Solid Bank Corp. v. Commissioner of Internal Revenue

SIXTH DIVISION [CA-G.R. SP No. 68673. November 5, 2003.] SOLID BANK CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N SABIO, J.L. , J p : At bar is a Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure challenging the September 27, 2001 Decision and the December 14, 2001 Resolution of the Court of Tax Appeals (hereinafter, CTA) in CTA Case No. 5820. The assailed decision disposed as follows: "WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby DENIED due to insufficiency of evidence." Reconsideration of the above-quoted decision was denied in the assailed Resolution. The antecedent facts as succinctly synthesized by the CTA are as follows: Petitioner Solid Bank Corporation (hereinafter, Solid Bank) is a domestic banking institution organized and existing under the laws of the Philippines. For the calendar quarters of the year 1997, petitioner seasonably filed its Quarterly Percentage Tax returns reflecting gross receipts in the amount of P2,229,470,672.81, with corresponding gross receipts tax payments in the sum of P111,473,533.63, broken down as follows: Quarter Ended Exh. Gross Receipts Gross Receipts Tax March 31, 1997 A P 485,293,073.32 P 24,264,653.67 June 30, 1997 B 498,062,950.98 24,903,147.54 September 30, 1997 C 593,302,026.53 29,665,101.32 December 31, 1997 D 652,812,621.98 32,640,631.10 T o t a l P 2,229,470,672.81 P 111,473,533.63 Meanwhile, on January 30, 1996, the CTA rendered a decision in CTA Case No. 4720 entitled Asian Bank Corporation vs. Commissioner of Internal Revenue holding that the 20% final withholding tax on a bank's interest income should not form part of its taxable gross receipts for purposes of computing gross receipts tax. cDEHIC On April 19, 1999 and on the strength of the aforementioned Asian Bank case, petitioner filed a letter-request for refund or for the issuance of a tax credit certificate with the Bureau of Internal Revenue (hereinafter, BIR) in the amount of P6,131,434.56 computed as follows: Interest Income Subject to the 20% Final Tax Withheld At Source P613,143,456.44 Multiply by Final Tax Rate 20% 20% Final Tax Withheld At Source P122,268,691.88 Multiply by GRT Rate 5% Overpaid GRT P 6,131,434.56 Petitioner alleged in its claim for refund that in computing the gross receipts tax, it erroneously included in the taxable gross receipts the final withholding taxes derived from its passive (interest) income on trading account securities amounting to P122,268,691.88, detailed as follows: Quarter Ended Gross Amount 20% Final Tax March 31,1997 P189,218,927.63 P 37,843,785.26 June 30,1997 117,526,428.73 23,505,285.75 September 30, 1997 142,745,895.34 28,549,179.07 December 31, 1997 163,652,204.74 32,730,440.95 Total P613,143,456.44 P 122,268,691.88 On April 20, 1999 and pending resolution of its claim for refund, petitioner elevated the case before the CTA presumably to toll the running of the two-year prescriptive period as provided for under Section 230 of the Tax Code . In support of its claim for recovery of overpaid gross receipts tax, petitioner presented the following documents: (a) its Quarterly Percentage Tax Returns for the year 1997; (b) its administrative claim for refund filed with the Bureau of Internal Revenue; (c) letter from the Bureau of Treasury's Payments Division with the attached summary report concerning taxes withheld on its purchases of treasury bills; (d) Report of SGV and Co. signed by its partner, Ms. Feliza A. Peralta, the commissioned independent CPA, who conducted the examination on petitioner's documents relative to the claim for refund; and (e) pre-marked documents examined by the commissioned independent CPA which consist of the Bureau of Treasury and Bangko Sentral ng Pilipinas' certifications of final taxes withheld for the year 1997, trading orders, Bangko Sentral ng Pilipinas' advice registers, and security trade deal slips. Respondent BIR, on the other hand, submitted its case for decision without adducing any evidence. It also chose not to file a Memorandum. On September 27, 2001, the CTA denied petitioner's claim for refund. Following its decision in the case of Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720, dated January 30, 1996 , the CTA declared that the 20% final taxes on interest income should no longer form part of taxable gross receipts for the purpose of computing the gross receipts tax. The said ruling is in accord with the Supreme Court decision in the case Collector of Internal Revenue vs. Manila Jockey Club, 108 Phil. 821 , as quoted in Compania Maritima vs. Acting Commissioner of Internal Revenue, CTA Case No. 1426 dated November 14,1996. The CTA went on to state that its decision in the above-cited cases has already been affirmed by the Court of Appeals in Commissioner of Internal Revenue vs. City Trust Philippines, CA G.R. SP No. 52707, August 17, 1999, when it ruled in this manner: "Accordingly the 20% final tax withheld against the Respondent's passive income was already remitted to the Bureau of Internal Revenue, for the corresponding year that the same was actually withheld and considered final withholding taxes under Section 50 of the same Code. Indubitably, to include the same to respondent's (City Trust) gross receipts for the year 1994 would be to tax twice the passive income derived by the Respondent for the said year, which would constitute double taxation anathema to our taxation laws ." (Emphasis supplied)." Nonetheless, it denied petitioner's claim for refund based on insufficiency of evidence. It elucidated: "Section 230 of the Tax Code, as amended, provides that a claim for refund, both with the Bureau of Internal Revenue and with this Court, must be filed within two years from the date of payment of the tax. In counting the two-year prescriptive period, the filing of the quarterly percentage tax return should be considered as the "date of payment of the tax" ( Solid Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5408, April 14, 1999 and City Trust Investment Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 5403, April 19, 1999) . Applying the above ruling in the case at bar reveals that petitioner was able to file its claim for refund with the Bureau of Internal Revenue on April 19, 1999, and the Petition for Review with this Court on April 20, 1999, both within the two-year reglementary period, reckoned, at the earliest, from April 21, 1997, the date when Petitioner filed its 1997 First Quarterly Percentage Tax Return. "Aside from proving that the Petition for Review was timely filed within the two-year reglementary period, petitioner must also prove its compliance with the following requisites: 1. That it paid gross receipts tax; 2. That it erroneously overpaid gross receipts tax by including the 20% final withholding tax derived on its passive income as part of the gross receipts declared in the quarterly percentage tax returns for the period involved; and 3. That the withholding agent certifies that the 20% final withholding tax was paid on such passive income. ( Bank of the Philippine Islands vs. Commissioner of Internal Revenue, CTA Case No. 5458, February 15, 1999 and BPI Capital vs. Commissioner of Internal Revenue, CTA Case No. 5457, March 1, 1999 ; cited in Solid Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5408, April 14, 1999) . "A careful examination of the records of this case discloses that petitioner was only able to comply with requirement number one and partially with requirement number three. "Petitioner was able to prove that it paid gross receipts tax for the four calendar quarters of 1997 as evidenced by the machine validations appearing on the lower portion of the quarterly percentage tax returns (Exhibits A, B, C, and D). The Bangko Sentral ng Pilipinas (BSP) and the Bureau of Treasury certified that the 20% final withholding tax on treasury bills purchased by petitioner through regular auction were withheld and remitted to the Bureau of Internal Revenue (Exhibits I, I-1, and I-2). However, the evidence submitted by petitioner are inadequate to guide the court as to what portion of the alleged 20% final tax in the amount of P122,268,691.88 derived from interest on trading account securities was included in its taxable gross receipts. "The audit procedures adopted by the independent CPA are insufficient to come-up with the desired result of ascertaining the propriety of petitioner's claim for refund. The audit procedures performed focused on tracing the daily summary total of accrued interest form the Bank's "Detail Transactions and Trial" schedule to the "Master List of Income" without checking the authenticity of individual entries reflected in the summary or schedule against their supporting documents. We consider the schedule of daily accrual of interest income to be self-serving evidence because entries therein should have been supported by another document ( Solid Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5641, June 7, 2000) . In addition, documents such as "Detail Transactions and Trial" schedule, "Master List of Income," from which the independent CPA based her findings were never offered in evidence. Furthermore, confirmation of sale, confirmation of purchase, inventory of securities and the like which are all essential to substantiate the alleged investment of Petitioner in trading accounts securities were also not presented in evidence. The Court likewise noticed that the final withholding taxes on interest income allegedly earned by petitioner from fixed rate treasury notes have no certification of withholding. "In conclusion, the failure of Petitioner to present the pertinent documents and individual transactions that would support the certification of the independent CPA proved fatal to its claim for refund. Well-settled is the rule in this jurisdiction that a claim for refund is in the nature of a claim for exemption, hence should be construed in strictissimi juris against the taxpayer (Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332) ." Undaunted, petitioner sought a reconsideration of the CTA decision. In a Resolution promulgated on December 14, 2001, the CTA modified its previous decision but remained firm in its denial of petitioner's claim for refund. It explained: "In moving for reconsideration, Petitioner argues that substantial evidence was presented to warrant the granting of the claim for refund. It asseverates that the audit procedures adopted by the independent CPA are sufficient to come-up with the desired result of ascertaining the propriety of its claim for refund. Petitioner further avers that the audit procedures adopted in the case of Solid Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5533, dated August 6, 1999, which was decided in favor of the (same) petitioner, are the same procedures adopted in the instant case. "The court finds the foregoing arguments of no significance in view of the recent developments involving issues of this nature. "The present composition of this court brought about a shift in the majority opinion as indicated in the recently decided case of FEB Investments, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 5758 promulgated on November 20, 2001, where the ruling in the Asian Bank case (CTA Case No. 4720) was abandoned to reflect instead the Dissenting Opinion of Judge Amancio Q. Saga. Quoted hereunder are portions of the aforementioned FEB Investments decision, thus: "The decision in the Asian Bank case has for its legal basis Section 4(e) of Revenue Regulations No. 12-80 dated November 07, 1980, which states, thus: "Section 4. . . . (e) Gross receipts on banks, non-bank 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 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." (Emphasis supplied) However, it is significant to note that the aforequoted legal anchor, Section 4(e) of Revenue Regulations No. 12-80, had already been amended, superseded and omitted in the amendatory Revenue Regulations No. 17-84 dated October 12, 1984. Verily, the citation of Section 4(e) of Revenue Regulations No. 12-80 as cited by petitioner's counsel in the Asian Bank case was erroneous and which misled this Court to adopt petitioner's legal basis. The applicable legal basis that should have been cited is Section 8(c) of Revenue Regulations No. 12-80 which became Section 7(c) of Revenue Regulations No. 17-84 which provides" "Section 8. . . . If the recipients 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% FWT is legally included as part of petitioner's gross receipts for purposes of computing the gross receipts tax. Petitioner's counsel purposely did not cite the said section because certainly it won't be able to get a refund or tax credit for the alleged overpaid gross receipts tax for obvious reasons. 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 Revenue Regulations No. 12-80 merely authorize the determination of the amount of gross receipts on the basis of the method of accounting being adopted by the taxpayer. Said methods of accounting comprise a set of rules for determining when and how to report income and deduction (Consolidated Mines, Inc. vs. Court of Tax Appeals, L-18843, August 29, 1974) . Thus under the cash receipts and disbursements method, the 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 in the case of the accrual method, income is included in gross income when earned, whether received or not, and expenses are allowed as deductions when incurred although not paid within the year (BIR Ruling No. 35-98, April 13, 1998) . Thus, the CTA ruled: "WHEREFORE, in view of the foregoing, the Court hereby DENIES the Petitioner's motion for reconsideration for lack of merit and correspondingly, MODIFIES its decision in the above-entitled case. The decretal portion of which shall now read as follows: WHEREFORE, in view of the foregoing, the instant petition for review is hereby DENIED for lack of merit. SO ORDERED." Hence, this petition for review, arguing that: THE CTA ERRED IN DENYING PETITIONER'S CLAIM FOR REFUND IN THE AMOUNT OF P6,131,434.56 FOR OVERPAID GROSS RECEIPTS TAX FOR 1997. HIAEcT At issue is the question of whether or not the 20% Final Withholding Tax on interest income of a financial institution like the petitioner should be included in the tax base for purposes of computing the gross receipts tax. Invoking Sections 4(e) and 8(c) (now Section 7(c) of RR No. 17-84) of Revenue Regulations No. 12-80 of the BIR, it is petitioner's stand that the clear intention of the law is to exclude from the gross receipts tax the 20% Final Withholding Tax it paid on interest income. While Section 7(c) of Revenue Regulations No. 17-84 says in general that items of income are included as part of the tax base, Section 4(e) of RR No. 12-80 on the other hand states in particular that only items of income actually received shall be included. The interpretation given by the petitioner on the two seemingly conflicting provisions is that in determining what constitutes the tax base for computing the gross receipts tax of financial institutions, all items of income must be included in the said tax base, but only such items of income that are actually received should be included. Petitioner belies the holding of the CTA that Section 4(e) of Revenue Regulations No. 12-80 has been effectively superseded and amended in the amendatory Revenue Regulations No. 17-84 . It claims that the latter law does not cover percentage tax and gross receipts tax, being captioned Income Taxation of Interest Income derived from Deposits and yield from Deposits Substitute as it precisely covers only a limited subject of taxation in scope, specifically taxation of interest income from deposits and deposit substitutes. Thus, when read side by side, RR No. 17-84 must be seen only as amending or superseding the provisions of RR No. 12-80 on final withholding income tax on interest on savings and time deposit and on yield on deposit substitutes only. It does not amend or supersede the provisions of gross receipts tax as the CTA had declared in its assailed Resolution. We do not agree. The question of whether or not the 20% final withholding tax on interest income should form part of Solid Bank's gross receipts in computing the gross receipts tax on banks has been put to rest by the Supreme Court in the recent case of China Banking Corporation vs. Court of Appeals, GR Nos. 146749 and 147938 promulgated on June 10, 2003. The Supreme Court, tracing the history of gross receipts tax, recalls that the said gross receipts tax was first imposed in 1946 via Republic Act 39 which amended Section 249 of the Tax Code of 1939. Interest income on banks, without any deduction, formed part of the taxable gross receipts. From 1946 to June of 1977, there was no withholding tax on interest income from bank deposits. In 1977, however, Presidential Decree No. 1156 was issued requiring the withholding at source of a 15% tax on interest on bank deposits. This tax was a creditable, not a final withholding tax. Despite the withholding of the 15% tax, the entire interest income, without any deduction, formed part of the bank's taxable gross receipts. In 1980, Presidential Decree No. 1739 made the withholding tax on interest a final tax at the rate of 15% on savings account, and 20% on time deposits. From 1980 until the decision of the CTA in the Asian Bank case came out in 1996, banks included the entire interest income, without any deduction, in their taxable gross receipts. Subsequently, the CTA reversed its ruling in Asian Bank . In Far East Bank & Trust Co. vs. Commissioner and Standard Chartered Bank vs. Commissioner , both promulgated in 2001, the tax court ruled that the Final Withholding Tax forms part of the bank's gross receipts in computing the gross receipts tax. The court also held in the same case that the exclusion of the FWT from gross receipts operates as a tax exemption, which the law must expressly grant. Since there is practically no law providing for such an exemption, then it cannot be excluded from gross receipts. In addition, the tax court also pointed out that Section 4(e) of Revenue Regulations No. 12-80 had already been superseded by Section 7(c) of Revenue Regulations No. 17-84 providing that: cATDIH "Section 7. Nature and Treatment of Interest on Deposits and Yield on Deposit Substitutes. xxx xxx xxx (c) If the recipient of the above-mentioned items of income are financial institutions, the same should be included as part of the tax base upon which the gross receipts tax is imposed." As aid in resolving the controversy, the Supreme Court looked at the pertinent statutes and existing jurisprudence for the purpose of defining the term "gross receipts". It cited National City Bank vs. Collector of Internal Revenue , decided in 1952, where the tax court agreed with the argument of the Collector that gross receipts should be interpreted as " the whole amount received as interests without deductions, otherwise, if deductions are made from gross receipts, it will be considered as 'net' receipts ". The Supreme Court noted that the decision in the National City Bank case remained unchallenged until the time when the CTA rendered its decision in the Asian Bank case. And in November 2001, in the twin cases of Far East Bank and Standard Chartered Bank , the same tax court reversed Asian Bank , in effect reinstating the decision in National City Bank . The Supreme Court explained the seeming disparity between Section 4(e) of Revenue Regulations No. 12-80 and Section 7(c) of Revenue Regulations No. 17-84 : "Under Revenue Regulations Nos. 12-80 and 17-84, as well as in several numbered rulings, the BIR has consistently ruled that the term "gross receipts" does not admit of any deduction. This interpretation has remained unchanged throughout the various re-enactments of the present Section 121 of the Tax Code. The only conclusion that can be drawn is that the legislature has adopted the BIR's interpretation, following the principle of legislative approval by re-enactment. xxx xxx xxx "Even without a statutory definition, the term "gross receipts" will have to exclude any deduction of the withholding tax. Otherwise, other items of income in Section 121 would also be subject to deductions despite the absence of a specific provision of law excluding any portion of such items of income from taxable gross receipts, Section 121 refers not only to interest income, but also to dividends, rentals of property, real or personal, profits from exchange and all other items treated as gross income under Section 32 of this Code. xxx xxx xxx "In the same manner, the amount of final withholding tax on interest income should not be deducted from the bank's interest income for purposes of the gross receipts tax. The final withholding tax on interest, like the creditable withholding tax on rentals, comes from the bank's income and is money the bank owns that is used to pay the bank's tax liability. The final withholding tax and the creditable withholding tax constitute payment by the bank to extinguish a tax obligation to the government. The bank can only pay with money it owns, or with money it is authorized to spend. In either case, such money comes from the bank's revenues or receipts, and certainly not from the government's coffers. "CBC's argument will create tax exemptions where none exist. If the amount of the final withholding tax is excluded from taxable gross receipts, then the amount of the creditable withholding tax should also be excluded from taxable gross receipts. For that matter, any withholding would qualify as "earmarking by regulation". Under section 57(B) of the Tax Code, the Commissioner, with the approval of the Secretary of Finance, may by regulation impose withholding tax on other items of income to facilitate the collection of income tax. Every time the Commissioner expands the withholding tax, he will create tax exemptions where the law provides for none. Obviously, the Court cannot allow this." The Supreme Court, in the same case, explained the policy objective why no deductions, exemptions or exclusions are normally allowed in a gross receipts tax. The gross receipts tax, as opposed to the income tax, was devised to maintain simplicity in tax collection and to assure a steady source of state revenue even during periods of economic slowdown. Such a policy frowns upon erosion of the tax base. Deductions, exemptions or exclusions complicate the tax system and lessen the tax collection. By its nature, gross receipts tax applies to the entire receipts without any deduction, exemption or exclusion, unless the law clearly provides otherwise. EHACcT In the case at bar, petitioner maintains that the 20% Final Withholding Tax is definitely not an item of income to begin with, and neither is it something which has been actually received by it. As this tax has already been withheld at source by the withholding agent and the same duly remitted to the government, it becomes fairly obvious that such tax was received not by the petitioner but by the government itself. To this, the Supreme Court has this explanation in the same China Bank case, viz : "The government subsequently becomes the owner of the money constituting the final tax when CBC pays the final withholding tax to extinguish its obligation to the government. This is the consideration for the transfer of ownership of money from the CBC to the government. Thus, the amount constituting the final tax, being originally owned by the CBC as part of its interest income, should form part of its taxable gross receipts." The Supreme Court went on: "Moreover, when Section 121 of the Tax Code includes "interest" as part of gross receipts, it refers to the entire interest earned and owned by the bank without any deduction. "Interest" means the gross amount paid by the borrower to the lender as consideration for the use of the lender's money. Section 2(h) of Revenue Regulations No. 12-80, now Section 2(i) of Revenue Regulations No. 17-84 defines the term "interest" as the amount which a depository bank (borrower) may pay on savings and time deposit in accordance with rates authorized by the Central Bank of the Philippines. This definition does not allow any deduction. The entire interest paid by the depository bank, without any deduction, is what forms part of the lending bank's gross receipts." As to petitioner's contention that there is no basis for the CTA's holding that RR No. 12-80 has been superseded by RR No. 17-84 , the Supreme Court has this to say: "The tax court erred glaringly in interpreting Section 4(e) of Revenue Regulations No. 12-80. Income may be taxable either at the time of its actual receipt or its accrual, depending on the accounting method of the taxpayer. Section 4(e) merely provides for an exception to the rule, making interest income taxable for gross receipts tax purposes only upon actual receipt. Interest is accrued, and not actually received, when the interest is due and demandable but the borrower has not actually paid and remitted the interest, whether physically or constructively. Section 4(e) does not exclude accrued interest income from gross receipts but merely postpones its inclusion until actual payment of the interest to the lending bank. This is clear when Section 4(e) states that "[m]ere accrual shall not be considered, but once payment is received on such accrual or in case of prepayment, then the amount actually received shall be included in the tax base of such financial institutions . . . ." "Actual receipt of interest income is not limited to physical receipt. Actual receipt may either be physical receipt or constructive receipt. When the depository bank withholds the final tax to pay the tax liability of the lending bank, there is prior to the withholding a constructive receipt by the lending bank of the amount withheld. From the amount constructively received by the lending bank, the depository bank deducts the final withholding tax and remits it to the government for the account of the lending bank Thus, the interest income actually received by the lending bank both physically and constructively, is the net interest plus the amount withheld as final tax. CDAHIT "The concept of a withholding tax on income obviously and necessarily implies that the amount of the tax withheld comes from the income earned by the taxpayer. Since the amount of the tax withheld constitutes income earned by the taxpayer, then the amount manifestly forms part of the taxpayer's gross receipts. Because the amount withheld belongs to the taxpayer, he can transfer its ownership to the government in payment of his tax liability. The amount withheld indubitably comes from income of the taxpayer and thus forms part of his gross receipts. "In addition, Section 8 of Revenue Regulations No. 12-80 expressly states that interest income, even if subject to the final withholding tax and excluded from gross income for income tax purposes, should still form part of the bank's taxable gross receipts. Section 8 of Revenue Regulations No. 12-80 provides: Section 8. Nature and Treatment of Interest on deposits and Yield on deposit Substitutes (a) The interest earned on Philippine currency, bank deposits and yield from deposit substitutes subjected to the withholding taxes in accordance with these regulations need not be included in the gross income in computing the depositor's/investor's income tax liability in accordance with the provisions of Section 29(b), (c) and (d) of the Tax Code. (b) . . . (c) If the recipient of the above-mentioned items of income are financial institutions, the same shall be included as part of the tax base upon which the gross receipts tax is imposed. " (Emphasis supplied) "Thus, interest earned by banks, even if subject to the final tax and excluded form taxable gross income, forms part of its gross receipts for gross receipts tax purposes. The interest earned refers to the gross interest without deduction since the regulations do not provide for any deduction. The gross interest, without deduction, is the amount the borrower pays, and the income the lender earns, for the use by the borrower of the lender's money. The amount of final tax plainly comes from the interest earned and is consequently part of the bank's taxable gross receipts." Thus, the Supreme Court held that in deciding the Asian Bank case in January 1996, the tax court not only erroneously interpreted Section 4(e) of RR No. 12-80 , but also used the said provision when it was no longer the applicable revenue regulation. The controlling revenue regulation (RR No. 17-84) requiring interest income, whether actually received or merely accrued, to form part of the bank's taxable gross receipts, has been in effect for approximately 12 years when the tax court decided the Asian Bank case . To reiterate, the revenue regulations applicable at the time the tax court decided Asian Bank was RR No. 17-84 , not RR No. 12-80 . Finally, We apply the rule enunciated in the China Bank case that petitioner's claim of deducting the 20% final withholding tax from its interest income amounts to a claim of tax exemption. As consistently held, exemptions are highly disfavored and whoever claims an exemption must justify his right by the clearest grant of organic or statute law (Wonder Mechanical Engineering Corp. vs. CTA, 64 SCRA 555) . Petitioner must point to a specific provision of law granting the tax exemption (Manila Electric Company vs. Vera, 67 SCRA 351) . The tax exemptions cannot arise by mere implication and any doubt whether the exemption exists is strictly construed against the taxpayer and in favor of the taxing authority (Collector of Internal Revenue vs. Manila Jockey Club, 98 Phil. 670) . The public respondent's posture in modifying its earlier decision that the claim for refund of the petitioner miserably failed to submit sufficient evidence and declaring in its resolution on petitioner's motion for reconsideration that the claim is without merit is in consonance with the latest development in our case law on the issue. It becomes unnecessary to review its previous findings of facts as to do so would be an exercise in futility in view of the Supreme Court decision in the China Bank case. In the same vein, it is pointless for this Court to resolve the secondary issue of whether or not the petitioner has proved, by sufficient evidence, its claim for refund. WHEREFORE, in view of the foregoing premises and in the light of the Supreme Court decision in China Banking Corporation vs. Court of Appeals (GR No. 146749) and Commissioner of Internal Revenue vs. China Banking Corporation (GR No. 147938) promulgated on June 10, 2003, the instant petition for review is hereby DISMISSED for utter lack of merit. The September 27, 2001 Decision and the December 14, 2001 Resolution of the Court of Tax Appeals in Case No. 5820 are AFFIRMED. No costs. DaHcAS SO ORDERED. Vidallon-Magtolis and Abdulwahid, JJ ., concur.