CIR vs.

PHILIPPINE NATIONAL BANK

G.R. No. 195147, July 11, 2016

FACTS:
1. Respondent bank received a preliminary assessment notice which indicated therein that PNB had deficiency payments of
documentary stamp taxes (DST), withholding taxes on compensation, and expanded withholding taxes for taxable year 1997.
It subsequently received a formal assessment notice, together with a formal letter of demand requiring PNB to pay the
deficiency taxes.
2. PNB paid its deficiency taxes except for the DST, arguing that Interbank Call Loans are not subject to DST.
3. Petitioner claims that while interbank call loans were not considered as deposit substitute debt instruments (DSDI), PNB’s
interbank call loans, which had a maturity of more than 5 days, were included in the concept of loan agreements; hence,
subject to DST.

ISSUE:
1. Whether or not Interbank call loans are considered deposit substitute debt instrument? No.
2. Whether or not Interbank call loans are subject to DST? No.

RULING:
1. For taxation purposes, Section 22(y) of the NIRC provides that debt instruments issued for interbank call loans with maturity
of not more than 5days to cover deficiency in reserves against deposit liabilities, including those between or among banks
and quasi-banks, shall not be considered as deposit substitute debt instrument.
2. Section 180 of the NIRC states that the DST shall only be imposed on the face value of: (1) loan agreements; (2) bills of
exchange; (3) drafts; (4) instruments and securities issued by the Government or any of its instrumentalities; (5) certificates
of deposits drawing interest; (6) orders for the payment of any sum of money otherwise than at sight or on demand; and (7)
promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation, and on each renewal of
any such note. Interbank call loans, although not considered as deposit substitutes, are not expressly included among the
taxable instruments. Hence, not subject to DST.