pagcor vs bir

7/24/2015 G.R.No.172087

http://www.lawphil.net/judjuris/juri2011/mar2011/gr_172087_2011.html 1/14

TodayisFriday,July24,2015

RepublicofthePhilippinesSUPREMECOURT

Manila

ENBANC

G.R.No.172087March15,2011

PHILIPPINEAMUSEMENTANDGAMINGCORPORATION(PAGCOR),Petitioner,vs.THEBUREAUOFINTERNALREVENUE(BIR),representedhereinbyHON.JOSEMARIOBUAG,inhisofficialcapacityasCOMMISSIONEROFINTERNALREVENUE,PublicRespondent,JOHNDOEandJANEDOE,whoarepersonsactingfor,inbehalf,orundertheauthorityofRespondent.PublicandPrivateRespondents.

DECISION

PERALTA,J.:

For resolution of this Court is the Petition for Certiorari and Prohibition1 with prayer for the issuance of aTemporary Restraining Order and/or Preliminary Injunction, dated April 17, 2006, of petitioner PhilippineAmusementandGamingCorporation(PAGCOR),seeking thedeclarationofnullityofSection1ofRepublicAct(R.A.)No.9337insofarasitamendsSection27(c)oftheNationalInternalRevenueCodeof1997,byexcludingpetitionerfromexemptionfromcorporateincometaxforbeingrepugnanttoSections1and10ofArticleIIIoftheConstitution.PetitionerfurtherseekstoprohibittheimplementationofBureauofInternalRevenue(BIR)RevenueRegulationsNo.162005forbeingcontrarytolaw.

Theundisputedfactsfollow.

PAGCORwascreatedpursuanttoPresidentialDecree(P.D.)No.1067A2onJanuary1,1977.Simultaneoustoits creation, P.D. No. 1067B3 (supplementing P.D. No. 1067A) was issued exempting PAGCOR from thepaymentofanytypeoftax,exceptafranchisetaxoffivepercent(5%)ofthegrossrevenue.4Thereafter,onJune2,1978,P.D.No.1399wasissuedexpandingthescopeofPAGCOR'sexemption.5

ToconsolidatethelawspertainingtothefranchiseandpowersofPAGCOR,P.D.No.18696wasissued.Section13thereofreadsasfollows:

Sec.13.Exemptions.xxx

(1)CustomsDuties,taxesandotherimpostsonimportations.Allimportationsofequipment,vehicles, automobiles, boats, ships, barges, aircraft and suchother gambling paraphernalia,including accessories or related facilities, for the sole and exclusive use of the casinos, theproperandefficientmanagementandadministrationthereofandsuchotherclubs,recreationoramusementplacestobeestablishedunderandbyvirtueofthisFranchiseshallbeexemptfrom the payment of duties, taxes and other imposts, including all kinds of fees, levies, orchargesofanykindornature.

Vessels and/or accessory ferry boats imported or to be imported by any corporation havingexistingcontractualarrangementswith theCorporation, for thesoleandexclusiveuseof thecasinoortobeusedtoservicetheoperationsandrequirementsofthecasino,shalllikewisebetotallyexempt from thepaymentofallcustomsduties, taxesandother imposts, includingallkindsoffees,levies,assessmentsorchargesofanykindornature,whetherNationalorLocal.

(2) Income and other taxes. (a) FranchiseHolder: No tax of any kind or form, income orotherwise,aswellas fees,charges,or leviesofwhatevernature,whetherNationalorLocal,shallbeassessedandcollectedunderthisFranchisefromtheCorporationnorshallanyformoftaxorchargeattachinanywaytotheearningsoftheCorporation,exceptaFranchiseTaxof five percent (5%)of the gross revenue or earnings derived by the Corporation from its

7/24/2015 G.R.No.172087


operationunder thisFranchise.Such taxshall bedueandpayablequarterly to theNationalGovernmentandshallbeinlieuofallkindsoftaxes,levies,feesorassessmentsofanykind,natureordescription, levied,established,orcollectedbyanymunicipal,provincialornationalgovernmentauthority.

(b) Others: The exemption herein granted for earnings derived from the operationsconducted under the franchise, specifically from the payment of any tax, income orotherwise,aswellasanyformofcharges,feesorlevies,shallinuretothebenefitofandextend to corporation(s), association(s), agency(ies), or individual(s) with whom theCorporation or operator has any contractual relationship in connection with theoperations of the casino(s) authorized to be conducted under this Franchise and tothosereceivingcompensationorotherremunerationfromtheCorporationasaresultofessential facilities furnished and/or technical services rendered to the Corporation oroperator.

The feeor remunerationof foreignentertainerscontractedby theCorporationoroperator inpursuanceofthisprovisionshallbefreeofanytax.

(3)DividendIncome.Notwithstandinganyprovisionof law to thecontrary, in theevent theCorporationshoulddeclareacashdividend incomecorresponding to theparticipationof theprivatesectorshall,asan incentiveto thebeneficiaries,besubjectonly toa final flat incomerate of ten percent (10%) of the regular income tax rates. The dividend income shall not insuchcasebeconsideredaspartofthebeneficiaries'taxableincomeprovided,however,thatsuchdividendincomeshallbetotallyexemptedfromincomeorotherformoftaxesifinvestedwithinsix(6)monthsfromthedatethedividendincomeisreceivedinthefollowing:

(a) operation of the casino(s) or investments in any affiliate activity thatwill ultimatelyredound to the benefit of the Corporation or any other corporation with whom theCorporation has any existing arrangements in connection with or related to theoperationsofthecasino(s)

(b)Governmentbonds,securities,treasurynotes,orgovernmentdebenturesor

(c)BOIregisteredorexportorientedcorporation(s).7

PAGCOR'staxexemptionwasremovedinJune1984throughP.D.No.1931,butitwaslaterrestoredbyLetterofInstructionNo.1430,whichwasissuedinSeptember1984.

On January 1, 1998, R.A. No. 8424,8 otherwise known as theNational Internal Revenue Code of 1997, tookeffect. Section 27 (c) ofR.A.No. 8424 provides that governmentownedand controlled corporations (GOCCs)shallpaycorporateincometax,exceptpetitionerPAGCOR,theGovernmentServiceandInsuranceCorporation,theSocialSecuritySystem,thePhilippineHealthInsuranceCorporation,andthePhilippineCharitySweepstakesOffice,thus:

(c)Governmentowned or Controlled Corporations, Agencies or Instrumentalities. The provisions of existingspecial general laws to the contrary notwithstanding, all corporations, agencies or instrumentalities ownedandcontrolled by the Government, except the Government Service and Insurance Corporation (GSIS), the SocialSecuritySystem(SSS), thePhilippineHealth InsuranceCorporation(PHIC), thePhilippineCharitySweepstakesOffice (PCSO),and thePhilippineAmusement andGamingCorporation (PAGCOR), shall pay such rate of taxupontheir taxable incomeasare imposedbythisSectionuponcorporationsorassociationsengaged insimilarbusiness,industry,oractivity.9

WiththeenactmentofR.A.No.933710onMay24,2005,certainsectionsoftheNationalInternalRevenueCodeof 1997wereamended.Theparticular amendment that is at issue in this case isSection1 ofR.A.No. 9337,whichamendedSection27 (c)of theNational InternalRevenueCodeof1997byexcludingPAGCORfrom theenumerationofGOCCsthatareexemptfrompaymentofcorporateincometax,thus:

(c)Governmentowned or Controlled Corporations, Agencies or Instrumentalities. The provisions of existingspecialgeneral laws to thecontrarynotwithstanding,all corporations,agencies,or instrumentalitiesownedandcontrolled by the Government, except the Government Service and Insurance Corporation (GSIS), the SocialSecurity System (SSS), the Philippine Health Insurance Corporation (PHIC), and the Philippine CharitySweepstakesOffice(PCSO),shallpaysuchrateoftaxupontheirtaxableincomeasareimposedbythisSectionuponcorporationsorassociationsengagedinsimilarbusiness,industry,oractivity.

Different groups came to this Court via petitions for certiorari and prohibition11 assailing the validity andconstitutionalityofR.A.No.9337,inparticular:

7/24/2015 G.R.No.172087


1)Section4,which imposesa10%ValueAddedTax (VAT)onsaleofgoodsandpropertiesSection5,whichimposesa10%VATonimportationofgoodsandSection6,whichimposesa10%VATonsaleofservicesanduseor leaseofproperties,allcontainauniformprovisoauthorizing thePresident,upon therecommendation of the Secretary of Finance, to raise the VAT rate to 12%. The said provisions wereallegedtobeviolativeofSection28(2),ArticleVIoftheConstitution,whichsectionvestsinCongresstheexclusiveauthoritytofixtherateoftaxes,andofSection1,ArticleIIIoftheConstitutionondueprocess,aswellasofSection26(2),ArticleVIoftheConstitution,whichsectionprovidesforthe"noamendmentrule"uponthelastreadingofabill

2) Sections 8 and 12 were alleged to be violative of Section 1, Article III of the Constitution, or theguaranteeofequalprotectionofthelaws,andSection28(1),ArticleVIoftheConstitutionand

3)othertechnicalaspectsofthepassageofthelaw,questioningthemanneritwaspassed.

OnSeptember1,2005,theCourtdismissedallthepetitionsandupheldtheconstitutionalityofR.A.No.9337.12

On the same date, respondent BIR issued Revenue Regulations (RR) No. 162005,13 specifically identifyingPAGCOR as one of the franchisees subject to 10% VAT imposed under Section 108 of the National InternalRevenueCodeof1997,asamendedbyR.A.No.9337.Thesaidrevenueregulation,inpart,reads:

Sec.4.1083.DefinitionsandSpecificRulesonSelectedServices.

xxxx

(h)xxx

GrossReceiptsofallotherfranchisees,otherthanthosecoveredbySec.119oftheTaxCode,regardlessofhowtheir franchiseesmayhavebeengranted,shallbesubject to the10%VAT imposedunderSec.108of theTaxCode. This includes, among others, the Philippine Amusement and Gaming Corporation (PAGCOR), and itslicenseesorfranchisees.

Hence,thepresentpetitionforcertiorari.

PAGCORraisesthefollowingissues:

I

WHETHER OR NOT RA 9337, SECTION 1 (C) IS NULL AND VOID AB INITIO FOR BEINGREPUGNANTTOTHEEQUALPROTECTION[CLAUSE]EMBODIEDINSECTION1,ARTICLEIIIOFTHE1987CONSTITUTION.

II

WHETHER OR NOT RA 9337, SECTION 1 (C) IS NULL AND VOID AB INITIO FOR BEINGREPUGNANTTOTHENONIMPAIRMENT[CLAUSE]EMBODIEDINSECTION10,ARTICLEIIIOFTHE1987CONSTITUTION.

III

WHETHER OR NOT RR 162005, SECTION 4.1083, PARAGRAPH (H) IS NULL AND VOID ABINITIOFORBEINGBEYONDTHESCOPEOFTHEBASICLAW,RA8424,SECTION108,INSOFARASTHESAIDREGULATIONIMPOSEDVATONTHESERVICESOFTHEPETITIONERASWELLASPETITIONERS LICENSEES OR FRANCHISEES WHEN THE BASIC LAW, AS INTERPRETED BYAPPLICABLEJURISPRUDENCE,DOESNOTIMPOSEVATONPETITIONERORONPETITIONERSLICENSEESORFRANCHISEES.14

TheBIR,initsComment15datedDecember29,2006,counters:

I

SECTION 1 OF R.A. NO. 9337 AND SECTION 13 (2) OF P.D. 1869 ARE BOTH VALID ANDCONSTITUTIONAL PROVISIONS OF LAWS THAT SHOULD BE HARMONIOUSLY CONSTRUEDTOGETHERSOASTOGIVEEFFECTTOALLOFTHEIRPROVISIONSWHENEVERPOSSIBLE.

II

SECTION1OFR.A.NO.9337ISNOTVIOLATIVEOFSECTION1ANDSECTION10,ARTICLEIIIOFTHE1987CONSTITUTION.

7/24/2015 G.R.No.172087


III

BIRREVENUEREGULATIONSAREPRESUMEDVALIDANDCONSTITUTIONALUNTILSTRICKENDOWNBYLAWFULAUTHORITIES.

TheOffice of theSolicitorGeneral (OSG), byway ofManifestation InLieuofComment,16 concurred with theargumentsofthepetitioner.ItaddedthatalthoughtheStateisfreetoselectthesubjectsoftaxationandthattheinequity resulting from singling out a particular class for taxation or exemption is not an infringement of theconstitutional limitation, a tax law must operate with the same force and effect to all persons, firms andcorporationsplacedinasimilarsituation.Furthermore,accordingtotheOSG,publicrespondentBIRexceededitsstatutoryauthoritywhenitenactedRRNo.162005,becausethelatter'sprovisionsarecontrarytothemandatesofP.D.No.1869inrelationtoR.A.No.9337.

ThemainissueiswhetherornotPAGCORisstillexemptfromcorporateincometaxandVATwiththeenactmentofR.A.No.9337.

Afteracarefulstudyofthepositionspresentedbytheparties,thisCourtfindsthepetitionpartlymeritorious.

Under Section 1 of R.A. No. 9337, amending Section 27 (c) of the National Internal Revenue Code of 1977,petitionerisnolongerexemptfromcorporateincometaxasithasbeeneffectivelyomittedfromthelistofGOCCsthat are exempt from it. Petitioner argues that suchomission is unconstitutional, as it is violative of its right toequalprotectionofthelawsunderSection1,ArticleIIIoftheConstitution:

Sec.1.Nopersonshallbedeprivedoflife,liberty,orpropertywithoutdueprocessoflaw,norshallanypersonbedeniedtheequalprotectionofthelaws.

InCityofManilav.Laguio,Jr.,17thisCourtexpoundedthemeaningandscopeofequalprotection,thus:

Equal protection requires that all persons or things similarly situated should be treated alike, both as to rightsconferredandresponsibilitiesimposed.Similarsubjects,inotherwords,shouldnotbetreateddifferently,soastogiveunduefavortosomeandunjustlydiscriminateagainstothers.Theguaranteemeansthatnopersonorclassofpersonsshallbedeniedthesameprotectionoflawswhichisenjoyedbyotherpersonsorotherclassesinlikecircumstances. The "equal protection of the laws is a pledge of the protection of equal laws." It limitsgovernmental discrimination. The equal protection clause extends to artificial persons but only insofar as theirpropertyisconcerned.

xxxx

Legislativebodiesareallowedtoclassifythesubjectsoflegislation.Iftheclassificationisreasonable,thelawmayoperateonlyonsomeandnotall of thepeoplewithoutviolating theequalprotectionclause.Theclassificationmust,asanindispensablerequisite,notbearbitrary.Tobevalid,itmustconformtothefollowingrequirements:

1)Itmustbebasedonsubstantialdistinctions.

2)Itmustbegermanetothepurposesofthelaw.

3)Itmustnotbelimitedtoexistingconditionsonly.

4)Itmustapplyequallytoallmembersoftheclass.18

It isnotcontestedthatbeforetheenactmentofR.A.No.9337,petitionerwasoneofthefiveGOCCsexemptedfrompaymentofcorporateincometaxasshowninR.A.No.8424,Section27(c)ofwhich,reads:

(c) Governmentowned or Controlled Corporations, Agencies or Instrumentalities. The provisions of existingspecialorgenerallawstothecontrarynotwithstanding,allcorporations,agenciesorinstrumentalitiesownedandcontrolled by the Government, except the Government Service and Insurance Corporation (GSIS), the SocialSecuritySystem(SSS), thePhilippineHealth InsuranceCorporation(PHIC), thePhilippineCharitySweepstakesOffice (PCSO), and thePhilippineAmusement andGamingCorporation (PAGCOR), shall pay such rate of taxupontheir taxable incomeasare imposedbythisSectionuponcorporationsorassociationsengaged insimilarbusiness,industry,oractivity.19

Aperusalof the legislativerecordsof theBicameralConferenceMeetingof theCommitteeonWaysonMeansdatedOctober27,1997wouldshowthattheexemptionofPAGCORfromthepaymentofcorporateincometaxwasduetotheacquiescenceoftheCommitteeonWaysonMeanstotherequestofPAGCORthatitbeexemptfromsuchtax.20TherecordsoftheBicameralConferenceMeetingreveal:

HON.R.DIAZ.Theotherthing,sir,isweInoticedweimposedataxonlottowinnings.

7/24/2015 G.R.No.172087


CHAIRMANENRILE.Walana,tinanggalnanaminyon.

HON.R.DIAZ.Tinanggalnabanatinyon?

CHAIRMANENRILE.Oo.

HON.R.DIAZ.Because Iwaswonderingwhetherwecovered the taxon Whetheronauniversalbasis,weincludedataxoncockfightingwinnings.

CHAIRMANENRILE.No,weremovedthe

HON.R.DIAZ.I...(inaudible)natinyonglotto?

CHAIRMANENRILE.PatiPAGCORtinanggaluponrequest.

CHAIRMANJAVIER.Yeah,PhilippineInsuranceCommission.

CHAIRMAN ENRILE. Philippine Insurance Health, health ba. Yon ang request ng Chairman, I will accept.(laughter)PagPagibigyon,maliliitnasataoyon.

HON.ROXAS.Mr.Chairman,IwonderifintherevenuegainersifwefactoredinanamountthatwouldreflecttheVATandothersalestaxes

CHAIRMANENRILE.No,weretalkingofthismeasureonly.Wewillnot(discontinued)

HON.ROXAS.No,no,no,no,fromthearisingfromtheexemption.Assumingthatwhenwereleasethemoneyintothehandsofthepublic,theywillnotusethattoforwallpaper.Theywillspendthateh,Mr.Chairman.Sowhentheyspendthat

CHAIRMANENRILE.TheresaVAT.

HON.ROXAS.TherewillbeaVATandtherewillbeothersalestaxesno. Is thereaquantification?Isthereanapproximation?

CHAIRMANJAVIER.Notanything.

HON. ROXAS. So, in effect, we have sterilized that entire seven billion. In effect, it is not circulating in theeconomywhichisunrealistic.

CHAIRMANENRILE.Itdoes,itdoes,becausethisistakenandspentbygovernment,somebodyreceivesitintheformofwagesandsuppliesandotherservicesandothergoods.Theyarenotbeingtakenfromthepublicandstoredinavault.

CHAIRMANJAVIER.That7.7lossbecauseoftaxexemption.Thatwillbeextraincomeforthetaxpayers.

HON.ROXAS.Precisely,sotheywillbespendingit.21

The discussion above bears out that underR.A.No. 8424, the exemption of PAGCOR from paying corporateincometaxwasnotbasedonaclassificationshowingsubstantialdistinctionswhichmakeforrealdifferences,butto reiterate, the exemptionwas granted upon the request of PAGCOR that it be exempt from the payment ofcorporateincometax.

With thesubsequentenactmentofR.A.No.9337,amendingR.A.No.8424,PAGCORhasbeenexcludedfromthe enumeration ofGOCCs that are exempt from paying corporate income tax. The records of the BicameralConferenceMeetingdatedApril18,2005,oftheCommitteeontheDisagreeingProvisionsofSenateBillNo.1950andHouseBillNo.3555,showthatitisthelegislativeintentthatPAGCORbesubjecttothepaymentofcorporateincometax,thus:

THECHAIRMAN(SEN.RECTO).Yes,Osmea,theproponentoftheamendment.

SEN.OSMEA.Yeah.Mr.Chairman,oneofthereasonswhywe'reevenconsideringthisVATbill iswewanttoshow the world who our creditors, that we are increasing official revenues that go to the national budget.Unfortunatelytoday,Pagcorisunofficial.

Now, in2003, I tookaquick look thismorning,Pagcorhadanet incomeof9.7billionafterpayingsomesmalltaxesthattheyaresubjectedto.Ofthe9.7billion,theyclaimtheyremittedtonationalgovernmentsevenbillion.Pagkatapos,thereareotherspecificremittancesliketothePhilippineSportsCommission,etc.,asmandatedbyvariouslaws,andthenabout400milliontothePresident'sSocialFund.Butallinall,theirnetprofittodayshould

7/24/2015 G.R.No.172087


beabout12billion.That'swhyIamquestioningthistwobillion.Becausewhileessentiallytheyclaimthatthemoneygoestogovernment,andIwillacceptthatjustforthesakeofargument.Itdoesnotpassthroughtheappropriationprocess.AndI thinkthatat least ifwecancapture35percentor32percentthroughthebudgetaryprocess,first, it isreflectedinourofficial incomeofgovernmentwhichisappliedtothenational budget, and secondly, it goes through what is constitutionally mandated as Congressappropriating and defining where themoney is spent and not through a board of directors that hasabsolutelynoaccountability.

REP.PUENTEBELLA.Well,withallduerespect,Mr.Chairman,followuplang.

ThereiswisdominthecommentsofmygoodfriendfromCebu,SenatorOsmea.

SEN.OSMEA.AndNegros.

REP.PUENTEBELLA.AndNegrosatthesametimeayKasimanwa.ButIwouldnotwanttoputmyfriendsfromthe Department of Finance in a difficult position, but may we know your comments on this knowing that asSenatorOsmeajustmentioned,hesaid,"Iacceptthatthatalotofitisgoingtospendingforbasicservices,"youknow,goingtomost,Ithink,supposedlyalotormostofitshouldgotogovernmentspending,socialservicesandthelike.Whatisyourcommentonthis?Thisisgoingtoaffectalotofservicesonthegovernmentside.

THECHAIRMAN(REP.LAPUS).Mr.Chair,Mr.Chair.

SEN.OSMEA.Itgoesfrompockettotheother,Monico.

REP.PUENTEBELLA.Iknowthat.ButIwantedtoaskthem,Mr.Senator,becauseyoumayhaveyourownprejudgmentonthisandIdon'tblameyou.Idon'tblameyou.AndIknowyouhaveyourownresearch.Butwillthisnotaffectalot,thedisbursementsonsocialservicesandother?

REP.LOCSIN.Mr.Chairman.Mr.Chairman, if I canadd to thatquestionalso.Wouldn't itbeeasier foryou toexplain to, say, foreign creditors, how do you explain to them that if there is a fiscal gap some of our richestcorporationshas[been]spared[from]taxationbythegovernmentwhichisonerichsourceofrevenues.Now,whydoyousave,whydoyousparecertaingovernmentcorporationsonthat,likePagcor?So,woulditbeeasierforyoutomakeanargumentifeverythingwasexposedtotaxation?

REP.TEVES.Mr.Chair,please.

THECHAIRMAN(REP.LAPUS).CanweasktheDOFtorespondtothosebeforewecallCongressmanTeves?

MR.PURISIMA.Thankyou,Mr.Chair.

Yes,fromdefinitelyimprovingthecollection,itwillhelpusbecauseitwillthenenterasanofficialrevenuealthoughwhendividendsdeclareitalsogoesinasotherincome.(sic)

xxxx

REP.TEVES.Mr.Chairman.

xxxx

THECHAIRMAN(REP.LAPUS).CongressmanTeves.

REP.TEVES.Yeah.PagcoriscontrolledunderSection27,thatisonincometax.Now,wearetalkinghereonvalueaddedtax.Doyoumeantosaywearegoingtoamenditfromincometaxtovalueaddedtax,asfarasPagcorisconcerned?

THECHAIRMAN(SEN.RECTO).No.WearejustamendingthatsectionwithregardtotheexemptionfromincometaxofPagcor.

xxxx

REP.NOGRALES.Mr.Chairman,Mr.Chairman.Mr.Chairman.

THECHAIRMAN(REP.LAPUS).CongressmanNograles.

REP. NOGRALES. Just a point of inquiry from the Chair. What exactly are the functions of Pagcor that areVATable?WhatwillweVATinPagcor?

THECHAIRMAN(REP.LAPUS).Thisisonownincometax.ThisisPagcorincometax.

7/24/2015 G.R.No.172087


REP.NOGRALES.No,that'swhy.AnongivaVatnatinsakanya.Saleofwhat?

xxxx

REP.VILLAFUERTE.Mr.Chairman,myquestionis,whatareweVATingPagcorwith,isitthe...

REP.NOGRALES.Mr.Chairman,thisisasecretagreementorthewaytheycrafttheircontract,whichbasis?

THECHAIRMAN(SEN.RECTO).CongressmanNograles, theSenateversiondoesnotdiscussaVATonPagcorbutitjusttakesawaytheirexemptionfromnonpaymentofincometax.22

Taxation is the rule and exemption is the exception.23 The burden of proof rests upon the party claimingexemption to prove that it is, in fact, covered by the exemption so claimed.24 As a rule, tax exemptions areconstrued strongly against the claimant.25 Exemptions must be shown to exist clearly and categorically, andsupportedbyclearlegalprovision.26

Inthiscase,PAGCORfailedtoprovethatitisstillexemptfromthepaymentofcorporateincometax,consideringthat Section 1 of R.A. No. 9337 amended Section 27 (c) of the National Internal Revenue Code of 1997 byomitting PAGCOR from the exemption. The legislative intent, as shown by the discussions in the BicameralConference Meeting, is to require PAGCOR to pay corporate income tax hence, the omission or removal ofPAGCORfromexemptionfromthepaymentofcorporateincometax.Itisabasicpreceptofstatutoryconstructionthat the express mention of one person, thing, act, or consequence excludes all others as expressed in thefamiliarmaximexpressiouniusestexclusioalterius.27Thus,theexpressmentionoftheGOCCsexemptedfrompaymentofcorporateincometaxexcludesallothers.Notbeingexcepted,petitionerPAGCORmustberegardedascomingwithin thepurviewof thegeneral rule thatGOCCsshallpaycorporate income tax,expressed in themaxim:exceptiofirmatregulamincasibusnonexceptis.28

PAGCORcannotfindsupport intheequalprotectionclauseof theConstitution,asthe legislativerecordsof theBicameral Conference Meeting dated October 27, 1997, of the Committee on Ways and Means, show thatPAGCORsexemptionfrompaymentofcorporateincometax,asprovidedinSection27(c)ofR.A.No.8424,ortheNationalInternalRevenueCodeof1997,wasnotmadepursuanttoavalidclassificationbasedonsubstantialdistinctionsand theother requirementsofa reasonableclassificationby legislativebodies,so that the lawmayoperateonlyonsome,andnotall,withoutviolatingtheequalprotectionclause.Thelegislativerecordsshowthatthebasisof thegrantofexemption toPAGCOR fromcorporate income taxwasPAGCORsown request tobeexempted.

Petitioner further contends that Section 1 (c) of R.A. No. 9337 is null and void ab initio for violating the nonimpairmentclauseoftheConstitution.Petitioneraversthatlawsformpartof,andisreadinto,thecontractevenwithout the parties expressly saying so. Petitioner states that the private parties/investors transacting with itconsideredthe taxexemptions,which inure to theirbenefit,as themainconsiderationand inducement for theirdecisiontotransact/investwithit.PetitionerarguesthatthewithdrawalofitsexemptionfromcorporateincometaxbyR.A.No.9337hastheeffectofchangingthemainconsiderationandinducementforthetransactionsofprivatepartieswithitthus,theamendatoryprovisionisviolativeofthenonimpairmentclauseoftheConstitution.

Petitionerscontentionlacksmerit.

Thenonimpairmentclause iscontained inSection10,Article IIIof theConstitution,whichprovides thatno lawimpairingtheobligationofcontractsshallbepassed.Thenonimpairmentclauseislimitedinapplicationtolawsthatderogatefromprioractsorcontractsbyenlarging,abridgingorinanymannerchangingtheintentionoftheparties.29Thereisimpairmentifasubsequentlawchangesthetermsofacontractbetweentheparties,imposesnewconditions,dispenseswiththoseagreeduponorwithdrawsremediesfortheenforcementoftherightsoftheparties.30

As regards franchises, Section 11, Article XII of theConstitution31 provides that no franchise or right shall begrantedexceptunder thecondition that itshallbesubject toamendment,alteration,or repealby theCongresswhenthecommongoodsorequires.32

InManilaElectricCompany v.Provinceof Laguna,33 theCourt held that a franchise partakes the nature of agrant,which isbeyondthepurviewof thenonimpairmentclauseof theConstitution.34Thepertinentportionofthecasestates:

WhiletheCourthas,nottooinfrequently,referredtotaxexemptionscontainedinspecialfranchisesasbeinginthe nature of contracts and a part of the inducement for carrying on the franchise, these exemptions,nevertheless,arefarfrombeingstrictlycontractualinnature.Contractualtaxexemptions,intherealsenseofthetermandwherethenonimpairmentclauseoftheConstitutioncanrightlybeinvoked,arethoseagreedtobythe

7/24/2015 G.R.No.172087


taxingauthorityincontracts,suchasthosecontainedingovernmentbondsordebentures,lawfullyenteredintobythemunderenablinglawsinwhichthegovernment,actinginitsprivatecapacity,shedsitscloakofauthorityandwaives itsgovernmental immunity.Truly, taxexemptionsof thiskindmaynotbe revokedwithout impairing theobligationsofcontracts.Thesecontractualtaxexemptions,however,arenottobeconfusedwithtaxexemptionsgrantedunder franchises.A franchise partakes the nature of a grantwhich is beyond the purviewof the nonimpairmentclauseof theConstitution. Indeed,ArticleXII,Section11,of the1987Constitution, like itsprecursorprovisionsinthe1935andthe1973Constitutions,isexplicitthatnofranchisefortheoperationofapublicutilityshallbegrantedexceptundertheconditionthatsuchprivilegeshallbesubjecttoamendment,alterationorrepealbyCongressasandwhenthecommongoodsorequires.35

In this case, PAGCOR was granted a franchise to operate and maintain gambling casinos, clubs and otherrecreationoramusementplaces,sports,gamingpools,i.e.,basketball,football,lotteries,etc.,whetheronlandorsea, within the territorial jurisdiction of the Republic of the Philippines.36 Under Section 11, Article XII of theConstitution, PAGCORs franchise is subject to amendment, alteration or repeal by Congress such as theamendment underSection 1 ofR.A.No. 9377.Hence, the provision inSection 1 ofR.A.No. 9337, amendingSection27(c)ofR.A.No.8424bywithdrawingtheexemptionofPAGCORfromcorporateincometax,whichmayaffectanybenefitstoPAGCORstransactionswithprivateparties,isnotviolativeofthenonimpairmentclauseoftheConstitution.

AnentthevalidityofRRNo.162005,theCourtholdsthattheprovisionsubjectingPAGCORto10%VATisinvalidforbeingcontrarytoR.A.No.9337.NowhereinR.A.No.9337is itprovidedthatpetitionercanbesubjectedtoVAT. R.A. No. 9337 is clear only as to the removal of petitioner's exemption from the payment of corporateincometax,whichwasalreadyaddressedabovebythisCourt.

AspointedoutbytheOSG,R.A.No.9337itselfexemptspetitionerfromVATpursuant toSection7(k) thereof,whichreads:

Sec.7.Section109ofthesameCode,asamended,isherebyfurtheramendedtoreadasfollows:

Section 109. Exempt Transactions. (1) Subject to the provisions of Subsection (2) hereof, the followingtransactionsshallbeexemptfromthevalueaddedtax:

xxxx

(k) Transactions which are exempt under international agreements to which the Philippines is a signatory orunderspeciallaws,exceptPresidentialDecreeNo.529.37

PetitionerisexemptfromthepaymentofVAT,becausePAGCORscharter,P.D.No.1869,isaspecial lawthatgrantspetitionerexemptionfromtaxes.

Moreover, the exemption of PAGCOR from VAT is supported by Section 6 of R.A. No. 9337, which retainedSection108(B)(3)ofR.A.No.8424,thus:

[R.A.No.9337],SEC.6.Section108ofthesameCode(R.A.No.8424),asamended,isherebyfurtheramendedtoreadasfollows:

SEC.108.ValueAddedTaxonSaleofServicesandUseorLeaseofProperties.

(A)RateandBaseofTax.Thereshallbelevied,assessedandcollected,avalueaddedtaxequivalenttotenpercent (10%) of gross receipts derived from the sale or exchange of services, including the use or lease ofproperties:xxx

xxxx

(B)TransactionsSubject toZeroPercent (0%)Rate.The followingservicesperformed in thePhilippinesbyVATregisteredpersonsshallbesubjecttozeropercent(0%)rate

xxxx

(3)ServicesrenderedtopersonsorentitieswhoseexemptionunderspeciallawsorinternationalagreementstowhichthePhilippinesisasignatoryeffectivelysubjectsthesupplyofsuchservicestozeropercent(0%)rate

xxxx38

Aspointedoutbypetitioner,althoughR.A.No.9337introducedamendmentstoSection108ofR.A.No.8424byimposingVATonotherservicesnotpreviouslycovered, itdidnotamendtheportionofSection108(B)(3)thatsubjects to zero percent rate services performed by VATregistered persons to persons or entities whose

7/24/2015 G.R.No.172087


exemption under special laws or international agreements to which the Philippines is a signatory effectivelysubjectsthesupplyofsuchservicesto0%rate.

Petitioner'sexemptionfromVATunderSection108(B)(3)ofR.A.No.8424hasbeenthoroughlyandextensivelydiscussed inCommissioner of Internal Revenue v.Acesite (Philippines) Hotel Corporation.39 Acesite was theowner and operator of the Holiday Inn Manila Pavilion Hotel. It leased a portion of the hotels premises toPAGCOR.ItincurredVATamountingtoP30,152,892.02fromitsrentalincomeandsaleoffoodandbeveragestoPAGCORfromJanuary1996toApril1997.AcesitetriedtoshiftthesaidtaxestoPAGCORbyincorporatingitintheamountassessedtoPAGCOR.However,PAGCORrefusedtopaythetaxesbecauseofitstaxexemptstatus.PAGCORpaidonlytheamountduetoAcesiteminusVATinthesumofP30,152,892.02.AcesitepaidVATintheamountofP30,152,892.02totheCommissionerofInternalRevenue,fearingthelegalconsequencesofitsnonpayment.InMay1998,AcesitesoughttherefundoftheamountitpaidasVATonthegroundthatitstransactionwithPAGCORwassubjecttozerorateasitwasrenderedtoataxexemptentity.TheCourtruledthatPAGCORandAcesitewerebothexemptfrompayingVAT,thus:

xxxx

PAGCORisexemptfrompaymentofindirecttaxes

ItisundisputedthatP.D.1869,thechartercreatingPAGCOR,grantsthelatteranexemptionfromthepaymentoftaxes.Section13ofP.D.1869pertinentlyprovides:

Sec.13.Exemptions.

xxxx

(2)Incomeandothertaxes.(a)FranchiseHolder:Notaxofanykindorform,incomeorotherwise,aswellasfees,chargesorleviesofwhatevernature,whetherNationalorLocal,shallbeassessedandcollectedunderthisFranchise from theCorporation nor shall any form of tax or charge attach in anyway to the earnings of theCorporation, except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by theCorporationfromitsoperationunderthisFranchise.SuchtaxshallbedueandpayablequarterlytotheNationalGovernment and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature ordescription,levied,establishedorcollectedbyanymunicipal,provincial,ornationalgovernmentauthority.

(b)Others: The exemptions herein granted for earnings derived from the operations conducted under thefranchisespecificallyfromthepaymentofanytax,incomeorotherwise,aswellasanyformofcharges,feesorlevies,shall inuretothebenefitofandextendtocorporation(s),association(s),agency(ies),or individual(s)withwhom the Corporation or operator has any contractual relationship in connection with the operations of thecasino(s) authorized to be conducted under this Franchise and to those receiving compensation or otherremunerationfromtheCorporationoroperatorasaresultofessentialfacilitiesfurnishedand/ortechnicalservicesrenderedtotheCorporationoroperator.

Petitionercontends that theabove taxexemptionrefersonly toPAGCOR'sdirect tax liabilityandnot to indirecttaxes,liketheVAT.

Wedisagree.

AclosescrutinyoftheaboveprovisosclearlygivesPAGCORablanketexemptiontotaxeswithnodistinctiononwhetherthetaxesaredirectorindirect.WeareonewiththeCArulingthatPAGCORisalsoexemptfromindirecttaxes,likeVAT,asfollows:

Under the above provision [Section 13 (2) (b) of P.D. 1869], the term "Corporation" or operator refers toPAGCOR.AlthoughthelawdoesnotspecificallymentionPAGCOR'sexemptionfromindirecttaxes,PAGCORisundoubtedlyexempt fromsuch taxesbecause the lawexempts from taxespersonsorentities contractingwithPAGCORincasinooperations.Although,differentlyworded,theprovisionclearlyexemptsPAGCORfromindirecttaxes.Infact, itgoesonestepfurtherbygrantingtaxexemptstatustopersonsdealingwithPAGCORincasinooperations.TheunmistakableconclusionisthatPAGCORisnotliablefortheP30,152,892.02VATandneitherisAcesite as the latter is effectively subject to zero percent rate under Sec. 108 B (3), R.A. 8424. (Emphasissupplied.)

Indeed,byextendingtheexemptiontoentitiesorindividualsdealingwithPAGCOR,thelegislatureclearlygrantedexemptionalso fromindirect taxes. Itmustbenotedthat the indirect taxofVAT,as in the instantcase,canbeshiftedorpassedtothebuyer,transferee,or lesseeofthegoods,properties,orservicessubjecttoVAT.Thus,byextendingthetaxexemptiontoentitiesorindividualsdealingwithPAGCORincasinooperations,itisexemptingPAGCORfrombeingliabletoindirecttaxes.

ThemannerofchargingVATdoesnotmakePAGCORliabletosaidtax.

7/24/2015 G.R.No.172087


ItistruethatVATcaneitherbeincorporatedinthevalueofthegoods,properties,orservicessoldorleased,inwhichcaseitiscomputedas1/11ofsuchvalue,orchargedasanadditional10%tothevalue.Verily,thesellerorlessorhastheoptiontofolloweitherwayinchargingitsclientsandcustomer.Intheinstantcase,Acesitefollowedthelattermethod,thatis,charginganadditional10%ofthegrosssalesandrentals.Bethatasitmay,theuseofeithermethod,and inparticular, the firstmethod,doesnotdenigrate the fact thatPAGCOR isexempt fromanindirecttax,likeVAT.

VATexemptionextendstoAcesite

Thus,whileitwasproperforPAGCORnottopaythe10%VATchargedbyAcesite,thelatterisnotliableforthepayment of it as it is exempt in this particular transaction by operation of law to pay the indirect tax. SuchexemptionfallswithintheformerSection102(b)(3)ofthe1977TaxCode,asamended(nowSec.108[b][3]ofR.A.8424),whichprovides:

Section102.Valueaddedtaxonsaleofservices.(a)RateandbaseoftaxThereshallbelevied,assessedandcollected,avalueadded taxequivalent to10%ofgross receiptsderivedbyanypersonengaged in thesaleofservicesxxxProvided,thatthefollowingservicesperformedinthePhilippinesbyVATregisteredpersonsshallbesubjectto0%.

xxxx

(3)ServicesrenderedtopersonsorentitieswhoseexemptionunderspeciallawsorinternationalagreementstowhichthePhilippines isasignatoryeffectivelysubjects thesupplyofsuchservicestozero(0%)rate(emphasissupplied).

TherationalefortheexemptionfromindirecttaxesprovidedforinP.D.1869andtheextensionofsuchexemptiontoentitiesor individualsdealingwithPAGCOR in casinooperationsarebest elucidated from the1987caseofCommissionerofInternalRevenuev.JohnGotamco&Sons,Inc.,wheretheabsolutetaxexemptionoftheWorldHealth Organization (WHO) upon an international agreement was upheld. We held in said case that theexemptionofcontracteeWHOshouldbeimplementedtomeanthattheentityorpersonexemptisthecontractoritself who constructed the building owned by contractee WHO, and such does not violate the rule that taxexemptionsarepersonalbecausethemanifestintentionoftheagreementistoexemptthecontractorsothatnocontractor'staxmaybeshiftedtothecontracteeWHO.Thus,theprovisoinP.D.1869,extendingtheexemptiontoentitiesor individualsdealingwithPAGCOR incasinooperations, isclearly toproscribeany indirect tax, likeVAT,thatmaybeshiftedtoPAGCOR.40

Although the basis of the exemption of PAGCOR and Acesite from VAT in the case of The Commissioner ofInternal Revenue v. Acesite (Philippines) Hotel Corporation was Section 102 (b) of the 1977 Tax Code, asamended,whichsectionwasretainedasSection108(B)(3)inR.A.No.8424,41itisstillapplicabletothiscase,sincetheprovisionrelieduponhasbeenretainedinR.A.No.9337.42 1 a v v p h i1

It issettledrulethat incaseofdiscrepancybetweenthebasic lawandaruleorregulation issuedto implementsaidlaw,thebasiclawprevails,becausethesaidruleorregulationcannotgobeyondthetermsandprovisionsofthebasiclaw.43RRNo.162005,therefore,cannotgobeyondtheprovisionsofR.A.No.9337.SincePAGCORisexemptfromVATunderR.A.No.9337,theBIRexceededitsauthorityinsubjectingPAGCORto10%VATunderRRNo.162005hence,thesaidregulatoryprovisionisherebynullified.

WHEREFORE,thepetitionisPARTLYGRANTED.Section1ofRepublicActNo.9337,amendingSection27(c)ofthe National Internal Revenue Code of 1997, by excluding petitioner Philippine Amusement and GamingCorporation from theenumerationofgovernmentownedandcontrolledcorporationsexempted fromcorporateincometaxisvalidandconstitutional,whileBIRRevenueRegulationsNo.162005insofarasitsubjectsPAGCORto10%VAT isnullandvoid forbeingcontrary to theNational InternalRevenueCodeof1997,asamendedbyRepublicActNo.9337.

Nocosts.

SOORDERED.

DIOSDADOM.PERALTAAssociateJustice

WECONCUR:

RENATOC.CORONAChiefJustice

7/24/2015 G.R.No.172087


ANTONIOT.CARPIOAssociateJustice

CONCHITACARPIOMORALESAssociateJustice

PRESBITEROJ.VELASCO,JR.AssociateJustice

OnOfficialLeaveANTONIOEDUARDOB.NACHURA

AssociateJustice

TERESITAJ.LEONARDODECASTROAssociateJustice

OnOfficialLeaveARTUROD.BRIONAssociateJustice

LUCASP.BERSAMINAssociateJustice

MARIANOC.DELCASTILLOAssociateJustice

ROBERTOA.ABADAssociateJustice

MARTINS.VILLARAMA,JR.AssociateJustice

JOSEPORTUGALPEREZAssociateJustice

JOSECATRALMENDOZAAssociateJustice

MA.LOURDESP.A.SERENOAssociateJustice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the aboveDecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriteroftheopinionoftheCourt.

RENATOC.CORONAChiefJustice

Footnotes

*Onofficialleave.

1UnderRule65oftheRulesofCourt.

2CREATINGTHEPHILIPPINEAMUSEMENTSANDGAMINGCORPORATION,DEFINING ITSPOWERSANDFUNCTIONS,PROVIDINGFUNDSTHEREFOR,ANDFOROTHERPURPOSES.

3 GRANTING THE PAGCOR A FRANCHISE TO ESTABLISH, OPERATE AND MAINTAIN GAMBLINGCASINOSONLANDORWATERWITHINTHETERRITORIALJURISDICTIONOFTHEREPUBLICOFTHEPHILIPPINES.

4Section4ofP.D.No.1067B,provides:

Section4.Exemptions.

(1)Duties,taxesandotherimpostsonimportations.Allimportationsofequipment,vehicles,boats,ships,barges,aircraftandothergamblingparaphernaliaorfacilitiesforthesaleandexclusiveuseofthecasinos,clubsandotherrecreationoramusementplacestobeestablishedunderandbyvirtueofthisFranchiseshallbeexemptfromthepaymentofduties,taxesandotherimports.

(2) Incomeandothertaxes.No incomeoranyother formshallbeassessedandcollectedunderthisFranchisefromthefranchiseholdernorshallanyformoftaxorchargeattachinanywaytotheearningsofthefranchiseholder,EXCEPTaFranchiseTaxoffivepercent(5%)ofthegrossrevenueorearningsderivedbythefranchiseholderfromitsoperationunderthisFranchise.Suchtaxshallbedueandpayablequarterly to theNationalGovernmentandshallbe in lieuofall taxesofanykind,nature or description, levied, established, or collected by any municipal, provincial or Nationalauthority.(Emphasissupplied.)

5Section3,P.D.No.1399,inpart,reads:

7/24/2015 G.R.No.172087


Section3.Section4ofPresidentialDecreeNo.1067Bisherebyamendedtoreadasfollows:

Section4.Exemptions.xxx

(1)Duties,taxesandotherimpostsonimportation.xxx

(2)Incomeandothertaxes.

(a)FranchiseHolder:Notaxofanykindorform,incomeorotherwise,aswellasfees,charges,orleviesofwhatevernature,shallbeassessedandcollectedunderthisFranchisefromtheFranchiseHoldernorshallanyformoftaxorchargeattachinanywaytotheearningsoftheFranchiseHolder,except a Franchise Tax of five percent (5 %) of the gross revenue or earnings derived by theFranchiseHolderformitsoperationunderthisFranchise.SuchtaxshallbedueandpayabletotheNationalGovernmentandshallbeinlieuofalltaxes,levies,feesorassessmentsofanykind,natureordescription,levied,established,orcollectedbyanymunicipal,provincialornationalauthority.

(b)Others:Theexemptionhereingrantedforearningsderivedfromtheoperationsconductedunderthefranchise,specificallyfromthepaymentofanytax, incomeorotherwise,aswellasanyformofcharges, fees or levies, shall inure to the benefit of and extend to corporation/s, association/s,agency/ies, or individual/swithwhom theFranchisehasany contractual relationship in connectionwith the operations of the casino/s authorized to be conducted under the franchise and to thosereceiving compensation or other remuneration from the Franchise Holder as a result of essentialfacilitiesfurnishedand/ortechnicalservicesrenderedtotheFranchiseHolder.(Emphasissupplied.)

6CONSOLIDATINGANDAMENDINGPRESIDENTIALDECREENOS.1067A,1067B,1067C,1399AND1632,RELATIVETOTHEFRANCHISEANDPOWERSOFTHEPHILIPPINEAMUSEMENTANDGAMINGCORPORATION(PAGCOR).

7Emphasissupplied.

8ANACTAMENDINGTHENATIONAL INTERNALREVENUECODE,ASAMENDED,ANDFOROTHERPURPOSES.

9Emphasissupplied.

10ANACTAMENDINGSECTIONS27,28,34,106.107,108,109,110,111,112,113,114,116,117,119,121, 148, 151, 236, 237, AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, ASAMENDED,ANDFOROTHERPURPOSES.

11G.R.Nos.168056,168207,168461,168463and168730.

12SeeAbakadaGuroPartyListv.Ermita,506Phil.1(2005).

13 Revenue Regulations No. 162005 states: "Pursuant to the provisions of Secs. 244 and 245 of theNationalInternalRevenueCodeof1997,aslastamendedbyRepublicActNo.9337(TaxCode),inrelationtoSec.23ofthesaidRepublicAct,theseRegulationsareherebypromulgatedtoimplementTitleIVoftheTaxCode,aswellasotherprovisionspertainingtoValueAddedTax(VAT).TheseRegulationssupersedesRevenueRegulationsNo.142005datedJune22,2005."

14Rollo,pp.1819318319.

15Id.at230260.

16Id.at190222.

17495Phil.289(2005).

18Id.at326,citingIchongv.Hernandez,101Phil.1155(1957),16BAmJur.2d779299,citingStateofMissouriexrel.Gainesv.Canada,305U.S.337,59S.Ct.232,83L.Ed.208(1938), reh'gdenied,305U.S.676,59S.Ct.356,83L.Ed.437(1939)andmandateconformedto,344Mo.1238,131S.W.2d217(1939),Romerv.Evans,517U.S.620,116S.Ct.1620,134L.Ed.2d855,109Ed.LawRep.539,70FairEmpl.Prac.Cas.(BNA)1180,68Empl.Prac.Dec.(CCH)44013(1996),Walkerv.BoardofSupervisorsofMonroeCounty,224Miss.801,81So.2d225(1955),cert.denied,350U.S.887,76S.Ct.142,100L.Ed.782(1955)Preislerv.Calcaterra,362Mo.662,243S.W.2d62(1951)Smith,Bell&Co.v.Natividad,40Phil.136,145(1919):Nuezv.Sandiganbayan,197Phil.407(1982)Cruz,IsaganiA.,ConstitutionalLaw125(1998)andPeoplev.Cayat,68Phil.12(1939).

7/24/2015 G.R.No.172087


19Emphasissupplied.

20Emphasissupplied.

21Emphasissupplied.

22Emphasissupplied.

23NationalPowerCorporationv.Provinceof Isabela,G.R.No.165827, June16,2006,491SCRA169,180.

24Id.

25NationalPowerCorporationv.CityofCabanatuan,449Phil.233,259(2003).

26Id.

27Id.RubenE.Agpalo,StatutoryConstruction,FifthEdition,2003,p.222.

28C.N.Hodgesv.MunicipalBoard,IloiloCity,etal.,125Phil.442,449(1967)RubenE.Agpalo,StatutoryConstruction,FifthEdition,2003,pp.222223.

29BANATPartylistv.COMELEC,G.R.No.177508,August7,2009,595SCRA477,498,citingSerranov.GallantMaritimeServices,Inc.,582SCRA254(2009).

30Id.,citingClemonsv.Nolting,42Phil.702(1922).

31TheConstitution,Art.XII,Sec.11.No franchise, certificate,oranyother formofauthorization for theoperation of a public utility shall be granted except to citizens of the Philippines or to corporations orassociationsorganizedunderthelawsofthePhilippinesatleastsixtypercentumofwhosecapitalisownedby such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for alonger period than fifty years. Neither shall any such franchise or right be granted except under thecondition that it shallbesubject toamendment,alteration,or repealby theCongresswhen thecommongoodsorequires.TheStateshallencourageequityparticipationinpublicutilitiesbythegeneralpublic.Theparticipationofforeigninvestorsinthegoverningbodyofanypublicutilityenterpriseshallbelimitedtotheirproportionate share in its capital, and all the executive and managing officers of such corporation orassociationmustbecitizensofthePhilippines.(Emphasissupplied.)

32Emphasissupplied.

33366Phil.428(1999).

34Id.at438.(Emphasissupplied.)


36SeeP.D.No.1869,Sec.10.

37Emphasissupplied.

38Emphasissupplied.

39G.R.No.147295,February16,2007,516SCRA93,101,citingCommissionerof InternalRevenuev.JohnGotamco&Sons,Inc.,148SCRA36(1987).


41R.A.No.8424,SEC.108.ValueAddedTaxonSaleofServicesandUseorLeaseofProperties.xxx

Rate and Base of Tax. There shall be levied, assessed and collected, a valueadded taxequivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services,includingtheuseorleaseofproperties.

The phrase "sale or exchange of services"means the performance of all kinds of services in the

7/24/2015 G.R.No.172087


Philippines for others for a fee, remuneration or consideration, including those performed orrendered by xxx services of franchise grantees of telephone and telegraph, radio and televisionbroadcastingandallotherfranchisegranteesexceptthoseunderSection119ofthisCodexxx

xxxx

(B) Transactions Subject to Zero Percent (0%) Rate.The following services performed in thePhilippinesbyVATregisteredpersonsshallbesubjecttozeropercent(0%)rate

xxxx

(3) Services rendered to persons or entities whose exemption under special laws or internationalagreementstowhichthePhilippinesisasignatoryeffectivelysubjectsthesupplyofsuchservicestozeropercent(0%)rate

xxxx(Emphasissupplied.)

42Section6ofR.A.No.9337states:

SEC.6.Section108ofthesameCode,asamended,isherebyfurtheramendedtoreadasfollows:

SEC.108.ValueAddedTaxonSaleofServicesandUseorLeaseofProperties.

(A) Rate and Base of Tax There shall be levied, assessed and collected, a valueadded taxequivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services,includingtheuseorleaseofpropertiesxxx

xxxx

(B) Transactions Subject to Zero percent (0%) Rate.The following services performed in thePhilippinesbyVATregisteredpersonsshallbesubjecttozeropercent(0%)rate

xxxx

(3) Services rendered to persons or entities whose exemption under special laws or internationalagreementstowhichthePhilippinesisasignatoryeffectivelysubjectsthesupplyofsuchservicestozeropercent(0%)rate

xxxx(Emphasissupplied.)

43 Hijo Plantation, Inc. v. Central Bank, 247 Phil. 154, 162 (1988), citingPeople v. Lim, 108 Phil. 1091(1960).

TheLawphilProjectArellanoLawFoundation

pagcor vs bir

Documents