CIR vs Solidbank GR No 148191 Facts: CIR paid under protest (around) P1.

5M quarterly percentage tax based on gross receipts from passive income of P350M+. It contends that said passive income was subjected to 20% final withholding tax hence said 20% should no longer be included in the computation of the quarterly percentage tax and said FWT was not received by the bank but paid directly to the government. CIR contended that although FWT was not actually received by Solidbank, it still redounded to its benefit. Issue: Whether or Not FWT deducted from passive income should form part of the computation of quarterly percentage tax? Held: Yes. In a withholding tax system, the payee is the taxpayer while the BIR is the payor. Amount used to settle tax liability is sourced from the proceeds constituting the tax base. Proceeds are either actual or constructive. Constructive receipt, although not physically received, it must be rationalized since the payee is the real taxpayer. Article 531 of the Civil Code provides that acquisition of the right of possession is through the acts and legal formalities established. Withholding process is one such act. There may not be actual receipt of the income withheld, however as provided in Art 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 system, possession is acquired by payor (BIR) as withholding agent of the government, because the payee/taxpayer ratifies the very act of possession for the government. (Constructive) The process off bookkeeping and accounting for interests on deposits and yield on deposit substitutes that are subject to final withholding tax are tantamount to delivery, receipt or remittance.