Case Digest (G.R. No. 149636) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Commissioner of Internal Revenue v. Bank of Commerce (G.R. No. 149636, June 8, 2005), the Bank of Commerce (respondent) earned passive income from investments in government securities and private commercial papers during 1994–1995. It suffered a 20% final withholding tax on those interest earnings but nevertheless included the full P85,384,254.51 in computing its 5% gross receipts tax (GRT), paying P4,269,212.73 quarterly. On July 19, 1996, relying on the January 30, 1996 CTA decision in Asia Bank Corporation v. Commissioner of Internal Revenue (CTA Case No. 4720) and Section 4(e) of Rev. Reg. No. 12-80, the bank filed an administrative claim for refund of P853,842.54. Before resolution, it petitioned the Court of Tax Appeals (CTA) in Case No. 5415 to prevent prescription. The CTA granted a partial refund of P355,258.99, holding the 20% withholding tax was not part of gross receipts under Collector of Internal Revenue v. Manila Jockey Club, Inc. The Commissioner of Internal R Case Digest (G.R. No. 149636) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Income Generation and Tax Payments
- In 1994–1995, Bank of Commerce invested in government securities and private commercial papers, earning passive income totaling ₱85,384,254.51.
- It filed quarterly percentage tax returns and paid 5% gross receipts tax (GRT) on its total receipts, including the above passive income which had been subjected to a 20% final withholding tax at source.
- Administrative and Judicial Proceedings
- January 30, 1996 – The Court of Tax Appeals (CTA) in Asia Bank Corp. (CTA Case No. 4720) ruled that the 20% final withholding tax on bank interest does not form part of gross receipts for GRT purposes (Rev. Reg. No. 12-80, § 4(e)).
- July 19, 1996 – Bank of Commerce filed an administrative claim for refund of ₱853,842.54 (computed as ₱85,384,254.51 × 20% × 5%) and, to preserve its rights, a petition with the CTA when the claim remained unresolved. The Commissioner interposed defenses challenging the refundability and burden of proof.
- April 27, 1999 – The CTA granted partial refund of ₱355,258.99, relying on CIR v. Manila Jockey Club and its own rulings in China Banking Corp. and Equitable Banking Corp., and applied NIRC § 204(3).
- August 14, 2001 – The Court of Appeals (CA) affirmed the CTA, holding that the ₱17,076,850.90 representing final withholding tax is a trust fund for the government and not part of the bank’s gross receipts for 5% GRT. The CA cited NIRC §§ 51, 58(A), Rev. Reg. No. 12-80 § 4(e), as well as CIR v. Tours Specialists and Manila Jockey Club.
Issues:
- Does the 20% final withholding tax on a bank’s interest income form part of its taxable gross receipts for computing the 5% GRT?
- Is Bank of Commerce entitled to refund of ₱853,842.54 representing alleged GRT overpayment?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)