Commissioner of Internal Revenue v. Manila Golf & Country Club
NEW DOCTRINEFacts
The Antecedents: The Commissioner of Internal Revenue (CIR) assessed Manila Golf & Country Club, Inc. (MGCC) for fixed taxes as operators of golf links and restaurants, and for percentage tax (caterer's tax) on its sales of food and fermented liquors/wines for the period September 1969 to December 1970. MGCC protested the assessment, claiming it was without basis because Section 42 of House Bill No. 17839 (which became R.A. No. 6110) was vetoed by President Ferdinand E. Marcos. Procedural History: The CIR denied MGCC's protest. MGCC then petitioned the Court of Tax Appeals (CTA), which sustained MGCC's position, ruling that the presidential veto was clear and unqualified, and that the President could not veto part of an item but only an entire section. The CIR appealed to the Supreme Court. The Petition: The CIR seeks to set aside the decision of the CTA, arguing that Section 42 of R.A. No. 6110 was not entirely vetoed but only specific portions, and that the CTA erred in its interpretation of the President's veto power.
Issue(s)
Whether the presidential veto of August 4, 1969, referred to the entire Section 42 of House Bill No. 17839 or merely to specific impositions within it. Whether the President has the power to veto part of an item in a revenue bill, or only an entire section. Whether Manila Golf & Country Club, Inc., as a non-stock corporation operating a clubhouse with dining and bar facilities for its members and guests, is liable for caterer's tax under Section 191-A of R.A. No. 6110.
Ruling
The petition is GRANTED. The decision of the Court of Tax Appeals in CTA Case No. 2630 is SET ASIDE. Section 191-A of R.A. No. 6110 is declared valid and enforceable, and Manila Golf & Country Club Inc. is liable for the amount assessed against it.
Ratio Decidendi
On whether the presidential veto referred to the entire Section 42 or specific impositions: The Supreme Court reiterated its ruling in Commissioner of Internal Revenue v. Manila Hotel Corporation, et al., G.R. No. 83250, September 26, 1989, holding that the presidential veto referred merely to the inclusion of "hotels, motels and resthouses" in the 20% caterer's tax bracket, not to the entire section. The Court clarified that the veto message's reasons, such as potential restraint on the development of hotels essential to the tourist industry, indicated a specific objection to certain additions, not a wholesale rejection of the section. The House Ways and Means Committee's interpretation supported this, recommending deletions of enterprises connected with the tourist industry rather than exempting entities already subject to tax. On whether the President has the power to veto part of an item in a revenue bill: The Court disagreed with the CTA's opinion that the President could not veto words or phrases but only an entire section. It held that the inclusion of "hotels, motels and resthouses" in the 20% caterer's tax bracket constituted "items" in themselves within the meaning of Section 20(3), Article VI of the 1935 Constitution, which the President has the power to veto. The Court reasoned that an "item" in a revenue bill refers to the subject of the tax and the tax rate, not necessarily an entire section. To construe "item" as an entire section would render the President's power inutile, forcing him to either approve an unacceptable provision or forego the collection of a tax altogether. The Court cited Commonwealth ex rel. Elkin v. Barnett to support this interpretation. On whether Manila Golf & Country Club, Inc. is liable for caterer's tax: The Court affirmed that Section 191-A of R.A. No. 6110 is valid and enforceable. The last paragraph of Section 191-A explicitly states that "Where the establishments are operated or maintained by clubs of any kind or nature (irrespective of the disposition of their net income and whether or not they cater exclusively to members or their guests) the keepers of the establishments shall pay the corresponding tax at the rate fixed above." Since MGCC, a non-stock corporation, maintained a clubhouse with a lounge, bar, and dining room, it fell under this provision and was therefore liable for the caterer's tax assessed by the CIR. The Court noted that even if the veto were considered ineffectual, it would render the whole section as not having been vetoed, thus becoming law.
Main Doctrine
The President's power to veto items in a revenue bill under Section 20(3), Article VI of the 1935 Constitution extends to specific provisions or phrases within a section that constitute distinct 'items,' and an ineffectual veto does not invalidate the entire section.