Philippine Veterans Bank entitled to Refund on Taxes Withheld

May 14, 1993 BIR RULING NO. 213-93 PHILIPPINE VETERANS BANK ENTITLED TO REFUND ON TAXES WITHHELD 24 (e) 000-00 213-93 Philippine Veterans Bank 105 Paseo de Roxas G F Sycip Law All Asia Capital Center Legaspi Village, Makati, Metro Manila Attention: Atty . Cosme D . Rosell Chief Legal Counsel This refers to your letter dated March 3, 1993, stating that during the period covering October 4, 1985 to July 31, 1992, at which time the Philippine Veterans Bank (PVB) was closed, PVB invested its available funds in money market instruments, consisting of treasury bills, treasury notes, Development Bank of the Philippines (DBP) countryside bills, Central Bank Certificates of Indebtedness (CBCI), National Development Company (NDC) and National Food Authority (NFA) bonds; that a total amount of Three Hundred Sixty-Six Million Six Hundred Twenty Thousand Nine Hundred Sixty-Eight & 77/100 (P366,620,968.77), representing twenty (20%) percent withholding tax was withheld by dealer-banks on the interest income earned by PVB on the said money market placements; and that PVB now claims that the said taxes paid during said period should be returned to it by way of refund and/or tax credit pursuant to Sec. 2 of R.A. No. 7169, otherwise known as "An Act to Rehabilitate the Philippine Veterans Bank." In connection therewith, you now request confirmation of your opinion that the PVB is entitled to a refund and/or tax credit of the withholding tax on its interest income from the aforesaid treasury bill and various bonds and notes pursuant to Sec. 2 of R.A. No. 7169. In reply thereto, I have the honor to inform you that Section 2 of Republic Act No. 7169, provides in part, as follows: cdtech "Sec. 2. Settlement of Liabilities . xxx xxx xxx "The accrued interest due the National Government deposits up to and during the time of Veterans Bank closure in 1985 and the tax liabilities incurred by the Veterans Bank also up to and during the time of the Veterans Bank's closure are hereby condoned and extinguished ," (Emphasis supplied) Under this provision of the law, what has been "condoned and extinguished" are (a) the accrued interest on government deposits with the PVB; and (b) the tax liabilities during its closure from October 4, 1985 up to July 31, 1992. Insofar as (b) is concerned, the question arises as to whether the final withholding tax of 20% on interest from government bills, notes and bonds, which was already withheld and remitted to the BIR as provided under the Tax Code, could be considered "condoned and extinguished". This provision of law did not categorically state that only unpaid incurred tax liabilities should be condoned/extinguished. For a proper understanding of this issue, we can cite the cardinal rule in statutory construction that the general legislative intent could be discovered from or is unraveled by the four corners of the statutes as a whole and not from only a particular provision thereof ( Manila Lodge No. 761 vs. Court of Appeals, G . R . No . L-41001 ; 1976, cited in Statutory Construction (6th Edition, by Martin). The law ibid that rehabilitate the PVB provides, thus: "Sec. 1. Declaration of Policy . In order to give meaning and realization to the constitutional mandate to provide immediate and adequate care, benefits, and other forms of assistance to war veterans and veterans of military campaigns, then surviving spouses and orphans, it is hereby declared the policy of the Government to provide the necessary mechanisms to rehabilitate the Philippine Veterans Bank, hereinafter known as the Veterans Bank, a bank owned by the Filipino veterans of World War II and deeply imbued and impressed with public interest." so that considering such legislative intent, it is opined that all accrued interest and tax liabilities (whether paid or unpaid) during the bank's closure, could be considered condoned/extinguished. VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue