G.R. No. 83250 September 26, 1989
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MANILA HOTEL CORPORATION AND THE COURT OF TAX APPEALS, respondents.

FACTS

The respondent Manila Hotel Corporation, operating the Manila Hotel and its banquet outlets, paid the total sum of P2,463,576.30 as caterer’s tax to the Commissioner of Internal Revenue for the period January 20, 1977, to April 29, 1978. On December 18, 1978, the Hotel filed a claim for refund, arguing that the legal basis for the tax, Section 191-A of the National Internal Revenue Code, never became law. It contended that this section was inserted by House Bill No. 17839 (later R.A. 6110) but was specifically vetoed by President Marcos on August 4, 1969. The Commissioner denied the claim, prompting the Hotel to file a case before the Court of Tax Appeals (CTA).
The CTA ruled in favor of Manila Hotel Corporation, ordering a refund. It found that Congress had not overridden the presidential veto of the proposed Section 191-A, thus the provision did not become law, rendering the tax collection without legal basis. The Commissioner appealed, asserting that the CTA failed to consider existing and subsequent legislations that lawfully imposed the caterer’s tax.

ISSUE

Whether the Manila Hotel Corporation is entitled to a refund of the caterer’s tax it paid, on the ground that Section 191-A of the Tax Code, which purportedly imposed the tax, was vetoed and never became effective law.

RULING

The Supreme Court granted the petition, reversing the CTA and dismissing the claim for refund. The Court clarified that the caterer’s tax was lawfully imposed and collected from the Hotel. The legal logic rests on the existence of a valid tax imposition independent of the vetoed Section 191-A. The Court examined the legislative history and found that a caterer’s tax was first imposed by Republic Act No. 2376, approved on June 2, 1959, which amended Section 191 of the Tax Code to require caterers and restaurant operators to pay a 3% tax on gross receipts. This law remained in effect.
The presidential veto of August 4, 1969, pertained only to the new Section 191-A proposed under H.B. 17839. This veto did not repeal or nullify the pre-existing caterer’s tax under the already-effective Section 191 (as amended by R.A. 2376). Subsequently, the tax provisions were recodified under Section 206 of the Tax Code, further amended by P.D. 1299 in 1978, which continued to impose the tax. Therefore, during the period when Manila Hotel paid the tax (1977-1978), a valid legal basis—the un-repealed Section 191 as amended by R.A. 2376—existed. The Hotel, as an operator of restaurants, was unequivocally liable under this provision. The CTA’s error was in concluding that the veto abolished the tax entirely, without examining the enduring statutory imposition. The assessment and collection were lawful, precluding any right to a refund.