CTA Case No. 5521 (Decision)

REPUBLIC OF THE PHILIP~INES COURT OF TqX APPEALS QUEZON CITY EQUITABLE BAN~!NG CORPOR~TION, Petitioner, - versus n C.T.A. CASE NC. 5521 Pron:ulgat~d: COMMIS3IONER OF INTERNAL REVENUE, --�--S-E-P--0-81-�9-99-- - Respondent. �- - - -- -~ - - -� - ~... - /' >< -- -- DECISION -~is case involve; a c:a1m ~or refund of al 1 eged On Reve'�tu.e of a of P385,640. 115.87 a~~ oaymen-1; n the su~ of ?18.212,999.56. Pet1tioner a::eoP~ t~at the sa1d p<~.yment co r.1 o:�~ i. _; e s the aggregate a~o~n~ o~ gross re~e:pts b~� -3.Pd .( ) P385,640, 115.87 i'lcluded amounts of ~1,850, 179.43 <Exh. C-3-B) and P2o, ;;::og, 4~ 7. 91 <Exh. C-4-A) wh1ch

DECISION C.T.A. CASE NO. 5521 - 2- ~espectively cor~espand tc the 20% po~+ion of tax paid income and income subjected to final tax booked at gross. fJn t h i s Court rendF~ed a ~ecision in the case o~ Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720, d~C>cJa.r���1ng tr .3t -:.h" E:o~~,; final ~o\Jithholding ta.x on bani-< inter~;est form part of its taxable gross receipts for purposes of computing gross receipts tax. Thus~ on the basis of the above t'uling, petitioneJ�' filed on Septe~ber 26, 1996 an administrative claim f~r issuance of tax credit certificate in the total o"f subject matter of this case, f~rmed a part of (Exh. ,~; The amount claimed to be t��e fundab l e is wI u derived at by recomputing the tax base, as follows: Gross Receipts Subjected to Tax P.385,S40, 1:!.5.87 Less: 1) 20% Portion of Tax Paid 1.' 850, 179. '+3 Income :=~c)ij :::('~3i, -4-:~ 7 ~ 91 C.: ) I n v f.! ~; t men t Tnco me s '-l b j e c t J;;_3f<31} 58(), ~jl8J~ 5.3 to 20% final tax booked a t g t~(F; s Adjusted Gro~s Receipts Tax Base Com~utation of Adjusted Gross Receipts Tax Gt'oss Receipts Tax Rate Tax Du2 P. :l.t,~:~li.=::,45fL67 0.00 ":fuJ. .3, 8;:::5, 5SO. BS .38,255.51 17, 76El, 0'+-3. 0:;:5 ... J ,~: .3.30, 77'-1�'1 4�55. 95 53-:;~ (::<�:�1 � ;:::�s G,2;53 2 ~)8t)11 ~5 ~ 8~ ~.i3 5'1. 16,, 5.3EL 7:-::;2. 80 Gross Receipts Tax Paid Less: Adjusted Gross Receipts Tax F�j,7,~ :t 1<).1 ()1.~:3~ 7() TaH Refund P 18, 2L~:, 999. 56 17. 110. 01.9. 70 P 1. 1 Oc~. 979 .. 8E

DECIS I ON C.T. A. CASE NO. 552 1 3 t~e respondent~ petitioner filed t~is ju~ic~al claim fo- Respondent~ of Special a) Petit i. oner~' s claim for tax refund or credit is un~er]oing routine adwinistra~ive investigation or examination by the Burea~ of Internal Reve~ue; Pssuming tha.t pa.1c ";he refundable or rred table gros~ the same were nevertheless collected and paid pursuant to law and pertinent BIR implementins ru!es and reg11.0tjons; c) Petition e1�~' s allegations that i t erroneously or e:<:cess j vt:�I y paid i t s g'r''Os<:; ~'ece i pt �:;; d u�r' in g the under review does not ipso facto warrant refund Detitianer must estab!ish that the exclusions g-oss receipts are allowable under the implementing rules anc' d) Pet::. t :. one!�~ must 1�" 1. !.-<E! w1. s e establish that the -'1!. 1 �::: g ed re~undable/creditable t 0.}{ n?it~er automatically applied as tax credit against its ta:<: liability tite succeedi~g quarter/s of the succeeding year nor included as creditable taxes dec:ared and applied to the succeeding ta~able year/s.

DEC I S ION C.T.A. CASE NO . 5521 - 4- To petitioner~ followi~g documentary e~idence 1 to wit: t Tt~a.n ~:;mi. t a l Office and Branches/Units of Large Taxpaye~s for� the Quarter Ended March 31, 1995; Qua~terly Percentage Tax Return o~ the quarter '',i' i �..J ,{. 1J Written claim f~r refund dated Sept ember~ 26~ ; 9'36; Income & Expense Account Sub-ledgers quarter e~ded Marc~ 31~ 1995; and Sta.t :ment of Income and Expense Accounts of EBC ?�I \ �.� j. '} al'-:;o lt>Ji.tnesses to testify and identify the aforecited documents. All the aforementioned documentary evidence as well as th@ testimonies of the witnesses were admitted by this Cour~t in a r~esolution dated '=-ebr~ u.o:wy 27, 1998. Respondent, on the other hanrl, mani~ested that t~e~P no o1�~ examtnat:ion conducted on cJa::.m. submitted the case for decisior base~ on the pleadings and other ava~lsb!e The both p<=wt ies to thei;~ W1-.l.lCI.I, the case deemed submitted for� decision on July 3, 1.998.

DECISION C.T.A. CASE NO~ 5521 5 On fJct oiJr~Y' t 'i the case ~as decided by this Cour~t, petit i onel'~ ~iled a Motion to Reopen the Case to allow the presentatior of additioral evidence in order to comply wit'! the ~equirements laid dow~ in the two C2) h ....�\71 this C:Df..t~���t thf' pa.i�~t :l. ~ s and subject matter CCTA Case Nos. 5411 ard 5146). the motion to reaper the case was deried in a r~esolution dated October 29f 1998 .. "The presentation of additional e '.J idence is allowed only when i t is new 1 y d :~<:;co verec' ~ or�� where it has been omitted through inadvertence, rn' mistake, ot' ~'�lh E"�'e t'ie ;urpose of the evidence is to correct evidence previously It appears that the reason of petitioner wanting to reopen the case is based solEly in our Decision in the case of Equitable Banking vs. CIR, CTA Case No. 5411 and 5416). Petitioner failed to specifically state the facts surrounding the alleged inadvertence or mistake or inexcusable negligence in t~e presentation of that alleged additional document except for the ~act that it was raised in cur previous decision involving the same parties and subject matter. T~e Cou~t cannot allow the presen~ation of piecemeal evidence, oi<1et~�;.~ise, the1���e will be no enc' to litigation .. " <CTP ~--�ecDl�-�ds. 0P� 182--~B5) 1998, a motion for reconsideration o�F thE' t'e~:;olution dated October�� C.~'3~ 1.'3'38 \�'II<=<~; filE:d by the petitioner but the Court likewise denied the same in a r';:,'sni.utj.on pt'omulgated on

DECISION C.T.A. CASE NO. 5521 - 6- ordered this case to be :~ubmitted t~e date of promulgation of said resolution. ( i ) Whether~ at~ '1ot petition et~ is entitled to r~e fund 31 ~ 1995 corresponding to the 20% final withholding tax on its passive income; and (2) Whethet~ or~ not oetitioner has proven i t s clai~ by substantial evide,ce. As this Court has alr~ady settled the s.ame in the case of Asian Bank Corporation vs. Co:nmissioner of Internal Revenue; CTJ-:1 C�:,';e :Jc:, L�T::c,, are quoted below: "I...Je agr~e(~ r,.;it'l the petitione1�~ that the 20% final withholding tax on its interest inc2me s~ould not form part of its taxable gross t~eceipts . Revenue Regulations No. 12-80 dated Nov. 7, 1980 on Taxation of Certain Income Deri;Pd from Banking Activities provides that the rates of tax to be imposed on t~e gross receipts of su2h financial i'1stitution, shall be based on all items of income actually received, thus: }{ )(}( ((>) Dr'oss r'eceipts; tax or' b.lnh!"'~ ron-ban!-: F.in,::~nc.i..:<l r i '7 t e r' mt? d i a r' i e :::; , i nan c i n fJ com pan i e s " and other non-bank r.inancial .in t er�med i ;;,~r'.i :::> s not pt.?r' ror'm in g q~.1a s; i -�� banking activities. The rates of taxes to be imposed on the gross rere1pts of such firancial institutions shall be bas?d on all

DEC ISION C.T.A. CASE NO. 5521 7- .; t t'ITI ~-; 2r�t 1.1.~ �1 1 v ~e~e accrual sha~l not be cansider~c, but once payment is rec2ive~ on sue~ accrual or in cases cf prepaymert 1 then the amount actually received shall be included in the ta~ base of such financial institutions, as provided hereunder. (Underscoring �;upplied,) :l t is but logical "::o + ...,,., ~~at v ._,. .r. ~ received by the petitioner but instead went to t h e c o f f e 1�� "= o f t h e g o v e r� n me n t ~ s h o ..t: d n c 1 o n :; f~ ,, ~orm part of its gross receipts ~o~ the purpose 8f comput~ng the GRT. Th~s conclusion ~s in accord with th2 interpretation of th2 SupreEe CJurt in t~e ra~P en+itl2~ Collector of Inter~nal Revenue vs. Manila Jockey Club ~ 108 PhlJ.. 8;:::1., a~; quotecl by this Coul"'t in d:i.spos:ing of a similar issue in the case ?ntitled Campania Mar�itima vs. f:icting Commissionet� at= Intet�nal .Revenue ., CTA Case i\io. 14�i:::S rl..:~t2-:-: \;a v s= mt~2r... 1. L;.'J 196f~~ thus: In the second place, the h~~hest tribunal of the land inter~~eted the ter~m !;p-~ ass t�eceipts': to mean all rere;pts of a taxraye�~ exclJdinJ !;hose �'~~h ich have been especiall-y earmarked by law or re~ula~i3r f~r the government ~r some oersor other than the taxpayer. Thus, it ~as held: "xx xx. The Govet�nment could not have meant to tax as gross receipt of the Manila Jockey Club the 1 / e% w~ich 1~ directs same Club to turn over to t!1e Boar~d of Races. .,.he l.:;:~.ttet~ being a Government 1nstitution, t~?re ~ould be double ta~ation, ~-.Jhich should be avoided u.n1.ess the statut? admits o~ no In manner, t~e Govern~ent could not ~ave int~nde~ t o conside~ 35 gt'O s s r-�ece i pt the fund-::~ I.AJh: ~'�-~ i t directed t~e C~ub to give, or know the Club would g1ve~ to winning horses and Joc'<eys admitted 51.. It is

DECISION C.T.A. CASE NO. 5521 - 8- true that the law says t~at o1t of the total wager funds :2 1 /a~ s.h.:::l"' 1 be set a.s ide 2.s t:f�,f:- 'commissio"l' of' the tJ�'ac!-< ov�mer'S but t~e law itself takes 8fficia' notice~ a"ld virtually approves or ~ire~ts p2yment of t~e portjon t~at goes to owners of h~rses as prizPs and oonuses of j~c~eys~ which po~tion is admittedly 5~ out of the 12 l /~% corrn~ssion. As it did not at that time contemplate the application of gross receipts ' t.., e �~-= t~ n u e pt'inciple, t~e 'a:.-\1 in mal-<ing a d~str1butjon of tne ~otal funds, took ro trouble of separa~inQ one item from t~e other; and for convenience~ !~~'Duped th~'ee j t ems uncJe" on<:' common denomination. ' 1 1\let-~dless -L.o s.:::1y': D~"'�~--M~s recei~ts o~ the propr~etor of the ~museme"lt place s~c~l~ "lGt in2lude any money wh~ch although delivered to the amus2~ent place especially earmarked by law or regulation ~or some person oth(~t' than the pl�'Clj::w i (:!tor��. " ( The Commissioner of Internal Revenue vs. Manila Jockey Club, Inc., G.R. Nos. L-13890 & L-13887, June 3 0 , 1960 ) :r.t is to be notecl -:hat, under' Section 260 of t~e Tax Code, a rare- track is subject to an amusement tax of 20% of its gross receipts and the term gross receipts~ e~braces a l l t~e receipts of the proprietor! ~~ssee, or ooerator of t~e amusement pL'l.C(:>," !'~ot~'Jithsta.nding t~1e br'OE.d and al~-embrac~ng definition of the te�r'IP "gr'oss t~eceipts" -~=ou.�-,d 1.n ct~' amusement tax law, our S~preme Court djd not adopt a. J.ite~'al interpretation of the said tet'm in thP rase of the Manila Jockey Club, Inc. , supr'c?l .. "

DECISION C.T.A. CASE NO. 5521 - 9- sum? the 20% final income shouJ.cJ. r.ot for�m oart o F taxable g~�oss ta:-<. T~e legal issue having been settled, what rema1ns to r' e s o l v e d .=n�� e f e:'c:�t ua l paY' t j_ c !J ~- :3 ;- 1 ~-� whether' or not petitioner has established by evidence its claim for refund. 1.-Jh i 1 e i t i s tt�ue t h a t p e t i t i o n e r c l e a r l y declar�ed the exactitude or the amount being claimed for refcnd~ ~ of t~e records shows some errors committed by the in arriving at t~e Adjusted Grass Receip~s ~ax base which will be s �_;bj ect ed to the tax l��ate oi"' 0%, l%, A c.::~1�'e ful SCt''Ut i ny of t i~e petitioner-� tax shown in Exhibit !f C-2!! (page CTA t'9COt'd 5) ' in including the amount of P20,209~417.91 <Ezhibit "C--2-c") ,::dle~;;edly r�'epr�esenting the tax withheld on income t� ece i ved by petit i. one~-�- . An ~eveals that the interest income from which the amount of was allegedly dPd~cted was r~corded ~r t~F ledger~ at 100~1.,, mear. i. ""~g v-Ji thaut deduc~t i ng t h�? f'inal tax. The implication being that t~e 201 ~inal ~-Jithholding was not actually wi thheld and that

DECI S ION C.T. A. CASE NO. 5521 - 10 - setitioner recei~ed the full amou�-�t of the without deductions for fin3l tax (~xhibits Q to X, r'G .._ o .J J, P R to TT) � It is i mpcn��t .::1nt to note that the o."-\CCOIJnt ti.tle -r:o~� T.:;.x of petitioner dee; nat final may merely be a segregation of the amount to be paid to the BIR. Petitioner should be that the refund of gross receipts taxes is based on the ;:,~.ct ual payment of the 20~ final tax which shall be c'r-:.�ciu.cted from the gross receipts fJr the pGrpose computing the 'his is the essence aforequ.oted Asian Bank case, CTP Case Nc. s e g r~ e g at ~. o n i s n .J t s u f f 7. c 1. e '! t , t h r.:> 1�" e m�.t s t b e proof of payment of the 20~ f~nal t&xes to wa~rant t~e grant of t~e claim for refund. In the case at baY', petitioner failed to Cet"t if i CC~. t e s of Inco~e Tax Withheld at Source to prove t'IE' final taxes were withheld snd actually remitted to of the gover~nment. Although petitioner !:.omP ~..�e levant cJoc:-'.ment s to sub~;t;-~nt j_;;;.;t e claim finds the sa~e insu~ficient ;ra~t the desired re!ie f . Plainly that petitioner has no other evide'!ce ~o show ho~ final withhold~ng ta~ was paid on in~erest income it

DECISION C.T.A. CASE NO. 5521 - 11 - c G n ".; t r~ a "- n e d n o t to g�--ant Settled is the rule in this that a C2 1 a.:i.;r i �: 1n the fc�~ exemption, hence in s t t"' i. c~t 1 s s i rr i t a,� p2. '/ e r' (Commiss i oner of In te rna l Re venue v s. Tok yo Shi ppin ~ Co . Ltd . , 244 SCRA 332) . '=� t��--t h 2"... '1'1 nr.. e lj it is incumbent upon the pet:.tione t'~ not oniy to the ledgers and subledgers containing in s~mmary the amount to be claimed and how it was arrivej at~ but likev~isE tn ~:-.i_!~-�mjt fGr' the r:rur'�r'-::; a.ppr~"'c:i.a.tion t'l�-> spec~fic documents and other evidence ~hat woL~d support As 1 ucid' ,. in do~.,;�;1 the case o~ BP I Capital Co rporation vs. CIR tCTA Case No . 5457 , March 1 , 1 999) ~ "To co:nply 1-Jith -~he::;2 e1:i:!er.tiat'Y t-equi'�'r:>:Tlr-'lTl:.c:.~ pp"'�:i�1-it'Jr>e'�' !T'"~.t p�-2':-,ent t'-:-::: Stat2ments or Certi�~cates o~ Tax With~eld at Source issued by its withholding agents~ togethe r with a summary o f t~e same, as these documents will clearly show how muc~ final taxes were wit~held and remitted by the withholding a~ents to the Respo~dent, ~or the acc0unt oF the Pet~tioner. T~? total a~ thes~ 20~ Fira' taxes with~e!d from ~et:~io~er's interest income will be the basis of the amourt whjc~ w~ll bg ded~cted f~am t~e t~~al ~~0~c vereipts of the cetit~oner far t~e period i~ c � q ._ t �2 s t i o n , '::i e f c '' e t h e -::; -3. me >�J :. I l b e s u b _j e c t e c t~e 5~, 3~, !~, 0% GRT rate as required ir Sect -ion 119. supra and as di~cussed in the As ian Ban'-< C-'':l.se.

DECISION C.T.A. CASE NO . 5521 - 12 - I N THE L;GHT OF ALL THE FOREGOING, . L., t. ~, P t .: '- i on f o t' r' e v e w ; <:=, h ~ '::> '/ D! SM! SSED "'o 1, �� n ��- �- f.::: �� _ � ~ r� - � � SO ORDERED Gto~ o~ ERNESTO D. ACOST /k- RAMON 0. DE '..'E �"'~~soc:ate J1 ft:ic~e'lt;r;' AMANCIO Q. SAGA CERTIFICATION t e -; .t= t' d u e c on s u 1 t at i G r, ~'>I i t h t h e mt- ;n .... C' r�� -; o f t ..., P ~~ G u �, t ,~ .r- T"'\x !lj:>oeal<:~ in accot'dance wit!- Sectior �{ 7 .J ~ L-� Q�~ ERJEST D. ACOSTA Ct ...-. ;:-' r� .; ~ i TJ

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY EQUITABLE BANKING CORPORATION, Petitioner, -versus- C.T.A. CASE NO. 5521 COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. SEP 081999 X---------------- - ---- -------- -------- --- ---------------- -X DISSENTING OPINION Majority of my esteemed colleagues denied the instant claim for refund due to insufficiency of evidence. I agree that this claim for refund should be denied but for reasons that go beyond mere lack of evidence. It is my belief that this Court' s ruling in the case of Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720, dated January 30, 1996, on which the decision in the instant case is partially based, is erroneous. There is no provision in the Tax Code or any special laws which excludes the 20% final income tax withholding under Section 50(a), as no longer forming part of the gross receipts for purpose of the 5% gross receipts tax. Section 8(c) of Revenue Regulations No. 12-80, dated November 7, 1980, as amended by Section 7(c) of Revenue Regulations No. 17-84, dated October 12, 1984 have the same provisions, thus:

DISSENTING OPINION - CTA CASE NO . 5521 PAGE2 "If the rec1p1ent 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." Clearly, there is no doubt that the 20% final withholding tax is legally includible as part of the gross receipts for purposes of computing the gross receipts tax. The petitioner cited the case of Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720, dated January 30, 1996, where this Court has upheld the petitioner's contention that the interest income included as part of such gross receipts should be computed minus the 20% final tax already withheld and deducted by various withholding agents for the reason that the amount did not go to its funds, hence, was not actually received by them. And the Court approved the petitioner' s citation of Section 4(e) of Revenue Regulations No. 12-80, dated November 7, 1980, thus: "Gross receipts tax on banks, non-bank financial intermediaries, financing companies, and other non-bank financial intermediaries not performing quasi-banking activities. - The rates oftaxes 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 overpayment then the amount actually received shall be included in the tax base of such financial institutions, as provided hereunder." This Court concluded in said case that from the aforestated provlSlons it can logically be inferred that the amount representing 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 receipts for purposes of computing the gross receipts tax. Such conclusion in law is legally objectionable for two (2) reasons, to wit:

DISSENTING OPINION - CTA CASE NO . 5521 PAGE3 (1) Section 4(e) of Revenue Regulations No. 12-80 is not a computation determinative 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 taxpayer under Section 37 of the Tax Code. Such accounting methods for tax purposes comprise a set of rules for determining when and how to report income and deductions (Consolidated Mines, Inc. vs. CTA, L-18843 , August 29, 1974). The two principal accounting methods expressly and impliedly recognized by the Tax Code and the Income Tax Regulations are : (a) Cash receipts and disbursement method or cash basis. - Income earned by the taxpayer is not included in gross income until received and expenses are not deducted until paid within the taxable year; and (b) Accrual basis. - Income is included in gross income when earned, whether received or not, and expenses are allowed as deductions when incurred although not yet paid within the year. (2) That the non-inclusion of the 20% final withholding income tax from the gross interest income for purposes of the gross receipts tax operates as an exemption from tax. Being an exemption from tax, the same must be construed strictly not against the government but against the one who asserts the claim of exemption. Tax exemption can only be given effect when the grant is clear and categorical inasmuch as taxation is the rule and exemption is the exception, Section 26, Tax Code. The holding therefore in the Asian Bank Corporation to the effect that the non-inclusion of the 20% final withholding income tax from the gross receipts can logically be inferred from the wordings of said Section 4(e) of Revenue Regulations No. 12-80, is misplaced. Tax statutes are to receive a reasonable construction with a view to carrying out their purpose and intent (51 Am Jur 361). It should not be construed as to permit the taxpayer to easily evade the payment of the tax (Cabon Steel Co. vs. Lewelyn, 251 U.S. 501). Thus, the good faith ofthe taxpayer is not sufficient justification for exemption from the payment of surcharges imposed by law (Commissioner vs. Royal Interocean Lines and CTA, L-26506, July 30, 1970). A tax statute should be construed to avoid the possibilities of tax evasion (Lorenzo vs. Posadas, 64 Phils. 353).

DISSENTING OPINION - CTA CASE NO . 5521 PAGE4 The High Court's decision in the case of Commissioner of Internal Revenue vs. The Manila Jockey Club, Inc., 108 Phils. 821, June 30, 1960, which was reaffirmed by the said Court in the case of Visayan-Cebu Terminal Co., Inc. vs. Commissioner of Internal Revenue, 13 SCRA 357, February 27, 1965 cannot be considered as precedent cases, hence, inapplicable to the two cases decided by this Honorable Court in the cases of Compania Maritima vs. Acting Commissioner of Internal Revenue, CTA Case No. 1426 dated November 14, 1966 and Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720 dated January 30, 1996, for the following reasons : In the Manila Jockey Club, Inc. case, the Club was authorized to operate horse races in which betting was made through the sale of tickets to the public. The total amount of bets called "wager fund" were distributed pursuant to Executive Order No. 320 and Republic Act No. 309, as follows: 87% as dividends to holders of winning tickets 12 1 2 as "commissions" of the Manila Jockey Club, of which 1h% / was assigned to the Board on Races and 5% was distributed as prizes for owners of winning horses and authorized bonus for jockeys. According to the above-mentioned distribution of the "wager fund", the then Collector of Internal Revenue assessed the Club on the whole amount of its "commission" of 12 1h . But since the Club had already paid the amusement tax based on its 7% share of the "commission", the amount assessable pertains only to the 5 1 2% for / the period from November 1946 to October 1950. On various instances, the Club protested the proposed assessments and was sustained by the opinions of the Secretary of

DISSENTING OPINION - CTA CASE NO . 5521 PAGES Justice rendered on three different occasions (Opinion No. 345 , series of 1941; Opinion No. 249, series of 1952 and Opinion No. 340, series of 1955). Notwithstanding the opinions of the Secretary of Justice to the effect that the amount corresponding to the 5 1 2% was held only by the Club in trust for the owners of / winning horses and authorized bonuses of jockeys, the then Collector of Internal Revenue demanded payment of amusement taxes for the period November 1946 to October 1950. Said demand letter was timely appealed to the Court of Appeals wherein a unanimous judgment was obtained reversing the Collector' s stand on the matter. In the High Court, the position of the Secretary of Justice was sustained thereby upholding the Court of Tax Appeals' decision. Accordingly, gross receipts of the proprietor of the amusement place should not include any money which, although delivered to the amusement place was "especially earmarked" by law or legal rule and regulations for some persons other than the proprietor. Undeniably, they are money received by the racing club but they are moneys earmarked by law or regulations for winning horse owners and jockeys and never for a minute become the property of the race track. The same is true in the case of the 1 2% / 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 51h% of the li h% "commissions" of the race track do not form part of the gross receipts, hence not subject to the amusement tax of 20%. The above-mentioned decision of the High Court was also applied in the case of Visayan Cebu Terminal Co., Inc. vs. Commissioner of Internal Revenue, 13 SCRA 357, Nos. L-19530 and L-19444, February 27, 1965. The legal issue involved in this

DISSENTING OPINION - CTA CASE NO . 5521 PAGE6 case is the interpretation of the management contract entered into by and between the Bureau of Customs and Visayan Cebu Terminal Co., Inc. whereby the latter as contractor was appointed the sole manager of the Arrastre Service at the Port of Cebu City. In the said Management Contract, it was further agreed and understood that in consideration of the rights and privileges granted the Contractor for the management of the Arrastre Service, the Bureau of Customs shall receive twenty eight (28%) percent of the total monthly gross income derived from whatever source in connection with the operations of the Arrastre Service, payable within ten (1 0) days of the succeeding month. The main legal issue involved in this case is whether or not the gross receipts corresponding to the 28% of the total gross income of the Service Contractor delivered to the Bureau of Customs within ten (1 0) days of the following month should form part of the gross receipts subject to 3% contractor's tax under Section 191 of the Tax Code. The Court of Tax Appeals ruled in favor of the petitioner, holding the view that the said 28% payment by the Arrastre Contractor based on its monthly gross income should not form part of the gross receipts subject to 3% contractors tax and that paragraph 23 of the said Management Contract can legally be construed as a "regulation". As the learned trial court has aptly observed: "x x x the government could not have intended to consider as gross receipts the 28% that went to one of its institutions, the Bureau of Customs, and thereby 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 191 of the Tax Code." All the above-mentioned decisions of the High Court made specific reference to gross receipts which are especially "earmarked by law or legal rule or regulation" as not

DISSENTING OPINION - CTA CASE NO . 5521 PAGE 7 forming part of the taxable gross receipts for purposes of the gross receipts tax under the Tax Code. For this purpose, it is pertinent to define the word "earmark" as a mark put upon a thing to distinguish it from another. Originally and literally, a mark upon the ear, a mode of marking sheep and other animals. Property is said to be earmarked when it can be identified or distinguished from other property of the same nature. To set apart from others (Black's Law Dictionary, 6th Edition, p. 508). In the case of the Manila Jockey Club, Inc. Executive Order No. 320 and Republic Act No. 309 made the specific "earmarking" for distribution of the total wager fund to different persons other than the proprietor. The same is true in the case of Visayan Cebu Terminal Co., Inc. where the specific earmarking of the 28% of the total monthly gross income to be delivered to the Bureau of Customs by the Contractor was provided in paragraph 23 of the Management Contract. Such specific earmarking of the twenty percent (20%) final income tax as not includible in the gross receipts for purposes of the gross receipts tax was not provided by any law or legal rule or regulations, hence the non-applicability of the above-cited High Court decisions to the Asian Bank Corporation case. This legal observation is also in point in the case of Campania Maritima case where the non-inclusion of the 10% reserve from the total cash collection to avoid claim for refund on freight and passengers tickets not taken is not provided by any law or legal rule or regulations. In the Asian Bank Corporation case, petitioner bank alleges that subjecting the gross receipts to the 20% final withholding income tax and later to the 5% gross receipts tax is not only oppressive and obnoxious but even a confiscatory form of double taxation. Double taxation has been defined "as the taxing of the same item or piece of property twice to the same person, or taxing it as the property of one person and again as the

DISSENTfNG OPfNION- CTA CASE NO . 552 1 PAG E S property of another, but this does not include the imposition of different taxes concurrently on the same property or income (e.g. federal and state income taxes), nor the taxation of the same piece of property to different persons when they hold different interests in it or when it represents different values in their hands, as when both the mortgagor and mortgagee of property are taxed in respect to their interests in it, or when a tax is laid upon the profits of the corporation and also upon the dividends paid to its stockholders" (Black's Law Dictionary, 6th Edition, p. 491). This acceptable form of double taxation is reflected in BIR Ruling No. 223 dated November 2, 1989, thus: "The 5% gross receipts tax under Section 120 of the Tax Code is collectible on all finance companies doing business in the Philippines from interests, discounts, and all other items treated as gross income under the Tax Code. Accordingly, your income derived from investing the excess funds in short-term market placements through commercial banks constitutes income hence, subject to the 5% gross receipts tax under said Section. The fact that it has been subjected to the 20% final withholding income tax under Section 50(a) is immaterial. Besides, the withholding tax is imposed under Title II of the Tax Code while the finance tax is provided under Title V thereof." (BIR Ruling No. 223 , November 2, 1989) For as long as the basis for the claim for refund or tax credit certificate is based on the non-inclusion of the amount representing the final withholding income tax under Section 50(a) as part of the gross income subject to gross receipts tax, this dissenting opinion will stand. For purposes of the amusement tax under Section 260 of the Tax Code, the term ' gross receipts' embraces 'all the receipts' of the proprietor, lessee, or operator of the amusement place. The words ' all the receipts ' refer to the total amount of cash received which becomes part of the funds of the taxpayer and does not include any money which has been specially earmarked by any law or legal rule or regulation for

DISSENTING OPINION - CTA CASE NO. 5521 PAGE9 some other person other than the proprietor, lessee or operator of the amusement place. Receipts means actually received (Philippine Long Distance Telephone Co. vs. Collector of Internal Revenue, G.R. No. L-3222, January 21, 1952) for itself and not for others, for otherwise they would not be receipts (Manila Jockey Club, Inc. vs. Collector of Internal Revenue, CTA Case No. 205, April 15, 1958; Jai Alai Corporation of the Philippines vs. Araneta, CTA Case No. 108, July 31, 1956 [Annotated, NIRC by Commissioner Jose Araiias, 1988 Edition, p. 687). WHEREFORE, in view of the fore going, I hereby register my dissent to the majority opinion and vote for the denial of the claim for refund for lack oflegal basis.