Rock Steel Resources, Inc. v. City of Davao

EN BANC [C.T.A. EB CASE NO. 1567. June 19, 2018.] (C.T.A. AC No. 139) ROCK STEEL RESOURCES, INC. , petitioner , vs. CITY OF DAVAO and HON. RODRIGO S. RIOLA, in his capacity as the City Treasurer of Davao City , respondents . DECISION MINDARO-GRULLA , J p : Submitted for decision of this Court En Banc is a Petition for Review filed by Rock Steel Resources, Inc.,(RSRI) under Section 3 (b), Rule 8 of the 2005 Revised Rules of the Court of Tax Appeals , 1 as amended, seeking the reversal of the Decision dated August 11, 2016 2 and the Resolution dated November 28, 2016 3 rendered by the Second Division of this Court, the dispositive portions of which, respectively, read as follows: HTcADC Decision dated August 11, 2016: " WHEREFORE ,premises considered, the Petition for Review is DENIED for lack of merit. SO ORDERED ." Resolution dated November 28, 2016: "Foregoing considered, and finding no reversible error in the Assailed Decision which may warrant its reversal, petitioner's Motion for Reconsideration is DENIED for lack of merit. SO ORDERED ." The following facts of the case as recited by the Court in Division in its Decision 4 and as established by the records of the case, read as follows: " The Petitioner's Allegations: In its Petition and Memorandum, petitioner, in brief, alleges that: i) On July 14, 1976, Presidential Decree ('P.D.') No. 961 established the Coconut Industry Investment Fund ('CIIF') from a portion of the levy imposed on the initial sale by coconut farms of copra and coconut products; administered by the United Coconut Planters Bank; and pursuant to the mandate of P.D. 961, the CIIF invested in various oil mills also known as the CIIF OMG; ii) sometime in 1983, the CIIF OMG incorporated fourteen (14) holding companies for the purpose of owning and holding shares of stock of San Miguel Corporation which were sold by the group of Mr. Andres Soriano; and petitioner is one of these fourteen (14) holding companies; CAIHTE iii) in 1986, CIIF OMG and the said holding companies, including the petitioner, were sequestered by the PCGG; iv) since 2012, petitioner became the registered owner of Fifty Eight Million Two Hundred Thirty Seven Thousand Four Hundred Three (58,237,403) preferred shares of stock in San Miguel Corporation ('SMC Preferred') after the Supreme Court approved the conversion of petitioner's Fifty Eight Million Two Hundred Thirty Seven Thousand Four Hundred Three (58,237,403) SMC common shares of stock into SMC Preferred shares; and the dividends received by the petitioner from said preferred shares were deposited in a trust account which earned interest from money market placements; v) since incorporation, petitioner's principal office address was located in Makati City, Metro Manila; but on 22 December 2009, the Securities and Exchange Commission approved the transfer of its principal office address at Legaspi Oil Compound, Km. 9.5, Sasa, Davao City; and the consequent amendment of Article III of its Articles of Incorporation; vi) in 2010, petitioner obtained the amount of Four Hundred Forty One Million Nine Hundred Seventeen Thousand One Hundred Three and 62/100 (P441,917,103.62) Pesos which were derived from dividends the petitioner received from its SMC preferred shares and interests on its money market placements; vii) in its Decision dated January 24, 2012 and Resolution dated September 4, 2012, the Supreme Court declared that the SMC shares held by the 14 holding companies, including the petitioner, are owned by the government; viii) on January 20, 2014, respondent City of Davao, through respondent City Treasurer Riola; assessed petitioner the amount of Two Million Four Hundred Fifteen Thousand Three Hundred Fifty Three and 10/100 (P2,415,353.10) Pesos, supposedly as 0.55% local business tax on the dividends derived from its stock and interest on its money market placements for the third and fourth quarters of 2011; ix) on March 21, 2014, petitioner filed with respondent City Treasurer its written administrative protest on the erroneously and illegally assessed local business tax; but respondent City Treasurer failed to act on the said protest within sixty (60) days; x) respondent City Treasurer refused to act upon petitioner's protest because he is of the position that payment under protest of the local business tax is required before the petitioner's protest may be resolved under Section 423 of the 2005 Revised Revenue Code of the City of Davao; and rejected petitioner's argument that the requirement of payment under protest is invalid and unconstitutional, for being inconsistent with Section 252 in relation to Section 195 of Republic Act No. 7160; which provides that payment under protest is required only for protests on real property tax assessments and not on other local taxes; aScITE xi) petitioner then made the following additional arguments: a) under Section 133(A) of Republic Act No. 7160, it is erroneous and illegal for respondents to collect 0.55% local business tax on the dividends and interest income of petitioner, as the latter is not a bank or financial institution; b) petitioner is not engaged in business that is subject to local business tax under Section 143 of Republic Act No. 7160; c) the SMC shares held by petitioner and all income derived therefrom are owned by the government; thus, business tax cannot be imputed on the same; and d) Section 423 of the 2005 Revenue Code of the City of Davao requiring payment under protest before a protest on local business tax assessments may be acted upon is null and void and has no basis in fact and law. The Respondents' Allegations: In their Memorandum, the respondents aver, in brief, that: i) the City of Davao issued a Business Tax Order of Payment, dated January 20, 2014, assessing the petitioner the amount of Two Million Four Hundred Fifteen Thousand Three Hundred Fifty Three and 10/100 (P2,415,353.10) Pesos, representing the third and fourth quarter of 2011 local business tax, including surcharges and interest, at the rate of 55% of 1% of the petitioner's gross sales or receipts, consisting of dividends and interest on money placements derived from San Miguel Corporation for the year 2010; which was made pursuant to Section 143(f) of Republic Act No. 7160, otherwise known as the 'Local Government Code of 1991,' and Section 69(f) of the City's enabling Ordinance No. 158-05, Series of 2005, otherwise known as the '2005 Revenue Code of Davao City'; ii) the City Treasurer imposed the above local graduated business tax against the petitioner's said gross receipts, because the City Treasurer deems the petitioner as falling within the purview of 'banks and other financial institution,' pursuant to Section 131(e) of Republic Act No. 7160 and Section 5 (b3) of the same Ordinance No. 0158-05, series of 2005; DETACa iii) however, instead of paying the tax as assessed, the petitioner filed a protest with the City Treasurer, contesting the legality of the assessment, in accordance with Section 195 of the Local Government Code; iv) the protest was not entertained or acted upon by the City Treasurer, because it failed to comply with the prerequisite of paying first the entire tax as assessed before the filing of the protest, as required under Section 423 of Ordinance No. 00158-05, series of 2005, otherwise known as the 2005 Revenue Code of Davao City; v) respondents then made the following arguments: a) the Court has no jurisdiction to hear the instant Petition, because the tax assessment had become conclusive and unappealable for failure of the petitioner to pay first the tax as assessed before filing the protest, as aforestated; b) petitioner is deemed a 'Bank and Other Financial Institution' specifically as a Non-Bank Financial Intermediary or an Investment Company by virtue of its investment in San Miguel Corporation; c) petitioner's Articles of Incorporation, stating that it shall not act as investment company or securities broker or dealer is not a conclusive proof that is not a 'Bank and other Financial Institution'; d) Section 27(D) of the National Internal Revenue Code (NIRC) which states that inter-corporate dividends shall not be subject to tax is not applicable in this case since the same involves local taxation; e) the definition of gross sales/receipts under Section 131(N) of the Local Government Code of 1991 that does not include dividends and interest income as component of sales of receipts, is a general definition of such term, which cannot defeat a specific and clear provision of taxability of dividends and interest income as provided under Section 143(F) of the same Code; and HEITAD f) the opinion of the Bureau of Local Government Finance (BLGF),that petitioner is exempt from local business tax for not being a bank and other financial institution, is not binding upon the issue involved in this case, as it is not an administrative agency whose findings on questions of fact and law are given respect in the courts." After trial on the merits, the Court in Division gave both parties a period of thirty (30) days from notice within which to submit their respective memorandum. RSRI filed its Memorandum via registered mail on September 14, 2015, 5 while respondents submitted their Memorandum via registered mail also on September 24, 2015. 6 Accordingly, in the October 15, 2015 Resolution, 7 the instant case was deemed submitted for decision. The Court in Division thereafter rendered the assailed Decision dated August 11, 2016, which ruled that petitioner is liable for local business tax on the dividends earned on its San Miguel shares of stock and interests on its money market placements as earlier discussed. Aggrieved, petitioner filed its Motion for Reconsideration 8 on August 25, 2016 which was denied thru the assailed Resolution. Hence, this Petition for Review was filed. We rule to GRANT the Petition for Review. In the instant case, petitioner RSRI was assessed for 0.55% local business tax for the 3rd and 4th quarters of 2011 on the dividends it received from its San Miguel Corporation (SMC) shares of stock and interest income on its money market placements. Respondents insist that petitioner is a non-bank financial intermediary, and that as its pieces of evidence would prove, RSRI engaged in activities which would qualify it to be subject to local business tax. This Court is not convinced. In a line of cases already decided by this Court, the power of local government units to levy taxes, fees and charges emanates from Sec. 5, Article X of the 1987 Constitution, subject to the guidelines and limitations as Congress may provide. Sec. 5, Article X of the 1987 Constitution reads, thus: "Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the local governments." aDSIHc Notably, Section 129 of the Local Government Code (LGC) of 1991 vests local government units, such as the petitioner in this case, with the authority to create their own sources of revenue, to wit: "SECTION 129. Power to Create Sources of Revenue. Each local government unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government units." Corollarily, Section 143 9 in relation to Section 151 10 of the LGC categorically enumerates which business may be subject to local tax. To implement the aforementioned provision, Section 69 of the 2005 Revenue Code of the City of Davao provides as follows: "Section 69. Imposition of Tax. There is hereby imposed on the following persons who establish, operate, conduct or maintain their respective business within the City a graduated business tax in the amounts hereafter prescribed: xxx xxx xxx F. On Banks and Other Financial Institutions ,at the rate of fifty-five percent (55%) of one percent (1%) of the gross receipts of the preceding calendar year derived from interest, commissions and discounts from lending activities, income from financial leasing, dividends, rentals on property, and profit from exchange or sale of property, insurance premium. All other income and receipts not herein enumerated shall be excluded in the computation of tax." While Section 143 (f) in relation to Section 151 both of the LGC of 1991, empowered local government units to levy taxes, fees and charges on banks and other financial institutions, it nonetheless, expressly subjected such power to some common limitations, such as those enumerated under Section 133 of the LGC of 1991, the pertinent provisions which read as follows: "SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: (a) Income tax, except when levied on banks and other financial institutions . ATICcS xxx xxx xxx (o) Taxes, fees or charges of any kind on the National Government ,its agencies and instrumentalities, and local government units." (Emphases supplied) In the case of Philippine Coconut Producers Federation, Inc. v. Republic of the Philippines , 11 the Supreme Court ruled that the said SMC shares of stock are owned by the government. The Supreme Court ruled in this wise: " The CIIF Companies and the CIIF Block of SMC shares are public funds/assets From the foregoing discussions, it is fairly established that the coconut levy funds are special public funds. Consequently, any property purchased by means of the coconut levy funds should likewise be treated as public funds or public property, subject to burdens and restrictions attached by law to such property. xxx xxx xxx Since the CIIF companies and the CIIF block of SMC shares were acquired using coconut levy funds, which have been established to be public in character it goes without saying that these acquired corporations and assets ought to be regarded and treated as government assets. Being government properties, they are accordingly owned by the Government, for the coconut industry pursuant to currently existing laws . It may be conceded hypothetically, as COCOFED, et al. urge, that the 14 CIIF holding companies acquired the SMC shares in question using advances from the CIIF companies and from UCPB loans. But there can be no gainsaying that the same advances and UCPB loans are public in character, constituting as they do assets of the 14 holding companies, which in turn are wholly-owned subsidiaries of the 6 CIIF Oil Mills. And these oil mills were organized, capitalized and/or financed using coconut levy funds. In net effect, the CIIF block of SMC shares are simply the fruits of the coconut levy funds acquired at the expense of the coconut industry. In Republic v. COCOFED ,the en banc Court, speaking through Justice (later Chief Justice) Artemio Panganiban, stated: 'Because the subject UCPB shares were acquired with government funds, the government becomes their prima facie beneficial and true owner.' By parity of reasoning, the adverted block of SMC shares, acquired as they were with government funds, belong to the government as, at the very least, their beneficial and true owner . xxx xxx xxx Accordingly, We sustain the ruling of the Sandiganbayan in CC No. 0033-F that the CIIF companies and the CIIF block of SMC shares are public funds necessarily owned by the Government ." (emphases supplied) Applying the foregoing in the instant case, RSRI, being a "CIIF company," is considered as Government property, thus, any tax imposed upon petitioner is considered, in effect, as a tax on Government. Considering that the subject shares are owned by the government, it follows that the dividends and any income therefrom are also owned by the government. Thus, the same is not within the power of the City of Davao to tax. ETHIDa In any event, RSRI is not a bank or other financial institution, on which the subject local business tax may be imposed. Section 131 (e) of the LGC of 1991 states the scope of the term "Banks and other financial institutions," provides as follows: "SEC. 131. Definition of Terms . When used in this Title, the term: xxx xxx xxx (e) Banks and other financial institutions' include non-bank financial intermediaries ,lending investors, finance and investment companies, pawnshops, money shops, insurance companies, stock markets, stock brokers and dealers in securities and foreign exchange, as defined under applicable laws, or rules and regulations thereunder ;" (Emphases supplied) While Section 131 (e) 12 of the LGC defines the term banks and other financial institutions, it did not define what is a non-bank financial intermediary. Thus, this Court finds it necessary to resort to other applicable laws which may enlighten us in its definition. The National Internal Revenue Code (NIRC) of 1997, as amended, defines the term "non-bank financial intermediary" in Section 22 (W) as follows: "The term a non-bank financial intermediary " means a financial intermediary, as defined in Section 2(D)(c) of Republic Act No. 337, as amended, otherwise known as the General Banking Act, authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities." Accordingly, Section 2-D (c) of the General Banking Act defines "financial intermediaries" as follows: "Financial intermediaries" shall mean persons or entities whose principal functions include the lending, investing or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them, or otherwise coursed through them, either for their own account or for the account of others." Section 4.101 Q.1 of the Manual of Regulations for Non-Bank Financial Institutions (Manual) defines "financial intermediaries" to be persons or entities whose principal functions include the lending, investing or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them, or otherwise coursed through them either for their own account or for the account of others .(Emphasis supplied) TIADCc The same section further clarifies the definition by elaborating the terms "Principal and Functions," to wit: " Principal shall mean chief, main, most considerable or important, of first importance, leading, primary, foremost, dominant or preponderant ,as distinguished from secondary or incidental. Functions shall mean actions, activities or operations of a person or entity by which his/its business or purpose is fulfilled or carried out. The business or purpose of a person or entity may be determined from the purpose clause in its articles of incorporation/partnership, and from the nature of the business indicated in his/its application for registration of business filed with the appropriate government agency." Relevant thereto, in order to be considered a financial intermediary, any of the following functions must be performed on a regular and recurring, not on an isolated basis : a. Receive funds from one (1) group of persons, irrespective of number, through traditional deposits, or issuance of debt or equity securities; and make available/lend these funds to another person or entity, and in the process, acquire debt or equity securities; b. Use principally the funds received for acquiring various types of debt or equity securities; c. Borrow against, or lend on, or buy or sell debt or equity securities; d. Hold assets consisting principally of debt or equity securities such as promissory notes, bills of exchange, mortgages, stocks, bonds, and commercial papers; e. Realize regular income in the nature of, but need not be limited to, interest, discounts, capital gains, underwriting fees, guarantees, fees, commissions, and service fees, principally from transactions in debt or equity securities or by being an intermediary between suppliers and users of funds. On the other hand, non-banking financial intermediaries shall include the following: (1) A person or entity licensed and/or registered with any government regulatory body as a non-bank financial intermediary, such as investment house, investment company, financing company, securities dealer/broker, lending investor, pawnshop, money broker, fund manager, cooperative, insurance company, non-stock savings and loan association and building and loan association. (2) A person or entity which holds itself out as a non-banking financial intermediary, such as by the use of a business name, which includes the term financing, finance, investment, lending and/or any word/phrase of similar import which connotes financial intermediation, or an entity which advertises itself as a financial intermediary and is engaged in the function(s) where financial intermediation is implied. cSEDTC (3) A person or entity performing any of the functions enumerated in Items a to e of this Subsection. In sum, the following are the basic requirements for a person or entity to be considered as a "non-bank financial intermediary," to wit: 1) The person or entity is "authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities" ; 2) The principal functions of the said person or entity "include the lending, investing or placement of funds or evidences of indebtedness or equity deposited to them, acquired by them, or otherwise coursed through them, either for their own account or for the account of others" ;and 3) The person or entity must perform any of the following functions on a regular and recurring, not on an isolated, basis, to wit: a. Receive funds from one (1) group of persons, irrespective of number, through traditional deposits, or issuance of debt or equity securities; and make available/lend these funds to another person or entity, and in the process acquire debt or equity securities; b. Use principally the funds received for acquiring various types of debt or equity securities; c. Borrow against, or lend on, or buy or sell debt or equity securities; The Court in Division ruled that in comparison with Section 4101Q.1 of the Manual, "the scope of RSRI's primary business purpose in its Amended Articles of Incorporation is wittingly or unwittingly broad enough to catch all the descriptive functions of a Financial Intermediary." With all due respect to the Court in Division, there is nothing on record that shows that petitioner RSRI can be categorized as a financial intermediary or that it has engaged in the activities defined and enumerated in the General Banking Act and in the Manual. First, there is no indication that petitioner fulfills the first requirement, as there is no evidence found by the court a quo showing that it was "authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities." Thus, on this basis alone, petitioner cannot be treated as non-bank financial intermediary. AIDSTE Second, the Court En Banc is also not convinced that the stated primary purpose of RSRI in the Amended Articles of Incorporation is broad enough to catch all the descriptive functions of a financial intermediary. It was not shown that said functions are "principal" in nature, i.e. , "chief, main, most considerable or important, of first importance, leading, primary, foremost, dominant or preponderant, as distinguished from secondary or incidental." Therefore, it is not proper to just assume that petitioner is engaged as a non-bank financial institution or intermediary based on the said primary purpose. Likewise, it was also not established that the enumerated functions performed by RSRI are "on a regular and recurring, not on an isolated, basis." In fact, it was not shown that petitioner ever performed the said functions. Also, a careful perusal of the records would reveal that there is also no evidence to show that RSRI held itself out, or advertised itself, as a non-banking financial intermediary. Lastly, it must be emphasized that the determination of whether a person or an entity is (a) performing banking or quasi-banking functions, or (b) engaged in other types of financial intermediation is vested in the Monetary Board subject to judicial review. In Commission of Internal Revenue vs. Hantex Trading Co., Inc. , 13 the Supreme Court ruled that an assessment must be based on actual facts. Accordingly, the local business tax assessment should be based on actual facts, and since there is no proof that petitioner can be considered as a non-bank financial institution or intermediary or is engaged in such activities, the local business tax assessment has no factual basis. Such a conclusion is based on an assumption, with no support in evidence. Such being the case, this Court thus finds that petitioner is not a non-bank financial intermediary, and the interests and dividends it receives from the preceding calendar year may not be the subject of local business tax imposed by respondent City of Davao. WHEREFORE ,in light of the foregoing considerations, the instant Petition for Review is hereby GRANTED . Accordingly, the assailed Decision dated August 11, 2016 and Resolution dated November 28, 2016 of the Second Division in CTA AC No. 139 are hereby REVERSED AND SET ASIDE .The Business Tax Order of Payment dated January 20, 2014 issued by the City Treasurer of Davao City, assessing petitioner for local business tax in the amount of Php2,415,353.10 is SET ASIDE AND CANCELLED for lack of factual and legal bases. SO ORDERED. (SGD.) CIELITO N. MINDARO-GRULLA Associate Justice Lovell R. Bautista, Erlinda P. Uy, Esperanza R. Fabon-Victorino, Ma. Belen M. Ringpis-Liban and Catherine T. Manahan, JJ. ,concur. Roman G. del Rosario, P.J. ,with Concurring Opinion. Juanito C. Castaeda, Jr.,J. ,with Dissenting Opinion. Caesar A. Casanova, J. ,joins Justice Castaeda's D.O. Separate Opinions DEL ROSARIO , P.J.,concurring opinion : I concur in the ponencia of my esteemed colleague, the Honorable Associate Justice Cielito N. Mindaro-Grulla, which grants the Petition for Review filed by Rock Steel Resources, Inc.,thereby reversing and setting aside the Decision and Resolution of the Court Division, and thus, setting aside and cancelling the Business Tax Order of Payment dated January 20, 2014 issued by respondents, assessing petitioner of local business tax in the amount of P2,415,353.10. SDAaTC As articulated in the ponencia , the City of Davao's power to impose local business tax (LBT) on banks and other financial institution, including non-bank financial intermediaries, emanates from Section 143 (f) of the Local Government Code of 1991 (LGC) 1 in relation to Section 131 (e) of the same Code. Section 131 (e) of the LGC did not provide for a specific definition of the term "non-bank financial intermediary" as it states that it shall be defined under applicable laws, rules and regulations. The term "non-bank financial intermediary" is defined in Section 22 (W) of the National Internal Revenue Code (NIRC) of 1997, as amended, Section 2.3 of Revenue Regulations (RR) No. 09-2004, Section 2-D (c) of the General Banking Act, 2 and Section 4.101Q.1 of the Bangko Sentral ng Pilipinas' (BSP) Manual of Regulations for Non-Bank Financial Institutions. The foregoing laws and regulations specifically defined what constitutes "non-bank financial intermediary" as they provide for the specific requisites in order for an entity to be regarded as such. While a person or entity must be "authorized by the BSP to perform quasi-banking activities," Section 4 of the General Banking Act, as amended, is categorical in stating that the "determination of whether a person or an entity is (a) performing banking or quasi-banking functions, or (b) engaged in other types of financial intermediation shall be decided by the Monetary Board subject to judicial review." Sorely, no such determination by the Monetary Board exists on record that may confirm, even remotely, that petitioner is a non-bank financial intermediary . The mere fact that petitioner has investments in San Miguel Corporation (SMC) and money market placements does not per se make it a non-bank financial intermediary. To insist otherwise would be absurd as any ordinary person who invests funds in money market or shares of stock will be considered non-bank financial intermediary. AaCTcI Incidentally, in his Dissenting Opinion, my learned colleague, the Honorable Associate Justice Juanito C. Castaeda, Jr.,makes the following analogy in concluding that petitioner is a non-bank financial intermediary, thus: "However, lack of authority by the BSP for petitioner to engage in NBFI activities, or lack of determination by the Monetary Board whether it is an NBFI, cannot be used as bases for concluding that petitioner is not an NBFI. To my mind, these requirements are designed merely to regulate NBFI activities. In fact, the present situation may be compared, by analogy, to a person presently and smoothly driving a car without driver's license. To argue that this person is not presently driving a car because he or she has no driver's license is simply fallacious. Basically, such argument would necessarily lead to a conclusion that the car is moving smoothly by itself. However, it wrongfully omits the fact that the smoothly moving car is being driven by a person without a driver's license." With due respect, I submit that the analogy is inaccurate. Truth to tell, any driver who drives a motor vehicle is indeed a "driver" and no license is necessary to be called as such. But when one is elevated to the category of a "professional driver," the term has to be taken within the context of the law that defines it. A student driver or any person who actually drives without license cannot be considered as a "professional driver" unless he possesses a "professional driver's license" as defined and mandated by law. In the same manner, a "non-bank financial intermediary" may not be considered as such in its legal sense unless it possesses all the requirements that qualify it to fall within its legal definition . The findings of the lower court that petitioner's income were derived solely from dividends and interest income on money market placements are not sufficient to justify the conclusion that petitioner is a non-bank financial intermediary. The imposition of LBT on non-bank financial intermediaries springs from Section 143 (f) in relation to Section 131 (e) of the LGC and it must be strictly exercised in accordance with its precepts. This is consistent with Article 1158 of the Civil Code of the Philippines which provides that "Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them ;x x x." In the absence of any evidence showing that petitioner has met all the requirements set forth by law to be regarded as a non-bank financial intermediary, I submit there is no basis to impose LBT on the dividends derived by petitioner from its investments in SMC shares of stock or on the interest income it derived from its money market placements. All told, I CONCUR with the ponente . acEHCD CASTAEDA, JR. , J.,dissenting opinion : With due respect, I dissent to the conclusion reached by the ponencia that the instant Petition for Review should be granted, primarily on the ground that respondent is not a non-bank financial intermediary (NBFI),among others. In granting the instant Petition, the subject Decision pertinently found that: "In any event, RSRI, is not a bank or other financial institution, on which the subject local business tax may be imposed. x x x The Court in Division ruled that in comparison with Section 4101Q.1 of the Manual, 'the scope of RSRI's primary business purpose in its Amended Articles of Incorporation is wittingly or unwittingly broad enough to catch all the descriptive functions of a Financial Intermediary. With all due respect to the Court in Division, there is nothing on record that shows that petitioner RSRI can be categorized as a financial intermediary or that it has engaged in the activities defined and enumerated in the General Banking Act and in the Manual. First, there is no indication that petitioner fulfills the first requirement, as there is no evidence in the court a quo showing that it was 'authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities.' Thus, on this basis alone, petitioner cannot be treated as non-bank financial intermediary. Second, the Court En Banc is also not convinced that the primary purpose of RSRI in the Amended Articles of Incorporation is broad enough to catch all the descriptive functions of a financial intermediary. It was not shown that said functions are 'principal' in nature, i.e.,'chief, main, most considerable or important, of first importance, leading, primary, foremost, dominant or preponderant, as distinguished from secondary or incidental.' Therefore, it is not proper to just assume that petitioner is engaged as a non-bank financial institution or intermediary based on the said primary purpose. Likewise, it was also not established that the enumerated functions performed by RSRI are 'on a regular and recurring, not on an isolated, basis.' In fact, it was not shown that petitioner ever performed the said functions. Also, a careful perusal of the records would reveal that there is also no evidence to show that RSRI held itself out, or advertised itself, as a non-banking financial intermediary. Lastly, it must be emphasized that the determination of whether a person or an entity is (a) performing banking or quasi-banking functions, or (b) engaged in other types of financial intermediation is vested in the Monetary Board subject to judicial review." EcTCAD However, the subject Decision failed to consider the following: (1) The authorization by the BSP for an entity to perform NBFI activities, and the Monetary Board's determination whether an entity is performing banking or quasi-banking functions or other types of financial intermediation, are mere regulatory measures; (2) Petitioner performed NBFI activities despite the limitations set in its Articles of Incorporation (AOI);and (3) Petitioner's consistent receipt of dividends and interest income from its equity securities and money market placements leads to no other conclusion that it engaged in NBFI activities. The authorization by the BSP for an entity to perform NBFI activities, and the Monetary Board's determination whether an entity is performing banking or quasi-banking functions or other types of financial intermediation, are mere regulatory measures Petitioner performed NBFI activities despite the limitations set in its Articles of Incorporation (AOI) As cited earlier, the subject Decision concluded that since there is no authorization by the BSP for petitioner to act as an NBFI, or a determination by the Monetary Board that it is performing banking or quasi-banking functions or other types of financial intermediation, petitioner cannot be classified as an NBFI. However, lack of authority by the BSP for petitioner to engage in NBFI activities, or lack of determination by the Monetary Board whether it is an NBFI, cannot be used as bases for concluding that petitioner is not an NBFI. To my mind, these requirements are designed merely to regulate NBFI activities. In fact, the present situation may be compared, by analogy, to a person presently and smoothly driving a car without driver's license. To argue that this person is not presently driving a car because he or she has no driver's license is simply fallacious. Basically, such argument would necessarily lead to a conclusion that the car is moving smoothly by itself. However, it wrongfully omits the fact that the smoothly moving car is being driven by a person without a driver's license. In this case, petitioner depicts the driver without license while the dividends and interest income from equity securities and money market placements depict the car. The car could not have smoothly moved, i.e.,petitioner could not have regularly earned dividends and interest income from equity securities and money market placements ,if no driver is maneuvering it, i.e.,if petitioner did not engage in NBFI activities ,albeit without driver's license, i.e.,without authority or categorization as such by the BSP or Monetary Board, respectively .Otherwise, petitioner's consistent earnings from dividends and interest income emanating from an unknown activity, i.e. ,if it did not engaged in NBFI activities, would border on the metaphysical, because it is as if such regular events had no cause. SDHTEC The above-reasoning also applies to the fact that there can also be no guarantee that a holding company will not act as an NBFI despite the limitations provided in its AOI. As the saying goes action speaks louder than words .As will be further discussed, petitioner's acts are clearly indicative of being engaged in NBFI activities. As such, petitioner's actions spoke louder than its AOI, such that it engaged in acts contrary to what was set forth therein. Petitioner's consistent receipt of dividends and interest income from its equity securities and money market placements leads to no other conclusion that it engaged in NBFI activities Contrary to the findings in the subject Decision that there is no evidence on record which would establish that petitioner performed the NBFI functions, the Court in Division, consistent with the findings of the lower court, found that: "It cannot be gainsaid that petitioner is engaged in business since it was organized as a stock corporation to perform all the above-enumerated functions with the end in view of earning a profit. As succinctly stated by the court a quo in the Assailed Decision, viz. : 'Coming to the merits of the case, the records show that petitioner's business operations consist solely of stock investments and money placements in San Miguel Corporation. Consequently, by holding a substantial number of shares of stock; and thus, receiving dividends as return of such investment and interest income from the petitioner's money market placements in San Miguel Corporation, the Court finds that the same clearly constitutes an act of investment or doing business which make them fall under the definition of a non-banking financial intermediary. While it may be true that petitioner's Amended Articles of Incorporation prohibits the corporation to act as an investment company, the Court finds that the records prove the contrary. HSAcaE The evidence submitted reveals that petitioner owns and invests in the shares of stock of San Miguel Corporation. It also has money placements in the said company as its principal and actual function or business operation. As raised by the respondents, based on the tax audit made by the latter, the petitioner has no other business operation and source of revenue apart from owning shares of stock of San Miguel Corporation and making money placements therein. This fact was not rebutted by petitioner.' Thus, any profit received by petitioner from its business activities is a direct consequence thereof and not just mere incidental thereto." In light of the findings both of the lower court and of the Court in Division, it cannot be doubted that petitioner engaged in NBFI activities. Again, the fact that petitioner earned dividends and interest income is not a metaphysical phenomenon that arose out of nothing. Surely, petitioner engaged in NBFI activities in order to generate such income. Considering the foregoing, I VOTE to DENY the instant Petition for Review. Footnotes 1. RULE 8, Sec 3. Who may appeal; period to file petition. xxx xxx xxx (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review. (Rules of Court, Rule 42, Sec. 1a) xxx xxx xxx 2. Penned by Associate Justice Caesar A. Casanova, concurred in by Associate Justice Juanito C. Castaeda, Jr. and Associate Justice Amelia Cotangco-Manalastas, En Banc Docket, pp. 33-60. 3. Id. ,pp. 61-65. 4. Supra note 2. 5. Petitioner's Memorandum dated September 14, 2015, Division Docket pp. 206-237. 6. Respondents' Memorandum dated September 23, 2015, Division Docket pp. 240-260. 7. Division Docket, p. 261. 8. Id. ,pp. 295-314. 9. "SEC. 143. Tax on Business. The municipality may impose taxes on the following businesses : xxx xxx xxx f) On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one percent (1%) on the gross receipts of the preceding calendar year derived from interest ,commissions and discounts from lending activities, income from financial leasing, dividends ,rentals on property and profit from exchange or sale of property, insurance premiums." (Emphases and underscoring supplied) 10. "SEC. 151. Scope of Taxing Powers. Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: xxx The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes." (Emphases supplied) 11. Philippine Coconut Producers Federation, Inc. v. Republic of the Philippines ,G.R. Nos. 177857-58 & 178193, January 24, 2012. 12. Section 131 (e) of the Local Government Code of 1991. Section 131 . Definition of Terms . When used in this Title, the term: xxx xxx xxx (e) "Banks and other financial institutions" include non-bank financial intermediaries, lending investors, finance and investment companies, pawnshops, money shops, insurance companies, stock markets, stock brokers and dealers in securities and foreign exchange, as defined under applicable laws, or rules and regulations thereunder. 13. Commission of Internal Revenue vs. Hantex Trading Co., Inc. , G.R. No. 136975, March 31, 2005, citing Collector of Internal Revenue vs. Benipayo ,4 SCRA 182 (1962). DEL ROSARIO, P.J.,concurring opinion: 1. Republic Act No. 7160. 2. Republic Act No. 337, as amended by Presidential Decree No. 71.