CTA Case No. 2890 (Decision)

REPUBLI C OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY DELGADO BROTHERS HOTEL C.T.A. CASES NOS. CORPORATION doing business 2890, 2907 & 2929 under the name and style of THE MANILA HILTON, F'eti tioner� , - versus - THE COMMISSIONER OF INTERNAL REVENUE. Respondent. X - - - -- - - - - - - - - X DEC I I0N Delgado Brothers Corporation doing business under the name and s ty 1e of The Mani 1a Hi 1 ton, petitio er- in these thr�ee cases, seeks the ref und of the caterer's taxes it paid in the total a mo un t of F'3,319 , 462.01, under Section 191-A o f the t hen ap pl ic:'t:\b 1 e Nation a 1 In tern a 1 Revenue Code as a me n de d by Rep u b l ic: Act . No. 6110. F'eti ticmer� o wned and operated The Ma n ilC\ Hilton l ocated at United Nations Avenue , Metro Manila , wherei n it operated restaurants, bars , cafes, and n ightclubs where food, r�efres hment, d istilled spirits, l iquor and wines were served. Conf~~ m ab l y with Section 191-A, whic h too k ef fect. September 1 ' 1969, petitioner pai d caterer'. s''I1'�"t' :a>:es �for the per icld Apr i 1 1' .1975 to 11.1

DECISION - CTA CASES NOS. 2890,2907 & 2929 -2 M.:"H~ ch 31, 1'377 ir1 tt1e t�:�tal i:H11 0::�tmt o f P3 , 53'3, 182. 1'3 representing 3~ of it s gross receipts on the sale said section, 7~ of its gros s receipts on the sale of distilled spirits, liquors and wines under pat~agt~aph (2) thet~eof and 20~ of i t s total gt~o::�ss receipts from the sale of both under paragraph (3) thereof. On Mat~ch 30, 1'377, this Co::o1.1t~t pt�o::�mulgated its decision in CTA. Case No::t. 2 6 3 0, Manila Golf and Country Club, Inc. vs. Commissioner of Internal Reveril.te, whet~eir, it held that Secti o::�n '+2 o::�f House B i 11 No. 1873'3 <Y10::�W Repub 1 i c Act No. 6110), i r1set~t i r1g S~ct i or1 1'31 - A bet we en Sect ,i o ns 1'31 and 1'32 of the then in force National Internal Revenue Code, was vetoed by the President in his veto message dated Al.lgl.tst 4, 1'36'3, which veto was not overidder1 by Cor,gress, , thet~efo::�re, Sectio::�r1 1'31 - A did not become a law. As filed with respondent on July 6, 1'377 its claims for the ref1.md of caterer's taxes in the amounts of P343,402.37, P42'3,262.'30, P4'32,215.83 and P2,277,3,4.78 it paid for the periods April to June 1'375, J1.1l y to Sept em bet~ 1'375, Oct o::obet~ t �::t December 1'375 �nd January 1, 1'376 to March 31, 1'377' .11~

DECISION - CTA CASES NOS. 2890,2907 & 2929 -3 t~espect i ve 1 y. CExhs. K, L, M & N, Petitioner's Er.ve 1ope. > its claims or.ly wher1 a fir1al t1ecisio:on has beer� reached by the Supreme Court in the Manila Golf and Country Club case which is the legal basis of pet it ior.et~' s claim. <Exh. 0) Hence, petitioner's recourse to the present Cases Nos. 2890, 2907 and 2929 for the recovery of ta><es it paid in the amo�.mt s of P340,398.68, P429,262.90 and P2,769,520.61 for the pet�iods Apt~il 1, 1975 to:. J�.me 30, 1977, July 1, 1975 to Sept em bet~ 30, 1975 and Oct co bet~ 1, 1975 to Apt~ i 1 20, 1977, t~espect i ve 1 y. Due to the two-year pt�escriptive pet�io:od, ho:owevet�, the claim f�:n~ t~efund in the amount of P340,398.68 in CTA Case No. 2890 was later t~ed�.tced by pet it io:onet' to:. P120, 678.50 to covet~ o:or.ly the pet�io::od J�.me 1 to:. 30, 1975 thereby excluding the caterer's taxes it paid prior to July 2, 1975. (See Exh. J & petitioner's memorandum, p. 110, CTA t�ecot~ds. ) Th�.ts, petitio:met�'s claim fot� the refund of caterer's taxes it paid for the period J�Jr�e 1, 1975 to March 31, 1.977 totallir�g P3,319,462.01 is broken down as follows: CExh. J) llu

DECISION - CTA CASES NOS. 2890,2907 & 2929 -4 Payments of Caterers Ta x June 1975 to March 31, 1977 (Claim for Refund to be Fi led In View of the Court of Ta x Appeals Decision on the Manila Golf and Country Club Case) /' Official Total 3'l. Ta x 7'1. Ta>: l O'l. Tax Add ' I 10% Receipts Amount on Food Date Numbers Paid Sales on Beverage on NightCl ub tax on Night Year Period Covered Paid Sales Sales Club Sec. 191-A 1975 June 1-30 7-31-75 2277034 P1,1 20 .678.50 p 37,689.09 p 30,752 .46 p 26,118 .48 p 26,118.47 July 1-Sept. 30 10-21-75 2277136 429,262.90 130,424.39 109,570.42 94,634.05 94,634.04 Oc t.1-Dec. 31 1-20-76 2277248 492, 215.83 147,468.51 109,759.54 117,493.89 117 , 493. 89 1976 Jan.1-Mar.31 4-20-76 2603960 478 ,217 .24 1~� 5,376.39 117,463 .65 102,688.60 102,688.60 Apr.1 -June30 7-20-76 2928786 434, 093 .52 140,936.36 109,513.03 91 '822. 06 91,822.07 July1-Sept.30 10-20-76 2928886 542,1 32.21 143,393.38 115,115.48 141,811.68 141 ,811.67 Oct.1-0ec. 31 1-20-76 2928970 448,288.92 145,248.97 11 5,271.81 93,884.07 93,884.07 1977 Jan.1-Mar.31 .. 4-20-77 09499641 ��-� . lZ1.l.~.U..!1lJ. . .._J_UJ.J.Y~.~k ........B..!>.l.!&L.Q.? ... ..?..7.1}1.~. ~1? -~?..l.~.1J.~.1? Total ~~l,~;~:~:!1,6,"2,,:2J, EJ,~2n,~z~,~~,,?,~ r:n,1,!,U~,~,1,~ fL~,~:1.Z~L~,~J fd.~~,!l~L3,9 The pr�.inc.ipal i ss;ue her-e is li'Jhet:.hPr- petitioner- is entitled to the r�e�fund of the c.:'lt:l:~rer� 's t:.a>:es i t paid under Section 191- A of the . applicable National Internal Revenue Code~ dLwing the per.. .i.od aun e l ~ 197~' to Man: h 31, 1977. In brief~ the controversy centers on whether Section 191 - A bec ame a law. F'eti tioner c:on te!nd s t:.ha t it !:?rr�oneous 1y paid the disputed caterer's taxes under Section 191 - A since that section turne~ o ut to h ave been vetoed by � the President as determined by this Court in CTA Case No. 263 0~ Manila Golf And Country Club, In c:. v s. Commissioner of Internal Revenue as 'follows :

DECISION - CTA CASES NOS. 2890,2907 & 2929 -5 a. Sect icon '+2 o:::of House B i 11 No::o. 18739, r11::0W F~epubl ic Act. No::o. 6110, inserting Section 191 - A between Sections 191 and 192 of the National Internal Revenue Code, was vetoed by the President in his veto message dated August 4, 1969; b. Ccor.gt�ess did no::ot ovet't' ide the presidential veto; c. Sect icon 191--� A did no:ot become a law and should not therefore form part of the National Internal Revenue Code: The decision of respondent Commissioner of Internal Revenue dated Mat�ch 2, 1973 assessing pet it iconet' Mard la Gcolf and Co�.mtry Cll.lb, Inc., fixed taxes as copr:.n�atot' cof golf links and restaurant's and caterer's tax imposed in Section 182 and 191 - A of the Revenue Code iY'1 the to::.tal amount o:::of P32, 80'+. 96, inclusive of surcharge and compromise penalty, cannot be sustained. Notwithstanding this Court's decision in that case, however, respondent maintains that Section 191-A o:of tt1e Nat icoY'1al Intet� r.al F~evenue Code is in full force and effect and that what was vetoed was the proposed increase to 20~ o:of the tax on hotels, motels, and t�estho�Jses so:::o that such establ ishmeY'.ts would still be liable as ordinary eateries for the catet�et'' s taxes of 3?<. and 7?<. as the case may be. (AY'ISWer, p. 16 & 17, CTA reccot�ds.) Having appealed the abovecited decisicoY'� to the Stlpreme Cout�t in G.R. No. L-47421, entitled Commissioner of Internal ReveY'��Je vs. Mar.ila Go:olf and Co:o�.mtt�y Club IY'1C. and the Court of Tax Appeals, respondent prays that the llv

DECISION - CTA CASES NOS. 2890,2907 & 2929 -6 decision .i.n th<:?. in ~~ te:1nt cas:,p �, b!':~ hf~ ld in abeyance pending the final decision by the Supreme Court in the r.;; a id c a~.:.e ~ vJJ-�,ic h invo 1 vp s t.hP r:~ amE~ i s~.; ue a s that in the cases at bar. Petit.i.onE~r� in s ists that the �fin.::1l r�esolut..i.on of the issues in the Manila Golf and Country Club Inc. case is not ind i spr.:> n�:::.C:"\b 1 e to t.hf~ adjudication of the in s tant petitions for even following respondent's defense that the veto of Section 4~:.> limit e d t:. o th,:'lt thf:~r- eof imposing 2 20% cC~terer' s tax on hotels~ motels and rE~sthrJus; es~ pPtitionpr� would ~:; till bF:~ entitled to the r�e �fund of t .ht..,> c:at. r:~r� r.�?r�� 's; t.r.~:-:r:?s c:l,:'!imed since these were p2id by a hotel enterprise and therpfore was not li2ble for c:C~t.erer' s t.2x. We . find that pet.iti.oner� 's-, cau s r.:> mus-. t fail in t he light of the recently promulgated deci s ions of the Supreme Court in two cases where the main issue raised is identic:C:"Il to that in the pres ent cases. In Commissioner of Internal Revenue vs. Manila No. 83250 dated September 26~ 1989~ the Supreme Cour-t he 1d: The powPr of the stC~tP to impose the 3% c<:~terer� ' 5 ta:-: i s not c:IF.~bC:"Itable. Thr.,:> Court Df Ta:�: AppE:�a 15 !~ rr-� ed ~ howE~ver. :i.n holding t. h r.,,t t.hr.;~ ti::l :-: vJaf:5 abnl :i. s hed as a result of thP presidential veto of August 4 ~ 1. 969. It �failed to e :-u:~mine the 1 a\1'1 then~ and up to nnw~ e x isting on the

DECISION - CTA CASES NOS. 2890,2907 & 2929 -7 subject which has always iMposed a 3~ caterer's tax on operators of restaurants. Since the Manila Hotel r.:�pet�ates t�estaut�ar.ts ir� its pt�emises, it is liable to pay the tax provided in paragraph (1), Section 206 of the Tax Code. The issue o:�f whet het�� Section 1'31 - A became a law was not squarely settled in the above case, but it was finally laid to rest in the aforementioned case of Commissioner of Internal Revenue vs. Court of Tax Appeals and Manila Gr.:�lf and Co�.mtry Club, G. R. Nr.:�. '+7421 dated May 1'+, 1'3'30, whet�ein the High Co�.1rt t�uled that "Sect ion 1'31 �- A �::>f RA No. .110 is valid and enfot�ceable." The pertinent provisions of Section 1'31 - A are as follows: Sec. 1'31 - A. Caterers. -- A caterer's tax is hereby imposed as follows: <1) On pt'Ctpt' i et o:�t'S Ctt' o:�pet� at ot�s �::>f restaurants, refreshment parlo::;.rs and o:�t het' eat i r�g p 1aces, inc l1.1d i ng c 1 ubs and catet�et�s, tht�ee pet' cer.t �::>f theit� gt�oss receipts; (2) On pt'O:�pt�ieto:�t' S �::>t' opet�ators of restaurants, bars, cafes and other eating places ir.cludir�g clubs, whet��e distilled spit�its, fet�rner.ted liquet'S m� wines at�e served, three per cent of their gross receipts frorn sa 1e of fo:�od Ot' refreshments and seven per cent of their gross receipts frorn sale of distilled sp~rits, fermented liquors or wines. Two sets C� f c�::ornrnet�c i a 1 i r.vo ices �::Ot' t�ece i pt s set�ially rn.mrb et�ed in d�.1pl icate shall be sepat�at e 1y pt�epat�ed ar1d issued, �::>ne f�::>t' each sa 1e �:of fc�od �:::tt' t�eft�eshment set�ved ar1d anothet' fo:�t' each sale �:::tf distilled spit�its, fet�mented J.iq~_~o:ot' S �::Ot' wir1es l l. i' I

DECISION - CTA CASES NOS. 2890,2907 & 2929 -a set�ved, the r.n' i g i rra 1 s o:�f the i rrvo ices o:�t' receipts to be issued to the purchaser or cust omet�. ( 3) Orr pt'O::Opt' i et O:�t' S �::Ot' r.:opet-at Cot' S cof restaurants, refreshment parlors, bars, cafes and othet' eatirrg places whtch at�e maintained within the premises or Co:ompcor.md �:Of a CC�C~(.pit, t''ace tt' aC~(.' jai - alai, cabaret, night or day club or which are accessible to patrons r.:of such cc�cl4.pit, t�ace tt�ack, ,jai-alai, cabat� et, rright Ot' day club by rrH?ans o:�f a connecting door or passage, twenty per cent of their gross receipts. There is no question that from June 1, 1975 to March 31, 1977, the period involved, petitioner cafes and rr i ght c l�.tbs in its whet�e food, t�eft�estunerrts, distilled spit�its, l. iquo::ws and wirres (Se e Petit icon fo::Ot' Review, p. 1, CTA Cases Nos. 2890, 2907 & 2929. > The applicable law then wa s Section 191 - A above as amended by Republic Act. No. 5110 which . tc�c�k effect �:orr Septernbet' 1, 1969. Eviderrt ly, r.tndet' the pt'CoV iS iCons �:Of (1) and (2) of Sect i orr 191 - A, petitioner, as an operator of restaurants, bars and cafes, is 1 iable fot' the 3'1- catet�et'' s tax on its gross receipts frorn sales of food and refreshments and the.7Y. caterer's tax on its gross receipts frorn sales of distilled spit�its, liqr.tr.:�t'S and wirres in said eating places. llo

DECISION - CTA CASES NOS. 2890 , 290 7 & 2929 -9 Thet'e is n�::t met' i t in pet i t i c� YH?t��' s cc�nter�t ion in the altet'native, that being a t1r::otel entet'Pt'ise i t is not liable for the 20~ caterer's tax. Since petitior.et' copet'ated nightcl1.1bs in its pt' ernises, i t is sl..lbject to the 20~ catet��et'' s tax o::tY'I the gt"oss t'eceipts it det'ived ft'Ctfll its nightcl1.1b sales <See Exh. J), tmdet' pat"agt'aph (3) r:::of said Sect icon 191-A which imposes a 20~ catet"et'' s ta>< r::on the gt'r::oss receipts r::�f opet'at r:::ot'S r::of t'es t al..lt'a nt s, t' efreshment pat' 1o::ors, cafes, and cother eating places Cleat'ly, petitioner is not entitled to its claim fcor refl..lnd of the catet"et'' s taxes it paid in the P3,319 , '+62.0 1 fo::tt' the pet' iod .h.me 1, 1'375 to Mat"ch 31 , 1977 beca1.1se these have been collected in accordance with law. WHEREFORE, f i nding the petitions f o r review without merit, the same are dis missed and the refund sought is her eby de ni e d, at petitioner's costs. SO ORDERED. Ql..lezcon City , Metro Manila, J1.1ne 29, 1990 Pt' esiding� J1.1dge ll~

DECISION - CTA CASES NOS. 2890,2907 & 2929 - 10 WE CONCUR1 ......_____ � ROAQUIN Judg e CE RT I F I C AT I 0 N I hereby certify that thi s decision was reached afte~ due consultAtion a mong the members of the Court of Tax Appeals in accord a nce with Section 13, ~kticle VIII of the AMANTE Pt' esi.ding .Judqe Court of Tax Appeals l 2 tJ