Facts:

In the case of Prudential Bank vs. Commissioner of Internal Revenue, filed under G.R. No. 180390, the petitioner was Prudential Bank, a corporation duly organized under Philippine law. The case originated on July 23, 1999, when the petitioner received a Final Assessment Notice, No. ST-DST-95-0042-99, along with a Demand Letter from the Commissioner of Internal Revenue (CIR) for deficiency Documentary Stamp Tax (DST) for taxable year 1995. The assessment was against the bank's Repurchase Agreements with the Bangko Sentral ng Pilipinas (BSP), the Purchase of Treasury Bills, and its Savings Account Plus (SAP) product, amounting to P18,982,734.38 in total tax liability. The breakdown of the liability detailed assessments on various accounts, including the basic amount and penalties.

Disputing the assessment, Prudential Bank filed a protest arguing that the transactions in question were not subject to DST. However, this was denied by the CIR on December 28, 2001. Following this,

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Facts:

Background and Parties

• Petitioner: Prudential Bank, a banking corporation organized under Philippine law.
• Respondent: Commissioner of Internal Revenue (CIR).

Issuance of Assessment and Nature of the Tax

• On July 23, 1999, Prudential Bank received from the CIR:
• Final Assessment Notice No. ST-DST-95-0042-99; and
• Demand Letter for deficiency Documentary Stamp Tax (DST) for the taxable year 1995.
• The DST assessment pertained to three transactions:
• Repurchase Agreement with the Bangko Sentral ng Pilipinas (BSP).
• Purchase of Treasury Bills from the BSP.
• Savings Account Plus (SAP) product.
• The deficiency tax was computed and broken down as follows:
• Repurchase Agreement – Basic tax on P1,656,000,000.00 with additional surcharge and compromise penalty, totaling P3,130,000.00.
• Purchase of Treasury Bills – Basic tax on P5,038,610,000.00 with additional surcharge and compromise penalty, totaling P9,472,393.75.
• Savings Account Plus – Basic tax on P3,389,515,000.00 with additional surcharge and compromise penalty, totaling P6,380,340.63.
• Grand Total of the assessment amounted to P18,982,734.38.

Petitioner’s Initial Protest and Litigation

• Prudential Bank protested the assessment on the ground that the documents involved were not subject to DST.
• The respondent, however, denied the protest on December 28, 2001.
• Consequently, the petitioner filed a Petition for Review before the Court of Tax Appeals (CTA), which was raffled to its First Division and docketed as CTA Case No. 6396.

Rulings of the Court of Tax Appeals

• First Division's Decision (February 10, 2006):
• Affirmed the deficiency DST assessment insofar as the SAP is concerned.
• Cancelled and set aside the assessments on the Repurchase Agreement and the Purchase of Treasury Bills with the BSP.
• Ordered Prudential Bank to pay a reduced tax amount of P6,355,340.63 (computed solely on the SAP), with 20% delinquency interest from August 23, 1999.
• Petitioner’s subsequent motion for partial reconsideration was denied by the First Division (Resolution dated May 22, 2006).
• Appeal to the CTA En Banc:
• On March 30, 2007, the CTA En Banc denied the appeal for lack of merit, thereby essentially affirming the First Division’s decision regarding the SAP.
• On October 30, 2007, the CTA En Banc rendered a Resolution denying petitioner’s motion to withdraw its petition and cancel the DST assessment, citing non-compliance with the requirements for the Improved Voluntary Assessment Program (IVAP).

Contentions of the Parties

• Petitioner’s Arguments:
• The SAP is not subject to DST because it is not expressly included in the list of documents under Section 180 of the old National Internal Revenue Code (NIRC), as amended.
• A distinction is drawn between a time deposit (which is evidenced by a deposit certificate) and the SAP (evidenced by a passbook).
• The SAP is payable on demand and not on a fixed determinable future date.
• The legislative intent prior to Republic Act (RA) No. 9243 and historical background of certificate of deposit taxation support its position.
• Even assuming taxability, petitioner argued that its payment under the IVAP (amounting to P5,084,272.50) should be deemed as substantial compliance sufficient to warrant withdrawal of its petition.
• Respondent’s Arguments:
• Maintained that the SAP qualifies as a certificate of deposit drawing interest pursuant to Section 180 of the old NIRC, in line with prior rulings (e.g., International Exchange Bank v. Commissioner of Internal Revenue).
• Asserted that a passbook, as a written acknowledgement of the deposit, fulfills the requirement; it need not be in the form of a conventional certificate.
• The CTA En Banc’s denial of the motion to withdraw was proper because petitioner failed to comply with the IVAP requirements; payment under the program must be based on the original assessment amount or the court’s decision (whichever is higher) and must be accompanied by the necessary documentation, which petitioner did not submit.
• Additional Emphasis:
• The notion that mere payment does not automatically discharge the tax liability as tax amnesty or exemption unless the statutory and regulatory conditions are strictly met.

Issue:

• Whether petitioner’s Savings Account Plus (SAP) product, which has a feature of bearing a higher interest and is evidenced by a passbook rather than a certificate, is subject to Documentary Stamp Tax under Section 180 of the old NIRC.

• Whether the CTA En Banc erred in denying the withdrawal of the petition and the cancellation of the DST assessment on the ground that petitioner had already paid and substantially complied with the requirements of Revenue Regulation (RR) No. 15-2006, Revenue Memorandum Order (RMO) No. 23-2006, and the Improved Voluntary Assessment Program (IVAP).

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)