CITY OF DAVAO v. RANDY ALLIED VENTURES, INC.

(RAVI)
G.R. No. 241697, July 29, 2019
SECOND DIVISION, PERLAS-BERNABE

To constitute “doing business”; holding companies not doing business/dealing in

investments

The phrase “doing business” means some “trade or commercial activity “regularly” engaged
in as a means of livelihood or with a view to profit.” The primary test is “regularity of
function,” not on an isolated basis, with the end in mind for self-profit.

RAVI is a Coconut Industry Investment Fund (CIIF) “holding company” established to own
and hold certain shares of stock previously ruled by the Court as “public funds necessarily
owned by the Government.” Davao City assessed RAVI Local Business Taxes (LBT), arguing
that RAVI’s activities of (a) investing in and holding stocks, and (b) further managing the
dividends therefrom by placing them into to interest-yielding trust accounts, tantamounted
to “doing business,” properly subjecting RAVI to LBT.

Is RAVI “doing business,” hence subject to LBT?

NO.

LBTs are imposed by local government units on the privilege of “doing business” within their
jurisdictions. Here, the mentioned activities of RAVI do not constitute a business, hence it
cannot be subject to LBT.

While holding companies may partake in investment activities, this does not per se qualify
them as financial intermediaries in the business of and actively dealing in the same.
Financial intermediaries are regulated by the BSP because they deal with public funds when
they offer quasi-banking functions. On the other hand, a holding company is not similarly
regulated because any investment activities it conducts are mere incidental operations,
since its main purpose is to hold shares for policy-controlling purposes.

RAVI's act of placing said dividends in a trust account, which incidentally earns interest,
does not convert it into an active and regular investor or dealer in securities. Being
restricted to managing said dividends on behalf of the government, RAVI cannot be said to
be "doing business" as a bank or other financial institution.