CTA Case No. 6157 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ROGELIO M. ANTONIO, JR., Petiti oner, -versus - C.T.A. CASE NO . 6157 THE COMMISSIONER OF Promul gated: INTERNAL REVENUE, aJUL Qf1 20 Ot Respo nden t. v i'�J/(?1("'-�f t--l-. c, .[_./h~ X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - X DECISION The present case seeks the refund of the amount of P200,000.00 representing the 20% final tax withheld from Petitioner's PI Mill ion pri ze money won in the 1st Pambansa Mill enium Chess Grand Prix held last April , 2000. The facts of the case are as follows: Petitioner is a Chess Grandmaster, of lega l age, Fi lip ino, married and with postal address at No. 152-A Set. Gandia Street, Quezo n City (No. 1, Joint Stipul ati on of Facts and Issues). In April , 2000, Petiti oner wo n the Mill enium Chess Grand Pri x sancti oned by the Philippine Chess Federati on (PCF), a sports assoc iati on recogni zed by the Philippine Sports Commi ssion (PSC). During the award ing ce remoni es on April 18, 2000, the PCF withheld twenty percent (20%) of Petiti oner's P I Milli on cash pri ze, prompting the latter to refu se to accept the slashed award not onl y because the PCF 80 8

DECISION- CTA CASE NO. 6157 PAGE 2 announced during the start of the competition that the champion's purse would be tax- free, but also because of the existence of Republic Act (R.A.) No. 7549 which exempts all prizes and awards gained from local and international sports tournaments and competitions from the payment of income and other forms of taxes. On April 27, 2000, Petitioner requested for a ruling from herein Respondent as to whether the former's PI Million prize is tax-exempt or not (No. 3, Joint Stipulation of Facts and Issues). ln reply thereto, Respondent issued BlR Ruling No. 026-2000 stating that Petitioner's PI Million purse is not tax-exempt because the Philippine Chess Federation (PCF) which sanctioned the sports tourn<:ment is not accredited by the Philippine Olympic Committee (POC) pursuant to Section 2 of Republic Act (R.A.) No. 7549 (No.4, Joint Stipulation of Facts and Issues). On June 27, 2000, Petitioner filed a request for reconsideration of BIR Ruling No. 026-2000 and at the same time disputed the assessment made on his PI Mi Ilion prize (No. 5, Joint Stipulation of facts and Issues and Exhibit "!"), advancing the following arguments: "First, by imposing a 20% tax on his PI Million prize, Respondent unduly discriminated against him and unlawfully denied him the equal protection guarantee enshrined in the 1987 Constitution; Second, the rule that "exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority" is not absolute. Special laws applying to special cases (like R.A. No. 7549) are liberally construed in favor of the taxpayer and strictly construed against the State; Third, chess, as a sport, has its own Olympiad which, is held every two (2) years. The PCF which sanctioned the subject chess event gets its

DECISION- CTA CASE NO. 6157 PAGE 3 accreditation from the World Chess Federation (FIDE) and not from the International Olympic Committee (IOC). The PCF docs not need prior accreditation by the POC before it becomes a member of the FIDE. Therefore, being a sports association recognized by the Philippine Sports Commission (PSC), the PCF never sought accreditation from the POC. It results, hence, that Section 2 of R.A. No. 7549 does not and cannot apply to the PCF. But this insignificant technicality should not defeat the laudable purpose behind the enactment of the law. Respondent should have interpreted R.A. No. 7549 not by the letter that killeth. but by the spirit that giveth life because when the reason for the law ceases. the law automatically ceases to be one. "Cessante ratione cessat ipsa lex." Finally, R.A. No. 7549 is a special law intended for a special purpose while the Tax Code of 1997 is intended for general application. The settled rule is that "If the general law was enacted after the special law, the special law remains unless the subsequent general law covers the whole subject and is clearly intended to replace the special law on the matter. The Tax Code of 1997, particularly Section 32(B)(7)(d) thereof has, indeed, replaced R.A. No . 7549 and has also done away with the definition of a "National Sports Association" as one accredited by the POC." On July 18, 2000, Respondent denied with finality Petitioner's request for reconsideration, standing finn in his position that the exemption granted under Section 32(B)(7)(d) of the Tax Code of 1997 does not apply to Petitioner. This letter of denial was received by Petitioner on July 24, 2000. According to Respondent, "this provision was recommended for inclusion into the present Tax Code by the Technical Working Group of the BIR during the formulation of the CTRP in Congress, precisely on account of the special law on the matter, which is R.A. No. 7549. For all intents and purposes, therefore, it is R.A . No. 7549 which is the governing special law on the matter while the Tax Code, as amended by the CTRP. serves as the general law on the subject. x x x In case of conflict, the rule is that where there are two acts, one of which is special and 810

DECISION- CTA CASE NO. 6157 PAGE 4 particular and the other general which, if standing alone. would include the same matter and thus conflict with the special act. the special statute must prevail since it evinces the legi s lative intent more clearly than that or a ge neral statute x x x." Thus, based on R./\. No . 7549, Respondent held that to be exempt from ta xes on prii'.cs and awards received by athletes in sports competition, that competition must be sa nctioned by their national sports association. Since the governing special law defined " natio nal sports assoc iati ons" to mean only those duly accredited by the POC, then the clear intent of the law is to grant exemption only when thi s condition is met. On July 28, 2000, the PCF remitted to the Bureau of Internal Revenue the amount of P200,000.00 representing the 20% final withholding tax on the PI Million pri ze of Petitioner (Exhibits J and K) . On August 4, 2000, Petitioner filed a seco nd requ est for reco nsideration , thi s time on account of hi s meeting with former Congressman Leonardo B. Fugoso, the author of House Bill No. 22232 which later became R.A. No. 7549, vvho wrote a letter to Respondent on May 8, 2000 and rece ived by the latter on May 9, 2000, explaining the legislative motive and intent behind the enactment of R. A. No . 7549. Thinking that the said letter might have bee n overlooked by the Respo nd ent in formulating the correct ruling on the matter, Petitioner moved for another reco nsideration a nd requested again for a refund. However, since there was no immediate action on the part of the Respo ndent and the thirty-day period from receipt of the final decision or rulin g of the Commissioner of 81 1

/ DEC ISION - CT I\ CA SE N O. 61 57 PAGE 5 Interna l Revenue within whi ch to fil e an appeal before thi s Co urt was abo ut to lapse. Pe titi o ner elevated hi s case befo re Us on Au gust 23. 2000 . Respondent fil ed hi s Answer o n Septe mber 18, 2000, and claimed by way of Special and Affirmati ve Defenses th at: " 7.Petitioner fa il ed to dem onstrate th at the tax subj ect o f the case a t bar was erroneo usly or ill egall y coll ected . 8. Taxes paid and co ll ec ted a rc pres umed to have been pa id 111 accordance w ith law and regul ati ons, hence, not refund abl e. 9. In an ac tio n. fo r tax refund /credit, the burde n of proof is on th e tax payer to establi sh its ri ght to refund , and fa ilure to addu ce sufficient proo f is fata l to the acti on fo r tax refund/cred it. 10. Republic Act (R.A.) 7549 entitled "A n Ac t Exe mp ting A ll Pri zes And Awards Ga ined From Loca l And Inte rnati ona l Sports Tournaments A nd Competitions From The Pay ment Of Income And O ther Form s Of Taxes And For Other Purposes, w hich is th e law on th e iss ue is quoted as fo ll ows : "SECTI ON I . A ll pri zes and awa rds granted to athl etes in local and intern ati ona l sports tournaments and competiti ons held in the Philippines or abroad and sancti oned by the ir res pecti ve nationa l sports assoc iati ons sha ll be exe mpt from inco me tax: Provided, T hat such pri zes and award s given to sai d athl etes shall be deductibl e in full from th e gross inco me o f th e donor: Pro vided, furth er, That the donors o f said pri zes and awa rd s shall be exempt fro m the pay ment o f do nor's tax. " The bene fit s herein provi ded sha ll cove r th e X V!th Southeast Asian Games (SEA Games) hL: Id in Manil a from November 25 to December 5. 199 1. "SECTI ON 2. As used in thi s i\ct. the term : ( I) "S ports tourn aments and competiti ons" shall mean those tourn aments and competiti ons sanctio ned by th e nati ona l s ports assoc iations in acco rdance w ith th e rul es and reg ulati ons purs uant to Secti on 3 hereo f; and 81 2

DEC IS IO N - CTA CASE NO. 6157 PAGE6 (2) "Nationa l sports associatio n" sha ll mea n th ose du ly accred ited by th e Ph ilippine O lympic Comm ittee ." "SECT ION 3. Upo n the reco mmendation of the Commi ssioner of th e Bureau o f Interna l Reve nu e, the Philippine Sports Co mm issio n (PSC) and th e D epartm ~nt of �7 inance sha ll , w ithin thirty (30) days from the effectivi ty of th is Ac t, j o intl y promul gate rul es and regul ati ons necessary fo r th e effective im plementat ion of thi s Ac t. "SECTION 4. A ll laws, decrees, executive orders, othe r executive iss uances, rul es and reg ul at ions, or parts th ereof, w hi ch are inco nsistent wi th th is Act, are hereby repea led or modifi ed acco rdin gly. "SECT ION 5. This Ac t sha ll take effect upo n the completion of its p ubli catio n in at least two (2) newspape rs of genera l circul ati on. "App roved: May 22, 1992" The p resent provis ion of the Tax Code, as amended, wh ich incl ude pri zes and award s in spo rts competiti on among the items of inco me exempt from tax, is found in Secti on 32(B)(7)(d) thereof and thi s is quoted as fo llows: "(d) Pri zes and Awards in Spo rts Competit io n. - A ll prizes and awards granted to athl etes in local and internati ona l sports competiti ons and tournaments whethe r he ld in the Phil ipp ines or abroad and sancti oned by the ir natio na l sports assoc iati ons." II . For a ll intents and purposes, R. A. 7549 is th e gove rn ing specia l law on th e matter w hil e the Tax Code, as amended is the genera l law on th e subj ect. Where th ere arc two statutes, the earlie r special and th e late r ge neral - the terms of the ge neral being broad eno ugh to inc lude the ma tter provided lo r in the s pecial - th e fac t th at one is spec ia l and th e oth er is gene ra l creates a pres umpti on that the s pecia l is to be co nsidered as remai ni ng an exceptio n to the genera l, one as a ge ne ra l law of th e land, the other as th e law of a parti cul ar case. (Manila Ra il road Co. vs . Rafferty. 40 Phil. 224.) 12. T herefore, in order th at pri zes and awards may be exem pt fro m taxes as provided in R.A. 7549, the to urn aments and competi tio ns mu st be 81 3

DEC ISION - CT A CA SE N O. 6 157 PAGE 7 san ctioned by the ir respec ti ve nati onal sports assoc tatt ons. The go ve rni ng special law defin es " national sports assoc iati on'' . to mea n onl y those d uly accredited by th e Philippine Ol ympi c Committee. Hence, if the sa ncti onin g national sports assoc iati on is no t dul y acc redited by th e Philippine O lympi c Committee. the exe mption does not appl y. 13. As a rul e, any c laim for exemption must be stri ctl y construed aga in st th e g rantee. In additi on, whe re the prov ision o f th e law is c lear a nd unambi guous, so th at the re is no occasio n fo r th e co urt 's seekin g the legislative intent, the law must be taken as it is, devo id o fjudi c ial additi on or subtraction. (Republic Flour Mill s, Inc. vs . C IR. 3 1 SC RA 520). 14. Finally, th ere is no way to di spute the cardin a l rul e in taxati on that tax exemptions are hi ghl y di sfavo red in law and he who c la ims tax exempti on must be able to justify hi s claim or ri ght. The exempti o n cann ot be establi shed by mere .implication but it must be c learl y ex pressed. (Wond er Mechanical Engineering Corpo rati on vs . Co urt o f Tax Appeals, et al. , 64 SCRA 555)." On September 26, 2000, Res pond ent answered Peti tioner's second req uest fo r reconsiderati on, but merely re iterated hi s prev ious argum ents (Ex h. M). In the ir Jo int Stipul ati on of Facts and Iss ues fil ed on October 30. 2000 (p.58, CTA Record s), the parti es submitted the fo ll owing iss ues for reso luti on: I . Whether or not in ord er that pri zes and awards may be exe mpt ll�om taxes as provided in Republic Ac t No. 7549, tournaments and co mpetiti ons must be sanctio ned by the ir respecti ve na ti ona l sports "Ssoc iati ons, whi ch must be dul y accredited by the Philippine Olympi c Committee. 2. Whether or not Republic Ac t N o. 7549 is th e gove rnin g specia l law rega rd ing pri zes a nd awards granted to athl etes in loca l and intern ati onal spo rts competiti ons. 81 4

D LC ISION- CTA CA SE N O. 6 157 PA GE 8 3. Whether or not Petitioner is entitled to a refund of the withholding tax on th e prize he won in a chess tournament. 4. Whether or not the PI Milli on champi on's pri ze of Petiti oner in the Mill cni um Chess Grand Prix is tax-exempt. After a painstaking stud y of the argum ents raised by the parti es and the appli cable prov isions of law, We rule against Petiti oner. With reference to the first and second issues, thi s Court rules in the affirmative. Secti ons I and 2(2) of R.A. 7549 arc quoted here unde r. thu s: Section l. All pri zes and award s granted to athl etes in loca l and internati onal sports tournaments and competiti ons held in the Philippines or abroad and sanctioned by their respec ti ve nati onal sports associations shall be exempt from income tax: Provided, That such pri zes and awards given to sa id athletes shall be deductible in full from the gross income of th e donor: Provided, furth er, That the donors of said pri zes and award s shall be exempt from the payment of donor's tax . The benefits herein prov ided shall cover the XV Ith So utheast As ian Games (SEA Games) held in Manila from November 25 to Decem ber 5, 1991. Section 2. As used in thi s Act, the term " (1 ) X X X (2) "National sports assoc iati on" shall mean those dul y accredited by the Philippine Olympic Committee. It is clear from the aforequoted pro visions of R.A. 7549 that the tax exemption applies onl y if such pn zes and awards were granted in local and internati onal sports competitions that arc dul y sa ncti oned by their respecti ve nati onal spo rts assoc iati ons and 81u

DEC ISION- CTA CA SE N O. 6 157 PAGE 9 that the latter term sha ll mean onl y th ose that are accredited by the Philippine Ol ympi c Co mmittee. otherw ise the exempti o n docs not a ppl y. Co nseque ntl y, th e Co urt has no reco urse but onl y to appl y th e law as w ritten fo r "(a ) statute is no t o pe n to co nstructi o n as a matte r o f co urse. It is o pe n to co nstru cti on onl y whe re the language used in the statute requires interpretati on, tha t is. where th e statute is ambi guous, or w ill bear two or more co nstru cti ons or is o f s uc h do ubt ful or obscure meaning, th at reaso nable minds mi ght be un ce rtain or di sagree as to its meaning. (50 A m. Jur., pp. 204,205). Where the language of a statute is pla in and un ambi guo us and conveys a clear and definite meanin g, th ere is no occasion for reso rtin g to the rul es of statutory interpretati on, and th e co urt has no ri ght to look fo r or impose anoth er meanin g. A pl a in and un ambi guous statute is to be app li ed , and no t to be inte rpreted. since such a statute speaks for itse lf, and any attem pt to make it cl earer is a vai n labor and te nd s onl y to obscurity. (Ibid , pp. 205,20 7). In hi s first letter to the Respondent dated April 27, 2000 requ estin g for a rulin g on the taxability of the P 1 Million cash prize, Petiti oner himself acknowledged that ItA . No . 7549 has not ye t been repealed nor amended and th at it is still a good law w hi ch shoul d be made applicabl e on the matte r (Annex 13, Petiti on fo r Review) . No ti ceabl y. however. after Respond ent issued a rulin g un favo rabl e to him , Petiti oner, in hi s request !o r reco nsideration , ave rred th at the Tax Code of 1997 , parti cul arl y Secti o n 32 (B) (7) (d) thereof, has repl aced R.A. No . 75 49 and has a lso do ne away w ith the definiti on o f a " Nati onal Sports Assoc iati on" as one acc red ited by th e POC. 8lb

DEC ISION- CTA CASE N O. 6 157 PAGE 10 We canno t ag ree w ith Petiti oner th at R. A. No. 7549 had alread y been supe rseded by th e T ax Code o f 199 7. T he forme r rem ains to be the governing spec ia l law o n th e ma tter of gra ntin g tax -free prizes and award s to athl etes in local and intern ati ona l sports co mpetitions. "A subsequent statute w hi ch is ge neral docs no t repea l o r abrogate a form er statute w hi ch is specia l and intend ed to o perate o n a parti cul a r s ubj ect, o r a parti cular phrase th e reo f, o r fo r the be ne fit o r re iicf o f indi vidua Is." (C. .f. S., p. 5 15). Exce pted from thi s rul e are cases w here a diffe rent legi slati ve intent is pl ainl y m ani fes ted (P eople vs. Q uack, 11 N.E. 2d. , p. 965), o r w he re the ge nera l act is a rev isio n of th e w ho le subj ect intended to co nta in a ll the law o n the m atter o r w here the two ac ts a re so repugnant and irreco nc il able as to indi cate a legislati ve intent th at one sho uld re peal o r m odify the o the r. (82 C.J.S. .pp .5 Jl , 5 13). (c ited o n pp. l 78, 179, Statutory Co nstructi o n, Martin , Si xth Editi o n) Unfo rtun ate ly fo r the Petiti oner. hi s case does no t fa ll und e r any of the exceptions. Petiti o ner a lso prese nted as w itness fo rm e r Co n ~ ress m a n Leo nard o Fugoso . th e princ ipa l a uth or of Ho use B ill No. 22232, w hi ch eve ntuall y became R .A . No. 7549. When he testifi ed during the hearin g of thi s case o n Novem ber 16, 2000, M r. Fugoso explained th at hi s bill reall y intend ed to bene fit the athl etes engaged in a ll kind s of spo rts includin g chess and that the reason wh y a nati o na l spo rts associati o n was taken to mea n o nl y those dul y accredited by the POC is that the PSC was crea ted o nl y in 199 1, or two (2) years after House Bill N o. 22232 was fil ed . While it may be true th at at th e tim e M r. Fugoso introd uced Ho use Bill No. 22232 111 1989 the PSC was no t ye t in ex istl:nce (th e same ha' ing bee n created in 1990, no t in 81(

DEC ISION - CTA CA SE N O. 61 57 PA GE 11 1991 , by R.A. No . 684 7) and th at onl y th e POC was at th e tim e in the positi o n to di scharge the duty of accred iting th e di fferent sports assoc iati ons, it bears stress ing that R .A. No . 7549 was finall y approved onl y in 1992 when the PSC had been in ex istence fo r quite sometime, w hi ch clearly shows th at the lawmakers had the opportunity to cha nge POC to PSC or add within its scope a lso th ose dul y acc redited by the PS C. ln fac t, o n February 4, 1992, certain members of the Senate and th e I louse o l' Representati ves met at the 5111 Regular Sess ion of the Bi camera l Co n ference Co mmittee on Ways a nd Mea ns (Exhibit D) to make fin a l changes in th e bill. Still , they did not introduce any change in the mea ning of the term " Nati onal Sports Assoc iati on." Th ey likewise reJI'a ined l'rom making an enumerati on o f th e sports included in the bill , allowing th e same to be enumerated or stated in the rul es and regul ations to be promul gated in accordance w ith the bill. For purposes of clarity, quoted hereund er are the pertin ent portions of the de liberations taken during the said meetin g: " TH E C HAIRM AN (SEN . U NA ): A nd in Secti on 2, as used in thi s Act, th e term sports tournaments and competiti ons shall mean th ose tournam ents and competiti ons sancti oned by the Nati ona l Sports A ssociati ons in accord ance w ith the rul es a nd regul ations pursuant to Section 3 hereof. TI-I E C HAIRM AN (R EP. PER EZ): We agree 111 essence subj ec t to style . THE CHAIRMA N (S EN . U NA): And th en the term N ati ona l Sports A ssociatio n shall mean th ose dul y acc redited by the Philippine Ol ympic Co mmittee . (Offthe reco rd) 81 8

DEC ISION - CTA CASE NO. 6 157 PAGEI2 THE CHAIRMAN (SEN . U NA) : On reco rd na. So I propose that we adopt thi s sub-secti on, of pa ragraph 2 of Secti on 2, Mr. Chai rman. THE CHAIRMAN (REP. PEREZ): Yes, I accept that." Veril y from the above, the intention of the law ma:<ers was to grant the exempti on only to those dul y accredited by the POC. Fo r if they intended otherwi se, they co uld have easil y rev ised the bill . " Indeed, it is the duty of the courts to give a statute the interpretati on its language call s for, where thi s ca n reasonab ly be done, and the general rul e is that no intent may be imputed to the legi slature in the enactm ent of a law other than such as is supported by the face of the law itself." The law may be hars h, but that is the law. Dura lex sed lex. "xxx (T)he legislatu re must be assumed or presumed to know the meaning of the wo rds, to have used the wo rds advised ly and to have expressed its intent by the usc of such wo rds as are fo und in the stat ute." (50 A m. Jur., pp. 211 , 212) Since Petiti oner won in the Mill enium Chess Grand Pri x sancti oned by the PCF, a sports association recognized by the PSC but not accredi ted by the POC, it fo llows then that hi s champi on's prize of PI Million is not tax-exem pt. We agree with Respondent that from the prov isions of R.A. No. 7549, it is clear that the law intended to ex tend the benefit of tax exempti on to athl etes in sports events played in the Olympic Games, thus the need for accreditati on with the POC. Therel'orc, Petiti oner is not entitled to a refun d or the tax withheld on the said amoun t. Time and again , thi s Co urt has held that since a tax exemption impli es a waiver on the part of the Government of its ri ght to co ll ect what is otherwise due it, the same is subj ect to the rul e on strict co nstruction again st the taxpaye r claiming the exempti on and

) I DEC IS IO N- CTt\ CASE NO. 6 157 l't\GE 13 he who claims its bene fit has the burden of provin g th at there is a law th at clearly and ex press ly grants th e exempti on and that he is qua lified to enj oy th e pri vil ege. The grant cannot be given a w ider or ex tend ed sco pe th an what is clearl y gra nted. (p.85. Principles o_( Taxation. Palma, 1988 Edition). While We commi serate w ith w inning athl etes who are not members of the POC fo r they have to be taxed acco rdin gly, thi s Co urt has no reco urse but onl y to appl y the law. The legislati ve intent is pl ai n and c lea r maki ng it unnecessary to appl y any presumpti on of law. Unl ess and until the prov isio ns o f R.A. 7459 arc amend ed so as to inc lude w ithin its purview even non-members of the POC, th e law prevail s and has to be foll owed. WHEREFORE, premi ses considered. Petiti oner's claim for tax refund is hereby DENIED for lack of meri t. SO ORDERED. ~fi ~ c_Lt / Assoc iate J uclge < I CONCUR: L[S} ~ ~ ERNESTO D. ACOSTA Presiding Judge 820

DEC ISION- CTA CA SE NO. 615 7 PAG E 14 CERTIFICATION I hereby certify th at th e above dec ision was reached afte r clue co ns ultatio n w ith th e members of the Co urt o f Tax A ppeals in acco rdance w ith Secti on 13, A rti cle Vlll of th e Co nstituti o n . ~4>- 0~ ERNESTO D. ACOSTA Presiding Judge 82 1