CTA Case No. 4419 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PHILIPP INE BASKETBALL C.T. A. CASE NO. 4419 ASSOCIAT ON , Petitioner, - versus - THE COMHISSIONER OF INTERNAL REVENUE , Respondent. x- - - - - - - - - - - - - - x DECI S I 0 N This ~ase involve s an ass essment of the alleged 1987 deficie ncy income and amusement taxes in t he amount of P8,870,902.20 and P5 ,864,260.84 respectively , including s urcharge end int res - . e i_ ion ~, Ph ppi ne Basketball Associatio n (PBA), is n unincorpo ed juridical entity organized to conduct b ske all tournaments for its members , to wit: San Migue Corporatio n, Pilipinas Shell Pet role um � Corpora tion , CFC Corporation, La Tondena Distillers , Inc., GF Equity I nc . , and Elizalde & Co. , Inc. on June 21, 1989, Petitioner receive d a n assessment letter from the Respondent demanding payment of P14,757,088.94 representing a lleged deficiency income and amusement taxes , including increments, computed as follows:

DECISION - C.T.A. CASE NO . 4419 - 2- Deficiency Income Tax Ne t Taxa ble Income P14,080,79 7 . 20 Tax Due thereon p 4,928 , 279. 00 Add1 50 % s u rcharge ( fraud) 2 ,46 4, 139 .50 20 % interes t fro m 4- 15- 88 1 ,4 79,483.70 to 4- 15- 89 p 8 ,870, 902 . 20 Total Amo u nt Du e & Collectible De f ic i ency Amusement Tax Total gross r e cei pts 1987 P19 , 970,9 28.00 15 % ta x du e there on p 2,995, 639 . 20 Less: Tax p i d 602�063.3 5 Deficiency a mu semen t t ax p 2 , 393,57 5 . 85 Add : 75% surc h arge 1,79 5, 181.89 1 r67 5 r 50 3. 10 20% interest ( 2 years) p 5l 864 ! 260 . 84 Total Amo un t Due & Collectible On J ul y 18 , 1 989 , wi th in the regle ment ary t h i rty (30) day per od g i ve n the taxpayer, Pe t i ti oner filed its protest "det iling t h facts a nd ci r cum stances i n c id ent to t h e for mation of the PBA, the purp oses for its creation , the actual conduct of its ope r ations and t he c le aring house/trusteeship natur e of the PBA " (Exh. M) On October 19, 1989, whi l e the protest remained unresolved, the Bureau of Internal Revenue (BIR) garnished Petitioner's bank deposits with the Rizal Commercial Banking Corporation in the amount of P3,533,245.45, which Petitioner promptly protested (Annex E)

DECISION - C.T . A. CASE NO. 441 9 - 3- On January 2, 1990, Petitioner receive d t he l e tter of Resp ondent o n November 6, 1989 denyin g Peti t i o ner ' s prote s t wi th f i n al it y. ( see An n ex F) He n ce, thi Pe i on for Review. I n comp l ian ce w� h the r e elution o f t h i s Cou r t date d January 23, 1990, Peti ioner filed a surety b o nd (N o. 0064 4 ) in t h e a moun o f Pl4,800,000. 00 to co ve r th e defi c 1 e n y in c om an d mu s me nt taxes asse ,s.s e d a ga i nst the Peti ne r. "d s rety bond was approved by th i s Court on Ap 27 , 199 0 h e eby en jo i n ing a nd restraini n g t h e Respo n dent "from p r oc eeding with the collection of said de ficiency taxes t h rough a writ of garnishment issued against petitioner's depository bank, pending final adjudicati on o f the above-entitled case" (Resolution p. 151 CTA Re c ords). The only issue remaining in the case at bar after the counsels of the parties filed a Joint Manifestation on September 8, 1992 is: wh e ther or not Petition e r is liable for the 1987 defi ci enc y amusement tax. The assessment on income tax was withdrawn by the Respondent and accordingly, Petitioner amended the Petition for Review deleting said issue in accordance with the Joint Manifestation of the partie~ ~h i ch is h ere by reproduced for easy reference ~ ') � I

DECISION - C.T.A. CASE NO. 4419 - 4- JOINT MANIFESTATION The parties, thru their respective counsel , before this Honorable Court, respectfully manife st: 1 . The instant case invol ves the re spondent's def' cie nc y tax assessments for the yea 1987 in the amount of P8 ,89 2,828.10 as def'cie n c y incom tax an d the sum of P5,864, 2G 0. 64 as de� ciency a mu se ment tax being - s on d by petitioner. 2. The ss u s o f the ca e are : ( ) Wh eth or not petitio ner is a cle aring hou s I rus t ee of its mem er of the revenues derive d from i ts operat ion: nd (b) Wh he o not etitioner is l iab e for 1987 defici ency amusemen tax as e s d by respondent . 3. In an administrative protest filed by petitioner against respondent's assessment for deficiency income tax for 1988 which involves the same issue in the case at bar, i.e. , whether or not petitioner is a clearing hou se of its members, and respondent upon careful review of the facts of the case and the applicable laws and jurisprudence, ruled th at "The PBA function s so lely as the clearing house to distribute the revenue s derived to the team members . As it has no income, perforce it s hall not be taxed under Section 24 of the Tax Code." 4. Attached herewith and mad e an integral part of this Joint Manif~ stati on is a x~ rox copy of the letter of the respondent dated J n 10 1 ~92 ad dress ed to Mr. Reyna ldo G. Ma que ~ , CQm mi~s Ph~r, Philippine Basket b a l l AS$o Ci~ aM , w thd rawing and cancelling the 1988 defici ency . income tax assessment issued against the PBA. 5. Petitioner, therefore, on the basis of the above letter is withdrawing its petition for review insofar as the 1987

DECISION - C.T.A. CASE NO. 4419 - 5- deficiency income tax assessment is involved in the case at bar which respondent interposes no objection to said withdrawal. (Emphasis supplied) 6. The remaining issue of whether or not petitioner is liable for the 1987 deficiency amusement tax assessed against it by respondent shall be litigated by the parties before this Honorable Court. .(Emphasis supplied) We resolve the issue in the aff irmative. The Petitioner 's contention that the jurisdiction to collect amusement taxes is vested i n the local g vernment units under Presidential Decree 231 (Local Tax Code l , \"li h o t merit. Whi le it is true tha t P.O. 2 3 1 a uth o izes he p ov i no to impose a tax on admission to be collected from proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement, such proviso of the Local Tax Code was expressly repealed by Presidential Decree No. 1456, as a mended by P.O. No. 1959 as to the rate of tax imposed by subjecting to amusement tax the professi onal basketball games as envisio ned in P.O. No. 871. Section 13 of the LOCa Tax Code provides, hu Amusement tax ,on admission. The province shall impose a tax on admission to be collected from the proprietors, lessees, or operato rs of the a ters, cinematographs, concert halls, circuses and other places of amusement.

DECISION - C.T.A. CASE NO. 4419 - 6- Although the term "other places of amusement" embraces not only those enumerated under the Local Tax Code but those to be included must belong to the same class as those enumerated under the doctrine of ejusdem generis. We do not see professional basketball games as falling under the same class as theaters, cinematographs, concert halls or circuses although professional basketball games can be a form of entertainment yet it falls categorically under sports while the others can easily fall under fine arts. And besides, professional basketball games was specifically mentioned under P.D. 1456 together with race tracks and boxing exhibitions thereby expressly repealing the foregoing proviso of the Loc a l Tax Code. Not even the Revenue Memorandum Circular No. 8-88 cited by the Petitioner could save it from p a ying the defi c iency amus e ment tax since a reven e mem ra ndum cir c ula r co uld never super cede wha t is clearly mand t d y la w. Said Presidential De cree No . 1456, as amended by P.O. No. 1959 , exp ressly provid es, t hu s: SEC. 44. Sec ion 268 of this Code, as amended, is hereby further amended to read as fol lows : "Sec. 268 . Amusement taxes.- There shal l be col l ecte d from the proprietor, lessee or operator of _, cockpi ts , cabarets , night or day cl ubs, b oxing e xhib itions, professi onal basketball games , Jai

DECISION - C.T . A. CASE NO. 4419 - 7- Alai, race racks and bowling alleys, a tax equivalent to: "1. XXX XXX "2. XXX XXX "3. XXX XXX "4. Fifteen per centum in the case of professional basketball game s as envisi on ed in Presidential Decree No. 871 . Provided, however, That the tax herein shall be in lieu of all other percentage taxes of whatever nature and descri ption , "5 . XX X XXX "6. xxx For the purpose of the amusement ax , the term "gross receipts" e mb races all the receipts ot the propri to r, less ee or operator of the musement pl ace. Said gross .ec eipts lso include all inco me from televisio nz radio and motion picture rights, if anl:. (A p son or entity or assoc ' ation co nducting any ac ivity subje ct to the tax herein imposed shall be s imilarly liable for said tax wi h espec t to s uch portion J of t he rece 'pts derived by him or it.) ( Emphases s upplied) This is now incorporated under Section 228 of the 1987 Tax Code . Un der the fore g oing provision o f the Tax Code, another contention o f t he Petitioner that "the ces sion of advertising and streamer s paces to VEI, for which the latt er paid the PBA members P1,SOO,OOO.OO is not subject t o the paym en of am u se ment taxes" is again untenab le . The law is too plain t o be missed and too categoricctl o be mi s nterp eted . Thus, "the te rm

DECISION - C.T.A. CASE NO. 4419 - 8- 'gross re c eipts' embraces all receipts of the proprietor, lessor or operator of the amusement place ... " (ibid.) which necessarily cover or include revenues derived from advertising and streamer spaces in the venue of the games. (Emphasis supplied) WHEREFORE, in all the foregoing, herein petition for review is hereby DISMISSED for lack of merit and the Petitioner is hereby ORDERED to PAY to the Respondent the amount of P5,864, 260.8 4 as deficiency am usement tax for the year 1987 plus 20% annual delinquency interest from July 22, 1989 which is the due dat e app e ri ng on the noti c and demand of the Commissioner (i.e. 30 day s rom receipt of the assessment) until fully paid pursuant to the provisions of Sections 248 and 249 (c) (3) of the Tax Code, as amended. SO ORDERED. Quez on City, Metro Manila , Decemb r 24, 1993 RAM~ON"0.?)D,E. "-*.I~ ~ Associate Jud

DECISION - C.T . A. CASE NO. 4419 - 9- WE CONCUR: ~Q�~~ ERNESTO . ACOSTA Presiding Judge GRU A Judg CERT F I CAT I 0 H I hereby certify hat the decision was reached after due consultation among the me mb ers of 'the Court of Tax Appeals in accordance with Section 13, Article VIII of he Constit tion. ~ RH STO 0. ACOSTA Presiding Judge Court of Tax Appeals /amf