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PHILIPPINE NATIONAL BANK, Petitioner, |
G.R. No. 158175 |
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- versus - |
Present: Quisumbing,
j., Chairperson, Carpio, Carpio Morales, Tinga, and Velasco, JR., jj. |
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COMMISSIONER OF INTERNAL REVENUE, Respondent. |
Promulgated: |
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QUISUMBING, J.:
Before us is a petition
for review on certiorari assailing the Decision[1]
dated May 12, 2003 of the Court of Appeals in CA-G.R. S.P. No. 58230, which had
reversed both the Decision[2]
and Resolution[3]
dated January 26, 2000 and March 21, 2000, respectively, of the Court of Tax
Appeals (CTA) in C.T.A. Case No. 5406, entitled Philippine National Bank v.
Commissioner of Internal Revenue and, accordingly, denied petitioner’s
claim for tax refund.
The facts are undisputed.
For the eight taxable
quarters for the period
On July 19, 1996,
petitioner filed amended Quarterly Percentage Tax Returns for the said taxable
quarters excluding the 20% FWT, invoking CTA Case No. 4720, entitled Asian
Bank Corporation v. Commissioner of Internal Revenue, promulgated on
January 30, 1996, wherein the tax court ruled that the 20% FWT on interest
income should not form part of the bank’s taxable gross receipts for GRT
purposes. Petitioner’s amended Quarterly
Percentage Tax Returns reflected a lesser amount of taxable gross receipts
resulting to an overpayment of GRT of P17,504,775.48,
to wit:
Period Covered Tax Due Per Tax Due
Per Overpayment
(Quarter
– End) Original
Return Amended Return For
Refund
P]107,483,285.27 [P] 105,127,122.33 [P] 2,356,162.94
TOTAL P 981,421,203.69*
[P] 963,916,518.21 [P]
17,504,775.48[5]
Simultaneous
with the filing of the amended Quarterly Percentage Tax Returns, petitioner
also filed a written claim for tax refund or credit of P17,504,775.48 with the Commissioner of Internal Revenue and a
petition for review with the CTA in order to toll the running of the two-year
prescriptive period to judicially claim for the refund of overpaid GRT for the
taxable quarters ending June 30, 1994 and September 30, 1994.
On
WHEREFORE, in view of the foregoing,
the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, Respondent [Commissioner of
Internal Revenue] is hereby ORDERED to ISSUE a TAX CREDIT CERTIFICATE
in the amount of P13,785,413.38 to
the petitioner [Philippine National Bank] immediately.
SO ORDERED.[6]
Respondent sought
reconsideration, but it was denied. On
WHEREFORE, the assailed [decision and
resolution] of the Court of Tax Appeals dated…
SO ORDERED.[7]
Hence, this instant
petition, raising the following as issues:
I.
WHETHER OR NOT [COMM.] OF INTERNAL REVENUE VS. MANILA JOCKEY CLUB, [INC.] (108 PHIL. 821) IS APPLICABLE IN RESOLVING THE ISSUE OF WHETHER OR NOT THE 20% FINAL WITHHOLDING TAX ON THE BANK’S INTEREST INCOME SHOULD FORM PART OF TAXABLE GROSS RECEIPTS.
II.
WHETHER OR NOT CTA RULINGS SHOULD BE DISTURBED[,]
BEING A COURT OF SPECIAL JURISDICTION.[8]
Simply stated, the issues
are: (1) Does
the 20% FWT on interest income form part of the taxable gross receipts in
computing the 5% GRT on banks? (2) Is Comm. of Internal Revenue v.
According to petitioner, the 20% FWT on interest income
should be excluded from petitioner’s taxable gross receipts for GRT purposes
because under Section 51(g)[10]
(now Section 58A) of the 1977 National Internal Revenue Code (Tax Code), as
amended and Section 7(a)[11]
of Revenue Regulations No. 12-80,[12]
taxes withheld are merely held in trust for the government. Citing Section 4(e)[13]
of Revenue Regulations No. 12-80, petitioner likewise avers that the FWT never
formed part of its income because it does not actually receive such
amount. Petitioner also invokes Manila
Jockey Club, Inc., where we ruled
that “gross receipts of the proprietor of the amusement place should not
include any money which although delivered to the amusement place has been
especially earmarked by law or regulation for some person other than the
proprietor.”[14] Finally, petitioner avers that the CTA, being
a court of special jurisdiction, its findings and conclusions should not be
disturbed and must be respected.
On the other hand, respondent contends that Manila Jockey
Club, Inc. is not applicable, but what should be applicable is China
Banking Corporation v. Court of Appeals,[15]
where we ruled that the 20% FWT on interest income should form part
of the bank’s taxable gross receipts.
The issues raised herein are not novel. In a catena of cases,[16]
we categorically ruled that the 20% FWT on a bank’s interest income forms part
of the taxable gross receipts for purposes of computing the 5% GRT.[17] The 5% GRT, as imposed by Section 119 (now
Section 121)[18]
of the Tax Code, by its nature applies to all the receipts without any
deduction, unless otherwise provided by law.
Any deduction, exemption or exclusion from gross receipts is
inconsistent with the policy of the law and is not normally allowed in a gross receipts
tax, to maintain simplicity in tax collection, and to assure a steady source of
state revenue even during periods of economic slowdown.[19] It also changes the result and meaning of
gross receipts to net receipts.[20]
Petitioner asserts that under Section 51(g) of the Tax Code
and Section 7(a) of Revenue Regulations No. 12-80, taxes withheld are merely
held in trust for the government. This
assertion, however, does not suffice.
The fact that the FWT is a special trust fund for the government does not
justify its exclusion from the computation of interest income subject to GRT.[21] The concept of a withholding tax on income
necessarily implies that the amount of tax withheld comes from the income
earned by the taxpayer. Because the
amount withheld belongs to him, he can transfer its ownership to the government
in payment of its tax liability.[22] This constitutes payment which would
extinguish a bank’s obligation to the government. The bank can only pay the money it owns, or
the money it is authorized to pay.[23]
Petitioner also contends that under Section 4(e) of Revenue
Regulations No. 12-80, the amount of taxes withheld cannot be considered as
actually received by the bank, hence, the same must be
excluded from the taxable gross receipts.
This argument is bereft of merit.
Revenue Regulations No. 12-80 had been superseded on
Also, the Manila Jockey Club, Inc. does not apply in
this case. There we held that the term
“gross receipts” shall not include money which, although delivered, has been
especially earmarked by law or regulation for some person other than the
taxpayer.[28] What happened in Manila Jockey Club, Inc. is
earmarking and not withholding.
Earmarking is different from withholding. Amounts earmarked, whether delivered or
received, do not form part of gross receipts, because these are by law or
regulation reserved for some person other than the taxpayer. On the contrary, amounts withheld form part
of gross receipts because these are in the constructive possession of the
income earner and not subject to any reservation, the withholding agent, being
merely, a conduit in the collection process.[29]
Now, petitioner avers that CTA rulings should not be
disturbed, the CTA being a court of special jurisdiction. This, however, is
only the general rule. CTA rulings will
generally not be disturbed on appeal as long as the CTA does not commit gross
error in the appreciation of facts.[30] But in this case, the CTA, like in China
Banking Corporation, relied erroneously on Manila Jockey Club, Inc., thus, its pronouncement that the
20% FWT on interest income of banks should not form part of the taxable gross
receipts subject to GRT cannot be sustained.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated
SO ORDERED.
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LEONARDO A. QUISUMBING Associate Justice |
WE CONCUR:
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ANTONIO T. CARPIO Associate Justice |
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CONCHITA CARPIO MORALES Associate Justice |
DANTE O. TINGA Associate Justice |
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PRESBITERO J. VELASCO, JR. Associate Justice |
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A T T E S T A T I O N
I
attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
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LEONARDO A. QUISUMBING Associate Justice Chairperson |
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
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REYNATO S. PUNO Chief Justice |
[1] Rollo,
pp. 43-60. Penned by Associate Justice Salvador J. Valdez,
Jr., with Associate Justices Bienvenido L. Reyes and Danilo B. Pine concurring.
[2]
[3]
[4] Imposed by
Section 119 (now Section 121) of the National Internal Revenue Code.
SEC. 121. Tax on Banks and Non-bank Financial Intermediaries. –
There shall be collected a tax on gross receipts derived from sources
within the
(a) On interest, commissions
and discounts from lending activities as well as income from financial leasing,
on the basis of remaining maturities of instruments from which such receipts
are derived:
Short-term maturity (not in
excess of two [2] years) 5%
Medium-term maturity (over
two
[2] years but not exceeding
four [4] years) 3%
Long-term maturity –
(1) Over four (4) years
but not exceeding seven (7) years
1%
(2)
Over seven (7) years 0%
(b) On
dividends 0%
(c) On
royalties, rentals of property,
real or personal, profits from exchange
and all other items treated as gross income
under Section 32 of this Code 5%
Provided, however, That in case the maturity period referred to in paragraph (a) is
shortened thru pretermination, then the maturity
period shall be reckoned to end as of the date of pretermination
for purposes of classifying the transaction as short, medium or long-term and
the correct rate of tax shall be applied accordingly.
Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar banking activities.
*
Total should be P981,421,293.69.
[5] Rollo,
p. 167.
[6]
[7]
[8]
[9] 108 Phil. 821 (1960).
[10] SEC. 51. Returns and payment of taxes withheld at source. – …
x x x x
(g) All taxes withheld pursuant to the provisions of this Code and its implementing regulations are hereby considered trust funds and shall be maintained in a separate account and not commingled with any other funds of the withholding agent.
x x x x
[11] SEC. 7. Nature and Treatment of Taxes Imposed Under
These Regulations –
(a) All withholding taxes deducted and withheld by
the withholding agent in accordance with these regulations shall be held as a
special fund in trust for the government until paid to the collecting officer.
x
x x x
[12] Taxation
of Certain Income Derived from Banking Activities, issued on
[13] Section 4. Manner of Computation of Tax
Base. – …
x
x x x
(e) Gross receipts tax on banks, non-bank financial intermediaries, financing companies, and other non-bank financial intermediaries not performing quasi-banking activities. – The rates of taxes to be imposed on the gross receipts of such financial institutions shall be based on all items of income actually received. Mere accrual shall not be considered, but once payment is received on such accrual or in cases of prepayment, then the amount actually received shall be included in the tax base of such financial institutions, as provided hereunder: (Emphasis supplied.)
x x x x
[14] Supra at 825-826.
[15] G.R. Nos. 146749 and 147938,
[16] Commissioner of Internal Revenue v. Citytrust Investment Phils., Inc., G.R. Nos. 139786 and
140857, September 27, 2006, 503 SCRA 398; Commissioner of Internal Revenue
v. Bank of Commerce, G.R. No. 149636, June 8, 2005, 459 SCRA 638; Commissioner
of Internal Revenue v. Bank of the Philippine Islands, G.R. No. 147375,
June 26, 2006, 492 SCRA 551; Commissioner of Internal Revenue v. Solidbank Corporation, G.R. No. 148191, November 25,
2003, 416 SCRA 436; China Banking Corporation v. Court of Appeals,
supra.
[17] China Banking Corporation v. Court of Appeals, supra at 642.
[18]
Supra note 4.
[19] China Banking Corporation v. Court of Appeals, supra at 652.
[20]
[21] Commissioner of Internal Revenue v. Bank of Commerce, supra at 651.
[22]
[23] Supra note 21.
[24] Income Taxation of Interest Derived from Bank Deposits and Yield from Deposit Substitutes.
[25] SEC. 7. Nature and Treatment of Interest on
Deposits and Yield on Deposit Substitutes –
x x x x
c. 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.
[26] Commissioner
of Internal Revenue v. Citytrust Investment Phils.,
Inc., supra note 16, at 412.
[27] Commissioner of Internal Revenue v. Bank of Commerce, supra note 21, at 653.
[28] Commissioner of
Internal Revenue v. Solidbank Corporation, supra
note 16, at 453.
[29] Commissioner of Internal Revenue v. Citytrust Investment Phils., Inc., supra note 16, at 415.
[30] Commissioner of Internal Revenue v.
Court of Appeals, G.R. No. 124043, October 14, 1998, 298 SCRA 83, 91.