G.R. No. 241697, July 29, 2019.
City of Davao and Bella Linda N. Tanjili, in her official capacity as City Treasurer of Davao City, Petitioners vs. Randy Allied Ventures, Inc., Respondent.

FACTS

Respondent Randy Allied Ventures, Inc. (RAVI) is a Coconut Industry Investment Fund (CIIF) holding company established to own and hold shares of San Miguel Corporation (SMC). On January 24, 2012, the Supreme Court in Philippine Coconut Producers Federation, Inc. v. Republic (COCOFED) declared the CIIF companies, including RAVI, and the CIIF block of SMC shares as public funds owned by the Government. RAVI filed a claim for refund of local business taxes (LBT) for taxable year 2010, amounting to ₱503,346.00, which was collected on the assumption that RAVI was a non-bank financial intermediary (NBFI) subject to tax under the Local Government Code. Petitioners maintained that RAVI’s activities of owning shares and receiving dividends and interest income constituted doing business as an NBFI. The Regional Trial Court denied the refund claim, holding RAVI was a financial intermediary subject to LBT. The CTA First Division reversed, granting the refund, a decision upheld by the CTA En Banc, which found RAVI was not an NBFI and that its assets were government properties beyond the City’s taxing power.

ISSUE

Whether or not the CTA En Banc erred in finding that RAVI is not a non-bank financial institution subject to local business tax under Section 143(f) of the Local Government Code.

RULING

The Supreme Court denied the petition and affirmed the CTA En Banc rulings. RAVI is not a bank or other financial institution (NBFI) subject to LBT. To be considered an NBFI under relevant laws and regulations, an entity must: (a) be authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking functions; (b) have principal functions that include lending, investing, or placement of funds for its own account or for others; and (c) perform such functions on a regular and recurring basis. RAVI, as a CIIF holding company, does not meet these criteria. Its management of dividends from government-owned SMC shares, including placing them in a trust account, is an activity essential to its nature as a holding company, not a regular financial intermediary business. A holding company invests for controlling policies, while a financial intermediary deals with public funds and is regulated by the BSP. RAVI’s corporate powers to purchase shares and receive dividends are common to all corporations and do not automatically convert it into an NBFI. Consequently, RAVI cannot be held liable for LBT under Section 143(f) of the Local Government Code. The pronouncement is without prejudice to RAVI’s potential liability for other taxes should it engage in other profit-making activities.