Philippine Basketball Association v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: Petitioner Philippine Basketball Association (PBA) received an assessment letter from the Commissioner of Internal Revenue (CIR) for deficiency amusement tax for the year 1987, amounting to P2,393,575.85, plus surcharge and interest, totaling P5,864,260.84. Procedural History: The PBA filed a petition for review with the Court of Tax Appeals (CTA) questioning the CIR's denial of its tax protest. The CTA dismissed for lack of merit and ordered the PBA to pay the deficiency tax, surcharge, and interest. The PBA's motion for reconsideration was denied. Subsequently, the PBA appealed to the Court of Appeals (CA), which affirmed the CTA's decision. The CA also denied the PBA's motion for reconsideration, leading to the present petition for review on certiorari. The Petition: The PBA contends that Presidential Decree No. 231 (Local Tax Code of 1973) transferred the power to levy and collect amusement taxes from national to local governments. It cited BIR issuances supporting this transfer and argued that any revocation or modification of these rulings should not be retroactive. The PBA also argued that professional basketball games are not included in the enumeration of 'other places of amusement' under the Local Tax Code and that BIR rulings upholding local government authority should bind the CIR.
Issue(s)
Whether professional basketball games are subject to national amusement tax or local amusement tax. Whether the principle of ejusdem generis applies to the enumeration of 'other places of amusement' in the Local Tax Code. Whether BIR rulings and memorandum circulars on the collection of amusement tax by local governments bind the Commissioner of Internal Revenue. Whether the PBA is liable for surcharge and interest on the deficiency amusement tax.
Ruling
The petition is denied. The Court of Appeals' decision affirming the Court of Tax Appeals' ruling is sustained. Professional basketball games are subject to national amusement tax, and the PBA is liable for the deficiency amusement tax, surcharge, and interest.
Ratio Decidendi
On whether professional basketball games are subject to national or local amusement tax: The Court held that professional basketball games are subject to national amusement tax. It reasoned that while the Local Tax Code of 1973 transferred the power to levy amusement taxes to local governments, subsequent laws, specifically PD 871, PD 1456, and PD 1959, explicitly placed professional basketball games under national amusement tax. These decrees consistently referred to PD 871, indicating a legislative intent to treat professional basketball games as a subject of national taxation. Furthermore, Section 125 of the 1997 National Internal Revenue Code continues to classify amusement taxes on professional basketball games as national taxes, while Section 140 of the Local Government Code of 1992, which enumerates areas where provinces may levy amusement tax, does not include professional basketball games. This historical analysis and statutory construction demonstrate a clear legislative intent to maintain professional basketball games under national taxation. On the application of ejusdem generis: The Court ruled that the principle of ejusdem generis does not apply to include professional basketball games under the phrase 'other places of amusement' subject to local taxation. The principle dictates that general words following an enumeration of specific items should be interpreted to refer to things of the same kind or class as those enumerated. The specific items enumerated in the Local Tax Code were theaters, cinematographs, concert halls, and circuses, which are characterized by artistic expression. Professional basketball games, being sports and gaming events, do not fall within this category. Therefore, the general words 'other places of amusement' cannot be construed to encompass professional basketball games, which are distinctly different in nature from the enumerated artistic forms of entertainment. On whether BIR rulings bind the CIR: The Court found the petitioner's stance that BIR Ruling No. 231-86 and BIR Revenue Memorandum Circular No. 8-88 should bind the government to be erroneous. The Court emphasized that administrative rulings and circulars are generally not laws, and while they may be persuasive, they do not have the force of law. The CIR has the authority to revoke or modify previous rulings when the law clearly dictates otherwise, as demonstrated by the subsequent legislative enactments placing professional basketball games under national taxation. The principle that reversals or modifications should operate prospectively is not applicable when the underlying law has been clarified or amended by subsequent legislation. On liability for surcharge and interest: The Court dismissed the petitioner's contention that it is not liable for surcharge and interest due to good faith reliance on BIR issuances. The Court noted that this issue was never raised before the lower courts (CTA and CA). It is a well-established rule that issues not raised in the court a quo cannot be raised for the first time on appeal. Therefore, the petitioner's argument on good faith and non-liability for surcharge and interest was deemed waived and could not be considered by the Supreme Court.
Main Doctrine
Professional basketball games are subject to national amusement tax, not local amusement tax, as evidenced by legislative intent and specific statutory references, and the principle of ejusdem generis does not apply to include them under 'other places of amusement' subject to local taxation.