BIR Ruling

June 18, 1968 Mr. Adriano Roxas No. 45 Dr. Alejos St. Quezon City S i r : This refers to your letter dated June 7, 1968 requesting a ruling based on a query stated as follows: "Since the inception of the Consolidated Bank and Trust Corporation on July 19, 1963 I was employed therein as its Credit Manager. On July 19, 1967, I was retired due to my age, 67 years, and further due to my intermittent inability to attend to my office brought about by high blood pressure, dizziness and at times pains in my joints. Because of my service with the aforesaid bank the latter gave me a certain amount as retirement benefit. An excerpt of the resolution of the Board of Directors of the aforesaid Bank is hereto attached as Annex "A" and made a part hereof. "The Consolidated Bank and Trust Corporation does not maintain a benefit plan for its employees." "My question is, will the retirement benefit which I received after the effectivity of R.A. 4917 which was on June 17, 1967, be covered by the exemption provided for under the aforesaid law?" In reply, I have the honor to inform you as follows: The exemption under the final proviso of Section 1 of Republic Act No. 4917 reading "in case of separation of an official or employee from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee, any amount received by him or his heirs from the employer as a consequence of such separation shall likewise be exempt as hereinabove provided" stands distinct and separate from the exemption under a private benefit plan, and, therefore, is not subject to the conditions antecedent to the exemption under the benefit plan. In other words, any amount received by an official or employee by reason of death, sickness or other physical disability or for any cause beyond the control of the official or employee is exempt as aforesaid regardless of age, length of service and whether or not payment was made in accordance with a reasonable private benefit plan as defined by the Act. As you represented, you were separated from the services of your employer because of your age and of your failing health. Apparently, if not for your physical condition your services as the Credit Manager of the Consolidated Bank and Trust Corporation would not have been terminated. In view thereof, this Office believes and so holds that your case falls squarely within the final proviso of Section 1 of the Act. Accordingly, the termination pay which you received as a consequence of your separation from services is exempt from income tax pursuant to the said proviso of the Act. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue