Bloomberry Resorts v. Bureau of Internal Revenue
REITERATIONFacts
The Antecedents: Petitioner Bloomberry Resorts and Hotels, Inc. (Bloomberry) was granted a provisional license by the Philippine Amusement and Gaming Corporation (PAGCOR) to operate an integrated resort and casino. Bloomberry, as a licensee of PAGCOR, paid license fees and claimed exemption from all other taxes, based on its provisional license and Presidential Decree (PD) No. 1869, as amended by Republic Act (RA) No. 9487 (PAGCOR Charter), which provides tax exemptions for entities contracting with PAGCOR. Procedural History: The Bureau of Internal Revenue (BIR), through Commissioner Kim S. Jacinto-Henares, issued Revenue Memorandum Circular (RMC) No. 33-2013, subjecting PAGCOR and its contractees and licensees to income tax under the National Internal Revenue Code (NIRC) of 1997, as amended. Bloomberry, aggrieved by this, filed a Petition for Certiorari and Prohibition before the Supreme Court, seeking to annul and enjoin the implementation of RMC No. 33-2013. The Petition: Bloomberry argued that PD No. 1869, as amended, expressly exempts its contractees and licensees from all taxes except the 5% franchise tax, and this exemption was not repealed by the deletion of PAGCOR from the list of tax-exempt entities under the NIRC. Bloomberry contended that the CIR acted with grave abuse of discretion in issuing RMC No. 33-2013, which effectively repealed or amended the PAGCOR Charter. Bloomberry also justified its direct recourse to the Supreme Court on grounds of pure question of law, patent illegality, national interest, and to prevent multiplicity of suits.
Issue(s)
Whether the assailed provision of RMC No. 33-2013 subjecting PAGCOR's contractees and licensees to income tax was issued by the CIR with grave abuse of discretion amounting to lack or excess of jurisdiction. Whether Section 13(2)(b) of PD No. 1869, as amended (PAGCOR Charter), grants tax exemptions to PAGCOR's contractees and licensees, and whether this exemption was validly removed or altered by subsequent legislation.
Ruling
The petition is GRANTED. The Bureau of Internal Revenue, represented by Commissioner Kim S. Jacinto-Henares, is ORDERED to CEASE AND DESIST from implementing Revenue Memorandum Circular No. 33-2013 insofar as it imposes corporate income tax on petitioner Bloomberry Resorts and Hotels, Inc.'s income derived from its gaming operations.
Ratio Decidendi
On the issue of grave abuse of discretion and the validity of RMC No. 33-2013: The Court held that the CIR committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing RMC No. 33-2013. This is because administrative issuances must be consistent with the law they intend to implement and cannot override or modify the law itself. The RMC, by imposing income tax on PAGCOR's contractees and licensees for their gaming operations, contravened the express tax exemption provisions of the PAGCOR Charter. While direct recourse to the Supreme Court is allowed in exceptional cases, the Court opted to resolve the merits of the case directly, citing recent jurisprudence allowing such actions. On the validity of the tax exemption under the PAGCOR Charter: The Court reiterated its ruling in PAGCOR v. The Bureau of Internal Revenue, et al. and earlier decisions, clarifying the interplay between RA No. 9337 and PD No. 1869. While Section 1 of RA No. 9337 validly excluded PAGCOR from the enumeration of GOCCs exempt from corporate income tax, PAGCOR's tax privilege of paying a five percent (5%) franchise tax in lieu of all other taxes with respect to its income from gaming operations remains valid. Section 13(2)(b) of PD No. 1869 explicitly provides that the exemptions granted for earnings derived from operations conducted under the franchise shall inure to the benefit of and extend to corporations, associations, agencies, or individuals with whom PAGCOR has any contractual relationship in connection with the operations of the casinos. Therefore, Bloomberry, as a contractee and licensee of PAGCOR, is entitled to this tax exemption for its gaming operations, provided it pays the 5% franchise tax.
Main Doctrine
Revenue Memorandum Circular No. 33-2013, insofar as it imposes corporate income tax on petitioner Bloomberry Resorts and Hotels, Inc.'s income derived from its gaming operations, is declared void for having been issued with grave abuse of discretion, as the tax exemption granted to PAGCOR's contractees and licensees under Section 13(2)(b) of PD No. 1869, as amended, remains valid and was not repealed by subsequent laws.