G.R. No. 215427 , December 10, 2014
PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR), Petitioner, vs. THE BUREAU OF INTERNAL REVENUE, represented by JOSE MARIO BUNAG, in his capacity as Commissioner of the Bureau of Internal Revenue, and JOHN DOE and JANE DOE, Respondents.

FACTS

This case originated from a Motion for Clarification filed by PAGCOR on September 13, 2013, concerning the Court’s Decision dated March 15, 2011, in G.R. No. 172087 . The Motion sought clarification and injunctive relief against BIR Revenue Memorandum Circular (RMC) No. 33-2013 dated April 17, 2013. The Court En Banc treated the Motion as a new petition for certiorari, docketed as G.R. No. 215427 . The core issue revolves around the interpretation of the Court’s prior ruling and the correct tax treatment of PAGCOR’s income following the enactment of Republic Act (R.A.) No. 9337, which amended the National Internal Revenue Code (NIRC). In the March 15, 2011 Decision, the Court upheld the validity of Section 1 of R.A. No. 9337 , which excluded PAGCOR from the enumeration of government-owned or controlled corporations (GOCCs) exempt from corporate income tax, but nullified BIR Revenue Regulations No. 16-2005 insofar as it subjected PAGCOR to 10% VAT. Subsequently, the BIR issued RMC No. 33-2013, clarifying that PAGCOR’s income from its operations and licensing of gambling and related operations is subject to corporate income tax, and that PAGCOR is subject to a 5% franchise tax under its Charter (P.D. No. 1869, as amended). PAGCOR sought clarification on whether its tax privilege of paying a 5% franchise tax in lieu of all other taxes for its gaming income under its Charter was repealed by R.A. No. 9337 , and if so, whether its gaming income is subject to both franchise and income taxes.

ISSUE

The primary issue is the correct interpretation of the Court’s March 15, 2011 Decision in relation to R.A. No. 9337 and P.D. No. 1869, as amended, specifically: whether PAGCOR’s income from gaming operations is subject only to the 5% franchise tax under its Charter, or also to corporate income tax following its exclusion from tax-exempt GOCCs under the NIRC.

RULING

The Court ruled that PAGCOR’s income from gaming operations is subject only to the 5% franchise tax under P.D. No. 1869, as amended, while its income from other related services is subject to corporate income tax under the NIRC, as amended by R.A. No. 9337 . The Court clarified that its March 15, 2011 Decision did not withdraw PAGCOR’s tax exemption under its Franchise concerning its gaming operations. The franchise tax under P.D. No. 1869 is “in lieu of all taxes,” and this specific exemption was not expressly repealed by the general provision of R.A. No. 9337 . The Court applied the principle that a special law (P.D. No. 1869) prevails over a general law (NIRC), and that repeals by implication are not favored. Therefore, RMC No. 33-2013 was erroneous in subjecting PAGCOR’s gaming income to both franchise and corporate income taxes. Only income from “other related services” under Section 14(5) of P.D. No. 1869, which was always subject to income tax even under its Charter, is liable for corporate income tax pursuant to R.A. No. 9337 .