OF THE PHILIPPINES REPUBLIC TRIALCOURT REGIONAL NATIONALCAPITALJI'DICIAL REGION BRANCH146.

MAKATI CITY

OF DEC1AMTORY IN THE MATTER VAIJDITY OF BIR ON THE RELIEF

REVENUE CIRCUI.AR MEMORANDUM 6s-2012 NO.

OF " CIARIMNG THE TN(ABITJTY DUES, MEMBERSHIP ASSOCIATION OTHER AND FEES ASSESSMENTS/CHARGES COLTECTEDBY CONDOMINIUM CORPOMTION,

FIRST

E.BANK

TOWER

AS CORPOMTION, CONDQMINIUM BY ITS REPRESENTED HEREIN

CHAIRMAN/Pf,.ESIDENT ENGR. .{. AMANTE, VICTORIO Petltloner, .vrBusREVENUE BUREAUOF INTERNAL (BIR) , AS HEREIN REPRESENTED KIM S. BY TTS COMMISSIONER REVENUE and IACINTO-HENARES DISTRICT OFFICER RICARDO B. ESPERmJ, Respondents.
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praylngthat thls court rendere JudEmt No.65-20 Clrcular Memorandum Revenue part of the on and dutleb thereunder petluonen pronouncerirent on wtlo between ls entltled to th a of Internal Revenue leglsby' tax and VATlh custodta Incorn conslgnauon.

by petltlonr the valldlty of {eclarlngthe rlghts ier, lncludlng the

Bureau rsepondent amounb of nulng Judlclal

effrctiveon thq 31, 2012 and made lmmcdlatety lssuedlast Octotrer lrlentsrandum CircularNg. 65-20i2 (RMC-2012) ram da)/,Revenue 'Clarlfytngthe Taxablltty F5rnd Membershlp d Assoclatlon Dues., um Corporation. ls/ Charges Coll ected by Condorntnl Otler Assessrr'en corporatlon Fotltionerwhlch ls a non-stocknon -prollt condomlnlum possessed by th mmberc tftsrlselves of ofllce bulf,Jing owned and of wlll be adverselvNfected by the hplcmntatlon 6nd enforcernant sald Ri4C-65-:013, bsaugelt now lmposas uPon ptitloner a fiew kind of tax liabttltv.wlth th amount of Php 118,971.53VAT purportedlf to be pald on Oecerntrer2012 and yert' month tlrereafter. ptus Php 665.904.12 lnsorne tax nt of dlrct cost purpo*edly i.o br pald on or before Aprti i5, 20i3 and evsry year thereafter.

of InternalRwcnuc, atleged thrt rspondntBureu Petltloner of?lclally Klm S. iactrfio-Henares by lts coffimlsslonr rcpresentd

No. 55Petltloneraverrsdthat tfis operatlvsmandrt of R,MC lt lr unjust because lt and confiscatory. 2012 is ur'Just,oppresslve dlrcctly and ac.tunllyburdens the unlt ownart comprlslng tfie colpora0on wlth lncomc tax and VAT on thCr own condornlnlum pooled togther and epent excluglv.tyfor ths purpose of monoy rnalntalningand preservtngthe butldhg and lts prmlssswhlch they FurtherpN$tlonetallegedthat to tax themselvesown 8nd possss. hlp ,nees and other the cotlectad assoclatlon dues, rnembere ol the .rsssmentsls to dlmhlsh rnd lmpalrthc laglflmrte exerclse propertY. It i5 owners' righi to po&gssend en]sy one's sYtn and actually eracts lt dlrectty because oppresslve and conffscatory wlth corporatlsn ihe condornlulum uwfiers, comprlsing uponihe iinit sums of moneyto pay for IncometEx the duty to sheuout addltlonal in truth and in fact pstl$oner,Just tlke any other and VAT v'rheri csrPor$tion ls alreadyIn dlre financlalstratt and typlcalcondomitrium hard up in its every day corporatee{lstnce,hnce,tri pay a 32% by RttC ilo. 65-2012 ls to tncomtax and 12% VAT- as espoused put to the edge of the sword the very ltfe of petltioner. Hence, patltlonerrnalntains that malnlydue to RMCt{o. 55-2012'soperatlva and conllscatoryand unfawfully m.ndat to be unjust, opprsslve and cnforcemnt imPlsmentatlon lts dcstructlve, then ipeo tacto clausefound In Artlde lil, Sectlon1 sf wauldvlolateths du proaBss commandng" th.t no personshall be deprlvedof our Constltuflon propcrtywlifroutdueprocese of lsw". Petltlonerthrough th Makttl CommrdelE5tatsAssoclagon' Incorporateil hiii sen'ra letter dated Decefiiber5, 2'012,to the tslR requestlngfor dcferment of tho irnPtsnntetionof the Commissioner 19, aOlf for tha ciicuiarand anotherfetier datd Daca.nber subJect attention of Makatl Clty RevsnueDlstrlct Offlcer RlcardoB' splrltur judiclat consignatton of the lncorr,etax and coiii.lnulnq announciriq VAT amounts purportedlydue under thc ques$oncdRl"lC-No' 65e0i;. it was iu,'thet'aliegedthst petitlofierhas not commlttedany that any or nll of the act to breach RMCNe, 05-201? constdertng '#.T purpoftadly due uniiei ihe amsunts of lnco|r iax and qustionad are *t the momant placedln custodialegisby RMC-2012

way of conUnulng TheJudldrldetcrmlnatlon sf Judldrl conslgnrtlon. the valldityof RMC No. 65-2012 as wdl as the dcdareUon of rlghts part pdltlonr, and dutlegthere und6r on thc of F ncca$ry md propr under the drcumstrnces, for suctr detsrmlnatlon and dechmUonwould termlnate t}tc uncartrlnty or controversy whlch grve rlseto the lnstant ectlon. ln lts Comrnnt,thc Buroru of Internrl R.venuo (BIR), throughthe Offlceof th. Solldtor General avcrrcdtiat thc rerncdy of dcclrratoryrellrf, ls no longerproptr rlrrcotha ercrllcd R.y.nue Clrculrr already took effcct la* Octobr 31, 2072. Reepondcnt allogcdthrt the hrury whlch pc00onersceksto avoE pryrnent of lncomc tax and value added tax lmposod by BIR Rorcnue (RMC lrlcrnorandum 65-2012 No -65-2012) Clrcular on thr collectlon of assocladon duee, Hownver,by petldoneis own allegrtlonc,tJt acsalldlcsuance alrcrdy took cllect on October31, 2012. It hm pald, already throughJudlclal conslgnmert, the valuc addedtax lmposed by RMC No.65-2012 and gavcrlseto the InJury sought to be avoldedby the peUUon. Hnce,dedaratoryrellaf ls no longer Propr. Respondents BIR throughthdr own LlUgrilonDlvldonalso fllad a separato Comment on thc petltlon.Repondentsallcgodthat thc petltlon lacks proper verlllcauon slnce thcn ls lnsufidffit pleadlng. verlflcaUon, the peUUon ehould as an undgned be dccmed Respondents also averrcd that the peUUonrhould bc dlrrnlsecd applylng th6 doctrh of prlmary Respond.nts malnbln Jurlsdlcuon, that courtscannotand wlll not ddcrmlner controvemy Involvlng a questlon whlchls wlthln theJurlsdlcflon of the rdndnlitreUv trlbunal prlorto the rasolutlon que3uon of thrt by thr ldmlnlstruUve trlbunal, where the quastlondernands the excrclscof sound admlnlstratlvc dlscreUon rsqulrlngthe spclrl knowledge, or;rdrlcnccrnd ssrvlccs of the admlnlstratfvc trlbunal to determlnetechnlcaland Intrlcate mattsrs of fact. It ls notLvorthy that hcreln peutloncrl edmltedly addrcssedthe mattcr to rspondent Commtssloncr of Intemal (GR) R.venue wlthout wrltlng for rn approprht ruply from the latter. In fact, eeveral condornfnlurn corporatlons rdcrrd th tssrJGs prassed by petltloners to th Ltw Dlvlslonof thc Bureauof Intcmal Revenuefor further darlflca$on.UlUmatdy, tt would be the Secretaryof the Departrnent of Flnance thrt wlll exerdse prlmery over the lesues ralsd In the lnstantpcdUon. The lssue Jurlsdldlon requlr$ the technlcal knowledgc and xprlncc of theee admlnlstratlve agcncles concerned.Clearly, petlUoner has not prlorto lts r$ort to thls Court. exhaustcd all admlnlgtrrtlve remedlee further rrgued ln lB Comment Respondent that Declarutory Rellefls not avallablc whenthere le breachof etrtute bcforel?llng of tctlon. The complalnt for dcclrratory rellsf wlll not prosperlf filed aftsr a contract,statute or rlght has been breached or vlolated.In present prcclsdy the cascsuchls the Cturtlon rrlslng from the frcte aflegedIn the petltlon for declaratoryrClf. Wlthholdlng of taxss lrwfullydue to thc aovernmcnt ls r blatantbreach of RMC 65-2012.

Under thc s!m6 perspctlvgth aeumulated amounteof lncome tax and VATIn custodta teglsshoutdheve bffin r.rnltted dlrcUy to the BIRbrcluse tho latter, bdng rn ldmlnlstrtflvo bodysnfbfcd to collect taxes, tts functlonr should not be unduly ddryed or hampered by Incldent l mrttcm.Thc conUnulng condgneuon Judlcltt ls In vlolatJon of the fundamsntal precepts of texa$on and consequenUy, a brelch of the rtght of th rtghtof thc Stateto collect taxes. Flnolly, Rsvnue Memorandum Clrcular 6F-2012ls alrerdy a clarlflcatory lssuancs of persnntlaws underthe HIRC.Rorpondnt argudthat the sald Revonua Memorandum Orcularwtc bsudto darfi the taxabllltyof assoclailon dues,menbershlp fea, and other es$essmcnts/charge collectedby condomlnlum corporruonsffom Its mernbers andtenants. ThcdlsputedRMC was lssuod dmply to restlte andthon chrlfy . provallhg poslilonrrd rullngof tha BIR.It merdy lnt$preH an the exlstlngbw whlchhrd rlready beenIn d?cctendwhlchwagnot sd to b amndsd. R6pondent$ furtherefuddrts thit th RMC provldes that rssoclaflon dues, membershlp fes3, rnd othcr asEessrnnB/charges are colleted by the condomlnlum corporr$on a8sodrtlon rs compengaUon for benefldalssvlc rgrdmd to ltg members. Benelldal srvlcesrncn5 any servlcr Inctudlng$c operutlon, manegenTlent, 8nd malntenanc of common areas/communltyfaclllfleq provtded for by a condomlnlum corporttlonsfor the benellt of lts mernbers.In rocordanc wlth Sacuonl0 of Republlc Ad (R.A.)No. 4726 othrurls knownas the Condornlnlgm Act, the act of management proJcct of the consiltutes beneflclal bsvlc. Payment, ln returnfor suchsofylsas, comeln the form of amountp.ld In as due6or feesby mernbus andtcnentsof r condomlnlum corporatlon, formlng part of the froes Incomeof the latter aubjectto Incoma trx. Slncsthey consfltute paymcnts Income or componsatlon for beneficlal servlces, thy shouldbe aubJact to VAT, RGopondents peflUoner allegedthrt ts d!cted merely by the abandonrnent of prevlous BIR Rullngs to the d?ad that assoclaUon dues are fundawhlchare merelyheld In trust by a condomlnlum corporaUon.Howevgr, reepondentsargued that 8ny erronoous appllcatlon and enforcsncntof tax laws does not prcdudc Ure subseguent corrctappllcatlon of sucfrlawr. Tharule holdstru even lf thE rectlflcaHon picJudlcss partlca who had manwhtle recelved baneflts.Furthcr, lt ls axlomatlcthat the State can nBver be ln estoppel, and thls ls partlcularly true In matter3lnvolvlng trxrflon. Flnally, th Court,cannotIn th abinceof eoundbaslsthercfore dlsturbthe dlscretlon thrt has bcenexerdsdby Rerpon&nt CIRIn determlnlng,aft,ermaklng a comparlson, rtudy and waluaUonof prvlou8 BIR Rullngs sxsnptlng chargescdlectcdby corporuuon condomlnlums frorn lncomtax and VAT,and thet R.MC 65-2012ts proper the lnterprdatlonof the law and rnore advrntagcous to th Government.

In FrsReply, peUdonerargucd that repondent't lntarpretatlon l3 ab6olutdy rronoous' of the comeguenceof Judlclal conBlgnatton Petlfloner malntalns that In lleu of ddtvrhg tho moncy to tlro respondent, the patlUoner aought the legrl rcfuge of Judldal lr rkln so much 30 thtt the act of Judldalcondgnagon conslgnatlon, ln ths c.t$ ol Departmentof to thc payment under Prot66tprovldGd Budgt and Manrgrncnt v3. Manlls'sRn6t Rctlf$t Assoclltlon, Inc. G.R- No. 169466,09 May 2007, ctUngthe casc of l{atalln Coconut of Mtlab.ng, Lanaodel Sur, 8o thrt C.ouncll Co., Inc. vs. Mun|clpal under the prlnclple of starQ declsls, enren lf pefltloner Judlda[y conslgned the VAT amount Purportcdly due and peyaHe to respondent BIR, th apptlcabllttyof the aeealfodBIR RlfC No. 652012 to futur transctlons EUll rsntlm to be lsolvsd. Furthr' petlttoner alteged that Judlclal conelgnotlon of the vAT amounts nor purportedly due and payablendther $(ungulthesth. obllgNtlon iutimattcatly releases the obtlgor. Thus, lt 13 errongous for the rBpondent to argue that when psu$onr mrdc the Judlclrl conslgnatlon, lt automattcally becomes paymcnt of the VAT purportsdlydue under R!'tC65-2012. Judldal ondgndlon 3lmfly to amosnt In custod|r legls - zubJcct means puttlng the controYrted and the rlghts th dlsposltlon by thle Court upon ddsrmlnttlon of duttcs of the peuuoner under ths spedal dvll acffon of Dcleratory Rellef. Moreovr,patltloner has not rcglstrcd ltsdf re t VAT enttty' whlch li lndlcailvethat there ls no lqrury yet sustelnedon the paft of the respondentrcontrary to the allegatlom of ths OSG' Thc non' as a VAT pcrson, and of courscthe non-avallrnentof tJte rGglstratlon Input-output tax benqflb, coupled wlth the fact thet the Purporbd taxable amount due le presently under Judldal conslgnatlon, altogether show thst the pctlUoner has not gubmlttcd any act of obelslnceof RMCno. 65-2012and has not su*alnsd any real lqfury at all.

of the parUes Memorundum of the rspectlve After submlsslon thls Courtwlll posltlons and arguments, thelr rsspcctlve dellneatlng th peUUon. ow regolve Stappdof non Qtsnutlsthe lssusIn thls cts botleddown to the followlng: ls props; Rellef for Declaratory a Pqtltlon 1. Whether ls valld' 65-2012 Clrcular Flernorundum Revenue 2. Whether of Courtprovldos: 1 (1) of the Rules Rul63 Sectlon Secflrcn1 ' who may llts' ' Any personlnbrestad undr,r a deed, wlll, @ntra,ct or otltsf wrtttan ln*rument or whassrtgh|sarc afiE+tcd DYe statutcr executlveorder or rqulatbn, ordinane or anf other governmentat rcgulatlon may bfore brcach or v'ntatbn thererr|,brlng an actlon ln the apgoprlate

R(d,inrl mal caurt b dc&'rm,n6 any qd,ffiion 6 eN far a da{Ja/r'.tlo'l constructlrn or vetld/ty arrsltlgi, therl un*r. of hB ngm s dtrtlgF7 It bearsto not thtt wher I Petluongcekgr dcdtrrtlon of end/or nulllty of . law, lt m$st be treatedes ttro unconstltutl,onallty onc tbr dslrntory re$sfand ehouldbc broughtbr*br3tho R3{lonNl Trlal Crurt and not before thc SuprenreCoilrt (Alled Brotdsung Inc. vs. Rrpubllc,190SCRATSA). Csntorr The requlrrnwrte of rn rctlon for daderrtory rdlrf rre ac follows: 1) there mugtbc t Ju*lable controv.rry; 2) the contrcvrysy rnud bc bdwecn pstons whorc Inbrocts aro edYss; 3) thc party rrchng dtd!rutory rdbt mu!il hrvr r lrgrl and lntsrestln ths controversy; 4) thc h6u lnvolvqdmu3t be rlp6 lor Judldrl dd*rnlnruon (IolonUno vs. Bcrrd d rtaountancy,9'0Phll.83 cEcdIn the crc. of Cormaalonsr d Curbmt ffid tile Dfrskt Cdlctor of tho Poft o?SubtcY3. HyPonr{xFdE Corpondon'G.R. FSruary 1,2012). No. 179579, vrlldl$ or to 'praa$ $. PrtlUoncr ftlcd thls cr* const[uuon|Hty of the Revenue],lsmrind|gn C1rular 65-20fe Irsucd by Rspondant BIR commlsdon.r KIm g' l.dlt$Hcneru8, contedlng that the aart $ns lsrnd wflfiout dse pntcss sf faw. P.dtontr mslntrlnsthrt lt lg rn uqfurl tnd opprlfdw lsturns, rnd corponilonc imposer eddltlonaltax burdm upon tlte condonSnlurn whcn lt dcclrrcg thrt thc grott twptr of condomldumcotpoftUons lndudlng &ssodatlon ducs, mornbg|3hlp fca6 and o$tr agcernants/chtrgl eru anbJcctto vAL lncoma trx rnd Incofiie paynrentsmrde to lt .re subtect to rpplkede w[hholdlng taxes unds edsungregulruom. Guldcd by th. prrarnetorr lsld down In Ufo abo\n dtffl GE8, thle court bdlwe ,tfiat pstluon fsr ffirratorY rell.f l3 $3 rnd thlt court rppruprlatercmorlyglvcn tho obt ln|ng elrcumdanaa to t k cogntslnccof thc samc. Al Sl3 nqulr.rndtts hts Jurlsdlctlon rulld.re prsutt In thtr crrc. Th. for llHng! c!3c lbr dscleretory ls6ue propoundd by prftuoner t5 ,uEtlchblq b) the ontfovatEy bdrrcn pcfrUonrr and nepondent rre rdvrma b erch othu, c) pdlttonq haer legalfnt{|$t In th oootrov*sy, conCdfl'lrq$.t lt wlll Erudy rflhct hls right !t I t8xpNycr,rnd d) thrt thr h8uc r.le&l ls rlpefor Judld.l detsmlneuon. rrlsod th vdldlty tnd sn3utuuonelltyof Prtlssner3ecnBrlly drcular, tflhldl rnsttor l5 rlp for Judlclrl menrorandum Sre subJect

ambn of tJts poftrerof Judfdelrrnrlrw. It har bo*r hdd tn th cmc of Srfiart ConrnunlcsUonE vs. !lTC, {56 PtU. 145 also dtrd In thr crse of Commlslonenof Custonrrrnd thr Dlffi Cdector of thr Port of G.R.t{o. 179f,79, Fcbrurry1, Sublcr,3.Hypefn$x Frrds Corporeuofi, 2011)that: *Ttle dcbnntntdon d whalhcr t n* ffi|ft tr sct d ruls kad by m admh,tstifgvd '8prr,l srArudrclr ffp l'w or tha carcdkrfbn b wfrrh, tt?f, ot tlr. twubr astlr lt}dc4 dr. $wtrfpin Constltutbn vefS tfl6 ,gf er ffttfrcis,t mvfrw or &a W&r to &dera e lrw trw.ty, lnbrnttfltrrll or onds cxduflv agrsGnd'?f.,pffientbl ea6, lntrucf;ign,o,,dlnan(l or ragnrbtton ln tha cor,#, fi*l&lng tha rcgbral HaI eur&E" 7hb b rfifi$t tllc pwar, whktr trr/tr.dcsthe rluthqny wp d fifiel d the @,wts b &tr,nnlne ln an ap.ryta# a&n fhc Wtdty ol' #p rcts d 0t ,F/tfd',@artmcntr. JL&tal Wwar Indttu Ste drrty d tfu dnts of ilsdcc to *ttlc d&tat mntrcrurslar f,l.wMfi rtgflm. whilt arc WW &mandabb aod an{wr,afl/r, .t d to daF.rmlnawlpflpr or aot 6xrrr ltss bttt t frlv'! ebuso of abcrathn amoun@ to bcr( ol'Jurbdrcffon an tha art 6 my trlbunal or lnefrunrcntr,llty d Vp govafirment.' PettUonrrhrs not yC ornrdtEd wlltul breech of thr subJect lseu6nc.Petluonerle not asralllnCI an |56ssrnnt bst&3a s of th* corporluont tlme of ths lssusnccof tho drcular tio ccndornlnlum lk and otts Nesocleuon due rnd membweflp coflecilon of chrrgre wanc not rs yet dur end no trx t$atrnant har yet bcnn msde, Pefltoner har ngt yet kn ueesecd r ttx to bo pald to the tsIR. Pefftloner herdn tcb rdlcf from th|3 court to ddsrrdn whether the mcmonndum drculrr le*ucd l* villdty lssuedor not. Ftorsovar,pstluons for the pmvloui yttlB ha$ not b.n Eublcctad to p.ymsrt of trx on rssodrUon duce, and mcrnbrr*hlp lbs cpllwted to lb msnbers. Thui, io sty tilat pdfloncr h.' afrerdy comnrlttedbfiBrchend thcrafors thGprUuonfll.d b no longnr prspcr has no leg to rtand qn. The tlrtlontl Inttrnrl Ra/anuc Codc trtvldta for thc tlmr of paymant of corporateIncorntax. rtte pu$nent provlslonr of thr tax codeF heretoquoted: Saton 5a of ilIRCthus: (A) ftagufr?rtcr0t - Elrulry4iryarttlott ttqF'ct tp

tlte tax hcreln bnryd,

ffipaa,tJorc t#

exryt

lbreCIn

shalltan6, h d$Fr'!e,, a ln the Phttlp#nes trr lnn and tcrurt$t $rr,rfrrfr ,fat[t

angl'ged ttr be'dr tr hdncg

rGturn tnd tta.t ot a,dtuafllncnt ttd;urn in aqordene wlth the provlsbn6 ChW|F.'r nI of this T'itle. Sectlon77 - Placeand Tlme of Flllngrnd prymnt of Qusrtedy Corporate Income Tax (B) Tlme and Hling tha Inoinc TEx Rctum - thc @.rpontc qmftafi dac,/',ntbn ileil ba clon ol qcb ot tho firfi t!,rce (g) qulrtart of thc fxabla yoc.r. f)G ftnel t{uatmont ,e,turn chafl h flhd an or bclotp thc fltteentl (t#) dtf of Aprll or on or Delbre the flfreenth (lgo) dey of tourth 1&1 nonth fottowtngtnc'cnit of tfie flscal year, as the cae mayh, (C) Tlme of Pryment of ttrc Inamc Thx - The lnome tex dua on tha corpnF' quirErly retums and thd frnel EqusFtcnt ttturns @mput& in aeotdane wjtfi .Safrtons 75 and 76 sheil be pald at the uma tt' dxlarutbn or return ln a manner prwnfud W the Cammisslonar.

Petltioner adoptedan accounung prloduslng the calendrr year method. Thlswas showntn its IncomcTtx Return flledfor the year 2011,(Exh."H"-Prelhhary InJunc$on) rnd lyar usedagthelr vldflce during the appflcaflon for thc lscuanc ior a wrlt of prellmlnary lnjundlon.The Memorandum ClrEular was lssucdon . October31, 2012 maklngthe same afiecHve lmmcdlately. Slnce pHtloner adopted calendrryear accounUng perlod,rnd lrollowlng the above clt6d rgulrments for corporatflflng rnd payfng ol Incom tax due on the corporcUon, pcflilonefsll.blfity to pay the tax for the year 2012 wlll aocrueon April of 2013, on the flnal edjustment rturn. Thua,rt the flmc of the fillngof the peflUon on peuuoner December 26, 2OL2, yt l5 not obftgated to pay and flle lts Income tax andvat returnand broach has nst yt 3etIn. On the matteqof Judlclrlconstgnailon rrlsed by pefliloner, thls court In lts evaluaHon of the caeahs not found proof that petltlonerin fact made . Judlclalcon$tgnailon of the purported lncomo tax andvalueadded tax duefor December 2012. Howeyer, svn lf lt dld, lt ls of no momntr slncat the Umethe pililonfor declaratory rellef was flled, the corporat lncome tax for the corporatlon wasnotyet duefor payment. As to th valldltyof tho Mernonndum Clrculrrl$rued,tt ls rospondent's contentlon that lt merely clarffird and was slmply lssued to restato pluon and rullngof the andclarlfrtlre prevalling

BIR. lt was a mre InterprctlBon of an exlg0nglaw whlch hrs aiieaoi been ln elfcct and whlch was not sEt to be amendcd. Howevar,the sEmtppcel3 to be not truels lt gocl beyondltc oote"ilv" to clarlfy ttre cxlcttng etatutc. .The assallcd R6vnu clrcu'larnot merdy Intsrpded or drrficd thc qlsung m-imonnaum undcr a.ntr leglslatlon or lntroducsd BIi iullng but ln fact legl6latsd ir," mintti of tts quasFlegldrweruthorlty. The BIR commbconor, unaertne gulseoi clarlfyhg Incorrptex on aisode0ondue, mado r{'lectlvctnrnedlatdy. In so dolng, ievcnu" MimorandumCitrcutar mandateof due proces the conoUtutlonal contravenee the passage of law. It becrs to sttte herdn tho perflnent poftton of the rullng 65'2012thue: Clrcular Memorandum In Revenuo contalncd "Thls Ctrcularts tssl.frdb cltrfi the txailllty of asctatton dlw, nanbetslrtp {bea' and &rcr assaecnrcnt/cfraryns @,lEctucl by andomlnlum and tan|tts' arwntion from lts tnemDers EACKGROUND The Eutcau tts bsuca ecwral rullngs tf'6 tax Incr,mc fiom exemptlng by srtominlum crijffi asienina/chargqs orWrattons fro; tE nsmberc onjhe gft,uod that th; rclk,rlibn of arErriatbn dns and stfier mcraly hald ln 6nrt 0o Dc aggrlsntanfs/charyrltaFG ln exryn*r &bty for dmtn&rattw ixa tB pur,ogcs 1.e.. b gpGnt'Ftrytntfi tmplGmcnttng anfromlnlum, and fiwtr whktt a * *t. in&mtntum a@ontlon auld not retlllru any galn or prcfit as e rsutt ol 16 rcelPt tharr'vf,.

arii nanteti tte'oiaomntum rroftrt tb Hny the

In affitlon, tlp srnc rultngs cxclttpbd tha essochtlon duesftom valtr-.rddsd tzx for tie roason that a qltfrnttntum citrpntlott cM notg,ll, Mrllgr' ngr ba* any gpods or -Ptwtty and iiarirg", n*nai dcxlstt rcndcr any rrlruk; lbr a lbe, but tmplemens $ admlnhtntbn of tt'G iiitv rcCd;ad *tvres !o olbct assodetbn drps ttwtt tlto es unit ownars pursuantb i6 orWntr pttw{s) frustac of thc fund thcrPof.
CIARIFICATION -

Thc Exabtlttyof aswlatfun dtn's, mamhrshlp fc;s and otier assessrnsngcharyescpllledrrl bY a andomlnlum arpantlon lrom f8 mcmbcts, te','nfs and other antltbs arad*uwd haraundar:

l0

In&{na Tax * The tmo{rnt9 ptE tn ts du5 or L fees by rnernbers and tensnE d a cDn&,mlnlum mrporttbin lorm prrt d drc gros lnorrre oftrt?tc /atter subJacf to tr'f'*w |;,x. ThE E 'ffauf furnblus tE mcrt0g'rgaN andomlnlum cptpp,ratF,n tenanb wifh benefltE, advrntrslff and prlvibges tn t ra rctu'T4 fer *rct, ''ymcntn ftr tax purpwt tttd othar es8siatlon dtns, mamfut'' rF fu, a$scsnentq,/dlaGErs col/rctld by e an&mtnlum ,r'@nE prffitttfB ar conifffuts @rpof3tbn protdcs ,e b @mfrnwtfu.n br fp,ne{klel 'nlg6 tf mem&rs ard &*ran6. Iie gevlna finetrrfttbn snd &e assssrncnt ctucar,Q llnd whfcfi ut mudy trld in frust by a @r&mlnhrm carporatb*t hcfts logal bastsand b haraby r}*tffinad.

tn* suljEct fp incone trx, ,n@f'e payments

Norcsver' srnd e d/n&'mlnlum @rpo1'.tb,n ls

t0 ,t

ara subjocf to epplJcab&wtthhddng ttxcs wder existlng reflulatta'ls. rN VAD tsc/atfon ADDED IL VALUE ofhar ,be6, and membersfi{p d{e&, rssrssmGnfs/c/targmallectad by r wrdunlntum b VAT slne tlpy an*ltute *r4ratlan ere suDJsct servicsit provider to its mcrnkls erd ienant* " frlled to Clrcular ThEabovecltd porton of the Msrtorartdurn lt chrflled. Ineieadlt Eftsr* that lt mcrsly sfrowryfiatpartlcularlasd from departedfrom the cvaralrullng3of thc Bursru exernpdng collcld by condornlnlwn Income tax ths assessrnents/cherge ground of frcm ltr membQrt, that tfie collccfion on the corporrUons are rnerCyhdd In driesand other rcsegrnwts/cnorges $ssdaUon In lmpleNrlQntlng cxpnsec trust to be usedsdely for ddmlnlstrauva tts pur?ose"The new rJrcularln E{fed mad A$ cwn legilsldbn rbandonlngthe prvlou*rullngeof tha BIR whlch becamcthc pracfice corporailone IndudlnghflnptlUonar. of the conCom,nlum lrom the long $rndlng rnd deperted Clrcularchanged The Revenue ruling of th BIR that assodruondu6Bndothst f** and charg3 coltxtad from mstrbss .rs tar axenrpt, ln to dolng, lt rbru$ly wftHhwas thn not odt0ng, cfiarg*sfrorn taxpayeran lrnposlUon whlch lE Prgudlcltl to St and worssmade lt lmmedlrtelyel'ibstlvs It dtd not mrely lnterpret or clarlfy but flghts of the pe$tiorrer" nltogether the long standlnsrul*s of the Buraeuof Intsnal changad Rvnu. It 13rclvsntto statEherdn the rul|ngof the HIghcourt In tlte of Intsrnal Revanusvs. Court of Appeals, cags of Commlsslonr
lncorne pdwncat ar emg6{Eildm ,br tha b'l'tci?f,lal

ll

Court of Tax Appeb and FortuneToboccoCorpor!flon,G.R. N o . guoted 119761, 29 August 1996). whlchls hreunder thu6: 'It should fu un@andabtc ttnt wlnn en admlnMraffveruk b mcrcly lntpmrrltafiveln aaturc iF-apollablltlvllaggF rcthttp flstlter than l* barc Isssance. tbr lt pives no rcaI conse{scr4afnorc tlrro w_ha!thc law ltggaJtr hrs *lratdv oratr/rlbd'.Ythan uaprrdE athar hand" tha edmlnfuatfirc ru& gorls Deyolld merctv orovldha @ ths mqnt tlnt an fedl&te er ftrlder ba&_ rxlI'.l,bcr&ffta the bfovrs tfc fGrrv b a@rd rt fcrsf tl' &ost dlrcdtv afftrt'rrcladtan*6 h haail- arrdtharar,fEr to tu dulf lnfotmcd, Dc/!rle.' .thc ttcfi @ana le given the tote and efrbcf.of hw1. (ur*lre,rlng outs), "Evfrcntly, ln or&r b plau "Hry Lurury, Mora,"aN "Chamfun'c&Eratb gvttih " Ftlg'mlum th. ffifr 6 thc omcndr@ lrw ad sl.fijad thcnt b an lnc/aa* tex ra,ta,tha rrowclwuw RNC37-93 had b bc bescd. In w dolng, 0r. 8IR not dnw interpretd tie law; veff lt JrybbM tr#er its quasl lcgts,latlve of atfrndv. TI7E&E &*rvena tha iaqulrarnanB of natfu, lurdng and ol publlcat&,n sttwW not hsva&cn lgnarcd.' thrt FlrutEIn thc lmtsnt c!se, lt was dlsclmadby petlfloner Bank CondsmlnlumCorporaUonb a msnlEr of thc itfakatl Inc. who elso wrot r ldter to thc Comrn3rclef EsteteAssochtlon, of the zubJect BIR Commlesloner eoeklng thi d#armsnt Honorablo MemorandumCtrcular 30 thst crtaln ls,But8msybe properly sn ths samr be put In phcc. Uktvvtss, addreseed and the guldClnes patltlonerrppendedto lb Mmorrndum thc vrrlous opfnlom and end even durlng the rullngr of prevlous BIR Comrnlscloncru of s wrlt of prdlmhtry tn unctlon(Slxto rppllcetlonlbr the lssusnc$ Group,ln Legaland Enforccmont Esqulvlss IV, DeputyCommlsslonor Novgnber1998,Jrnurry 5, a000,UllanB. hleftf).In all tfimc rul|ngt tho Comnrlsctoner of lntarnal Revofiue,deidy dedaros that the duoc,rnambcehlpftcs, powarand wrhr recdpts of the aseoclaUon thatwlll bEcollectd from collectjom and otherasEessrnentr/chargs Ite mernbcrs,whlch wlll be hrdd ln tru6t rnd rYfkh Nre to bn uscd and |n lmplsnnunglB puryo6/5 soldy for adrnlnl*rauvcxpnses proflt galn r of or rs mgult whlctrths rforessldcouldnot reallzeany gross In tald corporeuon's Its rccdpts thereof, ero not Includlble Incorne, endtherafore, thc fund th3|dbrc 8rs not ilbrert to VAT. Moreover,lt ls slrcady the common buslnes* Fncflc of petftlonerthat the assoclatlon fees snd tha llke dues, membcrshlp

t2 as part of lts Incomeand thcrcforeof the VAT' The are not Included advent of the Mamorandum Clrcular 65-2012 lseud by the the trx lllblllty of pestlonerln the snsathtt changes commlssioner It ls now subjectto tax. It createda new tax burdenupon petftloner. pegloner thln could not be faulted to conslgnfudlclally as they clalm, the vat amount pendtng resolutlon of the petltlon for declsrEtory rellef hereln flled. Raspondent BlR Commissloner to be h'rd, whlch petluonerth oPportunity shoutdhave accorded was the bone of contntlonof th lctter sent to the Honorcble whlchwas not actedupon' Commlsdoner The RevenueMemorsndumClrcular dld not only clerlfy an exlsunglaw,butchangesltshportandlntsrpretatlonthatlnso th rlEhtof the petltloneras . tax paYr' dolng lt preJudlces Further, the above clted case of Comrnl$loner of Customsand th8 Dlstrlct collector of the Port of sublc ys. Hypernlx Fecds of 1, 201a, 8.Gase G.R. No. 179579,dated February Corporatlon, and stmitar tmpdrt also glve lrnportanccto the requtremsntof notlca hearlng and pub[Catlon before a regulatlon could be glYen an lmprimatur of valldity, the guprerneCourt ddarEdl

woud aM

" ConsldcrlnE that ths queffinad

explained dbove, it ttredbrc follows tfi.t rrltft'lo.ners snoud have apptied tha pettlnent provlstons of Eook VII, Chapter2 of thd Revt*d Admlnt*ntflva CodartE wlt:

tl'e subtandvetlghtsof rwndent ae

regulttlon

tgatry shall file Sectton3. Htlng - (I) Evcgry wtth the LJniveE,wof the Phlltppln5lay ccnter thrr* (3) certificd oples of every rub a@ted by it, fare on thi dab of aMlvlty of th8 Code Ruhs'lnltum thtt whbh are not flledwlthtnthrce(3) months date shall not be tfia basesof any sanctipn agetnst eny pertyof perwns.

Section g. Public hrtalpetion * (1) If not shnll,as far as rqulred by law,en aEency othenvise pncticable,publlshor drstlate nofbes of ptoposed 'rules andafford intersted parties the oryrtuni$ to submit thetr vlewsprtor to th ada$on d eny rules. (2) In theftxtrg of rttcr., no rulc or find.order stratt ie' vatid unless the proposd ntes shatl have af gcnenl circulatlon ln a newspaper been pubtished at lebst two (2) weels be{are the flrct hearlng theteon.

l3

{i) In crse of opposttbn, ctta rul66 on @ntesfedc:s6s shtfl be obserued. )(xxx xxw )ou xxx xxx xxx xn(

ln Tenad,vs, TuYera, we held; Llkcw&e, Thecbar obJad of thc abvequofid provblon is to glve tha generel publb a&qwte nothe of the varlaus laws whldt are tD regulafr thclr edk)ns and andud es citlzens, Wiihout srch natirg and publtatbn, therc woutd bc no DEslt for the appthatbn of the maxlm "pnonntJa legb non b ercnsrt". It would bc ttp lrG$ht of lnt,ffi punislt or atfierwtu bwden a cithen lbr tha tTztf,grGssbn d a law of whk;h lrc had notla wlrtt$oever, not even a constnrctlrcona, )Otxxx xm no1g)( nu xxru xlo$ noo( xxxx xxxxxx

SGca{.Rpctttbners fattedb folbw thc tqulnmcnts enwneratedby the RevlsedAdminlEtnttveGode,t',e asailcd rqulatlon mssf Dp stttrckdown,' the subJect msnorrndum clrcuhr Slncethe BIR In passlng slmllarly Stuated 8s a tax or those falled to accordrespondent pryer due notlc and opportunltyto be heard,bN\orc lssulngs.ld wri arbltr dly and clrcularlt fs thlEcourt'soplnlonthat the lssuancc process of the clause co$tftuHon. Tho ln vlolatlon.of the due vlolated tax burdenon psUUoncr In lmposlngaddl$onal respondent and heirlng. rlghtto dueno0ce he latter'sconstltuHonNl Anent the prayer of ptltloner for thls court to meke a pronouncement Bureauof Intmal on who betwEen th rspondnt amountof eumulatd and the former ls entltldto the Revanue legls,thls courtcannotrt thls polnt lncEme tax and yat In custodlc dectarethe same. Flrst, th allegatlonof pfltlonorthat lt elready on the amount of the mrde a contlnulng JudlclalconCgnsuon purported lof tho bars alhgatlong Except VATwas not substan$ated. ghown that thr waE Inded a of ptltlonr no proof was for tfie rnadeto thls court or to 6ny othrcourt. Except conrignatlon to th6 RevenueDlstrtct Offlcer Rlcsrdo $plr{tu lottar addrassd the conilnulngJudldal dated Decembert2, 2012 announclng due conslgnstlon of the lncometax and VATcmountspurportcdly thq record coufd wa RMC 65-2012, nowhereln underthe qustloned was rnedc. Hencs, tharE 13 retson to flnd that a conslgnatlon parflE thereto. ls enUtled the contendlng detrmlne who betwcen

t4 Reliefls the Declaratory In vlew of the foregolng, WHEREFORE, No. Clrcular Memorandum glven due course. of Revenue The lssuance to havebeen invalldlylssued. b herebydeclared OS-ZOfZ SOORDERED. 5, 2013. MakatlClty, Septmber

Cc: Atty. Jo6D. Melgarejo for mitionr Counsel BZLA2 LapujapuSt., NEwCaoitolEstates I CitY Ave., Quezon Commonweahh Atty. BmardimPaulSomera,Jr' BIR ForRespondenrt Gneral Officeof thE.Solicitor St., LegopiVillaga 134 Amorsolo Mak ti City LitigationDivision Burgaud IntArnalRevEnue Rm.703, BIRBldg., CttY Diliman,Quezon
Mcv/llrct ebank vs. blr'retolution