FACTS: This case involves the
auction of P30billion worth of 10- year Zero-Coupon Bonds. The Bonds to be
auctioned are not subject to 20% withholding tax as the issue will be limited
to a maximum of 19 lenders in the primary market. RCBC participated and won the
bid. The Bureau of Treasury issued P35 billion worth of Bonds for
approximately P10.17 billion, resulting in a discount of approximately
P24.83 billion.
CIR issued a resolution declaring
that the PEACe Bonds, being deposit substitutes, were subject to 20% final
withholding tax. That the final withholding tax due be imposed and
withheld not only on RCBC/CODE NGO but also on 'all subsequent holders of the
Bonds.
ISSUE: WON the Bureau of Treasury respondents
liable for 6% legal interest reckoned until they fully pay the amount
corresponding to the 20% final withholding tax.
HELD: YES. No interest on refund of
tax can be awarded unless authorized by law or the collection of the tax was
attended by arbitrariness. An action is not arbitrary when exercised honestly
and upon due consideration where there is room for two opinions, however much
it may be believed that an erroneous conclusion was reached. Arbitrariness
presupposes inexcusable or obstinate disregard of legal provisions.
Here, the Bureau of Treasury made no
effort to release the amount of ₱4.9 corresponding to the 20% final withholding
tax, when it could have done so.
BoT failed to comply with the TRO to
enjoin the implementation of BIR.
As early as 2011, petitioners could
have deposited the amount of ₱4.9B in escrow and earned interest, had the Bureau
of Treasury complied with the temporary restraining order and released the
funds. It was inequitable for the Bureau of Treasury to have withheld the
potential earnings of the funds in escrow from petitioners.
Due to the Bureau of Treasury's
unjustified refusal to release the funds to be deposited in escrow, in utter
disregard of the orders of the Court, it is held liable to pay legal interest
of 6% per annum on the amount of ₱4.9b representing the 20%
final withholding tax on the PEACe Bonds.
Respondent Bureau of Treasury is
hereby ORDERED to immediately release and pay the bondholders
the amount of P4,966,207, 796.41, representing the 20% final withholding tax on
the PEACe Bonds, with legal interest of 6% per annum from
October 19, 2011 until full payment.