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COMMISSIONER
OF INTERNAL REVENUE,
G. R. No. 96016 October 17, 1991 -versus-COURT
OF APPEALS and EFREN P. CASTANEDA,
PADILLA, J.: The issue to be resolved in this Petition for Review on Certiorari is whether or not terminal leave pay received by a government official or employee on the occasion of his compulsory retirement from the government service is subject to withholding [income] tax. We resolve the issue in the negative.cralaw:red Private respondent Efren P. Castaneda retired from the government service as Revenue Attache in the Philippine Embassy in London, England, on 10 December 1982 under the provisions of Section 12 [c] of Commonwealth Act 186, as amended. Upon retirement, he received, among other benefits, terminal leave pay from which petitioner Commissioner of Internal Revenue withheld P12,557.13 allegedly representing income tax thereon.cralaw:red Castaneda filed a formal written claim with petitioner for a refund of the P12,557.13, contending that the cash equivalent of his terminal leave is exempt from income tax. To comply with the two-year prescriptive period within which claims for refund may be filed, Castaneda filed on 16 July 1984 with the Court of Tax Appeals a Petition for Review, seeking the refund of income tax withheld from his terminal leave pay.cralaw:red The Court of Tax Appeals found for private respondent Castaneda and ordered the Commissioner of Internal Revenue to refund Castaneda the sum of P12,557.13 withheld as income tax. [Annex "C", petition].cralaw:red Petitioner appealed the abovementioned Court of Tax Appeals decision to this Court, which was docketed as G. R. No. 80320. In turn, we referred the case to the Court of Appeals for resolution. The case was docketed in the Court of Appeals as CA-G. R. SP No. 20482.cralaw:red On 26 September 1990, the Court of Appeals dismissed the petition for review and affirmed the decision of the Court of Tax Appeals. Hence, the present recourse by the Commissioner of Internal Revenue.cralaw:red The Solicitor General, acting on behalf of the Commissioner of Internal Revenue, 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. Thus:
ACCORDINGLY, the petition for review is hereby denied.cralaw:red SO ORDERED. Melencio-Herrera, J., is on leave. |
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