Case Summary (G.R. No. 182045)
Procedural history
The CTA Second Division dismissed GF’s petition on March 21, 2007, applying Revenue Regulations No. 6-66 to compute gross receipts based on CAB-approved single one-way fare and adding special commissions for passengers and cargo to gross receipts. The CTA En Banc affirmed that decision on January 30, 2008 and denied reconsideration by resolution dated March 12, 2008. GF filed a petition for review under Rule 45 of the Rules of Court challenging the CTA En Banc rulings.
Issue presented
Whether “gross receipts” for purposes of the 3% percentage tax under Section 118(A) of the 1997 NIRC must include special commissions on passengers and cargo determined by CAB-approved rates (as interpreted and applied in Revenue Regulations No. 6-66), or whether gross receipts should instead be the “net net” actual amounts received by the carrier (as provided later by Revenue Regulations No. 15-2002).
Holding
The petition is denied. The Supreme Court affirmed the CTA En Banc decision upholding the BIR assessment. The Court ruled that Revenue Regulations No. 6-66 was the governing regulation for the taxable periods at issue and that special commissions approved by the CAB are properly included in gross receipts for the percentage tax computation.
Court’s determination on applicable regulation and temporal scope
The Court found that Revenue Regulations No. 6-66 was the operative regulation for the periods covered (the first, second and fourth quarters of 2000 and the amended returns filed October 25, 2001). Revenue Regulations No. 15-2002, which adopted a different rule measuring gross receipts by the actual amounts received (i.e., net fares reflected on tickets and remittance areas) became effective October 26, 2002 and could not be applied retroactively to the periods at issue. The Court emphasized the general doctrine that tax laws and implementing rules operate prospectively unless there is legislative intent to the contrary.
Interpretation of Section 118(A) and deference to Revenue Regulations No. 6-66
GF argued that the statutory definition of gross receipts under Section 118(A) should mean the actual amounts collected by the carrier and that Revenue Regulations No. 6-66 misinterpreted the statute by using CAB-approved fares as the tax base. The Court rejected this argument and afforded respect to the Secretary of Finance’s construction in Revenue Regulations No. 6-66 as an interpretation promulgated under the rule-making authority granted by Section 244 of the NIRC. The Court held that, in the absence of a showing that Revenue Regulations No. 6-66 is inconsistent with the NIRC, its provisions must be upheld.
Legislative approval by re-enactment and the presumption of tacit endorsement
The Court invoked the doctrine of legislative approval by re-enactment. It observed that the tax provision on common carrier percentage tax had been repeatedly reproduced in successive iterations of the NIRC with no substantial change; hence the legislature is presumed to have known of Revenue Regulations No. 6-66 and to have tacitly approved the executive construction when it re-enacted substantially similar statutory language. This presumption reinforced the validity of the Secretary’s interpretation embodied in Revenue Regulations No. 6-66.
Treatment of Revenue Regulations No. 15-2002
Although Revenue Regulations No. 15-2002 adopted a method that measures gross receipts by amounts actually received and thus vindicated GF’s preferred interpretation prospectively, the Court held that GF could not insist on applying the later regulation to prior taxable periods. The Court reiterated tax rules operate prospectively and that GF expressly disclaimed seeking retroactive application of Rev. Reg. No. 15-2002.
Deference to the Court of Tax Appeals and standards for reversal
The Supreme Court accorded deference to the CTA’s factual and legal findings, explaining that the CT
...continue readingCase Syllabus (G.R. No. 182045)
Case Caption, Citation, and Panel
- Reporter citation: 695 Phil. 493, Third Division.
- G.R. No.: 182045.
- Decision date: September 19, 2012.
- Title (as provided): Gulf Air Company, Philippine Branch (GF), Petitioner, vs. Commissioner of Internal Revenue, Respondent.
- Opinion penned by: Mendoza, J.
- Concurrence: Velasco, Jr. (Chairperson), Peralta, Abad, and Perez, JJ., concur.
- Notation: Perez, J. designated Additional Member per Special Order No. 1299, dated August 28, 2012.
Nature of Petition and Relief Sought
- Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure.
- The petition assails the January 30, 2008 Decision and the March 12, 2008 Resolution of the Court of Tax Appeals (CTA) En Banc in C.T.A. E.B. No. 302 (C.T.A. Case No. 7030), entitled "Gulf Air Company, Philippine Branch (GF) v. Commissioner of Internal Revenue."
Relevant Parties and Corporate Status
- Petitioner: Gulf Air Company, Philippine Branch (GF), a branch of Gulf Air Company, a foreign corporation duly organized under the laws of the Kingdom of Bahrain.
- Respondent: Commissioner of Internal Revenue.
Factual Background — Tax Filings, Claims, and Examinations
- On October 25, 2001, GF availed itself of the Bureau of Internal Revenue's (BIR) Voluntary Assessment Program under Revenue Regulations No. 8-2001 for:
- Its 1999 and 2000 Income Tax and Documentary Stamp Tax.
- Its Percentage Tax for the third quarter of 2000.
- GF paid P11,964,648.00 in connection with its participation in the Voluntary Assessment Program.
- GF filed a claim for refund of percentage taxes for the first, second, and fourth quarters of 2000.
- A letter of authority was issued by the BIR authorizing revenue officers to examine GF's books of accounts and other records to verify its refund claim.
- After submissions and an informal conference with BIR representatives, GF received on November 4, 2003:
- A Preliminary Assessment Notice for deficiency percentage tax amounting to P32,745,141.93.
- A letter denying GF's claim for tax credit or refund of excess percentage tax remittance for the first, second, and fourth quarters of 2000, and requesting immediate settlement of the deficiency tax assessment.
- GF received a Formal Letter of Demand dated December 10, 2003, for payment of a total of P33,864,186.62.
- GF filed a protest protesting the assessment and reiterating its request for reconsideration on December 29, 2003.
- On June 30, 2004, the Deputy Commissioner, Officer-in-Charge of the Large Taxpayers Service of the BIR, denied GF's written protest for lack of factual and legal basis and again requested immediate payment of the P33,864,186.62 deficiency percentage tax assessment.
- GF filed a petition for review with the CTA.
Procedural History in the Court of Tax Appeals
- March 21, 2007: The Second Division of the CTA dismissed GF's petition.
- The CTA Second Division found Revenue Regulations No. 6-66 to be the applicable rule, which requires that gross receipts be computed based on the cost of the single one-way fare as approved by the Civil Aeronautics Board (CAB).
- The CTA Second Division noted GF's failure to include in its gross receipts the special commissions on passengers and cargo.
- The CTA Second Division held that Revenue Regulations No. 15-2002, allowing the use of the net net rate in determining gross receipts, could not be given retroactive effect.
- The CTA Second Division affirmed the BIR decision and ordered payment of P41,117,734.01 plus 20% delinquency interest.
- GF elevated the case to the CTA En Banc.
- January 30, 2008: CTA En Banc promulgated a Decision dismissing the petition and affirming the Division decision.
- CTA En Banc held that Revenue Regulations No. 6-66 applied because the assessment covered the first, second, and fourth quarters of 2000 and the amended percentage tax returns were filed on October 25, 2001.
- CTA En Banc found Revenue Regulations No. 15-2002 (effective October 26, 2002) could not be retroactively applied because it provided a different rule in determining gross receipts and declared a new right.
- GF filed a motion for reconsideration of the CTA En Banc Decision.
- March 12, 2008: CTA En Banc denied the motion for reconsideration by Resolution.
Issue Presented to the Supreme Court
- As identified by the tax court and reiterated in the petition, the sole issue is whether the definition of "gross receipts" for purposes of computing the 3% Percentage Tax under Section 118(A) of the 1997 National Internal Revenue Code (NIRC) should include special commissions on passengers and special commissions on cargo based on the rates approved by the Civil Aeronautics Board (CAB).
Petitioner’s Contentions (GF)
- Revenue Regulations No. 6-66 is not a correct interpretation of Section 118(A) of the NIRC.
- Gross receipts should be based on the "net net" amount—the amount actually received, derived, collected, and realized by GF from passengers, cargo, and excess baggage.
- CAB-approved fares are merely notional and do not reflect actual revenue or receipts derived by GF.
- Revenue Regulations No. 15-2002 validates GF's construction of "gross receipts" as the net amount actually received and expressly supersedes Revenue Regulations No. 6-66.
- The definition of gross receipts under RR No. 6-66 conflicts with definitions in other sections of the NIRC concerning value-added tax and percentage taxes; thus legislative intent was to collect percentage tax solely on actual receipts, implying RR No. 6-66 was effectively repealed, amended, or modified by the NIRC.
Statutory and Regulatory Provisions Quoted and Considered
- Section 118(A) of the 1997 NIRC:
- "International air carriers doing business in the Philippines shall pay a tax of three percent (3%) of their quarterly gross receipts."
- Revenue Regulations No. 15-2002 (Section 5 and S