redounded to the bank’s benefit makes it part of the taxable gross receipts in computing the Gross Receipts

Tax. Solidbank says the CA ruling is correct.

Issue:
Whether or not the FWT forms part of the gross receipts tax.
Held: Yes. In a withholding tax system, the payee is the taxpayer, the person on whom the tax is imposed.
The payor, a separate entity, acts as no more than an agent of the government for the collection of tax in
order to ensure its payment. This amount that is used to settle the tax liability is sourced from the proceeds
constitutive of the tax base.
These proceeds are either actual or constructive. Both parties agree that there is no actual receipt by the
bank. What needs to be determined is if there is constructive receipt. Since the payee is the real taxpayer,
the rule on constructive receipt can be rationalized.
The Court applied provisions of the Civil Code on actual and constructive possession. Article 531 of the
Civil Code clearly provides that the acquisition of the right of possession is through the proper acts and
legal formalities established. The withholding process is one such act. There may not be actual receipt of
the income withheld; however, as provided for in Article 532, possession by any person without any power
shall be considered as acquired when ratified by the person in whose name the act of possession is executed.
In our withholding tax system, possession is acquired by the payor as the withholding agent of the
government, because the taxpayer ratifies the very act of possession for the government. There is thus
constructive receipt.
The processes of bookkeeping and accounting for interest on deposits and yield on deposit substitutes that
are subjected to FWT are tantamount to delivery, receipt or remittance. Besides, Solidbank admits that its
income is subjected to a