DOJ Opinion No. 065, s. 1999

DOJ OPINION NO. 065 , s. 1999 August 16, 1999 4th Indorsement Respectfully returned to the Honorable Chairman, Commission on Audit, Quezon City, the within request for clarification on the issue of whether the Air Transportation Office (ATO) can stop billing flight charges on the Philippine Airlines, Inc. (PAL) and write-off the amount of P506,586,059.31 representing uncollected receivables from PAL for domestic and international flight charges which PAL continuously refuses to pay. cdlex It appears from the records that PAL is of the contention that under its franchise, specifically, Section 13 of Presidential Decree (P.D.) No. 1590 (PAL Franchise Law), as amended, its payment of either the basic corporate income tax or of a two per cent (2%) franchise tax shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature or description, imposed, levied, established, assessed or collected by any municipal, city, provincial or national authority or government agency now or in the future. Also to support said view, PAL cites Opinion No. 44, s. 1997 of this Department as well as the opinion of the Office of the Solicitor General (OSG) dated January 16, 1998 to the effect that PAL's exemption from the payment of fees and other charges under Section 13 of its franchise appears to be comprehensive enough to include even those fees and charges imposed by the ATO. Accordingly, PAL refuses to make any payments to the billings of the ATO except for some charges which it has paid "under protest." Thus, ATO, in its March 9, 1998 letter to then President Fidel V. Ramos, requested for the amendment of Section 13 of P.D. No. 1590 because of the view that the full exemption of PAL to pay operational fees and charges is contrary to the provisions of sub-paragraph iii, paragraph 37 of the Statements by the Council to Contracting States on Charges for Airports and Air Navigation Services that the system of charges for air navigation services must be non-discriminatory. ATO was advised however that it should be the one to initiate the drafting of the proposed amendatory bill. On September 2, 1998, Assistant Secretary Jacinto F. Ortega, Jr. of the ATO requested clarification from COA on whether ATO can stop billing and subsequently write-off its accounts receivable from PAL based on the above-mentioned opinions of this Department and of the Office of the Solicitor General. Since the said request involves a legal issue, the COA resident auditor of the ATO, Villa DJ. Bernaldo, indorsed the said request to the COA Commission Proper with the position that if PAL is indeed exempt from paying the subject billings under P.D. No. 1590, then it may be logical for ATO not to continue billing PAL for the said account and to write-off the uncollectible accounts receivable for a fair presentation of said account in the ATO's books of accounts. Subsequently, General Manager Antonio P. Gana of the Manila International Airport Authority (MIAA) sought the opinion of the OSG on PAL's refusal despite demands and using as basis P.D. No. 1590, to pay aeronautical fees which include take-off, landing, parking and lighting fees. In reply, OSG issued on December 16, 1998 an opinion to the effect that the tax exemption granted to PAL under Section 13 of P.D. No. 1590 was incorporated to favor PAL as a government-owned and controlled corporation and that such exemption was however, expressly removed by Executive Order No. 93, s. 1986. Moreover, since the majority ownership of PAL was sold by the government to Lucio Tan who now owns approximately 67% of PAL, the overriding reason for the tax exemption in P.D. No. 1590, i.e., government ownership, is no longer tenable. The OSG reply further states that even granting that the exemption in P.D. No. 1590 still applies, the same contemplates only fees and charges imposed by the Government, or its agencies in the exercise of its taxing, regulatory or licensing authority, but not fees and charges arising from proprietary transactions which PAL voluntarily entered into with the Government or agencies in connection with its business. In addition, the Philippines, as a member of the International Civil Aviation Organization (ICAO) and a signatory to the Agreement reached during the 1944 Chicago Convention on International Civil Aviation, is bound to the fulfillment of its terms and conditions or obligations. Hence, PAL's claim of exemption from aeronautical fees constitutes a violation of the country's undertaking since the Agreement explicitly forbids national flag carriers from being favored with preferential rates. Considering the divergence of views on the matter, and in the light of existing jurisprudence on "in-lieu-of all-taxes" exemption upheld by the Supreme Court in Province of Misamis vs. CEPALCO (181 SCRA 38), CIR vs. Lingayen Gulf (164 SCRA 27) and PAL vs. Edu (164 SCRA 320), COA now seeks an advisory opinion or clarification on the said issue for its guidance in its audit and other future cases. With regret, this Department has to decline rendition of the opinion requested. The specific issue raised in the instant request necessarily affects the substantive rights of the parties concerned, upon whom the opinion of the Secretary of Justice, which is merely advisory in nature, has no binding effect, and who may, in all probability, contest the same in court if the opinion turns out to be adverse to their interests. Inasmuch as the matter herein might subsequently be the subject of judicial controversy, it is neither advisable nor proper for this Office to comment thereon (Sec. of Justice Opn. Nos. 53, 36, 12, 8 and 3, current series; Nos. 31, 45 and 76, s. 1997). Moreover, the resolution of the foregoing query would amount to a review of the position taken by the Office of the Solicitor General. The Office of the Solicitor General, although attached to this Department, is an independent and autonomous office over which this Office has no revisory authority (Sec. 34, Chap. 12, Title III, Book IV, 1987 Administrative Code). By established policy and precedents, this Department has desisted from passing upon the official actuations and/or rulings of any government official, in this case, the Office of the Solicitor General, over which this Department has neither supervisory or revisory authority (Secretary of Justice Opn. Nos. 59, 37, 16 and 3, current series). aisadc (SGD.) JUSTICE SERAFIN R. CUEVAS Secretary