DOJ Opinion No. 087, s. 1997

DOJ OPINION NO. 087 , s. 1997 2nd Indorsement December 9, 1997 Respectfully returned to the President, Philippine Tuberculosis Society, Inc. (PTSI), Quezon City, its within request for opinion on the validity of the action of the Philippine Racing Club, Inc. (PRCI) in declining to remit the 6% allocation from the gross earnings of the PRCI pursuant to the provisions of Section 9 of Republic Act No. 6632 (PRCI Charter), as amended by R.A. No. 7953. The request, it appears, is made in view of the recommendation of the Commissioner of Internal Revenue, in response to the letter of the PTSI, to direct to this Department its query on the matter of whether or not PTSI is entitled to an allocation from the earnings of the PRCI. LexLib As a matter of policy and established precedents, this Department does not render opinion on matters pertaining to the jurisdiction of another agency, which, in this instant query, the Department of Finance (DOF), the government agency primarily responsible for the formulation, institutionalization and administration of fiscal policies. Nonetheless, considering that the DOF's revenue arm itself, the Bureau of Internal Revenue, has suggested to the querist PTSI to direct the same to this Department, and considering further that the issue involves merely the application of the settled rules in statutory construction, we shall render opinion on the matter. You state, in your letter to the BIR dated April 12, 1997 that the Philippine Tuberculosis Society, Inc. (PTSI) is, by law, the recipient of a 6% allocation from the earnings of the Philippine Racing Club, Inc. (PRCI) from horse races conducted by it (R.A. No. 7953); that the PRCI has consistently carried out its legal obligations for the past years; that due to the enactment of the E-VAT Law, the PRCI stopped giving PTSI its allocation for the year 1996 on the ground that said law repealed the particular provision of R.A. No. 7953 on its franchise grantees which includes the PTSI; that your Legal Counsel, Atty. Rene V. Sarmiento, has taken the position that even with the E-VAT Law, still the PRCI is under obligation to give allocation to the franchise grantees under R.A. No. 7953; that in other words, the payment of taxes under the E-VAT Law does not exempt the PRCI from giving the 6% allocation from its gross earnings to the PTSI as a special grantee which is a consideration for the franchise granted to it by law; and that R.A. No. 7953 is a special law which should not be declared repealed by a general law on taxation. On the other hand, PRCI argues that R.A. No. 7716, or the Expanded Value Added Tax Law, which became effective on January 1, 1996, has amended the pertinent provision on the franchise tax under R.A. No. 7953 which was the basis for the remittance to the PTSI by the PRCI of the 6% allocation. It is a basic rule in statutory construction 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 (Baranda vs. Gustilo, 165 SCRA 757, 758-759). The rationale is because where the law speaks in clear and categorical language, there is no room for interpretation; there is only room for application (Cebu Portland Cement vs. Mun. of Naga, Cebu, 24 SCRA 708; also, Nepomuceno vs. Rehabilitation Finance Corporation, 110 Phil. 42; Pascual vs. Pascual-Bautista, 207 SCRA 561, 567). Section 103 of the National Internal Revenue Code, as further amended by R.A. No. 7716, pertinently provides, to wit: "SEC. 103. Exempt transactions . The following shall be exempt from the value-added tax: xxx xxx xxx (q) Transactions which are exempt under special laws , except those granted under Presidential Decree Nos. 66, 529, 972, 1491 and 1590, and non-electric cooperatives under Republic Act No. 6938, or international agreements to which the Philippines is a signatory, . . . " (amended by Sec. 4, R.A. No. 7716) (emphasis ours) Upon the other hand, R.A. No. 7953, "An Act Amending Republic Act Numbered Sixty-Six Hundred Thirty-Two Entitled 'An Act Granting The Philippine Racing Club, Inc., A Franchise To Operate And Maintain A Race Track For Horse Racing In The Province Of Rizal', And Extending The Said Franchise By Twenty-Five Years From the Expiration Of The Term Thereof" reiterating the provisions of then Section 8 of R.A. No. 6632, insofar as material, reads: "SECTION 1. . . . : xxx xxx xxx "SEC. 9. In consideration of the franchise and rights herein granted to the Philippine Racing Club, Inc., the grantee shall pay into the National Treasury a franchise tax equal to twenty-five per centum (25%) of its gross earnings from the horse races authorized to be held under this franchise which is equivalent to the eight and one-half per centum (8-%) of the total wager funds or gross receipts on the sale of betting tickets during the racing days mentioned in Section 6 hereof, allotted as follows: . . . ; (c) Philippine Anti-Tuberculosis Society, six per centum (6%); . . . The said tax shall be paid monthly and shall be in lieu of any and all taxes , except the income tax, of any kind, nature and description levied, established or collected by any authority whether barangay, municipality, city, provincial or national, on its properties, whether real or personal, from which taxes the grantee is hereby expressly exempted ." (R.A. No. 7953). (emphasis ours) The clear and explicit language of the provisions of R.A. Nos. 7716 and 7953, respectively, above-quoted, leaves no room for doubt. The transactions of the PRCI was and still is exempted from any and all kind of taxes under its franchise (R.A. No. 6632), as amended by (R.A. No. 7953), although it is obliged to pay a franchise tax portions of which are reserved for the PTSI. The Supreme Court in Tolentino vs. Secretary of Finance, 235 SCRA 630, interpreting the same provision of Section 103 of NIRC, as amended by R.A. No. 7716 (albeit conversely) in connection with the issue of tax exemption of Philippine Airlines (PAL) under its franchise (P.D. No. 1590), has ruled thus: "Among the provisions of the NIRC amended is (sec.) 103, which originally read: (sec.) 103. Exempt transactions . The following shall be exempt from the value-added tax: xxx xxx xxx (q) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory. Among the transactions exempted from the VAT were those of PAL because it was exempted under its franchise (P.D. No. 1590) from the payment of all 'other taxes . . . now or in the near future,' in consideration of the payment by it either of the corporate income tax or a franchise tax of 2%. As a result of its amendment by Republic Act No. 7716, (sec.) 103 of the NIRC now provides: (sec.) 103. Exempt transactions . The following shall be exempt from the value-added tax: xxx xxx xxx (q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, 1590. . . . The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is concerned." (at pp. 673-674). The opposite is true in the case of the PRCI which retained its tax exemption privileges granted under R.A. No. 6632 when R.A. No. 7953 was enacted. Relevantly, it may be added that both laws are special laws whereas R.A. No. 7716 is a law of general application. Under the equally settled doctrine that a special law prevails over a general law, without regard to the respective dates of passage (Lagman vs. City of Manila, 17 SCRA 580, quoting Cassion vs. Banco National Filipino, 89 Phil. 560, 561; see also, Atlas Consolidated Mining & Dev. Coop. vs. Court of Appeals, 182 SCRA 166), and that the former shall be considered as an exception to the latter (De Jesus vs. People, 120 SCRA 763) in the absence of special circumstances facing a contrary construction (National Power Corporation vs. Presiding Judge, RTC, Br. XXV, 190 SCRA 477), it can safely be said that PRCI's tax exemption and corresponding obligation to PTSI pursuant to its franchise still exist. The foregoing considered, it is, therefore, our view that the action of the PRCI in declining to remit the 6% allocation from its gross earnings does not find support under existing laws and settled jurisprudence. Please be guided accordingly. Very truly yours, (SGD.) TEOFISTO T. GUINGONA, JR. Secretary