G.R. No. 215801 and G.R. No. 218924, January 15, 2020
BUREAU OF INTERNAL REVENUE (BIR), AS HEREIN REPRESENTED BY ITS COMMISSIONER KIM S. JACINTO-HENARES AND REVENUE DISTRICT OFFICER (RDO) RICARDO B. ESPIRITU, PETITIONER, VS. FIRST E-BANK TOWER CONDOMINIUM CORP., RESPONDENT. / FIRST E-BANK TOWER CONDOMINIUM CORP., PETITIONER, VS. BUREAU OF INTERNAL REVENUE (BIR), AS HEREIN REPRESENTED BY ITS COMMISSIONER KIM S. JACINTO-HENARES, RESPONDENT.

FACTS

First E-Bank Tower Condominium Corp. (First E-Bank), a non-stock, non-profit condominium corporation, filed a petition for declaratory relief before the Regional Trial Court (RTC) of Makati, Branch 146, seeking to declare as invalid BIR Revenue Memorandum Circular No. 65-2012 (RMC No. 65-2012) dated October 31, 2012. The RMC clarified that association dues, membership fees, and other assessments/charges collected by condominium corporations from members and tenants constitute income payments for services rendered, making them subject to 12% Value-Added Tax (VAT) and income tax (32% for corporations), and are also subject to applicable withholding taxes. First E-Bank argued that the RMC was oppressive and confiscatory as it imposed taxes on funds used exclusively for the maintenance and preservation of the condominium building, effectively taxing the unit owners on their own money. The BIR, through the Office of the Solicitor General, opposed the petition, arguing that declaratory relief was improper since the RMC had already taken effect and the alleged injury had already arisen, and that the issue fell under the primary jurisdiction of the Secretary of Finance. The RTC ruled in favor of First E-Bank, declaring RMC No. 65-2012 invalidly issued. Both parties appealed to the Court of Appeals (CA), but the CA dismissed the appeals outright for lack of jurisdiction, holding that under Section 7(a) of Republic Act No. 9282, the Court of Tax Appeals (CTA) has exclusive appellate jurisdiction over decisions of the RTC in local tax cases. The CA denied the parties’ motions for reconsideration, prompting the filing of these twin petitions before the Supreme Court.

ISSUE

Whether the Court of Appeals correctly dismissed the appeals for lack of jurisdiction on the ground that the CTA has exclusive appellate jurisdiction over the RTC’s decision declaring RMC No. 65-2012 invalid.

RULING

No. The Supreme Court ruled that the Court of Appeals erred in dismissing the appeals. The case originated from a petition for declaratory relief, which is a special civil action that seeks an authoritative declaration of rights or status for the guidance of parties. It is not an action for the collection of taxes. The RTC’s resolution declaring the RMC invalid did not constitute a “decision” in a “local tax case” as contemplated under Section 7(a) of R.A. No. 9282, which grants the CTA exclusive appellate jurisdiction. A “local tax case” refers to disputes involving local government taxes under the Local Government Code, not national internal revenue taxes like VAT and income tax imposed by the BIR. Since the case involved the validity of a BIR issuance concerning national taxes, it was not a local tax case. Furthermore, the RTC’s resolution was an interlocutory order (declaring the RMC invalid) issued in a special civil action, not a final judgment. Therefore, the proper remedy was an appeal via a petition for review under Rule 41 of the Rules of Court to the Court of Appeals, not to the CTA. The Supreme Court set aside the CA Resolutions, reinstated the appeals, and remanded the cases to the CA for further proceedings.