FIRST DIVISION
COMMISSIONER OF
INTERNAL
REVENUE,
Petitioner,
G.R.
No.
148191
November 25, 2003
-versus-
SOLIDBANK
CORPORATION,
Respondent.
D E C I S I O N
PANGANIBAN,
J.:
Under the Tax Code,
the earnings of banks from "passive" income are subject to a twenty
percent
final withholding tax (20% FWT). This tax is withheld at source and is
thus not actually and physically received by the banks, because it is
paid
directly to the government by the entities from which the banks derived
the income. Apart from the 20% FWT, banks are also subject to a five
percent
gross receipts tax (5% GRT) which is imposed by the Tax Code on their
gross
receipts, including the "passive" income.chanrobles virtuallaw libraryred
Since the 20% FWT is
constructively received by the banks and forms part of their gross
receipts
or earnings, it follows that it is subject to the 5% GRT. After all,
the
amount withheld is paid to the government on their behalf, in
satisfaction
of their withholding taxes. That they do not actually receive the
amount
does not alter the fact that it is remitted for their benefit in
satisfaction
of their tax obligations.chanrobles virtuallaw libraryred
Stated otherwise, the
fact is that if there were no withholding tax system in place in this
country,
this 20 percent portion of the "passive" income of banks would actually
be paid to the banks and then remitted by them to the government in
payment
of their income tax. The institution of the withholding tax system does
not alter the fact that the 20 percent portion of their "passive"
income
constitutes part of their actual earnings, except that it is paid
directly
to the government on their behalf in satisfaction of the 20 percent
final
income tax due on their "passive" incomes.chanrobles virtuallaw libraryred
The Case
Before us is a Petition
for Review[1]
under Rule 45 of the Rules of Court, seeking to annul the July 18, 2000
Decision[2]
and the May 8, 2001 Resolution[3]
of the Court of Appeals[4]
(CA) in CA-GR SP No. 54599. The decretal portion of the assailed
Decision
reads as follows:chanrobles virtuallaw libraryred
"WHEREFORE,
we AFFIRM in toto the assailed decision and resolution of the Court of
Tax Appeals."[5]
The challenged
Resolution
denied petitioner's Motion for Reconsideration. The Facts
Quoting petitioner,
the CA[6]
summarized the facts of this case as follows:
"For the
calendar
year 1995, [respondent] seasonably filed its Quarterly Percentage Tax
Returns
reflecting gross receipts (pertaining to 5% [Gross Receipts Tax] rate)
in the total amount of P1,474,691,693.44 with corresponding gross
receipts
tax payments in the sum of P73,734,584.60, broken down as follows:chanrobles virtuallaw libraryred
Period
Covered
Gross
Receipts
Gross Receipts Tax
January to March
1994
P
188,406,061.95
P 9,420,303.10
April to June
1994
370,913,832.70
18,545,691.63
July to September
1994
481,501,838.98
24,075,091.95
October to
December
1994
433,869,959.81
21,693,497.98
------------------------
------------------------
Total P
1,474,691,693.44
P73,734,584.60
===============
=============
"[Respondent] alleges
that
the total gross receipts in the amount of P1,474,691,693.44 included
the
sum of P350,807,875.15 representing gross receipts from passive income
which was already subjected to 20% final withholding tax.chanrobles virtuallaw libraryred
"On January 30,
1996,
the Court of Tax Appeals rendered a decision in CTA Case No. 4720
entitled
Asian Bank Corporation vs. Commissioner of Internal Revenue, wherein it
was held that the 20% final withholding tax on a bank's interest income
should not form part of its taxable gross receipts for purposes of
computing
the gross receipts tax.chanrobles virtuallaw libraryred
"On June 19, 1997,
on
the strength of the aforementioned decision, respondent filed with the
Bureau of Internal Revenue (BIR) a letter-request for the refund or
issuance
of a tax credit certificate in the aggregate amount of P3,508,078.75,
representing,
allegedly overpaid gross receipts tax for the year 1995, computed as
follows:chanrobles virtuallaw libraryred
Gross
Receipts
Subjected to the Final Tax
Derived from
Passive
Income
P350,807,875.15
Multiply by Final
Tax
rate 20%
_______________
20% Final Tax
Withheld
at
Source
P 70,161,575.03
Multiply by Gross
Receipts
Tax rate 5%
_______________
Overpaid Gross
Receipts
Tax
P 3,508,078.75
============
"Without waiting for
an
action from the petitioner, respondent on the same day filed a petition
for review with the Court of Tax Appeals in order to toll the running
of
the two-year prescriptive period to judicially claim for the refund of
any overpaid internal revenue tax, pursuant to Section 230 now 229 of
the
Tax Code, also 'National Internal Revenue Code' x
x
x.chanrobles virtuallaw libraryred
x
x
x
x x
x
x x x
"After trial on
the
merits, the Court of Tax Appeals, on August 6, 1999, rendered its
decision
ordering x x x petitioner to refund
in favor of x x x respondent the
reduced
amount of P1,555,749.65 as overpaid gross receipts tax for the year
1995.
The legal issue x x x was resolved
by the Court of Tax Appeals, with Hon. Amancio Q. Saga dissenting, on
the
strength of its earlier pronouncement in x x
x
Asian Bank Corporation vs. Commissioner of Internal Revenue
x x x , wherein it was held that the 20% final
withholding
tax on a bank's interest income should not form part of its taxable
gross
receipts for purposes of computing the gross receipts tax."[7]chanrobles virtuallaw libraryred
Ruling of
the
CA
The CA held that the
20% FWT on a bank's interest income did not form part of the taxable
gross
receipts in computing the 5% GRT, because the FWT was not actually
received
by the bank but was directly remitted to the government. The appellate
court curtly said that while the Tax Code "does not specifically state
any exemption, x x x the statute
must
receive a sensible construction such as will give effect to the
legislative
intention, and so as to avoid an unjust or absurd conclusion."[8]chanrobles virtuallaw libraryred
Hence, this appeal.[9]
Issue
Petitioner raises this
lone issue for our consideration:
"Whether or
not the 20% final withholding tax on a bank's interest income forms
part
of the taxable gross receipts in computing the 5% gross receipts tax."[10]chanrobles virtuallaw libraryred
The Court's
Ruling
The Petition is meritorious.cralaw:red
Sole Issue:
Whether the 20% FWT Forms Part of the Taxable Gross Receipts
Petitioner claims that
although the 20% FWT on respondent's interest income was not actually
received
by respondent because it was remitted directly to the government, the
fact
that the amount redounded to the bank's benefit makes it part of the
taxable
gross receipts in computing the 5% GRT. Respondent, on the other hand,
maintains that the CA correctly ruled otherwise.chanrobles virtuallaw libraryred
We agree with petitioner.
In fact, the same issue has been raised recently in China Banking
Corporation
v. CA,[11]
where this Court held that the amount of interest income withheld in
payment
of the 20% FWT forms part of gross receipts in computing for the GRT on
banks.chanrobles virtuallaw libraryred
The FWT and the GRT:
Two
Different
Taxes
The 5% GRT is
imposed
by Section 119[12]
of the Tax Code,[13]
which provides:
"SEC.
119.
Tax on banks and non-bank financial intermediaries. — There shall be
collected
a tax on gross receipts derived from sources within the Philippines by
all banks and non-bank financial intermediaries in accordance with the
following schedule:
"(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.chanrobles virtuallaw libraryred
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:chanrobles virtuallaw libraryred
(i)
Over
four (4) years but not exceeding
seven (7)
years
1%
(ii) Over
seven
(7) years 0%
"(b) On dividends
0%.chanrobles virtuallaw libraryred
"(c) On
royalties, rentals
of property, real or personal, profits from exchange and all other
items
treated as gross income under Section 28[14]
of this Code 5%.chanrobles virtuallaw libraryred
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.chanrobles virtuallaw libraryred
"Nothing in this
Code
shall preclude the Commissioner from imposing the same tax herein
provided
on persons performing similar banking activities."chanrobles virtuallaw libraryred
The 5% GRT[15]
is included under "Title V. Other Percentage Taxes" of the Tax Code and
is not subject to withholding. The banks and non-bank financial
intermediaries
liable therefor shall, under Section 125(a)(1),[16]
file quarterly returns on the amount of gross receipts and pay the
taxes
due thereon within twenty (20)[17]
days after the end of each taxable quarter.chanrobles virtuallaw libraryred
The 20% FWT,[18]
on the other hand, falls under Section 24(e)(1)[19]
of "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,[20]
and paid in the same manner and subject to the same conditions as
provided
for in Section 51.[21]chanrobles virtuallaw libraryred
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.chanrobles virtuallaw libraryred
A percentage tax
is
a national tax measured by a certain percentage of the gross selling
price
or gross value in money of goods sold, bartered or imported; or of the
gross receipts or earnings derived by any person engaged in the sale of
services.[22]
It is not subject to withholding.
An income tax, on
the
other hand, is a national tax imposed on the net or the gross income
realized
in a taxable year.[23]
It is subject to withholding.chanrobles virtuallaw libraryred
In a withholding
tax
system, the payee is the taxpayer, the person on whom the tax is
imposed;
the payor, a separate entity, acts as no more than an agent of the
government
for the collection of the tax in order to ensure its payment.
Obviously,
this amount that is used to settle the tax liability is deemed sourced
from the proceeds constitutive of the tax base.[24]
These proceeds are either actual or constructive. Both parties herein
agree
that there is no actual receipt by the bank of the amount withheld.
What
needs to be determined is if there is constructive receipt thereof.
Since
the payee — not the payor — is the real taxpayer, the rule on
constructive
receipt can be easily rationalized, if not made clearly manifest.[25] Constructive
Receipt Versus Actual Receipt
Applying Section 7 of
Revenue Regulations (RR) No. 17-84,[26]
petitioner contends that there is constructive receipt of the interest
on deposits and yield on deposit substitutes.[27]
Respondent, however, claims that even if there is, it is Section 4(e)
of
RR 12-80[28]
that nevertheless governs the situation.cralaw:red
Section 7 of RR 17-84
states:
"SEC. 7.
Nature
and Treatment of Interest on Deposits and Yield on Deposit Substitutes.
—
'(a) The
interest
earned on Philippine Currency bank deposits and yield from deposit
substitutes
subjected to the withholding taxes in accordance with these regulations
need not be included in the gross income in computing the
depositor's/investor's
income tax liability in accordance with the provision of Section 29(b),[29]
(c)[30]
and (d) of the National Internal Revenue Code, as amended.
'(b) Only
interest paid
or accrued on bank deposits, or yield from deposit substitutes declared
for purposes of imposing the withholding taxes in accordance with these
regulations shall be allowed as interest expense deductible for
purposes
of computing taxable net income of the payor.chanrobles virtuallaw libraryred
'(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
receipts
tax is imposed.'"chanrobles virtuallaw libraryred
Section 4(e) of RR
12-80,
on the other hand, states that the tax rates to be imposed on the gross
receipts of banks, non-bank financial intermediaries; financing
companies,
and other non-bank financial intermediaries not performing
quasi-banking
activities shall be based on all items of income actually received.
This
provision reads:chanrobles virtuallaw libraryred
"SEC.
4.
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 tax 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 x x x."chanrobles virtuallaw libraryred
Respondent argues that
the above-quoted provision is plain and clear: since there is no actual
receipt, the FWT is not to be included in the tax base for computing
the
GRT. There is supposedly no pecuniary benefit or advantage accruing to
the bank from the FWT, because the income is subjected to a tax burden
immediately upon receipt through the withholding process. Moreover, the
earlier RR 12-80 covered matters not falling under the later RR 17-84.[31]
We are not persuaded.cralaw:red
By analogy, we apply
to the receipt of income the rules on actual and constructive
possession
provided in Articles 531 and 532 of our Civil
Code.cralaw:red
Under Article 531:[32]
"Possession
is acquired by the material occupation of a thing or the exercise of a
right, or by the fact that it is subject to the action of our will, or
by the proper acts and legal formalities established for acquiring such
right."chanrobles virtuallaw libraryred
Article 532 states:
"Possession
may be acquired by the same person who is to enjoy it, by his legal
representative,
by his agent, or by any person without any power whatever; but in the
last
case, the possession shall not be considered as acquired until the
person
in whose name the act of possession was executed has ratified the same,
without prejudice to the juridical consequences of negotiorum gestio in
a proper case."[33]
The last means of
acquiring
possession under Article 531 refers to juridical acts — the acquisition
of possession by sufficient title — to which the law gives the force of
acts of possession.[34]
Respondent argues that only items of income actually received should be
included in its gross receipts. It claims that since the amount had
already
been withheld at source, it did not have actual receipt thereof.chanrobles virtuallaw libraryred
We clarify. Article
531 of the Civil
Code clearly provides that the acquisition of the right of
possession
is through the proper acts and legal formalities established therefor.
The withholding process is one such act. There may not be actual
receipt
of the income withheld; however, as provided for in Article 532,
possession
by any person without any power whatsoever shall be considered as
acquired
when ratified by the person in whose name the act of possession is
executed.cralaw:red
In our withholding tax
system, possession is acquired by the payor as the withholding agent of
the government, because the taxpayer ratifies the very act of
possession
for the government. There is thus constructive receipt. The processes
of
bookkeeping and accounting for interest on deposits and yield on
deposit
substitutes that are subjected to FWT are indeed — for legal purposes —
tantamount to delivery, receipt or remittance.[35]
Besides, respondent itself admits that its income is subjected to a tax
burden immediately upon "receipt," although it claims that it derives
no
pecuniary benefit or advantage through the withholding process. There
being
constructive receipt of such income — part of which is withheld — RR
17-84
applies, and that income is included as part of the tax base upon which
the GRT is imposed.chanrobles virtuallaw libraryred
RR 12-80 Superseded
by RR 17-84
We now come to the effect
of the revenue regulations on interest income constructively received.cralaw:red
In general, rules and
regulations issued by administrative or executive officers pursuant to
the procedure or authority conferred by law upon the administrative
agency
have the force and effect, or partake of the nature, of a statute.[36]
The reason is that statutes express the policies, purposes, objectives,
remedies and sanctions intended by the legislature in general terms.
The
details and manner of carrying them out are oftentimes left to the
administrative
agency entrusted with their enforcement.chanrobles virtuallaw libraryred
In the present case,
it is the finance secretary who promulgates the revenue regulations,
upon
recommendation of the BIR commissioner. These regulations are the
consequences
of a delegated power to issue legal provisions that have the effect of
law.[37]chanrobles virtuallaw libraryred
A revenue regulation
is binding on the courts as long as the procedure fixed for its
promulgation
is followed. Even if the courts may not be in agreement with its stated
policy or innate wisdom, it is nonetheless valid, provided that its
scope
is within the statutory authority or standard granted by the
legislature.[38]
Specifically, the regulation must (1) be germane to the object and
purpose
of the law;[39]
(2) not contradict, but conform to, the standards the law prescribes;[40]
and (3) be issued for the sole purpose of carrying into effect the
general
provisions of our tax laws.[41]chanrobles virtuallaw libraryred
In the present case,
there is no question about the regularity in the performance of
official
duty. What needs to be determined is whether RR 12-80 has been repealed
by RR 17-84.chanrobles virtuallaw libraryred
A repeal may be express
or implied. It is express when there is a declaration in a regulation —
usually in its repealing clause — that another regulation, identified
by
its number or title, is repealed. All others are implied repeals.[42]
An example of the latter is a general provision that predicates the
intended
repeal on a substantial conflict between the existing and the prior
regulations.[43]chanrobles virtuallaw libraryred
As stated in Section
11 of RR 17-84, all regulations, rules, orders or portions thereof that
are inconsistent with the provisions of the said RR are thereby
repealed.
This declaration proceeds on the premise that RR 17-84 clearly reveals
such an intention on the part of the Department of Finance. Otherwise,
later RRs are to be construed as a continuation of, and not a
substitute
for, earlier RRs; and will continue to speak, so far as the subject
matter
is the same, from the time of the first promulgation.[44]chanrobles virtuallaw libraryred
There are two well-settled
categories of implied repeals: (1) in case the provisions are in
irreconcilable
conflict, the later regulation, to the extent of the conflict,
constitutes
an implied repeal of an earlier one; and (2) if the later regulation
covers
the whole subject of an earlier one and is clearly intended as a
substitute,
it will similarly operate as a repeal of the earlier one.[45]
There is no implied repeal of an earlier RR by the mere fact that its
subject
matter is related to a later RR, which may simply be a cumulation or
continuation
of the earlier one.[46]chanrobles virtuallaw libraryred
Where a part of an earlier
regulation embracing the same subject as a later one may not be
enforced
without nullifying the pertinent provision of the latter, the earlier
regulation
is deemed impliedly amended or modified to the extent of the repugnancy.[47]
The unaffected provisions or portions of the earlier regulation remain
in force, while its omitted portions are deemed repealed.[48]
An exception therein that is amended by its subsequent elimination
shall
now cease to be so and instead be included within the scope of the
general
rule.[49]chanrobles virtuallaw libraryred
Section 4(e) of the
earlier RR 12-80 provides that only items of income actually received
shall
be included in the tax base for computing the GRT, but Section 7(c) of
the later RR 17-84 makes no such distinction and provides that all
interests
earned shall be included. The exception having been eliminated, the
clear
intent is that the later RR 17-84 includes the exception within the
scope
of the general rule.chanrobles virtuallaw libraryred
Repeals by implication
are not favored and will not be indulged, unless it is manifest that
the
administrative agency intended them. As a regulation is presumed to
have
been made with deliberation and full knowledge of all existing rules on
the subject, it may reasonably be concluded that its promulgation was
not
intended to interfere with or abrogate any earlier rule relating to the
same subject, unless it is either repugnant to or fully inclusive of
the
subject matter of an earlier one, or unless the reason for the earlier
one is "beyond peradventure removed."[50]
Every effort must be exerted to make all regulations stand — and a
later
rule will not operate as a repeal of an earlier one, if by any
reasonable
construction, the two can be reconciled.[51]chanrobles virtuallaw libraryred
RR 12-80 imposes the
GRT only on all items of income actually received, as opposed to their
mere accrual, while RR 17-84 includes all interest income in computing
the GRT. RR 12-80 is superseded by the later rule, because Section 4(e)
thereof is not restated in RR 17-84. Clearly therefore, as petitioner
correctly
states, this particular provision was impliedly repealed when the later
regulations took effect.[52]chanrobles virtuallaw libraryred
Reconciling the
Two
Regulations
Granting that the two
regulations can be reconciled, respondent's reliance on Section 4(e) of
RR 12-80 is misplaced and deceptive. The "accrual" referred to therein
should not be equated with the determination of the amount to be used
as
tax base in computing the GRT. Such accrual merely refers to an
accounting
method that recognizes income as earned although not received, and
expenses
as incurred although not yet paid.chanrobles virtuallaw libraryred
Accrual should not be
confused with the concept of constructive possession or receipt as
earlier
discussed. Petitioner correctly points out that income that is merely
accrued
— earned, but not yet received — does not form part of the taxable
gross
receipts; income that has been received, albeit constructively, does.[53]chanrobles virtuallaw libraryred
The word "actually,"
used confusingly in Section 4(e), will be clearer if removed entirely.
Besides, if actually is that important, accrual should have been
eliminated
for being a mere surplusage. The inclusion of accrual stresses the fact
that Section 4(e) does not distinguish between actual and constructive
receipt. It merely focuses on the method of accounting known as the
accrual
system.chanrobles virtuallaw libraryred
Under this system, income
is accrued or earned in the year in which the taxpayer's right thereto
becomes fixed and definite, even though it may not be actually received
until a later year; while a deduction for a liability is to be accrued
or incurred and taken when the liability becomes fixed and certain,
even
though it may not be actually paid until later.[54]chanrobles virtuallaw libraryred
Under any system of
accounting, no duty or liability to pay an income tax upon a
transaction
arises until the taxable year in which the event constituting the
condition
precedent occurs.[55]
The liability to pay a tax may thus arise at a certain time and the tax
paid within another given time.[56]chanrobles virtuallaw libraryred
In reconciling these
two regulations, the earlier one includes in the tax base for GRT all
income,
whether actually or constructively received, while the later one
includes
specifically interest income. In computing the income tax liability,
the
only exception cited in the later regulations is the exclusion from
gross
income of interest income, which is already subjected to withholding.
This
exception, however, refers to a different tax altogether. To extend
mischievously
such exception to the GRT will certainly lead to results not
contemplated
by the legislators and the administrative body promulgating the
regulations.chanrobles virtuallaw libraryred
Manila Jockey
Club Inapplicable
In Commissioner of Internal
Revenue v. Manila Jockey Club,[57]
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.[58]chanrobles virtuallaw libraryred
To begin, we have to
nuance the definition of gross receipts[59]
to determine what it is exactly. In this regard, we note that US cases
have persuasive effect in our jurisdiction, because Philippine income
tax
law is patterned after its US counterpart.[60]chanrobles virtuallaw libraryred
"'Gross
receipts'
with respect to any period means the sum of:
(a) The
total
amount received or accrued during such period from the sale, exchange,
or other disposition of x x x other
property of a kind which would properly be included in the inventory of
the taxpayer if on hand at the close of the taxable year, or property
held
by the taxpayer primarily for sale to customers in the ordinary course
of its trade or business; and
(b) The gross
income,
attributable to a trade or business, regularly carried on by the
taxpayer,
received or accrued during such period x x x."[6]chanrobles virtuallaw libraryred
"x x
x
By gross earnings from operations x x
x
was intended all operations x x x
including
incidental, subordinate, and subsidiary operations, as well as
principal
operations."[62]chanrobles virtuallaw libraryred
"When we speak of
the
'gross earnings' of a person or corporation, we mean the entire
earnings
or receipts of such person or corporation from the business or
operations
to which we refer."[63]chanrobles virtuallaw libraryred
From these cases,
"gross
receipts"[64]
refer to the total, as opposed to the net, income.[65]
These are therefore the total receipts before any deduction[66]
for the expenses of management.[67]
Webster's New International Dictionary, in fact, defines gross as
"whole
or entire."chanrobles virtuallaw libraryred
Statutes taxing the
gross "receipts," "earnings," or "income" of particular corporations
are
found in many jurisdictions.[68]
Tax thereon is generally held to be within the power of a state to
impose;
or constitutional, unless it interferes with interstate commerce or
violates
the requirement as to uniformity of taxation.[69]
Moreover, we have emphasized
that the BIR has consistently ruled that "gross receipts" does not
admit
of any deduction.[70]
Following the principle of legislative approval by reenactment,[71]
this interpretation has been adopted by the legislature throughout the
various reenactments of then Section 119 of the Tax Code.[72]chanrobles virtuallaw libraryred
Given that a tax is
imposed upon total receipts and not upon net earnings,[73]
shall the income withheld be included in the tax base upon which such
tax
is imposed? In other words, shall interest income constructively
received
still be included in the tax base for computing the GRT?chanrobles virtuallaw libraryred
We rule in the affirmative.cralaw:red
Manila Jockey Club does
not apply to this case. Earmarking is not the same as withholding.
Amounts
earmarked do not form part of gross receipts, because, although
delivered
or received, 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 constructive possession and not subject
to any reservation, the withholding agent being merely a conduit in the
collection process.chanrobles virtuallaw libraryred
The Manila Jockey Club
had to deliver to the Board on Races, horse owners and jockeys amounts
that never became the property of the race track.[74]
Unlike these amounts, the interest income that had been withheld for
the
government became property of the financial institutions upon
constructive
possession thereof. Possession was indeed acquired, since it was
ratified
by the financial institutions in whose name the act of possession had
been
executed. The money indeed belonged to the taxpayers; merely holding it
in trust was not enough.[75]chanrobles virtuallaw libraryred
The government subsequently
becomes the owner of the money when the financial institutions pay the
FWT to extinguish their obligation to the government. As this Court has
held before, this is the consideration for the transfer of ownership of
the FWT from these institutions to the government.[76]
It is ownership that determines whether interest income forms part of
taxable
gross receipts.[77]
Being originally owned by these financial institutions as part of their
interest income, the FWT should form part of their taxable gross
receipts.chanrobles virtuallaw libraryred
Besides, these amounts
withheld are in payment of an income tax liability, which is different
from a percentage tax liability. Commissioner of Internal Revenue v.
Tours
Specialists, Inc. aptly held thus:[78]chanrobles virtuallaw libraryred
"x
x
x Gross receipts subject to tax under the Tax Code do not include
monies or receipts entrusted to the taxpayer which do not belong to
them
and do not redound to the taxpayer's benefit; and it is not necessary
that
there must be a law or regulation which would exempt such monies and
receipts
within
the meaning of gross receipts under the Tax Code."[79]chanrobles virtuallaw libraryred
In the
construction
and interpretation of tax statutes and of statutes in general, the
primary
consideration is to ascertain and give effect to the intention of the
legislature.[80]
We ought to impute to the lawmaking body the intent to obey the
constitutional
mandate, as long as its enactments fairly admit of such construction.[81]
In fact, " x x x no tax can be levied
without
express authority of law, but the statutes are to receive a reasonable
construction with a view to carrying out their purpose and intent."[82]chanrobles virtuallaw libraryred
Looking again into
Sections
24(e)(1) and 119 of the Tax
Code, we find that the first imposes an income tax; the second, a
percentage
tax. The legislature clearly intended two different taxes. The FWT is a
tax on passive income, while the GRT is on business.[83]
The withholding of one is not equivalent to the payment of the other.chanrobles virtuallaw libraryred
Non-Exemption of FWT
from GRT :
Neither
Unjust
nor Absurd
Taxing the people
and
their property is essential to the very existence of government.
Certainly,
one of the highest attributes of sovereignty is the power of taxation,[84]
which may legitimately be exercised on the objects to which it is
applicable
to the utmost extent as the government may choose.[85]
Being an incident of sovereignty, such power is coextensive with that
to
which it is an incident.[86]
The interest on deposits and yield on deposit substitutes of financial
institutions, on the one hand, and their business as such, on the
other,
are the two objects over which the State has chosen to extend its
sovereign
power. Those not so chosen are, upon the soundest principles, exempt
from
taxation.[87]chanrobles virtuallaw libraryred
While courts will not
enlarge
by construction the government's power of taxation,[88]
neither will they place upon tax laws so loose a construction as to
permit
evasions, merely on the basis of fanciful and insubstantial
distinctions.[89]
When the legislature imposes a tax on income and another on business,
the
imposition must be respected. The Tax
Code should be so construed, if need be, as to avoid empty
declarations
or possibilities of crafty tax evasion schemes. We have consistently
ruled
thus:chanrobles virtuallaw libraryred
"x
x
x It is upon taxation that the [g]overnment chiefly relies
to obtain the means to carry on its operations, and it is of the utmost
importance that the modes adopted to enforce the collection of the
taxes
levied should be summary and interfered with as little as
possible
x x x."[90]
"Any delay
in the proceedings of the officers, upon whom the duty is devolved of
collecting
the taxes, may derange the operations of government, and thereby cause
serious detriment to the public."[91]chanrobles virtuallaw libraryred
"No government
could
exist if all litigants were permitted to delay the collection of its
taxes."[92]
A taxing act will be
construed,
and the intent and meaning of the legislature ascertained, from its
language.[93]
Its clarity and implied intent must exist to uphold the taxes as
against
a taxpayer in whose favor doubts will be resolved.[94]
No such doubts exist with respect to the Tax
Code, because the income and percentage taxes we have cited earlier
have been imposed in clear and express language for that purpose.[95]chanrobles virtuallaw libraryred
This Court has steadfastly
adhered to the doctrine that its first and fundamental duty is the
application
of the law according to its express terms — construction and
interpretation
being called for only when such literal application is impossible or
inadequate
without them.[96]
In Quijano v. Development Bank of the Philippines,[97]
we stressed as follows:chanrobles virtuallaw libraryred
"No process
of interpretation or construction need be resorted to where a provision
of law peremptorily calls for application."[98]
A literal application
of
any part of a statute is to be rejected if it will operate unjustly,
lead
to absurd results, or contradict the evident meaning of the statute
taken
as a whole.[99]
Unlike the CA, we find that the literal application of the aforesaid
sections
of the Tax Code
and its implementing regulations does not operate unjustly or
contradict
the evident meaning of the statute taken as a whole. Neither does it
lead
to absurd results. Indeed, our courts are not to give words meanings
that
would lead to absurd or unreasonable consequences.[100]
We have repeatedly held thus:chanrobles virtuallaw libraryred
"x
x
x Statutes should receive a sensible construction, such as
will give effect to the legislative intention and so as to avoid an
unjust
or an absurd conclusion."[101]chanrobles virtuallaw libraryred
"While it is true
that
the contemporaneous construction placed upon a statute by executive
officers
whose duty is to enforce it should be given great weight by the courts,
still if such construction is so erroneous, x x
x the same must be declared as null and void."[102]chanrobles virtuallaw libraryred
It does not even matter
that the CTA, like in China Banking Corporation,[103]
relied erroneously on Manila Jockey Club. Under our tax system, the CTA
acts as a highly specialized body specifically created for the purpose
of reviewing tax cases.[104]
Because of its recognized expertise, its findings of fact will
ordinarily
not be reviewed, absent any showing of gross error or abuse on its part.[105]
Such findings are binding on the Court and, absent strong reasons for
us
to delve into facts, only questions of law are open for determination.[106]chanrobles virtuallaw libraryred
Respondent claims that
it is entitled to a refund on the basis of excess GRT payments. We
disagree.chanrobles virtuallaw libraryred
Tax refunds are in the
nature of tax exemptions.[107]
Such exemptions are strictly construed against the taxpayer, being
highly
disfavored[108]
and almost said "to be odious to the law." Hence, those who claim to be
exempt from the payment of a particular tax must do so under clear and
unmistakable terms found in the statute. They must be able to point to
some positive provision, not merely a vague implication,[109]
of the law creating that right.[110]chanrobles virtuallaw libraryred
The right of taxation
will not be surrendered, except in words too plain to be mistaken. The
reason is that the State cannot strip itself of this highest attribute
of sovereignty — its most essential power of taxation — by vague or
ambiguous
language. Since tax refunds are in the nature of tax exemptions, these
are deemed to be "in derogation of sovereign authority and to be
construed
strictissimi juris against the person or entity claiming the exemption."[111]
No less than our 1987
Constitution provides for the mechanism for granting tax exemptions.[112]
They certainly cannot be granted by implication or mere administrative
regulation. Thus, when an exemption is claimed, it must indubitably be
shown to exist, for every presumption is against it,[113]
and a well-founded doubt is fatal to the claim.[114]
In the instant case, respondent has not been able to satisfactorily
show
that its FWT on interest income is exempt from the GRT. Like China
Banking
Corporation, its argument creates a tax exemption where none exists.[115]chanrobles virtuallaw libraryred
No exemptions are normally
allowed when a GRT is imposed. It is precisely designed to maintain
simplicity
in the tax collection effort of the government and to assure its steady
source of revenue even during an economic slump.[116]chanrobles virtuallaw libraryred
No Double Taxation
We have repeatedly said
that the two taxes, subject of this litigation, are different from each
other. The basis of their imposition may be the same, but their natures
are different, thus leading us to a final point. Is there double
taxation?chanrobles virtuallaw libraryred
The Court finds
none.chanrobles virtual law library
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,"[119]
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.[120]chanrobles virtuallaw libraryred
First, the taxes
herein are imposed on two different subject matters. The subject matter
of the FWT is the passive income generated in the form of interest on
deposits
and yield on deposit substitutes, while the subject matter of the GRT
is
the privilege of engaging in the business of banking.chanrobles virtuallaw libraryred
A tax based on receipts
is a tax on business rather than on the property; hence, it is an excise[121]
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.chanrobles virtuallaw libraryred
Second, although
both taxes are national in scope because they are imposed by the same
taxing
authority — the national government under the Tax Code — and operate
within
the same Philippine jurisdiction for the same purpose of raising
revenues,
the taxing periods they affect are different. The FWT is deducted and
withheld
as soon as the income is earned, and is paid after every calendar
quarter
in which it is earned. On the other hand, the GRT is neither deducted
nor
withheld, but is paid only after every taxable quarter in which it is
earned.chanrobles virtuallaw libraryred
Third, these
two taxes are of different kinds or characters. The FWT is an income
tax
subject to withholding, while the GRT is a percentage tax not subject
to
withholding.chanrobles virtuallaw libraryred
In short, 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.[125]
Subjecting interest income to a 20% FWT and including it in the
computation
of the 5% GRT is clearly not double taxation.chanrobles virtuallaw libraryred
WHEREFORE, the Petition
is GRANTED. The assailed Decision and Resolution of the Court of
Appeals
are hereby REVERSED and SET ASIDE. No costs.cralaw:red
SO ORDERED.chanrobles virtuallaw libraryred
Davide, Jr., C.J., Ynares-Santiago,
Carpio and Azcuna, JJ.,
concur.chan
robles virtual law library
____________________________
Endnotes:
[1]
Rollo, pp. 8–19.
[2]
Id., pp. 21–29.
[3]
Id., p. 31.
[4]
Sixth Division. Penned by Justice Ma. Alicia Austria-Martinez (Division
chairman and now a member of this Court) and concurred in by Justices
Portia
Aliño-Hormachuelos and Elvi John S. Asuncion (members).chanrobles virtuallaw libraryred
[5]
Assailed Decision, p. 8; rollo, p. 28.chanrobles virtuallaw libraryred
[6]
Words in brackets [ ] supplied. In its Memorandum, respondent likewise
cites this narration of facts by the CA.
[7]
Assailed Decision, pp. 1–3; rollo, pp. 21-23.chanrobles virtuallaw libraryred
[8]
Id., pp. 5 & 25.chanrobles virtuallaw libraryred
[9]
This case was deemed submitted for decision on January 24, 2002, upon
receipt
by this Court of petitioner's Memorandum, signed by Attys. Pablo M.
Bastes
Jr. and Rhodora J. Corcuera-Menzon. Respondent's Memorandum, signed by
Atty. P. Winston G. Conlu, was received by this Court on January 10,
2002.chanrobles virtuallaw libraryred
[10]
Petitioner's Memorandum, p. 3; rollo, p. 120. Original in upper case.chanrobles virtuallaw libraryred
[11]
GR No. 146749, p. 10, June 10, 2003, per Carpio, J.chanrobles virtuallaw libraryred
[12]
Now §121.chanrobles virtuallaw libraryred
[13]
Now RA 8424, approved on December 11, 1997, and effective January 1,
1998.chanrobles virtuallaw libraryred
[14]
Now §32.chanrobles virtuallaw libraryred
[15]
On October 1, 1946, RA 39 amended §249 of the 1939 Tax Code by
imposing
a GRT on banks. Their taxable gross receipts included interest income
on
their own deposits with other banks, without deduction or any
withholding
tax until June 1977. (China Banking Corp. v. CA, supra, p. 11).chanrobles virtuallaw libraryred
[16]
Now §128(A)(1).chanrobles virtuallaw libraryred
[17]
Now twenty-five (25) days.chanrobles virtuallaw libraryred
[18]
On June 3, 1977, PD 1156 required the withholding of a 15% tax on the
interest
income from bank deposits. This was a creditable tax — not a FWT — and
the entire interest income still formed part of taxable gross receipts.
On September 17, 1980, however, PD 1739 made this a FWT of 15% on
savings
accounts and 20% on time deposits. (China Banking Corp. v. CA, supra,
pp.
11–12)
[19]
Now §27(D)(1).chanrobles virtuallaw libraryred
[20]
Now §57(A).chanrobles virtuallaw libraryred
[21]
Now §58.chanrobles virtuallaw libraryred
[22]
De Leon, The Fundamentals of Taxation (12th ed.), 1998, p. 136.chanrobles virtuallaw libraryred
[23]
Id., p. 92.chanrobles virtuallaw libraryred
[24]
The withholding tax concept obviously and necessarily implies that the
amount withheld comes from the income earned by a taxpayer. (China
Banking
Corp. v. CA, supra, p. 31)
[25]
Bank of America NT & SA v. Court of Appeals, 234 SCRA 302, July 21,
1994.chanrobles virtuallaw libraryred
[26]
Dated October 12, 1984, these regulations cover the "Income Taxation of
Interest Income Derived from Deposits and Yield from Deposit
Substitutes"
as provided for by PD No. 1959.
[27]
"Interest" is the amount paid by a borrower to a lender in
consideration
for the use of the lender's money. It is an expense item to the
borrower
and an income item to the lender. Hence, the total interest expense
paid
by a depository bank forms part of the gross income of a lending bank.
(China Banking Corp. v. CA, supra, p. 28).chanrobles virtuallaw libraryred
[28]
Respondent's Memorandum, p. 8; rollo, p. 81. Dated November 7, 1980,
these
regulations cover the "Taxation of Certain Income Derived from Banking
Activities."
[29]
Now §32(A).chanrobles virtuallaw libraryred
[30]
Now §32(B).chanrobles virtuallaw libraryred
[31]
Respondent's Memorandum, p. 10; rollo, p. 83.chanrobles virtuallaw libraryred
[32]
The possession by a sheriff by virtue of a court order is one of the
ways
of constructive possession. (Paras, Civil Code of the Philippines, Vol.
II [10th ed.], 1981, p. 359; Muyco v. Montilla, 7 Phil. 498, February
18,
1907)chanrobles virtuallaw libraryred
And so is the inscription of información posesoria or possessory
information titles. (Bishop of Nueva Segovia v. Municipality of Bantay,
28 Phil. 347, November 7, 1914. See Alcala v. Alcala, 35 Phil. 679,
December
11, 1916)chanrobles virtuallaw libraryred
[33]
"The most usual form of the authority to acquire possession for another
is that of agency, whether it be a special power or a general
authority.
Where there is such authorization, the principal acquires the
possession
from the moment the agent holds the thing for the former." Tolentino,
Commentaries
and Jurisprudence on the Civil Code of the Philippines, Vol. II (1992
ed.),
p. 263.
[34]
Id., p. 262.chanrobles virtuallaw libraryred
[35]
Commissioner of Internal Revenue v. Royal Interocean Lines, 34 SCRA 9,
15, July 30, 1970.chanrobles virtuallaw libraryred
[36]
Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil.
555,
558, March 17, 1962.chanrobles virtuallaw libraryred
[37]
Kenneth Culp Davis, Administrative Law Treatise, Vol. I (1958 ed.), p.
299.chanrobles virtuallaw libraryred
[38]
Victorias Milling Co., Inc. v. Social Security Commission, supra.chanrobles virtuallaw libraryred
[39]
Director of Forestry v. Muñoz, 23 SCRA 1183, 1198, June 28, 1968.chanrobles virtuallaw libraryred
[40]
People v. Exconde, 101 Phil. 1125, 1129, August 30, 1957.chanrobles virtuallaw libraryred
"The delegated power, if at all, therefore, is not the determination of
what the law shall be, but merely the ascertainment of the facts and
circumstances
upon which the application of said law is to be predicated." Calalang
v.
Williams, 70 Phil. 726, 731, December 2, 1940, per Laurel, J.chanrobles virtuallaw libraryred
"Delegata potestas non potest delegare x x
x
has been made to adapt itself to the complexities of modern
governments,
giving rise to the adoption, within certain limits, of the principle of
'subordinate legislation' x x x. The difficulty
lies in the fixing of the limit and extent of the authority. While
courts
have undertaken to lay down general principles, the safest is to decide
each case according to its peculiar environment, having in mind the
wholesome
legislative purpose intended to be achieved." People v. Rosenthal, 68
Phil.
328, 343, June 12, 1939, per Laurel, J.chanrobles virtuallaw libraryred
"Accordingly, with the growing complexity of modern life, the
multiplication
of the subjects of governmental regulation, and the increased
difficulty
of administering the laws, there is a constantly growing tendency
toward
the delegation of greater powers by the legislature, and toward the
approval
of the practice by the courts." Pangasinan Transportation Co., Inc. v.
Public Service Commission, 70 Phil. 221, 229, June 26, 1940, per
Laurel,
J.chanrobles virtuallaw libraryred
"Discretion x x x may be committed
by the Legislature to an executive department or official. The
Legislature
may make decisions of executive departments or subordinate officials
thereof,
to whom it has committed the execution of certain acts, final on
questions
of fact." Rubi v. Provincial Board of Mindoro, 39 Phil. 660, 701, March
7, 1919, per Malcolm, J.chanrobles virtuallaw libraryred
[41]
The true distinction is between the delegation of power to make the
law,
which necessarily involves a discretion as to what it shall be, and the
conferment of an authority or discretion as to its execution, to be
exercised
under and in pursuance of the law. The first cannot be done; to the
latter,
no valid objection can be made. (Calalang v. Williams, supra, 730. See
also Rubi v. Provincial Board of Mindoro, supra, pp. 700–701; State v.
Fields, 35 NE 2d 744, 750, July 15, 1938; and Matz v. J. L. Curtis
Cartage
Co., 7 NE 2d 220, 226, March 17, 1937)
[42]
Mecano v. Commission on Audit, 216 SCRA 500, 504, December 11, 1992.chanrobles virtuallaw libraryred
[43]
Id., p. 505.chanrobles virtuallaw libraryred
[44]
Posadas Jr. v. National City Bank of New York, 296 US 497, 503, 80 L.
Ed.
351, 355, January 6, 1936.
[45]
Ibid.chanrobles virtuallaw libraryred
A subsequent regulation, which revises the whole subject matter of a
previous
one and is evidently intended as a substitute for it, operates to
repeal
it. (People v. Almuete, 69 SCRA 410, 414, February 27, 1976)chanrobles virtuallaw libraryred
When both intent and scope clearly evince the idea of a repeal, then
all
parts and provisions of the previous regulation that are omitted from
the
revised one are deemed repealed. (People v. Binuya, 61 Phil. 208, 210,
February 27, 1935)chanrobles virtuallaw libraryred
[46]
Valera v. Tuason Jr., 80 Phil. 823, 827, April 30, 1948.chanrobles virtuallaw libraryred
[47]
Agpalo, Statutory Construction (2nd ed.), 1990, p. 279.chanrobles virtuallaw libraryred
[48]
Parras v. Land Registration Commission, 108 Phil. 1142, 1146, July 26,
1960.chanrobles virtuallaw libraryred
[49]
Victorias Milling Co., Inc. v. Social Security Commission, supra.chanrobles virtuallaw libraryred
[50]
Smith, Bell & Co. v. Estate of Maronilla, 41 Phil. 557, 562,
February
5, 1916, per Carson, J
[51]
Ibid.chanrobles virtuallaw libraryred
[52]
Petitioner's Memorandum, p. 7; rollo, p. 124. Indeed, RR 17-84
supplanted
RR 12-80; §4(e) of the earlier regulation was not readopted by the
later one. (China Banking Corp. v. CA, supra, pp. 33–34)chanrobles virtuallaw libraryred
[53]
Id., pp. 9 & 126. In fact, we ruled in China Banking Corp. v. CA
that
Section 4(e) did not exclude accrued interest income from taxable gross
receipts, but merely postponed its inclusion until actual payment,
physically
or constructively, to a lending bank, pp. 30–31.
[54]
Commissioner of Internal Revenue v. Blaine, Mackay, Lee Co., 141 F. 2d
201, 203, March 6, 1944. See Brown v. Helvering, 291 US 193, 199, 78 L.
Ed. 725, 730, January 15, 1934.
[55]
Utah-Idaho Sugar Co. v. State Tax Commission, 73 P. 2d 974, 977–978,
December
2, 1937.chanrobles virtuallaw libraryred
[56]
Lorenzo v. Posadas, 64 Phil. 353, 368, June 18, 1937.chanrobles virtuallaw libraryred
[57]
108 Phil. 821, 825–826, June 30, 1960.chanrobles virtuallaw libraryred
[58]
See Visayan Cebu Terminal Co., Inc. v. Commissioner of Internal
Revenue,
121 Phil. 337, February 27, 1965.chanrobles virtuallaw libraryred
[59]
From RA 39 to the present Tax Code, there has been no statutory
definition
of "gross receipts" as applied to taxes on banks. (China Banking Corp.
v. CA, supra, p. 14)chanrobles virtuallaw libraryred
[60]
Limpan Investment Corp. v. Commissioner of Internal Revenue, 17 SCRA
703,
709, July 26, 1966. See also Consolidated Mines, Inc. v. Court of Tax
Appeals,
58 SCRA 618, August 29, 1974.
[61]
Lucky Lager Brewing Co. v. Commissioner of Internal Revenue, 246 F. 2d,
621, 622, June 24, 1957, per Denman, C.J.
[62]
State v. United Electric Light & Eater Co., 97 A. 857, 859, June 2,
1916, per Thayer, J.chanrobles virtuallaw libraryred
[63]
Ibid.chanrobles virtuallaw libraryred
[64]
"Gross receipts," absent a statutory definition, is to be understood in
its plain and ordinary meaning. The words are to be taken in their
usual
and familiar signification, with due regard to their general and
popular
use. This principle applies to all statutes, including tax statutes.
(China
Banking Corp. v. CA, supra, p. 17).chanrobles virtuallaw libraryred
[65]
Ibid. See Taylor v. Rosenthal, 213 SW 2d 437, April 23, 1948. The
Taylor
case, however, is not a tax case. It refers to a lease contract
covering
the rental of a motion picture theater.
[66]
Deducting any amount from gross receipts changes the meaning to net
receipts.
(China Banking Corp. v. CA, supra, p. 16, citing Commonwealth v.
Koppers
Co., Inc., 156 A. 2d 328, 332, Nov. 24, 1959, and Laclede Gas Co. v.
City
of St. Louis, 253 SW 2d 832, 835, January 9, 1953)chanrobles virtuallaw libraryred
[67]
Cooley, The Law on Taxation, Vol. II (1924), pp. 1789-1790; State v.
Illinois
Cent. R. Co., 92 NE 848, Oct. 28, 1910.
[68]
Ibid., pp. 1786–1787.chanrobles virtuallaw libraryred
[69]
Id., p. 1788.chanrobles virtuallaw libraryred
The rule of taxation shall be uniform and equitable. §28(1), Art.
VI, 1987 Constitution.chanrobles virtuallaw libraryred
[70]
China Banking Corp. v. CA, supra, p. 19.chanrobles virtuallaw libraryred
[71]
"When a statute is susceptible of the meaning placed upon it by a
ruling
of the government agency charged with its enforcement and the
[l]egislature
thereafter [reenacts] the provisions with substantial change, such
action
is to some extent confirmatory that the ruling carries out the
legislative
purpose." Alexander Howden & Co., Ltd. v. Collector (now
Commissioner)
of Internal Revenue, 121 Phil. 579, 587, April 14, 1965, per Bengzon
J.P.,
J.chanrobles virtuallaw libraryred
[72]
China Banking Corp. v. CA, supra.chanrobles virtuallaw libraryred
[73]
State v. Illinois Cent. R. Co., 92 NE 847, Oct. 28, 1910.chanrobles virtuallaw libraryred
[74]
Manila Jockey Club merely held that these amounts were held in trust
and
did not form part of gross receipts.chanrobles virtuallaw libraryred
[75]
A trustee does not own money received in trust. It is a basic concept
in
taxation that such money does not constitute taxable income to the
trustee.
(China Banking Corp. v. CA, supra, p. 27)
[76]
Ibid., p. 26.chanrobles virtuallaw libraryred
[77]
Ibid., p. 27.chanrobles virtuallaw libraryred
[78]
183 SCRA 402, March 21, 1990.chanrobles virtuallaw libraryred
[79]
Id., p. 412, per Gutierrez Jr., J.chanrobles virtuallaw libraryred
In an earlier case — Philippine Long Distance Telephone Co. v.
Collector
of Internal Revenue, 90 Phil. 674, January 21, 1952 — cited in the
Dissenting
Opinion of CTA Associate Judge Amancio Q. Saga, receipts means amounts
actually received; otherwise, they will not be receipts. A careful
reading
of this case, however, reveals that receipts are equated with earnings,
the latter word having been used in the legislative acts referred to
therein;
and dealing with collection, not accrual. In fact, these acts have been
construed so as not to be rendered unconstitutional.
[80]
Hart v. Smith, 64 NE 661, 662, June 27, 1902.chanrobles virtuallaw libraryred
[81]
Ibid.chanrobles virtuallaw libraryred
[82]
Scottish Union & National Insurance Co. v. Bowland, 196 US 611,
629,
49 L. Ed. 619, 627, February 20, 1905, per Day, J.
[83]
China Banking Corp. v. CA, supra, p. 40.chanrobles virtuallaw libraryred
[84]
Hart v. Smith, supra.chanrobles virtuallaw libraryred
[85]
Kirtland v. Hotchkiss, 100 US 491, 497, 25 L. Ed. 558, 561–562,
November
17, 1879.chanrobles virtuallaw libraryred
[86]
M'Culloch v. Maryland, 4 Wheaton 316, 429, 4 L. Ed. 579, 607, February
1819.chanrobles virtuallaw libraryred
[87]
Kirtland v. Hotchkiss, supra, p. 562.chanrobles virtuallaw libraryred
[88]
Bromley v. McCaughn, 280 US 124, 137, 74 L. Ed. 226, 230, November 25,
1929.chanrobles virtuallaw libraryred
[89]
"It is a general rule in the interpretation of all statutes levying
taxes
or duties upon subjects or citizens, not to extend their provisions by
implication beyond the clear import of the language used, or to enlarge
their operation so as to embrace matters not specifically pointed out,
although standing on a close analogy. In every case, therefore, of
doubt,
such statutes are construed most strongly against the government, and
in
favor of the subjects or citizens, because burdens are not to be
imposed,
nor presumed to be imposed, beyond what the statutes expressly and
clearly
import. Revenue statutes are in no just sense either remedial laws, or
laws founded upon any permanent public policy, and therefore are not to
be liberally construed." Froelich & Kuttner v. Collector of
Customs,
18 Phil. 461, 481–482, March 2, 1911, per Moreland, J.chanrobles virtuallaw libraryred
[90]
Churchill and Tait v. Rafferty, 32 Phil. 580, 585, December 21, 1915,
per
Trent, J.chanrobles virtuallaw libraryred
[91]
Lorenzo v. Posadas Jr., supra, p. 371, per Laurel, Jchanrobles virtuallaw libraryred
[92]
Republic v. Lim Tian Teng Sons & Co., Inc., 16 SCRA 584, 590, March
31, 1966, per Bengzon, J.P., JSee also Churchill and Tait v.
Raferty,
supra.chanrobles virtuallaw libraryred
[93]
A. Magnano Co. v. Hamilton, 292 US 40, 46, 78 L. Ed. 1109, 1115, April
2, 1934.chanrobles virtuallaw libraryred
[94]
Moran v. Leccony Smokeless Coal Co., 10 SE 2d 581, June 22, 1940.chanrobles virtuallaw libraryred
Tax laws are to be strictly construed against the taxing power. (Miller
v. Illinois Cent. R. Co. 111 So. 559, February 28, 1927)
[95]
"If there is any doubt whether the language of an act was intended to
authorize
the taxation of certain property, the language of the act will not be
extended
beyond its clear import in order to make the property subject to the
tax.
In case of doubt such statutes are construed most strongly against the
government and in favor of the citizen." People ex rel. Chicago v.
Barrett,
139 NE 903, 906, June 20, 1923, per Carter, J.
"Before one is liable for taxes he must come within the express
provisions
of the taxing statute." Miller v. Illinois Cent. R. Co., supra.
[96]
Lizarraga Hermanos v. Yap Tico, 24 Phil. 504, 513, March 27, 1913. See
Pacific Oxygen & Acetylene Co. v. Central Bank of the Philippines,
22 SCRA 917, 921, March 1, 1968.
"Where language is plain, subtle refinements which tinge words so as to
give them the color of a particular judicial theory are not only
unnecessary
but decidedly harmful. That which has caused so much confusion in the
law,
which has made it so difficult for the public to understand and know
what
the law is with respect to a given matter, is in considerable measure
the
unwarranted interference by judicial tribunals with the English
language
as found in statutes and contracts, cutting out words here and
inserting
them there, making them fit personal ideas of what the legislature
ought
to have done or what parties should have agreed upon, giving them
meanings
which they do not ordinarily have, cutting, trimming, fitting, changing
and coloring until lawyers themselves are unable to advise their
clients
as to the meaning of a given statute or contract until it has been
submitted
to some court for its interpretation and construction." Nery v.
Lorenzo,
44 SCRA 431, 437, April 27,1972, per Fernando, JSee Yangco v. Court
of First Instance of Manila, 29 Phil. 183, 188, January 6, 1915.
[97]
35 SCRA 270, October 16, 1970.chanrobles virtuallaw libraryred
[98]
Id., p. 277, per Barredo, J.chanrobles virtuallaw libraryred
[99]
In Re Allen, 2 Phil. 630, 643, October 29, 1903.chanrobles virtuallaw libraryred
[100]
Comm. of Internal Revenue v. Esso Standard Eastern, Inc., 172 SCRA 364,
370, April 18, 1989.
[101]
People v. Rivera, 59 Phil. 236, 242, December 22, 1933, per Imperial,
J.chanrobles virtuallaw libraryred
[102]
Insular Bank of Asia and America Employees' Union v. Inciong, 132 SCRA
663, 673, October 23, 1984, per Makasiar, J(later CJ ). See
Chartered
Bank Employees Association v. Ople, 138 SCRA 273, 280, August 28, 1985,
per Gutierrez, Jchanrobles virtuallaw libraryred
[103]
China Banking Corp. v. CA, supra, p. 24.chanrobles virtuallaw libraryred
[104]
It was created by Congress pursuant to Republic Act No. 1125, effective
June 16, 1954.chanrobles virtuallaw libraryred
[105]
The Coca-Cola Export Corp. v. Commissioner of Internal Revenue, 56 SCRA
5, 14, March 15, 1974. See Commissioner of Internal Revenue v. Court of
Appeals, 242 SCRA 289, 304, March 10, 1995.chanrobles virtuallaw libraryred
[106]
Commissioner of Internal Revenue v. Tours Specialists, Inc., 183 SCRA
402,
407, March 21, 1990. See Philippine Refining Co. v. CA, 256 SCRA 667,
675–676,
May 8, 1996.
[107]
Commissioner of Internal Revenue v. SC Johnson & Son, Inc., 368
Phil.
388, 411, June 25, 1999; Magsaysay Lines, Inc., v. Court of Appeals,
329
Phil. 310, 324, August 12, 1996; Commissioner of Internal Revenue v.
Tokyo
Shipping Co., Ltd., 314 Phil. 220, 228, May 26, 1995.
[108]
Whoever claims an exemption must justify it by the clearest grant of
organic
or statute law. (China Banking Corp. v. CA, supra, p. 37)
[109]
Ibid. See Davao Light & Power Co., Inc. v. Commissioner of Customs,
44 SCRA 122, 130, March 29, 1972.
[110]
Asiatic Petroleum Co., Ltd. v. Llanes, 49 Phil. 466, 471, October 20,
1926.chanrobles virtuallaw libraryred
[111]
Commissioner of Internal Revenue v. SC Johnson and Son, Inc., supra, p.
411, per Gonzaga-Reyes, J
[112]
§28(4) of Art. VI states:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
"No law granting any tax exemption shall be passed without the
concurrence
of a majority of all the Members of the Congress."
[113]
Davao Light & Power Co., Inc. v. Commissioner of Customs, supra.chanrobles virtuallaw libraryred
[114]
Manila Electric Co. v. Vera, 67 SCRA 351, 357–358, October 22, 1975.
See
Asiatic Petroleum Co., Ltd. v. Llanes, supra.
[115]
China Banking Corp. v. CA, supra, p. 22.chanrobles virtuallaw libraryred
[116]
Ibid., p. 23.chanrobles virtuallaw libraryred
[117]
Afisco Insurance Corp. v. Court of Appeals, 361 Phil. 671, January 25,
1999, per Panganiban, J.chanrobles virtuallaw libraryred
[118]
San Miguel Brewery, Inc. v. City of Cebu, 43 SCRA 275, 280, February
26,
1972. See also Villanueva v. City of Iloilo, 135 Phil. 572, 588,
December
28, 1968, and Commissioner of Internal Revenue v. Lednicky, 120 Phil.
586,
593, July 31, 1964.chanrobles virtuallaw libraryred
[119]
Victorias Milling, Co., Inc. v. Municipality of Victorias, Province of
Negros Occidental, 134 Phil. 180, 198, September 27, 1968.
[120]
Villanueva v. City of Iloilo, supra.chanrobles virtuallaw libraryred
[121]
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. (Manila
Electric Company v. Vera, 67 SCRA 352, October 22, 1975. See also State
ex rel. Janes v. Brown, 148 NE 95, 96, May 19, 1925; Buckstaff Bath
House
Co. v. McKinley, 127 SW 2d 802, 806, April 10, 1939; and State v.
Fields,
35 NE 2d 744, 749, July 15, 1938).
[122]
Cooley, The Law on Taxation, Vol. II, 1924, p. 1785.chanrobles virtuallaw libraryred
[123]
We have also ruled that there is no double taxation when the law
imposes
two different taxes on the same income, business or property. (China
Banking
Corp. v. CA, supra, p. 40. See also Sanchez v. Collector of Internal
Revenue,
97 Phil. 687, 690, Oct. 18, 1955, and People v. Mendaros, 97 Phil. 958,
959, May 27, 1955).chanrobles virtuallaw libraryred
[124]
62 Phil. 624, 632, December 19, 1935.chanrobles virtuallaw libraryred
[125]
Afisco Insurance Corp. v. Court of Appeals, supra. De Leon, The
Fundamentals
of Taxation (12th ed.) 1998, p. 51.chanrobles virtuallaw libraryred |