDO, FOR [23] Id. at 18-19.

HERSELF AND THE

OTHER HEIRS OF THE [24] Id. at 75-78.

LATE DR. REGALADO

FLORENDO,
[25] SEC. 15. The Congress shall create an
PETITIONER, VS.
agency to promote the viability and growth of
PARAMOUNT
cooperatives as instruments for social justice
INSURANCE CORP.
and economic development.

(NOW RENAMED AS

MAA GENERAL
[26] ART. 2. Declaration of Policy.- It is the
ASSURANCE, INC.),
RESPONDENT. declared policy of the State to foster the

creation and growth of cooperatives as a

[G.R. No. 167464 : practical vehicle for promoting self-reliance

January 21, 2010] and harnessing people power towards the

RONNIE SUMBILLO, attainment of economic development and

FRANCISCO SERICON, social justice. The State shall encourage the

JOSELITO SERICON, private sector to undertake the actual

AND FELIX GAYUSO, formation and organization of cooperatives

JR., PETITIONERS, VS. and shall create an atmosphere that is

PEOPLE OF THE conducive to the growth and development of

PHILIPPINES, these cooperatives.

RESPONDENT.

Toward this end, the Government and all its

 [G.R. No. 164152 : branches, subdivisions, instrumentalities and
January 21, 2010] agencies shall ensure the provision of
COMMISSIONER OF technical guidance, financial assistance and
INTERNAL REVENUE, other services to enable said cooperatives to
PETITIONER, VS. develop into viable and responsive economic
JULIETA ARIETE, enterprises and thereby bring about a strong
RESPONDENT. cooperative movement that is free from any

conditions that might infringe upon the

[G.R. No. 159835 : autonomy or organizational integrity of
January 21, 2010] cooperatives.

THE BOARD OF

COMMISSIONERS OF Further, the State recognizes the principle of

THE BUREAU OF subsidiarity under which the cooperative
IMMIGRATION AND sector will initiate and regulate within its own
DEPORTATION, ranks the promotion and organization,
PETITIONER, VS. training and research, audit and support
JUNG KEUN PARK @ services relative to cooperatives with
JUNG GEUN PARK @ government assistance where necessary.

CHUNG KEUN PARK,

RESPONDENT. (Now amended by Republic Act No. 9520 or

the Philippine Cooperative Code of 2008.)

[G.R. No. 182722 :

January 22, 2010] [27] Rollo, pp. 62-63.

DUMAGUETE

CATHEDRAL CREDIT [28] Id. at 62.

COOPERATIVE

[DCCCO],
[29] Nestle Philippines, Inc. v. Court of
REPRESENTED BY
Appeals, G.R. No. 86738, November 13,
FELICIDAD L. RUIZ,
1991, 203 SCRA 504, 510.

ITS GENERAL

MANAGER,
[30] Republic act No. 6938, Article 7.

PETITIONER, VS.

COMMISSIONER OF
[31] Tañada and Macapagal v. Cuenco, et al.,
INTERNAL REVENUE,
RESPONDENT. 103 Phil. 1051, 1086 (1957).

[32] 234 Phil. 267, 272-273 (1987).

[G.R. No. 180374 :

January 22, 2010]

BIENVENIDO T. [33] Commissioner of Internal Revenue v.

BUADA, ISAIAS B. American Express International, Inc.
QUINTO, NEMESIO (Philippine Branch), 500 Phil. 586 (2005).

BAUTISTA, ORLANDO

R. BAUTISTA FREDDIE [34] Dissenting Opinion of Justice Isagani A.

R. BAUTISTA, Cruz in Republic of the Philippines v. Judge
CARLITO O. BUADA, Peralta, 234 Phil. 40, 59 (1987).
GERARDO O. BUADA,

ARMANDO M. OLIVA,
ROGELIO F. RAPAJON,

AND EUGENIO F.
FLORES,
Back to Home | Back to Main
PETITIONERS, VS.
CEMENT CENTER,
INC., RESPONDENT.

[G.R. No. 180870 :

January 22, 2010]
JULIUS CACAO Y
PRIETO, PETITIONER,
VS. PEOPLE OF THE
PHILIPPINES,
RESPONDENT.

[G.R. No. 179161 :

January 22, 2010]
PHILIPPINE NATIONAL
BANK, PETITIONER,
VS. DKS
INTERNATIONAL, INC.
AND MICHAEL DY,
RESPONDENTS.

[G.R. No. 174584 :

January 22, 2010]
VICTORIA P. CABRAL,
PETITIONER, VS.
JACINTO UY, MICHAEL
UY, MARILYN O. UY,
RICHARD O. UY, REY
IGNACIO DIAZ, JOSE
PO AND JUANITO
MALTO,

[G.R. No. 186471 :

January 25, 2010]
PEOPLE OF THE
PHILIPPINES,
PLAINTIFF-APPELLEE,
VS. RODANTE DE
LEON Y DELA ROSA,
ACCUSED-APPELLANT.

[G.R. No. 183279 :

January 25, 2010]
LAND BANK OF THE
PHILIPPINES,
PETITIONER, VS.
DEPARTMENT OF
AGRARIAN REFORM
ADJUDICATION
BOARD AND HEIRS OF
VICENTE ADAZA,
HEIRS OF ROMEO
ADAZA, AND HEIRS
OF CESAR ADAZA,
REPRESENTED BY
RUSSEL ADAZA,
RESPONDENTS.

[G.R. No. 170256 :

January 25, 2010]
ALVIN B. GARCIA,
PETITIONER, VS.
COMMISSION ON
ELECTIONS AND
TOMAS R. OSMEÑA,
RESPONDENTS.

 [A.M. No. P-09-

2657 [formerly OCA
IPI No. 04-2075-P] :
January 25, 2010]
BENJAMIN E. SANGA
COMPLAINANT, VS.
FLORENCIO SJ.
ALCANTARA AND
SALES T. BISNAR,
RESPONDENTS.

[G.R. No. 149497 :

January 25, 2010]
NATIONAL
ELECTRIFICATION
ADMINISTRATION,
PETITIONER, VS.
CIVIL SERVICE
COMMISSION AND
PEDRO RAMOS,
RESPONDENTS.

[G.R. No. 179909 :

January 25, 2010]
FAR EAST BANK AND
TRUST COMPANY
(NOW BANK OF THE
PHILIPPINE ISLANDS)
AND ROLANDO
BORJA, DEPUTY
SHERIFF,
PETITIONERS, VS.
SPS. ERNESTO AND
LEONOR C.
CAYETANO,
RESPONDENTS.

[G.R. No. 171586 :

January 25, 2010]
NATIONAL POWER
CORPORATION,
PETITIONER, VS.
PROVINCE OF
QUEZON AND
MUNICIPALITY OF
PAGBILAO,
RESPONDENT.

[G.R. No. 157659 :

January 25, 2010]
ELIGIO P. MALLARI,
PETITIONER, VS.
GOVERNMENT
SERVICE INSURANCE
SYSTEM AND THE
PROVINCIAL SHERIFF
OF PAMPANGA,
RESPONDENTS.

[G.R No. 188078 :

January 25, 2010]
VICTORINO B.
ALDABA, CARLO
JOLETTE S. FAJARDO,
JULIO G. MORADA,
AND MINERVA
ALDABA MORADA,
PETITIONERS, VS.
COMMISSION ON
ELECTIONS,
RESPONDENT.

G.R. No. 171911 :

January 26, 2010]
BERNARDA CH.
OSMEÑA,
PETITIONER, VS.
NICASIO CH.
OSMEÑA, JOSE CH.
OSMEÑA, TOMAS CH.
OSMEÑA, HEIRS OF
FRANCISCO CH.
OSMEÑA AND SIXTA
CH. OSMEÑA,
RESPONDENTS.

[G.R. No. 177138 :

January 26, 2010]
PEOPLE OF THE
PHILIPPINES,
APPELLEE, VS. JOEL
GUILLERMO,
APPELLANT.

[G.R. No. 169858 :

January 26, 2010]
JUANITO GERONIMO,
ANTONIA LIMSON
AND LINDA
GERONIMO,
PETITIONERS, VS.
THE HEIRS OF
CARLITO GERONIMO
REPRESENTED BY
ANGELITO

[A.M. No. CA-10-

49-J [Formerly A.M.
OCA IPI No. 08-142-
CA-J] : January 28,
2010] RAMON C.
GONZALES,
COMPLAINANT, VS.
COURT OF APPEALS
ASSOCIATE JUSTICE
AMELITA G.
TOLENTINO,
RESPONDENT.

[Adm. Case No.

804 : January 28,
2010] MANILA
LUMBER,
INCORPORATED,
COMPLAINANT, VS.
PABLO ORO,
RESPONDENT.

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