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    China Banking Corporation v. CA

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    amareia yap
    1. China Banking Corporation paid gross receipts tax on its income, including interest income that was subject to a 20% final withholding tax. CBC argued it should not pay gross receipts tax on the amounts withheld, citing a previous case. 2. The Court of Tax Appeals initially ruled in CBC's favor, but the Supreme Court reversed. The Court found that the amounts withheld for the final tax constitute income for CBC and form part of its gross receipts. Actual receipt of income includes constructive receipt. 3. The Court also found there was no double taxation, as the gross receipts tax and final withholding tax are different types of taxes imposed by different sections of the Tax Code.

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    China Banking Corporation v. CA

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    amareia yap
    90 views3 pages
    1. China Banking Corporation paid gross receipts tax on its income, including interest income that was subject to a 20% final withholding tax. CBC argued it should not pay gross receipts tax on the amounts withheld, citing a previous case. 2. The Court of Tax Appeals initially ruled in CBC's favor, but the Supreme Court reversed. The Court found that the amounts withheld for the final tax constitute income for CBC and form part of its gross receipts. Actual receipt of income includes constructive receipt. 3. The Court also found there was no double taxation, as the gross receipts tax and final withholding tax are different types of taxes imposed by different sections of the Tax Code.

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    1. China Banking Corporation paid gross receipts tax on its income, including interest income that was subject to a 20% final withholding tax. CBC argued it should not pay gross receipts tax on the amounts withheld, citing a previous case. 2. The Court of Tax Appeals initially ruled in CBC's favor, but the Supreme Court reversed. The Court found that the amounts withheld for the final tax constitute income for CBC and form part of its gross receipts. Actual receipt of income includes constructive receipt. 3. The Court also found there was no double taxation, as the gross receipts tax and final withholding tax are different types of taxes imposed by different sections of the Tax Code.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    90 views3 pages

    China Banking Corporation v. CA

    Uploaded by

    amareia yap
    1. China Banking Corporation paid gross receipts tax on its income, including interest income that was subject to a 20% final withholding tax. CBC argued it should not pay gross receipts tax on the amounts withheld, citing a previous case. 2. The Court of Tax Appeals initially ruled in CBC's favor, but the Supreme Court reversed. The Court found that the amounts withheld for the final tax constitute income for CBC and form part of its gross receipts. Actual receipt of income includes constructive receipt. 3. The Court also found there was no double taxation, as the gross receipts tax and final withholding tax are different types of taxes imposed by different sections of the Tax Code.

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    © All Rights Reserved
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    1*China Banking Corporation v.

    CA

    CHINA BANKING CORPORATION vs. COURT OF APPEALS

    G.R. No. 146749; June 10, 2003

    FACTS:
    Petitioner paid P12,354,933.00 as gross receipts tax on its income from interests on
    loan investments, commissions, services, collection charges, foreign exchange profits
    and other operating earnings during the second quarter of 1994. Citing Asian
    Bank, Petitioner argued that it was not liable for the gross receipts tax - amounting
    to P1,140,623.82 - on the sums withheld by the Bangko Sentral ng Pilipinas as final
    withholding tax on its passive interest income in 1994.

    Disputing Petitioner’s claim, the Commissioner asserted that Petitioner paid the gross
    receipts tax pursuant to Section 119 (now Section 121) of the National Internal
    Revenue Code ("Tax Code") and pertinent Bureau of Internal Revenue ("BIR")
    regulations. Further it argued that the final withholding tax on a bank’s interest
    income forms part of its gross receipts in computing the gross receipts
    tax. Contending that the term "gross receipts" means the entire income or receipt,
    without any deduction.

    The Court of Tax Appeals ruled in favor of Petitioner and held that the 20% final
    withholding tax on interest income does not form part of CBC’s taxable gross
    receipts.

    ISSUE:
    a. WON the 20% final withholding tax on interest income should form part of CBC’s
    gross receipts in computing the gross receipts tax on banks.
    b. WON there is double taxation
    HELD:

    a. Yes. The concept of a withholding tax on income obviously and necessarily


    implies that the amount of the tax withheld comes from the income earned by the
    taxpayer. Since the amount of the tax withheld constitutes income earned by the
    taxpayer, then that amount manifestly forms part of the taxpayer’s gross receipts.
    Because the amount withheld belongs to the taxpayer, he can transfer its ownership
    to the government in payment of his tax liability. The amount withheld indubitably
    comes from income of the taxpayer, and thus forms part of his gross receipts.

    Actual receipt of interest income is not limited to physical receipt. Actual receipt may
    either be physical receipt or constructive receipt. When the depository bank
    withholds the final tax to pay the tax liability of the lending bank, there is prior to
    the withholding a constructive receipt by the lending bank of the amount withheld.
    From the amount constructively received by the lending bank, the depository bank
    deducts the final withholding tax and remits it to the government for the account of
    the lending bank. Thus, the interest income actually received by the lending bank,
    both physically and constructively, is the net interest plus the amount withheld as
    final tax.

    b. No. There is no double taxation when Section 121 of the Tax Code imposes a
    gross receipts tax on interest income that is already subjected to the 20% final
    withholding tax under Section 27 of the Tax Code. The gross receipts tax is a
    business tax under Title V of the Tax Code, while the final withholding tax is an
    income tax under Title II of the Code. There is no double taxation if the law imposes
    two different taxes on the same income, business or property.

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