Commissioner of Internal Revenue vs. Ayala Land, Inc.

DECISION

Cf A EB No. 402 (Cf A Case No. 7261)

Page 2 of 17

canceling and setting aside the assessment for deficiency value added tax ("VAT") against herein respondent in the amount of P103,346,691.40 for the year 2003; and

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2.

the Resolution dated July 3, 2008, denying the "Motion for Reconsideration" of herein petitioner.

Antecedent Facts

As recapitulated by the Court in Division, the following facts are undisputed:

"Petitioner, 2 Ayala Land, Incorpora ted, is a corporation duly organized and existing under Philippine laws, with principal place of business located at the 29th Floor Tower One, Ayala Triangle, Ayala Avenue, Makati City. It is primarily engaged in the sale and/or lease of rea l properties, and among others, likewise owns and operates theaters or cinemas.

On the other hand, responden t,3 Commissioner of Internal Revenue, is the duly-appointed officer of the Bureau of Internal Revenue (BIR), with exclusive and original jurisdiction to: (a) interpret the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, and other tax lavVs, subject td review by the Secretary of Fi nance; and (2) decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the NIRC or other laws or portions thereof administered by the BIR, subject to the exclusive jurisdiction of the Court of Tax Appeals; with office address at the 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City.

On November 12, 2004, petitioner received respondent's Formal Lette r of Demand and Assessme11t Notice No. 002-03, both dated October 29, 2004; whereby respondent assessed petitioner for an alleged deficiency ten percent (10%) VAT on its alleged income from cinema operations for taxable year 2003 in the aggregate amount of P103,346,691.40, inclusive of twenty percent (20%) interest. The deficiency VAT is computed as follows:

Income from cinema operation Rate of Tax (Sec. 108, NIRC) ' Herein RespondPnl.

' Herein Petitioner.

129 896,424,485.80 10%

DECISION

Cr A EB No. 402 (CT A Case No. 7261)

Page 3 of ·17

Basic VAT due Add: 20% interest from 01/26/04 to 10/31/04

Total Amount Due

89,642,448.58 13,704,242.82 103.346.691.40 On December 10, 2004, petitioner filed its protest with the office of respondent contesting the factual and legal bases of the VAT assessment. Subsequently on April28, 2005, petitioner received respondent's Decision da ted April 25, 2005 denying petitioner's protest with a notation that the same constitutes respondent's 'Final Decision' on the matter, thus consh·aining petitioner to file the instant Petition for Review on May 27, 2005.

Respondent filed an Answer on August 25, 2005. After the pre- trial held on September 29, 2005, the parties submitted their Joint Stipulation of Facts and Issues on January 26, 2006, which was approved by this Court in the Resolution dated February 1, 2006. During trial, petitioner presented testimonial and documentary evidence to prove its case. Upon admission of petitioner's documentary evidence, the Court set the presentation of respondent's evidence on January 31, 2007, March 7, 2007, and April 25, 2007, but respondent's counsel failed to do so. Upon motion of petitioner's counsel, respondent was declared to have waived the right to present evidence in the Resolution dated April 30, 2007 rand the parties were directed to submit their respective Memorandum. Both petitioner and respondent submitted the required Memorandum on May 22, 2007 and on July 6, 2007, respectively. This case was considered submitted for decision in the Resolution dated July 30, 2007.

In the meantime however, petitioner filed an 'Urgent Omnibus Motion' on January 21, 2008 alleging, among others, that respondent's January 11, 2008 Letter, requiring petitioner to settle and pay the alleged deficiency tax liabilities involved in this case on or before January 18, 2008 to prevent the issuance of a Warrant of Distraint and Garnishment and/ or Levy, has no basis under existing laws considering that petitioner appealed the instant case to the Honorable Court of Tax Appeals prior to the finality of respondent's assessment, which cannot therefore be considered as delinquent. In said Motion, petitioner prayed for the issuance of an order directing respondent to desist from enforcing its January 11, 2008 letter and collecting the alleged deficiency taxes until the case is decided with finality; requiring respondent not to issue the Warrant of Dish·aint and Garnishment and/ or Levy against the petitioner and suspend the collection of the disputed VAT assessment until this case is decided with finality.

During the hea ring of said Motion on January 31, 2008, respondent's counsel interposed no objection to petitioner's Motion to suspend collection of taxes. Thus, the same was correspondingly granted by th;, Com! ;0 the Re,olut;on dat:d ::"""'Y 7, 2008, fm the pmpo'eY erA EB No. 402 (CrA Case No. 7261) preserving the status quo during the pendency of this appeal, and in order not to render ineffec tive and nug?. tory the judgment that will be rendered in this case, pursuant to R.A No. 9282, in relation to Rule 10 of the Revised Rules of the Co urt of Tax Appeals, subject to the filing of an acceptable surety bond in an amount double the disputed amount or value. On February 22, 2008, petitioner filed the required surety bond and the same was approved in the Resolution dated February 29, 2008."4(Citntions omitted)

The Ruling of the Court in Division

The following issues were submitted by the parties for resolution by the

Court in Division:

"(A) Whether or not the gross receipts from admission to petitioner'ss cinem as are subject to the 10% value-added tax?

(B)

Whether or not the gross receipts, or a portion thereof, by cinema/ theater proprietors are subject to VAT considering the fo llowing:

1.

Whether or not there is a provtston in the Local Government Code of 1991 (R.A No. 7160) that expressly excludes the National Government from imposing VAT on the gross receipts of cinema/ theater operators or proprietors?

2.

Whether or not there is a current, existing provision of law in this jurisdiction w hich exem p ts the business, or a portion of the business, of operators or proprietors of cinemas/ theater houses from the coverage of VAT?

(C)

Whether or not the assessment for deficiency VAT on petitioner's income from cinema operations for the taxable year 2003 in the amount of P103,346,691.40 is valid and accurate?"6 In resolving the issues, the Court in Division made a run-through of all the tax laws enacted in the Philippines involving operators of theaters and

I

cinematographs. According to the Court in Division, operators of theaters were formerly subjected to amusement tax under Section 260 of Commonwealth Act • Rollo, pp 37 -40.

; Herein Respondent.

• Rolla, pp. 40-41.

131

G A EB No. 402 (G A Case No. 7261)

No. ("CA") 466, the first codifica tion of the National Internal Revenue Code (IINIRC") of 1939.

However, the National Government's right to subject operators of theaters to amusemeht tax was removed with the passage of Presidential Decree No. ("PD") 231, otherwise known as the Local Tax Code. The power to tax operators of theaters and cinematographs was thereafter transferred exclusively to the Local Government. As a result, the revisions made on the NIRC, particularly PD 1158, otherwise known as the NIRC of 1977, no longer imposed II amusement tax" on the "proprietor, lessee, or operator of theaters of cinematographs" which was previously provided under CA 466. On the other hand, the subsequent repeal of the Local Tax Code by Republic Act No. (liRA") 7160, otherwise known as the Local Government Code, retained the provision on a1nusement tax.

Although the phrase II to the exclusion of both the national or municipal government" is no longer found il\ RA 7160, the Court in Division did not take this to mean that the National Government is now empowered or authorized to levy and collect tax on the gross receipts from admission fees collected by the operators/proprietors of theaters, cinemas and other amusernent places, without Congress enacting a statute enabling the National Govenunent to do so. It said that when the legislature enacts a provision, it is understood that it is aware of previous statu tes relating to the same subject matter and that in the absence of any express repeal or amendment therein, the new provision should be deemed enacted pursuant to the legislative policy embodied in the prior statutes. In support of this view, the Court in Division pointed out the fact that Section 125 of 132

DECISION

CT A EB No. 402 (CT A Case No. 7261)

Page6of1 7

the NIRC of 1997 only imposes amusement tax on proprietors, lessees or operators of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, jni-nlai, and raceh·acks; and not on proprietors and opera tors of theaters and cinemas. TI1e Court in Division saw this as an indication of the legislature's intention to impose only one form of tax on proprietors/ operators of theaters or cinemas, and that is, the amusement tax as found in RA 7160.

To the mind of the Court in Division, this interpretation holds true even after the passage of Executive Order No. ("EO") 273, otherwise known as "Adopting A Value-Added Tax, Amending For This Purpose Certain Provisions Of The National Internal Revenue Code And For Other Purposes," and its

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subsequent amendments (RA Nos. 7716, 8241, 8424 and 9238). The Court in Division explained that:

"While the meaning of the phrase 'sales or exchange of services' remains unchanged and may appear all-encompassing, the intention of the legislature to sul;>ject specific sales of services to VAT is clear. Had Congress intended the phrase to comprehend all kinds of sales of services, it would not have included more types or kinds of sales of services to be subject to VAT in every amendment of the VAT laws. Moreover, the showing of films by operators of cinematographs and thea ters is a widely known service too significant to be omitted in the enumeration if the lawmaking body indeed intended to include the same as being subject to VAT.

The sa me remains true notw ithstandin g that the phrase 'sale or exchange of services' is qualified at the end of the enumeration with the phrase 'and other similar services.' Under the principle of ejusdem generis, where genera l words follow an enumeration of persons or things by words of a particular and specific meanin g, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the sa me kind or class as those specifically mentioned . Its purpose is to giye effect to both the particular and general words, by trea ting the particular words as indicating the class and the general words as including all that is embraced in said class, although not 133

CTA EB No. 402 (CTA Case No. 7261) specifically named by the particular words. Had the lawmaking body intended the general terms to be used in their unrestricted sense, it would have not made an enumeralion of particular subjects but would have used only general terms.

Moreover, the exclusion of petitioner's cinema / theater operation from payment of value-added tax under Section 108 of the Tax Code find s affirmation in the House of Representatives' House Resolution No. 975, submitted by the Committee on Rules on October 11, 2005, recommending its approval by the House of Representatives as House Joint Resolution No. 13, which,reads:

"WHEREAS, it is imperative fo r the State to promote and support the development and growth of the theater and local film indus try as a medium for the dissemination of aesthetic, cultural and social values for the better understanding and appreciation of the Filipino identity;

WHEREAS, theaters and/ or movie houses are the primary media through w hich the output or artistic creation of the local film industry is exhibited;

WHEREAS, U1e viability of U1e cinema/ theater industry is now under threat due to continuous operational losses brought about by low patronage and high taxation regime; WHEREAS, boU1 theater owners and local movie producers are greatly pi·ejudiced by cheaper home movie alternatives like television and cable programs, as well as by rampant film piracy which turns out inexpensive and untaxed films in VCD or DVD formats and severely undercut the cost of movie tickets;

WHEREAS, fue industry is now suffering from the wron g collection of two business ta xes, each imposed by U.e n ational goverrunent and local government units on ticket sales; WHEREAS, when li•e collection of the amusement tax on admission to theaters was transferred by the old Local Tax Code of 1973 from the national government to fue local government, the indus try has been subject to U1e top rate of thirty percent (30%) amusement tax imposed by the local government w1its to the exclusion of the national government until the Bureau of Internal Revenue erroneously appreciated the Local Government Code of 1991 and imposed a business tax of ten percent (10%) on tl}e same gross receipts by way of fue value-ad ded ta x (VAT).

WHEREAS, such erroneous interpretation of U1e law will result to U.e imposition of a total top rate of forty percent (40%) business taxes (30% local and 10% n ational) on gross receipts which, under the circumstances, is unjust, oppressive and confiscatory;

13·1 y

DECISION

CT A EB No. 402 (CT A Case No. 7261)

Page B of 17

WHEREAS, the foregoing tax imposi tion, which is consistent with the Stctte's policy to hctve ct victble, sustainable and competitive theater and film induslTy, wi ll surely lead to the demise of the indush·y. Now, therefore, be it;

I

Resolved, as it is1 hereby resolved by the House of Representatives, That it is the sense of Congress that there should only be one business tax applicable to . theaters and movie houses, same being the top rate of thirty percent (30''l\,) amusement tax imposed by cities and provinces under the Local Government Code of 1991, and that consistent with the State's policy to have a viable, sustainable and competitive theater and film industry, it is the intent of Congress under prevailing la~s, that the national government be precluded from imposing its own business tax in addition to that already imposed and collected by local government units.'" 7 Simply put, the Court in Division found that the gross receipts derived from cinema or theater ticket sales are not subject to VAT. Accordingly, the Court in Division disposed of the case in this wise: "WHEREFORE, the instant Petition for Review is hereby GRANTED and the assessmen t against petitioner for deficiency VAT in the amount of P103,346,691.40 for calendar year 2003 is hereby CANCELLED and SET ASIDE.

Accordingly, the Surety Bond posted by petitioner for the suspension of collection of tax@-5 is likewise ®rdered cancelled .

The Issue

Hence, the instant Petition where the petitioner interposes the following assigned errors:

' Rollo, pp. 54 - 56 .

• /d., pp. 56 - 57.

" l~ eco rds, C T. A Case No. 7261, pp. 371-389.

10 Rollo, pp. 59- 63.

135

DECISION

O"A EB No. 402 (Cf A Case No. 7261) Page9ofl 7 "THE ASSESSMENT ISSUED BY PETITIONER IS . VALID IN ALL

RESPECTS AND WAS ERRONEOUSLY CANCELLED BY THE SECOND

DIVISION OF THE HONORABLE CTA.

TI-IE SECOND DIVISION OF THE HONORABLE CTA ERRONEOUSLY

UTILIZED

LEGISLATIVE

HISTORY,

RULES

OF

STATUTORY

CONSTRUCTION AND A PROPOSED HOUSE RESOLUTION TO

INTEPRET A CLEAR PROVISION OF LAW."ll Based on the following errors, the crux of the conh·oversy boils down to w hether or not the operation of thea.ters and cinematographs is subject to VAT. The Ru.lingofthe Court En Bane The Petition for Review is bereft of m erit.

The tax provision in dispute reads:

"SEC. 108.

Value-added Tax on Sale of Services and Use or Lease of Properties. -

I

(A)

Rate and Base of Tax. - There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties.

The phrase 'sale or exchange of services' means the performance of all kinds of sei·vices in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service conh·actors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or dish·ibu tors of cinematographic fi lms;

persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, opera tors or keepers of hotels, motels, res t houses, pension houses, in ns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; h·ansportation conh·actors on their h·ansport of goods or cargoes, including persons w ho transport goods or cargoes for hire and other domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code; services of banks, non-bank financial intermediaries and fu1 ~mce companies; and non-life insurance companies (except their crop insurances), including surety, 11 Rollo, p. 9.

13G

DECISION

CT A EB No. 402 (Cf A Case No. 7261)

Page10of ] 7

fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental facu lties. The phrase 'sale or exchange of services' shall likewise include:

(1) The lease or the use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, h·ade brand or other like property or right; (2) The lease or the use of, or the right to use of any industrial, commercial or scientific equipment;

(3) The supply of scientific, technical, industrial or commercial knowledge or information;

(4) The supply of any ass istance that is ancillary and subsidiary to and is furnished as a me<t ns of enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3);

(5) The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such nonresident person; (6) The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commerci<tl undertaking, venture, project or scheme;

(7) The lease of motion picture films, films, tapes and discs; and (8) The lease or the use of or the right to use radio, television, sa tellite transmission and cable television time.

XXX

XXX

xxx" Petitioner's view is that Section 108 of the NIRC of 1997 does not categorically define what conslit+utes "service," which may be "sold or

I

exchanged" in the course of business. Rather, the phrase "sale or exchange of service" is a catch-all phrase which embraces the performance of all kinds of serv1ces rendered m the Philippines by a person for others for a fee, 137

DECISION

Cf A EB No. 402 (Cf A Case No. 7261)

Page 11 of ] 7

remuneration, or consideration, regardless of whether the performance thereof calls for the exercise or use of the physical or mental faculties, including but not limited to, several items of services as enumerated and similar services.

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Therefore, even in the absence of a specific mention in the provision, the operation of theaters and cinematographs rendered in the Philippines by a person for others for a fee, remuneration, or consideration, which is not expressly exempt from VAT under the NIRC of ] 997 or any special law, is a sale of service contemplated under Section 108 of the NIRC of 1997. We do not agree with petitioner.

The issue presented before Us is not novel.

In the case of Cornmissioner of Internal Re11erzue v. SM Prime Holdings, Inc. and First Asia Realty Development Corpomtion,12 We declared that the activity of showing motion pictures, films or movies by the proprietors, lessees, or operators of theaters or cinemas i~ , not a "sale ,or exchange of service" subject to VAT, as it is not among the enumerated activities contemplated in the phrase "sale or exchange of services" found in Section 108 of the NIRC of 1997. Althou gh the said provision makes use of the phrase "all kinds of services" to define what " sale or exchange of services" is subject to VAT, it actually sets forth an exhaustive enumera tion of what services are intended to be subject to VAT. The only provision rela ting to films or motion pictures in the said section is the lease of motion picture films, films, tapes and discs, which is different and distinct from the act of showing or exhibiting movies, motion pictures or films. 138

I

"C.T. i\ FB CasP No. 244 (C.TA Case Nos. 7079, 7085, 71 n & 7272), April 30, 2008.

CT A EB No. 402 (CT A Case No. 7261)

"Exhibition" in Black's Law Dictionary is defined as "to show or display xxx to produce anything in public so that it may be taken il1to possession." While the word "lease" is defined as "a conh·act by which one owning such property grants to another the right to possess, use and enjoy it on specified period of time in exchange for periodic payment of a stipulated price, referred to as rent." Without a doubt, the law in specifically providing the lease of motion pichtre films, films, tapes and discs as a "sale or exchange of service" subject to VAT, did not intend to include the shown1g of motion picture/ films by cinema and theaters operators or proprietors. It is well to note that film showing is a widely known activity too significant to be omitted in the enumeration, if it was intended to be subject to VAT. In fact, il1 Our jurisdiction, th~ tax laws, past and present, did not include the showing of films in public by the owners, operators or proprietors of cinematographs or theaters as "sale or exchange of services" subject to VAT. We further ruled in the case of SM Prillle Holdings that such interpretation holds true notwithstandu-ig the fact that the phrase "sale or exchange of services" is qualified at the end of the enumeration with the phrase "and other similar services." Under the principle of ejusdem generis, where general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applyn1g only to persons or things of the same kind or class as those specifically mentioned.13 Its purpose is to give effect to both the particular and general words, by trea ting the p ~_rticular words as indicating the class and the n Philippine Basketball Association v. Court of Appeals, G.R. No. 119122, August 8, 2000, 337 SCRA 358. 13'9

C f A EB No. 402 (C f A Case No. 7261) general words as including all that is embraced in said class, although not specifically named by the particular words. rD1is is justified on the ground that if the lawmaking body intended the general terms to be used in their umesh·icted sense, it would have not made an enumeration of particular subjects but would have used only general terms.

It is a hornbook doch·ine in the interpretation of tax laws that: "A statute will not be consh·ued as imposing a tax unless it does so clearly, expressly, and unambiguously xxx. A tax cannot be imposed without clear and express words for that purpose. Accordingly, the general rule of requiring adherence to the letter in consh·uing statutes applies with peculiar sh·ich1ess to tax laws and the provisions of a taxing act are not to be extended by implication."14 A tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation.15 Thus, in answering the question of who is subject to tax statutes, the rule is that in case of doubt, tax statutes are to be consh·ued strictly against the government and liberally in favor of the taxpayer, for taxes being burdens, are not to be presumed beyond what the applicable statute expressly and clearly declares.16 The reason underlying the rule of sh·ict construction of statutes imposing taxes or customs duties is that taxation is a desh·uctive power which

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interferes with the personal and property rights of the people and takes from them a portion of their property for the su pport of the governmentY " Commissioner of Tnternal Revf'nue v. Court of Appeals, G.R No. 115349, April 18, 1997, 271 SCRA 605. '' Philippine Fisheries Development A'! thority v. Court of Appeals, G.R No. 169836, July 31, 2007, 528 SCRA 707. "' Republic of the Phihppmes v Intermed iate Appellate Court, G R No 69344, April 26, 1991, 196 SCRA 335/ "At\P<llo, Ruben E , Statutory Cmzslmctw11, 3rd Edihon (1995), p 235 140 Cf A EB No. 402 (Cf A Case No. 7261) In v1ew of the foregoing disquisition, the contention of petitioner that respondent has the burden to prove its exemption from the imposition of VAT

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no longer has any leg to stand on. The principles of tax exemption may not be applied without first applying the well-settled doch·ine of strict interpretation in the imposition of taxes.

It is obviously both illogical and impractical to determine who are exempted without first determining who are covered by the provision.18 The rule that tax exemptions should be construed sh·ictly against the taxpayer presupposes that the taxpayer is clearly subject to the tax being levied against him.

Unless a statute imposes a tax clearly, expressly, and unambiguously, what applies is the equally well-settled rule that the imposition of a tax carmot be presumed.19 For this reason, petitioner must fiJ:st prove that respondent is indeed covered by Seclion 108 of the NIRC of 1997 before he can impose upon it the burden of prov_~ng its exemption from the imposition of VAT. This petitioner failed to do. What is clear, instead, is that respondent is not subject to VAT, and consequently, has no burden to prove its exemption from it. Neither do We find any error on the part of the Court iJ1 Division in applying the doch·iJ1e of ejusdem gweris, nor in utilizing legislative history, rules of statutory consh·uction, and a proposed House Resolution to interpret a clear provision of law. It is a basic precept in statutory consh·uction that the intent of the legislature is the conh·olling factor in the interpretation of a statute. 20 And in case of doubt as to what a provision of a stalute means, the meaning put to the '"Commissioner of Internal Revenue v. Court of Appeals, surra at note 14. '"Commissioner of Internal Revenue v. Philippine American Accident Insurance Company, Inc., et. al., G.R No. 141658, March lR. 21105, 453 SCRA 668.

'"Commission on Au dit of the Province of Cebtt v. Province of Cebu, G.R No. 141386, November 29, 2001,371 SCRJ\ 196. 141

DECISION

CT A EB No. 402 (O'A Case No. 7261) r~ ge 15 of 17 provision during the legislative deliberations may be adopted. 21 It bears stressing that statutes should receive a sensible consh·uction, such as will give effect to the legislative intention, and so as to avoid an unjust or an absurd conclusion. 22 As We see it then, the activity of showing motion pictures, films or movies by the proprietors, lessees, or opera tors of theaters or cinemas is not a "sale or exchange of service" subject to VAT, but is an "amusement activity" subject to amusement tax under Section 140 of the RA 7160, to wit: "SEC 140.

Amusement Tax. -

(a) The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of nC)t more than thirty percent (30%) of the gross receipts from admission fe,es.

(b) In the case of theaters or cinemas, the tax shall first be deducted and withheld by their proprietors, lessees, or operators and paid to the provincial treas urer before the gross receipts are divided between said proprietors, lessees, or operators and the distributors of the cinematographic films.

(c) The l1olding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows, m usical programs, literary and oratorical presentations, except pop, rock, or similar concerts shall be exempt from the payment of the ta x hereon imposed. (d) The sangguniang panlalawigan may prescribe the time, mam1er, terms and conditions for the payment of tax. In case of fraud or failure to pay the tax, the sa ngguniang panlalawigan may impose such surcharges, interest and penalties as it may deem appropriate. (e) The proceeds from the amusement tax shall be shared equally by the province and the municipality where such amusement places are located."

"National Police Commission (NAPOLCOM) v. De Guzman, Jr., G.R No. 106724, February 9,1994, 229 SCRA 801. 22 Commissioner of Internal Revenue v. TMX Sales, Inc., G.R. No. 83736, january 15, 1992, 205 SCRA 184, citing People v. l~ izwrn, 59 Pl!il. 236 (7 933).

142

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DECISION

Cf A EB No. 402 (Cf A Case No. 7261)

Page 16 of1 7

In arriving at this conclusion, We explained m the case of SM Prime Holdings that:

"It must be emphasized that motion picture/film/movie exhibition or showing is an amusement activity subject to amusement tax. Under RA 7160, otherwise known as ('An Act Providing for A Local Government Code of 1991'), 'Amusement' is defined as a 'pleasurable diversion and entertainment. It is synonymous to relaxation, avocation, pastime, or fun' (Section 131 {b), RA 7160). While, 'Amusement Places' 'include theaters, cinemas, concert halls, ci rcuses and other places of am usement where one seeks admission to entertain oneself by seeing or viewing the show or performances' (Section 131 (c), RA 7160). Specifically, Section 140 of the RA 7160 imposes amusement tax to proprietors, lessees, or opera tors of theaters and cinemas, to wit:

XXX

XXX

XXX

Pursuant to the foregoing provisions of RA 7160, it is clear that the activi ty of showing motion pictures, films or movies by the proprietors, lessees, or operators of thea ters or cinemas is considered an 'amusement activity' subject to amusement tax. It is not considered a 'sale or exchange of service' subject to VAT.

All told, We find no convincing reason to depart from Our previous ruling. TI1en and now, the same tax principle applies: "No person or property is subject to taxation unless they fall within the terms or plain import of a taxing s ta lute." 23

WHEREFORE, the instant Petition for Review is hereby DISMISSED . Accordingly, the Decision dated April 11, 2008 and the Resolution dated July 3, · 2008 are hereby AFFIRMED.

WE CONCUR:

~..a. o~ ERNE~TO D. A COST A

Presiding Justice

~Hc·~~.Q..

J{:JANITO C. CASTANEDA, JW .

ER~P.UY

Assocrate Justice

Associate Justice

CAESAR A. CASANOVA

~A~~A-ENIUQUEZ

Associate Justice

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the above Decision has been reached in consultation with the members of the Court En Bane before the case was assigned to the writer of the opinion of this Court.

t~o-- 0.~ ERNESTO D. A COST A

Presiding Justice