Philippine Basketball Associat on vs. The Comhissioner of Internal Revenue

DECISION -

Deficiency Income Tax Net Taxable Income P14,080,797.20 Tax Due thereon P 4,928,279.00 Add: 50% surcharge (fraud) 2,464,139.50 20% interest from 4-15-88 ; to 4-15-89 1,479 ,483.70 Total Amount Due & Collectible P_ 8,870,902.20 Deficiency Amusement Tax Total gross receipts 1987 P19 ,970,928.00 15% tax due thereon P 2,995,639.20 Less: Tax paid 602,063.35 Deficiency amusement tax P 2,393,575.85 Add: 75% surcharge 1,795,181.89 20% interest (2 years) 1,675,503.10 Total Amount Due & Collectible P_5,864,260.84 On July 18, 1989, within the reglementary thirty

(30) day period given the taxpayer, Petitioner filed its protest “detailing the facts and circumstances incident to the Sorkativ# nf the PBA, the purposes. for its creation, the actual conduct of its operations and the clearing house/trusteeship nature of the PBA" (Exh. M) On October 19, 1989, while the protest remained unresolved, the Bureau of Internal Revenue (BIR) garnished Petitioner’s bank deposits with the Rizal Commercial Banking Corporation in the amount of P3,533,245.45, which Petitioner promptly protested (Annex §&) 4Qr1n

DECISION -

C.T . A. CASE NO. 441 9 - 3 - On January 2, 1990, Petitioner receive d t he l e tter of Respondent on November 6, 1989 denying Peti t i oner ' s prote s t wi th f i nal ity. ( see Annex F) He nce, thi Pe i on for Review.

I n comp l iance w· h the r e elution o f t h i s Cou r t date d January 23, 1990, Peti ioner filed a surety b o nd (N o. 0064 4 ) in t h e a moun o f Pl4,800,000. 00 to cove r th e defi c 1e n y inc om an d mu s me nt taxes assesse d ,.

a ga i nst th e Peti ne r.

"d s rety bond was approved by th i s Court on Ap 27 , 199 0 h e eby en jo i n ing a nd restraini n g t he Respo ndent "from p r oceeding with the collection of said de ficiency taxes t h rough a writ of garnishment issued against petitioner's depository bank, pending final adjudicati o n o f the above-entitled case" (Resolution p. 151 CTA Re c ords). The only issue remaining in the case at bar after the counsels of the parties filed a Joint Manifestation on September 8, 1992 is: wh e ther or not Petitione r is liable for the 1987 defi ci enc y amusement tax.

The assessment on income tax was withdrawn by the Respondent and accordingly, Petitioner amended the Petition for Review deleting said issue in accordance with the Joint Manifestation of the partie~ ~h i ch is here by reproduced for easy reference ~

1 ') • I

•) '~ J '

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JOINT MANIFESTATION

The parties, thru counsel , before this respectfully manife st: their respective Honorable Court, 1 .

The instant case involves the re spondent's def' cie nc y tax assessments for the yea 1987 in the amount of P8 ,892,828.10 as def'cie n c y incom tax an d the sum of P5,864, 2G 0. 64 as de£ ciency a mu sement tax being - s on d by petitioner.

2.

The ss u s o f the ca e are : ( ) Wheth is a cle aring mem er of the i ts operation:

or not petitioner hou s I rus t ee of its revenues derive d from nd (b) Wh he o not etitioner is l iab e for 1987 defici ency amusemen tax as e s d by respondent . 3.

In an administrative protest filed by petitioner against respondent's assessment for deficiency income tax for 1988 which involves the same issue in the case at bar, i.e. , whether or not petitioner is a clearing hou se of its members, and respondent upon careful review of the facts of the case and the applicable laws and jurisprudence, ruled that "The PBA function s solely as the clearing house to distribute the revenue s derived to the team members .

As it has no income, perforce it s hall not be taxed under Section 24 of the Tax Code." 4.

Attached herewith and mad e an integral part of this Joint Manif~ stati on is a x~ rox copy of the letter of the respondent dated J n 10 1 ~92 addressed to Mr. Reynaldo G.

Ma que ~ , CQm mi~s Ph~r, Philippine Basketb a l l AS$o Ci~ aM , w thd rawing and cancelling the 1988 deficiency . income tax assessment issued against the PBA. 5.

of the petition Petitioner, therefore, on the above letter is withdrawing for review insofar as the basis its 1987

- 5 - deficiency income tax assessment in the case at bar which interposes no objection to said (Emphasis supplied) is involved respondent withdrawal.

6.

The remaining issue of whether or not petitioner is liable for the 1987 deficiency amusement tax assessed against it by respondent shall be litigated by the parties before this Honorable Court.

(Emphasis supplied) .

We resolve the issue in the aff irmative. The Petitioner 's contention that the jurisdiction to collect amusement taxes is vested i n the local g vernment units under Presidential Decree 231 (Local Tax Code l , \"li ho t merit.

Whi le it is true that P.O. 23 1 auth o izes he p ovi no to impose a tax on admission to be collected from proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement, such proviso of the Local Tax Code was expressly repealed by Presidential Decree No. 1456, as a mended by P.O.

No.

1959 as to the rate of tax imposed by subjecting to amusement tax the professi onal basketball games as envisioned in P.O. No. 871.

Section 13 of the LOCa Tax Code provides, hu Amusement tax ,on admission.

The province shall impose a tax on admission to be collected from the proprietors, lessees, or operato rs of the aters, cinematographs, concert halls, circuses and other places of amusement.

" - 6 - Although the term "other places of amusement" embraces not only those enumerated under the Local Tax Code but those to be included must belong to the same class as those enumerated under the doctrine of ejusdem generis. We do not see professional basketball games as falling under the same class as theaters, cinematographs, concert halls or circuses althoug h professional basketball games can be a form of entertainment yet it falls categorically under sports while the others can easily fall under fine arts. And besides, professional basketball games was specifically mentioned under P.D.

1456 together with race tracks and boxing exhibitions thereby expressly repealing the foregoing proviso of the Loc a l Tax Code.

Not even the Revenue Memorandum Circular No. 8-88 cited by the Petitioner could save it from p a ying the defi c iency amus e ment tax since a reven e mem randum circ ula r could never supercede what is clearly mand t d y law.

Said Presidential Decree No . 1456, as amended by P.O.

No.

1959 ,

expressly provides, t hu s:

SEC. 44.

Sec ion 268 of this Code, as amended, is hereby further amended to read as fol lows :

"Sec. 268 .

Amusement taxes.- There shal l be col l ecte d from the proprietor, lessee or operator of cockpits , cabarets , night or day clubs, boxing e xhibitions, professi onal basketball games , Jai _,

- 7 - Alai, race racks and bowling alleys, a tax equivalent to:

" 1 .

XXX XXX " 2 .

XXX XXX " 3 .

XXX XXX "4.

Fifteen per centum in the case of professional basketball game s as envisi on ed in Presidential Decree No. 871 .

Provided, however, That the tax herein shall be in lieu of all other percentage taxes of whatever nature and descri ption , "5 .

XX X

XXX "6.

xxx For the purpose of the amusement ax , the term "gross receipts" e mbraces all the receipts ot the propri to r, less ee or operator of the musement place.

Said gross .eceipts lso include all income from televisio nz radio and motion picture rights, if anl:.

(A p son or entity or assoc ' ation conducting any ac ivity subject to the tax herein imposed shall be s imilarly liable for said tax wi h espec t to s uch portion J of t he rece 'pts derived by him or it.) ( Emphases s upplied) This is now incorporated under Section 228 of the 1987 Tax Code .

Under the fore going provision o f the Tax Code, another contention o f t he Petitioner that "the cession of advertising and streamer s paces to VEI, for which the latter paid the PBA members P1,SOO,OOO.OO is not subject t o the paymen of amusement taxes" is again untenab le .

The law is too plain t o be missed and too categoricctl o be mi s nterp eted .

Thus, "the te rm - 8 - 'gross re c eipts' embraces all receipts of the proprietor, lessor or operator of the amusement place ... " (ibid.)

which necessarily cover or include revenues derived from advertising and streamer spaces in the venue of the games. (Emphasis supplied)

WHEREFORE, in all the foregoing, herein petition for review is hereby DISMISSED for lack of merit and the Petitioner is hereby ORDERED to PAY to the Respondent the amount of P5,864, 260.8 4 as deficiency amusement tax for the year 1987 plus 20% annual delinquency interest from July 22, 1989 which is the due dat e app e ri ng on the noti c and demand of the Commissioner (i.e.

30 day s rom receipt of the assessment) until fully paid pursuant to the provisions of Sections 248 and 249 (c)

(3) of the Tax Code, as amended.

WE CONCUR:

~Q·~~ ERNESTO . ACOSTA Presiding Judge

GRU A

Judg

C E R T

F I C A T I 0 H

I hereby certify hat the decision was reached ' after due consultation among the me mbers of the Court of Tax Appeals in accordance with Section 13, Article VIII of he Constit tion.

/amf ..

• \ ~ RH STO 0. ACOSTA Presiding Judge Court of Tax Appeals