Gotesco entered into a loan agreement with PNB on April 7, 1995. The loan was secured by a real estate mortgage of a six-hectare property known as Ever Ortigas Commercial Complex. Gotesco subsequently defaulted on its loan obligations and PNB foreclosed the mortgaged. On October 20, 2000, Gotesco filed a civil case against PNB before the RTC of Pasig, Branch 168 for the annulment of the foreclosure proceedings, specific performance and damages with prayer for temporary restraining order (TRO) and/or preliminary injunction.
As PNB prepared to consolidate its ownership over the foreclosed property, PNB withheld and remitted to the BIR withholding taxes amounting to P74,400,028.49, or 6% of the bid price.
Realizing that it made a mistake, PNB filed an administrative claim for refund of excess withholding taxes on October 27, 2005. The next day, PNB filed its petition for review for the claim for refund before the tax court.