21_CIR vs SM Prime Holdings Facts:These are consolidated cases. It arose when BIR sent SM Prime Preliminary AssessmentNotice (PAN)for value added ta (!AT) de"ciency on cinema tic#et sales$ BIR sent %irstAsia a PAN for !AT de"ciency oncinema tic#et sales.Petitioners Arguments&Petitioner ar'ues that the enumeration of services su()ect to !AT in Section *+, of theNIR- is not ehaustive (ecause it covers all sales of services unless eem.ted (y law./emaintains that the ehi(ition of movies (y cinema o.erators or .ro.rietors to the .ayin'.u(lic0 (ein' a sale of service0 is su()ect to !AT.Respondents Arguments: Res.ondents insist that 'ross recei.ts from cinema1theater admission tic#ets were neverintended to (e su()ect to any ta im.osed (y the national'overnment. Accordin' tothem0 the a(sence of 'ross recei.ts from cinema1theater admission tic#ets from the list ofservices which are su()ect to the national amusement ta under Section *23 of the NIR-of *445 reinforces this le'islative intent. Res.ondents also hi'hli'ht the fact that RM- No.2,62++* on which the de"ciency assessments were (ased is an un.u(lishedadministrative rulin'.ISSUE& 7hether the 'ross recei.ts derived (y o.erators or .ro.rietors of cinema1theaterhouses from admission tic#ets are su()ect to !AT.RULIN: (1) The enumeration of servicessubject to VAT under Section 108 of theNIRC is not ehaustive

S8-. *+,. !alue6added Ta on Sale of Services and 9se or :ease ofPro.erties. (A) Rate and Base of Ta. There shall (e levied0 assessed and collected0 avalue6added ta e;uivalent to ten .ercent (*+0 NIR-0 as amended(y8.C. 25>). ."eta!ongrossrecei&tsderived#romadmissiontic)ets s"all %eleviedandcollected%0 t"e cit0 government&$rs$ant to Section 23 o# Presidential 4ecree No5 231/ as amended! ! ! or %0 t"e &rovincial government/ &$rs$ant to Section 11 o#P545 231/ ot"er*ise )no*n as t"e Local .a! Code. (8m.hasis su..lied) These reveal the le'islative intent not to im.ose !AT on .ersons already covered (ythe amusement ta. This holds true even in the case of cinema1theater o.erators taedunderthe:D-of *44*.recisely(ecausethe!ATlawwasintendedtore.lacethe.ercenta'etaoncertainservices.Themerefact that theyaretaed(ythelocal'overnment unit and not (y the national 'overnment is immaterial. The :ocal Ta -ode0 intransferrin'the.ower tota'rossrecei.tsderived(ycinema1theater o.eratorsor.ro.rietor fromadmissiontic#ets tothelocal 'overnment0 didnot intendtotreatcinema1theater housesasase.arateclass. Nodistinctionmust0 therefore0 (emade(etween the .laces of amusement taed (y the national 'overnment and those taed (ythe local 'overnment.(*) The re'ea% of the +oca% Ta Codeb) the +,C of 1--1 is not a %e&a% basis forthe im'osition of VAT The re.eal of the :ocal Ta -ode (y the :D- of *44* is not a le'al (asis for theim.osition of !AT on the 'ross recei.ts of cinema1theater o.erators or .ro.rietors derivedfrom admission tic#ets. The removal of the .rohi(ition under the :ocal Ta -ode did not'rant nor restore to the national 'overnment the .ower to im.ose amusement ta oncinema1theater o.erators or .ro.rietors. Neither did it e.and the covera'e of !AT. Sincethe im.osition of a ta is a (urden on the ta.ayer0 it cannot (e .resumed nor can it (eetended (y im.lication. A law will not (e construed as im.osin' a ta unless it does soclearly0 e.ressly0 and unam(i'uously.=34? As it is0 the .ower to im.ose amusement ta oncinema1theater o.erators or .ro.rietors remains with the local 'overnment. (.) Revenue /emorandum Circu%arNo0 $81$001 is inva%id -onsiderin' that there is no .rovision of law im.osin' !AT on the 'ross recei.ts ofcinema1theater o.erators or .ro.rietors derived from admission tic#ets0 RM- No. 2,62++*which im.oses !AT on the 'ross recei.ts from admission to cinema houses must (e struc#down. 7e cannot overem.hasiEe that RM-s must not override0 su..lant0 or modify thelaw0 (ut must remain consistent and in harmony with0 the law they see# to a..ly andim.lement.=A+?

(2) Ru%e ontaeem'tiondoes nota''%) Moreover0 contrary to the view of .etitioner0 res.ondents need not .rove theirentitlement to an eem.tion from the covera'e of !AT. The rule that ta eem.tionsshould (e construed strictly a'ainst the ta.ayer .resu..oses that the ta.ayer is clearlysu()ect to the ta (ein' levied a'ainst him.=A*? The reason is o(vious& it is (oth illo'ical andim.ractical to determine who are eem.ted without "rst determinin' who are covered (ythe .rovision.=A2? Thus0 unless a statute im.oses a ta clearly0 e.ressly andunam(i'uously0 what a..lies is the e;ually well6settled rule that the im.osition of a tacannot (e .resumed.=A>? In fact0 in case of dou(t0 ta laws must (e construed strictlya'ainst the 'overnment and in favor of the ta.ayer.=AB? 22_.6M7UN.IN P68NSH9P INC5 :S CIRF6C.S: Petitioner .rotested the assessment.=2? As the .rotest merited no res.onse0 it"led a Petition for Review=>? with the -ourt of Ta A..eals (-TA) .ursuant to Section22, of the National Internal Revenue -ode. Petitioner contends that=B?a .awnsho. isnot enumeratedas oneof thoseen'a'edinsaleor echan'eof services=*5? inSection *+, of the National Internal Revenue -ode.=*,? -itin' -ommissioner ofInternal Revenue v. Michel F. :huillier Pawnsho.s0 Inc.0=*4? it contends that the natureof the (usiness of .awnsho.s does not fall under service as de"ned under the :e'alThesaurus of 7illiam -. Burton0viE& accommodate0 administer to0 advance0 aGord0 aid0 assist0 attend0 (e ofuse0 care for0 come to the aid of0 commodere0 com.ly0 confer a (ene"t0contri(ute to0 coo.erate0 deservire0 dischar'e ones duty0 do a service0do ones (iddin'0 "ll an oHce0 forward0 furnish aid0 furnish assistance0'ive hel.0 lend0 aid0 minister to0 .romote0 render hel.0 servire0 su(mit0succor0 su..ly aid0 ta#e care of0 tend0 wait on0 wor# for.=2+? ISSUE:8"et"er &a*ns"o&s are lia%le to &a0 :6.5RULIN:The-ourt0 in 3irst4%anters4a5nsho'6 Inc0 v0 CommissionerofInterna% Revenue6=2*? held&In "ne0 .rior to the =.assa'e of the? 8!AT :aw =in *44B?0 .awnsho.s were treated aslendin' investors su()ect to lendin' investorIs ta.Su(se;uently0 with the -ourtIsrulin' in +hui%%ier0 .awnsho.s were then treated as !AT6a(le enter.rises under the'eneral classi"cation of Jsale or echan'e of servicesJ under Section *+, (A) of theTa -ode of *4450 as amended. R.A. No. 42>, =which was .assedin2++B?"nallyclassi"ed .awnsho.s as Cther Non6(an# %inancial Intermediaries. The-ourt "nds that .awnsho.s shouldhave(eentreatedas non6(an#"nancial intermediaries from the very (e'innin'0 su()ect to the a..ro.riatetaes .rovided (y law0 thus %inally0 with the enactment of R.A. No. 42>, in 2++B0 the services of (an#s0non6(an#"nancial intermediaries0 "nancecom.anies0 andother "nancialintermediaries not .erformin' ;uasi6(an#in' functions were s.eci"callyeem.ted from !AT0 2, and the +< to 3< .ercenta'e ta on 'ross recei.tson other non6(an# "nancial intermediaries was reim.osed under Section *22of the Ta -ode of *445. At the time of the dis.uted assessment0 that is0 for the year 2+++0 .awnsho.swere not su()ect to *+643 dated %e(ruary *B0 *4430 declarin' therein that if =res.ondent?chooses to re'ister as a !AT .erson and the consideration for its services is.aid for in acce.ta(le forei'n currency and accounted for in accordance withtherules andre'ulations of the Ban'#o Sentral n' Pili.inas0 theaforesaidservices shall (e su()ect to !AT at Eero6rate.=Res.ondent? chose to re'ister as a !AT ta.ayer.%ortheyear*44A0 =res.ondent?seasona(ly"ledits;uarterly!alue6AddedTa Returns reMectin'0 amon' others0 a total Eero6rated salesofP*B50>*50*,4.A2 with !AT in.ut taes of P>0>A*0*5B.*B0 detailed asfollows& Cn Fanuary 50*4440 =res.ondent? was a(le to secure !AT Rulin' No. ++>644fromthe!ATReview-ommitteewhichrecon"rmedBIRRulin'No. +2>643insofar as it held that the services (ein' rendered (y B7S-MI is su()ect to!AT at Eero .ercent (+ of theBIR. =Res.ondent? (elieved that it erroneously .aid the out.ut !AT for *44Adue to its availment of the !oluntary Assessment Pro'ram (!AP) of the BIR.=B? ."e Iss$e: The lone issue for resolution is whether res.ondent is entitled totherefundof PA044B0A34.A5 as erroneously.aidout.ut !ATfor theyear*44A.=*A? ."e R$ling o# t"e Co$rt: 7e deny the .etition.At the outset0 the -ourt declares that the denial of the instant .etition is not on the'round that res.ondents services are su()ect to +< !AT.Rather0 it is (ased on thenon6retroactivity of the .re)udicialrevocation of BIR Rulin' No. +2>643=*5? and !ATRulin'No. ++>6440=*,?whichheldthatres.ondentsservices aresu()ectto+643 whichstates thatthe contract(etween the-onsortium and NAPC-CRisfora 1>;0earterm?5#or t"e o&eration and maintenance o# t*o 1@@;Mega*att &o*er %arges+Po*er 7arges- acA$ired %0 N6P9C9R #or a 1>;0ear term5=2>? -onsiderin' this len'th of time0 the -onsortiums o.eration andmaintenance of NAPC-CRs .ower (ar'es cannot (e classi"ed as a sin'le or isolatedtransaction. The-onsortiumdoesnotfall underSection*+2(()(2) whichre;uiresthat thereci.ient of theservicesmust (ea.ersondoin'(usinessoutsidethePhili..ines. Therefore0 res.ondents services to the -onsortium0 not (ein' su..liedto a .erson doin' (usiness outside the Phili..ines0 cannot le'ally ;ualify for +< !AT. Res.ondent0 as su(contractor of the -onsortium0 o.erates andmaintains NAPC-CRs .ower (ar'es in the Phili..ines. NAPC-CR .ays the-onsortium0 throu'h its non6resident .artners0 .artly in forei'n currency outwardlyremitted. In turn0 the -onsortium .ays res.ondent also in forei'n currency inwardlyremittedandaccountedforinaccordancewithBSPrules. This.aymentschemedoes not entitleres.ondent to +;0ear contract to o&erate andmaintain N6P9C9Rs t*o 1@@;mega*att &o*er %arges in Mindanao5 The-ourt reco'niEestherulethat the!ATsystem'enerallyfollowsthedestination .rinci.le (e.orts are Eero6rated whereas im.orts are taed). /owever0as the -ourt stated in American !'ress0 there is an ece.tion to this rule.=23? Thisece.tion refers to the +6440=2,? which recon"rmed BIR Rulin'No.+2>643=24? insofarasit heldthat theservices(ein'rendered(yB7S-MI issu()ect to!ATat Eero.ercent(+643. /owever0 such revocation cannot (e 'iven retroactive eGect since it will.re)udiceres.ondent. -han'in'res.ondentsstatuswill de.riveres.ondent of arefund of a su(stantial amount re.resentin' ecess out.ut ta.=>+? Section 2BA of theTa -ode .rovides that any revocation of a rulin' (y the -ommissioner of InternalRevenue shallnot (e 'iven retroactive a..lication if the revocation will.re)udicethe ta.ayer. %urther0 there is no showin' of the eistence of any of the ece.tionsenumerated in Section 2BA of the Ta -ode for the retroactive a..lication of suchrevocation./owever0 u.on the "lin' of .etitioners Answer dated 2 March 2+++ (efore the -TAcontestin' res.ondentsclaim for refund0 res.ondents servicesshall(esu()ecttothe re'ular *+< !AT.=>*? Such "lin' is deemed a revocation of !AT Rulin' No. ++>644and BIR Rulin' No. +2>643.2B_CIR vs 6merican E!&ress International %A-TS& J=Res.ondent? is aPhili..ine(ranchof American8.ress International0 Inc.0 acor.oration duly or'aniEed and eistin' under and (y virtue of the laws of the Stateof @elaware0 9.S.A.0 with oHce in the Phili..ines at the Dround %loor0 A-8 Buildin'0corner Rada and de la Rosa Streets0 :e'as.i !illa'e0 Ma#ati -ity. It is a servicin' unitof American 8.ress International0 Inc. 6 /on'#on' Branch (Ame6/O) and isen'a'ed.rimarilytofacilitatethecollectionsof Ame6/Oreceiva(lesfromcardmem(ers situated in the Phili..ines and .ayment to service esta(lishments in thePhili..ines.JAme Phili..ines re'istered itself with the Bureau of Internal Revenue (BIR)0Revenue @istrict CHce No. B5 (8ast Ma#ati) as a value6added ta (!AT) ta.ayereGective March *4,,and was issued !AT Re'istration -erti"cate No. +,,BB3(earin'!ATRe'istrationNo. >2A6>6++B,A,. %or the.eriodFanuary*0 *445to@ecem(er >*0 *4450 =res.ondent? "led with the BIR its ;uarterly !AT returnsJ A.ril *>0 *4446=res.ondent? "led with the BIR a letter6re;uest for the refund of its*445 ecess in.ut taes in the amount of P>053*0+A5.+B0 which amount was arrivedat after deductin' from its total in.ut !AT .aid ofP>05A>0+A+.B> its a..lied out.ut!AT lia(ilities only for the third and fourth ;uarters of *445 amountin' to P30*4>.AAand PA0544.B>0 res.ectively. =Res.ondent? cites as (asis therefor0 Section **+ (B) ofthe *445 Ta -ode. Accordin' to =res.ondent?0 (ein' a !AT6re'istered entity0 it issu()ect to the !AT im.osed under Title I! of the Ta -odeISSUE:7hether or not the -ourt of A..eals committed reversi(le error in holdin'that res.ondent is entitled to the refund of the amount of P>0>320B+A.34 alle'edlyre.resentin' ecess in.ut !AT for the year *445. RULING: Entitlement to Tax RefundSection *+2 of the Ta -ode** .rovides&JSec. *+2. !alue6added ta on sale of services and use or lease of .ro.erties. 66 (a)Rate and (ase of ta. 66 There shall (e levied0 assessed and collected0 a value6addedtae;uivalent toten.ercent (*+4 es.ecially when rendered in the Phili..ines (y a !AT6re'istered.ersonB+ that 'ets .aid in acce.ta(le forei'n currency accounted for in accordancewith BSP rules and re'ulations.'AT Re(uirements for te !uppl) of !er"i#eThe !AT is a ta on consum.tionB* Je.ressed as a .ercenta'e of the value added to'oods or servicesJB2.urchased (y the .roducer or ta.ayer.B> As an indirect taBB onservices0B3 its main o()ect is the transactionBAitself or0 more concretely0 the.erformance of all #inds of servicesB5 conducted in the course of trade or (usiness inthe Phili..ines.B, These services must (e re'ularly conducted in this country$underta#eninJ.ursuitofacommercial oraneconomicactivity$JB4 foravalua(leconsideration$ andnot eem.t under theTa-ode0 other s.ecial laws0 or anyinternational a'reement.3+7ithout dou(t0 the transactions res.ondent entered into with its /on' Oon'6(asedclient meet all these re;uirements.3irst0 res.ondent re'ularly renders in the Phili..ines the service of facilitatin'thecollectionand.aymentof receiva(les (elon'in' toa forei'n com.anythat is a clearly se.arate and distinct entity.Second0 suchserviceiscommercial innature$carriedonoverasustained.eriod of time$ on a si'ni"cant scale$ with a reasona(le de'ree of fre;uency$and not at random0 fortuitous or attenuated.Third0 for this service0 res.ondent de"nitely receives consideration in forei'ncurrency that is accounted for in conformity with law.3ina%%)0 res.ondent is not an entity eem.t under any of our laws orinternational a'reements.!er"i#es !u*+e#t to Zero 'ATAs a 'eneral rule0 the !AT system uses the destination .rinci.le as a (asis for the)urisdictionalreach of the ta.3*Doods and services are taed only in the countrywhere they are consumed. Thus0 e.orts are Eero6rated0 while im.orts are taed.-onfusioninEeroratin'arises(ecause.etitioner e;uatesthe 'erformance of a.articular ty.e of service with the consum'tion of its out.ut a(road. In the .resentcase0 the faci%itation of the co%%ection of receiva(les is diGerent from the uti%i8ationor consum'tion of the outcome of such service. 7hile the faci%itation is done in thePhili..ines0 theconsum'tion isnot. Res.ondentrendersassistancetoitsforei'nclients 66 the RC-s outside the country 66 (y receivin' the (ills of serviceesta(lishments locatedhereinthecountry andforwardin'themtotheRC-sa(road. The consum'tion contem.lated (y law0 contrary to .etitionerKsadministrative inter.retation032 does not im.ly that the service (e done a(road inorder to (e Eero6rated.-onsum.tion is Jthe use of a thin' in a way that there(y ehausts it.J3> A..lied toservices0 the termmeans the .erformance or Jsuccessful com.letion of acontractual duty0 usually resultin' in the .erformerKs release from any .ast or futurelia(ility .J3B The services rendered (y res.ondent are .erformed or successfullycom.leted u.on its sendin' to its forei'n client the drafts and (ills it has 'atheredfromservice esta(lishments here. Its services0 havin' (een .erformed in thePhili..ines0 are therefore also consumed in the Phili..ines.9nli#e 'oods0 services cannot (e .hysically used in or (ound for a s.eci"c .lacewhen their destination is determined. Instead0 there can only (e a J.redeterminedend of a courseJ33 when determinin' the service Jlocation or .ositionfor le'al.ur.oses.J3A Res.ondentKs facilitation service has no .hysicaleistence0 yet ta#es.lace u.on rendition0 and therefore u.on consum.tion0 in the Phili..ines. 9nder thedestination .rinci.le0 as .etitioner asserts0 such service is su()ect to !AT at the rateof *+ .ercent.Respondent,s !er"i#es Exempt from te -estination Prin#iple/owever0 the law clearly .rovides for an ece.tion to the destination .rinci.le$ thatis0foraEero.ercent!ATrate forservices thatare 'erformedinthe 4hi%i''ines0J.aid for in acce.ta(le forei'n currency and accounted for in accordance with therules and re'ulations of the =BSP?.J35 Thus0 for the su..ly of service to (e Eero6ratedas an ece.tion0 the law merely re;uires that :rst0 the service (e .erformed in thePhili..ines$ second0 the service fall under any of the cate'ories in Section *+2(() ofthe Ta -ode$ and0 third6 it (e .aid in acce.ta(le forei'n currency accounted for inaccordance with BSP rules and re'ulations.Indeed0 these three re;uirements for eem.tion from the destination .rinci.le aremet (y res.ondent. Thus0 it should (e Eero6rated.Performan#e of !er"i#e "ersus Produ#t Arising from Performan#eIt sim.ly states that the services .erformed (y !AT6re'istered .ersons in thePhili..ines66 servicesother thanthe.rocessin'0 manufacturin'or re.ac#in'of'oods for .ersons doin' (usiness outside this country 66 if .aid in acce.ta(le forei'ncurrency and accounted for in accordance with the rules and re'ulations of the BSP0areEero6rated. Theservicerendered(yres.ondent isclearlydiGerentfromthe.roduct that arises from the rendition of such service. The activity that creates theincome must not (e confused with the main (usiness in the course of which thatincome is realiEed.34Tax !itus of a Zero.Rated !er"i#eThe law neither ma#es a ;uali"cation nor adds a condition in determinin' the tasitusof aEero6ratedservice. 9nderthiscriterion0 the.lacewheretheserviceisrendered determines the )urisdictionA+ to im.ose the !AT.A* Performed in thePhili..ines0 suchserviceisnecessarilysu()ect toits)urisdiction0A2 for theStatenecessarily has to have Ja su(stantial connectionJA> to it0 in order to enforce a Eerorate.AB The.laceof .ayment isimmaterial$A3 muchlessisthe.lacewheretheout.ut of the service will (e further or ultimately used.'AT Ruling Nos/ 010.23 and 030.32!AT Rulin' No. +B+64, relied u.on (y .etitioner is a less 'eneral inter.retation attheadministrativelevel053rendered(ytheBIRcommissioner u.onre;uest of ata.ayer to clarify certain .rovisions of the !AT law. As correctly held (y the -A0when this rulin' states that the service must (e Jdestined for consum.tion outsideof the Phili..inesJ5A in order to ;ualify for Eero ratin'0 it contravenes (oth the lawand the re'ulations issued .ursuant to it.55 This .ortion of !AT Rulin' No. +B+64, isclearly u%tra vires and invalid.5,Althou'h J=i?t is widely acce.ted that the inter.retation .laced u.on a statute (ythe eecutive oHcers0 whose duty is to enforce it0 is entitled to 'reat res.ect (y thecourts0J54 this inter.retation is not conclusive and will have to (e Ji'nored if)udiciallyfoundto(eerroneousJ,+ andJclearlya(surdor im.ro.er.J,* Anadministrative issuance that overrides the law it merely see#s to inter.ret0 insteadof remainin' consistent and in harmony with it0 willnot (e countenanced (y this-ourt.,2Inthe.resent case0 res.ondent hasreliedu.on!ATRulin'No. +,+6,40 whichclearly reco'niEes its Eero ratin'. -han'in' this status will certainly de.riveres.ondent of a refund of the su(stantial amount of ecess in.ut taes to which it isentitled.A'ain0 assumin' ar&uendo that !AT Rulin' No. +B+64, revo#ed !AT Rulin' No. +,+6,40 such revocation could not (e 'iven retroactive eGect if the a..lication of thelatter rulin' would only (e .re)udicial to res.ondent.,> "4onsumed A*road" Not Re(uired *) LegislatureJSenator Herrera& 7hat is im.ortant hereis that theseservices are .aidinacce.ta(le forei'n currency remitted inwardly to the Phili..ines.JSenator Herrera& This .rovisiona..lies toa!AT6re'istered.erson. 7henhe.erforms services in the Phili..ines0 that is Eero6rated.JSenator Maceda& That is ri'ht.J4+2>_P"ili&&ine P"os&"ate FertiliCer v5 CIR%A-TS&Phili..ine Phos.hate %ertiliEer -or.oration (Phil.hos) is a domestic cor.orationre'istered with the 8.ort Processin' Qone Authority (8PQA). It manufacturesfertiliEers for domestic and internationaldistri(ution and as such0 utiliEes fuel0 oilandother .etroleum.roducts whichit .rocures locallyfromPetronPhili..ines-or.oration (Petron). Petron initially .ays the Bureau of Internal Revenue (BIR) andthe Bureau of -ustoms the taes and duties im.osed u.on the .etroleum .roducts.Petron is then reim(ursed (y .etitioner when Petron sells such .etroleum .roductsto the .etitioner. In a letter dated Au'ust 2,0 *4430 .etitioner sou'ht a refund ofs.eci"ctaes.aidonthe.urchasesof .etroleum.roductsfromPetronfor the.eriod of Se.tem(er *44> to @ecem(er *44B in the total amount of PA+20>B4.++which claimis .ursuant to the incentives it en)oyed (y virtue of its 8PQAre'istration. Since the two6year .eriod within which .etitioner could "le a case forta refund (efore the -ourt of Ta A..eals (-TA) was a(out to e.ire and no actionhad (een ta#en (y the BIR0 .etitioner instituted a .etition for review (efore the -TAa'ainst the -ommissioner of Internal Revenue (-IR).=2?The -TA rationaliEed thus&