G.R. No. 180390; July 27, 2011
PRUDENTIAL BANK, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS

Petitioner Prudential Bank received a Final Assessment Notice and Demand Letter from the Commissioner of Internal Revenue (CIR) for deficiency Documentary Stamp Tax (DST) for the taxable year 1995. The assessment covered its Repurchase Agreement with the Bangko Sentral ng Pilipinas (BSP), Purchase of Treasury Bills from the BSP, and its Savings Account Plus (SAP) product, totaling ₱18,982,734.38. Petitioner protested, arguing these documents were not subject to DST. The CIR denied the protest. Petitioner filed a Petition for Review before the Court of Tax Appeals (CTA) First Division. The First Division affirmed the assessment only for the SAP, canceling the assessment on the repurchase agreement and treasury bills, and ordered petitioner to pay ₱6,355,340.63. Petitioner’s motion for partial reconsideration was denied. Petitioner appealed to the CTA En Banc, which affirmed the First Division’s ruling that the SAP is a certificate of deposit bearing interest subject to DST. Petitioner sought reconsideration but later moved to withdraw it due to its availment of the Improved Voluntary Assessment Program (IVAP). The CTA En Banc denied the motion to withdraw for non-compliance with the IVAP requirements, specifically noting the payment was not based on the higher amount between the original assessment and the court’s decision, and petitioner failed to submit a required letter of termination and authority to cancel assessment signed by the CIR.

ISSUE

1. Whether petitioner’s Savings Account Plus (SAP) with a higher interest is subject to Documentary Stamp Tax.
2. Whether the CTA En Banc erred in not allowing the withdrawal of the petition and/or cancellation of the DST assessment on petitioner’s SAP on the ground that petitioner had already paid and substantially complied with RR No. 15-2006 and RMO No. 23-2006.

RULING

1. Yes, petitioner’s Savings Account Plus is subject to Documentary Stamp Tax. The Supreme Court held that a certificate of deposit need not be in a specific form; a passbook of an interest-earning deposit account issued by a bank is a certificate of deposit drawing interest. DST is imposed on certificates of deposit bearing interest under Section 180 of the old National Internal Revenue Code. The SAP, evidenced by a passbook and earning interest, falls within this definition, regardless of being payable on demand. The Court cited China Banking Corporation v. Commissioner of Internal Revenue, which held that a similar savings product is a certificate of deposit subject to DST.
2. No, the CTA En Banc did not err in denying the withdrawal. The Supreme Court ruled that petitioner failed to comply with the requirements for abatement under the IVAP. Specifically, petitioner did not pay the correct amount, as Revenue Memorandum Circular No. 66-2006 required payment based on the original assessment or the court’s decision, whichever is higher. Petitioner paid only the basic tax from the original assessment, not the higher amount from the CTA’s decision. Furthermore, petitioner failed to submit the required letter of termination and authority to cancel assessment signed by the CIR. Tax amnesty provisions must be construed strictly against the taxpayer, and mere payment does not constitute substantial compliance.