full text tax cases

7/23/2019 Full Text Tax Cases

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FULL TEXT

PELIZLOY VS PROVINCE OF BENGUET

The principal issue in this case is the scope of authority of a province to impose an amusement tax. This is a Petition

Review on Certiorari under Rule 45 of the Rules of Court praying that the December !" #!!$ decision of the Regional T

Comi"% &ranch '#" (a Trinidad" &enguet in Civil Case )o. !'%C*%##+# be reversed and set aside and a new one issued

which, - respondent -/ Decision # 0.R. )o. 1++$ Province of &enguet is declared as having no authority to le

amusement taxes on admission fees for resorts" swimming pools" bath houses" hot springs" tourist spots" and other places

recreation2 -# 3ection 5" rticle 6 of the &enguet Provincial Revenue Code of #!!5 is declared null and void2 and -+

respondent Province of &enguet is permanently en7oined from enforcing 3ection 5" rticle 6 of the &enguet Provinc

Revenue Code of #!!5. Petitioner Peli8loy Realty Corporation -9Peli8loy: owns Palm 0rove Resort" which is designed

recreation and which has facilities li;e swimming pools" a spa and function halls. n December 1" #!!5" the Provincial &oard of the Province of &eng

approved Provincial Tax >rdinance )o. !5%!$" otherwise ;nown as the &enguet Revenue Code of #!!5 -9Tax >rdinanc

3ection 5" rticle 6 of the Tax >rdinance levied a ten percent -!? amusement tax on gross receipts from admissions

9resorts" swimming pools" bath houses" hot springs and tourist spots.: 3pecifically" it provides the following, rticle Tmusement Tax on dmission 3ection 5. rdinance imposed a percentage tax in violation of the limitation on the taxing powers of local government units -(0G

under 3ection ++ -i of the (0C. Thus" it was null and void ab initio. 3ection ++ -i of the (0C provides, 3ection +

Common (imitations on the Taxing Powers of (ocal 0overnment Gnits. % Gnless otherwise provided herein" the exercisethe taxing powers of provinces" cities" municipalities" and barangays shall not extend to the levy of the following, x x x

Percentage or value%added tax -*T on sales" barters or exchanges or similar transactions on goods or services except

otherwise provided herein The Province of &enguet assailed the Petition for Declaratory Relief and


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measures may be raised on appeal within thirty -+! days from the effectivity thereof to the 3ecretary of ustice who sh

render a decision within sixty -'! days from the date of receipt of the appeal, Provided" however" That such appeal shall

have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax" fee" or charge levi

therein, Provided" finally" That within thirty -+! days after receipt of the decision or the lapse of the sixty%day period with

the 3ecretary of ustice acting upon the appeal" the aggrieved party may file appropriate proceedings with a court

competent 7urisdiction. # Rollo" p. . Decision 4 0.R. )o. 1++$ phrase Iother places of amusementJ in 3ection 4! -athe (0C+ encompasses resorts" swimming pools" bath houses" hot springs" and tourist spots since 9rticle ##! -b -sic:

the (0C defines 9amusement: as 9pleasurable diversion and entertainment x x x synonymous to relaxation" avocati

pastime" or fun.:4 Fowever" the Province of &enguet erroneously cited 3ection ##! -b of the (0C. 3ection ##! of the (

refers to valuation of real property for real estate tax purposes. 3ection + -b of the (0C" the provision which actua

defines 9amusement:" states, 3ection +. Definition of Terms. % Khen used in this Title" the term, x x x -b Lmusement

a pleasurable diversion and entertainment. rdinance" the RTC noted that" while 3ection 5" rticle 6 imposes a percentage tax" 3ection ++ -i of the (0C its

allowed for exceptions. rdinance as being a -supposedly prohibited percentage tax per 3ection ++

of the (0C. )3T


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Provincial Treasure of &atangas" 5# Phil. !"' -#12 &aldwin vs. Coty Council 5+ la." p. 4+$2 3tate vs. 3mith

(owa" p. 4+2 +1 m ur pp. '1" $#%$+. Decision ' 0.R. )o. 1++$ such power is delegated to it either by the Constitut

or by statute. 3ection 5" rticle 6 of the 1$ Constitution is clear on this point, 3ection 5. Aach local government unit sh

have the power to create its own sources of revenues and to levy taxes" fees and charges sub7ect to such guidelines a

limitations as the Congress may provide" consistent with the basic policy of local autonomy. 3uch taxes" fees" and charg

shall accrue exclusively to the local governments. @Gnderscoring suppliedB Per 3ection 5" rticle 6 of the 1$ Constituti9the power to tax is no longer vested exclusively on Congress2 local legislative bodies are now given direct authority to le

taxes" fees and other charges.:# )evertheless" such authority is 9sub7ect to such guidelines and limitations as the Congr

may provide:.+ riental Championships in any division is at st

shall be exempt from amusement tax, Provided" further" That at least one of the contenders for Korld or >rien

Championship is a citi8en of the Philippines and said exhibitions are promoted by a citi8enEs of the Philippines or b

corporation or association at least sixty percent -'!? of the capital of which is owned by such citi8ens2 -d Mifteen perc

-5? in the case of professional bas;etball games as envisioned in Presidential Decree )o. 1$, Provided" however" T


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the tax herein shall be in lieu of all Decision 1 0.R. )o. 1++$ which are levied regardless of whether or not a taxpayer

already liable to pay value%added tax -*T. musement taxes are fixed at a certain percentage of the gross receipts incur

by certain specified establishments. Thus" applying the definition in C


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! 3CR +$. 1 0.R. )os. '!##5%#'" =ay 1" #" #!1 3CR 54# -#. xford merican Dictionary"## IshowJ means 9a spectacle or display of something" typically

impressive one:2#+ while IperformanceJ means 9an act of staging or presenting a play" a concert" or other form

entertainment.:#4 s such" the ordinary definitions of the words IshowJ and IperformanceJ denote not only visengagement -i.e." the seeing or viewing of things but also active doing -e.g." displaying" staging or presenting such th

actions are manifested to" and -correspondingly perceived by an audience. Considering these" it is clear that reso

swimming pools" bath houses" hot springs and tourist spots cannot be considered venues primarily 9where one se

admission to entertain oneself by seeing or viewing the show or performances:. Khile it is true that they may be venu

where people are visually engaged" they are not primarily venues for their proprietors or operators to actively display" sta

or present shows andEor performances. Thus" resorts" swimming pools" bath houses" hot springs and tourist spots do

belong to the same category or class as theaters" cinemas" concert halls" circuses" and boxing stadia.


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the second paragraph of 3ection 5" rticle 6 of the Tax >rdinance which imposes amusement taxes on Lresorts" swimmi

pools" bath houses" hot springs" and tourist spotsL. The first paragraph of 3ection 5" rticle 6 of the Tax >rdinance refer

Ltheaters" cinemas" concert halls" cir%cuses" coc;pits" dancing halls" dancing schools" night or day clubs" and other places

amusementL. rdinance is not limited to resorts" swimming pools" bath houses" hot springs" and tour

spots but also covers admission fees for boxing. s 3ection 4! of the (0C allows for the imposition of amusement taxes

gross receipts from admission fees to boxing stadia" 3ection 5" rticle 6 of the Tax >rdinance must be sustained w

respect to admission fees from boxing stadia. KFARAM>RA" the petition for review on certiorari is 0R)TAD. The sec

paragraph of 3ection 5" rticle 6 of the &enguet Provincial Revenue Code of #!!5" in so far as it imposes amusement ta

on admission fees to resorts" swimming pools" bath houses" hot springs and tourist spots" is declared null and vo

Respondent Province of &enguet is permanently en7oined from enforcing the second paragraph of 3ection 5" rticle 6

the &enguet Provincial Revenue Code of #!!5 with respect to resorts" swimming pools" bath houses" hot springs and tou

spots. 3> >RDARAD. ssociate ustice Decision KA C>)CGR, + PRA3& . *A(3C>" R. ssoc ate ustice

airperson 0.R. )o. 1++$ R>&ART> Q . &D ssociate ustice >3A CQ)D> ssQQQ ustice TTA3TT

attest that the conclusions in the above Decision had be reached in consultation before the case was assigned to the write

the pinion of the Courts Division. PRA3 &


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ofP"#$'"!4$.4! for taxable year #!!!.@1Bn December #" #!!+" the &n 3eptember '" #!!4" the &n >ctober 5" #!!4" 3= Prime filed a Petition for Review before the CT doc;eted as CT Ca

)o. $!$.@#B

CTA Case No. 7085

>n =ay 5" #!!#" the &n pril '" #!!4" the &


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CTA Case No. 7272

Re: Assessment Notice No. 008-02

P) for *T deficiency on cinema tic;et sales for the taxable year #!!# in the total amou

of P+#"1!#"#.# was issued against Mirst sia by the &


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>n 3eptember ##" #!!'" the Mirst Division of the CT rendered a Decision granting the Petiti

for Review. Resorting to the language used and the legislative history of the law" it ruled that the activ

of showing cinematographic films is not a service covered by *T under the )ational


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CT!n 4ancagreed with its Mirst Division that the same cannot be given force and effect for failure

comply with R=C )o. #!%1'.

Issue

Fence" the present recourse" where petitioner alleges that the CT!n 4ancseriously erred,

- PRR3 T> TFA POR&(A C>GRT ARR>)A>G3(O PP(=G(0TAD D)0AR>G3 PRACADA)T32

-e TFARA *(


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-+


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- Rate and &ase of Tax. There shall be levied" assessed and collected" a value%added tax

eHuivalent to ten percent -!? of gross receipts derived from the sale or exchange of services"

including the use or lease of properties.

The phrase s!le "r e#$%!ne "& ser'i$esmeans the performance of all ;inds of services in the

Philippines for others for a fee" remuneration or consideration" in$lu(inthose performed orrendered by construction and service contractors2 stoc;" real estate" commercial" customs and

immigration bro;ers2 lessors of property" whether personal or real2 warehousing

services2 less"rs "r (is)ri*u)"rs "& $ine+!)"r!,%i$ &il+s-persons engaged in milling"

processing" manufacturing or repac;ing goods for others2 proprietors" operators or ;eepers of

hotels" motels" rest houses" pension houses" inns" resorts2 proprietors or operators of restaurants"

refreshment parlors" cafes and other eating places" including clubs and caterers2 dealers in

securities2 lending investors2 transportation contractors on their transport of goods or cargoes"

including persons who transport goods or cargoes for hire and other domestic common carriers

by land" air and water relative to their transport of goods or cargoes2 services of franchise

grantees of telephone and telegraph" radio and television broadcasting and all other franchise

grantees except those under 3ection of this Code2 services of ban;s" non%ban; financial

intermediaries and finance companies2 and non%life insurance companies -except their crop

insurances" including surety" fidelity" indemnity and bonding companies2 and si+il!r

ser'i$esregardless of whether or not the performance thereof calls for the exercise or use of the

physical or mental faculties. The phrase sale or exchange of services s%!ll li.e/ise in$lu(e0

- The lease or the use of or the right or privilege to use any copyright" patent" design or

model" plan" secret formula or process" goodwill" trademar;" trade brand or other li;e property

or right2

x x x x

123 T%e le!se "& +")i"n ,i$)ure &il+s4 &il+s4 )!,es !n( (is$s- !n(

-1 The lease or the use of or the right to use radio" television" satellite transmission and cable

television time.

x x x x -Amphasis supplied

cursory reading of the foregoing provision clearly shows that the enumeration of the sale or exchanof services sub7ect to *T is not exhaustive. The words" including" similar services" and shall li;ew

include" indicate that theenumeration is by way of example only.@+B

mong those included in the enumeration is the lease of motion picture films" films" tapes a

discs. This" however" is not the same as the showing or exhibition of motion pictures or films. s point

out by the CT!n 4anc:
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Axhibition in &lac;s (aw Dictionary is defined as To show or display. x x x To produce

anything in public so that it may be ta;en into possession -'th ed." p. 5$+. Khile the word lease

is defined as a contract by which one owning such property grants to another the right to

possess" use and en7oy it on specified period of time in exchange for periodic payment of a

stipulated price" referred to as rent -&lac;s (aw Dictionary" 'th ed." p. 11. x x x@4!B

3ince the activity of showing motion pictures" films or movies by cinemaE theater operators

proprietors is not included in the enumeration" it is incumbent upon the court to the determine wheth

such activity falls under the phrase similar services. The intent of the legislature must therefore

ascertained.

T%e le$islatre ne)er intended o#erators

or #ro#rietors o' cinema6t%eater %oses to e co)ered , /AT

Gnder the )


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manufacturing or repac;ing goods for others2 and similar services regardless of whether or not

the performance thereof calls for the exercise or use of the physical or mental faculties,

Provided That the following services performed in the Philippines by *T%registered persons

shall be sub7ect to !?,

- Processing manufacturing or repac;ing goods for other persons doing businessoutside the Philippines which goods are subseHuently exported" x x x

x x x x

0ross receipts means the total amount of money or its eHuivalent representing the

contract price" compensation or service fee" including the amount charged for materials

supplied with the services and deposits or advance payments actually or constructively received

during the taxable Huarter for the service performed or to be performed for another person"

excluding value%added tax.

-b Determination of the tax. - Tax billed as a separate item in the invoice. n Mebruary " 11" then Commissioner &ienvenido . Tan" r. issued R=C 1%11" whi

clarified that the power to impose amusement tax on gross receipts derived from admission tic;ets w

exclusive with the local government units and that only the gross receipts of amusement places deriv

from sources other than from admission tic;ets were sub7ect to amusement tax under the )rder )o. #$+" has amended the provisions of 3ection
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of the (ocal Tax Code. ccordingly" the sole 7urisdiction for collection of amusement tax on

admission receipts in places of amusement rests exclusively on the local government" to the

exclusion of the national government. 3ince the &ureau of


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- Fistorically" the activity of showing motion pictures" films or movies by

cinemaEtheater operators or proprietors has always been considered as a form of

entertainment sub7ect to amusement tax.

-# Prior to the (ocal Tax Code" all forms of amusement tax were imposed by the

national government.

-+ Khen the (ocal Tax Code was enacted" amusement tax on admission tic;ets from

theaters" cinematographs" concert halls" circuses and other places of amusements were

transferred to the local government.

-4 Gnder the )


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by 3ection 4! of the (0C of " or a total of 4!? tax. 3uch imposition would result in in7ustice"

persons taxed under the )


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The repeal of the (ocal Tax Code by the (0C of is not a legal basis for the imposition

*T on the gross receipts of cinemaEtheater operators or proprietors derived from admission tic;ets. T

removal of the prohibition under the (ocal Tax Code did not grant nor restore to the national governme

the power to impose amusement tax on cinemaEtheater operators or proprietors. )either did it expand t

coverage of *T. 3ince the imposition of a tax is a burden on the taxpayer" it cannot be presumed nor c

it be extended by implication. law will not be construed as imposing a tax unless it does so clear

expressly" and unambiguously.@5Bs it is" the power to impose amusement tax on cinemaEthea

operators or proprietors remains with the local government.

Re)ene emorandm Circlar No. 28-2001 is in)alid

Considering that there is no provision of law imposing *T on the gross receipts of cinemaEthea

operators or proprietors derived from admission tic;ets" R=C )o. #1%#!! which imposes *T on t

gross receipts from admission to cinema houses must be struc; down. Ke cannot overemphasi8e thR=Cs must not override" supplant" or modify the law" but must remain consistent and in harmony wi

the law they see; to apply and implement.@'!B


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PEPSI@COLA BOTTLING COMPANY OF THE PHILIPPINES4 INC:4plaintiff%appella

vs.

MUNICIPALITY OF TANAUAN4 LEYTE4 THE MUNICIPAL MAYOR4 ET AL:4 defendant appellees.

aido aido Associates 'or a##ellant.

Pro)incial +iscal oila . Redona Assistant Pro)incial +iscal 4oni'acio R atol and Assistant olicitor ene

Conrado T. *imcaoco olicitor !nri;e . Re,es 'or a##ellees.

MARTIN4J.:

This is an appeal from the decision of the Court of Mirst rdinances )os. #+ and #$ embrace or cover the same sub7ect matter and the production tax rates imposed therein

practically the same" and second" that on anuary $" '+" the acting =unicipal Treasurer of Tanauan" (eyte" as per his le

addressed to the =anager of the Pepsi%Cola &ottling Plant in said municipality" sought to enforce compliance by the latter

the provisions of said >rdinance )o. #$" series of '#.

=unicipal >rdinance )o. #+" of Tanauan" (eyte" which was approved on 3eptember #5" '#" levies and collects Lfrom s

drin;s producers and manufacturers a tai of one%sixteenth -E' of a centavo for every bottle of soft drin; cor;ed.L 7Mor

purpose of computing the taxes due" the person" firm" company or corporation producing soft drin;s shall submit to

=unicipal Treasurer a monthly report" of the total number of bottles produced and cor;ed during the month. 9

>n the other hand" =unicipal >rdinance )o. #$" which was approved on >ctober #1" '#" levies and collects Lon s

drin;s produced or manufactured within the territorial 7urisdiction of this municipality a tax of >)A CA)T*> -P!.!

each gallon -#1 fluid ounces" G.3. of volume capacity.L Mor the purpose of computing the taxes due" the person"

company" partnership" corporation or plant producing soft drin;s shall submit to the =unicipal Treasurer a monthly repor

the total number of gallons produced or manufactured during the month.

The tax imposed in both >rdinances )os. #+ and #$ is denominated as Lmunicipal production tax.

>n >ctober $" '+" the Court of Mirst


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Mrom this 7udgment" the plaintiff Pepsi%Cola &ottling Company appealed to the Court of ppeals" which" in turn" elevated

case to Gs pursuant to 3ection + of the udiciary ct of 41" as amended.

There are three capital Huestions raised in this appeal,

. V rdinances )os. #+ and #$ constitute double taxation and impose percentage or specific taxesS

+. V re >rdinances )os. #+ and #$ un7ust and unfairS

. The power of taxation is an essential and inherent attribute of sovereignty" belonging as a matter of right to eve

independent government" without being expressly conferred by the people.


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in7unction against double taxation found in the Constitution of the Gnited 3tates and some states of the Gnion. ;Dou

taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity ;or

the same 7urisdiction for the same purpose" ;rdinance )o. #+ and #$ constitute double taxation" because these two ordinancover the same sub7ect matter and impose practically the same tax rate. The thesis proceeds from its assumption that bo

ordinances are valid and legally enforceable. This is not so. s earlier Huoted" >rdinance )o. #+" which was approved

3eptember #5" '#" levies or collects from soft drin;s producers or manufacturers a tax of one%sixteen -E' of a centa

for .every bottle cor;ed" irrespective of the volume contents of the bottle used. Khen it was discovered that the producer

manufacturer could increase the volume contents of the bottle and still pay the same tax rate" the =unicipality of Tanau

enacted >rdinance )o. #$" approved on >ctober #1" '#" imposing a tax of one centavo -P!.! on each gallon -#1 fl

ounces" G.3. of volume capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drin

produced, in >rdinance )o. #+" it was E' of a centavo for every bottle cor;ed2 in >rdinance )o. #$" it is one centa

-P!.! on each gallon -#1 fluid ounces" G.3. of volume capacity. The intention of the =unicipal Council of Tanauan

enacting >rdinance )o. #$ is thus clear, it was intended as a plain substitute for the prior >rdinance )o. #+" and operates a

repeal of the latter" even without words to that effect. ;8Plaintiff%appellant in its brief admitted that defendants%appellees

only see;ing to enforce >rdinance )o. #$" series of '#. Aven the stipulation of facts confirms the fact that the cti

=unicipal Treasurer of Tanauan" (eyte sought t' compel compliance by the plaintiff%appellant of the provisions of s

>rdinance )o. #$" series of '#. The aforementioned admission shows that only >rdinance )o. #$" series of '# is be

enforced by defendants%appellees. Aven the Provincial Miscal" counsel for defendants%appellees admits in his brief Lt

3ection $ of >rdinance )o. #$" series of '# clearly repeals >rdinance )o. #+ as the provisions of the latter are inconsist

with the provisions of the former.L

That brings Gs to the Huestion of whether the remaining >rdinance )o. #$ imposes a percentage or a specific t

Gndoubtedly" the taxing authority conferred on local governments under 3ection #" Republic ct )o. ##'4" is broad enou

as to extend to almost Leverything" accepting those which are mentioned therein.L s long as the text levied under tauthority of a city or municipal ordinance is not within the exceptions and limitations in the law" the same comes within

ambit of the general rule" pursuant to the rules of e"clcion atte%s and e"ce#tio 'irmat re$lm in caiss non e"ce#ti ;?T

limitation applies" particularly" to the prohibition against municipalities and municipal districts to impose Lany percentage

or other taxes in any form ased t%ereon nor impose taxes on articles sub7ect tos#eci'ic ta" except gasoline" under

provisions of the )ational


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+. The tax of one -P!.! on each gallon -#1 fluid ounces" G.3. of volume capacity on all softdrin;s" produced

manufactured" or an eHuivalent of %W centavos per case" 79cannot be considered un7ust and unfair. #4 an increase in the

alone would not support the claim that the tax is oppressive" un7ust and confiscatory. =unicipal corporations are allow

much discretion in determining the reates of imposable taxes. #5 This is in line with the constutional policy of according

widest possible autonomy to local governments in matters of local taxation" an aspect that is given expression in the (o

Tax Code -PD )o. #+" uly " $+. #' Gnless the amount is so excessive as to be prohibitive" courts will go slowwriting off an ordinance as unreasonable. #$ Reluctance should not deter compliance with an ordinance such as >rdina

)o. #$ if the purpose of the law to further strengthen local autonomy were to be reali8ed. #1

Minally" the municipal license tax of P"!!!.!! per cor;ing machine with five but not more than ten crowners or P#"!!!

with ten but not more than twenty crowners imposed on manufacturers" producers" importers and dealers of soft drin;s and

mineral waters under >rdinance )o. 54" series of '4" as amended by >rdinance )o. 4" series of '1" of defenda

=unicipality" 7?appears not to affect the resolution of the validity of >rdinance )o. #$. =unicipalities are empowered

impose" not only municipal license taxes upon persons engaged in any business or occupation but also to levy for pub

purposes" 7ust and uniform taxes. The ordinance in Huestion ->rdinance )o. #$ comes within the second power o

municipality.

CC>RDrdinance )o. #+" same series" is hereby declared of valid and legal effect. Costs against petition

appellant.

3> >RDARAD.

FIRST PLANTERS VS CITY TREASURER OF PASAY CITY

Mirst Planters Pawnshop"


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ctober $" #!!5 are

hereby MM >RDARAD.@!B

Petitioner sought reconsideration but this was denied by the CT!n4ancper Resolution dated ugust

#!!'.@B
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Fence" the present petition for review under Rule 45 of the Rules of Court based on the following ground

)>R&(A C>GRT >M T6 PPA(3!N 4ANC0R*A(O ARRAD


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receipts beginning anuary " '" while pawnshops whose gross annual receipts do n

exceed P55!"!!!.!! are liable for percentage tax" pursuant to 3ection !-8 of the Tax Code of $.

CT decisions affirmed the &


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for percentage taxes on lending investors" under the then 3ection ' of the )


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ther )on%ban; Minanc


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Kith no further deferments given by law" the levy" collection and assessment of the !? *T

on ban;s" non%ban; financial intermediaries" finance companies" and other financial

intermediaries not performing Huasi%ban;ing functions were finally made effective beginning

anuary " #!!+2

Minally" with the enactment of R.. )o. #+1" the services of ban;s" non%ban; financial

intermediaries" finance companies" and other financial intermediaries not performing Huasi%

ban;ing functions were specifically exempted from *T"@#1Band the !? to 5? percentage tax on

gross receipts on other non%ban; financial intermediaries was reimposed under 3ection ## of

the Tax Code of $.@#B

t the time of the disputed assessment" that is" for the year #!!!" pawnshops were not sub7ect to !? *under the general provision on sale or exchange of services as defined under 3ection !1- of the T

Code of $" which states, sale or e"c%an$e o' ser)ices means the performance of all ;inds of services

the Philippines for others for a fee" remuneration or consideration x x x.


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The tax treatment of pawnshops as non%ban; financial intermediaries is not without basis.

R.. )o. ++$" as amended" or the 0eneral &an;ing ct characteri8es the terms an@iinstittion and an@as synonymous and interchangeable and specifically include commercial ban

savings ban;" mortgage ban;s" development ban;s" rural ban;s" stoc; savings and loan associations" a

branches and agencies in the Philippines of foreign ban;s.@+!BR.. )o. 1$ or the 0eneral &an;ing (

of #!!!" meanwhile" provided that an@sshall refer to entities engaged in the lending of funds obtained

the form of deposits.@+BR.. )o. 1$ also included cooperative ban;s"


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=anual of Regulations for )on%&an; Minancial M G()%&)X M


31/41

Coming now to the issue at hand % 3ince petitioner is a non%ban; financial intermediary" it is sub7ect to !

*T for the tax years ' to #!!#2 %"/e'er4 /i)% )%e le'54 !ssess+en) !n( $"lle$)i"n "& VAT &r"+ n"

*!n. &in!n$i!l in)er+e(i!ries *ein s,e$i&i$!ll5 (e&erre( *5 l!/"@+4B

)%en ,e)i)i"ner is n") li!*le &VAT (urin )%ese )!# 5e!rs. &ut with the full implementation of the *T system on non%ban; financ

intermediaries starting anuary " #!!+" petitioner is liable for !? *T for said tax year. nd beginni

#!!4 up to the present" by virtue of R.. )o. #+1" petitioner is no longer liable for *T but it is sub7ect

percentage tax on gross receipts from !? to 5 ?" as the case may be.

(astly" petitioner is liable for documentary stamp taxes.

The Court has settled this issue inic%el J. *%illier Pa(ns%o# &nc. ). Commissioner o' &nternal Re)en@+5Bin which it was ruled that the sub7ect of D3T is not limited to the document alone. Pledge" which is

exercise of a privilege to transfer obligations" rights or properties incident thereto" is also sub7ect to D3

thus

x x x the sub7ect of a D3T is not limited to the document embodying the enumerated

transactions. D3T is an excise tax on the exercise of a right or privilege to transfer obligations"rights or properties incident thereto.


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3ection # of the Pawnshop Regulation ct and 3ection # of the Rules and Regulations Mor

Pawnshops issued by the Central &an; to implement the ct" reHuire every pawnshop or

pawnbro;er to issue" at the time of every such loan or pledge" a memorandum or tic;et signed by

the pawnbro;er and containing the following details, - name and residence of the pawner2 -#

date the loan is granted2 -+ amount of principal loan2 -4 interest rate in percent2 -5 period ofmaturity2 -' description of pawn2 -$ signature of pawnbro;er or his authori8ed agent2 -1

signature or thumb mar; of pawner or his authori8ed agent2 and - such other terms and

conditions as may be agreed upon between the pawnbro;er and the pawner.


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nebulous claim that it is not sub7ect to D3T is without merit.


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annual receipts for the preceding calendar year based on the income or receipts reali8ed within the territorial

7urisdiction of Davao City.

3mart contends that its telecenter in Davao City is exempt from payment of franchise tax to the City" on the followgrounds, -a the issuance of its franchise under Republic ct -R.. )o. $#4 @5BsubseHuent to R.. )o. $'! shows the cl

legislative intent to exempt it from the provisions of R.. $'!2 @'B-b 3ection +$ of R.. )o. $'! can only applyexemptions already existing at the time of its effectivity and not to future exemptions2 -c the power of the City of Davao

impose a franchise tax is sub7ect to statutory limitations such as the in lie o' all ta"esclause found in 3ection of R.. )

$#42 and -d the imposition of franchise tax by the City of Davao would amount to a violation of the constitutional provis

against impairment of contracts.@$B

>n =arch #" #!!#" respondents filed their nswer@1Bin which they contested the tax exemption claimed by 3mart. Th

invo;ed the power granted by the Constitution to local government units to create their own sources of revenue.@B

>n =ay $" #!!#" a pre%trial conference was held. n the issue of violation of the non%impairment clause of the Constitution"

trial court citedactan Ce &nternational Air#ort At%orit, ). arcos@4Band declared that the citys power to tax is ba

not merely on a valid delegation of legislative power but on the direct authority granted to it by the fundamental law.

MR)CF) PAT)DA)T CKAR C>GRT ARRAD (DK3

RA3P>)DA)T C 3A TFA MR)CF


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@d.B TFA (>KAR C>GRT ARRAD T F>(DM TFA

(>C( 0>*AR)=A)T C>DA RAMAR >)(O T> A6A=PT)3 (RADO A6KAR C>GRT ARRAD RO C>)3TRGCT)TFT T6 A6A=PT)3 RA C>)3TRGAD 3TRGRT ARRAD T F>(D&A TA(AC>=" &A -RAPG&(. $##" KFC( 0>*AR)=A)T

C>DA" TFARA&O PR>*GRT ARRAD *AR)=A)T G)C( 0>*AR)=A)T C>DA.

@h.B TFA (>KAR C>GRT ARRAD T F>(DC(

MR)CF) PATG(D *(TA TFA C>)3TF


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The grantee shall file the return with and pay the tax due thereon to the Commissioner of


37/41

R.. )o. $#4 is not to be interpreted from a consideration of a single portion or of isolated words or clauses" but from

general view of the act as a whole. Avery part of the statute must be construed with reference to the context. @B

3mart is of the view that the only taxes it may be made to bear under its franchise are the national franchise tax -now *T

income tax" and real property tax.@#!B


38/41

Fowever" Congress did not expressly exempt 3mart from local taxes. Congress used the Lin lieu of all taxesL

clause only in reference to national internal revenue taxes. The only interpretation" under the rule on strict

construction of tax exemptions" is that the Lin lieu of all taxesL clause in 3marts franchise refers only to

national and not to local taxes.


39/41

Distance Telephone Company in the previous cases already decided by this Court. @++Bs previously held by the Court"

findings of the &(0M are not conclusive on the courts,

@TBhe &(0M opined that #+ of R.. )o. $#5 amended the franchise of petitioner and in effect restored its

exemptions from local taxes. Petitioner contends that courts should not set aside conclusions reached by the&(0M because its function is precisely the study of local tax problems and it has necessarily developed an

expertise on the sub7ect.

To be sure" the &(0M is not an administrative agency whose findings on Huestions of fact are given weight

and deference in the courts. The authorities cited by petitioner pertain to the Court of Tax ppeals" a highly

speciali8ed court which performs 7udicial functions as it was created for the review of tax cases.


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nother argument of 3mart is that the imposition of the local franchise tax by the City of Davao would violate

constitutional prohibition against impairment of contracts. The franchise" according to petitioner" is in the nature of a contr

between the government and 3mart.@4$B

Fowever" we find that there is no violation of rticle

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