DOJ Opinion No. 116, s. 1991

DOJ OPINION NO. 116 , s. 1991 August 12, 1991 Hon. Julio Francia Chairman Professional Regulation Commission Manila Sir : This refers to your request "for a ruling on whether or not the terminal leave pay of Ms. Cristeta T. Patajo, former member of the Board of Nursing of the Professional Regulation Commission is subject to withholding tax". Your query it appears, is being raised in connection with the Supreme Court's En Banc Resolution dated August 23, 1990 in Re Atty. Bernardo Zialcita. You state that the resolution "specifically applies only to officers and employees of the Judiciary in the absence of an actual case concerning 'government workers of varying categories from diverse officers', and that 'the authorities concerned will have to determine and rule on each case as it arises'". prcd You point our that in the aforecited resolution, the Supreme Court has ruled that "The terminal leave pay of Atty. Zialcita received by virtue of his compulsory retirement can never be considered a part of his salary subject to the payment of income tax but falls under the phrase other similar benefits received by retiring employees and workers , within the meaning of Section 1 of PD No. 220 and is thus exempt from the payment of income tax" (Emphasis supplied); and that the dispositive portion of said resolution provides, among others: "Accordingly, the Court Resolved to . . . (2) DECLARE that henceforth no withholding tax shall be deducted . . . from the terminal leave pay benefits of all retirees similarly situated including those who have already retired and from whose retirement benefits such withholding taxes were deducted." You also cite the decision of the Court of Tax Appeals in the case of Efren P. Castaeda vs. Commissioner of Internal Revenue (C.T.A. Case No. 3809) which held that "under the provisions of Section 1 of P.D. No. 220, the intent and policy of the law is clear to the effect that social security benefits and other similar benefits received by retiring employees and workers, whether received from Philippines or foreign government agencies and other institutions, private and public, shall be exempt from the payment of income tax." Further, you refer to Opinion No. 114 of the Presidential Assistant for Legal Affairs, Office of the President, which states that ". . . whether taken under P.D. No. 220 or under the Tax Code as amended by P.D. No. 1159 and Batas Pambansa Blg. 135, any amount received by a retiring government officer or worker as cash equivalent of its unused vacation and sick leaves is exempt from income tax." We regret to have to decline your aforesaid request for opinion. We note that the subject of your query relates to exemption from payment of "withholding tax" over which the Bureau of Internal Revenue has primary jurisdiction (Sec. 3, The National Internal Revenue Code of 1986, as amended). As a matter of propriety and official courtesy, the Secretary of Justice does not pass upon matters pertaining to the official cognizance of another office or agency, in this case, the BIR, unless requested by such office or agency (Secretary of Justice Ops. No. 72, s. 1983; No. 147, s. 1987). For your information and guidance, however, it should be noted that contrary to your allegations, there is nothing in the aforecited En Banc Resolution of the Supreme Court which expressly states that it "applies only to officers and employees of the Judiciary in the absence of an actual case concerning "government workers of varying categories from diverse offices . . ." A close reading of the resolution shows that it does not expressly or impliedly preclude other retiring employees of the government from the coverage of the ruling that terminal leave pay for retiring employees is not subject to income tax. Thus, the Court ruled that: prcd "An examination of the records convinces that Court that the posture of Atty. Zialcita is impressed with merit. In the case of Justice Victoriano, the terminal leave pay he received when he applied for optional retirement had been converted into vacation and sick leave with commutation of salary which forms part of his regular salary subject to income tax, considering that before the effectivity of his optional retirement on December 31, 1982 he was appointed Acting Commissioner of the Land Registration Commission on November 19, 1982. On the other hand, the terminal leave pay that Atty. Zialcita received by virtue of who's compulsory retirement can never be considered a part of his salary subject to the payment of income tax but fall under the phrase other similar benefit received by retiring employees and workers, within the meaning of Sec. 1 of P.D. No. 220 and is thus exempt from the payment of income tax . That the money value of his accrued leave credits is not a part of his salary is not a part of his salary is further buttressed by Sec. 3 of P.D. No. 985, otherwise known as "The Budgetary Reform Decree on Compensation and Position Classification of 1976" particularly Sec. 3(a) thereof, which makes it clear that the actual service is 'the period of time for which pay has been received, excluding the period covered by terminal leave ." (Emphasis supplied.) Very truly yours, (SGD.) SILVESTRE H. BELLO III Acting Secretary