G.R. No. 172990 - Dolmar Real Estate Development Corp. vs. Court of Appeals

Domestic corporate taxpayers, including banks, are subject to a 20% final withholding tax (FWT) on interest from bank deposits under Section 24(e)(1) in relation to Section 50(a) of the National Internal Revenue Code of 1977 (Tax Code).
Banks are also subject to a gross receipts tax (GRT) on their income derived from sources within the Philippines under Section 119 of the Tax Code at varying rates, including 5% on interest, commissions, and discounts from lending activities.
The term "gross receipts" is not defined in the Tax Code, thus its ordinary meaning is relied upon.

The Bank of the Philippine Islands (BPI), a domestic corporation, earned interest income subjected to the 20% FWT withheld at source.
BPI computed its 5% GRT tax including the amount corresponding to the 20% FWT withheld on interest income.
The Court of Tax Appeals (CTA), following Asian Bank Corporation v. Commissioner of Internal Revenue, held that the 20% FWT withheld did not form part of the bank’s taxable gross receipts for GRT purposes and ruled BPI’s tax payments including the withheld tax portion as overpayments refundable.
BPI requested a refund from the Bureau of Internal Revenue (BIR) for the alleged overpayment on the GRT computed on the 20% FWT withheld interest income; the BIR was inactive, prompting BPI to file a Petition for Review with the CTA.
The CTA confirmed its earlier decision, awarding partial refund to BPI for substantiated amounts withheld.
The Court of Appeals affirmed the CTA’s decisions, holding that the withheld 20% final tax did not belong to BPI and thus could not be included in gross receipts; it cited Revenue Regulations No. 12-80, Section 4(e) regarding taxable gross receipts being based on income "actually received."

The Commissioner of Internal Revenue filed a petition for review, contesting the CTA and Court of Appeals’ ruling.
The sole issue presented was whether the 20% final tax withheld on a bank’s passive income should be included in the computation of the gross receipts tax.

Whether the 20% final tax on a bank’s passive income, withheld at source, forms part of the bank’s gross income for computation of the gross receipts tax.
Whether the inclusion of the withheld 20% tax in the gross receipts tax base constitutes double taxation.
Whether Revenue Regulations No. 12-80, Section 4(e) excludes the 20% final tax withheld from the gross receipts tax base.
The proper interpretation of the term “gross receipts” for purposes of GRT computation under the Tax Code.