City of Davao v. Randy Allied Ventures, Inc.

EN BANC [C.T.A. EB CASE NO. 1635. July 27, 2018.] (C.T.A. AC No. 131) CITY OF DAVAO and BELLA LINDA N. TANJILI in her official capacity as The Officer-in-Charge City Treasurer's Office of Davao City , petitioners , vs. RANDY ALLIED VENTURES, INC. , respondent . DECISION UY , J p : Before the Court En Banc is the Petition for Review 1 filed on April 19, 2017 by the City of Davao and Bella Linda N. Tanjili, in her official capacity as the Officer-in-Charge, City Treasurer's Office of Davao City, against Randy Allied Ventures, Inc., praying for the reversal of the Decision dated August 12, 2016 2 and Resolution dated March 2, 2017, 3 both promulgated by the Third Division of this Court (Court in Division) in CTA AC No. 131, entitled "Randy Allied Ventures, Inc.,Petitioner, versus City of Davao and Hon. Rodrigo S. Riola, in his official capacity as the City Treasurer of Davao City, Respondents," the dispositive portions of which respectively read, as follows: Decision dated August 12, 2016 : " WHEREFORE ,premises considered, the instant Petition for Review is hereby GRANTED .The Orders dated October 15, 2014 and December 17, 2014 of the Regional Trial Court, Branch 16 of the City of Davao in Civil Case No. 35,674-14 are hereby REVERSED and SET ASIDE .The Assessment dated January 14, 2014 is hereby CANCELLED . SO ORDERED ." Resolution dated March 2, 2017 : " WHEREFORE ,finding no compelling reason to reverse the ruling of the Court in the assailed Decision, respondent's Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED ." THE FACTS Petitioner City of Davao is a local government unit (LGU) created by law, with principal office at City Hall, San Pedro Street, Davao City; while petitioner City Treasurer of Davao City, is represented by Ms. Bella Tanjili, the newly designated Officer-In-Charge of the City Treasurer's Office, after the retirement of Mr. Rodrigo S. Riola, and likewise holds office at the same address as above-stated. 4 CAIHTE Respondent Randy Allied Ventures, Inc. is a corporation duly organized in 1983 and existing under Philippine laws. It is registered with the Securities and Exchange Commission (SEC).On January 11, 2010, the SEC approved the transfer of respondent's principal office address from Makati City to Legaspi Oil Compound, Sasa, Davao City. Respondent was among the fourteen holding companies formed in 1983 for the purpose of owning and holding shares of stock of San Miguel Corporation (SMC).In 1986, the said holding companies, including respondent, were sequestered by the Philippine Commission on Good Government (PCGG).Subsequently, various cases were filed to resolve the ownership of the holding companies and the SMC shares of stock held by them. Until October 2009, respondent was a registered owner of SMC common shares, from which respondent occasionally received cash and stock dividends. In 2010, respondent received P183,034,999.16 from its SMC preferred shares, consisting of P180,864,202.50 in dividends and P2,170,796.66 in interest income from money market placements. In October 2012, respondent became the registered owner of 24,115,227 preferred shares of SMC, after the Supreme Court approved the conversion of an equal number of SMC common shares into preferred shares. The dividends received by respondent from the SMC preferred shares were deposited in a trust account, which earned interest from money market placements. In the meantime, the Supreme Court En Banc ,in Philippine Coconut Producers Federation, Inc. (COCOFED) vs. Republic of the Philippines , 5 declared the fourteen holding companies and the SMC shares held by them to be owned by the government. On January 20, 2014, respondent received from its Treasurer the Business Tax Order of Payment dated January 20, 2014 for P1,000,400.20. This amount corresponds to 0.55% local business tax on the dividends derived from its SMC shares and the interest on its money market placements for the third and fourth quarters of 2011, in accordance with Section 69 (f) of the 2005 Revenue Code of the City of Davao. On March 21, 2014, respondent filed a written administrative protest against the assessment. Its main contention was that the tax imposed on the dividends and its income was improper because it is not a bank or non-bank financial institution. In the letter dated April 4, 2014, petitioner Treasurer required respondent to submit proof of payment of the assessed business tax before its protest may be resolved, citing Section 423 of the 2005 Revenue Code of the City of Davao. In response thereto, respondent argued in its letter dated April 15, 2014, that the City of Davao had no authority to impose additional requirements before a protest may be entertained, other than those required by the Local Government Code (LGC), which does not require payment under protest for business tax. Thereafter, in the letter dated May 5, 2014, petitioner Treasurer reiterated the requirement under the 2005 Revenue Code of the City of Davao and pointed out that it is a valid ordinance, with which he shall abide. And for not having made the requisite payment, petitioner Treasurer did not act on respondent's protest. DETACa On June 9, 2014, respondent filed a Petition for Review dated June 6, 2014 with the RTC of Davao City, pursuant to Section 195 of the LGC. The case was docketed as 36,774-14. In the Order dated October 15, 2014, the RTC of Davao City dismissed respondent's Petition for Review .The said trial court found that respondent is a financial intermediary, and that the imposition by the City of Davao of the 0.55% local business tax on the dividends derived from its SMC shares and the interest on its money market placements for the third and fourth quarters of 2011 was proper. The dispositive portion reads: " FOR REASONS STATED , the instant 'Petition for Review' filed by the petitioner under Section 195 of R epublic Act No. 71 60 is hereby DENIED and/or DISMISSED . SO ORDERED ." In the Order dated December 17, 2014, the RTC of Davao City denied respondent's Motion for Reconsideration finding no cogent reason to alter, modify or set aside the Order dated October 15, 2014. Consequently, respondent filed a Petition for Review before the Court in Division on February 6, 2015. The case was docketed as CTA AC No. 131. As directed by the Court in Division, petitioners filed their Comment to the Petition in CTA AC No. 131 on May 21, 2015. In the Resolution dated June 15, 2015, the Court in Division ordered the parties to submit their respective memorandum. Respondent filed its Memorandum on July 20, 2015; while petitioners filed their Memorandum on August 7, 2015. Subsequently, the Court deemed CTA AC No. 131 submitted for decision in the Resolution dated August 24, 2015. In the assailed Decision dated August 12, 2016, 6 the Court in Division granted respondent's Petition for Review .The Orders dated October 15, 2014 and December 17, 2014 of the RTC of Davao City in Civil Case No. 35,674-14 were reversed and set aside, and the Assessment dated January 14, 2014 was cancelled. Petitioners then filed their Motion for Reconsideration on September 22, 2016, 7 to which respondent filed its Comment/Opposition to Respondent's Motion for Reconsideration (Re: Decision Promulgated 12 August 2016) on October 28, 2016. 8 In the assailed Resolution dated March 2, 2017, 9 the Court in Division denied petitioners' Motion for Reconsideration for lack of merit. Undaunted, on April 4, 2017, petitioners filed a Motion for Extension of Time to File Petition for Review , 10 which the Court En Banc granted in the Minute Resolution dated May 2, 2017. On April 19, 2017, petitioners timely filed the instant Petition for Review . 11 Without necessarily giving due course to the instant Petition for Review ,respondent was ordered by the Court En Banc to file its comment in CTA EB 1635. 12 Thus, respondent filed its Comment (On Petition for Review dated 19 April 2017) on June 9, 2017. 13 In the Resolution dated July 10, 2017, 14 the parties were ordered to submit their respective memorandum, within a period of thirty (30) days from receipt thereof. Petitioners filed their Memorandum on August 30, 2017, 15 while respondent filed its Memorandum on September 25, 2017. 16 Thereafter, the instant case was submitted for decision on October 12, 2017. 17 Hence, this Decision. THE ISSUE In the instant Petition for Review ,petitioners raise this sole issue for the Court En Banc 's resolution, to wit: "WHETHER OR NOT RESPONDENT IS A 'NON-BANK FINANCIAL INTERMEDIARY,' FALLING UNDER THE CATEGORY OF A 'BANK AND OTHER FINANCIAL INSTITUTIONS,' SO AS TO BE SUBJECT TO LOCAL BUSINESS TAX IMPOSITION, AS PROVIDED UNDER SECTION 143 (f) OF R A 71 60, OTHERWISE KNOWN AS THE 'LO CAL GOVERNMENT COD E OF 1991.'" 18 Petitioners' arguments: Petitioner contends that respondent is deemed a "bank and other financial institution," specifically as a "non-bank financial intermediary" by virtue of its investment and money placements in SMC. According to petitioners, the business purpose of respondent as contained in its Amended Articles of Incorporation is wittingly and unwittingly broad enough to catch all the descriptive function of a non-bank financial intermediary as provided under Section 4101Q.1 of the Manual of Regulations for Non-Bank Financial Institutions issued by the Bangko Sentral ng Pilipinas (BSP). ATICcS In addition, petitioners are of the view that respondent's Articles of Incorporation stating that it shall not act as an investment company or securities broker or dealer is simply an evasive proviso purposely written in order to evade compliance with existing regulations for non-bank financial intermediaries. That in fact, based on the tax audit conducted by the City Treasurer, it was established that respondent has no other business, except its investment in SMC and that this only shows the real intent of the respondent to engage solely and primarily in the business of stock investment and money market placements in SMC. Moreover, even if we assume that respondent's income partakes the nature of public funds pursuant to the ruling of the Supreme Court in Cocofed vs. Republic , 19 since the CIIF block of SMC shares were acquired using coconut levy funds, the same should be treated as government assets, nevertheless, it does not allegedly exempt the respondent from the payment of local business tax on its dividends and interest, pursuant to Section 143 (F) of Republic Act (RA) No. 7160. Furthermore, petitioners contend that the non-issuance of a secondary license by the Monetary Board does not ipso facto exclude the respondent from being a "non-bank financial intermediary." Finally, petitioners argue that being a stock corporation, respondent is presumed to have been organized to engage in business with the end view of a profit. Hence, respondent is allegedly subject to local business taxes. Respondent's counter-arguments: Respondent counters that the 0.55% local business tax assessed by petitioners against respondent for the third and fourth quarters of taxable year 2011, based on the dividend and interest income for the year 2010 should be cancelled on the basis of the following grounds: ETHIDa a) Pursuant to Section 133 (A) of the Local Government Code, it is erroneous and illegal for petitioners to assess local business tax on the dividends and interest income of respondent because it is not a bank or a financial institution; b) Being a holding company, respondent's dividend and interest income are not subject to local business tax; and c) Respondent, as well as its SMC shares and income derived therefrom are national government property exempt from local business tax. Respondents aver that it does not fulfill any of the requirements of being a non-bank financial intermediary as it is not authorized by the BSP to perform quasi-banking functions; and that there is no evidence that it is principally engaged in functions that would qualify a person or entity as a non-bank financial intermediary, and it was never shown that respondent performed the activities enumerated in paragraph 4, 4101 Q.1 of the BSP Manual on a regular and recurring basis. In addition, respondent enumerates other circumstances that point to the conclusion that it is not a bank or other financial institution, as its Amended Articles of Incorporation indicate that it is a holding company. Relative thereto, respondent emphasizes that as stated in its primary purpose, respondent is expressly prohibited from acting as an investment company or a securities broker and/or dealer, which are all types or classifications of a non-bank financial intermediary; that it is not engaged in lending money, investing, reinvesting or trading securities and/or foreign exchange, either for its own account or for the account of others in a regular or recurring basis; that it was not required by the Securities and Exchange Commission to secure a secondary license; that respondent is not regulated by the BSP or the Insurance Commission, which is the case for those falling within the definition of banks and other financial institutions under Section 131 (e) of the LGC; and that respondent, and other holding companies funded by the coconut levy funds, were organized solely to hold SMC shares. Moreover, respondent contends that in this case, the Monetary Board has not declared respondent to be a financial intermediary or institution; that it cannot be considered a bank or other non-bank financial institution, more specifically a non-bank financial intermediary, since it is not engaged in lending money, investing, reinvesting or trading securities and/or foreign exchange either for its own account or for the account of others on a regular and recurring basis. Since its incorporation, it has allegedly not engaged in any business activity; that it acquired SMC shares only once after its incorporation and has not bought any shares of stocks or invested in any other corporation other than in SMC. It allegedly placed dividends derived from said SMC shares in a trust fund that earned interest from money market placements, as any prudent administrator would. In other words, the investment that it made in SMC shares happened only once and is an isolated transaction. Respondent likewise argues that under applicable laws and regulations, it is not a non-bank financial institution; and thus, its dividend and interest income are beyond the taxing powers of respondent City of Davao. cSEDTC Lastly, according to respondent, it does not ipso facto qualify as a non-bank financial intermediary by simply owning or holding shares of stock of SMC. Relative thereto, respondent points out that what should prevail is the real nature and substance of its functions. Allegedly, as the records of the case bear, it has not engaged in any business activity; that it acquired the SMC shares only once after its incorporation and has not bought any shares of stocks or invested in any other corporation other than in SMC. THE COURT EN BANC 'S RULING The instant Petition for Review lacks merit. Respondent is not a non-bank financial intermediary. Hence, it cannot be subjected to local business taxes on its dividend and interest income on its investments and money placements in SMC. The scope of the term "Banks and other financial institutions" is stated by Section 131 (e) of the LGC of 1991, to wit: AIDSTE "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) Based on the foregoing, "non-bank financial intermediaries," inter alia ,are included in the term "Banks and other financial institutions" ;and that the term "non-bank financial intermediaries" are those that are "as defined under applicable laws, or rules and regulations thereunder." On the basis on the foregoing provision, for us to know the meaning of "non-bank financial intermediary" in relation to this case, We must look into the definitions given by applicable laws, and rules and regulations with regard the said term. Relative thereto, the term "non-bank financial intermediary" is defined in Section 22 (W) of the National Internal Revenue Code of 1997, which reads as follows: "(W) The term 'non-bank financial intermediary' means a financial intermediary, as defined in Section 2(D)(c) of R epublic Act No. 3 37, as amended, otherwise known as the G eneral Banking A ct, authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities ." (Emphasis supplied) Section 2-D (c) of R A No. 33 7, as amended by P residential Decree (PD) N o. 71, in turn, defines "financial intermediaries" in this wise, to wit: "(c) '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"; Moreover, Section 4101Q.1 of the BSP's Manual of Regulations for Non-Bank Financial Institutions, elaborated on this, as follows: " 4101Q.1. Financial intermediaries . 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. 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. To be considered a financial intermediary, a person or entity must perform any of the following functions 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; AaCTcI 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. 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 . (3) A person or entity performing any of the functions enumerated in Items a to e of this Subsection." (Underscoring supplied) In accordance with the foregoing applicable laws and rules and regulations, the basic requirements for a person or entity to be considered as a "non-bank financial intermediary" are as follows: 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" ; 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; EcTCAD 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. In the present case, there is no indication that respondent fulfills the first requirement, as there is no evidence showing that it was "authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities." On the basis of this finding alone, respondent cannot already be considered as a non-bank financial intermediary. But even granting that We ignore the non-fulfillment of the said first requirement, the second requirement is likewise not met. According to respondent's Amended Articles of Incorporation, 20 the primary purpose of respondent is as follows: SDHTEC "PRIMARY PURPOSE The primary purpose for which such Corporation is formed is: To purchase, subscribe for, or otherwise acquire and own, hold, use, sell, assign, transfer, mortgage, pledge, exchange, or otherwise dispose of real and personal property of every kind and description, including shares of stock, voting trust certificates for shares of the capital stock, bonds, debentures, notes, evidences of indebtedness, and other securities, contracts, or obligations of any corporation or corporations, association or associations, domestic or foreign, and to pay therefor in whole or in part in cash or by exchanging therefor stocks, bonds, or other evidences of indebtedness or securities, contracts, or obligation, to receive, collect, and dispose of the interest, dividends and income arising from such property, and to possess and exercise in respect thereof, all the rights, powers and privileges of ownership, including all voting powers on any stocks so owned; and to do every act and thing covered generally by the denomination "holding corporation," and especially to direct the operations of other corporations through the ownership of stock therein, provided however that the Corporation shall not act as an investment company or a securities broker and/or dealer nor exercise the functions of a trust corporation." While it may be true that the functions of the respondent, on the basis of its primary purpose as stated in its Amended Articles of Incorporation, may cover the supposed functions of a non-bank 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." The records of this case are wanting of any proof that the stated functions were principally done by the respondent. In fact, no evidence was shown that respondent ever performed any of the said functions. As a corollary, it was also never established that the enumerated functions under the third requirement were performed by respondent "on a regular and recurring, not on an isolated, basis." Finally, there is absolutely no showing that respondent held itself out as a non-bank financial intermediary. Such being the case, this Court En Banc upholds the finding that respondent is not a non-bank financial intermediary, and the interests and dividends it received, may not properly be the subject of local business tax imposed by petitioner City of Davao. In addition to Our findings that respondent is not a "non-bank financial intermediary," We likewise find that respondent is beyond the taxing powers of the City of Davao. Respondent is owned by the Government. Thus, the City of Davao may not tax respondent. In this case, petitioners argue that assuming that respondent's income partakes the nature of public funds and are treated as government assets, it does not exempt respondent from the payment of local business taxes on its dividends and interest, pursuant to Section 143 (f) of RA No. 7160. n We are not swayed. AScHCD Contrary to petitioners' contentions, Section 129, Book II, of R.A. No. 7160, otherwise known as the Local Government Code (LGC) of 1991, empowers each LGU to create its own sources of revenue, and to levy taxes, fees, and charges subject to the provisions of the code, consistent with the basic policy of local autonomy. In relation thereto, Section 143 (f), in relation to Section 151, both of the LGC of 1991, grants the power to petitioner City of Davao to impose taxes on banks and other financial institutions, to wit: "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) "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 :x x x 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) The aforesaid taxing power granted to petitioner City of Davao, however, is not without limitation. Section 133 of the LGC of 1991, specifies the common limitations on the taxing power of Local Government Units, to wit: HESIcT " SEC. 133. Common Limitations on the Taxing Power 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 : 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) Based on the foregoing provisions, while petitioner City of Davao is empowered to impose income tax, i.e. ,on the gross receipts derived by banks and other financial institutions ,from dividends and interest, at the rate of 0.55%,it still cannot tax, inter alia ,the National Government. In this case, respondent received from petitioner City Treasurer the Business Tax Order of Payment dated January 20, 2014, for the imposition of 0.55% local business taxes on the dividends derived from its SMC shares of stock and interest income on its money market placements for the third and fourth quarters of 2011. In Philippine Coconut Producers Federation, Inc. (COCOFED), et al. vs. Republic of the Philippines , 21 the Supreme Court held that the SMC shares of stock are owned by the government, to wit: "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 . We thus affirm the decision of the Sandiganbayan on this point. But as We have earlier discussed, reiterating our holding in Republic v. COCOFED ,the States avowed policy or purpose in creating the coconut levy fund is for the development of the entire coconut industry, which is one of the major industries that promotes sustained economic stability, and not merely the livelihood of a significant segment of the population. 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 necessary owned by the Government .We, however, modify the same in the following wise: These shares shall belong to the Government, which shall be used only for the benefit of the coconut farmers and for the development of the coconut industry." (Emphases supplied) Respondent is one of the "CIIF companies" being referred to in the aforementioned case. 22 Thus, since respondent is considered as Government property, any tax imposed upon the respondent is considered, in effect, as a tax on Government. Such being the case, the dividend income earned by respondent may not be subjected to local business tax under the aforequoted Section 131 (e) of the LGC of 1991 by petitioner City of Davao, pursuant to Section 133 (o) of the same law. caITAC WHEREFORE ,in light of the foregoing considerations, the instant Petition for Review is DENIED for lack of merit. The Decision dated August 12, 2016 and the Resolution dated March 2, 2017 rendered by the Court in Division in CTA AC No. 131 are AFFIRMED . SO ORDERED. (SGD.) ERLINDA P. UY Associate Justice Lovell R. Bautista, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla, 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. ,I join Justice Castaeda's Dissenting Opinion. Separate Opinions DEL ROSARIO , P.J.,concurring opinion : I concur in the ponencia of my esteemed colleague, the Honorable Associate Justice Erlinda P. Uy, which denies the Petition for Review filed by the City of Davao and Bella Linda N. Tanjili, in her official capacity as the Officer-in-Charge, City Treasurer's Office of Davao City, against Randy Allied Ventures, thereby affirming the Decision dated August 12, 2016 and the Resolution dated March 2, 2017 of the Court in Division, and thus, cancelling the Assessment dated January 14, 2014. TAIaHE 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. 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 respondent to engage in NBFI activities cannot be used as basis for concluding that it is not an NBFI. To my mind, this requirement is 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. cDHAES All told, I CONCUR with the ponente . 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 denied primarily on the ground that respondent is not a non-bank financial intermediary (NBFI). In concluding that respondent is an NBFI, the lower court found that: "Furthermore, the Court observes and therefore must stress that the income of the Petitioner Corporation come only from two sources, to wit: 1. Dividends from RAVI's SMC Shares; and 2. Interest Income from RAVI's Money Market Placements In short, these dividends and interests are not considered incidental to its business quest, but are the principal x x x incomes of Petitioner's Corporation in the regular course of its business in line with the Primary Purpose of its Amended Articles of Incorporation." 1 TCAScE A perusal of the subject Decision, however, disregarded these findings of fact by the lower court. The subject Decision pertinently states: "In the present case, there is no indication that respondent fulfills the first requirement, as there is no evidence showing that it was 'authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities.' On the basis of this finding alone, respondent cannot already be considered as a non-bank financial intermediary. xxx xxx xxx While it may be true that the functions of the respondent, on the basis of its primary purpose as stated in its Amended Articles of Incorporation, may cover the supposed functions of a non-bank 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.' The records of this case are wanting of any proof that the stated functions were principally done by the respondent. In fact, no evidence was shown that respondent ever performed any of the said functions. As a corollary, it was also never established that the enumerated functions under the third requirement were performed by respondent 'on a regular and recurring, not on an isolated, basis.' Finally, there is absolutely no showing that respondent held itself out as a non-bank financial intermediary. Such being the case, this Court En Banc upholds the finding that respondent is not a non-bank financial intermediary, and the interests and dividends it received, may not properly be the subject of local business tax imposed by petitioner City of Davao. xxx xxx xxx Respondent is one of the 'CIIF companies' being referred to in the aforementioned case. Thus, since respondent is considered as Government property, any tax imposed upon the respondent is considered, in effect, as a tax on Government. Such being the case, the dividend income earned by respondent may not be subjected to local business tax under the aforequoted Section 131(e) of the LGC of 1991 by petitioner City of Davao, pursuant to Section 133(o) of the same law." The authorization by the BSP for an entity to perform NBFI activities is a mere regulatory measure Respondent performed NBFI activities despite the limitations set in its Amended Articles of Incorporation (AOI) As cited earlier, the subject Decision concluded that since there is no authorization by the BSP for respondent to act as an NBFI, it cannot be classified as an NBFI. However, lack of authority by the BSP for respondent to engage in NBFI activities cannot be used as basis for concluding that it is not an NBFI. To my mind, this requirement is 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, respondent 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.,respondent could not have regularly earned dividends and interest income from equity securities and money market placements ,if no driver maneuvers it, i.e.,if respondent did not engage in NBFI activities ,albeit without driver's license, i.e.,without authority from the BSP .Otherwise, respondent's consistent earnings from dividends and interest income emanating from an unknown activity, i.e. ,if it did not engage in NBFI activities, would border on the metaphysical, because it is as if such regular events had no cause. cTDaEH 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 Amended AOI. As the saying goes action speaks louder than words .As will be further discussed, respondent's acts are clearly indicative of being engaged in NBFI activities. As such, respondent's actions spoke louder than its Amended AOI, such that it engaged in acts contrary to what was set forth therein. Respondent'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 As earlier discussed, the lower court found that respondent's income emanated solely from dividends and money market placements. Despite these findings, the subject Decision found that there is nothing on record or there is no proof that respondent performed activities attributable to an NBFI. Yet, there is also nothing in the subject Decision that overturned the above findings of fact of the lower court. Without adequate foundation to support the conclusion of the subject Decision, i.e. ,proof that respondent did not engage in NBFI activities despite earnings from dividends and money market placements, it would be more prudent for the Court to sustain the factual findings of the lower court. The tax is levied upon the entity and not upon the shares or sources of gross receipts which operate as tax bases Section 143 of the LGC of 1991 pertinently states: " Section 143. Tax on Business . The municipality 2 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 premium." (Emphasis supplied) Section 143 (f) of the LGC of 1991 imposes local business tax on banks and other financial institutions , i.e. ,non-bank financial intermediaries. In other words, while the tax bases of Section 143 (f) consist of interest, commissions and discounts from lending activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of property, and insurance premium, the tax is imposed directly on the privilege enjoyed by banks and other financial institutions. It directly imposes business tax on the privilege being enjoyed by the entity and not on the sources of gross receipts. cSaATC In the instant case, while the San Miguel Shares had already been adjudged by the Supreme Court as belonging to the government, it is not directly the said shares, but the privilege enjoyed by respondent to engage in NBFI activities, that is subject to local business tax. Simply put, the dividends and interest income from these shares are mere tax bases under Section 143 (f) of the LGC of 1991. Ultimately, however, it is respondent's privilege against whom the local business tax is levied upon. Finally, the subject Decision's finding that respondent is a government property directly contradicts its primary conclusion that respondent is not an NBFI. Simply put, if the government owns respondent by reason of primarily dealing with San Miguel Shares, then we can safely conclude that the lower court is correct when it found that respondent's income comes only from dividends and money market placement of its San Miguel Shares. Therefore, respondent clearly engaged in NBFI activities. At any rate, I respectfully submit that it is the San Miguel Shares and not the respondent corporation, which is considered as government property. Considering the foregoing, I VOTE to DENY the instant Petition for Review. Footnotes 1. EB Docket, pp. 10 to 26. 2. EB Docket, pp. 28 to 40. This was penned by Associate Justice Ma. Belen M. Ringpis-Liban, and concurred by Associate Justices Lovell R. Bautista and Esperanza R. Fabon-Victorino. 3. EB Docket, pp. 41 to 46. Supra . 4. Petition for Review ,EB Docket, p. 11. 5. G.R. Nos. 177857-58 & 178193, January 24, 2012. 6. EB Docket, pp. 28 to 40; Division Docket (CTA AC No. 131),pp. 277 to 289. 7. Division Docket (CTA AC No. 131),pp. 291 to 295. 8. Division Docket (CTA AC No. 131),pp. 301 to 317. 9. EB Docket, pp. 41 to 46; Division Docket (CTA AC No. 131),pp. 322 to 327. 10. EB Docket, pp. 1 to 4. 11. EB Docket, pp. 10 to 27. 12. Resolution dated May 15, 2017, EB Docket, pp. 58 to 59. 13. EB Docket, pp. 60 to 90. 14. EB Docket, pp. 94 to 95. 15. EB Docket, pp. 96 to 111. 16. EB Docket, pp. 114 to 146. 17. EB Docket, pp. 150 to 151. 18. EB Docket, p. 15. 19. G.R. Nos. 177857-58 & 178193, January 24, 2012. 20. RTC Records, pp. 60 to 61. 21. G.R. Nos. 177857-58 and 178193, January 24, 2012. 22. See Footnote No. 4 of Philippine Coconut Producers Federation, Inc. (COCOFED), et al. vs. Republic of the Philippines, etseq., supra ,to wit: "Composed of Soriano shares, ASC Investors, ARC Investors, Roxas Shares. Toda Holdings, AP Holdings, Fernandez Holdings, SMC Officers Corps.,Te Deum Resources, and Anglo Ventures, Randy Allied Ventures ,Rock Steel Resources, Valhalla Properties Ltd.,and First Meridian Development, all names ending with the suffix 'Corp.' or 'Inc.'" (Emphasis and underscoring supplied) DEL ROSARIO, P.J., concurring opinion: 1. Republic Act No. 7160. 2. Republic Act No. 337, as amended by Presidential Decree No. 71. CASTAEDA , JR.,J.,dissenting opinion: 1. Court in Division Docket, p. 41. 2. The city, may levy the taxes, fees, and charges which the province or municipality may impose, in accordance with Sec. 151, LGC of 1991. n Note from the Publisher: Written as "7610" in the original document.