CTA Case No. 2911

DECISION

- 2 - In a letter dated October 12, 1977, petitioner f .i1 ed a clai m for· refund of the amount of P114,756.93 representing caterer's tax on food sold in its restaurant busi ness, the sales tax for which were not c harged to customers. Petitioner contends as g round therefor that Section 191-A of the applicable Tax Code pursuant to which the caterer's tax was paid never became a law as it was vetoed by the President on August 4, 1969. In a letter dated October 24, 1977, respondent denied petitioner· s c 1 aim ·for· refund, hence, the instant petition for· rev ie~.>J f i 1 ed on November 29, .1..977.

The issue is whether Section 191- A of the Tax Code become a law and formed part of the same code in view of the presidential veto made on August 4,

1969 .

A si rn.i.l ar· issue has already been settled r··ecently by the Supreme Court in Co••issioner o-f Internal Revenue vs. Hon. Court o-f Tax Appeals and Manila Gol-f & Country Club, Inc. , G.R. No. L-47421, Nay 1990, wherein the High Tribunal unequivocally ruled that the presidential veto referred mere ly to the inclusion of hotels, motels a nd rest houses in the 20% caterer's tax bracket but not to the whole Section 191-A of the then --- DECISION CTA CASE NO. 291 1 - 3 - applicable National Internal Revenue Code.

In arriving at t.hi s ru 1 ing, the Supreme Court made observations, among others, as follows: As mentioned earlier, We have already ruled that the presidential veto referred merely to the inclusion of hotel s , motels and resthouses in the 20% caterer's tax bracket but not to the whole section.

But, as mentioned earlier a 1 so, the CTA opined that the President could not veto words or phrases in a bill but only an entire item. Obviously, what the CTA meant by "item" was an entire sec tion.

We do not agree.

But even assuming it to be so, it would also be to petitioner's favor.

The ineffectual veto by the President rendered the whole Section 1.91 --A as not having been vetoed at. all and it, therefore, became law as an unconsti tu tionF.Il veto has no ef feet whatsoever.

(See Bo l i n ao Elec tr o nics Corp. v.

Va l eri a ..

No.

L-2074CJ..

,1tme 30?

1964, 11 SCRA 486).

However, We agree with then Solicitor GenerF.Il Estelito Mendoza and hi s associates that inclusion of hotel s, motels and resthouses in the 20% caterer·' s ta>:

bracket are "i terns" in themse lves within the meaning of Sec.

20(3), Ar·t. VI of the .1935 Constitution which, ther·e·fore, the President has t he power to veto.

An "item" in a r·evenue bill does not refer to an entire section imposing a particular kind of ta>:, but rather to the subject of the tax and the tax rate.

In the portion of a reven ue bill which actually imposes a tax, a section identifies the tax and enumerates the persons liable therefor with the corresponding ta>: rate. To construe the word "item " as referring to the who l e section would tie the President's hand in choosing either to approve the whole section at. the expense of also approving a provision therein which he deems unacceptab 1 e or veto the entire section

- 4 - at the expense of foregoing t he collection of the kind of tax a l together. The evil which was sought to be preven ted in giving the President the power to disapprove items in a revenue bill wo u l d be perpetrated rendering t hat power inutile (See Corntonwealth e x rei. Elkin v .

Ba r nett , 199 Pa.

161, 55 LRA 8 82 [1901]).

ACCORDINGLY, the petition for review in the a bove-entitled case is hereby dismissed with costs against petitioner.

WE

• ROAQUIN

AMANTE Presidi CERTIFICATION hereby certify t hat this decisi on was reached after due consultation among t he me mbers of the Court of Tax Appea l s in accordan c e wit h Section 13, Article VIII of the Constitu t ion. ~~

AMANTE F LLER

Presidin J udge Court of Tax Appea l s