CTA Case No. 2886 (Decision)

REPUBLYC OF THE PHYLYPPY N ES COUR T OF TAX APPEALS Q U EZON CYTV ENJAY , INCORPORATED, C.T.A. CASE NO. 2886 F'eti tioner- ~ COMMI SS IONER OF INTERNAL REVENUE , Respondent. X- - - - - - - - - - - X DEC I s 0N This case comes on a simp 1e issue in o J. v ing the va J. .id i t.y and en forceab.i.l.i ty o �f the cater-er� s tax under Section 191-A of the Tax Code during the period in question. Peti tionet�- is the oper-a tor of Hotel Intercontinenta l Manila~ including a restaurant~ bar and cafe and a nite club wit h in the said Hotel. Petitioner- had dec 1a red for t.a}: purposes a 1 1 its gross receipts for the period from the 2nd quarter of 1975 to the 1st quarter of 1977 and had paid the total amount of P3~273~020 . 35 as caterer's tax 2uu

DECISION CTA CASE NO. 2886 .._ 2 -� pursuant to Section 191-A of the National Internal Revenue Code. Relying on the r� ecent case of Manila Golf a Cc:�untry Club v. Co��tissioner of Internal Revenue, CTA Case No. 26.30 .~ Narch .30, 1977, v1herein this Court ruled that Section 191-A of the Tax Code was vetoed by the President of the Philippines and that the same did not become a lav1 nor formed part of the Old Tax Code, petitioner on July 6, 1977 filed with the respondent a claim for refund of the aforementioned a mount of P3,273,020.35 representing caterer's ta>: paid for the period. In order to toll the period of the statute of limitations it �filed the in s tant petition for- revievl on July 18, .1977. The situation obtaining comes analogous in f ac t s and identical in question with the case brought on appeal to the Supreme Court in the Co��i ss i oner of Internal Revenue v. Han i 1 a Golf a Country Club, Inc., G.R. No. L- 47421, May 14, 1990, which disposed of the particLil ar i SSL\1?. in controversy and unequivocably ruled that the presidential veto referred merely to the inclusion hotels, motels and resthouses in the 20% 2UJ.. ..

DECISION CTA CASE NO. 2886 .�.-..�. caterer's tax bracket but not to the whole Section 191-A of the then applicable National Internal Revenue Code. In arriving at this ruling, the Supreme Court made observations, among others, as follm~s: As mentioned earlier, We have already ruled that the presidential veto referred merely to the inclusion of hotels, motels and resthouses in the 20% caterer's tax bracket but not to the whole section. But, as mentioned earlier also, the CTA opines that the President could not veto words or phrases in a bill but only an entire item. Obviously, what the CTA meant by "item" was an entire section. ~.!Je do not agree. But even assuming it to be so, it would also be to petitioner's favor. The ineffectua l veto by the President rendered the whole Section 191-A as not having been vetoed at all and it, therefore, became law as an unconstitutional veto has no effect whatsoever. (See Bolinao Electronics Corp. v. Valeria, No, l.-20740 .� ~7une 30 .� 1964, 11 SCRA 486.) However, ~.!Je agree with then Solicitor General Estelito Mendoza and his associates that inclusion of hotels, motels and resthouses in the 20% caterer's ta>: bracket are "items" in themselves within the meaning of Sec. 20(3), Art. VI of the 1935 Constitution which, therefore, the President has the power to veto. An "i tern" in a revenue bill does not refer to an entire s ection imposing a particular kind of ta>:, but rather to the subject of the tax and tax rate. In the portion of a revenue bi 11 which ac tua 11 y imposes a ta>:, a section identifies the tax and enumerates the persons liable therefor with the

DECISION CTA CASE NO. 2886 - 4- corresponding ta>: rate. To construe the word "item" as referring to the whole section would tie the President's hand in choosing either to approve the whole section at the expense of also approving a provision therein which he deems unacceptable or veto the entire section at the e>:pense of foregoing the collection of the kind of tax altogether. The evil which was sought to be presented in giving the President the power to disapprove items in a revenue bill would be perpetrated rendering that power inutile. (See Co��anwealth ex rei. Elkin v. Barnett~ 199 Pa. 161~ 55 LRA 882 [19011.) WHEREFORE, the petition for review in the above- entitled case is hereby dismissed. No pronouncement as to costs. SO ORDERED. Quezon City~ Metro Manila~ August 31~ 1990. I CONCUR: CONS Judge 2Uu

DECISION CTA CASE NO. 2886 - 5 -� C:ERTXFXC:ATXON I hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals in accordance with Section 13~ Article VIII of the _sociate Judge C Jrt of Tax Appeals 2 U�.s