CITY OF DAVAO and BELLA LINDA N. TANJILI in her official capacity as The Officer-In-Charge City Treasurer`s Office of Davao City vs. TODA HOLDINGS, INC.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC CITY OF DAVAO and BELLA CTA EB NO. 1696 LINDA N. TANJILI in her official capacity as The Officer-in- (CTA AC No. 152) Charge City Treasurer's Office of Davao City, Present: Petitioners, DEL ROSARIO, P.J., CASTANEDA, JR., -versus- UY, FABON-VICTORINO, MINDARO -GRULLA, RINGPIS-LIBAN, and MANAHAN, JJ. TODA HOLDINGS, INC., Promulgated: MAY 28 X- - 2-01- ~ ~~ ~ ~~~�-.. . - - - - - - - - - - - - - Respondent. - - - - - - ---------- RESOLUTION MANAHAN, J .: This resolves petitioners' Motion for Reconsideration, 1 filed through registered mail on November 29, 2018, and received by the Court on December 10, 2018. Petitioners seek reconsideration of the Decision2 promulgated on October 29, 2018, denying petitioners' appeal, as follows: WHEREFORE, the instant Petition for Review is hereby DENIED for lack of merit. SO ORDERED.3 Due to the denial of petitioners' appeal, the Court in Division's Decision dated March 14, 2017, granting the refund of respondent's erroneously paid local business taxes on dividends and interests for the first and second quarters of I Rollo, pp. 169- 182 . 2 Rollo, pp. 134-152. 3 Rollo, p. 151. p,A./

RESOLUTION CTA EB No. 1696 (C.T.A. AC No. 152) Page 2 of5 taxable year 2011, was affirmed. The Court m Division's Decision states: WHEREFORE, premises considered, the instant Petition for Review is hereby GRANTED. The Decision dated June 22, 2015 and the Order dated September 11, 2015 of the Regional Trial Court, Branch 16 of the City of Davao in Civil Case No. 34,859-13 are hereby REVERSED and SET ASIDE. Accordingly, respondent Treasurer of the City of Davao is hereby ORDERED TO REFUND to petitioner Toda Holdings, Inc. the total amount of ONE MILLION FIVE HUNDRED SIXTY TWO THOUSAND SIX HUNDRED THIRTY SIX PESOS (pl,562,636.00) representing its erroneously paid local business taxes for the first and second quarters of taxable year 2011. SO ORDERED. Respondent Toda Holdings, Inc. (THI) filed its Comment/Opposition (To Petitioners' Motion for Reconsideration dated 29 November 2018),4 through registered mail on February 11, 2019, which was received by the Court on February 18, 2019. Petitioners seek reconsideration on the following grounds: 1. The Honorable Court En Bane erred m concluding that respondent's business operation does not fall within the definition of a non-bank financial intermediary. 2. The Honorable Court En Bane erred m concluding that since there is no evidence in the court a quo showing that respondent was authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities[,] respondent cannot be treated as non-bank financial intermediary. 3. The Honorable Court En Bane erred in not taking into account the factual findings of the lower court that respondent IS a Non-bank Financial � Rollo, pp. 187-214.~

RESOLUTION CTA EB No. 1696 (C.T.A. AC No. 152) Page 3 of5 Intermediary by owning, investing and holding shares of stock of San Miguel Corporation. 4. The Honorable Court En Bane erred in concluding that respondent's assets, being declared as owned by the government pursuant to COCOFED Decision, is exempt from the imposition of local business tax.s Petitioners reiterate that respondent's primary purpose contained in the Amended Articles of Incorporation is well within the purview of the nature and functions of a non-bank financial intermediary (NBFI); that respondent has no other sources of income but only dividends and interest on money market placements, hence, respondent's investment in San Miguel Corporation (SMC) shares is deemed its principal business; and, that being engaged principally and solely in the business of investing and holding SMC shares and money market placements, respondent THI is deemed an NBFI. Petitioners also state that the non-issuance of a license by the Monetary Board does not ipso facto exclude THI from the ambit of an NBFI. They state that the real nature and substance of THI's business operation, which consists primarily, continuously and regularly of investments in shares of stock of SMC and money placements, should be the main consideration in determining that THI is indeed an NBFI. The fact that THI has no other business, except its investment in SMC, shows its real intent to engage solely and primarily in the business of stock investment and money market placements in the said company, thus, any profit it received is a direct consequence of its business engagements and not just merely incidental thereto. Petitioners further state that the ruling in Philippine Coconut Producers Federation, Inc. v. Republic of the Philippines (COCOFED case),6 merely segregated or identified the nature of said fund as government owned, rather than privately owned. The Supreme Court ruling did not delve on the taxability of the fund or on its income but solely on the nature of ownership of the said SMC shares of stock. Finally, petitioners argue that under Section 133(o) of the 1991 Local Government Code (LGC), only the national government, its agencies and s Rollo, p. 170. 6 G.R. Nos. 177857-58 & 178193, January 24,2012. 1M'\/

RESOLUTION CTA EB No. 1696 (C.T.A. AC No. 152) Page4 of5 instrumentalities, and local government units, are exempted from the taxing power of the City of Davao. Thus, respondent THI not being the national government, or an agency or instrumentality, or a local government unit, is not exempt from Section 143(f) ofthe LGC. In its Comment, respondent THI states that the various definitions under Section 143(f) of the LGC, Revenue Regulations No. 9-2004, and BSP Manual of Regulations for Non-Bank Financial Institutions, lead to the conclusion that THI is not an NBFI. Respondent argues that it cannot be considered a bank or NBFI since it is not engaged in lending money, investing, reinvesting or trading securities and/ or foreign exchange either for its own account or for the account of others on a regular and recurring basis. It acquired SMC shares only once after its incorporation and has not bought any shares of stocks or invested in any other corporation other than in SMC. The investment made by respondent in SMC shares happened only once and is an isolated transaction. Thus, respondent argues that its dividend and interest income are beyond the taxing powers of petitioners. THI further argues that merely owning or holding shares of stock does not ipso facto make it an NBFI. The mere ownership of shares and placement of extra funds in trust accounts - as any prudent fiscal manager would - is not a business activity that is subject to local business tax. Respondent THI also reiterates that it is a mere holding company. Finally, respondent THI asserts that the subject SMC shares of stock and income derived therefrom are national govemment property exempt from local business tax. After careful examination of the motion and comment thereto, the Court En Bane finds that the arguments raised by petitioners are a mere rehash of issues which have already been discussed and resolved in the Decision dated October 29, 2018. As discussed in the said Decision, (1) respondent THI is a holding company organized for the purpose of holding SMC shares; and (2) respondent, including the SMC shares held by it, are owned by the national govemment and thus, beyond the taxing power of local government units. ...._/

RESOLUTION CTA EB No. 1696 (C.T.A. AC No. 152) Petitioners present no compelling reason for the Court to reconsider, modify or reverse the assailed Decision. WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED. ~'7- _4t.......,...~.. 4~- CATHERINE T. MANAHAN Associate Justice WE CONCUR: ( 1te te my Concu � g Opinion) ROMAN G. DEL ROSARIO Presiding Justice o_ <:2~.-....~ c.~~ ERL~P.UY (I R1a~tain my Dissenting OpifiWJrty Associate Justice JUANITO C. CASTANEDA, JR. Associate Justice t-.l._C:.. ~ N.CIELITO Mt'IvtNt-D\,A.LR..O...-~~ULhLAA Associate Justice ~. ~ /.,J <.' MA. BELEN M. RINGPIS-LIBAN Associate Justice