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Republic of the Philippines



Petitioner, Present:

UISUM!IN", J., Chairperson,
# $ersus # C%RPIO,
TIN"%, an'
VE&%SCO, (R), JJ.
,ebruar- ./, 0112



T!" C#$"

!efore us is a Petition for Re$ie4 on Certiorari
un'er Rule 78 of the
Rules of Court, assailin+ the No$e*ber .2, 0111 Decision
of the Court of
%ppeals 9C%: in C%#")R) SP No) 8/;./, 4hich affir*e' the (anuar- <,
0111 Decision
of the Court of Ta3 %ppeals 9CT%: in CT% Case No) 8/78
entitle' Acesite (Philippines) Hotel Corporation v. The Commissioner of
Internal Revenue for Refun' of V%T Pa-*ents)

T!" F#%&$

The facts as foun' b- the appellate court are un'ispute', thus:

%cesite is the o4ner an' operator of the =oli'a- Inn Manila
Pa$ilion =otel alon+ Unite' Nations %$enue in Manila) It leases
/,2/;)8< s>uare *eters of the hotel?s pre*ises to the Philippine
%*use*ent an' "a*in+ Corporation 5hereafter, P%"COR6 for
casino operations) It also caters foo' an' be$era+es to P%"COR?s
casino patrons throu+h the hotel?s restaurant outlets) ,or the perio'
(anuar- 9sic: @/ to %pril .@@2, %cesite incurre' V%T a*ountin+ to
P<1,.80,;@0)10 fro* its rental inco*e an' sale of foo' an'
be$era+es to P%"COR 'urin+ sai' perio') %cesite trie' to shift the
sai' ta3es to P%"COR b- incorporatin+ it in the a*ount assesse' to
P%"COR but the latter refuse' to pa- the ta3es on account of its ta3
e3e*pt status)

Thus, P%"COR pai' the a*ount 'ue to %cesite *inus the
P<1,.80,;@0)10 V%T 4hile the latter pai' the V%T to the
Co**issioner of Internal Re$enue 5hereafter, CIR6 as it feare' the
le+al conse>uences of non#pa-*ent of the ta3) =o4e$er, %cesite
belate'l- arri$e' at the conclusion that its transaction 4ith
P%"COR 4as subAect to Bero rate as it 4as ren'ere' to a ta3#
e3e*pt entit-) On 0. Ma- .@@;, %cesite file' an a'*inistrati$e
clai* for refun' 4ith the CIR but the latter faile' to resol$e the
sa*e) Thus on 0@ Ma- .@@;, %cesite file' a petition 4ith the Court
of Ta3 %ppeals 5hereafter, CT%6 4hich 4as 'eci'e' in this 4ise:

%s earlier state', Petitioner is subAect to Bero percent
ta3 pursuant to Section .10 9b:9<: 5no4 .1/9%:9C:6 insofar
as its +ross inco*e fro* rentals an' sales to P%"COR, a
ta3 e3e*pt entit- b- $irtue of a special la4) %ccor'in+l-,
the a*ounts of P0.,7.<,10/)2; an' P;,2<@,;/8)07,
representin+ the .1C EV%T on its sales of foo' an'
ser$ices an' +ross rentals, respecti$el- fro* P%"COR
shall, as a *atter of course, be refun'e' to the petitioner for
ha$in+ been ina'$ertentl- re*itte' to the respon'ent)

Thus, taDin+ into consi'eration the prescribe' portion
of Petitioner?s clai* for refun' of P@;,27<)71, an'
consi'erin+ further the principle of Esolutio indebiti? 4hich
re>uires the return of 4hat has been 'eli$ere' throu+h
*istaDe, Respon'ent *ust refun' to the Petitioner the
a*ount of P<1,187,.7;)/7 co*pute' as follo4s:

Total a*ount per
clai* <1,.80,;@0)10
&ess Prescribe' a*ount 9E3hs %, F, G F#01:
(anuar- .@@/ P 0,.@@)@7
,ebruar- .@@/ 0/,018)17
March .@@/ 21,<<;)70 @;,27<)71
H=ERE,ORE, in $ie4 of all the fore+oin+, the instant
Petition for Re$ie4 is partiall- "R%NTED) The
Respon'ent is hereb- ORDERED to RE,UND to the
petitioner the a*ount of T=IRTI MI&&ION ,I,TI ,OUR
%ND SIFTI ,OUR CENT%VOS 9P<1,187,.7;)/7:


T!" R'()*+ o, &!" Co'-& o, A.."#($

Upon appeal b- petitioner, the C% affir*e' in toto the 'ecision of the
CT% hol'in+ that P%"COR 4as not onl- e3e*pt fro* 'irect ta3es but 4as
also e3e*pt fro* in'irect ta3es liDe the V%T an' conse>uentl-, the
transactions bet4een respon'ent %cesite an' P%"COR 4ere Jeffecti$el-
Bero#rate'K because the- in$ol$e' the ren'ition of ser$ices to an entit-
e3e*pt fro* in'irect ta3es) Thus, the C% affir*e' the CT%?s 'eter*ination
b- rulin+ that respon'ent %cesite 4as entitle' to a refun' of PhP
<1,187,.7;)/7 fro* petitioner)

T!" I$$'"$

=ence, 4e ha$e the instant petition 4ith the follo4in+ issues: 9.:
4hether P%"COR?s ta3 e3e*ption pri$ile+e inclu'es the in'irect ta3 of
V%T to entitle %cesite to Bero percent 91C: V%T rateL an' 90: 4hether the
Bero percent 91C: V%T rate un'er then Section .10 9b:9<: of the Ta3 Co'e
9no4 Section .1; 9!:9<: of the Ta3 Co'e of .@@2: le+all- applies to %cesite)

The petition is 'e$oi' of *erit)

In resol$in+ the first issue on 4hether P%"COR?s ta3 e3e*ption
pri$ile+e inclu'es the in'irect ta3 of V%T to entitle %cesite to Bero percent
91C: V%T rate, 4e ans4er in the affir*ati$e) He 4ill ho4e$er 'iscuss both
issues to+ether)

PAGCOR )$ "/"0.& ,-o0 .#10"*& o, )*2)-"%& &#/"$

It is un'ispute' that P)D) .;/@, the charter creatin+ P%"COR, +rants
the latter an e3e*ption fro* the pa-*ent of ta3es) Section .< of P)D) .;/@
pertinentl- pro$i'es:

Sec) .<) Eemptions. M

3 3 3 3

90: Inco*e an' other ta3es) M 9a: ,ranchise =ol'er: No &#/ o,
#*1 3)*2 o- ,o-0, )*%o0" o- o&!"-4)$", #$ 4"(( #$ ,""$, %!#-+"$
o- ("5)"$ o, 4!#&"5"- *#&'-", 4!"&!"- N#&)o*#( o- Lo%#(, $!#(( 6"
#$$"$$"2 #*2 %o(("%&"2 '*2"- &!)$ F-#*%!)$" ,-o0 &!"
Co-.o-#&)o*7 *o- $!#(( #*1 ,o-0 o, &#/ o- %!#-+" #&&#%! )* #*1
4#1 &o &!" "#-*)*+$ o, &!" Co-.o-#&)o*, e3cept a ,ranchise Ta3 of
fi$e 98C: percent of the +ross re$enue or earnin+s 'eri$e' b- the
Corporation fro* its operation un'er this ,ranchise) Such ta3 shall
be 'ue an' pa-able >uarterl- to the National "o$ern*ent an' shall
be in lieu of all Din's of ta3es, le$ies, fees or assess*ents of an-
Din', nature or 'escription, le$ie', establishe' or collecte' b- an-
*unicipal, pro$incial, or national +o$ern*ent authorit-)

3 3 3 3

9b: Others: The "/"0.&)o*$ !"-")* +-#*&"2 ,o- "#-*)*+$
2"-)5"2 ,-o0 &!" o."-#&)o*$ %o*2'%&"2 '*2"- &!" ,-#*%!)$"
$."%),)%#((1 ,-o0 &!" .#10"*& o, #*1 &#/, )*%o0" o- o&!"-4)$",
#$ 4"(( #$ #*1 ,o-0 o, %!#-+"$, ,""$ o- ("5)"$, $!#(( )*'-" &o &!"
6"*",)& o, #*2 "/&"*2 &o %o-.o-#&)o*($), #$$o%)#&)o*($),
#+"*%1()"$), o- )*2)5)2'#(($) 4)&! 4!o0 &!" Co-.o-#&)o* o-
o."-#&o- !#$ #*1 %o*&-#%&'#( -"(#&)o*$!). )* %o**"%&)o* 4)&! &!"
o."-#&)o*$ o, &!" %#$)*o($) #'&!o-)8"2 &o 6" %o*2'%&"2 '*2"- &!)$
F-#*%!)$" an' to those recei$in+ co*pensation or other
re*uneration fro* the Corporation or operator as a result of
essential facilities furnishe' an'Nor technical ser$ices ren'ere' to the
Corporation or operator) 9E*phasis supplie'):

Petitioner conten's that the abo$e ta3 e3e*ption refers onl- to
P%"COR?s 'irect ta3 liabilit- an' not to in'irect ta3es, liDe the V%T)

He 'isa+ree)

% close scrutin- of the abo$e pro$isos clearl- +i$es P%"COR a
blanDet e3e*ption to ta3es 4ith no 'istinction on 4hether the ta3es are
'irect or in'irect) He are one 4ith the C% rulin+ that P%"COR is also
e3e*pt fro* in'irect ta3es, liDe V%T, as follo4s:

Un'er the abo$e pro$ision 5Section .< 90: 9b: of P)D) .;/@6, the
ter* JCorporationK or operator refers to P%"COR) %lthou+h the
la4 'oes not specificall- *ention P%"COR?s e3e*ption fro*
in'irect ta3es, PAGCOR )$ '*2o'6&"2(1 "/"0.& ,-o0 $'%! &#/"$
6"%#'$" &!" (#4 "/"0.&$ ,-o0 &#/"$ ."-$o*$ o- "*&)&)"$
%o*&-#%&)*+ 4)&! PAGCOR )* %#$)*o o."-#&)o*$) %lthou+h,
'ifferentl- 4or'e', the pro$ision clearl- e3e*pts P%"COR fro*
in'irect ta3es) I* ,#%&, )& +o"$ o*" $&". ,'-&!"- 61 +-#*&)*+ &#/
"/"0.& $&#&'$ &o ."-$o*$ 2"#()*+ 4)&! PAGCOR )* %#$)*o
o."-#&)o*$) The un*istaDable conclusion is that P%"COR is not
liable for the P<1,.80,;@0)10 V%T an' neither is %cesite as the
latter is effecti$el- subAect to Bero percent rate un'er Sec) .1; ! 9<:)
R)%) ;707) 9E*phasis supplie'):

In'ee', b- e3ten'in+ the e3e*ption to entities or in'i$i'uals 'ealin+
4ith P%"COR, the le+islature clearl- +rante' e3e*ption also fro* in'irect
ta3es) It *ust be note' that the in'irect ta3 of V%T, as in the instant case,
can be shifte' or passe' to the bu-er, transferee, or lessee of the +oo's,
properties, or ser$ices subAect to V%T) Thus, b- e3ten'in+ the ta3
e3e*ption to entities or in'i$i'uals 'ealin+ 4ith P%"COR in casino
operations, it is e3e*ptin+ P%"COR fro* bein+ liable to in'irect ta3es)

T!" 0#**"- o, %!#-+)*+ VAT 2o"$ *o& 0#3" PAGCOR ()#6(" &o $#)2

It is true that V%T can either be incorporate' in the $alue of the
+oo's, properties, or ser$ices sol' or lease', in 4hich case it is co*pute' as
.N.. of such $alue, or char+e' as an a''itional .1C to the $alue) Veril-, the
seller or lessor has the option to follo4 either 4a- in char+in+ its clients an'
custo*er) In the instant case, %cesite follo4e' the latter *etho', that is,
char+in+ an a''itional .1C of the +ross sales an' rentals) !e that as it *a-,
the use of either *etho', an' in particular, the first *etho', 'oes not
'eni+rate the fact that P%"COR is e3e*pt fro* an in'irect ta3, liDe V%T)

VAT "/"0.&)o* "/&"*2$ &o A%"$)&"

Thus, 4hile it 4as proper for P%"COR not to pa- the .1C V%T
char+e' b- %cesite, the latter is not liable for the pa-*ent of it as it is
e3e*pt in this particular transaction b- operation of la4 to pa- the in'irect
ta3) Such e3e*ption falls 4ithin the for*er Section .10 9b: 9<: of the .@22
Ta3 Co'e, as a*en'e' 9no4 Sec) .1; 5b6 5<6 of R)%) ;707:, 4hich pro$i'es:

Section .10) Value#a''e' ta3 on sale of ser$ices M 9a: Rate an'
base of ta3 M There shall be le$ie', assesse' an' collecte', a $alue#
a''e' ta3 e>ui$alent to .1C of +ross receipts 'eri$e' b- an- person
en+a+e' in the sale of ser$ices 3 3 3L Pro$i'e', that the follo4in+
ser$ices perfor*e' in the Philippines b- V%T#re+istere' persons
shall be subAect to 1C)

3 3 3 3

9b: Transactions subAect to Bero percent 91C: rate')O

3 3 3 3

9<: S"-5)%"$ -"*2"-"2 &o ."-$o*$ o- "*&)&)"$ 4!o$"
"/"0.&)o* '*2"- $."%)#( (#4$ or international a+ree*ents to 4hich
the Philippines is a si+nator- effecti$el- subAects the suppl- of such
ser$ices to Bero 91C: rate 9e*phasis supplie':)

The rationale for the e3e*ption fro* in'irect ta3es pro$i'e' for in
P)D) .;/@ an' the e3tension of such e3e*ption to entities or in'i$i'uals
'ealin+ 4ith P%"COR in casino operations are best eluci'ate' fro* the
.@;2 case of Commissioner of Internal Revenue v. John !otamco " #ons$
4here the absolute ta3 e3e*ption of the Horl' =ealth Or+aniBation
9H=O: upon an international a+ree*ent 4as uphel') He hel' in sai' case
that the e3e*ption of contractee H=O shoul' be i*ple*ente' to *ean that
the entit- or person e3e*pt is the contractor itself 4ho constructe' the
buil'in+ o4ne' b- contractee H=O, an' such 'oes not $iolate the rule that
ta3 e3e*ptions are personal because the 0#*),"$& )*&"*&)o* o, &!"
#+-""0"*& )$ &o "/"0.& &!" %o*&-#%&o- $o &!#& *o %o*&-#%&o-9$ &#/ 0#1
6" $!),&"2 &o &!" %o*&-#%&"" :HO) Thus, the pro$iso in P)D) .;/@,
e3ten'in+ the e3e*ption to entities or in'i$i'uals 'ealin+ 4ith P%"COR in
casino operations, is clearl- to proscribe an- in'irect ta3, liDe V%T, that
*a- be shifte' to P%"COR)

A%"$)&" .#)2 VAT 61 0)$&#3"

Consi'erin+ the fore+oin+ 'iscussion, there are un'oubte'l-
erroneous pa-*ents of the V%T pertainin+ to the effecti$el- Bero#rate
transactions bet4een %cesite an' P%"COR) Veril-, %cesite has clearl-
sho4n that it pai' the subAect ta3es un'er a *istaDe of fact, that is, 4hen it
4as not a4are that the transactions it ha' 4ith P%"COR 4ere Bero#rate' at
the ti*e it *a'e the pa-*ents) In%#T Cooperative #tore v. Cit& of 'anila,
4e e3plaine' that Jthere is erroneous pa-*ent of ta3es 4hen a ta3pa-er
pa-s un'er a *istaDe of fact, as for the instance in a case 4here he is not
a4are of an e3istin+ e3e*ption in his fa$or at the ti*e the pa-*ent 4as
Such pa-*ent is hel' to be not $oluntar- an', therefore, can be
reco$ere' or refun'e')

Moreo$er, it *ust be note' that asi'e fro* not raisin+ the issue of
%cesite?s co*pliance 4ith pertinent Re$enue Re+ulations on e3e*ptions
'urin+ the procee'in+s in the CT%, it cannot be +ainsai' that %cesite shoul'
ha$e 'one so as it pai' the V%T un'er a *istaDe of fact) =ence, petitioner?s
ar+u*ent on this point is utterl- tenuous)

Solutio indebiti #..()"$ &o &!" Go5"-*0"*&

Ta3 refun's are base' on the principle of >uasi#contract or solutio
indebiti an' the pertinent la4s +o$ernin+ this principle are foun' in %rts)
0.70 an' 0.87 of the Ci$il Co'e, 4hich pro$i'e, thus:

%rt) 0.70) Certain la4ful, $oluntar-, an' unilateral acts +i$e
rise to the Auri'ical relation of >uasi#contract to the en' that no one
shall be unAustl- enriche' or benefite' at the e3pense of another)

%rt) 0.87) If so*ethin+ is recei$e' 4hen there is no ri+ht to
'e*an' it, an' it 4as un'ul- 'eli$ere' throu+h *istaDe, the
obli+ation to return it arises)

Hhen *one- is pai' to another un'er the influence of a *istaDe of
fact, that is to sa-, on the *istaDen supposition of the e3istence of a specific
fact, 4here it 4oul' not ha$e been Dno4n that the fact 4as other4ise, it *a-
be reco$ere') The +roun' upon 4hich the ri+ht of reco$er- rests is that
*one- pai' throu+h *isapprehension of facts belon+s in e>uit- an' in +oo'
conscience to the person 4ho pai' it)

The "o$ern*ent co*es 4ithin the scope of solutio indebiti principle
as eluci'ate' in Commissioner of Internal Revenue v. (ireman)s (und
Insurance Compan&, 4here 4e hel' that: JEnshrine' in the basic le+al
principles is the ti*e#honore' 'octrine that no person shall unAustl- enrich
hi*self at the e3pense of another) It +oes 4ithout sa-in+ that the
"o$ern*ent is not e3e*pte' fro* the application of this 'octrine)K

A%&)o* ,o- -",'*2 $&-)%&(1 %o*$&-'"27 A%"$)&" 2)$%!#-+"2 &!"
6'-2"* o, .-oo,

Since an action for a ta3 refun' partaDes of the nature of an
e3e*ption, 4hich cannot be allo4e' unless +rante' in the *ost e3plicit an'
cate+orical lan+ua+e, it is strictl- construe' a+ainst the clai*ant 4ho *ust
'ischar+e such bur'en con$incin+l-)
In the instant case, respon'ent
%cesite ha' 'ischar+e' this bur'en as foun' b- the CT% an' the
C%) In'ee', the recor's sho4 that %cesite pro$e' its actual V%T pa-*ents
subAect to refun', as atteste' to b- an in'epen'ent Certifie' Public
%ccountant 4ho 4as 'ul- co**issione' b- the CT%) On the other han',
petitioner ne$er 'ispute' nor conteste' respon'ent?s testi*onial an'
'ocu*entar- e$i'ence) In fact, petitioner ne$er presente' an- e$i'ence on
its behalf)

One final 4or') The !IR *ust release the refun' to respon'ent
4ithout an- unreasonable 'ela-) In'ee', fair 'ealin+ is e3pecte' b- our
ta3pa-ers fro* the !IR an' this 'ut- 'e*an's that the !IR shoul' refun'
4ithout an- unreasonable 'ela- 4hat it has erroneousl- collecte')

:HEREFORE, the petition is DENIED for lacD of *erit an'
the No$e*ber .2, 0111 Decision of the C% is hereb-AFFIRMED) No


%ssociate (ustice


%ssociate (ustice

%ssociate (ustice %ssociate (ustice

%ssociate (ustice


I attest that the conclusions in the abo$e Decision ha' been reache' in
consultation before the case 4as assi+ne' to the 4riter of the opinion of the
Court?s Di$ision)

%ssociate (ustice


Pursuant to Section .<, %rticle VIII of the Constitution, an' the
Di$ision Chairperson?s %ttestation, I certif- that the conclusions in the
abo$e Decision ha' been reache' in consultation before the case 4as
assi+ne' to the 4riter of the opinion of the Court?s Di$ision)

Chief (ustice

Rollo, pp) 2#.;)
I') at <1#<8) The Decision 4as penne' b- %ssociate (ustice !uena$entura () "uerrero
9Chair*an: an' concurre' in b- %ssociate (ustices (ose &) Sabio, (r) an' ElieBer R) De &os Santos)
I') at </#78) The Decision 4as penne' b- Presi'in+ (u'+e Ernesto D) %costa an' concurre' in
b- %ssociate (u'+es Ra*on O) De Ve-ra an' %*ancio ) Sa+a)
Supra note 0, at <1#<0)
")R) No) &#<.1@0, ,ebruar- 02, .@;2, .7; SCR% </)
")R) No) &#.2.<<, Dece*ber <., .@/8, .8 SCR% /8/)
8. %*) (ur) .10<)
Supra note /)
7 %*) (ur) 8.7)
")R) No) &#<1/77, March @, .@;2, .7; SCR% <.8, <07#<08, citin+ Ramie Tetile$ Inc. v.
Ismael 'atha&$ #r., ")R) No) &#<0</7, %pril <1, .@2@, ;@ SCR% 8;/)
#ee Commissioner of Internal Revenue v. #.C. Johnson and #on$ Inc.$ et al., ")R) No) .02.18,
(une 08, .@@@, <1@ SCR% ;2L Phile 'inin* Corporation v. Commissioner of Internal Revenue$ et al., ")R)
No) .01<07, %pril 0., .@@@, <1/ SCR% .0/L Commissioner of Internal Revenue v. Court of Appeals$ et al.,
")R) No) .00./., ,ebruar- ., .@@@, <10 SCR% 770L+avao !ulf ,umber Corporation v. Commissioner of
Internal Revenue$ et al., ")R) No) ..2<8@, (ul- 0<, .@@;, 0@< SCR% 2/L Commissioner of Internal
Revenue v. To-&o #hippin* Co.$ ,td., ")R) No) /;0;0, Ma- 0/, .@@8, 077 SCR% <<0)
Commissioner of Internal Revenue v. To-&o #hippin* Co.$ ,td.$ supra note ..)