Case Summary (G.R. No. 119122)
Petitioner
Philippine Basketball Association – proprietor and operator of professional basketball games conducting national-level competitions.
Respondents
- Commissioner of Internal Revenue – issued the deficiency assessment for amusement tax.
- Court of Tax Appeals – denied the PBA’s protest and dismissed its petition for review.
- Court of Appeals – affirmed the CTA’s decision and dismissed the PBA’s appeal.
Key Dates
• June 21, 1989 – Deficiency assessment issued by the Commissioner.
• November 6, 1989 – Denial of the PBA’s protest.
• January 8, 1990 – Petition for review filed with the CTA.
• December 24, 1993 – CTA decision dismissing PBA’s petition.
• April 8, 1994 – CTA denial of reconsideration.
• November 21, 1994 – Court of Appeals decision affirming the CTA.
• January 31, 1995 – CA denial of reconsideration.
• August 8, 2000 – Supreme Court decision.
Applicable Law
• 1987 Philippine Constitution – governing national taxing power.
• Presidential Decree (PD) No. 231 (Local Tax Code of 1973) – grants provinces amusement tax on admissions to theaters, cinemas, concert halls, circuses, and similar venues.
• PD 871 – subjects PBA games to a 5% amusement tax on admission.
• PD 1456 (1978) and PD 1959 (1984) – amend national Internal Revenue Code to impose a percentage amusement tax on various activities, including professional basketball games, at a rate ultimately fixed at 15% of gross receipts.
• 1997 National Internal Revenue Code (Section 125) and 1992 Local Government Code (Section 140) – continue to distinguish national amusement taxes (including PBA games) from local amusement taxes.
Issues
- Whether amusement tax on PBA admission tickets is a national or local tax.
- Whether income from ceding advertising and streamer spaces is included in taxable “gross receipts.”
- Whether a 75% surcharge applies to the deficiency amusement tax.
- Whether revocation of prior BIR rulings on local tax jurisdiction can operate retroactively.
- Applicability of PBA’s franchise provision fixing a 5% tax rate.
Ruling and Reasoning
National versus Local Tax Jurisdiction
– Section 13 of the Local Tax Code limits local amusement taxes to specified venues (theaters, cinemas, concert halls, circuses). By ejusdem generis, “other places of amusement” exclude professional basketball games, which are governed by national law.
– PD 1456 and PD 1959 expressly classify professional basketball games as subject to national amusement tax at 15% of gross receipts, in lieu of all other percentage taxes. Subsequent National Internal Revenue Code provisions (Section 125) reaffirm this classification. The Local Government Code of 1992 retains amusement tax power for local governments only over venues listed in PD 231, excluding professional basketball.Retroactivity of BIR Rulings
– BIR Ruling No. 231-86 and Revenue Memorandum Circular No. 8-88 recognizing local governments’ jurisdiction were erroneous. The government is not estopped by its officers’ misinterpretations; correct application of the law may be applied retroactively.Gross Receipts and Advertising Income
– PD 1456 defines “gross receipts” to include all receipts of the proprietor “irrespective of whether or not any amount is charged or paid for admission.” Such broad definition encompasses proceeds from advertising and cession of streamer space
Case Syllabus (G.R. No. 119122)
Facts of the Case
- On June 21, 1989, the Commissioner of Internal Revenue issued an assessment letter to the Philippine Basketball Association (PBA) for 1987 deficiency amusement tax amounting to ₱2,393,575.85, plus a 75% surcharge (₱1,795,181.89) and two years’ interest at 20% (₱1,675,503.10), totaling ₱5,864,260.84.
- On July 18, 1989, PBA filed a protest with the Commissioner, which was denied on November 6, 1989.
- On January 8, 1990, PBA petitioned the Court of Tax Appeals (CTA) for review of the denial; on December 24, 1993, the CTA dismissed the petition and ordered PBA to pay the full amount due with interest.
- PBA’s motion for reconsideration before the CTA was denied on April 8, 1994.
- Within the appeal period, PBA appealed to the Court of Appeals (CA); on November 21, 1994, the CA affirmed the CTA decision.
- A motion for reconsideration before the CA was denied on January 31, 1995.
- PBA then filed the present petition for review on certiorari under Rule 45 before the Supreme Court.
Procedural History
- Petition for review on certiorari under Rule 45, seeking reversal of CA decision in CA-G.R. SP No. 34095.
- CTA Decision (C.T.A. Case No. 4419) dismissed PBA’s petition for lack of merit and imposed deficiency tax with surcharge and interest.
- CA Decision affirmed the CTA dismissal and ordered payment.
- Motions for reconsideration before both CTA and CA were denied.
- Supreme Court petition raises issues of jurisdiction, interpretation of statutes and regulations, and surcharge liability.
Issues for Resolution
- Whether amusement tax on PBA game admission tickets is a national or local tax.
- Whether PBA’s cession of advertising and streamer spaces to Vintage Enterprises, Inc. is subject to amusement tax.
- Whether PBA is liable for a 75% surcharge on the deficiency amount due.
Petitioner's Contentions
- The Local Tax Code of 1973 (P.D. 231) transfer