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    Dumaguete Cathedral Credit Cooperative (Dccco) V. Commissioner of Internal Revenue

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    paobny
    This case involves a petition filed by Dumaguete Cathedral Credit Cooperative (DCCCO) to set aside a Court of Tax Appeals decision ordering DCCCO to pay deficiency withholding taxes on interest earned by members from savings deposits for 1999-2000. The Court of Tax Appeals ruled that Section 24(B)(1) of the National Internal Revenue Code required DCCCO to pay these taxes. However, the Supreme Court reversed this decision, finding that BIR rulings and laws establishing preferential tax treatment for cooperatives indicate they do not need to withhold taxes on member interest. The Court also noted cooperatives play a vital role in economic development and social justice.

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    Dumaguete Cathedral Credit Cooperative (Dccco) V. Commissioner of Internal Revenue

    Uploaded by

    paobny
    225 views2 pages
    This case involves a petition filed by Dumaguete Cathedral Credit Cooperative (DCCCO) to set aside a Court of Tax Appeals decision ordering DCCCO to pay deficiency withholding taxes on interest earned by members from savings deposits for 1999-2000. The Court of Tax Appeals ruled that Section 24(B)(1) of the National Internal Revenue Code required DCCCO to pay these taxes. However, the Supreme Court reversed this decision, finding that BIR rulings and laws establishing preferential tax treatment for cooperatives indicate they do not need to withhold taxes on member interest. The Court also noted cooperatives play a vital role in economic development and social justice.

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    DCCCO v CIR Case Digest

    Original Title

    DCCCO v CIR

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    This case involves a petition filed by Dumaguete Cathedral Credit Cooperative (DCCCO) to set aside a Court of Tax Appeals decision ordering DCCCO to pay deficiency withholding taxes on interest earned by members from savings deposits for 1999-2000. The Court of Tax Appeals ruled that Section 24(B)(1) of the National Internal Revenue Code required DCCCO to pay these taxes. However, the Supreme Court reversed this decision, finding that BIR rulings and laws establishing preferential tax treatment for cooperatives indicate they do not need to withhold taxes on member interest. The Court also noted cooperatives play a vital role in economic development and social justice.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    225 views2 pages

    Dumaguete Cathedral Credit Cooperative (Dccco) V. Commissioner of Internal Revenue

    Uploaded by

    paobny
    This case involves a petition filed by Dumaguete Cathedral Credit Cooperative (DCCCO) to set aside a Court of Tax Appeals decision ordering DCCCO to pay deficiency withholding taxes on interest earned by members from savings deposits for 1999-2000. The Court of Tax Appeals ruled that Section 24(B)(1) of the National Internal Revenue Code required DCCCO to pay these taxes. However, the Supreme Court reversed this decision, finding that BIR rulings and laws establishing preferential tax treatment for cooperatives indicate they do not need to withhold taxes on member interest. The Court also noted cooperatives play a vital role in economic development and social justice.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    DUMAGUETE CATHEDRAL CREDIT COOPERATIVE (DCCCO) v.

    COMMISSIONER OF INTERNAL REVENUE


    January 22, 2010
    DEL CASTILLLO, J.
    NATURE
    Petition for review on certiorari of the decision and resolution of Court of Tax Appeals (CTA)
    FACTS
    This Petition for Review on Certiorari seeks to set aside the December 18, 2007 Decision of the Court of
    Tax Appeals (CTA), ordering petitioner to pay deficiency withholding taxes on interest from savings and
    time deposits of its members for taxable years 1999 and 2000, pursuant to Section 24(B)(1) of the
    National Internal Revenue Code of 1997 (NIRC), as well as the delinquency interest of 20% per annum
    under Section 249(C) of the same Code. It also assails the April 11, 2008 Resolution denying petitioners
    Motion for Reconsideration.
    DCCCO is a credit cooperative duly registered by the Cooperative Development Authority (CDA) for
    purposes such as increasing income, pooling resources, and extending loans to members. Nov 27 2001
    BIR Operations Group Deputy Commissioner issued letters authorizing examination of DCCCOs books
    for the internal revenue taxes for years 1999 & 2000. Jun & Oct 2002 Petitioner received Pre-
    Assessment Notices for deficiency withholding taxes for taxable years 1999 and 2000. The deficiency
    withholding taxes cover the payments of the honorarium of the Board of Directors, security and
    janitorial services, legal and professional fees, and interest on savings and time deposits of its members.
    DCCCO informed BIR that it would ONLY pay the deficiency withholding taxes corresponding to the
    honorarium of the Board of Directors, security and janitorial services, legal and professional fees for the
    year 1999 and 2000, EXCLUDING penalties and interest. After payment, DCCCO received from the BIR
    Transcripts of Assessment and Audit Results/Assessment Notices, ordering petitioner to pay the
    deficiency withholding taxes, INCLUSIVE of penalties, for the years 1999 and 2000. Petitioner filed
    Petition for Review. Partially granted by CTA but assessments for deficiency withholding taxes on
    interests are affirmed. Petitioner filed for partial reconsideration but was denied. Petitioner filed
    Petition for Review with CTA En Banc but was denied this and Motion for Reconsideration.
    Petitioner: Sec 24(B)(1) of the NIRC applies only to banks not cooperatives. Members of cooperatives
    deserve a preferential tax treatment pursuant to RA 6938, as amended by RA 9520.
    Respondent: Section 24(B)(1) of the NIRC applies to cooperatives as the phrase "similar arrangements"
    is not limited to banks.
    ISSUES x RULING
    1. Whether or not DCCCO is liable to pay the deficiency withholding taxes on interest from savings
    and time deposits of its members for the taxable years 1999 and 2000, as well as the
    delinquency interest of 20% per annum
    NO. BIR declared in BIR Ruling No. 551-888 that cooperatives are not required to withhold taxes on
    interest from savings and time deposits of their members. This was then reiterated in BIR Ruling DA-
    591-2006. Under Article 2 of RA 6938, as amended by RA 9520, it is a declared policy of the State to
    foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and
    harnessing people power towards the attainment of economic development and social justice. Thus,
    to encourage the formation of cooperatives and to create an atmosphere conducive to their growth
    and development, the State extends all forms of assistance to them, one of which is providing
    cooperatives a preferential tax treatment. The legislative intent to give cooperatives a preferential
    tax treatment is apparent in Articles 61 and 62 of RA 6938, amended by RA 9520. Cooperatives,
    including their members, deserve a preferential tax treatment because of the vital role they play in
    the attainment of economic development and social justice.
    DISPOSITIVE
    WHEREFORE, the Petition is hereby GRANTED. The assailed December 18, 2007 Decision of the Court of
    Tax Appeals and the April 11, 2008 Resolution are REVERSED and SET ASIDE. Accordingly, the
    assessments for deficiency withholding taxes on interest from the savings and time deposits of
    petitioners members for the taxable years 1999 and 2000 as well as the delinquency interest of 20% per
    annum are hereby CANCELLED.
    LAWS
    1. Section 24(B)(1) of the NIRC: A final tax at the rate of twenty percent (20%) is hereby imposed
    upon the amount of interest from any currency bank deposit and yield or any other monetary
    benefit from deposit substitutes and from trust funds and similar arrangements.
    2. BIR Ruling No. 551-888, reiterated in BIR Ruling DA-591-2006: cooperatives are not required to
    withhold taxes on interest from savings and time deposits of their members
    3. RA 6938 Art 61 & 62: cooperatives should not be subject to government taxes and fees
    4. RA 9520 Art 61: transactions of members with the cooperatives are not subject to any taxes
    and fees
    5. Sec 15, Art XII of Consti: considers cooperatives as instruments for social justice and economic
    development
    6. Sec 10, Art II of Consti: policy of the State to promote social justice in all phases of national
    development
    7. Sec 2, Art XIII of Consti: promotion of social justice shall include the commitment to create
    economic opportunities based on freedom of initiative and self-reliance

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