THIRD DIVISION
G.R. No. 212530, August 10, 2016
BLOOMBERRY RESORTS AND HOTELS, INC., Petitioner, v. BUREAU OF INTERNAL REVENUE, REPRESENTED BY COMMISSIONER KIM S. JACINTO-HENARES, Respondent.
D E C I S I O N
PEREZ, J.:
This is a Petition for Certiorari and Prohibition under Rule 65 of the Rules on Court seeking: (a) to annul the issuance by the Commissioner of Internal Revenue (CIR) of an alleged unlawful governmental regulation, specifically the provision of Revenue Memorandum Circular (RMC) No. 33-20131 dated 17 April 2013 subjectingcontractees and licensees of the Philippine Amusement and Gaming Corporation (PAGCOR) to income tax under the National Internal Revenue Code (NIRC) of 1997, as amended; and (b) to enjoin respondent CIR from implementing the assailed provision of RMC No. 33-2013.2chanrobleslaw
(a) | What is involved is a pure question of law, i.e. whether or not petitioner is exempted from payment of all taxes, national or local, except the 5% franchise tax by virtue of Section 13(2)(b) of PD No. 1869, as amended; | |
(b) | The rule on exhaustion of administrative remedies is disregarded, among others, when: (i) the administrative action is patently illegal amounting to lack or excess of jurisdiction; (ii) to require exhaustion of administrative remedies would be unreasonable; and (iii) it would amount to nullification of a claim; | |
(c) | The gaming business funded by private investors under license by PAGCOR is a new industry which involves national interest. Hence, the inclusion of the assailed provision in RMC No. 33-2013 which implements income taxes on PAGCOR's licensees and operators when an exemption for such is specifically provided for by PD No. 1869, as amended, being unlawful and unwarranted legislation by the respondent, seriously affects national interest as it effectively curtails the basis for the investments in the industry and resulting tourist interest and jobs generated by the industry; and | |
(d) | The assailed provision of RMC No. 33-2013 affects not only petitioner or other locators and PAGCOR licensees in Entertainment City, Parañaque City, but also the rest of private casinos licensed by PAGCOR operating in economic zones. Thus, in order to prevent multiplicity of suits and to avoid a situation when different local courts issue differing opinions on one question of law, direct recourse to this Court is likewise sought.7 |
After a thorough study of the arguments and points raised by the parties, and in accordance with our Decision dated March 15, 2011, we sustain [PAGCOR's] contention that its income from gaming operations is subject only to five percent (5%) franchise tax under P.D. No. 1869, as amended, while its income from other related services is subject to corporate income tax pursuant to P.D. No. 1869, as amended, as well as R.A. No. 9337. This is demonstrable.Furthermore,
First. Under P.D. No. 1869, as amended, [PAGCOR] is subject to income tax only with respect to its operation of related services. Accordingly, the income tax exemption ordained under Section 27(c) of R.A. No. 8424 clearly pertains only to [PAGCOR's] income from operation of related services. Such income tax exemption could not have been applicable to [PAGCOR's] income from gaming operations as it is already exempt therefrom under P.D. No. 1869, as amended, to wit:SECTION 13. Exemptions. –Indeed, the grant of tax exemption or the withdrawal thereof assumes that the person or entity involved is subject to tax. This is the most sound and logical interpretation because [PAGCOR] could not have been exempted from paying taxes which it was not liable to pay in the first place. This is clear from the wordings of P.D. No. 1869, as amended, imposing a franchise tax of five percent (5%) on its gross revenue or earnings derived by [PAGCOR] from its operation under the Franchise in lieu of all taxes of any kind or form, as well as fees, charges or levies of whatever nature, which necessarily include corporate income tax.
X X X X
(2) Income and other taxes. — (a) Franchise Holder: No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority.
In other words, there was no need for Congress to grant tax exemption to [PAGCOR] with respect to its income from gaming operations as the same is already exempted from all taxes of any kind or form, income or otherwise, whether national or local, under its Charter, save only for the five percent (5%) franchise tax. The exemption attached to the income from gaming operations exists independently from the enactment of R.A. No. 8424. To adopt an assumption otherwise would be downright ridiculous, if not deleterious, since [PAGCOR] would be in a worse position if the exemption was granted (then withdrawn) than when it was not granted at all in the first place.20 (Emphasis supplied)
Second. Every effort must be exerted to avoid a conflict between statutes; so that if reasonable construction is possible, the laws must be reconciled in the manner.The Court through Justice Diosdado M. Peralta, categorically followed what was simply provided under the PAGCOR Charter (PD No. 1869, as amended by RA No. 9487), by proclaiming that despite amendments to the NIRC of 1997, the said Charter remains in effect. Thus, income derived by PAGCOR from its gaming operations such as the operation and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and related operations is subject only to 5% franchise tax, in lieu of all other taxes, including corporate income tax. The Court concluded that the CIR committed grave abuse of discretion amounting to lack or excess of jurisdiction when it issued RMC No. 33-2013 subjecting both income from gaming operations and other related services to corporate income tax and 5% franchise tax considering that it unduly expands the Court's Decision dated 15 March 2011 without due process, which creates additional burden upon PAGCOR.
As we see it, there is no conflict between P.D. No. 1869, as amended, and R.A. No. 9337. The former lays down the taxes imposable upon [PAGCOR], as follows: (1) a five percent (5%) franchise tax of the gross revenues or earnings derived from its operations conducted under the Franchise, which shall be due and payable in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial or national government authority; and (2) income tax for income realized from other necessary and related services, shows and entertainment of [PAGCOR]. With the enactment of R.A. No. 9337, which withdrew the income tax exemption under R.A. No. 8424, [PAGCOR's] tax liability on income from other related services was merely reinstated.
It cannot be gainsaid, therefore, that the nature of taxes imposable is well defined for each kind of activity or operation. There is no inconsistency between the statutes; and in fact, they complement each other.
Third. Even assuming that an inconsistency exists, P.D. No. 1869, as amended, which expressly provides the tax treatment of [PAGCOR's] income prevails over R.A. No. 9337, which is a general law. It is a canon of statutory construction that a special law prevails over a general law — regardless of their dates of passage — and the special is to be considered as remaining an exception to the general. x x x
x x x x Where a general law is enacted to regulate an industry, it is common for individual franchises subsequently granted to restate the rights and privileges already mentioned in the general law, or to amend the later law, as may be needed, to conform to the general law. However, if no provision or amendment is stated in the franchise to effect the provisions of the general law, it cannot be said that the same is the intent of the lawmakers, for repeal of laws by implication is not favored.
In this regard, we agree with [PAGCOR] that if the lawmakers had intended to withdraw [PAGCOR's] tax exemption of its gaming income, then Section 13(2)(a) of P.D. 1869 should have been amended expressly in R.A. No. 9487, or the same, at the very least, should have been mentioned in the repealing clause of R.A. No. 9337. However, the repealing clause never mentioned [PAGCOR's] Charter as one of the laws being repealed. On the other hand, the repeal of other special laws, namely, Section 13 of R.A. No. 6395 as well as Section 6, fifth paragraph of R.A. No. 9136, is categorically provided under Section 24(a) (b) of R.A. No. 9337, x x x.
x x x x
When [PAGCOR's] franchise was extended on June 20, 2007 without revoking or withdrawing its tax exemption, it effectively reinstated and reiterated all of [PAGCOR's] rights, privileges and authority granted under its Charter. Otherwise, Congress would have painstakingly enumerated the rights and privileges that it wants to withdraw, given that a franchise is a legislative grant of a special privilege to a person. Thus, the extension of [PAGCOR's] franchise under the same terms and conditions means a continuation of its tax exempt status with respect to its income from gaming operations. Moreover, all laws, rules and regulations, or parts thereof, which are inconsistent with the provisions of P.D. 1869, as amended, a special law, are considered repealed, amended and modified, consistent with Section 2 of R.A. No. 9487, thus:SECTION 2. Repealing Clause. – All laws, decrees, executive orders, proclamations, rules and regulations and other issuances, or parts thereof, which are inconsistent with the provisions of this Act, are hereby repealed, amended and modified.It is settled that where a statute is susceptible of more than one interpretation, the court should adopt such reasonable and beneficial construction which will render the provision thereof operative and effective, as well as harmonious with each other.
Given that [PAGCOR's] Charter is not deemed repealed or amended by R.A. No. 9337, [PAGCOR's] income derived from gaming operations is subject only to the five percent (5%) franchise tax, in accordance with P.D. 1869, as amended. With respect to [PAGCOR's] income from operation of other related services, the same is subject to income tax only. The five percent (5%) franchise tax finds no application with respect to [PAGCOR's] income from other related services, in view of the express provision of Section 14(5) of P.D. No. 1869, as amended, x x x.21 (Emphasis supplied)
The resolution of the instant petition is limited to clarifying the tax treatment of [PAGCOR's] income vis-a-vis our Decision dated March 15, 2011. This Decision (dated 10 December 2014) is not meant to expand our original Decision (dated 15 March 2011) by delving into new issues involving [PAGCOR's] contractees and licensees. For one, the latter are not parties to the instant case, and may not therefore stand to benefit or bear the consequences if this resolution. For another, to answer the fourth issue raised by [PAGCOR] relative to its contractees and licensees would be downright premature and iniquitous as the same would effectively countenance sidesteps to judicial process.22Bearing in mind the parties involved and the similarities of the issues submitted in the present case, we are now presented with the prospect of finally resolving the confusion caused by the amendments introduced by RA No. 9337 to the NIRC of 1997, and the subsequent issuance of RMC No. 33-2013, affecting the tax regime not only of PAGCOR but also its contractees and licensees under the existing laws and prevailing jurisprudence.
Sec. 13. Exemptions. –As previously recognized, the above-quoted provision providing for the said exemption was neither amended nor repealed by any subsequent laws (i.e. Section 1 of R.A. No. 9337 which amended Section 27(C) of the NIRC of 1997); thus, it is still in effect. Guided by the doctrinal teachings in resolving the case at bench, it is without a doubt that, like PAGCOR, its contractees and licensees remain exempted from the payment of corporate income tax and other taxes since the law is clear that said exemption inures to their benefit.
x x x x
(2) Income and other taxes. — (a) Franchise Holder: No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority.
(b) Others: The exemptions herein granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or other remuneration from the Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the Corporation or operator. (Emphasis and underlining supplied)
Endnotes:
1Rollo, pp. 32-34.
2 Id. at 4.
3 As amended by Republic Act No. 9487 also known as "AN ACT FURTHER AMENDING PRESIDENTIAL DECREE NO. 1869, OTHERWISE KNOWN AS PAGCOR CHARTER," duly approved on 20 June 2007.
4 1 November 2005.
5 660 Phil. 636 (2011).
6Rollo, pp. 15-24.
7 Id. at 5-11.
8 Id. at 94-106.
9 565 Phil. 255, 269-270 (2007).
10 Revenue Memorandum Circulars (RMC) – These issuances shall disseminate and embody pertinent and applicable portions, as well as amplifications of the rules, precedents, laws, regulations, opinions and other orders and directives issued by or administered by the Commissioner of Internal Revenue, and by offices and agencies other than the Bureau of Internal Revenue, for the information, guidance or compliance of revenue personnel [paragraph (f), Revenue Administrative Order No. 2-2001 issued on 22 October 2001].
10 Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance. The power to decide disputed assessment, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. (Emphasis supplied)
11 "AN ACT CREATING THE COURT OF TAX APPEALS" which took effect on 16 June 1954.
12 "AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF REPUBLIC ACTNO. 1 125, AS AMENDED, OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES" which took effect on 23 April 2004. This Act was a consolidation of S. No. 2712 and H. No. 6673 finally passed by the Senate and the House of Representatives on 8 December 2003 and 2 February 2004, respectively.
14 Supra note 9 at 270-271.
15 G.R. No. 210987, 24 November 2014, 741 SCRA 578.
16 Id. at 599-600 citing City of Manila v. Grecia-Cuerdo, G.R. No. 175723, 4 February 2014, 715 SCRA 182, 202. (Emphasis and underlining omitted)
17 Id. at 600.
18 G.R. No. 215427, 10 December 2014, 744 SCRA 712.
19PAGCOR v. The Bureau of Internal Revenue, et al., supra note 5.
20PAGCOR v. The Bureau of Internal Revenue, el al., supra note 18 at 724-725.
21 Id. at 726-729.
22 Id. at 731.
23Amores v. House of Representatives Electoral Tribunal, el al, 636 Phil. 600, 608 (2010) citing Twin Ace Holdings Corporation v. Rufina and Company, 523 Phil. 766, 777 (2006).
24Padua v. People, 581 Phil. 488, 501 (2008).