Revenue v. Bank Of Commerce

SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 52706, affirming the ruling of the Court of Tax Appeals (CTA)2 in CTA Case No. 5415. The facts of the case are undisputed. 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 the said period, it paid 5% gross receipts tax on its income, as reflected in its quarterly percentage tax returns. Included therein were the respondent bank's passive income from the said investments amounting to ₱85,384,254.51, which had already been subjected to a final tax of 20%. Meanwhile, on January 30, 1996, the CTA rendered judgment in Asia Bank Corporation v. Commissioner of Internal Revenue, CTA Case No. 4720, holding 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 Section 4(e) of Revenue Regulations (Rev. Reg.) No. 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 ₱853,842.54, computed as follows: Gross receipts subjected to Final Tax Derived from Passive Investment ₱85,384,254.51 x 20%