Case Digest (G.R. No. 198756)
Facts:
Banco de Oro, Bank of Commerce, China Banking Corporation, Metropolitan Bank & Trust Company, Philippine Bank of Communications, Philippine National Bank, Philippine Veterans Bank, and Planters Development Bank, G.R. No. 198756, August 16, 2016, Supreme Court En Banc, Leonen, J., writing for the Court. The resolution disposes of motions for reconsideration and clarification of the Court's January 13, 2015 Decision that had granted a petition for certiorari, nullified two BIR rulings (Nos. 370-2011 and DA 378-2011), reprimanded the Bureau of the Treasury, and ordered the release of amounts withheld as a 20% final withholding tax on the PEACe zero-coupon treasury bonds.In October 2001 the Bureau of the Treasury (BTr) announced a public offering of 10-year zero-coupon treasury bonds (PEACe Bonds) stating the issue would be limited to a maximum of 19 lenders in the primary market and “not subject to 20% withholding tax.” RCBC participated on behalf of Caucus of Development NGO Networks (CODE-NGO) and, together with RCBC Capital (as underwriter/issue manager), facilitated distribution to final investors. The bonds were issued October 18, 2001 at a substantial discount.
Eleven days before maturity, on October 7 and 17, 2011, the Commissioner of Internal Revenue issued BIR Ruling No. 370-2011 and BIR Ruling No. DA 378-2011, holding that PEACe Bonds were deposit substitutes subject to the 20% final withholding tax and that the tax should be withheld from payment at maturity on all holders including secondary holders. Petitioners (the banks buying the bonds) filed a Petition for Certiorari, Prohibition, and/or Mandamus with urgent application for TRO on October 17, 2011; the Supreme Court issued a TRO on October 18, 2011 enjoining implementation of BIR Ruling No. 370-2011 but required petitioning banks to withhold the 20% and place the amounts in escrow.
RCBC, RCBC Capital, and CODE-NGO were allowed to intervene. After procedural exchanges, on January 13, 2015 the Supreme Court (Leonen, J.) granted the petition, applied Section 22(Y) of the NIRC to hold that the determinant is the actual number of lenders “at any one time,” nullified the two BIR rulings for disregarding the 20-lender rule, reprimanded the Bureau of the Treasury for retaining withheld funds, and ordered release of the withheld amounts to bondholders. Respondents filed motions for reconsideration (Mar. 13, 2015) and petitioners-intervenors filed motions for clarification/partial reconsideration. This August 16, 2016 Resolution denies respondents’ motion, partl...(Subscriber-Only)
Issues:
- Was the Supreme Court's direct exercise of jurisdiction here procedurally proper given the Court of Tax Appeals’ (CTA) exclusive jurisdiction over tax rulings and the rule on exhaustion of administrative remedies?
- How should “public” (i.e., “twenty (20) or more lenders at any one time”) in Section 22(Y) of the National Internal Revenue Code be interpreted for government debt instruments such as the PEACe Bonds — does it require an actual head count at the time of origination or may intended/distributive capacity in the secondary market suffice?
- Who is the proper withholding agent for the 20% final withholding tax on deposit substitutes: the payor-borrower (issuer), a seller in the secondary market, or any person with custody/control of the income?
- Should this Court’s interpretation of Section 22(Y) be applied retrospectively to the PEACe Bonds, or prospectively because taxpayers relied on earlier BIR rulings (and would retrospective application impair vested rights or violate due process)?
- Are the respondents (particularly the Bureau of the Treasury) liable to release...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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