Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=81174:175108&catid=1567&Itemid=566
Timestamp: 2019-04-22 08:05:03+00:00

Document:
G.R. No. 175108, February 27, 2013 - CHINA BANKING CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondents.
CHINA BANKING CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondents.
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court which seeks the review and reversal of the Decision1 dated June 16, 2006 and Resolution2 dated October 17, 2006 of the former Fifth Division of the Court of Appeals (CA).
For the four quarters of 1996, petitioner paid P93,119,433.50 as gross receipts tax (GRT) on its income from the interests on loan investments, commissions, service and collection charges, foreign exchange profit and other operating earnings.
On January 30, 1996, the Court of Tax Appeals (CTA) rendered a Decision entitled Asian Bank Corporation v. Commissioner of Internal Revenue,4 wherein it ruled that the 20% final withholding tax on a bank’s passive interest income should not form part of its taxable gross receipts.
On even date, petitioner filed its Petition for Review with the CTA.
Moreover, the Court of Appeals in the case of Commissioner of Internal Revenue v. Citytrust Investment Philippines, Inc., CA G.R. Sp No. 52707, August 17, 1999, affirmed our stand that the 20% final withholding tax on interest income should not form part of the taxable gross receipts. Hence, we find no cogent reason nor justification to depart from the wisdom of our decision in the Asian Bank case, supra.
Lastly, since Petitioner failed to prove the inclusion of the 20% final withholding taxes as part of its 1996 taxable gross receipts (passive income) or gross receipts (passive income) that were subjected to 5% GRT, it follows that proof was wanting that it paid the claimed excess GRT, subject of this petition.
IN THE LIGHT OF ALL THE FOREGOING, the instant Petition for Review is DISMISSED for insufficiency of evidence.
Not in conformity with the CTA’s ruling, petitioner interposed an appeal before the CA.
In its appeal, petitioner insists that it erroneously included the 20% final withholding tax on the bank’s passive interest income in computing the taxable gross receipts. Therefore, it argues that it is entitled, as a matter of right, to a refund or tax credit.
x x x Unfortunately for China Bank, it is flogging a dead horse as this argument has already been shot down in China Banking Corporation v. Court of Appeals (G.R. No. 146749 & No. 147983, June 10, 2003) where it was ruled the Tax Court, which decided Asia Bank on June 30, 1996 not only erroneously interpreted Section 4(e) of Revenue Regulations No. 12-80, it also cited Section 4(e) when it was no longer the applicable revenue regulation. The revenue regulations applicable at the time the tax court decided Asia Bank was Revenue Regulations No. 17-84, not Revenue Regulation 12-80.
WHEREFORE, the instant petition is DENIED DUE COURSE and DISMISSED.
Petitioner sought reconsideration of the aforementioned decision arguing that Section 4 (e) of Revenue Regulations (RR) No. 12-80 remains applicable as the basis of GRT for banks in taxable year 1996.
On October 17, 2006, the CA issued a Resolution9 denying petitioner’s motion for reconsideration on the ground that no new or compelling reason was presented by petitioner to warrant the reversal or modification of its decision.
In essence, the issue to be resolved is whether the 20% final tax withheld on a bank’s passive income should be included in the computation of the GRT.
Petitioner avers that the 20% final tax withheld on its passive income should not be included in the computation of its taxable gross receipts. It insists that the CA erred in ruling that it failed to show the legal basis for its claimed tax refund or credit, since Section 4 (e) of RR No. 12-80 categorically provides for the exclusion of the amount of taxes withheld from the computation of gross receipts for GRT purposes.
In a catena of cases, this Court has already resolved the issue of whether the 20% final withholding tax should form part of the total gross receipts for purposes of computing the GRT.
The gross receipts tax on banks was first imposed on 1 October 1946 by Republic Act No. 39 (“RA No. 39”) which amended Section 249 of the Tax Code of 1939. Interest income on banks, without any deduction, formed part of their taxable gross receipts. From October 1946 to June 1977, there was no withholding tax on interest income from bank deposits.
On 3 June 1977, Presidential Decree No. 1156 required the withholding at source of a 15% tax on interest on bank deposits. This tax was a creditable, not a final withholding tax. Despite the withholding of the 15% tax, the entire interest income, without any deduction, formed part of the bank’s taxable gross receipts. On 17 September 1980, Presidential Decree No. 1739 made the withholding tax on interest a final tax at the rate of 15% on savings account, and 20% on time deposits. Still, from 1980 until the Court of Tax Appeals decision in Asia Bank on 30 January 1996, banks included the entire interest income, without any deduction, in their taxable gross receipts.
Subsequently, the Court of Tax Appeals reversed its ruling in Asia Bank. In Far East Bank & Trust Co. v. Commissioner and Standard Chartered Bank v. Commissioner, both promulgated on 16 November 2001, the tax court ruled that the final withholding tax forms part of the bank’s gross receipts in computing the gross receipts tax. The tax court held that Section 4(e) of Revenue Regulations 12-80 did not prescribe the computation of the gross receipts but merely authorized “the determination of the amount of gross receipts on the basis of the method of accounting being used by the taxpayer.
In sum, all the aforementioned cases are one in saying that “gross receipts” comprise “the entire receipts without any deduction.” Clearly, then, the 20% final withholding tax should form part of petitioner’s total gross receipts for purposes of computing the GRT.
Also worth noting is the fact that petitioner’s reliance on Section 4 (e) of RR 12-80 is misplaced as the same was already superseded by a more recent issuance, RR No. 17-84.
Only interest paid or accrued on bank deposits, or yield from deposit substitutes declared for purposes of imposing the withholding taxes in accordance with these regulations shall be allowed as interest expense deductible for purposes of computing taxable net income of the payor.
If the recipient of the above-mentioned items of income are financial institutions, the same shall be included as part of the tax base upon which the gross receipt tax is imposed.
WHEREFORE, premises considered, the Decision dated June 16, 2006 and Resolution dated October 17, 2006 of the former Fifth Division of the Court of Appeals are hereby AFFIRMED in toto.
1 Penned by Associate Justice Roberto A. Barrios, with Associate Justices Mario L. Guariña III and Arcangelita M. Romilla-Lontok, concurring. rollo, pp. 154-158.
4 CTA Case No. 4720, January 30, 1996.
6 Id. at 41-44. (Italics in the original).
8 Id. at 156-157. (Italics in the original).
11 G.R. Nos. 146749 and 147938, June 10, 2003, 403 SCRA 634; 451 Phil. 772 (2003).
12 Id. at 643-645; at 786-788.
13 Id. at 651-659; at 793-803.
14 G.R. No. 148191, November 25, 2003, 416 SCRA 436; 462 Phil. 96 (2003).
15 Id. at 454; at 124.
16 G.R. No. 149636, June 8, 2005, 459 SCRA 638; 498 Phil. 673 (2005).
17 Id. at 649-650; at 685-686.
18 G.R. No. 147375, June 26, 2006, 492 SCRA 551; 525 Phil. 624 (2006).
19 Id. at 564; at 634-635.
20 G.R. Nos. 139786 and 140857, September 27, 2006, 503 SCRA 398; 534 Phil. 517 (2006).
21 Id. at 412-413; at 534-535.
22 Id. at 413; at 535.
23 Id. at 416; at 538.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.