DIGEST/ ALBERTINE DIN/Commissioner v Solidbank G.R. No. 148191 November 25, 2003

 Generally stated, an excise tax is one that is imposed on the performance of an act, the engagement in an occupation, or the enjoyment of a privilege; and the word has come to have a broader meaning that includes every form of taxation not a burden laid directly on persons or property.

 

Commissioner of Internal Revenue v Solidbank Corporation

(G.R. No. 148191 November 25, 2003)

Facts:

The Tax Code provides for the following tax for banks:

 

1.     5% Gross Receipts Tax (GRT) on their gross receipts, including passive income

2.     20% Final Withholding Tax (FWT) on their passive income, withheld at source and not physically received by banks

 

For calendar year 1995, Solidbank paid 5% of their Php 1.4B Gross Receipts as Gross Receipts Tax (GRT) which is Php 73M. They also say that the Php 1.4B Gross Receipts already included the Php 350M which forms part of their passive income. The Php 350M has already been subjected to 20% Final Withholding Tax (FWT).

 

In January 1996, the Asian Bank Corp. v. Commissioner of Internal Revenue decision was promulgated, providing that 20% FWT on a bank’s interest income should not form part of its taxable gross receipts for purposes of computing the GRT.

 

            In June 1997, Solidbank requested BIR for a refund of the allegedly overpaid GRT amounting to Php 3.5M.

 

Issue: W/N Whether or not the 20% FWT on a bank’s interest income forms part of the taxable gross receipts in computing the 5% GRT

 

Held: Petition is granted

 

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.

 

Double taxation means taxing the same property twice when it should be taxed only once; that is, "x x x taxing the same person twice by the same jurisdiction for the same thing."117 It is obnoxious when the taxpayer is taxed twice, when it should be but once.118 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.

 

A tax based on receipts such as the 5% GRT is a tax on business rather than on the property; hence, it is an excise121 rather than a property tax.122 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.123 Akin to our ruling in Velilla v. Posadas,124 these two taxes are entirely distinct and are assessed under different provisions.

 

The fact that the amount redounded to the bank’s benefit makes it part of the taxable gross receipts in computing the 5% GRT.

 

The 5% GRT is imposed by the Tax Code and it is included under "Title V. Other Percentage Taxes" of the Tax Code and is not subject to withholding. On the other hand, 20% FWT falls under "Title II. Tax on Income." It is a tax on passive income, deducted and withheld at source by the payor-corporation and/or person as withholding agent pursuant to Section 50, and paid in the same manner and subject to the same conditions as provided for in Section 51.

A perusal of these provisions clearly shows that two types of taxes are involved in the present controversy: (1) the GRT, which is a percentage tax; and (2) the FWT, which is an income tax. As a bank, petitioner is covered by both taxes.

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