G.R. No. 129644 - China Banking Corp. vs. Court of Appeals

CBC’s Transactions and Tax Payment
On 20 July 1994, China Banking Corporation (CBC), a universal banking corporation, paid ₱12,354,933.00 as gross receipts tax (GRT) for the second quarter of 1994, covering interest on loan investments, commissions, services, foreign exchange profits, and other operating earnings.
On 30 January 1996, the Court of Tax Appeals (CTA) in Asian Bank Corporation v. Commissioner of Internal Revenue ruled that the 20% final withholding tax on a bank’s passive interest income does not form part of its taxable gross receipts.

Tax Refund Claim and Judicial Proceedings
On 19 July 1996, CBC filed with the Commissioner of Internal Revenue a formal claim for refund or credit of ₱1,140,623.82 from the gross receipts tax paid, and on the same day petitioned the CTA to ensure timeliness. The Commissioner opposed, arguing the final withholding tax forms part of CBC’s gross receipts.
On 30 September 1998, the CTA granted CBC a partial refund of ₱123,778.73 but denied the remainder for insufficiency of evidence. Associate Judge Amancio Q. Saga dissented. Motions for reconsideration were denied on 15 January 1999.
CBC and the Commissioner separately appealed to the Court of Appeals (CA). On 16 October and 15 November 2000, the CA affirmed the CTA decisions. Motions for reconsideration were denied on 8 January and 25 April 2001.
On 6 February and 25 June 2001, respectively, CBC and the Commissioner filed petitions for review with the Supreme Court (SC). The SC consolidated the petitions on 21 April 2003.

Whether the 20% final withholding tax on interest income should form part of CBC’s gross receipts in computing the gross receipts tax on banks.
Whether CBC established by sufficient evidence its right to claim a full refund of ₱1,140,623.82 for alleged overpayment of the gross receipts tax.