Asianbank Corp. vs.

CIR
503 Scra 398 (G.R. No. 140857) (Income Tax Law)
-ANM Cabreros-

Facts:
Sometime in 1994 Citytrust, a domestic corporation engaged in quasi-banking activities reported its total
gross receipts and paid its 5% Gross Receipts Tax (GRT).
Meanwhile, in the case of Asianbank Corp. vs. CIR dated January of 1996, CTA ruled that the 20% Final
Withholding tax (FWT) on a banks passive income does not form part of the taxable gross receipts.
So inspired by the said ruling of CTA, on July 1996 Citytrust filed with the Commissioner a written claim for
the tax refund or credit. They contend that its reported total gross receipts included the 20% FWT on its passive
income. They sought to be reimbursed of the 5% GRT it paid on the portion of 20% FWT. CTA granted the Citytrust
petition. CIR appealed but CA affirmed CTAs decision citing the ruling on Manila Jockey Club that monies or
receipts do not redound to the benefit of the tax payers are not part of its gross receipts for the purpose of
computing its taxable gross receipts.
Accordingly, the 20% FWT withheld against Citytrusts positive income was already remitted to BIR. To
include the same to respondents gross receipts for the year 1994 would be to tax twice the passive income
derived by respondent for the said year which would constitute double taxation.
At the present case of Asiabank Corp. vs. CIR; Unsatisfied with the CTA decision granting herein
petitioners claim for refund of the overpaid GRT, CIR filed with CA a petition for review. This time CA reversed the
CTA decision. Hence this consolidated petition by Citytrust and Asiabank against CIR.
Issue: Whether or not the 20% FWT on a banks interest income forms part of the taxable gross receipts for the
purpose of computing the 5% GRT.
Held: Court ruled 20% FWT is excluded.
Citing relevant case(s) such as Chinabanking Corp. vs. CA, court defined gross receipts as the entire
receipts without any deduction. Tax code does not provide for its definition.
Citytrust and Asiabank simply anchor their argument on sec. 4(e) of the Revenue Regulations No. 12-80
stating that 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. SC affirmed in toto the decision of CA in the case of Asiabank.
While it is true that revenue regulation No. 12-80 provides that the GRT on bank and other financial
institutions should be based on all items on income actually received, receipt may be actual or constructive.
Actual receipt here is used in opposition to mere accrual. Accrued income refers to income already earned but not
yet received. The 20% FWT withheld from interest income of banks and other similar institutions is not the income
that they have not received; it is simply withheld from them and paid the government for their benefit.
In CIR vs. Citytrust, court granted CIR petition. (The decision adopted by CA from the previous Asiabank
CTA decision was reversed.)