WESTERN MINOLCO v. CIR [G.R. No. L-61632. August 16, 1983.

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FACTS: Petitioner is a domestic corporation engaged in mining, particularly copper
concentrates for export mined from mineral lands. It was granted by the Securities and
Exchange Commission, under Certificate of Renewal No. R-1056, authority to borrow
money and issue
commercial papers. Pursuant to this authority, the petitioner borrowed funds from
several financial institutions and paid the corresponding 35% transaction tax due
thereon. Petitioner applied for a refund alleging that it was not liable to pay the 35%
transaction tax.
ISSUE: WON the 35% transaction tax is a business tax that constitutes an allowable
deduction from gross income
HELD: No. The 35% transaction tax is imposed on interest income from commercial
papers issued in the primary money market. Being a tax on interest, it is a tax on
income. The petitioner who borrowed funds from several financial institutions by issuing
commercial papers merely
withheld the 35% transaction tax before paying to the financial institutions the interests
earned by them and later remitted the same to the respondent Commissioner of Internal
Revenue. Whatever collecting procedure is adopted does not change the nature of the
tax. Furthermore, whether or not certain taxes are on income is not necessarily
determined by their deductibility or non-deductibility from ross income. Income in the
form of dividends, capital gains on real property, shares of stock, and interests on
savings in bank accounts are incomes, yet they are not included in the gross income
when income taxes are paid because these are subject to final withholding taxes.