G.R. No. 170574 January 30, 2009
PHILIPPINE BANKING CORPORATION (NOW: GLOBAL BUSINESS BANK, INC.), Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS

Petitioner Philippine Banking Corporation (now Global Business Bank, Inc.) is a domestic banking corporation. For the taxable years 1996 and 1997, it offered a bank product called “Special/Super Savings Deposit Account” (SSDA), a savings deposit evidenced by a passbook earning a higher interest rate than a regular savings account. Petitioner believed the SSDA was not subject to Documentary Stamp Tax (DST) under Section 180 of the 1977 National Internal Revenue Code (NIRC), as amended. On January 10, 2000, respondent Commissioner of Internal Revenue sent a Final Assessment Notice assessing deficiency DST based on the outstanding balances of the SSDA, totaling ₱17,595,488.75 for 1996 and ₱47,767,756.24 for 1997. Petitioner argued that the SSDA, being evidenced by a passbook, was not among the instruments enumerated as subject to DST under Section 180, which specifically taxed “certificates of deposit drawing interest.” Petitioner claimed the SSDA was essentially a regular savings account with a higher interest incentive for maintaining a substantial average daily balance and a floating holding period, distinct from a time deposit which has a fixed term and pre-termination penalties. Respondent contended the SSDA was substantially identical to a time deposit account because it required a minimum deposit (₱50,000) to be maintained for a period to earn higher interest, and thus the passbook evidencing it was a certificate of deposit subject to DST.

ISSUE

Whether the Special/Super Savings Deposit Account (SSDA) offered by petitioner during the taxable years 1996 and 1997 is subject to Documentary Stamp Tax under Section 180 of the 1977 National Internal Revenue Code, as amended.

RULING

Yes. The Supreme Court affirmed the Court of Tax Appeals En Banc decision, holding petitioner liable for deficiency DST. The Court ruled that the SSDA is a certificate of deposit drawing interest subject to DST under Section 180 of the 1977 NIRC. The Court defined a certificate of deposit as a written acknowledgment by a bank of the receipt of a sum of money on deposit which the bank promises to pay to the depositor, creating a debtor-creditor relationship. The passbook evidencing the SSDA constitutes such a written acknowledgment. The Court found that the SSDA, while in passbook form, had essential features akin to a time deposit: it required a minimum amount (₱50,000) to earn a higher interest rate and required the amount to be maintained for a certain period (30, 60, 90, or 120 days). If the required holding period was not met, the account reverted to a regular savings account with a lower interest rate, which the Court equated to a penalty for pre-termination. These features distinguished it from a regular savings account where the interest rate is fixed regardless of the holding period. The Court also rejected petitioner’s argument that only negotiable certificates of deposit were taxable, stating that Section 180 did not limit its application to negotiable instruments. Consequently, petitioner was ordered to pay the assessed deficiency DST plus surcharge and interest.