G.R. No. 204142 - Honda Cars Phils., Inc. vs. Honda Cars Technical Specialist and Supervisors Union

On December 8, 2006, Honda Cars Philippines, Inc. (petitioner) and Honda Cars Technical Specialists and Supervisory Union (respondent) entered into a Collective Bargaining Agreement (CBA) effective from April 1, 2006 to March 31, 2011.
Prior to this agreement, union members received a fixed transportation allowance of P3,300.00 per month.
On September 3, 2005, a Memorandum of Agreement (MOA) was executed which converted the transportation allowance into a monthly gasoline allowance of 125 liters, effective April 1, 2005.
The gasoline allowance was intended to cover gasoline consumed by union members for official business and daily home-to-office travel.

The company maintained a policy similar to that for its managers and assistant vice-presidents (AVPs): if the allocated gasoline was not fully consumed, the unused portion could be converted into cash.
The company treated the cash conversion of the unused gasoline allowance as part of the employee’s compensation, subjecting it to income tax by deducting the corresponding withholding tax from the union members’ salaries.
The union, however, argued that the gasoline allowance was a negotiated fringe benefit under Article XV, Section 15 of the CBA, and thus should not be subjected to income tax withholding.

The disagreement over the tax treatment of the gasoline allowance led to a grievance under the CBA’s dispute resolution procedure.
Unresolved issues in the grievance process were referred to a panel of voluntary arbitrators as provided in the CBA.
On February 6, 2009, the Panel of Voluntary Arbitrators rendered a decision declaring that the cash conversion of the unused gasoline allowance was a fringe benefit subject to fringe benefit tax—not income tax—and that deductions made would be considered as advances refundable in future tax remittances.
The petitioner (Honda Cars Philippines, Inc.) sought partial reconsideration of this decision, which was denied on June 3, 2009, prompting an appeal to the Court of Appeals (CA) via a Rule 43 petition for review.

The CA, through its Eighth Division, upheld with modification the arbitrators’ decision, affirming that the gasoline allowance constituted a fringe benefit not subject to income tax withholding.
The CA clarified that despite being labeled a fringe benefit, the gasoline allowance was not necessarily liable for the fringe benefit tax under Section 33(A) of the National Internal Revenue Code (NIRC) because its primary purpose was for the convenience and advantage of the employer.
Honda Cars Philippines, Inc. subsequently appealed to the Supreme Court, reiterating its contention that the cash conversion should be treated as compensation income subject to withholding tax and not merely a fringe benefit.

Whether the cash conversion of the unused gasoline allowance should be classified as a fringe benefit subject to fringe benefit tax or as compensation income subject to income tax withholding.

Whether the panel of voluntary arbitrators had the jurisdiction to decide on tax matters involving the gasoline allowance given that such issues pertain to tax law rather than labor disputes.

Whether union members have a cause of action against the company for the refund of income taxes withheld from the cash conversion of the gasoline allowance.