DOJ Opinion No. 153, s. 1991

DOJ OPINION NO. 153 , s. 1991 October 24, 1991 Acting Secretary Peter D. Garrucho, Jr. Department of Trade and Industry 361 Sen. Gil J. Puyat Avenue Makati, Metro Manila Sir : This refers to your request for a review of Opinion No. 45, series of 1991 dated March 20, 1991 concerning the duration of certain incentives granted to Alliance Textile Mills, Inc. ("ATMI") by reason of its registration with the Board of Investments ("BOI") under Republic Act No. 5186. LLphil Particularly, you assert that it is not the intention of the law to enable firms registered prior to the effectivity of Batas Pambansa (BP) Blg. 391 [1983] to continuously avail of incentives for an indefinite period of time and thereby perpetually to have an undue advantage over other firms. You invoke, in support of your request, the guarantee of equal protection of the laws and cite the grave adverse effect of fiscal incentives on the revenue collection programs of the government. In relation thereto, you further request clarification as to the legal implications of the aforesaid opinion with particular reference to enterprises registered under Republic Act No. 5186 which have not yet availed of the subject incentives like ATMI. We take it that you earnestly seek a restudy of our opinion in connection with the discharge of your Department's responsibilities in the implementation of our investment laws. Particularly, we note that the Secretary of the Department of Trade and Industry is concurrently the Chairman of BOI and its Undersecretary for Industry and Investment is concurrently the Vice-Chairman of the BOI and its Managing Head. Further, the BOI is charged with the promulgation of rules and regulations implementing the Omnibus Investments Code of 1987 (Art. 7 (2), E.O. 226) and as you aptly stressed the BOI is authorized to do the following: "(3) Process and approve applications for registration with the Board, imposing such terms and conditions as it may deem necessary to promote the objective of this Code, including refund of incentives when appropriate, restricting availment of certain incentives not needed by the project in the determination of the Board. . . ." Accordingly, your views and the additional information and arguments adduced in your request of the reconsideration must be given serious consideration and must be accorded great weight. The resolution of your request for reconsideration hinges on the effect of the promulgation of B.P. Blg. 391 on April 28, 1983 on the indefinite enjoyment of incentives, specifically the deduction for expansion reinvestment and deduction of labor training expenses, as provided by the rules and regulation implementing R.A. No. 5186 and P.D. No. 1789 for firms registered under said laws. R.A. No. 5186 and P.D. No. 1789 are silent as to the duration of the availability of the above-mentioned incentives. However, the implementing rules of R.A. No. 5186 and P.D. No. 1789, namely, Rule XIX and Rule XXV, respectively, contain identical provisions expressly providing for the indefinite availment of the incentives as follows: prcd "All incentives in favor of registered enterprises and investors therein, as long as they remain so and commit no violation of the Act [R.A. No. 5186] /Code [P.D. No. 1789], these rules and regulations, or the terms and conditions of their certificates of registration, shall continue indefinitely , unless otherwise provided for in said Act [R.A. No. 5186]/Code [P.D. No. 1789], rules and regulations, and/or certificates of registration". (Emphasis supplied) On April 28, 1983, that was nine (9) years after the registration of ATMI, B.P. Blg. 391 was promulgated. Section 2 of this law provides in part as follows: Sec. 2. Declaration of Investment Policy. . . "The fiscal incentives shall be extended to stimulate establishment and assist initial operations of the enterprise, and shall terminate after a period of not more than 10 years from registration or start-up of operation unless a specific period is otherwise stated . The foregoing declaration shall apply to all investment incentive schemes and in particular will supersede Article 2 of Presidential Decree No. 1789". (Emphasis supplied) Another section of B.P. Blg. 391 reiterates the abrogation of Article 2 of P.D. 1789 by expressly providing for the repeal of said article, among others. In addition, Section 20 of B.P. Blg. 391 provides: "All other laws, decrees, executive orders, administrative orders, rules and regulations or parts thereof which are inconsistent with the provisions of this Act are hereby repealed , amended or modified accordingly". (Emphasis supplied) Section 2 of B.P. Blg. 391 imposing the 10-year limitation, which repealed and superseded Article 2 of P.D. No. 1789, rendered legally untenable the provision of the implementing rules of P.D. No. 1789 stating that the incentives "shall continue indefinitely", Moreover, the aforesaid provision of the rules is deemed repealed on the ground of irreconcilable inconsistency with Section 2 of B.P. Blg. 391 which replaced Article 2 of P.D. No. 1789, by virtue of the general provision on repeal contained in the above-quoted Section 20 of said Batas Pambansa. It is noted that there are two saving provisos in B.P. Blg. 391. However, upon a restudy of the language of these provisions, we arrive at the conclusion that none of them applies to the incentives claimed. Firstly, a saving provision is found in Section 2 of B.P. Blg. 391 which limits to a maximum period of ten (10) years all fiscal incentives "unless a specific period is otherwise stated". As mentioned above, neither R.A. No. 5186 no P.D. No. 1789 provides for a "specific period" for the subject incentives. The lack of any specific period is emphasized by the provision of their implementing rules that the incentives referred to "shall continue indefinitely". In its natural signification the word "indefinite" means "having no exact limits" (Webster's Ninth New Collegiate Dictionary, 1983 ed., Merriam-Webster, Inc., Massachusetts, U.S.A., p. 612) and is therefore, the opposite of the term "specific period". Accordingly, the subject incentives do not fall within the ambit of the aforementioned saving clause in Section 2 of B.P. Blg. 391 which allows the enjoyment of incentives for "specific period stated" in earlier laws. There is precisely no such specific period provided in said prior laws insofar as the subject incentives are concerned. prcd Secondly, the subject incentives cannot be deemed contemplated by the language of Section 21 of B.P. Blg. 391 providing for exceptions to the repealing provision of Section 20 of the same Act, as follows: "Sec. 21. The provisions of the preceding section notwithstanding , existing enterprises which are enjoying the incentives under the laws repealed by this Act shall continue to enjoy such incentives for the period therein stated : Provided, however, that they may waive such incentives and opt to be governed by the provisions of this Act, in which event, their period of availment of the incentives herein provided shall be reckoned from the original date of their entitlement to the incentives under the said laws". (Emphasis supplied) The above-quoted Section 21 similarly accords recognition to or respects incentives being enjoyed under former laws "for the period therein stated". Section 21, read in conjunction with the saving clause in Section 2 of the same law, contemplates only incentives the availment of which under prior law is subject to a "stated period" (Sec. 21) or "specific period" (sec. 2). That stated or specific period is respected by B.P. Blg. 391. There being no specific period to speak of where the incentive is made to continue indefinitely, there is no room for the application of the provision of Section 21. This conclusion is inescapable considering that the incentives, the availment of which is without a specific period, are not expressly mentioned in Section 21 and neither can they be deemed mentioned by implication in view of their irreconcilable inconsistency or repugnancy with the declared investment policy in B.P. Blg. 391. In view of the foregoing, we now hold that: 1. Section 2 of B.P. Blg. 391 providing for a 10-year duration of fiscal incentives, repeals the provisions of the implementing rules and regulations (Rule XIX, R.A. No. 5186 and Rule XXC, P.D. No. 1789) providing for the continued enjoyment of incentives indefinitely; 2. The Board of Investments Resolution No. 957, issued on June 13, 1986, stating in part as follows: "RESOLVED, That the following incentives shall be enjoyed by registered firms for a period of ten (10) years from date of registration or commercial operation whichever is more favorable to the firm: 1. accelerated depreciation; 2. expansion reinvestment allowance; 3. deduction of labor training expenses; . . ." is a valid issuance, being firmly anchored on the declared investment policy embodied in B.P. Blg. 391 (April 28, 1983), which governs all fiscal incentive systems for covered business establishments; and 3. The aforesaid 10-year limit on the availment of incentives which is reiterated in E.O. No. 226 (1987) uniformly applies to all firms registered with the Board of Investments including those registered prior to the effectivity of said B.P. Blg. 391. dctai This modifies Opinion No. 45, s. 1991. Very truly yours, (SGD.) SILVESTRE H. BELLO III Acting Secretary