Case Digest (G.R. No. 149636)
Facts:
Commissioner of Internal Revenue v. Bank of Commerce, G.R. No. 149636, June 08, 2005, Supreme Court Second Division, Callejo, Sr., J., writing for the Court.In 1994–1995 Bank of Commerce earned passive income as interest and discounts from investments in government securities and private commercial papers totaling P85,384,254.51; the bank reported and paid the 5% gross receipts tax (GRT) on its quarterly returns and those interest earnings were at the same time subject to a 20% final withholding tax (FWT). Relying on a prior Court of Tax Appeals (CTA) ruling in Asia Bank Corporation v. Commissioner of Internal Revenue (CTA Case No. 4720, Jan. 30, 1996) which interpreted Section 4(e) of Revenue Regulations No. 12-80 to exclude FWT from gross receipts, the bank filed an administrative claim for refund on July 19, 1996 for P853,842.54 (the asserted overpayment computed as P85,384,254.51 x 20% x 5%).
Before the Commissioner resolved the administrative claim, the bank filed a petition with the CTA to preserve its right under the two-year prescription rule (Sec. 230, Tax Code). The Commissioner answered, asserting several defenses including that tax refund claims are construed strictly against taxpayers, that the bank bore the burden of proving entitlement and compliance with the statutory refund procedure, and that amounts collected pursuant to law and implementing rules are not refundable unless shown otherwise.
The CTA (majority) partially granted the petition and ordered refund of P355,258.99 for erroneously withheld taxes from interest on government securities for 1994–1995, relying on Collector of Internal Revenue v. Manila Jockey Club and Section 4(e), Rev. Reg. No. 12-80. The Commissioner appealed to the Court of Appeals (CA) under Rule 43; the CA dismissed the petition and affirmed the CTA decision, holding the FWT was a trust fund earmarked for the government and therefore not part of the bank’s gross receipts, and that including FWT in the GRT base would amount t...(Subscriber-Only)
Issues:
- Does the 20% final withholding tax on interest income form part of a bank’s taxable gross receipts for computation of the 5% gross receipts tax?
- Does treating the same interest as subject to both the 20% final withholding tax and inclusion in the 5% gross receipts tax amount to impermissible double taxation?
- Was Bank of Commerce entitled to the refund it claimed (P853,842.54 or the...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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