Statutory Construction

Enacting Statutes

Case: COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON. COURT OF TAX APPEALS and
MANILA GOLF & COUNTRY CLUB, INC., respondents. G.R. No. L-47421 May 14, 1990

SC overruled Court of Tax Appeals decision that caterer’s tax under RA 6110 is illegal because it was vetoed by Former President
Marcos and Congress had not taken steps to override the veto. SC ruled in this case that the law has always imposed a 3% caterer’s
tax, as provided in Par 1, Sec 206 of the Tax Code.

FACTS: Respondent, Manila Golf & Country Club, Inc. is a non-stock corporation maintains a
golf course and operates a clubhouse with a lounge, bar and dining room, but these facilities
are for the exclusive use of its members and accompanied guests, and it charges on cost-
plus-expense basis. As such, it claims it should have been exempt from payment of privilege
taxes were it not for the last paragraph of Section 191-A of R.A. No. 6110, otherwise known
as the "Omnibus Tax Law." Section 191-A reads:

Sec. 191-A. Caterer. — A caterer's tax is hereby imposed as follows: (3) On proprietors or operators of
restaurants, xxx which are maintained within the preferences or compound of a hotel, motel, resthouse xxx
twenty per cent of their gross receipts.

Where the establishments are operated or maintained by clubs of any kind or nature (irrespective of the
disposition of their net income and whether or not they cater exclusively to members or their guests) the
keepers of the establishments shall pay the corresponding tax at the rate fixed above.
.
President Marcos vetoed Sec 191-A because according to him it would 1)shift the burden of
taxation to the consuming public and 2) restrain the development of hotels which are
essential to the tourist industry. The protestation of the club was denied by petitioners saying
that Sec 42 was not entirely vetoed but merely the words “hotels, motels, resthouses.” House
of Ways and Means concurred with petitioners stating that veto message only seems to
object with certain portions of 191-A and that can be gleaned by the reasons given by the
President.

The Court of Tax Appeals, reasoning that the veto message was clear and unqualified, as in
fact it was confirmed three years later by the Office of the President saying: “Sec. 191-A of
House Bill No. 17839, now R.A. 6110 was one of the Sections vetoed by the President”.

ISSUE: Whether the presidential veto referred to the entire section or merely to the imposition of
20% tax on gross receipts of operators or proprietors of restaurants, refreshment parlors,
bars and other eating places which are maintained within the premises or compound of a
hotel, motel or resthouses.

SC RULING President does not have the power to repeal an existing tax. Therefore, he could not have
repealed the 20% caterer’s tax. CTA agreed with respondent club that president vetoed only
a certain part. CTA mentioned that President can veto only an entire item, and not just words.
The President intentionally only vetoed a few words in Sec 191-A. Assuming that the veto
could not apply to just one provision but all would render the Presidential veto void and still in
favor of petitioner.

Inclusion of “hotels, motels, resthouses” in the 20% caterer’s tax bracket are items.
President has the right to veto such item, that which is subject to tax and tax rate. It does not
refer to an entire section. To construe item as an entire section would be to tie his hands to
eithercompletely agree with a section he has objections with or to disagree with an entire
section where he only has a portion he disagrees with.An "item" in a revenue bill does not
refer to an entire section imposing a particular kind of tax, but rather to the subject of the tax
and the tax rate. In the portion of a revenue bill which actually imposes a tax, a section
identifies the tax and enumerates the persons liable therefor with the corresponding tax rate.
To construe the word "item" as referring to the whole section would tie the President's
hand in choosing either to approve the whole section at the expense of also
approving a provision therein which he deems unacceptable or veto the entire section at the
expense of foregoing the collection of the kind of tax altogether. The evil which was sought to
be prevented in giving the President the power to disapprove items in a revenue bill would be
perpetrated rendering that power inutile (See Commonwealth ex rel. Elkin v. Barnett, 199 Pa.
161, 55 LRA 882 [1901]).

ACCORDINGLY, the petition is GRANTED and the decision of the Court of Tax Appeals in
CTA Case No. 2630 is set aside. Section 191-A of RA No. 6110 is valid and enforceable and,
hence, the Manila Golf & Country Club Inc. is liable for the amount assessed against it.

SO ORDERED