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Corporation Law My Digest
Corporation Law My Digest
Issues:
1. W/ RR No. 6-66 or RR No. 15-2000 is the applicable law
Ruling:
1. There is no doubt that prior to the issuance of Revenue Regulations No. 15-2002 which became effective
on October 26, 2002, the prevailing rule then for the purpose of computing common carriers tax was
Revenue Regulations No. 6-66.
a. While the petitioners interpretation has been vindicated by the new rules which compute gross
revenues based on the actual amount received by the airline company as reflected on the plane
ticket, this does not change the fact that during the relevant taxable period involved in this
case, it was Revenue Regulations No. 6-66 that was in effect.
b. because tax laws, including rules and regulations, operate prospectively unless otherwise
legislatively intended by express terms or by necessary implication.
c. RR promulgated by the Secretary of Finance, who has been granted the authority to do so by
Section 244 of the NIRC, "deserve to be given weight and respect by the courts in view of the
rule-making authority given to those who formulate them and their specific expertise in their
respective fields." The Court cannot be compelled to set aside its decisions, unless there is a
finding that the questioned decision is not supported by substantial evidence or there is a
showing of abuse or improvident exercise of authority.
d. Tax refunds partake the nature of tax exemptions which are a derogation of the power of
taxation of the State. Consequently, they are construed strictly against a taxpayer and liberally in
favor of the State. Regrettably, the petitioner in the case at bench failed to unequivocally prove
that it is entitled to a refund.
China Banking v CIR
Facts:
1. CBC is a universal banking corporation organized and existing under Philippine law.
2. CBC paid P12,354,933.00 as gross receipts tax in 1994.
3. On 2006 CTA in Asian Bank Corporation v. Commissioner of Internal Revenue ruled that the 20% final
withholding tax on a bank’s passive interest income does not form part of its taxable gross receipts.
4. CBC now claims for tax refund or credit of P1,140,623.82 from the P12,354,933.00 gross receipts tax that
CBC paid.
5. Citing Asian Bank, CBC argued that it was not liable for the gross receipts tax on the sums withheld by the
Bangko Sentral ng Pilipinas as final withholding tax on CBC’s passive interest income in 1994.
6. Commissioner claims
a. that CBC paid the gross receipts tax pursuant to Section 119 (now Section 121) of the NIRC.
b. that the final withholding tax on a bank’s interest income forms part of its gross receipts in
computing the gross receipts tax.
c. the term “gross receipts” means the entire income or receipt, without any deduction.
7. Ruling of CTA
a. CTA ruled in favor of CBC and held that 20% Final withholding tax on interest income does not
form part of CBC’s taxable gross income based on the Asian Bank ruling.
8. Ruling of CA
a. CA affirmed the CTA ruling
Issues:
Whether the 20% final withholding tax on interest income should form part of CBC’s gross receipts in
computing the gross receipts tax on banks?
Ruling:
The amount of interest income withheld in payment of the 20% final withholding tax forms part of CBC’s
gross receipts in computing the gross receipts tax on banks.
a. Definition of Gross Receipts
The Tax Code does not define the term “gross receipts” for purposes of the gross
receipts tax on banks. Absent a statutory definition, the BIR has applied the term in its
plain and ordinary meaning.
In ordinary terms “gross receipts” means the entire receipts without any deduction.
Deducting any amount from the gross receipts changes the result, and the meaning, to
net receipts. Any deduction from gross receipts is inconsistent with a law that
mandates a tax on gross receipts, unless the law itself makes an exception.
Under Revenue Regulations Nos. 12-80 and 17-84, as well as in several numbered
rulings, the BIR has consistently ruled that the term “gross receipts” does not admit of
any deduction. The interpretation has yet to be changed until the present tax code. The
legislature has adopted the BIR’s interpretation, following the principle of legislative
approval by re-enactment.
The tax code does not define for gross receipts except for the amusement tax which is
also a business tax. It defines it as it “embraces all receipts of the proprietor, lessee or
operator of the amusement place.” The Tax Code further adds that “*s+aid gross receipts
also include income from television, radio and motion picture rights, if any.” This
definition merely confirms that the term “gross receipts” embraces the entire receipts
without any deduction or exclusion, as the term is generally and commonly
understood.