First E-Bank Tower Condominium Corp. v. Bureau of Internal Revenue

FORMER SPECIAL SEVENTEENTH DIVISION [CA-G.R. CV NO. 102266. November 27, 2014.] IN THE MATTER OF DECLARATORY RELIEF ON THE VALIDITY OF BIR REVENUE MEMORANDUM CIRCULAR NO. 65-2012 "CLARIFYING THE TAXABILITY OF ASSOCIATION DUES, MEMBERSHIP FEES AND OTHER ASSESSMENTS/CHARGES COLLECTED BY CONDOMINIUM CORPORATION, FIRST E-BANK TOWER CONDOMINIUM CORP. , petitioner-appellant , vs. BUREAU OF INTERNAL REVENUE, as herein represented by its COMM. KIM S. JACINTO-HENARES, ET AL. , respondents-appellees. RESOLUTION BATO , JR. , J p : This treats of petitioner-appellant First E-Bank Tower Condominium Corporation's Motion for Reconsideration 1 dated 08 July 2014 assailing the Court's Resolution dated 26 June 2014 dismissing outright the instant case for lack of appellate jurisdiction over the subject matter of the action. Oddly, the Bureau of Internal Revenue, through the Office of the Solicitor General, also filed its Motion for Reconsideration 2 dated 15 July 2014 praying for the reconsideration of the dismissal of the appeal filed by First E-bank Tower Condominium Corporation. Both the petitioner-appellant and respondents-appellees argue that the Court of Appeals has appellate jurisdiction over the instant appeal. They asserted that the proceeding before the RTC is not a local tax case but a petition for declaratory relief questioning the constitutionality of BIR Revenue Memorandum Circular No. 65-2012 dated 31 October 2012. According to petitioner-appellant, the BIR Circular which "clarifies the taxability of association dues, membership fees and other assessment/charges collected by condominium corporations" is unjust and oppressive. We are not persuaded. To begin with, it is not disputed by the parties that the subject matter of the controversy is the imposition of 12% value added tax and 32% income tax on association dues/membership fees and other charges collected by condominium corporations from its members and tenants pursuant to BIR Revenue Memorandum Circular No. 65-2012 dated 31 October 2012. Although, petitioner-appellant filed a petition for declaratory relief before the RTC, it did not change the fact that its ultimate objective is to assail the imposition of 12% value added tax and 32% income tax on association dues/membership dues collected by the BIR. In other words, the BIR Circular, which is in the nature of a ruling or opinion on the taxability of "association dues, membership fees and other assessment/charges" collected by a condominium corporation is being assailed by the petitioner-appellant. As such, the matter is within the exclusive appellate jurisdiction of the Court of Tax Appeals. ITAaHc Instructive is the case of Commissioner of Internal Revenue vs. Josefinal Leal , 3 wherein the Supreme Court categorically ruled that the opinion or ruling of the BIR Commissioner on "matters arising under the National Internal Revenue Code or other law or part of the law administered by the Bureau of Internal Revenue" is within the exclusive jurisdiction of the Court of Tax Appeals, viz. : The questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing the Tax Code on the taxability of pawnshops. This is clear from petitioner's RMO No. 15-91, pertinent portion of which reads: A restudy of P.D. 114 (the Pawnshop Regulation Act) shows that the principal activity of pawnshops is lending money at interest and incidentally accepting a 'pawn' of personal property delivered by the pawner to the pawnee as security for the loan (Sec. 3, ibid. ). Clearly, this makes pawnshop business akin to lending investor's business activity which is broad enough to encompass the business of lending money at interest by any person whether natural or juridical. Such being the case, pawnshops shall be subject to the 5% lending investor's tax based on their gross income pursuant to Section 116 of the Tax Code, as amended. Such revenue orders were issued pursuant to petitioner's powers under Section 245 of the Tax Code, which states: SEC. 245. Authority of the Secretary of Finance to promulgate rules and regulations. The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code. "The authority of the Secretary of Finance to determine articles similar or analogous to those subject to a rate of sales tax under certain category enumerated in Sections 163 and 165 of this Code shall be without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including ruling on the classification of articles of sales and similar purposes. Under Republic Act No. 1125 (An Act Creating the Court of Tax Appeals [CTA for brevity]), as amended, such rulings of the Commissioner of Internal Revenue are appealable to that court, thus: CHTAIc "SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal , as herein provided (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue ; xxx xxx xxx. SEC. 11. Who may appeal; effect of appeal. Any person , association or corporation adversely affected by a decision or ruling of the Commissioner of Internal Revenue , or the Commissioner of Customs or any provincial or city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty days after the receipt of such decision or ruling . xxx xxx xxx. SEC. 18. . . . . No judicial proceedings against the Government involving matters arising under the National Internal Revenue Code , the Customs Law or the Assessment Law shall be maintained, except as herein provided, until and unless an appeal has been previously filed with the Court of Tax Appeals and disposed of in accordance with the provisions of this Act. xxx xxx xxx. This Court, in Rodriguez, etc. vs. Blaquera , etc., ruled: Plaintiff maintains that this is not an appeal from a ruling of the Collector of Internal Revenue, but merely an attempt to nullify General Circular No. V-148, which does not adjudicate or settle any controversy, and that, accordingly, this case is not within the jurisdiction of the Court of Tax Appeals. We find no merit in this pretense. General Circular No. V-148 directs the officers charged with the collection of taxes and license fees to adhere strictly to the interpretation given by the defendant to the statutory provisions abovementioned, as set forth in the Circular. The same incorporates, therefore, a decision of the Collector of Internal Revenue (now Commissioner of Internal Revenue) on the manner of enforcement of the said statute, the administration of which is entrusted by law to the Bureau of Internal Revenue. As such, it comes within the purview of Republic Act No. 1125, Section 7 of which provides that the Court of Tax Appeals 'shall exercise exclusive appellate jurisdiction to review by appeal . . . decisions of the Collector of Internal Revenue in . . . matters arising under the National Internal Revenue Code or other law or part of the law administered by the Bureau of Internal Revenue.' . . . . In the same vein, we held in Meralco Securities Corporation vs. Savellano , thus: EATCcI Respondent judge has no jurisdiction to take cognizance of the case because the subject matter thereof clearly falls within the scope of cases now exclusively within the jurisdiction of the Court of Tax Appeals . Section 7 of Republic Act No. 1125, enacted June 16, 1954, granted to the Court of Tax Appeals exclusive appellate jurisdiction to review by appeal, among others, decisions of the Commissioner of Internal Revenue in cases involving disputed assessments , refunds of internal revenue taxes, fees or other charges , penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue. The law transferred to the Court of Tax Appeals jurisdiction over all cases involving said assessments previously cognizable by Courts of First Instance, and even those already pending in said courts. The question of whether of not to impose a deficiency tax assessment on Meralco Securities Corporation undoubtedly comes within the purview of the words "disputed assessments" or of "other matters arising under the National Internal Revenue Code. . . ." In the case of Blaquera, etc. vs. Rodriguez, etc. (103 Phil. 511 [1958]), this Court ruled that 'the determination of the correctness or incorrectness of a tax assessment to which the taxpayer is not agreeable, falls within the jurisdiction of the Court of Tax Appeals and not of the Court of First Instance, for under the provisions of Section 7 of Republic Act No. 1125, the Court of Tax Appeals has exclusive appellate jurisdiction to review, on appeal, any decision of the Collector of Internal Revenue in cases involving disputed assessments and other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue. ' Here, as earlier mentioned, respondent Josefina Leal, being a pawnshop owner, is assailing the revenue orders imposing 5% lending investor's tax on pawnshops issued by petitioner. Clearly then, she should have filed her petition with the Court of Tax Appeals, not the RTC. Indeed, the Court of Appeals erred in holding that the RTC order should have been challenged before this Court. [Emphasis in the original] Moreover, Section 7 paragraph (a) subparagraph (1) of Republic Act No. 9282, explicitly provides that the Court of Tax Appeals has exclusive appellate jurisdiction to review by appeal "Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue." Corollarily, in the case of City of Iriga vs. Camarines Sur III Electric Cooperative, Inc. , 4 the Supreme Court succinctly declared that "RA 9282, which took effect on April 23, 2004, expanded the jurisdiction of the Court of Tax Appeals (CTA) to include, among others, the power to review by appeal decisions, orders or resolutions of the Regional Trial Court in local taxes originally decided or resolved by them in the exercise of their original or appellate jurisdiction." Clearly, regardless of whether the subject matter is a local tax or national tax, the appellate jurisdiction is vested exclusively in the Court of Tax Appeals a highly specialized body created solely for the purpose of reviewing tax cases. 5 By the nature of its functions, the Court of Tax Appeals is dedicated exclusively to the study and consideration of tax problems. 6 DHITCc ACCORDINGLY , both motions for reconsideration are DENIED for utter lack of merit. SO ORDERED . Zalameda and Reyes-Carpio, * JJ., concur. Footnotes * Acting Junior Member vice J. Diy per Office Order No. 283-14-ABR dated June 16, 2014. 1. Rollo , pp. 67-73. 2. Rollo , pp. 74-81. 3. G.R. No. 113459, November 18, 2002. 4. G.R. No. 192945, September 5, 2012. 5. Commissioner of Internal Revenue vs. Court of Appeals, G.R. No. 115349, April 18, 1997. 6. Commissioner of Internal Revenue vs. General Foods (Phil.), Inc. , G.R. No. 143672, April 24, 2003.