Metropolitan Bank and Trust Company vs.

CIR
CTA EB No. 269

Facts:

Metropolitan Bank and Trust Company (“MBTC”) issued universal savings account deposits
(“UNISA”), a special savings account deposit, to its customers. The Bureau of Internal Revenue
(“BIR”) assessed MBTC for the documentary stamp taxes on the ground that the UNISA are akin
to certificate of deposits. MBTC, on the other hand, argues that the UNISA is evidenced by a
passbook and should not be a negotiable instrument, thus, it cannot qualify as a certificate of
deposit, subject to the DST.

Issue:

Whether or not a special savings account deposit when evidenced by a passbook is subject to the
DST on certificates of deposit.

Ruling:

The term “certificate of deposit bearing interest” in the Tax Code covers special savings account
deposits such as the UNISA, thus, subjecting the latter to DST. The negotiable character is
immaterial for purposes of imposing DST. Moreover, the UNISA have features present in time
deposits. A depositor is allowed to withdraw his deposit even before its maturity subject to bank
charges on its pre-termination and the depositor loses his entitlement to earn the higher interest
rate. The only difference lies on the evidence of deposit, a special savings account is evidenced
by a passbook, while a time deposit is evidenced by a certificate of deposit.