CIR VS BANK OF COMMERCE In 1994 and 1995, the respondent Bank of Commerce derived passive income in the form

of interests or discounts from its investments in government securities and private commercial papers. On several occasions during that period, it paid 5% gross receipts tax on its income. Included therein were the respondent banks passive income from the said investments amounting to P85M+, which had already been subjected to a final tax of 20%. Meanwhile, CTA held in the Case ASIA BANK CORP. VS CIR, that the 20% final withholding tax on interest income from banks does not form part of taxable gross receipts for Gross Receipts Tax (GRT) purposes. The CTA relied on Sec 4(e) of Revenue Regulations.12-80. Relying on the said decision, the respondent bank filed an administrative claim for refund with the Commissioner of Internal Revenue on July 19, 1996. It claimed that it had overpaid its gross receipts tax for 1994 to 1995 by P853K+ submitted its own computation Before the Commissioner could resolve the claim, the respondent bank filed a petition for review with the CTA CIR ANSWERED: The alleged refundable/creditable gross receipts taxes were collected and paid pursuant to law and pertinent BIR implementing rules and regulations; hence, the same are not refundable. Petitioner must prove that the income from which the refundable/creditable taxes were paid from, were declared and included in its gross income during the taxable year under review; That the alleged excessive payment does automatically warrant the refund/credit Claims for tax refund/credit are construed in strictissimi juris against the taxpayer as it partakes the nature of an exemption from tax and it is incumbent upon the petitioner to prove that it is entitled thereto under the law. Otherwise refund will not be allowed.

CTA summarized the issues: WON the final income tax withheld should form part of the gross receipts of the taxpayer for GRT purposes; WON the respondent bank was entitled to a refund of P853,842.54.

RESPONDENT BANKs contends: that for purposes of computing the 5% gross receipts tax, the final withholding tax does not form part of gross receipts CIR contends: that the Court defined "gross receipts" as "all receipts of taxpayers excluding those which have been especially earmarked by law or regulation for the government or some person other than the taxpayer" in CIR v. Manila Jockey Club, Inc.,7 he claimed that such definition was applicable only to a proprietor of an amusement place, not a banking institution which is an entirely different entity altogether. As such, according to the Commissioner, the ruling of the Court in Manila Jockey Club was inapplicable. CTA HELD: - ORDERED to REFUND in favor of petitioner Bank of Commerce the amount of P355k+ representing validly proven erroneously withheld taxes from interest income derived from its investments in government securities for the years 1994 and 1995. - relied on the ruling in Manila Jockey Club, and held that the term "gross receipts" excluded those which had been especially earmarked by law or regulation for the government or persons other than the taxpayer. CIR filed for petition for review with CA alleging that:

There is no provision of law which excludes the 20% final income tax withheld under Section 50(a) of the Tax Code in the computation of the 5% gross receipts tax. - that the ruling of this Court in Manila Jockey Club, which was affirmed in Visayan Cebu Terminal Co., Inc. v. Commissioner of Internal Revenue,14 is not decisive. He averred that the factual milieu in the said case is different, involving as it did the "wager fund." - The Commissioner further pointed out that in Manila Jockey Club, the Court ruled that the race tracks commission did not form part of the gross receipts, and as such were not subjected to the 20% amusement tax. - the issue in Visayan Cebu Terminal was whether or not the gross receipts corresponding to 28% of the total gross income of the service contractor delivered to the Bureau of Customs formed part of the gross receipts was subject to 3% of contractors tax under Section 191 of the Tax Code. On the other hand, resp Bank was a banking institution and not a contractor. The petitioner insisted that the term "gross receipts" is self-evident; it includes all items of income of the respondent bank regardless of whether or not the same were allocated or earmarked for a specific purpose, to distinguish it from net receipts. CA rendered judgment dismissing the petition. - CA held that the P17,076,850.90 representing the final withholding tax derived from passive investments subjected to final tax should not be construed as forming part of the gross receipts of the respondent bank upon which the 5% gross receipts tax should be imposed. - That the final withholding tax was a trust fund for the government; hence, does not form part of the respondents gross receipts. The legal ownership of the amount had already been vested in the government. - That subjecting the Final Withholding Tax (FWT) to the 5% of gross receipts tax would result in double taxation. - In favor of resp Bank. Hence the petition by CIR THE COURT OF APPEALS ERRED IN HOLDING THAT THE 20% FINAL WITHHOLDING TAX ON BANKS INTEREST INCOME DOES NOT FORM PART OF THE TAXABLE GROSS RECEIPTS IN COMPUTING THE 5% GROSS RECEIPTS TAX ISSUE: IS THERE DOUBLE TAXATION? HELD: SC reverse the ruling of the CA that subjecting the Final Withholding Tax (FWT) to the 5% of gross receipts tax would result in double taxation.

In CIR v. Solidbank CorporatioN, SC said that the two taxes, subject of this litigation, are different from each other. The basis of their imposition may be the same, but their natures are different. NO DOUBLE TAXATION

Double taxation means taxing the same property twice when it should be taxed only once; that is, "xxx taxing the same person twice by the same jurisdiction for the same thing." It is obnoxious when the taxpayer is taxed twice, when it should be but once. Otherwise described as "direct duplicate taxation," the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and they must be of the same kind or character. First, the taxes herein are imposed on two different subject matters. The subject matter of the FWT is the passive income generated in the form of interest on deposits and yield on deposit substitutes, while the subject matter of the GRT is the privilege of engaging in the business of banking.

A tax based on receipts is a tax on business rather than on the property; hence, it is an excise rather than a property tax. It is not an income tax, unlike the FWT. In fact, we have already held that one can be taxed for engaging in business and further taxed differently for the income derived therefrom. Akin to our ruling in Velilla v. Posadas, these two taxes are entirely distinct and are assessed under different provisions. Second, although both taxes are national in scope because they are imposed by the same taxing authority the national government under the Tax Code and operate within the same Philippine jurisdiction for the same purpose of raising revenues, the taxing periods they affect are different. The FWT is deducted and withheld as soon as the income is earned, and is paid after every calendar quarter in which it is earned. On the other hand, the GRT is neither deducted nor withheld, but is paid only after every taxable quarter in which it is earned. Third, these two taxes are of different kinds or characters. The FWT is an income tax subject to withholding, while the GRT is a percentage tax not subject to withholding. In short, there is no double taxation, because there is no taxing twice, by the same taxing authority, within the same jurisdiction, for the same purpose, in different taxing periods, some of the property in the territory. Subjecting interest income to a 20% FWT and including it in the computation of the 5% GRT is clearly not double taxation.