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G.R. No.

180529 November 13, 2013


COMMISSIONER OF INTERNAL REVENUE, vs. BANK OF COMMERCE,
FACTS: Bank of Commerce (BOC)] and Traders Royal Bank(TRB) executed a Purchase and
Sale Agreement
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whereby it stipulated the TRBs desire to sell and the BOCs desire to purchase
identified recorded assets of TRB in consideration of BOC assuming identified recorded
liabilities. Under the Purchase and Sale Agreement, BOC and TRB shall continue to exist as
separate corporations with distinct corporate personalities.On September 27, 2002, [BOC]
received copies of the Formal Letter of Demand and Assessment Notice No. DST-99-00-000049
dated September 11, 2002, addressed to "TRADERS ROYAL BANK (now Bank of
Commerce)", issued by the CIR demanding payment of the amount of P41,467,887.51, as
deficiency documentary stamp taxes (DST) on Special Savings Deposit (SSD) account of TRB
for taxable year 1999.
ISSUE: Whether the transaction of BOC and TRB constitutes a merger such that TRB is
liable for DST.
RULING: NO. One distinctive characteristic for a merger to exist under the second part of
[Section 40(C)(b) of the 1997 NIRC] is that, it is not enough for a corporation to acquire all or
substantially all the properties of another corporation but it is also necessary that such acquisition
is solely for stock of the absorbing corporation. Stated differently, the acquiring corporation will
issue a block of shares equal to the net asset value transferred, which stocks are in turn
distributed to the stockholders of the absorbed corporation in proportion to the respective share.
After a careful perusal of the facts presented as well as the details of the instant case, it is
observed by this Office that the transaction was purely concerning acquisition and assumption by
[BOC] of the recorded liabilities of TRB. The [Purchase and Sale] Agreement did not mention
with respect to the issuance of shares of stock of [BOC] in favor of the stockholders of TRB.
Such transaction is absent of the requisite of a stock transfer and same belies the existence of a
merger. As such, this Office considers the Agreement between [BOC] and TRB as one of "a sale
of assets with an assumption of liabilities rather than merger."













PELIZLOY REALTY CORPORATION, vs. THE PROVINCE OF BENGUET
G.R. No. 183137 April 10, 2013

FACTS: Petitioner ("Pelizloy") owns Palm Grove Resort , which is designed for recreation and
which has facilities like swimming pools, a spa and function halls. The Provincial Board of the
Province of Benguet approved Provincial Tax Ordinance No. 05-107, otherwise known as the
Benguet Revenue Code of 2005. Section 59, Article X of the Tax Ordinance levied a ten percent
(10%) amusement tax on gross receipts from admissions to "resorts, swimming pools,bath
houses, hot springs and tourist spots.It was Pelizloy's position that the Tax Ordinance's
imposition of a 10% amusement tax on gross receipts from admission fees for resorts, swimming
pools, bath houses, hot springs, and tourist spots is an ultra vires act on the part of the Province
of Benguet.Pelizloy argued that Section 59, Article X of the Tax Ordinance imposed a
percentage tax in violation of the limitation on the taxing powers of local government units
(LGUs) under Section 133 (i) of the LGC. Thus, it was null and void ab initio.
On substantive grounds, the Province of Benguet argued that the phrase other places of
amusement in Section 140 (a) of the LGC
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encompasses resorts, swimming pools, bath houses,
hot springs, and tourist spots since "Article 220 (b) (sic)" of the LGC defines "amusement" as
"pleasurable diversion and entertainment x x x synonymous to relaxation, avocation, pastime, or
fun."
ISSUES: Whether or not provinces are authorized to impose amusement taxes on admission
fees to resorts, swimming pools, bath houses, hot springs, and tourist spots for being
"amusement places" under the Local Government Code.
RULING: However, provinces are not barred from levying amusement taxes even if amusement
taxes are a form of percentage taxes. Section 133 (i) of the LGC prohibits the levy of percentage
taxes "except as otherwise provided" by the LGC.
Section 140 of the LGC provides:
SECTION 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 not more than thirty percent (30%) of the gross
receipts from admission fees.
Evidently, Section 140 of the LGC carves a clear exception to the general rule in Section 133 (i).
Section 140 expressly allows for the imposition by provinces of amusement taxes on "the
proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and
other places of amusement."
However, resorts, swimming pools, bath houses, hot springs, and tourist spots are not among
those places expressly mentioned by Section 140 of the LGC as being subject to amusement
taxes. Thus, the determination of whether amusement taxes may be levied on admissions to
resorts, swimming pools, bath houses, hot springs, and tourist spots hinges on whether the phrase
other places of amusement encompasses resorts, swimming pools, bath houses, hot springs, and
tourist spots.
Under the principle of ejusdem generis, "where a general word or phrase follows an enumeration
of particular and specific words of the same class or where the latter follow the former, the
general word or phrase is to be construed to include, or to be restricted to persons, things or cases
akin to, resembling, or of the same kind or class as those specifically mentioned."
In determining the meaning of the phrase 'other places of amusement', one must refer to the prior
enumeration of theaters, cinematographs, concert halls and circuses with artistic expression as
their common characteristic.
In the present case, the Court need not embark on a laborious effort at statutory construction.
Section 131 (c) of the LGC already provides a clear definition of amusement places:
Section 131. Definition of Terms. - When used in this Title, the term:
x x x
(c) "Amusement Places" include theaters, cinemas, concert halls, circuses and other places of
amusement where one seeks admission to entertain oneself by seeing or viewing the show or
performances
Considering these, it is clear that resorts, swimming pools, bath houses, hot springs and tourist
spots cannot be considered venues primarily "where one seeks admission to entertain oneself by
seeing or viewing the show or performances". While it is true that they may be venues where
people are visually engaged, they are not primarily venues for their proprietors or operators to
actively display, stage or present shows and/or performances.
Thus, resorts, swimming pools, bath houses, hot springs and tourist spots do not belong to the
same category or class as theaters, cinemas, concert halls, circuses, and boxing stadia. It follows
that they cannot be considered as among the other places of amusement contemplated by
Section 140 of the LGC and which may properly be subject to amusement taxes.






CIR vs SAN ROQUE POWER CORPORATION
G.R. No. 187485 October 8, 2013
This Resolution resolves the Motion for Reconsideration and the Supplemental Motion for
Reconsideration filed by San Roque Power Corporation (San Roque) in G.R. No. 187485, the
Comment to the Motion for Reconsideration filed by the Commissioner of Internal Revenue
(CIR) in G.R. No. 187485, the Motion for Reconsideration filed by the CIR in G.R.No. 196113,
and the Comment to the Motion for Reconsideration filed by Taganito Mining Corporation
(Taganito) in G.R. No. 196113.
San Roque prays that the rule established in our 12 February 2013 Decision be given only a
prospective effect, arguing that "the manner by which the Bureau of Internal Revenue (BIR) and
the Court of Tax Appeals(CTA) actually treated the 120 + 30 day periods constitutes an
operative fact the effects and consequences of which cannot be erased or undone."
Issue: What is the doctrine of operative fact? Does it apply this case?
The general rule is that a void law or administrative act cannot be the source of legal rights or
duties. Article 7 of the Civil Code enunciates this general rule, as well as its exception: "Laws
are repealed only by subsequent ones, and their violation or non-observance shall not be excused
by disuse, or custom or practice to the contrary. When the courts declared a law to be
inconsistent with the Constitution, the former shall be void and the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not
contrary to the laws or the Constitution." The doctrine of operative fact is an exception to the
general rule, such that a judicial declaration of invalidity may not necessarily obliterate all the
effects and consequences of a void act prior to such declaration.
Clearly, for the operative fact doctrine to apply, there must be a "legislative or executive
measure," meaning a law or executive issuance, that is invalidated by the court. From the
passage of such law or promulgation of such executive issuance until its invalidation by the
court, the effects of the law or executive issuance, when relied upon by the public in good faith,
may have to be recognized as valid. In the present case, however, there is no such law or
executive issuance that has been invalidated by the Court except BIR Ruling No. DA-489-03.
To justify the application of the doctrine of operative fact as an exemption, San Roque asserts
that "the BIR and the CTA in actual practice did not observe and did not require refund seekers
to comply with the120+30 day periods."
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This is glaring error because an administrative practice
is neither a law nor an executive issuance. Moreover, in the present case, there is even no such
administrative practice by the BIR as claimed by San Roque.