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Facts:
Petitioner seeks reversal of the Decision of respondent CA ordering a refund to the GCL
Retirement Plan representing the withholding tax on income from money market
placements and purchase of treasury bills. Private respondent is an employees trust
maintained by the employer to provide retirement, pension, disability and death benefits to
employees. The Plan as submitted was qualified as exempt from income tax. Respondent
GCL made investsments and earned therefrom interest income from which was witheld the
fifteen per centum (15%) final witholding tax imposed by Pres. Decree No. 1959.
Issue: whether or not the GCL Plan is exempt from the final withholding tax on
interest income from money placements and purchase of treasury bills required
by Pres. Decree No. 1959
Ruling:
It is significant to note that the GCL Plan was qualified as exempt from income
tax by the Commissioner of Internal Revenue in accordance with Rep. Act No.
4917. This law specifically provided: Any provision of law to the contrary
notwithstanding, the retirement benefits received by officials and employees of
private firms, whether individual or corporate, in accordance with a reasonable
private benefit plan maintained by the employer shall be exempt from all taxes.
The tax-exemption privilege of employees' trusts, as distinguished from any other
kind of property held in trust, springs from the foregoing provision. It is
unambiguous.
Facts:
Ruling:
The Solicitor General contends that the terminal leave pay is income derived
from employer-employee relationship, citing in support of his stand Section 28 of
the National Internal Revenue Code; that as part of the compensation for
services rendered, terminal leave pay is actually part of gross income of the
recipient. The Court has already ruled that the terminal leave pay received by a
government official or employee is not subject to withholding (income) tax.
Commutation of leave credits, more commonly known as terminal leave, is
applied for by an officer or employee who retires, resigns or is separated from the
service through no fault of his own. The Government recognizes that for most
public servants, retirement pay is always less than generous if not meager and
scrimpy. A modest nest egg which the senior citizen may look forward to is thus
avoided. Terminal leave payments are given not only at the same time but also
for the same policy considerations governing retirement benefits.