PAGCOR versus BIR

G.R. No. 172087

March 15, 2011
FACT A TO P!TITION!R
PAGCOR was created pursuant to PD No. 1067-A
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on January 1, 177. !"#u$taneous to
"ts creat"on, P.D. No. 1067-%
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'supp$e#ent"n( P.D. No. 1067-A) was "ssued e*e#pt"n(
PAGCOR +ro# t,e pay#ent o+ any type o+ ta*, e*cept a +ranc,"se ta* o+ +"-e percent
'./) o+ t,e (ross re-enue.
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On January 1, 11, R.A. No. 1020,
1
ot,erw"se 2nown as
t,e National Internal Revenue Code of 1997, too2 e++ect. !ect"on 27 'c) o+ R.A. No. 1020
pro-"des t,at (o-ern#ent-owned and contro$$ed corporat"ons 'GOCCs) s,a$$ pay
corporate "nco#e ta*, e*cept pet"t"oner PAGCOR, G!3!,!!!, P43C, and PC!O.
5"t, t,e enact#ent o+ R.A. No. &&7
10
on 6ay 20, 200., certa"n sect"ons o+ t,e N3RC.
7,e part"cu$ar a#end#ent t,at "s at "ssue "n t,"s case "s !ect"on 1 o+ R.A. No. &&7,
w,"c, a#ended !ect"on 27 'c) o+ N3RC o+ 17 8y e*c$ud"n( PAGCOR +ro# t,e
enu#erat"on o+ GOCCs t,at are e*e#pt +ro# pay#ent o+ corporate "nco#e ta*.
FACT A TO R!PON"!NT
Respondent %3R "ssued Re-enue Re(u$at"ons 'RR) No. 16-200.,
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spec"+"ca$$y "dent"+y"n(
PAGCOR as one o+ t,e +ranc,"sees su89ect to 10/ :A7 "#posed under !ect"on 101 o+
t,e Nat"ona$ 3nterna$ Re-enue Code o+ 17, as a#ended 8y R.A. No. &&7.
I#! A TO P!TITION!R
1. Pet"t"oner ar(ues t,at RA &&7 "s nu$$ and -o"d ab initio +or 8e"n( repu(nant to
t,e e;ua$ protect"on c$ause e#8od"ed "n !ect"on 1, Art"c$e 333 o+ t,e 117
Const"tut"on.
2. Pet"t"oner ar(ues t,at RA &&7, sect"on 1'c) "s -"o$at"-e o+ t,e non-"#pa"r#ent
c$ause e#8od"ed "n sect"on 10, Art"c$e 333 o+ t,e Const"tut"on.
I#! A TO R!PON"!NT
1. Respondent ar(ues t,at RR 16-00. spec"+"ca$$y "dent"+y"n( PAGCOR as one o+
t,e +ranc,"sees su89ect to 10/ :A7 "#posed under !ect"on 101 o+ t,e Nat"ona$
3nterna$ Re-enue Code o+ 17, as a#ended 8y R.A. No. &&7 "s not nu$$ and
-o"d.
R#$ING OF T%! CO#RT
1. As to the issues of petitioner, the Supreme Court ruled in favor of respondent
PAGCOR cannot +"nd support "n t,e e;ua$ protect"on c$ause o+ t,e Const"tut"on,
as t,e $e("s$at"-e records o+ t,e %"ca#era$ Con+erence 6eet"n( dated Octo8er
27, 17, o+ t,e Co##"ttee on 5ays and 6eans, s,ow t,at PAGCOR<s
e*e#pt"on +ro# pay#ent o+ corporate "nco#e ta*, as pro-"ded "n !ect"on 27 'c)
o+ R.A. No. 1020, or t,e Nat"ona$ 3nterna$ Re-enue Code o+ 17, was not #ade
pursuant to a -a$"d c$ass"+"cat"on 8ased on su8stant"a$ d"st"nct"ons and t,e ot,er
re;u"re#ents o+ a reasona8$e c$ass"+"cat"on 8y $e("s$at"-e 8od"es, so t,at t,e $aw
#ay operate on$y on so#e, and not a$$, w"t,out -"o$at"n( t,e e;ua$ protect"on
c$ause. 7,e $e("s$at"-e records s,ow t,at t,e 8as"s o+ t,e (rant o+ e*e#pt"on to
PAGCOR +ro# corporate "nco#e ta* was PAGCOR<s own re;uest to 8e
e*e#pted.
As re(ards +ranc,"ses, !ect"on 11, Art"c$e =33 o+ t,e Const"tut"on
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pro-"des t,at
no +ranc,"se or r"(,t s,a$$ 8e (ranted e*cept under t,e cond"t"on t,at "t s,a$$ 8e
su89ect to a#end#ent, a$terat"on, or repea$ 8y t,e Con(ress w,en t,e co##on
(ood so re;u"res. 3n t,"s case, PAGCOR was (ranted a +ranc,"se, w"t,"n t,e
terr"tor"a$ 9ur"sd"ct"on o+ t,e Repu8$"c o+ t,e P,"$"pp"nes.
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. 4ence, t,e pro-"s"on "n
!ect"on 1 o+ R.A. No. &&7, a#end"n( !ect"on 27 'c) o+ R.A. No. 1020 8y
w"t,draw"n( t,e e*e#pt"on o+ PAGCOR +ro# corporate "nco#e ta*, w,"c, #ay
a++ect any 8ene+"ts to PAGCOR<s transact"ons w"t, pr"-ate part"es, "s not -"o$at"-e
o+ t,e non-"#pa"r#ent c$ause o+ t,e Const"tut"on
2. As to the issue of respondent
The Supreme Court ruled against respondent
Anent t,e -a$"d"ty o+ RR No. 16-200., t,e Court ,o$ds t,at t,e pro-"s"on
su89ect"n( PAGCOR to 10/ :A7 "s "n-a$"d +or 8e"n( contrary to R.A. No. &&7.
Now,ere "n R.A. No. &&7 "s "t pro-"ded t,at pet"t"oner can 8e su89ected to :A7.
R.A. No. &&7 "s c$ear on$y as to t,e re#o-a$ o+ pet"t"oner>s e*e#pt"on +ro# t,e
pay#ent o+ corporate "nco#e ta*, w,"c, was a$ready addressed a8o-e 8y t,"s
Court.
3t "s sett$ed ru$e t,at "n case o+ d"screpancy 8etween t,e 8as"c $aw and a ru$e or
re(u$at"on "ssued to "#p$e#ent sa"d $aw, t,e 8as"c $aw pre-a"$s, 8ecause t,e sa"d
ru$e or re(u$at"on cannot (o 8eyond t,e ter#s and pro-"s"ons o+ t,e 8as"c
$aw.
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RR No. 16-200., t,ere+ore, cannot (o 8eyond t,e pro-"s"ons o+ R.A. No.
&&7. !"nce PAGCOR "s e*e#pt +ro# :A7 under R.A. No. &&7, t,e %3R
e*ceeded "ts aut,or"ty "n su89ect"n( PAGCOR to 10/ :A7 under RR No. 16-
200.? ,ence, t,e sa"d re(u$atory pro-"s"on "s ,ere8y nu$$"+"ed.