Armi Corporation vs. Commissioner of Internal Revenue, et al.

DECISION

- 2 - Ta>: Code, not on 1 y on its gr--~ss r-eceipts fr-om the hotel bLisiness but also on its r-eceipts r-epr-esenting lease r-entals r-eceived by it in connection with its apar-tment leasing business. After- this Cour-t has admitted petitioner-'s evidence in s .. 1por-t of its c 1 aim for- r-efund, and this case was set for- hear-ing for- r-espondent to pr-esent his evidence, r-espondent Commissioner- of Inter-nal Revenue, thr-ough counse 1 , simply manifested dur-ing the hear-ing that "he finds petitioner-'s E>:hibit "G", apar-tel licenses issued by the Ministr-y of Tour-ism on Januar-y 3, 1983 and Januar-y 3, 1984, showing that petitioner- was duly r-egister-ed and licensed as an apar-tel and to oper-ate as such, ir-r-efutable;

and with the pr-esentation of such exhibit by petitioner-, he (r-espondent) cons-ider-s this case settled.

Respondent fur-ther- manifested that he has no objection to the Cour-t gr-anting petitioner-'s claim - ....

for- r-efund" .

(Minutes of the session held by the . Cour-t, July 5, 1988; p. 106, CTA r-ecor-ds.) With this manifestation of r-espondent, the I facts as alleged in the petition for- r-eview may now DECISION ....

CTA CASE ND. 3949 3 be;? c:onsiden?d as not disputed. {.)s stated in the petition:

That the petitioner is a corporation duly organized and existing under the laws of the Republic: of the Phi 1 ippines with business address at the Gilarmi Apartments, 52 Ayala Avenue, Makati, Metro Manila;

That the petitio~er operates an apartment hotel duly licensed as an apartel by the Department o ·f Tourism;

That under such license, the petitioner is engag f:?d in t.hf? business of leasing out apartments under duly executed contracts of leases for periods of not les s than 15 days under the pertinent provisions of the "Rules 8~ Regul.3.tions governing the business opf?r·ations of apartment-hotels (apartels), Tourist Inns, Pension Houses, Motor- Hote 1 s ( Motf? 1 s) , Lodging Houses and other simi 1 ar est.ab 1 i shmen ts", more specifically under Chapter II, Section 2 thereof, signed by Secretary Jose D. Aspiras of the Mi~istry of Tourism, on May 10, 1977;

60

- 4 -· As such 1 essor- of apar-tments, the petitioner- has paid the f i :-~ed real estate dealer's pr-escribed in Section 192( 3 ) (aa) of the National Int~r-nal Revenue Cod~;~ The peti. tioner- .::>.1 so appr·opr-iates the use of some of its apartments for the occupancy of transient guests, thereby enjoying in the hotel business under the authority of Chapt. II, Section 5 of the "Rules ~~.

Regulations governing the business operations of apar-tment hote 1 s (a parte 1) tourist Inn s , Pension Houses, .Motor- hotels (motels), lodging houses and other similar estab 1 ishmen ts" signed by Secr-etar-y .los e D . As pir-as of the Ministry of Tour-i s m, Republi c of the Philippines, on May 10, 1977. That for the first quarter- of 1983 to the second quarter- of 1983, the petitioner- er-roneous 1 y paid the hotel occupancy tax under Section 205-A of the Tax Code not on 1. y on its gross receipts from the hote 1.

bus .. ·1ess, but a 1 so on the 1 ease r-en ta 1 s r-eceived by it in connection with its apar-tment leasing business; hence, it had over paid the room •

- 5 - occupancy tax during the said period in the amount P257~214.99.

The room occupancy ta:-: payments made by the petitioner· are ev ic:lenced by peti ticmer' s business ta>~ returns, payment c:lr-der·s and Confirmation Receipt Nos.

B- 2376683 and B- 2345991. dated April 30, 1.983 and July 22nd, 1983, respectively. By a letter dated April 1.8, 1.985, counsel for petitioner ·f i 1 ed a c_l ~im for ref11.nd of taxes paid under Section 205-A of the Tax Code with the Chief~ Appellate Division of the Bureau of Internal Revenue in the amount of P257,21.4.99, which letter was duly received by the Chief~ Appellate Division on even d<::\ te.

Petitioner submitted Exhibit K, which is a statement showing the se~;.~r- egation of ·the receipts from the hotel business as defined under the Rules and Regulations of the then Ministr-y of Tourism fr·om the lease rentals received during the same period by petitioner under t~p contracts of leases e :·: ec u ted between the long staying guests and 02

- 6 - petitioner as 1 essor s hp wing that it had overpaid the amount of P257,214.99. Thus:

1st Quarter 1983 2nd Quarter 1983 T o t a l :

Per Quarterly Tax ~!.\!.!':D~ Apart1ent Tax ~R~.l~b p_~!.~.

P3,727,339.95 P410,007.40 .}J.ZP.ft,1~~!J~ ~H~-~.~~ .!1~ P7,496,295.11 P824,592.58 vvvvvvvvvvvvv vvvvvvvvvvv Rentals Fro• long Staying Guests P1,631,269.01 _. _ _9JQ.&~Q!_~_Q P2,572,149.89 vvvvvvvvvvvvv Tax Clail For Refund P163,126.90 __ _9_!,_9lQ..!_Q~ P257,214.99 vvvvvvvvvvv As basis of the claim for refund, it appears that during the period under review, petitioner oper··a ted an apar-tment hotel common 1 y known as the Gi 1 armi Apar·tments, which is du 1 y 1 icensed as an "a par-tel" by the Department o ·f Tourism. Under suc t1 license, petitioner engaged in the business of leasing out apa r-tments under·· duly e:-:ecu ted contr-acts o f leases for· per-iods of not less than fifteen (15) days in accordance with the pertinent provis ions of the Rules & Regulations gove r ning the business operations of apartment- hotels (apartels), tourist inns, pension houses, motor- hotels (mote 1 s) , lodging houses and other similar establishments, more specifically defined and described under Chapter II, Section 2 thereof, C3 ediened by the then Mami:

Marra pee ef Peek thy creebs thak htitioner the re dealer’ s tax CB) (aa) of the carved Sec hin Ls ie om presaribt applicable tional Internal Reverie Code, (FExbhbaibite H endentk of such ) Tneley * itioner alsa apprapreia pie eq the use of some af its apartimernke for the use and occupancy of transient Cpu Sy bh emeea ariel ese ging oan the hotel busine the autharity of Chap oof the Fules arid yuika gavercning the crf “hme t

LOVE «

Lode irig aurea) oc § bree Ais abated above, far the faire quarter caf Le ko the ond quarter cf petitioner hotel occupancy tax under Cade mak anly on its gross receipts fram its hotel DUSIMe Ss y but also oan ite rental receipts ain me Cl CIPTPT G30 tion with ibs apartment le ing business, oan C ryoa ’ “

DECISION ~

CTA CASE NO, 2949 which at had already paid the graduated fixed his Lies tax as a real estate dealer. The payments of the hotel occupancy tax made by petitioner during the pordad are evidenc (tive Joby their re confirmatian rece Lpts . payment emcee rs and thes percentage tax returns for the period under review.

(Exhibits I, Iel, I-8, a, od, Jed, Je amd J-3.) And as egtated earlier, petitioner also submitted Exhibit FE, whach is ao statement show drrg the seqreqatian of the rec 2ipts from the hotel business ag defined under the Rules ®& Regulations of the Ministry af Tourism fram the rentals received during the same period by petitioner under the coanhreac ts cnt Leas exectitecd between the lLlong staying que § and pekitioner, as shen Lrre that ait had overpaid the amounk of In a ruling 20f then COMM So Lome r Fics teary Ancheta, marked ap Exbibit C appearang an pp.

af the BIR records, it was held that - "Ss repregented, the Armni Corporation is authorized by the Ministry of Tourism to engage ain the busines of ranting apartments and in hotel operation pursuant to the rules & regulations governing the business, operations af apartment-hotels (Apartels), your client is & eparately HO), Sag Section Lee cn! of the Ta HCL mpoerc hry and to the 1O% (now Le%) he ream : han: cy Cire es fram ; ThA» coricd er OS of the Tay Codes AAS amended," petition for review, the Commi taner of Internal Revenue administratively made a decision dated June 104 of the 20, 19687, Exhibit D ring ano po. 1¢ BIF records, thats that the Rule Re acuidlat Lares by the Department of Tourism invak bo support khe albeav gqrouned thak your client was January 4, oy Pere qistered and goby oon CME Ley im for ane.

Fetitieoner’s claim for refried w thus cenied., and Gel, which are the apartel licenses issued by the Ministry of Tourism on January 3, 1982 and January 2, 1984, respectively, in favor af the Arm Cor porakiort y aotherwi naw AG the "Gilarmi “ Apartments", to establish that petitioner was a DE:C I!:; I Ul\1 .....

CTA CASE I\IU. 3949 -- 10 -·- duly 1 i.Cf?.nSC·?d ch.tr ing the p~::? r .i od under n;>v.i.ew.

under the df.~c::is.i.on of the Commissioner of Internal Revenue dated June 30, 1.9H7, F:-:h:i.b.i.t. D, all its busine~.s operations we1"e subject to the rules and regulations promulgated by the Department of Touri s m, which segregates the apartment leasing business from the business of o p~::? I'" at :i. nq a hotE~l, with c: o I'" r-· f7!~5 pcJn ding obliqation to pc:IY the on its businf?.~,;ses in <::lccord<:\nc::e with how thE~ r-·f?.SpE?cti.vE• busi nf?.f.-5Sl7?S arE·~ c::J..::~ssi ·fiecl a nd ta:-:F.?d undf.~r- the National Internal Revenue Code. And as defined in the rulinq of . then Commissioner Ruben Ancheta, E~·:hibit ( .. , ., , t.hf.·?

I'"E·1C f?. :i. p t: S 0 f pr?t.i t: . .i.onPI'- in c: on n E~c t .i. on with its Y"!en t. :i. n ct "·· Ot.l. t o'f .::~PC:'=' I'" tmen t s cover·f.·?d by pe1r· iods e:-:c:eeding 'fifteen (1.5) days are subject to the real estate dealer's annual graduated 'fi:-:ed ta:-: imposed undf.·?r· Sec:: t.icm .1. 9:.? ( :::;; ) ( r.:la) o·f the r .:~:-:

Codf?.

.:md its gross receipts 'from the hotel business 'from guests oc::cupy:i.ng its premisf?.s 'for a pf:?riod of less than fifteen (.1.5) clays subj ec::t C ~· ' -· .to the hotel NO. 3949 accupancy tax of 10% (now 12%) under the provisions of Section 2O8-A of the Tax Corde, as amended.

1 Reapondent, through counsel, filed a Manifestation dated May 4, 1988 to the effect that atter a "close examination of petitioner’s documentary evidence presented in the above-entitled case and contained in its "Formal Offer of its Documentary Evidence” dated April 18, 1988, respondent finds the same irrefutable, and , therefore, interpases ne Objection to their admission as well as to the individual purpagse for which they are being offered in evidence. (p. 72, CTA records. )

With this mari fies tion and admission by pandent, and as adequately established by the evidence, there to he mo more cigspute that Were a holder of an apartel license duly ieasued by the then Ministry of Tourism during the period under rev lew and that the roles and regulations of the Ministry of Tourism relating to the treatment of: licensed Apartels are applicable to petitianer herein.

Accardingly, aS a duly licensed apartel, petitioner was entitled to pay its tax separately ere from dita cveantal payments or 3, Which are the payment Lucker LIME ot 3 yo whether petitioner really aver~-paid pe onal cn rt = hy confirmation rim eipte, pay men ts orders and percentage tax returns for ‘Ve period under review submitted in ed NO. 2949 ;

evidence as Extvibitse IT, et, I-22, I-53, J, Jel, J-2 and J-2, Mr. Cesar EE. Enriquez, Treasurer af the Aarmi Corporation, alsa testified and submitted in evidence Exhibit EE, which is a statement showing the segregation af the receipts fram the lease rentals received by petitioner as a lessor, from the receipts subject to the hotel accupancy tax under Section 208-A of the Tax Code, If petitioner is duty bound to correctly pay the hotel oecupancy tax only oan ats hotel business, petitioner 1s undoubtedly entitled to ai refund of “7 a ela. OD during the period Larcher rey lew.

PSs ore cf has gpecial and affirmative de fens S, however, respondent alleqe im hig areswear that petitioner allegedly paid the tax soaudqht toa he refunded aon April 20, i982 and June while the petition for raview was filed on June 28, 1905. Ohviously, the 2-year period prescribed for filing the judicial action for refund has lapsed: hence, the right to claim the “refund is barred by prescription. (Gibbs vs. Collector, G.R. No. bL- 13453, February 29, 1960, 107 Phil. 223.)

od DEC I ElI Ui'J .....

CTA CASE NU. 3949 ·-- .1. 1.1 ......

As averred in the petition fpr review~ the r·oom . occupancy tax payments by petitioner are evidenced by petitioner's business tax returns~ payment orders and Confirmation Receipt Nos.

B- 2376683 and B- 2345991 dated April 30~ 1983 and July 22, 1983~ respectively.

And the evidence presented by petitioner clearly and adequately show that the ta:·~ s~ouqht t< be re'func:led ·for thE! ·f.i.F·"=',t quar .. te1·· of 1.983 in thE:> amount of F'.1.6~T.,.126.90 ~t-Ja s pe:\.i.d on 0..P.r: . .!.J. :?..(>.,. ........ .t!.?.n.:;;. t:\n d the t.a :·~ fo1r· the-:'? sec: on d qua I"' t:r:?l'" of 19f33 in the surn of P9·4, OBH .. f39 W e::\~:;; paid on ,}_t}J.Y .... Z.~~. , -...... :1:?§ ~~- (E:·~h.i.bits I~ J-·-.1.,

I - ·- 2~

I -~:;.~ J, ,J ·--.1., ,J--·2 and J --3.)

The petition f or review for refund or tax credi t of the aforementioned tax payments was filed with this Cour"t on ,JunE!

2H~ .1.9!:3~'· Clf.·?<':\r-ly, thE?r .. e for .. e, the two- year per i od prescribed 'for 'filing the judi c ial s uit for refund/credit of the amount of P.163,1 2 6.90 paid on April 20~ .1.983 has lapsed pursuant to (now. Section 243) of the National Internal Revenue Code. It is not necessary for the taxpayer to wait for the decision 11 m:::c I HI C:ll\1 ..... CTA CAHE NO. 3949 -·- .1. ;:i - of the Commissioner of Internal Revenue if he believes that such decision is not forthcoming before expiration of the two-year period. In ·fact, he should not wait for such decision because Section 292 (now Section 243) of the Revenue Code requires that court action for recovery of an internal revenue tax erroneously or illegally paid must be instituted within two years after payment. (Collector of Internal Revenue vs.

Sweeney, 106 Phil. 59; Gibbs vs. Collector of Internal Revenue, Convention of Phil . Baptist Churches , L- 11807, Jan. 7.:~B, .19B1, .1 SCF~A .1..1.4;

Commissj.oner ..

of Intr.~ r .. nc:~l Revenue vs.

Victorias Milling, L-24.1.08;

Jan.

.. =!' · ... • ~ Accordingly, only the amount of P94,088.0B pa id on July 2 2 , 1983 is refundable.

WHEREFORE, respondent Commi s sioner of Internal Revenue is hereby ordered to grant a tax credit in favor of petitioner Armi Corporation of the amount of P94,088.0B representing ~xcess occupancy tax payment made under Section 205-A of the applicable DECif:>IUN .....

CTA CASE NU. 3949 -- :l.b .....

~ational Internal Revenue Code. FlO Clf:WEJ~E D.

Qu ezon City, Metro Ma nil a, Septem ber 21, 1988. ,Judge

WE CONCUR:

z.~ An::;oc:: :i. a t.P ,Judqe C E R T I F I C A T I 0 N I that th.i:;

dE~c:i s.io n was rPac::hPd after due consultation a monq thP member s of the Cour-t of Tax AppPa l s in ac::cordancP with Section 1 3~ Article VIII of the Constituti o n.

AMANTE FILLER

Pr·es.id .nq ,Judqe Court of Tax Appeals