Case Digest (G.R. No. 139786)
Facts:
In G.R. No. 139786, the Commissioner of Internal Revenue challenged the refund claim of Citytrust Investment Philippines, Inc., a domestic quasi-banking corporation, which in 1994 reported total gross receipts of ₱110,788,542.30 and paid ₱5,539,427.11 as the 5% Gross Receipts Tax (GRT). Relying on the Court of Tax Appeals’ earlier ruling in the Asian Bank case, Citytrust filed, on July 19, 1996, a claim for refund of ₱326,007.01 representing GRT paid on the 20% Final Withholding Tax (FWT) withheld at source on its passive income. The CTA granted the refund, and the Court of Appeals affirmed. In G.R. No. 140857, Asianbank Corporation, likewise a domestic bank, paid the 5% GRT on its gross receipts for the quarters ending June 30, 1994 through June 30, 1996 and sought a refund of ₱2,022,485.78 on the same ground. The CTA allowed a reduced refund of ₱1,345,743.01, but the Court of Appeals reversed, dismissing the petition. Both cases were consolidated for review by the Supreme Co...Case Digest (G.R. No. 139786)
Facts:
- Taxation Framework
- Section 27(D) (formerly 24(e)(1)) of the Tax Code imposes a 20% final withholding tax (FWT) on passive income of banks (interest on deposits, yield on deposit substitutes, trust funds, royalties).
- Section 121 (formerly 119) of the Tax Code imposes a 5% gross receipts tax (GRT) on banks’ gross receipts, including passive income.
- G.R. No. 139786 – Commissioner v. Citytrust
- Citytrust Investment Phils., Inc., a quasi-bank, reported ₱110,788,542.30 gross receipts for 1994 and paid ₱5,539,427.11 (5% GRT).
- Relying on CTA’s January 30, 1996 decision in Asian Bank Corp. (CTA Case No. 4720) that 5% GRT base excludes amounts subject to 20% FWT, Citytrust on July 19, 1996 claimed refund of ₱326,007.01 (5% of ₱32,600,701.25 withheld).
- The CTA granted refund; the Court of Appeals affirmed, holding withheld taxes are trust funds not benefiting the bank and thus excluded from gross receipts.
- G.R. No. 140857 – Asianbank v. Commissioner
- Asianbank Corporation paid 5% GRT on gross receipts for quarters ending June 30, 1994 to June 30, 1996.
- Claiming entitlement under the CTA’s January 30, 1996 Asian Bank ruling, it sought refund of ₱2,022,485.78; CTA allowed ₱1,345,743.01.
- The Court of Appeals reversed, holding the 20% FWT is part of the gross receipts taxable at 5%.
Issues:
- Does the 20% final withholding tax on a bank’s passive income form part of its taxable gross receipts for computing the 5% GRT?
- If included, does imposing both the 20% FWT and the 5% GRT constitute double taxation?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)