First e-Bank v BIR

8/20/2019 First e-Bank v BIR

1/14

REPUBLIC

F THE

PHILIPPINES

REGIONAL

RIALCOURT

NATIONAL

CAPITAL

I'DICIAL

REGION

BRANCH

146.

MAKATI

CITY

IN THEMATTEROF DEC1AMTORY

RELIEF

NTHE

VAIJDITYOF

BIR

REVENUE

CIRCUI.AR

MEMORANDUM

NO.

6s-2012

"

CIARIMNG

THE

TN(ABITJTY

OF

ASSOCIATION

UES,MEMBERSHIP

FEES

AND

OTHER

ASSESSMENTS/CHARGES

COLTECTED

BY

CONDOMINIUM

CORPOMTION,

FIRST

E.BANK

TOWER

CONDQMINIUM

ORPOMTION,

S

HEREIN

REPRESENTED

Y ITS

CHAIRMAN/Pf,.ESIDENT

ENGR.

VICTORIO

{. AMANTE,

Petltloner,

.v€rBus-

BUREAU

OF INTERNAL

REVENUE

(BIR)

,

AS HEREIN

REPRESENTED

BY TTS COMMISSIONER

IM S.

IACINTO-HENARES

nd

REVENUE

DISTRICT

OFFICER

RICARDO

B.

ESPERmJ,

Respondents.

X---------- ' . '

- ' - ------X

j ,

',.|

by

petltlon€r

the

valldlty of

{eclarlng

he

rlghts

ier,

lncludlng the

rsepondent ureau

amounbof

nulng

udlclal

praylng

hat

thls court

rendere

JudEm€t

Revenue

emorandum

lrcular

o.

65-20

and

dutleb hereunder

n

the

part

of

pronouncerirentn wtlo between etluonen

of Internal

Revenue

s entltled

o

th€

a

Incorn€

ax

and VAT

h custodta

eglsby'

conslgnauon.


2/14

2

Petltloner

tlegedhrt rspond€nt

Bur€eu

f Internal

Rwcnuc,

rcpresent€d

y lts

coffimlsslon€rKlm S.

iactrfio-Henares f?lclally

lssued ast

Octotrer

1,

2012

and made

mmcdlatety ffrctive

on

thq

ram€ da)/,

Revenue

rlentsrandum ircularNg. 65-20i2

(RMC-2012)

'Clarlfytng

the

Taxablltty Assoclatlon ues.,

Membershlp

€€5 nd

Otler

Assessrr'en

s/ Cha ges

Coll

cted

by Condorntnl

m Corporation.

Fotltionerwhlch s a non-stock on -prollt condomlnlum orporatlon

of

ofllce

bulf,Jing wned

and

possessed

y th€ m€mberc

tftsrlselves

wlll

be

adverselv

Nfected by

the hplcm€ntatlon

6nd enforcernant f

sald

Ri4C-65-:013,

bs€auge

t now lmposas

uPon

p€titloner

a fiew

kind

of

tax

liabttltv.

wlth th€ amount

of Php

118,971.53

VAT

purportedlf

to

be

pald

on Oecerntrer2012

and

€yert' month

tlrereafter.

ptus

Php

665.904.12

lnsorne tax

n€t of dlr€ct cost

purpo*edly

i.o

br

pald

on

or

before

Aprti i5,

20i3

and evsry

year

thereafter.

Petltloner

verrsd

hat

tfis operatlvs

mandrt€

of

R,MC o. 55-

2012

is ur'Just,oppresslve

nd confiscatory.

t lr unjust becauset

dlrcctly and

ac.tunllyburdens the unlt

ownart

comprlslng

tfie

condornlnlum

olpora0on

wlth

lncomc

tax and VAT

on thCr

own

monoy

pooled

tog€ther

and epent excluglv.ty

or

ths

purpose

of

rnalntalning

and

preservtng

he butldhg

and

lts

pr€mlsss

whlch they

themselves

wn

8nd

poss€ss.

Further

pN$tlonet

alleged

hat to tax

the cotlectad

assoclatlon dues,

rnembere lp ,nees

and other

.rs€ssments s to

dlmhlsh rnd lmpalr

hc

laglflmrte

exerclse l

the

owners'

righi to

po&g€ss

end en]sy

one's

sYtn

propertY.

It

i5

oppresslve nd

conffscatory ecause

t dlrectty

and actuallyeracts

upon he iinit uwfiers, comprlsinghe condornlulumorporatlsnwlth

the duty

to sheuout

addltlonal ums

of

money

o

pay

for Income

Ex

and VAT v'rheri

n truth and

in

fact

pstl$oner,

Just

tlke

any other

typlcalcondomitrium

srPor$tions already

n

dlre

financlal

tratt

and

hard

up

in its

every day corporate

e{lst€nce,

h€nce,

ri

pay

a

32%

tncom€ ax

and 12%

VAT- as espoused

y

RttC ilo.

65-2012

s to

put

to

the edge

of

the

sword the

very

ltfe

of

petltioner.

Hence,

patltloner

nalntainshat

malnlydue

to RMC

{o.

55-2012's

operatlva

m.ndat€

to

be unjust, oppr€sslve

nd

conllscatory

nd unfawfully

dcstructlve,

then ipeo tacto

lts

imPlsmentatlon

and

cnforcem€nt

wauldvlolate hs du€proaBsslause ound n Artlde lil, Sectlon1 sf

our Constltuflon

ommandng

th.t

no

person

shall

be

deprlved

of

propcrty

wlifroutdueprocese

f

lsw".

Petltloner

hrough

th€

Makttl Comm€rdel

E5tats

Assoclagon'

Incorporateil

hiii

sen'r

a letter dated

Decefiiber

5,

2'012,

o the tslR

Commissioner

equestlng

or

dcferment

of tho

irnPtsn€ntetion

of the

subJect

iicuiar

and

another etier datd

Daca.nber

9,

aOlf

for tha

attention

of

Makatl Clty

RevsnueDlstrlct

Offlcer

Rlcardo

B' €splrltur

announciriq

oiii.lnulnq

udiclat

consignatton

f

the

lncorr,e

ax

and

VAT amounts

purportedlydue under

thc

ques$oncd

Rl"lC-

No'

65-

e0i;.

it

was

u,'thet'

alieged

hst

petitlofier

has

not commltted

any

act to

breach

RMC

Ne,

05-201?

constdertng

hat

any

or nll

of the

amsunts

of

lnco|r€ iax and

'#.T

purpoftadly

due

uniiei

ihe

qu€stionad

RMC-2012

re

*t the

momant

placed n custodia

egis

by


3/14

3

way of conUnulng

udldrl

conslgnrtlon.heJudldrl

detcrmlnatlon

f

the valldityof RMC

No. 65-2012 s wdl as the

dcdareUon f rlghts

and dutleg here und6r

on thc

part

of

pdltlon€r,

F n€cca$ry

md

prop€r

under the drcumstrnces, for suctr

detsrmlnatlon

and

dechmUonwould termlnate

}tc uncartrlnty or

controversy

whlch

grve

rlse o the nstant ctlon.

ln

lts Comrn€nt, hc Buroru

of

Internrl R.venuo

(BIR),

through he

Offlceof th. Solldtor

General

vcrrcd

iat thc rerncdy

of dcclrratory ellrf, s no longer

proptr

rlrrco ha

ercrllcd R.y.nue

Clrculrr already took effcct la* Octob€r 31,

2072. Reepondcnt

allogcd hrt

the

hrury

whlch

pc00oner

sceks o

avoE

pryrnent

of

lncomc tax

and

value added

tax lmposod by

BIR Rorcnue

lrlcrnorandum

lrcular

5-2012

RMC

No

-65-2012)

n thr collectlon

of assocladon uee,

Hownver,

by

petldoneis

own

allegrtlonc, Jt€

acsall€d

csuance lrcrdy took

cllect on October

31,

2012. It

hm

alreadypald, throughJudlclal onslgnmert,he valuc added ax

lmposed

y RMCNo.65-2012 nd

gavc

lse o

the

InJury

ought o

be avolded

by the

peUUon.

H€nce,

dedaratory ellaf ls no

longer

Prop€r.

Respondents

IR through

hdr own LlUgrilon

Dlvldonalso

fllad

a separatoComment

n thc

petltlon.

Repondentsallcgod

hat

thc

petltlon

lacks

proper

verlllcauon

slnce thcn ls lnsufidffit

verlflcaUon,

he

peUUon

hould

e

dccmed s

an undgned

leadlng.

Respondents

lso averrcd

that the

peUUon

hould bc dlrrnlsecd

applylng

h6 doctrh€

of

prlmary

Jurlsdlcuon,

espond.nts alnbln

that courts annotand wlll notddcrmlne controvemynvolvlng

questlon

whlch s

wlthln he

Jurlsdlcflon

f

the rdndnlitreUv€

rlbunal

prlor

o the

rasolutlon f

thrt

que3uon

y thr ldmlnlstruUve

rlbunal,

where

he

quastlon

dernands he

excrclscof sound admlnlstratlvc

dlscreUonsqulrlng

he sp€clrl knowledge,

r;rdrlcncc

nd ssrvlccs

of

the

admlnlstratfvc

rlbunal

to determlne echnlcal

and Intrlcate

mattsrs

of fact. It ls

not€Lvorthy

hat hcreln

peutloncrl

edmltedly

addrcssed he

mattcr to rspondent Commtssloncr

f Intemal

R.venue

(GR)

wlthout

wrltlng for rn approprht€

ruply

from the

latter.

In fact, eeveral

ondornfnlurn

orporatlonsdcrrd th€ tssrJGs

prassed y petltlonerso th€ Ltw Dlvlslonof thc Bureauof Intcmal

Revenue

or further

darlflca$on.

UlUmatdy, t

would be the

Secretary

of the Departrnent

f Flnance hrt wlll exerdse

prlmery

Jurlsdldlon

ver he esues alsd

In

the

lnstant

pcdUon.

he

ssue

requlr$

the technlcal

knowledgc and €xp€rl€ncc

of theee

admlnlstratlve

agcncles

concerned.Clearly,

petlUoner

has

not

exhaustcd

ll admlnlgtrrtlve emedlee

rlor

o

lts

r$ort

to thls

Court.

Respondent

urther

rrgued

ln

lB

Commenthat Declarutory

Rellef s not

avallablcwhen here e breachof

etrtute bcfore ?llng

f

tctlon. Thecomplalntor dcclrratory ellsfwlll not prosperf filed

aftsr

a contract,

statute or rlght has been breached

r

vlolated.

n

the

present

ascsuch s

prcclsdy

he Cturtlon rrlslng

from

the frcte

afleged n the

petltlon

or declaratory Cl€f. Wlthholdlng

of taxss

lrwfullydue

o thc

aovernmcnt

s r blatantbreach f RMC 5-2012.


4/14

Under

hc

s m6

persp€ctlvg

h€ aeumulated

amounte

of

lncome

tax

and VAT n custodta

egls

shoutdheve

bffin

r.rnltted

dlrcUy

to

the BIRbrcluse

tho latter,

bdng rn

ldmlnlstrtflvo

bodysnfbfc€d

o

collect taxes, tts functlonr should not be unduly ddryed or

hampered

y Incldent

mrttcm.

Thc conUnulng

udlcltt

ondgneuon

ls

In vlolatJon

of the

fundamsntal

precepts

of texa$on

and

consequenUy,

brelch

of the rtght

of

th€

rtght

of thc

State

o collect

taxes.

Flnolly,

Rsv€nue

Memorandum

lrcular F-2012

s

alrerdy a

clarlflcatory

ssuancs

f

persn€nt

aws

under

he

HIRC.

Rorpond€nt

argu€d

hat the

sald

RevonuaMemorandum

rcular

wtc

bsu€d o

darfi

the

taxablllty

of

assoclailon ues,

menbershlp

ea,

and

other

es$essmcnts/charge

ollected

by condomlnlum

orporruons

fom

Its mernbers nd enants.

.

Thc

dlsputed

RMC

was ssuod

mply

to restlte

and

hon

chrlfy

the

provallhg

poslilon

rd rullng

of tha

BIR. t

merdy

lnt$preH

an

exlstlng

bw whlch

hrd rlready

been n

d?cctend

whlch

wagnot

sd

to

b€ am€ndsd.

R6pondent$

urther

efuddrts

thit

th€ RMC

rovldes

that

rssoclaflon

dues,

membershlp

fes3,

rnd

othcr

asEessrn€nB/charges

re

colleted

by

the

condomlnlum

orporr$on

a8sodrtlon

rs compengaUon

or

benefldal

ssvlc€

rgrdmd

to ltg

members.

Benelldal

s€rvlces

nc€n5 any

servlcr

Inctudlng

$c

operutlon, manegenTlent,8nd malntenanc€ of common

areas/communlty

aclllfleq

provtded

for

by a condomlnlum

corporttlons

or the

benellt

of lts mernbers.

n rocordanc€

wlth

Sacuon

0

of

Republlc

d

(R.A.)

No. 4726

oth€rurls€

nownas

the

Condornlnlgm

ct, the

act of

management

f the

proJcct

onsiltutes

beneflclal

svlc€. Payment,

n return

or such

sofylsas,

ome n

the

form

of amount

p.ld

In as

due6

or feesby

mernbus

and cnents

of r

condomlnlum

orporatlon,

ormlng

part

of the

froes

Incomeof

the

latter

aubject o

Incoma rx.

Slncs hey

consfltute

ncome

paymcnts

or componsatlon

or

beneficlal

ervlces,

h€y should

be

aubJacto

VAT,

RGopondents

lleged hrt

peflUoner

s d €cted merelyby theabandonrnent

f

prevlous

IR

Rullngso the

d?ad

that assoclaUon

dues

are

fundawhlch

are

merelyheld n

trust by

a condomlnlum

corporaUon.

Howevgr,

reepondents

argued

that 8ny

erronoous

appllcatlon

nd

enforcsncnt

of

tax laws does

not

prcdudc

Ure

subseguent

orr€ct

appllcatlon

f sucfr awr. Tha ule

holds

ru€ even

lf

thE

rectlflcaHon

icJudlcss

artlca

who had

m€anwhtle ecelved

baneflts.

Furthcr,

t ls axlomatlc

hat the State

can

nBver

be ln

estoppel,

nd

hls s

partlcularly

rue In matter3

nvolvlngrxrflon.

Flnally,

h€ Court,cannot

n th€

abi€nceof

eoundbasls hercfore

dlsturb

he dlscretlon

hrt

has bcenexerds€d

by Rerpon&nt

CIR n

determlnlng,aft,ermaklnga comparlson,tudy and waluaUonof

pr€vlou8

BIR Rullngs xsnptlng

charges

dlectcdby corporuuon

condomlnlums

rorn lncom€

ax and VAT,and

thet R.MC

5-2012 s

the

proper

nterprdatlon

of

the law and rnore advrntagcous

o th€

Government.


5/14

In Frs

Reply,

peUdoner

argucd

that

repondent't

lntarpretatlon

of the

comeguence

of

Judlclal

conBlgnatton

3 ab6olutdy

€rronoous'

Petlfloner

malntalns

that

In lleu

of ddtv€rhg

tho moncy

to tlro

respondent,

the

patlUoner

aought

the

legrl

rcfuge

of

Judldal

conslgnatlon,

o much

30

thtt the

act of

Judldal

condgnagon

r

rkln

to thc paymentunderProt66tprovldGdn ths c.t$ ol Departmentof

Budg€t

and

Manrgrncnt

v3. Manlls's

Rn6t

Rctlf$t

Assoclltlon,

Inc.

G.R-No.

169466,

09 May 2007,

ctUng

he

casc of

l{atalln

Coconut

Co.,

Inc.

vs. Mun|clpal

C.ouncll

f

Mtlab.ng,

Lanao

del

Sur, 8o

thrt

under

the

prlnclple

of starQ

declsls,

enren

f

pefltloner

Judlda[y

conslgned

the

VAT

amount

Purportcdly

due and

peyaHe

to

respondent

BIR, th€

apptlcablltty

of

the aeealfodBIR

RlfC

No.

65-

2012

to

futur€

trans€ctlons

EUll

rsntlm

to

be lsolvsd.

Furth€r'

petlttoner

alteged

that

Judlclal

conelgnotlon

of the

vAT amounts

purportedly

ue

and

payable

ndther

$(ungulthes

h.

obllgNtlon

or

iutimattcatly releases the obtlgor.

Thus,

lt

13

errongous

for

the

rBpondent

to

argue

that

when

psu$on€r

mrdc

the

Judlclrl

conslgnatlon,

lt automattcally

becomes

paymcnt

of

the VAT

purportsdly

due under

R 'tC

65-2012.

Judldal

€ondgndlon

3lmfly

means

puttlng

the controY€rted

mosnt

In

custod|r

egls

-

zubJcct

o

th€ dlsposltlon

by thle Court

upon

ddsrmlnttlon

of

the rlghts

and

duttcs

of the

peuuoner

under

ths spedal

dvll acffon

of

Dcleratory

Rellef.

Moreov€r,

patltloner

has not

rcglst€rcd

tsdf

re

t VAT

enttty'

whlch

i lndlcailve

hat

there

ls no

lqrury

yet

sustelned

on the

paft

of

the respondentr

contrary

to the

allegatlom

of ths

OSG'

Thc non'

rGglstratlon

s

a VAT

pcrson,

and

of coursc

he non-avallrnent

of

tJte

Input-outputtax benqflb, coupled wlth the fact thet the Purporbd

taxable

amount due

le

presently

under

Judldal

conslgnatlon,

altogether

show thst

the

pctlUoner

has

not

gubmlttcd

any act

of

obelslnce

of

RMCno. 65-2012

and

has

not su*alnsd

any

real qfury

at a l l .

After

submlsslon

f

the r€spectlve

Memorundum

f the

parUes

dellneatlng

helr

rsspcctlve

osltlons

nd

arguments,

hls

Courtwlll

ow

regolve

h€

peUUon.

Stapp€dof non Qts€nutlshe lssu€s n thls cts€ botleddown

to

the ollowlng:

1.

Whether

Pqtltlon

or Declaratory

ellef

s

props;

2. Whether

Revenue

lernorundum

lrcular

5-2012

s valld'

Rul€

63

Sectlon

(1)

of the

Rules

f Court

provldos:

Secflrcn1

'

who may llts'

'

Any

person

nbrestad

undr,r

a deed,

wlll,

@ntra,ct

or

otltsf wrtttan

ln*rument

or whass

rtgh|sarc

afiE+tcd

DY

e statutcr

executlve

order

or

rqulatbn,

ordinane

or

anf other

governmentat rcgulatlon

may

bfore

brcach

or

v'ntatbn

thererr|,

brlng

an actlon

n the apgoprlate


6/14

6

R(€d,inrl

mal caurt b dc&'rm,n6

any

qd,ffiion

6

constructlrn or vetld/ty arrsltlgi,

N far a

da{Ja/r'.tlo'l

of

hB ngm s dtrtlgF7

herl un*r.

It bears o not€ thtt wher€ Petluon

gcekg

dcdtrrtlon of

ttro unconstltutl,onallty

nd/or nulllty

of . law, lt m$st

be

treated

es

onc tbr

dslrntory re$sf

and ehouldbc

broughtbr*br3

ho R3{lonNl

Trlal Crurt and not before thc

Suprenre

Coilrt

(Alled

Brotd€sung

Csntorr

nc. vs.

Rrpubllc,190SCRATSA).

The requlrrnwrte

of

rn rctlon for daderrtory

rdlrf rre ac

follows:

1) there mugt

bc t

Ju*lable

controv.rry;

2)

the contrcvrysy rnud

bc bdwecn

pstons

whorc

Inbrocts

aroedYss€;

3)

thc

party

rrchng

dtd rutory rdbt

mu il hrvr

r lrgrl

lntsrest n

ths controversy;

nd

4) thc h6u€ lnvolvqdmu3t

be

rlp6 lor

Judldrl

dd*rnlnruon

(IolonUno

s. Bcrrd d

rtaountancy,9'0

Phll.

83 cEcd n the

crc. of Cormaalonsr

d Curbmt

ffid tile

Dfrskt

Cdl€ctor

of tho

Poft o?Subtc

Y3. HyPonr{x

FdE Corpondon'

G.R.

No. 179579,

Sruary1,2012).

PrtlUoncr

ftlcd thls

cr*

to

'praa$

$.

vrlldl$ or

const[uuon|Hty

of

the Revenue

,lsmrind|gn

C1rular 65-20fe

Irsucd

by Rspondant

BIR commlsdon.r

KIm

g'

l.dlt$Hcneru8,

contedlng that

the aart€ $ns

lsrnd

wflfiout dse

pntcss

sf faw.

P.dtontr

mslntrlns

hrt

lt lg

rn

uqfurl tnd

opprlfdw

lsturns,

rnd

imposer eddltlonal

ax burdm

upon tlte

condonSnlurn

orponilonc

whcn

lt dcclrrcg thrt

thc

grott

twptr

of condomldum

cotpoftUons

lndudlng &ssodatlon

ducs, mornbg|3hlp

fca6 and o$tr

agcernants/chtrg€l

eru anbJcct

o

vAL lncoma trx

rnd Incofiie

paynrents

mrde

to lt .re

subtect to

rpplkede w[hholdlng

taxes

unds edsung egulruom.

Guldcd

by th.

prrarnetorr

lsld

down

In Ufo

abo\n

dtffl GE8,

thle

court

bdlwe

,tfiat

pstluon

fsr ffirratorY

rell.f l3 $3

rppruprlate

cmorly

glvcn

ho obt

ln|ng

elrcumdanaa

nd thlt court

hts

Jurlsdlctlon

o

t k cogntslncc

of thc

samc. Al

Sl3

nqulr.rndtts

for llHng

c 3c

lbr

dscleretory

ulld.re

prsutt

In thtr

crrc. Th.

ls6ue

propoundd

by

prftuoner

t5

,uEtlchblq

b) the ontfovatEy

bdrrcn

pcfrUonrr

and

nepondent

rre

rdvrma

b erch

othu,

c)

pdlttonq

hae

legal

nt{|€$t

In

th€

oootrov*sy,

conCdfl'lrq

$.t lt

wlll Erudy rflhct hls right t I t8xpNycr, nd d) thrt thr h8uc r.le&l

ls rlpe or

Judld.l

detsmlneuon.

Prtlssner€3ecnBrlly

rlsod

h€ vdldlty

tnd

sn3utuuonellty

of

Sre subJect

menrorandum

rcular,

tflhldl

rnsttor

5 rlp€

for

Judlclrl


7/14

7

ambn of tJts

poftrer

of

Judfdel

rrnrlrw. It har bo*r

hdd

tn th€

cmc of

Srfiart ConrnunlcsUonEs.

lTC, {56 PtU. 145 also dtrd

In thr

crse

of Commlslonenof Custonrr nd

thr Dlffi

Cdector

of

thr Port

of

Sublc ,3.Hypefn$xFrrds

Corporeuofi, .R. {o. 179f,79,Fcbrurry1,

2011) hat:

*Ttle dcbnntntdon d whalhcr t

ffi|ft

n*

tr sct d ruls kad

by

m

admh,tstifgvd

'8prr,l

srArudrclr

ffp l'w or tha carcdkrfbn b

wfrrh, tt?f,

$wtrfpin

ot tlr. twubr astlr lt}dc4 dr.

Constltutbn

vefS

tfl6 ,gf er

ffttfrcis,t

mvfrw or &a

W&r

to

&dera

e lrw

trw.ty,

lnbrnttfltrrll

or

cxd€uflv€ agrsGnd'?f.,

pffientbl

ea6,

onds

ln€trucf;ign,

o,,dlnan(l or ragnrbtton n tha cor,#,

fi*l&lng

tha rcgbral HaI

eur&E"

7hb

b rfifi$t

tllc

wp d

fifiel

pwar,

whktr

trr/tr.dcs

he

rluthqny

d the @,wts b &tr,nnlne ln an ap.ryta# a&n

fhc Wtdty

ol' #p rcts

d

0t€ ,F/tfd€',

@artmcntr.

JL&tal

Wwar

Indttu

Ste

drrty d tfu dnts

of

ilsdcc

to

*ttlc

d&tat mntrcrurslar f,l.wMfi

rtgflm.

whilt

arc

WW

&mandabb

aod

an{wr,afl/r,

.t d

to daF.rmlnawlpflpr or aot 6xrrr

ltss

bttt

t

frlv'

ebuso

of

abcrathn

amoun@

to bcr( ol'Jurbdrcffon

an tha art 6 my trlbunal or lnefrunrcntr,llty Vp

govafirment.'

PettUonrrhrs not

yC

ornrdtEd wlltul

breech

of thr subJect

lseu6nc€.Petluoner

e

not

asralllnCI

n |56ssrn€nt bst&3a

s of th*

tlme

of

ths

lssusncc

of

tho drcular tio ccndornlnlum

orporluont

coflecilon of

Nesocleuondue rnd membweflp

lk and

otts

chrrgre

wanc

not

rs

yet

dur

end no trx

t$€atrnant har

yet

bcnn

msde, Pefltoner

har ngt

yet

kn ueesecd r

ttx

to

bo

pald

to the

tsIR. Pefftloner herdn tc€b

rdlcf from

th|3

court

to ddsrrdn€

whether

he

mcmonndum drculrr

le*ucd * villdty lssued

or not.

Ftorsovar,

pstluons

for the

pmvloui y€ttlB

ha$

not

b€.n Eublcctad

to

p.ymsrt

of trx on rssodrUon duce,

and

mcrnbrr*hlp

lbs

cpllwted to lb msnbers. Thui, io sty tilat pdfloncr h.' afrerdy

comnrltted

bfiBrch

end

thcrafors thG

prUuon

ll.d b no longnr

prspcr

has

no

eg o

rtand

qn.

The

tlrtlontl

Inttrnrl Ra/anuc Codc

trtvldta

for thc

tlmr

of

paymant

of

corporate

ncorn€

ax. rtte

pu$nent provlslonr

of

thr

tax codeF hereto

quoted:

Saton 5a

of ilIRC hus:

(A) ftagufr?rtcr0t - Elrulry4iryarttlott ttqF'ct tp

tlte tax hcreln

bnryd, exryt lbreCIn

ffipaa,tJorc

t#

angl'ged

ttr be'dr

tr

hdncg

ln the

Phttlp#nes hall

an6, h

d$Fr' e,,

a

lnn and

tcrurt$t

$rr,rfrrfr

,fat[t

trr


8/14

8

rGturn

tnd

tta.t

ot

a,dtuafllncnt

ttd;urn

in

aqordene

wlth

the

provlsbn

6

ChW|F.'r

I

of

this

T'itle.

Sectlon

77

-

Place

and

Tlme

of

Flllng

nd

prym€nt

of Qusrtedy orporatencome ax

(B)

Tlme

and Hling

tha

Inoinc

TEx

Rctum

-

thc

@.rpontc

qmftafi

dac,/',ntbn

ileil ba

clon ol

qcb

ot

tho

firfi

t ,rce

(g)

qulrtart

of

thc

fxabla

yoc.r.

f)G ftnel

t{uatmont

,e,turn

chafl

h flhd

an or

bclotp

thc

fltteentl (t#)

dtf

of

Aprll or

on or

Delbre

the

flfreenth

(lgo)

dey

of tourth

1&1

nonth

fottowtng

nc'cnit

of tfie flscal

year,as thecae mayh,

(C)

Tlme of Pryment

of ttrc

Inamc

Thx

-

The

lnome

tex

dua

on

tha corpnF'

quirErly

retums

and

thd

frnel

EqusFt

cnt ttturns

@mput& in

aeotdane

wjtfi

.Safrtons

75

and

76 sheil

be

pald

at

the uma

tt'€

dxlarutbn

or

return

ln

a

manner

prwnfud

W

the

Cammisslonar.

Petltioner

dopted

an accounung

€rlod

uslng

he calendrr

year

method. hls

was shown

n

its Incomc

Ttx Return

lled or

the

year

2011,

Exh.

H"-Prelhhary

InJunc$on)

nd lyar used

ag

helr

€vld€flce

during the

appflcaflon

or thc

lscuanc€

or

a wrlt

of

prellmlnary

njundlon.

The

Memorandum

lrEular

was

lssucd

on

.

October

31,

2012 maklng

he

same

afiecHve

mmcdlately.

lnce

p€Htloner

dopted

alendrr

year

accounUng

erlod,

nd

lrollowlng

the

above

clt6d

r€gulr€ments

or

corporat€

lflng

rnd

payfng

ol

Incom€

ax

due on the

corporcUon,

cflilonefs

l.blfity

o

pay

the

tax for the year 2012 wlll aocrueon April of 2013,on the flnal

edjustment

€turn.

Thua,

t the

flmc

of

the

fillng

of the

peflUon

n

December

6,

2OL2,

euuoner

5 not

y€t

obftgated

o

pay

and

flle

lts

Income

ax and

vat return

and

broach

has nst

y€t

3et n.

On the

matteqof

Judlclrl

constgnailon

rlsed

by

pefliloner,

thls

court In

lts evaluaHon

f

the caea

h€s not

found

proof

hat

petltloner

n fact

made

.

Judlclal

on$tgnailon

f the

purported

lncomo

ax

andvalue

added

ax due or

December

012. Howeyer,

sv€n f lt

dld, t

ls

of

no mom€ntr

lnc€

at

the Ume he

p€ililon

or

declaratory

rellef

was

flled, the

corporat€

ncome tax for thecorporatlonasnotyetdue orpayment.

As to th€

valldlty

of tho

Mernonndum

lrculrr $rued,

t

ls

rospondent's

ontentlon

hat

lt merely clarffird

and was slmply

lssued

o

restato ndclarlfr

lre

prevalling €luon

and rullng

of the


9/14

9

BIR.

lt

was

a

m€re

InterprctlBon

of

an

exlg0ng

aw

whlch

hrs

aiieaoi

been

ln

elfcct

and

whlch

was

not

sEt to

be amendcd.

Howevar,

he

sEm€

ppcel3

to

be

not

truels

lt

gocl

beyond

tc

oote"ilv"

to clarlfy

ttre

cxlcttng

etatutc.

.The

assallcd

R6v€nu€

m-imonnaum

lrcu'lar

not merdy

Intsrpded

or drrficd

thc

qlsung

BIi

iullng

but

n fact

egl6latsd

r

lntroducsd

.

ntr

leglslatlon

ndcr

ir," mintti of tts quasFlegldrwe uthorlty. TheBIRcommbconor,

unaer

ne

gulse

oi

clarlfyhg

Incorrp

ex

on

aisode0on

due,

mado

ievcnu"

Mimorandum

Citrcutar

{'lectlvc

nrnedlatdy.

In so

dolng,

the

passage

ontravenee

he

conoUtutlonal

andate

of

due

proces

of law.

It becrs

to

sttte

herdn

tho

perflnent

poftton

of

the

rullng

contalncd

n

Revenuo

emorandum

lrcular

5'2012

hue:

"Thls Ctrculars tssl.frdb cltrfi the txailllty

of

asctatton

dlw,

nanbetslrtp

{bea' and

&rcr

assaecnrcnt/cfraryns

@,lEctucl

by

andomlnlum

arwntion

from

ts tnemDers

nd

tan|tts'

EACKGROUND

The Eutcau

tts

bsuca

ecwral

rullngs

exemptlng

fiom

Incr,mc

tax

tf'6

asienina/chargqs

crijffi

by

srtominlum

orWrattons

fro;

tE nsmberc

onjhe

gft,uod

that

th;

rclk,rlibn

of arErriatbn dns and stfier

aggrlsntanfs/charyrlt

aFG

mcraly

hald

n 6nrt

0o Dc

ixa

&bty

for

dmtn&rattw

exryn*r

ln

tmplGmcnttng

B

pur,ogcs 1.e..

b

gpGnt'Ft

rytntfi

arii

nanteti

tte'oiaomntum

rroftrt

tb

Hny

the

*t.

*

anfromlnlum,

and

fiwtr

whktt

a

in&mtntum

a@ontlon

auld

not

retlllru

any

galn

or

prcfit

as

e

rsutt

ol

16

rcelPt

tharr'vf,.

In

affitlon,

tlp srnc

rultngs

cxclttpbd

tha

essochtlonduesftom valtr-.rddsdtzx for tie roason

that

a

qltfrnttntum

citrpntlott

cM

notg,ll,

Mrllgr'

iiarirg",

ngr

ba*

any

gpods or

-Ptwtty

and

n*nai

dcxls

t

rcndcr

any

rrlruk;

lbr

a

lbe,

but

iiitv

tmplemens

$€

admlnhtntbn

of

tt'G

rcCd;ad

*tvres

o

olbct

assodetbn

drps

ttwtt

tlto

unit

ownars

pursuant

b

i6

orWntr

pttw{s)

es

frustac

of thc

fund

thcrPof.

CIARIFICATION

-

Thc

Exabtltty

of aswlatfun

dtn's,

mamhrshlp

fc;s

and

otier

assessrnsngcharyes

cpllledrrl

bY

a

andomlnlum

arpantlon

lrom

f8

mcmbcts,

e','nfs

and

other

antltbs

ara

d*uwd

haraundar:


10/14

l 0

L

In&{na Tax

*

The tmo{rnt9

ptE

tn

ts

du€5 or

fees by

rnernbers

and

tensnE d a

cDn&,mlnlum

mrporttbin

lorm

prrt

d drc

gros

lnorrre oftrt?tc

/atter subJacf

to

tr'f'*w |;,x.

ThE E 'ffauf€

andomlnlum

cptpp,ratF,n

urnblus tE mcrt0g'rg

aN

tenanb wifh benefltE, advrntrslff and prlvibges tn

rctu'T4

fer *rct, ''ymcntn ftr

tax

purpwt

t ra

es8s€iatlon

dtns,

mamfut'' rF

fu,

tttd

othar

a$scsnentq,/dlaGErs col/rctld

by

e an&mtnlum

@rpof3tbn

conifffuts

,r'@nE

prffitttfB

ar

@mfrnwtfu.n

br

fp,ne{klel

'€nlg6

tf

protdcs

b

,e

mem&rs

ard &*ran6.

Iie

gevlna

finetrr€fttbn

snd &e

assssrncnt ctucar,Q llnd

whfcfi ut mudy

trld

in frust by a @r&mlnhrm

carporatb*t

hcfts

logal

basts

and b haraby r}*tffinad.

Norcsver' srnd e d/n&'mlnlum @rpo1'.tb,n ls

suljEct

fp incone

trx,

,n@f'e

payments

n* t0

,t

ara subjocf

to epplJcab&

wtthhddng

ttxcs

wder

existlng

reflulatta'ls.

IL

VALUE DDED

N

VAD

-

tsc/atfon

d{e&,

membersfi{p

,be6, and

ofhar

rssrssmGnfs/c/targm

allectad

by

r

wrdunlntum

*r4ratlan

ere suDJsct VAT slne tlpy

an*ltute

lncorne

pdwncat

ar emg6{Eildm

,br tha

b'l'tci?f,lal

servic€st providerto its mcrnkls erd ienant* "

ThEabove

cltd

porton

of

the

Msrtorartdurn lrcular

rlled

to

sfrow yfiat

partlcular

asd

t

chrflled. Ineiead

t Eftsr*

that

lt

mcrsly

departed

rom the

c€varal

ullng3

of thc Bursru

exernpdng

rom

Income tax

ths assessrnents/cherge oll€cl€d

by

condornlnlwn

corporrUons

rcm ltr membQrt,

n the

ground

hat tfie

collccfion f

€$ssdaUon

ries

and

other

rcs€egrnwts/

cnorges

re

rnerCy

hdd In

trust to be

usedsdely for

ddmlnlstrauva

xp€nsec

n lmpleNrlQntlng

tts pur?ose"The new rJrcular n E{fed mad€ A$ cwn legilsldbn

rbandonlng

he

pr€vlou*

ullngeof

tha

BIR

whlch becamc hc

pracfice

f the

conCom,nlumorporailonendudlng

h€f€ln

p€tlUonar.

The Revenue

Clrcular

hanged nd deperted

rom the

long

$rndlng

ruling

of th€

BIR that

assodruon

du€6Bndothst

f**

and charg€3

coltxtad

from mstrbss

.rs

tar axenrpt, ln to

dolng,

t rbru$ly

cfiarg*s

rorn

taxpayer

an

lrnposlUon

ftHhwas

th€n not odt0ng,

and worss

made t

lmmedlrtelyel'ibstlvs

whlch

E

Prgudlcltl

to St€

flghts

of

the

pe$tiorrer"

t dtd not

mrely

lnterpret

or clarlfy but

changad

ltogetherhe

long

standlns

ul*s of the

Buraeu

of

Intsnal

R€v€nu€.

It

13

cl€vsnt o

statEherdn

the

rul|ng

of the

HIgh

court In

tlte

cags

of Commlsslon€r

f

Intsrnal

Revanus

s.

Court

of Appeals,


11/14

l l

Court

of Tax

App€eb

and

Fortune

Tobocco

Corpor flon,G.R.

119761, 9

August

996).whlch s h€reunder

uoted

hu6:

'It

should fu

un@andabtc

ttnt

wlnn

en

admlnMraffve uk

b

mcrcly

lntpmrrltafive n aaturc

iF-apollablltlvllaggF

rcthttp

flstlter than l* barc

Isssance. br lt pivesno rcaI conse{scr4a

norc

tlrro

w_ha hc

law ltggaJtr

rs *lratdv oratr/rlb€d'.

Ythan

uaprr

dE athar hand"

tha edmlnfuatfirc ru&

gorls

Deyolld

merctv orovldha

@

ths

mqnt

tlnt an

fedl&te

er ftrlder ba&_

rxlI'.l,bcr&ffta

the

to

tu dulf

lnfotmcd, Dc/ rle.'

thc

ttcfi

@ana

le

given the tote and efrbcf.of hw1. (ur*lre,rlng

outs),

"Evfrcntly,

ln or&r b

plau

"Hry

Lurury,

"

Ftlg'mlum

Mora,"aN

"Chamfun'c&Eratb

gvttih

th.

ffifr

6 thc omcndr@ lrw ad sl.fijad thcnt

b an lnc/aa* tex

ra,ta,

ha rrow

clwuw

RNC37-93

had b bc bescd. In w dolng,

0r.

8IR not dnw

interpretd tie law; veff lt

JrybbM tr#er its

quasl

lcgts,latlve

tfrndv.

TI7E

&E &*rvena

of

tha iaqulrarnanB of natfu, lurdng and ol

publlcat&,n

ttwW not hsva&cn

lgnarcd.'

In thc lmtsnt c se,

lt was dlsclmadby

petlfloner

hrt Flrut

E-

Bank

CondsmlnlumCorporaUon

b a msnlEr of

thc

itfakatl

Comrn3rclef stete

Assochtlon, nc.

who elso wrot€ r

ldter to

thc

Honorablo

IR Commlesloner oeklng hi d€#armsnt

f the zubJect

MemorandumCtrcular

30 thst c€rtaln ls,But8msybe

properly

addreseed nd he

guldClnes

n

ths

samr be

put

In

phcc.

Uktvvtss,

patltloner

ppended o

lb M€morrndum hc

vrrlous

opfnlom and

rullngr of prevlous BIR Comrnlscloncru nd even durlng the

rppllcetlon br the lssusnc$

f

s

wrlt

of

prdlmhtry

tn

unctlon

Slxto

EsqulvlssV,

DeputyCommlsslonoregaland Enforccmont

roup,

n

Novgnber1998,

Jrnurry 5,

a000,

UllanB.

hleftf). n all tfimc rul|ngt

tho Comnrlsctonerf

lntarnal Revofiue,deidy dedaros

that the

recdpts

of the aseoclaUonuoc,

nambcehlp tcs,

powar

and wrhr

collectjom nd

other

asEessrnentr/chargs

hatwlll

bE

collectd

from

Ite

mernbcrs,whlch wlll be

hrdd n tru6t rnd

rYfkh

Nre to bn uscd

soldy

for adrnlnl*rauvc

€xp€nses

n lmplsn€nung

B

puryo6€/5

nd

whlctr hs rforessld

couldnot reallze

any

galn

or

proflt

rs

r

mgult

of

Its rccdpts thereof, ero not Includlblen tald corporeuon's ross

Incorne, nd herafore,hc

fund

h3|dbrc

8rs

not lbrert

to VAT.

Moreover,

t ls slrcady the

common buslnes*

Fncflc€

of

petftloner

hat the assoclatlon

ues, membcrshlp

ees snd tha llke

No.

b€fovrs tfc fGrrv

b a@rd rt fcrsf tl' &ost

dlrcdtv afftrt'rrcladtan*6

h

haail-

arrd harar,fEr


12/14

t2

are

not

Included

s

part

of

lts Income

and

thcrcfore

of the

VAT'

The

advent

of

the Mamorandum

Clrcular

65-2012

lseud

by the

commlssioner

hanges

he

trx lllblllty

of

pestloner

n

the

s€nsa

htt

It ls

now

subject

o

tax. It

created

a new

ax

burden

upon

petftloner.

pegloner

thln

could

not be

faulted

to conslgn

udlclally

as

they

clalm,

the

vat

amount

pendtng

resolutlon

of

the

petltlon

for

declsrEtory

rellef

hereln flled. RaspondentBlR Commissloner

shoutd

have

accorded

etluoner

h€

oPportunity

o

be h€'rd,

whlch

was

the

bone

of cont€ntlon

of th€

lctter

sent

to

the

Honorcble

Commlsdoner

hlch

was

not

acted

upon'

The Revenue

Memorsndum

Clrcular

dld

not

only

clerlfy

an

exlsunglaw,butchangesl tshpor tandlntsrpretat lonthat lnso

dolng

t

preJudlces

h€

rlEht

of the

petltloneras

. tax

paY€r'

Further,

he

above

clted

case

of

Comrnl$loner

of

Customs

and

th8 Dlstrlct collector of the Port of sublc ys. Hypernlx Fecds

Corporatlon,

.R.

No.

179579,

dated

February

,

201a,

8.Gase

f

stmitar

mpdrt

also

glve

lrnportancc

o the

requtremsnt

of

notlca

and

hearlng

and

pub[Catlon before

a

regulatlon

could

be

glYen

an

lmprimatur

of

valldity,

the

guprerne

Court

d€darEdl

"

ConsldcrlnE

that

ths

queffinad regulttlon

woud

aM tl'e

subtandve

lghts

of

rwndent

ae

explained

dbove,

it ttredbrc

follows

tfi.t

rrltft'lo.ners

snoud

have

apptied

tha

pettlnent

provlstons

of Eook

VII, Chapter2 of thd Revt*d Admlnt*ntflva

Codar

E

wlt:

Sectton

3.

Htlng

-

(I) Evcgry

gatry

shall

file

wtth

the

LJniveE,w

of

the

Phlltppln€5

ay

ccnter

thrr*

(3)

certificd

oples

of every

rub

a@ted

by it,

Ruhs'ln-

are

on thi

dab

of

aMlvlty

of

th8

Code

whbh are

not

flled

wlthtn

hrce

3)

months

tum

thtt

date

shall

not be

tfia

bases

of

any sanctipn

agetnst

eny

perty

of

perwns.

Section

g.

Public

hrtalpetion

*

(1)

If

not

othenvise

qulred

by

law,

en

aEency

hnll,

as far

as

pncticable,

publlsh

or drstlate

nofbes

of

ptoposed

'rules

and

afford

intersted

parties

the

oryrtuni$

to

submit

thetr

vlews

prtor

to

th€

ada$on

d

eny

rules.

(2)

In

the

txtrg

of

rttcr.,

no

rulc

or

find.order

stratt

e'

vatid

unless

the

proposd

ntes

shatl

have

beenpubtishedn a newspaper f gcnenl circulatlon

at

lebst

two

(2)

weels

be{are

the

flrct

hearlng

theteon.


13/14

l3

{i)

In crse of opposttbn,

ctta

@ntesfedc:s6s shtfl be

obserued.

)(xxx xxw )ou xxx

xxx xxx xn(

Llkcw&e,

n Tenad,vs, TuYera, e held;

rul66

on

Thecbar

obJad

of

thc abvequofid

provblon

is to

glve

tha

generel

publb

a&qwte

nothe of the

varlaus laws whldt

are tD regulafr

thclr edk)ns and

andud

es citlzens,

Wiihout srch

natirg and

publtatbn,

therc woutd

bc no

DEslt

for

the

appthatbn

of the maxlm

"pnonntJa

legb

non

ercnsrt".

It would bc

ttp lrG$ht

of lnt,ffi b

punislt or atfierwtu bwden a cithen lbr tha

tTztf,grGssbn

d

a

law

of whk;h lrc had

notla

wlrtt$oever,

not even

a

constnrctlrc

ona,

)Otxxx xm

xxru xlo$

noo( xxxx

xxxxxx

no1

g)(

nu

SGca{.R

pctttbners

fattedb

folbw thc

tqulnmcnts

enwnerated

by the

RevlsedAdminlEtnttveGode,

',e

asailcd rqulatlon mssf Dp stttrckdown,'

Slnce

he BIR In

passlng

he subJectmsnorrndum

clrcuhr

falled to

accord espondent

r those

slmllarlyStuated

8s a tax

pryer

due

notlc€

and opportunlty

o be

heard,

b€N\orc

ssulngs.ld

clrcular t

fs

thlEcourt'soplnlon

hat the lssuancc

wri arbltr dly

and

ln vlolatlon.

of the due

process

clause

of the

co$tftuHon.

Tho

respondent

n

lmposlngaddl$onalax

burdenon

psUUoncr

lolated

he

atter's onstltuHonNl

lght o due

no0ce ndheirlng.

Anent

the

prayer

of

p€tltloner

or

thls court

to meke a

pronouncement

n who betwEenh€

r€spond€nt ureau

of Int€mal

Revanue

nd the former

s entltl€d o the

e€umulatd

amountof

lncEmeax and

yat

In custodlc

egls, hls courtcannot

t

thls

polnt

dectare

he same.

Flrst,

th€

allegatlon

of

p€fltlonor

hat

lt elready

mrde a contlnulng

udlclal

conCgnsuon

n

the

amount

of the

purported

VATwas not substan$ated.

xcept

of

tho

bars alhgatlong

of

p€tltlon€r

no

proof

was

ghown

that th€r€

waE Ind€ed

a

conrignatlon

nade o thls

court

or

to

6ny

oth€rcourt. Except

or

tfie

lottar addrass€d

o th6

RevenueDlstrtct Offlcer

Rlcsrdo $plr{tu

dated December 2, 2012 announclnghe conilnulngJudldal

conslgnstlonf

the lncome ax and

VATcmounts

purportcdly

ue

under

he

qu€stloned

MC 5-2012, owhereln

hq record oufdwa

flnd that a conslgnatlon

was rnedc.

Hencs,

harE 13 retson

to

det€rmlnewho

betwcen

he contendlng

arfl€E

s enUtled

hereto.


14/14

t4

WHEREFORE,

n vlew of

the foregolng,

he Declaratory

elief s

glven

due

course.

The

ssuance f

Revenue

Memorandum

lrcular

No.

OS-ZOfZ

hereby

declared

o have

been

nvalldly

ssued.

SOORDERED.

Makatl

Clty,

Sept€mber

,

2013.

Cc:

Atty. Jo6€

D.

Melgarejo

Counsel

or

mition€r

BZL

A2 Lapujapu

St.,

NEw

Caoitol Estates

Commonweahh

ve.,

Quezon

CitY

Atty.B€mardimPaulSomera,Jr'

ForRespondenrt

IR

Office

of

thE.Solicitor

G€neral

134

Amorsolo

St.,

Legopi

Villaga

Mak

ti City

Litigation

Division

Burgau

d

IntArnal

RevEnue

Rm.

703,BIR

Bldg.,

Diliman,

Quezon

CttY

Mcv/llrct

ebank

vs.

blr'retolution

First e-Bank v BIR

Documents

Transcript of First e-Bank v BIR