CTA Case No. 5435 (Decision)

J REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY STANDARD CHARTERED BANK - l'riANILA BRANCH, COMI'r1 ISS I ONER OF INTERNAL C.T.A. CASE NO. 5435 REVENUE, Respondent. JUL 12 1999 x�--���-����-��-� DECISION rh 1 s 1s a Pet1t1on for Rev1ew filed by STANDARD CHA RTE R!=.D B(.~i\!K. COMiYi ISS I ONER OF INTERNAL REVENUE, for' the latter'~ s ..::a:.J.u�.-�e to act former's claim for ref~nd/tax c1���ed it in the amount of allegedly gross receipts taxes for the second semester of 1994 up to and includ1ng t~e first semester of J996. As represented, Petitioner is a resident foreign banking institution duly organized and registered under the laws of ~ngland and authorized by our Secur1ties and Exchange Commission to in bus:.nec;s ln Philippines, w1th pr�inclpal office located at 6756 Ayala Avenue~ Makati City. ~ Fo~ the third and fourth quarters of 1994, the four�� of 1995 and the f1rst and second quarters

DECISION -- C.T.P. CASE NO. 5435 filed with Respondent Percentage Tax Return s and paid the corresponding gross 1��eceipts tax fm�' each of the said quarters, hereunde r summarized, the tax bases of which includes the pass1ve income which was subjected to twenty percent (20~) final taxes. Period Covered GRT Date Paid Exh . 3rd Qtr. (July to Sept., 1994) P5,716,270.00 10-20-94 A 4th Qtr. <Oct. to Dec., 1994) 4,772,985.00 1-20-95 B c 1st Qtr. (Jan. to March, 1995) 5,459,179.00 4-20-95 2nd Qtr. <Apr. to June, 1995) 6,542,752. 00 7-19-95 D 3rd Qtr. (July to Sept., 1995) 7,173,616.00 10-20-95 E 4th Qtr. <Oct. to Dec., 1995) 7,692,265.00 1-19-96 F 1st Qtr. (Jan. to March, 1996) 10,166,974.00 4-19-96 G 2nd Qtr. <Apr. to June, 1996) 11' 108, 506. 00 7-19-96 H After taking into account the decision of this Coux�t, dated Ja.nu.c:n'y 30, 1'396~ in the ca<;e of Asian Ban k Corporation vs~ Commissioner of I n terna l Re v en u e , CTA Case No. 4720, which ruled that the 20~ final withholding ta.:-: on :tncome should not +: D ,.-.m o.+: the taxable r.:p-� oss ~� eceipts, Petitioner filed with the respondent on October 15, 1996 a claim for refund of the alleged overpaid GRT for the last two quarters of 1994 up to the second quarter of 1996 in the aggregate amount of P796,;:::67.51 (Exh. PAA). On Octobel'~ 18, 1995, Petitioner fil e d with this Court t~e instant Petition for Review because Respondent did not act upo n the a forementioned claim fo r r efun d.

DECISION - C.T.A. CASE NO. 5435 3 Petitio~er presents CT the Petition for Review ~hat the gross receiots tax oa.id by .: .l.. OT the fout' J. 1~ quarters of 1995 and the first two quarters of :l9':35, we���e on r~ece:i.pts~~ inc:tu�,;ivP pa~.; s i v e income, >..-.lhich wer'e subjected to the i~OY. final at.: sou.;�.. c~e~ thu.s~ 1 t a1���gued, �l;hat 1n light of this Co,_wt' s t'u:!.ino in the ~lsian Bank case, withhol~ing ta~ on interest income should not form part of the taxable gross Petitioner has actually the amount l:gal~y due fr'GIT! it insofar as its GRT obligations are f~espondent on the other' hand, in his Answer stressed Pet1tioner's claim ~wo s s r��ece i pt s taxes for the second sem(-:>ster' of 1':39-4� up first semester of 1996 was filed only on October 15; 199E, and is still under administrative investigation by the BI P. Further, Respondent r',::i1Sec:l the u.su.al token of a defense that (1) in a claim for' r'efund, it is incumbent upon petitioner to prove that he it X X X, (2) claim for refund of taxes are constr"uecl claimant, the same l:H~:i.ng in the n<:'l.t U'r'P of exemption from taxes, and (3) it is incumbent upon p e t i t :i. o n P f'' t o that .... E:' has complied with provisions of Section 230 of the Tax Code.

DEC IS I Di'~ - C.T.A. CASE NO. 5435 - '-i� - The issue to ce resolved by the Court 1s whether or n ot final withhold1ng tax on certa1n passive :ncome ot the Petitioner oe excluded r~eceipts of said P e titioner, for GRT purposes, hence, 1"+'�' is entitled to the amount sought to be refunded. ~Je r~ule in the a ff i J�-�mat i v e. This i.s not a case of first impression. As correctly stated by the Petitioner, has r~esol v ed the s.:::1.me issue in thE~ case of Asian Bank Corporation vs. Commissioner of Internal Revenue, a.nch o1�~ed on c;imilar�' f<:~.ct u.a 1 c i J�~cum s t; a.nc e s .:":"l.nd on all Hence, we fi n d n o cogent JUstification to decision w~ich is now ruling case law. cieci�;:i.on states in par~ t ~ "The assessment fol""' GFH is based on Section 119 of the Tax Code, quoted her'eundeY' thus~ SEC. 119. Tax on banks and non- bank financial intermediar~ ies. There shall be collected a tax on gross receipts derived from sources within the Philippines by all banks and non-bank financial intermediaries i n a cco rdan ce with the foll owing s c hedule: ( a ) On interest~ co mmissions and discounts from lending activities as we.l1.L., as income fr~ om ,.f= 1� nancJ.d� .-1".I lea~:;ing~ on t h t:: basi ~; of ~~~?mal.n:i.ng matur~ities of instr~uments fr~om which such receipts are derived. Short-term maturity not i�n t?xc�(~~ss of thJG

DECISION �- C.T.A. CASE NO. 5435 5 Medium-term maturity-over two years but not exce(:?.ding f01..W� (4) years 3% Long-term maturity: ( i) Ovet~ fout�� (4) years but not exceeding seven (7) yea1�~s 1'1. <i i) Dver' seven en yeat~s 0% ( !:J) On d i v idE~nds (c) On t'oyalties~ t'entals of pr��o pel�'t y, l�'e.:::.l Ol"' pet'S on a 1, pY'O t� 1 +; s, from exchange and all other items treated as gross income under Section 28 of this Code 5% Pr�ovid1?c.l!, howevt?r.1 That 1n Cii:<se the maturity period referred to in par',:::l.!:;Jt'aph (<::1.) is �:;hor~tr~ned thr'U pretermination, then the maturity period shall be reckoned to end as of the date of pretermination for purposes of classifving the tr'ansaction as shm~t, medium ot' long term and the correct rate of tax shall be applied accordingly. Nothing in this Code s.ha 11 pt~eclude the Comm i �;s i onet' fr~om imposing the same tax her~ein pr~ovic:ied on persons performing similar~ banking act i vi t i e s. The afor~equot ed pr�ovision of the law speaks of gross receipts as the basis of the 5'1. bani-< tax Or' GRT? and it is petitione1���'s contention that the interest income included as part of such gross receipts should be computed minus the final tax already withheld by various withholding agents for the reason that such amount did not actually go to its funds, hence was not actually received by them. We agy�ee ~~~i th the petitioner that the 20'1. final withholding tax on its interest income should not form l"'E)ceipts. p<:\ r~t of its taxable gross

DEL:ISION �- C.T.A. CASE NO. 5435 s Revenue Regulations No. 12-80 dated November 7. 1980 on Taxation of Certain income Derived from Banking Activities provides that the rates of tax to be imposed on the gross rece1pts of such financial inst1tution; sha!l be based on all items of income actuallv t~er:eived .� thus: SEC. 4�. XXX XXX XXX (i:>) Dr'os�; T"'t"C:t:�.ipt�s t~ax on b �.:'lnhs~, non ..-�bank r.inanc�ia.l .intt?r'li1E.1di.:.'lr' ies, financing comp.:�~1"/iE.�s. and other non-bank Financial intermediaries not per�t==�o,.-�m.ing quas.i-bank.ing a c ti v .it.it?s. Thf= rates of taxes to be imposed on the gross receipts of such fin a ncial institutions shall be based on all items of income actuallv r~E�Cf:~ived.. tii!;~y�e acc:r-�ual �::;hall not be considered~ but once oayment is received on such accrual or in cases of prepayment, ~nen the amount actually received shall be included in the tax base of such financial institutions, as provided hereunder. (Underscoring supplied) Fl�~om the frn'ef,;JOi n g, it is but logical to infer that the final tax, not having been received by the petitioner but instead went to the coffers of the government, should no longer form part of its gross rece~pts for the purpose of computing the GRT. This conclusion is in ace o r�ci �,-J it h the interpretation of the Supy�e me Cou�r"�t in thE~ entitled Collector of Int ern al Revenu e vs. Mani la J oc key Clu b ~ J.08 Phil. 8;~1, as quoted by this Co:..wt in disposing of a similar issue in the case entitled Campania Maritima vs. Acting Commissioner of Internal Revenue ~ CTA l\lo. Novembel�' 14, 1965, thus: In the second place. the highest t r�� i bunc:\ 1 c-f the l<:>.ncl intel�'pt~eted the ter-�m "gr�'oss receipts~ to mean all receipts of a taxpayer excluding those which have been especially ear marked by law or regulation for~ ti"H? government or some person other than thE tax paye1�~. Thus~ i t ~'>!as held~ "xx X X. The could not have meant to tax as gross receipt of the Manila Jockey Club the 1/2 % which it directs same club to t1..wn over' to the BoB:r~c! of' Rac(0S. The

DECISION - C. T.A" CASE ND. 7 latter being a t) o v e �r� n men t institution, there would be double taxation, which should be avoided unless the statute admits of no . other' intero~etation. In the same manne~. the Government could not have intended to consider as gross receipt the portion of the funds which it directed the Club to give, to winning horses and Jockeys-admitted 5%. It is true that the law says t~at out of the total wager funds 12 1/2 % shall be set aside as the ' Commission' of the track owners but the law itselF takE'S official notice, and v::.r'tual2.y approves or directs payment of the portion that goes to ow~ers of horses as prizes and bonuses of jockeys, which portion js admittedly 5% out of the 12 1/2 % commission. As it did not at that time contemplate the application of gross receipts~ revenue principle, the law jn ma~ing a distribution of the total wager funds, took no trouble of separating one item from the other; and for convenience, grouped three items under one co~mon denomination. "i\leedlec.;s to <:;ay? L:;il�'OS'5 r'f:>Cf'ipt~; of the proprietor of the amusemE)nt place should not include any money which although delivered to the amusement place has been especial!~ earmarked by law or regulation for some person other than the pr'opt'ietot'." <The Commissioner' of Tnte1�... n'""ll Rt~venue v:~" IT1.:3.n:i.l<3. J'oc!-<ey Club, Inc., G. R. 1\los.. L�-�138'30 8.- L- l3887, ..TunP .30~ :!.':3E0) It is to be noted that, undet' Section z~~F.,O of the Tax Code, a race-track is subject to an amusemePt tax of 20~ of its gross receipts and the term gross receipts' embraces all t~e t'eceipts of the pt�opt�'ietot', lessee, or' opet'atot' of' the amusement pli3.ce." l\iotwithstanding the broad and all-embracing definition of the term ''!;'Jl"'oss Y'f~cPipts'' founci in ou.t�� amusPm~?nt ta>< law, our Supreme Court did not adopt a literal interpretation of the said term in the case of the t"lanila J'ockey C:l.1..tb, Inc.~ s tt pt�a ."

DECISION -- C.T.A. CASE NO. 5435 -8- The legal issue hav1ng bee~ settled, what r~emains to be resolved by the Court involves factual matters, that is, whether or not Petitioner has established by evidence its claim for refund. A study of tht-? evidence adduced by Petitioner' (Exhibits A to AAA) ~as :. ed this Cou.r't conclude that Petitioner 1s entitled to the amount sought to be r'efunded. Pet1tioner's evidence clearly shows that it filed its claimed refund within the two ye;:n' prescriptive period. F uJ�'t her' mo1�' e, records show that Petitioner paid GRT to the Respondent ~hich is ove1�' or~ in excess of the GRT required by law because it er'i���oni::!OU!', j 'y included the 20~ final withholding taxes on income in the computation of its gross receipts tax the pey�iod July 1, 1'3'34 to June 30, 1'3'35. These facts were never controverted by Respondent. fact, Respondent presented evidence that even str'engthen the claim of Petitioner when the Respondent's witness, IY!r�s. Elenita G'!uimosing, Revenue O~ficer IV of the Bureau of Inte:�'naJ. Revenue, testified on February 4, 19'38 that Petitioner's claimed refundable amo~nt of P7'36,2S7 . 5:l formed part of the gross receipts tax of the Petitioner. Exhibit 2 of Respondent also points to the fact that the i"�t~ v Pn u.e investigated/examired the claime~ refund of Petitioner concluded that indeed the gross receipts tax that Petitioner paid for the period under

DECISTQi',j - C.'.A. CASE NO. 5435 - 'l - was based on the wrlch i:tc:~udec1 the ta:{ ~nte .. e�;t i1come . ihP or�;:1cet'S however recommended that the alleged over��oaid should not :Je given due COUt'S e as the legal basis OT e�r'1�'oneou"'. the withholding tax should form pa rt of the gross receipts to be subjected to the GRT. As earlier adverted to, a Sl.ml.. L1 iH' lega~ <;sue beer settlr0d +-r1s Cour�t sam~, tl� 2 Co1.l +, pet'S uad ec: to ext<?nd tht' sougrt t~--c IN THE LIGHT OF ALL THE FOREGOING, pPtition 1 s GRANTED . is :.,e e. y ORDE RED REFUND en' ISSUE a TAX CR~DIT CE~T:c!C0TE to Petit~oner in the amount of Q79E,~67.51 for the last t V-JO quarcers of ~994, th o�~" i'=3'l5 anc~ the f t�st SO ORDERED.

D~-:; I._, -..," - 10 - C.~-. A. CAS '�.tO. =4.35 WE CO. CUR: ~lQ_c~ ERNEeTO D. ACOSTA Pt~ esldlng .Judge r D" " s e r �� :. �1 g AMANCIO Q. SAGA H' "'Dciate Jt.dge CERTIFICATION I hereby certify that tbe above jecis1on was reacned "~ f T; e.,., d u e cor. "' ' �L .::. t , n n w1 '; h -'-; h e c n' :: P t' <~ o ,_ ~' r~ o � �. r t ,. , f Tax Aopea1s 1n accot~aance ;...;:ith Se:::-c1on l3, i':lr�:::tc~e 'Jir- c-t th CnnstJtut1or. ~ to. 0--A-. ERNESTO D. ACOSTA t=�r'P. :;_ d 'i. n ~ .Judge

REPUBLIC OF THE PHILI PP INES COURT OF TAX APPEALS QUEZON CI TY STANDARD CHARTERED BANK - C.T.A. CASE NO. 543~ MANILA BRANCH, - Vet'S '-lS COMM ISS I ONER OF I NTERNAL REVENUE, Respondent. I< - - DISSENTING OPINION opini on of es-::;eemed alie~ed overpaid gross receip~s taxes. I humbly o:sagree w1th the conclus1on ot cr1mar1lv because 1t 1s ~ased on the case of Asian Ban k Cor p oration vs. Commiss i oner of In ternal Revenue, CTA Case No. 4720, January 30, 1996, wI.1.1cn' I believe to be errone0us. A more fundamen~al reason wh1ch prevents me from agreeing with the maJOrlty opinion is that i~ h e 1�' e 1 s n o pr� o vision in the Tax Cod e or any speci~l :;,aws which i~come t a x wit~hol~lnJ u~der Section 50(a), as no longer forning part of t~e :;jt'OSS the ot~er nand, Section 8(c) of Re venue Regulat1ons No.

DISSENfiNG OPINION - C.T.A. CASE NO. 5435 �'''I L7.. of Revenue Regulations i\t 0. 17-��84, dated Oct abet' 1'384 have the same provisions, thus: nrf the r~ec.:ioient of the above-mPnti.oned 1tems of income are financial institutions. the same shall be included as part of the tax base upon lt>lhich the gr'o~.;s l'eceiots ta>< is imposed." (Underscoring supplied) Clea~'ly, thet'e is no doubt that the 20'1- final withholding ta:-< is legc:dly Includible as part of the gt'o s s 1�'ece i pt s fat' ptwposes of the gt'O S S l�'t>CP:i.pts ta>< . The petitione1�' in the instant case c1ted the As1an Commissioner of Internal f<evenue, CTA Case No. 4720, dated Janua1�'y .30, 1996, where this Co ut't has uphedd the petitioner's contention that the i nt er��est income included as pat't of such gt'oss 1�'ece i pt s ':5hould be computed minus the tax withheld and deducted by various withholding agents fat' the 1���eason that the amount did not go to its funds~ hence, was not actually received by them. And the Com't appt'O './ E~d citation of Section of Revenue Regulations No. lE:-80, dated November' 7, 1980, thus: "Gt'oss t'eceiots tax on banks, non-ban!-< financial intermediaries, financing companies, and other non-bank financial intermediaries not performing quasi-banking activities. The rates of taxes to be imposed on the gross receipts of such financial institutions shall be based on all items of income actu.:::d1y

L; J c:;~)L'\i ~ J: NU tlP �. i\1 I Ui\! ���� C.T.A. CASE NO. 5435 7 �..J r�ece1vec: !Tier'e a.cc1���ual sna .. .l. ret oe considered, but once oayment is received on such accrual or ir cases of overoayment then the amount actually received shall be included in the tax oa~e of such financial 1nstitutions 1 a.�:; pl�'ovided her��eunder'." This Cotwt concluded that afor��esta.ted car, logically be Inferred that the a.mount final tax, not ~av1ng oeen received by the petit i one,.�� but instr=ad ~>Jent co f fer's o f t h e go v e t'n men t, should no of its gr'OSS of computing the tax. Such conclusion in law is legally object1onable for two (2) reasons. to wit: 1) Section 4(e) of Revenue Regulations i'.lo. lC:~-80 i<:.; not a. computat:loP deter�mina.tive of the amount of gross receipts as basis of the gross receipts tax under Section 119 of the Tax Code. Said revenue regulations merely authorize the determination of the amount of gross receipts on the basis of the method of accounting being used by the taxcayer under Sect1on 37 of the Tax Code. Such accounting methods for tax purposes comprise a set of rules for determining when and how to report incom~~ and d(�?cluctions ( Consolidated Mines, Inc. vs. CTA, L-18843, August 29, 1974 ) . The t vw p~incipal accounting methods expressly and impliedly recognized by the Tax Code and the Income Tax Regulations are: (a) Cash receipts and disbursement met~od or cash basJs. I n c o me e E.' r' n E.' d 1J y the taxpayer is not included in gross 1ncome until rece1ved and expenses are not deducted unt1l oaid within the taxable year'; .::md (b) basis. Income is included in gross income when earned, whether received or not, and expenses are

DISSENTING OPINION - C.T.A. CASE NO. 5435 a.11o~~r~d .=ts deductions when incurred although not yet paid within the year. fhat t i-�- e nan-1nc~us1on of the �=. ,-�,ui 1-. �-- .n: income tax from the 1nterest income for purposes of tne gross receipts tax operates as an exemption ~rom tax. Being an exemption from tax, the same m~st be construed strictly not against the government but aga1nst the one who asserts t~e clalm of exemption. Tax e x emption can only be given effect wh~n the g~ant is clear and categorical inasmuch as taxation is the r ule and exemption is the exception~ Section 26, Tax Code. The holding therefore in the Asian Bank Corporation to the ef~ect that ~he non-1nclusion of t� h ~'-' .:::o�r.. final withholding income tax from the :;woss receipts can logically be lnferred f ~--� o m t �1 E� wordings of said Section 4(e) of Fie venue t~E�L,1Ulat:i.on�s No. l;:>���l::\0, is mispl<::iced. Tax ~;tatutes are to receive a r~e<:\sonable construction with a vie~-v to car~~��ying out theiY' purpose and intent ( 51 Am Jur 36 1). It should not be construed as to permit the taxpayer to easily evade tne payment of the tax <Cabon Steel Co. vs. Lewelyn, 251 U.S. 501 ). Thus? the good faith of the taxpayer is not suffic:iE~nt .iustif:ic.::'lt:lon for- e><empt:Lon fr-�om t;he payment of surcharges imposed by law (Commissioner vs. Royal Interocean L ines a n d CTA, L-26506, July 30, 1970 ). A tax statute should be ronstrued to avoid the possibi;1t1es of tax evasion (Lorenzo vs. Posadas, 64 Phils. 353 ). The High decision in the case of C o mmi s s i o n e r' of IntfTnal i=<e�-/enue vs. The Manila Jockey Club, Inc. lOB Ph i l s . .Tune 30, 1'360, reaffirmed by the sa1d Court in the ca~~ of Vi sayan-Cebu Terminal Co., Inc. vs. Commissioner of Internal Revenue, 13 SCRA 357, February 27, 1965 cannot be con~:,:lder��ecJ m��ecedent case~;, he n ce, inapplicable to the two cases decided by this Honorable Court 1n the cases of Comp.::.J.nia

DISSENTING OPINION - C.T.A. CASE NO. 5435 �- 5 - Maritima vs. Acting Comm1ssioner of Internal Revenue, CTA Case 1\io. 1426 dated November~ 14~ 1966 and Asian Bank \..}. .:...:>. .. Revenue, CTA Case No. 4720 dated January 30~ 1995, for~ the follm"--ing 1) In the l'r1ani la Jockey Club, Inc. case, the Club was authorized to operate ~o~se races in wh1ch betting was made through the sale of tickets to the public. The total amount of bets called "wager~ fund" wer~e distr~ibuted pur~suant t o Execut:i.ve DJ�~der�' i'~o .. 3;:::0 and Republic Act No. 309, as follows: dividends to holdPr~s of ~AJ:inning tickets li::::v21. as "commiss1ons" of the lvtanil.:::\ Jockey Club, of which ~% was assJgned to the Boar~d on Races and 5% was distributed .::~.s p1�~1zes for~ O>'.Jne�r~s of ,,..,Jinning hor~ses and authot~i zed bonus for~ joci-<:eys. According to the above-mentioned distribution of the fund", the then Co 11 ect en~ of Inter~nal Revenue assessed the Club on the whole amount of its "commission" But since the Club had already paid the amusement tax based on its 71. shar~e of the "commission", the <O:li!IOunt assessable pertains only to the period from November 1946 to October 1950. On var~i ous :instances, the Club protested the proposed C:'\SS('i!SS!Tlents and was susta1ned by the opinions of the Secretary of J�u~;t ic(�? rendered on three different occasions <Opinion

DISSENTING OPINION - C.T.A. CASE NO. 5435 - 5- No. 0 f 1 ':35~~: a.nd Opinion \lo. 340, ser�'ies of 1'355). Notwithstanding the opinions of the Secretary of Just1ce to the effect that the amount corresoonding to the 5~~ was held only by the Club in trust of winning horses and authorized bonuses of jockeys, the then of Int eY'nal Revenue clem,::mded paymr~nt of amusement taxes for the oeriod November 1'345 to October 1':350. Se:dd demand letter was timely appealed to the Cotwt of Appeals wherein a unanimous judgment obtained reversing the Collector~s stand on the matt e1'. In the High Court, the position of the Secretary of Justice was sustained thereby upholding the Court of Tax Appeals' decision. f=1ccot'd:ingly, gr�'oss �r'eceipts of the proprietor of the .:::J.museml:?rlt Dlace should not include any money which, although delivered to the amusement place ~-.~as "especially law or legal rule or regulations for some persons other than the proprietor. Undeniably, they are money received by the racing club but they C:\"r'(7~ moneys earmarked by law or regulations for winning horse owners and jockeys and never for a minute become the property of The same is tt'IJe in the case of the ~~ which the law directs the club to deliver to the Board on Races. The High Court therefore agrees with the stand of the Court of Tax Appeals that such funds representing 5~%

DISSENl"lNG OPINION - C.T.A. CASE NO. 5435 - 7- of the 12t2�Y.: "commissions," of the race track do not for' Iii of the !Jt"'O S S t'eceipts~ hence not s;_~bject to the amusement tax of 20%. T~e above-mentioned decision of the High Court was :L n th!?. CE-!bu Te�..-�minaJ. Co �., nc. l V C::">. Comm1ssioner of Internal Revenu.e, 1.3 SCi:XP 357, Nos. L-19530 and L-19444, ~ebruary 27, T'""lC issue involved in this case is the interpretation of the management contr'act ent e;�-ed into by and Bu1�'eau of Customs and Visayan Cebu Terminal Co., Inc. latter as contractor was appointed the sole manager of tne Arrastre Service at the Port of Cebu City. In the sa:i.d :vlanagement was further agreed and unciet'stood that in consideration of the rights and privilPges granted the Cont1��'actn�,., for the management of the Arrastre Serv1ce, the Bureau of Customs shall receive eight (281.) pel�'cent of the income det'i ved h-om in connection with the operations of the Arrastre Sf~t'v:i.ce .. pc.~.yable ~"lith in t~!n (10) days of the succeeding month. .,..he main legaJ i�=.;sue �invoived in this case is whether or not t~e t'ece i pt s cot't"'e s pond in g to the of the total gt'O S S :i. ncom(~ of the Service Contractor delivered to the B u. Y' e .:,.'- u of Cu.stoms witrnn ten (10) days of the following manti-� ~-if10UJ.cl f 0 �r' ITi pi::\ Y't t"'~?c .;;;i.pt<:; subjc~ct to contractor~s tax under Section 191 of the Tax Code. The

DISSENTING OPINION - C.T.A. CASE NO. 5435 - 8- Court of Tax Appeals ruled in favor of the holding the v1ew that the said c:8'/.. payment by the Contt'i':\ctol�~ based on i t s monthly income should not fot~m part of the gross receipts subject to 3'/.. and that 23 ol the IYianagement Cant 1��act can legally be constr�ued as a !l Y" eo u.l C:l. t on 1 :l " tne lea~�ned t r' i .:::\ l obser~ved: "x x x the government co:.tld not have intended to consider as gross receipts the 28'/.. that went to one of its institutions.1 the Bur�eau of Customs, and thet~eby collect percentage tax on it from petitioner. To hold petitioner liable for~ the payment of percentage tax is unquestionably unjust and not contemplated by Section 1. ':H of the Tax Code." All the above-mentioned decisions o� the High Court made specific reference to y�ece i pt s especially "e,;:n�mar�ked b't' law <H' leqa:!. r�ule or� 1��eoulation" as not fot�ming part of the taxable gr�oss r�eceipts for� purposes of the gross receipts tax under the Tax Code. For this purpose, is per�t i nent to define the word put upon a thing to distin~uish it Ot�iginally and liter�ally, a mat�k upon the ear, a mode of marking sheep and other animals. sa::.d to be earmarked when it can be identified Of"' distingu1shed from ether property of the same nature. To ~; et ft�om othet�s <Black~s Law D1ctionary, 5th

DISSENTING OPINION - C.T.A. CASE NO. 5435 -- '~ - i::.cli t ion, p. 508) � In the case of the Man1la Jockey Club~ Inc. Executive Order No. 320 and Republic Act No. made the specific "e.snnax�king'' fol' ciist�i'ibut:;.on of �~he total wage t' fund to d i ffet'ent persons other than the r~e ~arne is true 1n the case Ter'minal Co., Inc. whel�'e the specific earmarking of the total monthly gross income to be of Customs by the Contractor was orovided in paragraph 23 of the ~anagement Such specif1c earmarking of the twenty (20~) percent final income tax -~\�:; not includible in the gross receipts for purposes of r'eceipts tax was not pt'OV ided by any law legal rule or regulations, hence the non-app~icability of tne above-cited decisions to the Asian BanH Corporation case. Thi� in point 1n the case of Campania Maritima case where the on non-�inc:tu.s~ of the "f't��om the t ot<':l.l collection to avoid claim for refund on f1�'e i ght and passengers tickets not t:<':l.ken is not Tr-�ovj_ded by any law or legal rule or regulations. In the f:~rsian Bank Cor'pot'ation case~ petitioner' bank th<::\t subjecting the !;W<JSS to the final withholding income tax and later to the 5~ gr��o s s not only oppt��essive <:Hld obno:-<iouc: b�_tt even a confiscatory fOl""'ffi of double taxation. Double -i;,�::tHation h<J<; be~?n dE�f:i.neci ��~J.<; the ta.;.<:ing of ti���~f~ 'samf:? :i.t;em

DISSENTING OPINION - C.T.A. CASE NO. 5435 i. 0 or piece of property twice to the same person, o ~�� t 3. x i n g it as the of one pel�~son and again as the but doe:; not include i:,he J.!TIDOS:tt10fl o f d 1 f f. e t~ P n t taxes concurrently on the-> ~:; i::\ me state income taxes), nor' the taxation same piece of to different persons when they hold different interests in it or when it represents different values in thpi�r-� hands. as when both the mortgagor and mortgagee of property are taxed in respect to thei1�~ :i.nter~(:-sts 1n i.t~ or�� ,,~hen 3. ta;.< 1s laid upon the profits of the corporation and also upon the dividends paid to its stockho:l.deY�s" (BJ.acl-<~ s Dictional�~y, 5th Edition, p. 't91). This acceptable of double taxation i�::; �r~Pflt:>cted in BIR Rul1nrJ 1\lo. �::1 ::�-:;. L... !�... ,_.; dated November~ 2, 1913'3, thus~ "The 51.. gt'oss l�'eceipts tax under' Section 120 of the Tax Code is col1ectitle on al' finance companies doing business in the j:.)hil:i.ppines fr'OITI inter'ests~ discounts, and all other items treated as gross income under the Tax Code. Accordingly, your income derived ~rom investing ~ne excess funds in short-term market placements through commercial banks constitutes income hence, c:.l.tb.jc->c:�t to the 5'Y: gross receipts tax under said Sect1on. The fact that it has been subjected to the 20% final Withholding Income tax under Section 50(a) is imma.tet'ial. Besides, the withholding tax is imposed under Title II of the Tax Lode while the finance ~ax is provided under Title V �l:;her~eof.." <BIR Ru1 in~~ No. ~=::2.3j i\lo��.tembel�' ;~~~ 1989)

DISSENTING OPINION - C.T.A. CASE NO. 5435 '. J'. ~I For as long as the basis for ~he claim for-� t~e fund oy�� tax cr� eciit certificate is based on the non-inclusion of the amount representing the final withholding income under Section 50(a) as part of the gross income s u.b.J ect tD r'ect~:i.pt~; tax~ t h i s opinion l,'iUl stand. The fac t that petitioner-claimant is able to establ1sh by competent documentary and testimonial evidence is of n o mom e nt. For pu r pos e s of the amusement tax under Section 260 of the Tax t'ece:i. pts' e mbr�aces 'all t h e r' e c e i p t s? o f t h e pl�' opt' i e tot', operator of the amusement place. 'all the t'ece i pt s' r' e f e r' t o t h e total amount of cash received which becomes part of the funds of the taxpayer and does not include any money WfllCh has beeP specially earmarked by any law or legal rule or regulation for so~e other' pet�son other' than the lessee operator of t he amusement place. Receipts means actually (Philippine Long Distance Telephone Co. VSa Collector of Internal Revenue, G.R. No. L-3222, 21, 1952 ) for�� itself and not for' othe r's, for' they t,-.Jould no�!~ be receipts <Manila Jockey Club, Inc. vs. Collector of Internal Revenue, CTA Case No. 205, April 15, 1958; Ja i Alai Corporation of t h e Phil i pp i nes vs. Araneta , CTA Case No. 108, July 31 , 1956 (Annotated, NIRS by Comm:i.ssion~?t-� . Josf? ~t r�a1~as, 1988 Edition, p. E.87).

DISSENTING OPINION - C.T.A. CASE NO. 5435 - 12 - In View of all the fo~egoing, T register my tissent to the majority opi~ion and vote to DENY the claim for~ refund for lack of leraJ ba~is.