G.R. No. 212530 - Bloomberry Resorts and Hotels, Inc. vs. Bureau of Internal Revenue

Case Summary (G.R. No. 212530)

Petitioner

Bloomberry is a provisional licensee of PAGCOR granted to establish and operate an integrated resort and casino complex at PAGCOR’s Entertainment City. Bloomberry pays PAGCOR license fees and, as a licensee, asserts it benefits from tax exemptions under the PAGCOR Charter and its amendment (R.A. No. 9487), specifically exemption from all taxes except a 5% franchise tax on gross gaming revenue.

Respondent

The Bureau of Internal Revenue, through RMC No. 33-2013 (17 April 2013), declared that PAGCOR is subject to corporate income tax pursuant to amendments effected by R.A. No. 9337 to the National Internal Revenue Code (NIRC) of 1997, and further stated that PAGCOR’s contractees and licensees authorized to operate gambling casinos and similar gaming facilities are likewise subject to corporate income tax.

Key Dates

8 April 2009: PAGCOR granted Bloomberry a provisional license for Entertainment City operations.
1 November 2005: Effectivity of R.A. No. 9337, which amended Section 27(C) of the NIRC.
17 April 2013: Issuance of RMC No. 33-2013 by the CIR.
10 December 2014 and subsequent cases: Prior Supreme Court rulings addressing PAGCOR’s tax status.
10 August 2016: Decision rendered by the Supreme Court (the decision that is the subject of this summary).

Applicable Law and Constitutional Basis

Primary statutes and issuances involved: Presidential Decree No. 1869 (PAGCOR Charter) as amended by R.A. No. 9487; National Internal Revenue Code of 1997, as amended (including R.A. No. 9337); RMC No. 33-2013; Section 4 of the NIRC granting the CIR interpretive and ruling powers. Procedural statutes referenced include R.A. No. 1125 as amended by R.A. No. 9282 regarding the Court of Tax Appeals’ jurisdiction. The constitutional framework applicable to the decision is the 1987 Philippine Constitution.

Factual Background

PAGCOR granted Bloomberry a provisional license to operate casino facilities; Bloomberry asserts that, under Section 13(2)(a)–(b) of P.D. No. 1869 (as amended), the 5% franchise tax on gross gaming revenue is in lieu of all other taxes and that exemptions inure to PAGCOR’s contractual partners, including licensees and contractees. R.A. No. 9337 amended Section 27(C) of the NIRC to remove PAGCOR from a list of tax‑exempt GOCCs; the BIR, by RMC No. 33-2013, interpreted that amendment to mean both PAGCOR and its contractees/licensees are subject to corporate income tax. Bloomberry challenged the RMC via a petition for certiorari and prohibition under Rule 65, invoking grave abuse of discretion by the CIR and seeking to enjoin implementation of the challenged provision.

Petitioner’s Contentions

Bloomberry advanced four core arguments: (i) PD No. 1869, as amended by R.A. No. 9487, expressly exempts PAGCOR’s contractees and licensees from all taxes except the 5% franchise tax; (ii) the deletion of PAGCOR from the list of tax-exempt GOCCs under the NIRC did not repeal or amend the PAGCOR Charter’s exemption for contractees and licensees; (iii) the CIR exceeded her jurisdiction and committed grave abuse of discretion by issuing RMC No. 33-2013 insofar as it effectively repealed or amended the PAGCOR Charter; and (iv) the RMC’s imposition of corporate income tax on licensees would adversely affect investment, tourism, and employment connected to the gaming industry.

Justification for Direct Recourse to the Supreme Court

Bloomberry asserted immediate recourse was appropriate because the matter presented a pure question of law, because the administrative action was allegedly patently illegal, because exhaustion of administrative remedies would be unreasonable or nullify its claim, and to preclude multiplicity of suits and conflicting rulings by lower tribunals.

Respondent’s Opposition

The CIR argued that RMC No. 33-2013 did not alter or amend P.D. No. 1869 but simply clarified taxability under prevailing laws; that prohibition is not the proper remedy to restrain purely administrative acts or already completed acts; and that tax exemptions are strictly construed against taxpayers, implying the BIR’s interpretation should be favored.

Issues Presented

The Court framed the dispute as two issues: (i) whether the CIR acted with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing RMC No. 33-2013 to subject PAGCOR’s contractees and licensees to corporate income tax; and (ii) whether that provision is valid or constitutional in light of Section 13(2)(b) of P.D. No. 1869, as amended, which grants tax exemptions inuring to PAGCOR’s contractual partners.

Jurisdictional and Procedural Considerations

The Court reviewed the doctrine that revenue memorandum circulars are administrative rulings under Section 4 of the NIRC and, under R.A. No. 1125 as amended, are generally appealable to the Court of Tax Appeals (CTA). Prior jurisprudence requires exhaustion of administrative remedies and hierarchy of courts; failure to seek administrative reconsideration or CTA review is ordinarily fatal. Nonetheless, the Supreme Court exercised its jurisdictional prerogative to decide the case directly, invoking recent practice and substantial justice considerations to avoid delay on an issue of significant public interest.

Reliance on Prior Decisions Concerning PAGCOR

The Court treated PAGCOR v. BIR and its subsequent related decisions as controlling precedent on PAGCOR’s tax character. The Supreme Court had previously held R.A. No. 9337 valid but clarified that PAGCOR’s income from gaming operations remains subject only to the 5% franchise tax under P.D. No. 1869, while income from other related services is subject to corporate income tax. The En Banc rulings emphasized statutory reconciliation, the primacy of a special law over a general law, and that the PAGCOR Charter’s franchise tax provision remained effective after subsequent legislation.

Statutory Interpretation and Reconciliation

The Court applied canon of construction favoring reconciliation over conflict: P.D. No. 1869 (a special law) explicitly imposed a 5% franchise tax in lieu of all other taxes on PAGCOR’s gaming operations, and R.A. No. 9337 simply reinstated tax liability for PAGCOR’s income from other related services without disturbing the franchise tax regime. The Court reje

Case Syllabus (G.R. No. 212530)

Case at a Glance

G.R. No. 212530 decided August 10, 2016; reported at 792 Phil. 751 (Third Division).
Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court filed by Bloomberry Resorts and Hotels, Inc. (petitioner) against the Commissioner of Internal Revenue (respondent).
Relief sought: annulment of the provision in Revenue Memorandum Circular (RMC) No. 33-2013 dated 17 April 2013 subjecting PAGCOR contractees and licensees to income tax under the National Internal Revenue Code (NIRC) of 1997, as amended; and injunctive relief enjoining the Commissioner from implementing said provision.

Procedural Posture

Petition directly filed with the Supreme Court seeking certiorari and prohibition.
Respondent filed a Comment dated 18 December 2014 opposing relief.
The Supreme Court chose to exercise its prerogative to act on the petition despite general rules on exhaustion of administrative remedies and hierarchy of courts, citing recent jurisprudential practice.

Factual Background

On 8 April 2009, PAGCOR granted petitioner a provisional license to establish and operate an integrated resort and casino complex at PAGCOR’s Entertainment City project; Bloomberry and its parent Sureste Properties, Inc. own and operate Solaire Resort & Casino.
Under petitioner’s provisional license and PAGCOR’s Charter (Presidential Decree No. 1869, as amended by R.A. No. 9487), petitioner paid PAGCOR license fees in lieu of all taxes consistent with the Charter’s exemption scheme.
R.A. No. 9337 (effective 1 November 2005) amended Section 27(C) of the NIRC of 1997 by removing PAGCOR from the list of GOCCs exempt from corporate income tax.
In implementing R.A. No. 9337’s amendments, the Commissioner issued RMC No. 33-2013 (17 April 2013) declaring PAGCOR subject to corporate income tax (in addition to the 5% franchise tax) and stating that PAGCOR’s contractees and licensees are likewise subject to income tax under the NIRC.

Statutory and Regulatory Instruments Cited

Presidential Decree (P.D.) No. 1869 (PAGCOR Charter), as amended by Republic Act No. 9487 (approved 20 June 2007).
Section 13(2)(a) and 13(2)(b) of P.D. No. 1869 (Exemptions provision, including the 5% franchise tax in lieu of other taxes).
Republic Act No. 9337 (amending Section 27(C) of the NIRC of 1997; effective 1 November 2005).
Revenue Memorandum Circular No. 33-2013 (17 April 2013).
Section 4 of the NIRC of 1997 (power of the Commissioner to interpret tax laws and to decide tax cases; subject to review by the Secretary of Finance and exclusive appellate jurisdiction of the Court of Tax Appeals for certain matters).

Petitioner's Contentions

PD No. 1869, as amended by R.A. No. 9487, expressly and clearly exempts PAGCOR’s contractees and licensees from payment of all kinds of taxes except the 5% franchise tax on gross gaming revenue (Section 13(2)(b)).
The exemption granted under PD No. 1869 to PAGCOR’s contracting parties was not repealed by the deletion of PAGCOR in the list of tax-exempt entities under the NIRC via R.A. No. 9337.
The Commissioner acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, when issuing the assailed provision in RMC No. 33-2013 which, in effect, repealed or amended PD No. 1869.
Issuance of the assailed provision will adversely affect an industry intended to create income for government, promote tourism, and generate jobs, thereby harming national interest and investments.
Justifications for direct recourse to the Supreme Court: pure question of law; exceptions to exhaustion doctrine where administrative action is patently illegal or unreasonable; national interest; and to prevent multiplicity of suits.

Respondent's (CIR) Contentions

The RMC did not alter, modify, or amend the intent and meaning of Section 13(2)(b) of P.D. No. 1869 as to imposition; it merely clarified taxability of PAGCOR and its contractees and licensees for income tax purposes and other franchise grantees similarly situated.
Prohibition is not an appropriate remedy to restrain a purely administrative act, nor to enjoin acts already done, as it is preventive.
Tax exemptions are strictly construed against the taxpayer.
The Commissioner’s issuance of revenue memorandum circulars is within her power under Section 4 of the NIRC.

Issues Presented for Resolution

Whether the assailed provision of RMC No. 33-2013 subjecting PAGCOR’s contractees and licensees to income tax under the NIRC was issued by the Commissioner with grave abuse of discretion amounting to lack or excess of jurisdiction.
Whether the assailed provision is valid or constitutional in view of Section 13(2)(b) of P.D. No. 1869, as amended, which grants tax exemptions to such contractees and licensees.

Jurisdictional and Procedural Legal Principles Applied

Revenue memorandum circulars are administrative rulings issued by the Commissioner pursuant to Section 4 of the NIRC; such rulings are generally appealable to the Court of Tax Appeals under R.A. No. 1125 as amended by R.A. No. 9282.
Exhaustion of administrative remedies and adherence to hierarchy of courts are normally required; premature invocation of judicial intervention is ordinarily fatal.
The Commissioner’s power to interpret tax laws is subject to review by the Secretary of Finance and the exclusive appellate jurisdiction of the Court of Tax Appeals.
The Supreme Court