Commissioner of Internal Revenue v. Manila Hotel Corporation
REITERATIONFacts
1. The Antecedents: The Manila Hotel Corporation (Hotel) operated restaurants and banquet outlets within its premises. During the period of January 20, 1977, to April 29, 1978, the Hotel paid P2,463,576.30 in caterer's tax on its gross receipts from food sales. The Hotel later filed a claim for a refund of this amount, asserting that the legal basis for the tax, Section 191-A of the National Internal Revenue Code, had never become law due to a presidential veto. 2. Procedural History: Following the Commissioner of Internal Revenue's failure to act on its refund claim, the Manila Hotel Corporation filed a case with the Court of Tax Appeals (CTA). The CTA ruled in favor of the Hotel, ordering the Commissioner to refund the paid caterer's tax, finding that Section 191-A of the National Internal Revenue Code lacked legal basis due to a presidential veto. The Commissioner of Internal Revenue sought review of this decision. 3. The Petition: The Commissioner of Internal Revenue filed a petition for review, arguing that the CTA erred in annulling the caterer's tax. The Commissioner contended that the tax remained validly imposed, citing existing legislation that consistently included a caterer's tax on restaurant operators. The petition sought to overturn the CTA's decision and dismiss the Hotel's claim for a refund.
Issue(s)
Whether the Manila Hotel Corporation is entitled to a refund of the caterer's tax paid, considering the validity of the tax's assessment and collection. Whether Section 191-A of the National Internal Revenue Code, as amended, became a law despite the presidential veto, and its impact on the caterer's tax.
Ruling
The petition for review is granted. The decision of the Court of Tax Appeals is annulled and set aside, and the claim of the respondent Manila Hotel Corporation for a refund of its payment of the caterer's tax from 1977 to 1978 is dismissed. Costs against the private respondent.
Ratio Decidendi
On the issue of the Manila Hotel Corporation's entitlement to a refund: Since the assessment and collection of the caterer's tax were lawful, the Manila Hotel Corporation is not entitled to a refund. The Hotel operates restaurants within its premises, making it liable for the tax provided in paragraph (1) of Section 206 of the Tax Code, as amended. The Court reiterated that the 3% caterer's tax on restaurant operators has consistently been imposed by law. The CTA's conclusion that the tax was abolished was based on an incomplete examination of the relevant legislation. The Court found the petition meritorious and reversed the CTA's decision. On the issue of whether Section 191-A of the National Internal Revenue Code became a law: The Court found that the CTA erred in holding that the caterer's tax was abolished due to the presidential veto. While President Marcos did veto Section 42 of House Bill No. 17839 (which became Section 191-A), the veto message indicated it was due to the burden on the consuming public and the potential restraint on hotel development. However, when House Bill No. 17839 was enacted as Republic Act No. 6110, Section 191-A was included in its entirety, except for the words "hotel, motel and resthouse" in paragraph (3). This indicates that Congress understood the veto to apply only to the higher tax rates on establishments within hotels, motels, and resthouses, not the general 3% caterer's tax. Subsequent laws, such as Presidential Decree No. 1158 (National Internal Revenue Code of 1977) and Presidential Decree No. 1299, continued to impose a caterer's tax, specifically the 3% rate under Section 206(1) of P.D. 1158, which is applicable to operators of restaurants. The Court emphasized that the power of the State to impose the 3% caterer's tax is not debatable. The Court also noted that Rep. Act No. 2376, approved on June 2, 1959, had already amended Section 191 of the Tax Code to include caterers in the imposition of a 3% tax on their gross receipts. Therefore, the legal basis for collecting the caterer's tax existed and continued to exist through subsequent legislation.
Main Doctrine
The Manila Hotel Corporation is liable for the 3% caterer's tax on its gross receipts from restaurant sales, as the assessment and collection of this tax were lawful. The claim for refund is dismissed.