Commissioner of Internal Revenue v. Standard Chartered Bank-Manila Branch

ELEVENTH DIVISION [CA-G.R. SP No. 54604. May 12, 2003.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . STANDARD CHARTERED BANK MANILA BRANCH , respondent . [CA-G.R. SP No. 58230. May 12, 2003.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . PHILIPPINE NATIONAL BANK , respondent . [CA-G.R. SP No. 59710. May 12, 2003.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . RIZAL COMMERCIAL BANKING CORPORATION , respondent . D E C I S I O N VALDEZ , JR. ,, J p : These three (3) cases have been consolidated because they involve the same petitioner; banking institutions as respondents, and identical issues whether or not the 20% final withholding tax on the respondent banks' interest income should form part of their taxable gross receipts in computing the 5% gross receipts tax. CA-G.R. S.P. NO. 54604 The facts, as found by the Court of Tax Appeals in the above-numbered case, are found below: "For the third and fourth quarters of 1994, the four quarters of 1995 and the first and second quarters of 1996, Petitioner (Standard Chartered Manila Branch) filed with Respondent (Commissioner of Internal Revenue) its Quarterly Percentage Tax Returns and paid the corresponding gross receipts tax (GRT) for each of the said quarters, hereunder summarized, the tax bases of which includes the passive income which was subjected to twenty percent (20%) final taxes. "Period Covered GRT Data Paid Exh. 3rd Qtr. (July to Sept. 1994) P5,716,270.00 10-20-94 A 4th Qtr. (Oct. to Dec. 1994) 4,772,986.00 1-20-95 B 1st Qtr. (Jan. to March, 1995) 5,459,179.00 4-20-95 C 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 Court, dated January 30, 1996, in the case of Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720 , which ruled that the 20% final withholding tax on interest income should not form part of the taxable gross receipts, 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 P796,267.51 (Exh. AAA). "On October 18, 1996, Petitioner filed with this Court the instant Petition for Review because Respondent did not act upon the aforementioned claim for refund. "Petitioner presents the proposition as rationale of its Petition for Review that the gross receipts tax paid by it for the last two quarters of 1994, the four quarters of 1995 and the first two quarters of 1996, were based on the total gross receipts, inclusive of the passive income, which were subjected to the 20% final withholding tax at source, thus, it argued, that in the light of this Court's ruling in the Asian Bank case, supra ., which states that the final withholding tax on interest income should not form part of the taxable gross receipts, Petitioner has actually overpaid the amount legally due from it insofar as its GRT obligations are concerned, hence, a refund in, therefore, in order. "Respondent on the other hand, in his Answer stressed that Petitioner's claim for the second semester of 1994 up to the first semester of 1996 was filed only on October 15, 1996 and is still under administrative investigation by the BIR. Further, Respondent raised the usual token of a defense that (1) in a claim for refund, it is incumbent upon petitioner to prove that he is entitled to it . . ., (2) claim for refund of taxes are construed strictly against the claimant, the same being in the nature of exemption from taxes, and (3) it is incumbent upon petitioner to show that he has complied with the provisions of Section 230 of the Tax Code." 1 In a decision dated July 12, 1999, the Court of Tax Appeals granted Standard Chartered Bank Manila Branch's claim for tax refund and ordered the Commissioner of Internal Revenue to issue it a Tax Credit Certificate in the amount of P796, 267.51. CA-G.R. S.P. NO. 58230 On the other hand, the following facts, quoted by herein respondent Philippine National Bank from the decision of the Court of Tax Appeals in this case, remain undisputed: "For the eight (8) taxable quarters covering the period June 30, 1994 up to March 31, 1996, Petitioner (Philippine National Bank) filed its quarterly percentage tax returns on gross receipts or earnings, inclusive of the 20% final withholding tax on interest income derived from investments, deposits and loans and paid correspondingly the GRT due thereon. "On July 19, 1996, Petitioner filed amended quarterly percentage tax returns for the period involved herein with the 20% final withholding tax duly excluded from its gross receipts on account of the decision of this Court in Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720, promulgated on January 30, 1996 , wherein it was ruled that the 20% final withholding tax on interest income should not form part of a bank's taxable gross receipts for GRT purposes. Such amendment thus reflected a reduced amount of taxable gross receipts and GRT liabilities with resulting overpayment of GRT when compared with previous returns as follows: "Period Covered Tax Due Per Tax Due Per Overpayment (Quarter End) Original Return Original Return For Refund June 30, 1994 107,483,285.27 105,127,122.33 2,356,162.94 September 30, 1994 114,292,729.36 111,817,191.57 2,475,537.79 December 31, 1994 118,443,383.42 116,578,108.77 1,870,274.65 March 31, 1995 127,781,909.47 125,733,423.93 2,048,485.54 June 30, 1995 105,615,948.79 102,932,534.56 2,683,414.23 September 30, 1995 136,977,975.85 134,253,099.12 2,724,876.73 December 31, 1995 137,565,070.91 135,893,668.65 1,671,410.26 March 31, 1996 133,260,982.62 131,586,369.28 1,674,613.34 TOTAL P981,421,293.69 P963,916,518.21 P17,504,775.48 ============ ============ =========== "Simultaneous with the submission of such amended quarterly percentage returns, Petitioner filed with the Respondent (Commissioner of Internal Revenue) at 2:34 p.m. of the same day, the corresponding written claim for tax refund or credit of the above mentioned overpaid GRT in the aggregate amount of P17,504,775.48. "Later at 4:35 p.m. of even date, it likewise filed the instant petition for review before this Court allegedly on the ground that the recovery of the portions of its claims for refund for the period covering quarters ending June 30, 1994 and September 30, 1994 were about to be barred judicially when reckoned with the two-year prescriptive period for claiming such refund from date of payment of the tax, as provided under Section 230 of the old Tax Code, as amended." 2 On January 26, 2000, the Tax Court promulgated as decision 3 partially granting the Philippine National Bank's petition for a refund of overpaid taxes and ordered the Commissioner of Internal Revenue to issue the bank a Tax Credit Certificate in the amount of P13,785,413.38. On February 15, 2000, the Commissioner of Internal Revenue filed a Motion for Reconsideration 4 on the ground that this Court, in a November 22, 1999 decision entitled Commissioner of Internal Revenue vs. Asianbank Corporation (CA-G.R. S.P. No. 51248) , reversed a similar ruling of the Tax Court in CTA Case No. 5412. In a Resolution dated March 21, 2000, the Court of Tax Appeals dismissed said motion, ruling in this wise: ATcEDS "Considering that the disposition of herein Motion for Reconsideration filed by the Respondent on February 15, 2000 is anchored on the question of which of the following two analogous cases is more meritorious, namely Commissioner of Internal Revenue vs. AsianBank Corporation, CA-G.R. SP. No. 51248, promulgated on November 22, 1999 or Commissioner of Internal Revenue vs. Citytrust Investment Philippines, Inc., CA-G.R. SP. No. 52707, promulgated on August 17, 1999 (both had been resolved by the sixth and thirteenth divisions of the Court of Appeals in separate conflicting decisions and at present are pending appeal before the Supreme Court), this Court, in accordance with its previous resolution in the case of Rizal Commercial Banking Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5409, dated February 21, 2000 , firmly resolves to reiterate and remain steadfast on its Decision at bar until the issue is finally settled by the Highest Tribunal of the land. "WHEREFORE, in view of the foregoing, Respondent's Motion for Reconsideration is hereby DENIED." 5 CA-G.R. S.P. NO. 59710 The facts giving rise to this present Petition for Review was aptly summarized by herein respondent Rizal Banking Commercial Corporation, to wit: "For each calendar quarter of taxable years 1996 and 1997, respondent seasonably filed its Quarterly Percentage Tax Returns, declaring all income subject to percentage tax in the amount of P6,335,606,848.99 and paid the corresponding gross receipts tax due thereon in the sum of P159,941,600.95, broken down as follows: "Quarter/Year Gross Receipts GRT Paid 1st Qtr. 1996 P844,973,478.92 P38,512,345.78 2nd Qtr. 1996 726,644,506.26 29,256,840.59 3rd Qtr. 1996 794,687,887.17 35,038,019.86 4th Qtr. 1996 648,228,412.80 28,940,257.14 Total P3,014,534,285.15 P131,747,463.37 ============= ============= 1st Qtr. 1997 P898,677,221.74 P40,271,782.69 2nd Qtr. 1997 783,462,070.75 35,341,735.91 3rd Qtr. 1997 856,749,984.57 36,577,352.47 4th Qtr. 1997 782,183,286.78 34,575,986.51 Total P3,321,072,563.84 P146,766,857.58 Grand Total P6,335,606,848.99 P278,514,320.95 ============= ============= "Respondent alleged that the aforementioned gross receipts in the amounts of P3,014,534,285.15 and P3,321,072,563.84, for the year 1996 and 1997, respectively, included some interest income derived from purchase of government securities and commercial papers in the amounts of P362,734,559.60 for 1996 and P508,514,033.00 for 1997. The latter sums were declared by respondent as part of the taxable gross receipts inclusive of the 20% final tax withheld at source. "On January 30, 1996, this Court rendered a decision in C.T.A. Case No. 4720 entitled Asian Bank Corporation vs. Commissioner of Internal Revenue wherein it was held that the 20% final withholding tax on bank's interest income should not form part of its taxable gross receipts for purposes of computing the gross receipts tax. "On April 17, 1998, on the strength of the aforesaid decision, petitioner (should be herein respondent) filed a letter-request for the refund or issuance of a tax credit certificate with the BIR Revenue Region No. 8 in the amount of P8,703,440.43, representing the overpaid gross receipts tax for the years 1996 and 1997, computed as follows: 1996 Final Tax Rate of Final Tax Gross Receipts Withheld by BSP 20% rate of tax P360,925,459.53 P72,185,091.91 15% rate of tax 1,809,100.07 271,365.01 Total P362,734,559.60 P72,456,456.92 1997 Final Tax Rate of Final Tax Gross Receipts Withheld by BSP 20% rate of tax P506,704,933.48 P101,340,986.70 15% rate of tax 1,809,100.07 271,365.01 Total P508,514,033.55 P101,612,351.71 Grand Total P871,248,593.15 P174,068,808.63 Multiply by GRT Rate 5% Excess of GRT Payment P8,703,440.43 "On April 20, 1998, respondent lodged its appeal in this Court (should be Court of Tax Appeals) in order to toll the running of the two-year prescriptive period to judicially claim for the refund of overpaid internal revenue tax pursuant to Section 230 of the Tax Code, as amended. "Respondent (should be herein petitioner) filed his Answer on May 25, 1998 by registered mail." 6 After trial on the merits, the Court of Tax Appeals, in a decision 7 dated June 16, 2000, partially granted the Rizal Commercial Banking Corporation's claim for a tax refund and ordered the Commissioner of Internal Revenue to pay the bank P963,680.35 representing overpaid gross receipts tax for the years 1996 and 1997. In all three cases, the decisions granting either a refund or partial refund of the alleged overpaid taxes of respondent banks were penned by Presiding Judge Ernesto D. Acosta and concurred in by Associate Judge Ramon O. de Veyra. Associate Judge Amancio Q. Saga consistently dissented 8 from the majority view and voted for the denial of the claims for refund for lack of legal basis. Judge Saga likewise registered his dissent 9 in the March 21, 2000 Order of the Tax Court denying the Commissioner of Internal Revenue's Motion for Reconsideration in C.T.A. Case No. 5406, now S.P. No. 58230. Herein petitioner, the Commissioner of Internal Revenue, in S.P. Nos. 54604 and 59710, is now before us via a Petition for Review grounded on the following: "GROUNDS FOR THIS PETITION "1. There is no provision of law which excludes the 20% final income tax withheld under Section 50(a) of the Tax Code in the computation of the 5% gross receipts tax. "2. The Tax Court erred in applying the ruling in Collector of Internal Revenue vs. Manila Jockey Club (108 Phil. 821) in the resolution of the legal issue of whether or not the 20% final withholding tax on bank's interest income should form part of taxable gross receipts for purposes of computing the gross receipts tax." 10 In S.P. No. 58230, petitioner lays down the basis of his petition in the following manner: "GROUNDS FOR PETITION "1. The Tax Court erred in holding that the 20% withholding tax on bank's interest income should not form part of the taxable gross receipts in computing the 5% GRT. "2. The Tax Court erred in holding that the inclusion of the 20% final withholding tax on bank's interest income in the taxable gross receipts in computing the 5% GRT, constitutes double taxation in the prohibited sense." 11 Section 119 12 of the National Internal Revenue Code of the Philippines (NIRC), as amended, the prevailing law at the time these cases were instituted, 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, commission 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. "Short-term maturity not in excess of two (2) years 5% "Medium-term maturity over two years but not exceeding four (4) years 3% "Long-term maturity: (i) Over four (4) years but not exceeding seven (7) Years 1% (ii) Over seven (7) years 0% "(b) On dividends 0% "(c) On royalties, rentals of property, real or personal profits from exchange and all other terms treated as gross income under Section 28 of this Code 5% "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. "Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar banking activities." In other words, banks are imposed a tax on gross receipts from interest, commissions and discounts at the rate of 5%, 3% 1% or 0% as the case may be. Section 24(e) 13 on the other hand, prescribes a 20% income tax on domestic corporations such as herein respondents Philippine National Bank and Rizal Commercial Banking Corporation, in the following manner, to wit: "SECTION 24. Rates of tax on domestic corporations . xxx xxx xxx "(e) Tax on certain incomes derived by domestic corporations . (1) Interest from deposits and yield or any other monetary benefits from deposit substitutes and from trust fund and similar arrangements, and royalties . Interest on Philippines currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements received by domestic corporation; and royalties, derived from sources within the Philippines, shall be subject to a 20% tax." xxx xxx xxx For resident foreign corporations like herein respondent Standard Chartered Bank, the following provision of the NIRC applies: "SECTION 25. Rates of tax on foreign corporation . "(a) Tax on resident foreign corporations xxx xxx xxx "(6) Tax on certain incomes received by resident foreign corporations . (A) Interest from deposits and yield or any other monetary benefit from deposit substitutes, trust fund and similar arrangements and royalties derived from sources within the Philippines shall be subject to a 20% tax." 14 Citing Collector of Internal Revenue vs. Manila Jockey Club 15 , the Court of Tax Appeals, in its assailed decisions, held that the 20% final withholding tax on the interest income of herein respondents should not form part of the banks' taxable gross receipts. Petitioner Commissioner of Internal Revenue, for its part, claims that the 20% final withholding tax was constructively received by respondent banks and, as such, should be included in the computation of the banks' 5% gross receipts tax. Before we can resolve the instant suits, a review of the Manila Jockey Club case is in order. The Manila Jockey 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 funds, were distributed, pursuant to Executive Order 320 and Republic Act 309, as follows: "87-1/2 as dividends to holders of winning tickets "12-1/2 as "commission" of the Manila Jockey Club, of which % was assigned to the Board on Races and 5% was distributed as prizes for owners or winning horses and authorized bonuses for jockeys." Under the then Internal Revenue Law, an amusement tax was payable by the operator of the Manila Jockey Club based on its "gross receipts". The club, however, paid amusement tax on its commission without including the 5% which went to the Board on Races and to the owners of the horses and jockeys, claiming that his did not form part of its gross receipts. The Collector of Internal Revenue had a different view and demanded payment of amusement taxes on the whole amount. The club's position was upheld by the Court of tax Appeals, and later, the Supreme Court, which opined that "gross receipts of the proprietor of the amusement place should not include any money which although delivered to the amusement place has been especially earmarked by law or regulation for some person other than the proprietor." With the Manila Jockey Club case as their authority, respondent banks maintain that the 20% final withholding tax on their income does not form part of their gross receipts since it is earmarked by law and regulation in favor of the government, as provided by Section 51 [d] (should be Section 51[g]) of the National Internal Revenue Code, wit: "SEC. 51. Returns and payment of taxes withheld at source. xxx xxx xxx "(g) All taxes withheld pursuant to the provisions of this Code and its implementing regulations are hereby considered trust funds and shall be maintained in a separate account and not commingled with any other funds of the withholding agent." 16 and Section 7 of Revenue Regulation No. 12-80, which states: "Section 7. Nature and treatment of taxes imposed under these regulations. "(a) All withholding taxes deducted and withheld by the withholding agent in accordance with these regulations shall be held as a special fund in trust for the government until paid to the collecting officer." Contrary to the view of respondent banks and the majority opinion of the Court of Tax Appeals, however, we cannot see how the ruling in the Manila Jockey Club case can be applied to the instant suits. The 5% commission, although received by the racing club, never for a moment became the club's property since the same was earmarked by law for the Board on Races, the owners of winning horses, and their respective jockeys. This being the case, said commission did not form part of the club's gross receipts and hence, not subject to the amusement tax of 20%. As held in the later case of Commissioner of Internal Revenue vs. Tours Specialists, Inc. , 17 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. EAIcCS Unlike the 5% commission in the Manila Jockey Club case, the 20% withholding tax on respondent banks' interest income is money which actually belongs to said banks but paid to the government to satisfy the banks' obligation. The withholding of the tax and its payment to the government redounds to the benefit of respondents. Clearly, the money which went into paying the 20% withholding tax forms part of the banks' gross receipts. This is in accord with the Supreme Court's pronouncement in Bank of America NT & SA vs. Court of Appeals, to wit: "In the operation of the withholding tax system, the payee is the taxpayer, the person on whom the tax is imposed, while the payor, a separate entity, acts no more than an agent of the government for the collection of the tax in order to ensure its payment. Obviously, the amount thereby used to settle the tax liability is deemed sourced from the proceeds constitutive of the tax base. Since the payee, not the payor, is the real taxpayer, the rule on constructive remittance (or receipt) can be easily rationalized, if indeed, made clearly manifest." 18 We cannot give credence to respondent banks' argument that since the 20% final tax on respondent's income has been earmarked in favor of the government , 19 the 20% final tax should be excluded from respondent's gross receipts in the computation of the gross receipts tax. Taxes are, by law, always "earmarked in favour of the government". Taxes are the lifeblood of the nation. Their primary purpose is to generate funds for the State to finance the needs of the citizenry and to advance the common weal. 20 Section 51[g] of the National Internal Revenue Code and Section 7 of Revenue Regulations No. 12-80, both cited by respondent banks, simply explain what the government, which is the withholding agent, intends to do with the 20% final withholding tax paid by the taxpayer. In fact, respondent Standard Chartered Bank Manila Branch even acknowledges this when it stated in its Comment that ". . . all taxes withheld pursuant to the provisions of the NIRC and its implementing regulations are in the nature of a "special fund" held by the withholding agent in trust for the government." 21 In the absence of any specific provision of law setting aside the 20% withholding tax not for a general special fund, but for a particular purpose, we hold, therefore, that the 20% final withholding tax on respondent banks' interest income should form part of taxable gross receipts for purposes of computing the gross receipts tax. Neither can we adopt the Tax Court's view that the imposition of the 20% final withholding tax and the 5% gross receipts tax on respondent banks' income constitute double taxation. Double taxation means taxing the same property twice when it should be taxed only once. That is, ". . . taxing the same person twice by the same jurisdiction for the same thing." 22 This is not the case here. As aptly explained by petitioner, to distinguish, (the 20%) final withholding tax is a tax on income withheld at the source, while gross receipts tax (5% GRT) is an excise tax levied upon licenses to pursue certain occupations or upon certain corporate privileges". 23 Respondent Standard Chartered Bank Manila Branch adds another perspective and argues that the case of Bank of America NT & SA vs. Court of Appeals 24 could be applied by analogy to the suits at bar. The issue in the Bank of America case dealt with the proper application of Section 24(b)(2)(ii) of the NIRC, in the way it was worded in 1982, to wit: "SECTION 24. Rates of tax on corporations . . . "(b) Tax on foreign corporations . . . "(2)(ii) Tax on branch profit and remittances. "Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen percent (15%) . . ." Petitioner Bank of America averred in this case that the 15% branch profit remittance tax should be assessed on the amount actually remitted abroad, which is to say that the 15% profit remittance tax itself should not form part of the tax base. Respondent Commissioner of Internal Revenue, on the other hand, maintained that in computing the 15% remittance tax, the tax should be inclusive of the sum deemed remitted. The Supreme Court ruled in favor of Bank of America and, in doing so, quoted with approval the decision of the Court of Tax Appeals in said case, to wit: "On the other hand, there is absolutely nothing in Section 24(b)(2)(ii), supra , which indicates that the 15% tax on branch profit remittance is on the total amount of profit to be remitted abroad which shall be collected and paid in accordance with the tax withholding device provided in Section 53 and 54 of the Tax Code. The statute employs" any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen per cent (15%) without more. Nowhere is there said of " base(d) on the total amount actually applied for by the branch with the Central Bank of the Philippines as profit to be remitted abroad, which shall be collected and paid as provided in Sections 53 and 54 of this Code. " Where the law does not qualify that the tax imposed and collected at source is based on profit to be remitted abroad, that qualification should not e read into the law. . . . And to our mind, the term 'any profit remitted abroad' can only mean such profit as is 'forwarded, sent, or remitted abroad' as the word 'remitted' is commonly and popularly accepted and understood. To say therefore that the tax on branch profit remittance is imposed and collected at source and necessarily the tax base should be the amount actually applied for the branch with the Central Bank as profit to be remitted abroad is to ignore the unmistakable meaning of plain words." 25 Herein respondent Standard Chartered Bank Manila Branch wants us to apply the ruling in the above-cited case to the present suits, stating that by "parity of reasoning, the 20% final withholding tax on passive interest income should not form part of taxable gross receipts inasmuch as GRT shall be based only on all items of income actually received" 26 Respondent bank maintains that Section 4(e) of Revenue Regulations No. 12-80 spells out such tax base as it provides that the rates of taxes to be imposed on the gross receipts of banking institutions shall be based on all items of income actually received. We find it difficult to accept such proposition. What we find more acceptable is the dissenting opinion of Judge Amancio Q. Saga in the three cases at present where he explained that Section 4(e) of Revenue Regulations No. 12-80 had already been amended, superseded and omitted by Revenue Regulations No. 17-84 dated October 12, 1984. He added that Section 4(e) of Revenue Regulations No. 12-80, as worded, is not a computation which is determinative of the amount to be used as basis of the 5% gross receipts tax. Rather, said section is reflective of the method of accounting being adopted by the taxpayer, such as the cash receipts and disbursement method or accrual method of accounting. Said methods of accounting comprise a set of rules for determining when and how to report income and deduction. Judge Saga further elucidates: "The 5% gross receipts tax under Section 120 of the Tax Code is collectible from all finance companies doing business in the Philippines from interests, discounts and all other items treated as gross income under the Tax Code. Accordingly, its income derived from investing the excess funds in short term market placements through commercial banks constitute income, hence, subject to the 5% gross receipts tax under said section. The fact that it has been subjected to the 20% final withholding 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 Ruling No. 223, November 2, 1989. The fact that the same income is subjected to two (2) different finds of taxes would not make such payments a case of double taxation. "By quoting a superseded revenue regulation, Petitioner in the Asian Bank case, led this Court to believe that indeed the basis of the gross receipts tax is total gross receipts exclusive of the 20% final withholding tax deducted and withheld under Section 50(a) of the Tax Code. Section 7(c) of Revenue Regulations No. 17-84 clearly and categorically provides that the basis of such tax is inclusive of the final withholding tax." 27 "Section 2.57 of Revenue Regulations No. 2-96 implementing Republic Act No. 8424 also provides that the bases of the 5% gross receipts tax includes the 20% final withholding income tax deducted at source, to wit: "(A) Final Withholding Tax Under the final withholding tax system the amount of income tax withheld by the withholding agent is constituted as a full and final payment of the tax rests (sic) primarily on the payor as withholding agent. Thus, in case of his failure to withhold the tax or in case of under withholding, the deficiency tax shall be collected form the payor/withholding agent. The payee is not required to file an income tax return for the particular income. "The finality of the withholding tax is limited only to the payee's income tax liability on the particular income. It does not extend to the payee's other tax liability on said income; such as when the said income is subject to a percentage tax, For example, if a bank receives income subject to final withholding tax, the same shall be subject to a percentage tax." 28 Besides, in the Bank of America case, there is a specific provision of law which determines the tax base upon which the 15% branch profit remittance tax should be computed. In the cases at bar, Section 119 of the NIRC undoubtedly provides the tax base for the 5% gross receipts tax, as it in fact states that "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 . . .". The term "gross", as it is commonly defined, is "an overall total exclusive of deductions (as taxes, expenses): 29 Clearly then, the 20% final withholding tax should not be excluded from respondent banks' gross receipts in the computation of the gross receipts tax. We must stress, at this point, that tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of organic or statute law. 30 Respondent banks, in this case, have not discharged the burden. On a final note, we are not unmindful of the fact that the Court of Tax Appeals is dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject unless there is an abuse or improvident exercise of its authority. 31 We note, however, that the decision of the Tax Court in this case is not unanimous. In instances such as these, a judicious review of its ruling is but proper. WHEREFORE, the assailed decisions of the Court of Tax Appeals dated July 12, 1999 and June 16, 2000 in CTA Case No. 5435 (S.P. No. 54604) and CTA Case No. 5636 (S.P. No. 59710), respectively; as well as the January 26, 2000 decision and March 21, 2000 resolution in CTA Case No. 5406 (S.P. No. 58230), are hereby REVERSED and SET ASIDE and the claims for tax refund by respondents Standard Chartered Bank Manila Branch, Rizal Commercial Banking Corporation and Philippine National Bank are hereby DENIED for lack of merit. SO ORDERED. Reyes and Pine, JJ . , concur. Footnotes 1. Annex "A", Comment, Rollo , S.P. No. 54604, pp. 6163. 2. Petition for Review, Rollo , S.P. No. 58230, pp. 910. 3. Decision, Annex "A", Ibid ., pp. 2230. 4. Motion for Reconsideration, Annex "E", Ibid ., pp. 146150. 5. Resolution, Annex "B", Ibid ., pp. 3839. 6. Petition, Rollo , S.P. No. 59710, pp. 89A. 7. Decision, Ibid ., pp. 3142. 8. Dissenting Opinion, S.P. No. 54604, pp. 7182; S.P. No. 58230, pp. 3537; S.P. No. 59710, pp. 4351. 9. Rollo , S.P. No. 58230, pp. 4041. 10. Rollo , S.P. No. 54604, p. 10; Rollo , S.P. No. 59710, p. 10. 11. Rollo , S.P. 58230; p. 11. 12. Now Section 121 of the Tax Reform Act of 1997. 13. Now Section 27(D)(1) of the Tax Reform Act of 1997. 14. Now Section 28(A)(7)(a) of the Tax Reform Act of 1997. 15. 108 SCRA 821 (1960). 16. Now Section 58(A) of the Tax Reform Act of 1997. 17. 183 SCRA 402, 412 (1990). 18. 234 SCRA 302, 310 (1994). 19. Underscoring supplied for emphasis. 20. National Power Corporation vs. Province of Albay 186 SCRA 198, 207 (1990). 21. Comment, S.P. No. 54604, p. 56 (underscoring supplied for emphasis). 22. Afisco Insurance Corporation vs. Court of Appeals , 302 SCRA 1, 16 (1999), citing Victoria Milling Co., Inc. vs. Municipality of Victorias, Negros Occidental , 25 SCRA 192, 209(1968). 23. Petition, Rollo , S.P. No. 59710, p. 24; S.P. No. 58230, p. 16; S.P. No. 54604, p. 22. 24. 234 SCRA 302 (1994). 25. Ibid ., p. 309. 26. Comment, Rollo , S.P. No. 54604, p. 54. 27. Dissenting Opinion, Rollo , S.P. No. 58230, p. 37; S.P. No. 59710, p. 45. 28. Dissenting Opinion, Rollo , S.P. No. 59710, pp. 4546. 29. Webster's Third New International Dictionary, 1993 ed., p. 1002. 30. Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc . 309 SCRA 87, 108109 (1999). 31. Commissioner of Internal Revenue vs. Court of Appeals , 204 SCRA 182, 190 (1991).