Interpretation of the Phrase "Other Entity Incorporated and/or Organized and Existing under Philippine Laws" under EO 226

DOJ OPINION NO. 051 , s. 2007 August 13, 2007 Undersecretary Elmer C. Hernandez Vice-Chairman & Managing Head Board of Investments Industry & Investments Building 385 Sen. Gil J. Puyat Avenue Makati City Sir : This refers to your request for opinion on whether or not the phrase " other entity incorporated and/or organized and existing under Philippine laws " in the definition of " Registered Enterprises " under Executive Order No. 226, otherwise known as the "Omnibus Investments Code of 1987", may include non-stock, non-profit corporations. SCaIcA The query, it appears, is raised in connection with the following views that you want us to confirm, to wit: 1. That non-stock, non-profit corporation is eligible for registration under E.O. No. 226 if the activity thereof falls under the listed activity in the Investment Priorities Plan (IPP); and 2. That the Board (of Investments) has the authority to restrict the availment of Income Tax Holiday (ITH) incentive in certain circumstances, such as when a stock corporation is already enjoying a preferential tax treatment on gross income under the National Internal Revenue Code (NIRC). On the extent of the coverage and application of the phrase " other entity incorporated and/or organized and existing under Philippine laws ", the Omnibus Investments Code of 1987, as amended, and the Corporation Code, 1 insofar as pertinent, respectively provide, thus: TDcCIS ART. 11. "Registered enterprise". shall mean any individual, partnership, cooperative, corporation or other entity incorporated and/or organized and existing under Philippine laws, and registered with the Board in accordance with this Book: Provided, however, That the term "registered enterprise" shall not include commercial banks, savings and mortgage banks, rural banks, savings and loan associations, building and loan associations, development banks, trust companies, investment banks, finance companies, brokers and dealers in securities, consumers' cooperatives and credit unions, and other business organizations whose principal purpose or principal source of income is to receive deposits, lend or borrow money, buy and sell or otherwise deal, trade or invest in common or preferred stocks, debentures, bonds or other marketable instruments generally recognized as securities, or discharge other similar intermediary, trust or fiduciary functions. 2 xxx xxx xxx SEC. 87. Definition . For the purposes of this Code, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, subject to the provisions of this Code on dissolution: Provided, That any profit which a non-stock corporation may obtain as an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized, subject to the provisions of this Title. xxx xxx xxx SEC. 88. Purposes . Non-stock corporations may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic, service, or similar purposes, like trade, industry, agricultural and like chambers, or any combination thereof, subject to the special provisions of this Title governing particular classes of non-stock corporations. It is basic in statutory interpretation that when the words and phrases of the statute are clear and unequivocal, their meaning must be determined from the language employed and the statute must be taken to mean exactly what it says. 3 The reason is because when the law is clear, interpretation does not apply only application. 4 Equally elementary is the rule or maxim " ejusdem generis ", that is, where general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned. 5 Applied to the instant case, we agree with your view that non-stock, non-profit corporations are eligible for registration under the Omnibus Investments Code of 1987. Section 11, earlier-quoted, is clear and categorical that an entity, whether formed under the Corporation Code, or the Omnibus Investments Code, or any other applicable Philippine laws, when registered with the Board of Investments in accordance with the Code is a "registered enterprise". Consequently, a non-stock corporation, which, as above-described, is included in the bigger class "corporation", must necessarily be construed as eligible for registration as such, subject, however, to the condition that it possesses all the qualifications of a registered enterprise under Article 32 of the said Code. CHDTIS Additionally, the eligibility for registration of said non-stock corporation is also subject to the qualification that it does not fall under any of those expressly enumerated in Section 11 as excluded from the term "registered enterprise". This is justified by the principle "expressio unius est exclusio alterius" , the mention of one thing implies the exclusion of another thing upon which it is to operate, everything else must necessarily, and by implication, be excluded from its operation and effect. Otherwise stated, the non-stock corporation must not fall under any of those enumerated exceptions for it to come within the scope of the general expression "corporation". 6 Anent the extent of the power of the Board of Investments (BOI) vis-a-vis the availment of Income Tax Holiday, the following provisions of E.O. No. 226 materially provide: ART. 7. Powers and Duties of the Board. The Board shall be responsible for the regulation and promotion of investments in the Philippines. It shall meet as often as may be necessary . . . to exercise its powers and perform its duties, which shall be as follows: ESTcIA xxx xxx xxx (8) After due notice, . . . suspend the enjoyment of incentives benefits of any registered enterprise and/or require refund of incentives enjoyed by such enterprise including interests and monetary penalties, for (a) failure to maintain the qualifications required by this Code for registration with the Board or (b) violation of any of the provisions of this Code, or the rules and regulations issued under this Code, of the terms and conditions of registration, or of laws for the protection of labor or of the consuming public: . . .; xxx xxx xxx (14) Extend the period of availment of incentives by any registered enterprise: Provided, That the total period of availment shall not exceed ten (10) years, subject to any of the following criteria: (a) The registered enterprise has suffered operational force majeure that has impaired its viability; CTHDcE (b) The registered enterprise has not fully enjoyed the incentives granted to it for reasons beyond its control; (c) The project of the registered enterprise has a gestation period which goes beyond the period of availment of needed incentives; and (d) The operation of the registered enterprise has been subjected to unforeseen changes in government policies, particularly, protectionism policies of importing countries, and such other supervening factors which would affect the competitiveness of the registered firm; xxx xxx xxx It is settled that an administrative agency has only such powers as are expressly granted to it by law and those necessarily implied in the exercise of its express powers. 7 Applied to the issue raised, it appears clear that the Board has the power to restrict the availment of incentives benefits, including the enjoyment of Income Tax Holiday (ITH). However, said power may be exercised only under any of the instances mentioned in the above-quoted Article 7 (8). Not only is the provision clear as to require interpretation. Under the earlier discussed principle of expressio unius est exclusio alterius , the Board cannot restrict the availment by registered enterprises of incentives granted them except on the grounds stated in said provision. HIAEcT Moreover, Article 39 (a) of the same Code, which governs the grant of ITH is explicit that the full tax exemption incentive is mandatory for a period of six (6) years from commercial operation for pioneer firms and four (4) years for non-pioneer newly registered firms. The use of the word "shall" is imperative, operating to impose a duty which may be enforced. 8 While the rule is not absolute, the tenor of the provision does not appear to be directory but one that imposes a command. The authority of the Board to restrict, i.e ., to grant or deny, any request for extension of the incentives is even limited to, and comes in only under, the cases mentioned in the aforesaid Article 39 (a). Like those in Article 7 (8), the fact that a registered enterprise is already enjoying preferential tax treatment on gross income under the National Internal Revenue Code is not one of the grounds for the grant or denial of ITH extension. Very truly yours, (SGD.) RAUL M. GONZALEZ Secretary Footnotes 1. Batas Pambansa Blg. 68. 2. Chapter I, Title I, Book I, E.O. No. 226, as amended. 3. Baranda vs. Gustilo , 165 SCRA 757, 770, citing cases. 4. Pascual vs. Pascual-Bautista , 207 SCRA 561, 568. 5. Republic vs. Migrino , 189 SCRA 289, citing cases. 6. Vera vs. Fernandez , 89 SCRA 199, citing Crawford, Statutory Construction, pp. 334-335. 7. Laguna Lake Development Authority vs. Court of Appeals , 231 SCRA 292, 306. 8. Baranda vs. Gustilo , 165 SCRA 757; Bersabal vs. Salvador , 84 SCRA 176, citing Dizon vs. Encarnacion , 9 SCRA 714.