BLOOMBERRY RESORTS & HOTELS v.

BIR
Aug 10, 2016 | PEREZ, J.| Special Corporations
PETITIONERS: BLOOMBERRY RESORTS AND HOTELS
RESPONDENTS: BIR, COMMISSIONER KIM HENARES
SUMMARY:
.
DOCTRINE:

FACTS:
1. Petition for Certiorari and Prohibition to annul Revenue Memo Circular No. 33-2013 subjecting
contractees and licensees of PAGCOR to income tax.
2. 04/08/09: PAGCOR granted to petitioner a provisional license to operate a resort-casino complex at
the Entertainment City project site of PAGCOR (particularly, Solaire Resort and Casino). Pursuant to
such license and to PAGCORs Charter (PD 1869), Petitioner only paid license fees in lieu of taxes.
PAGCORs charter provided for exemptions in favour of entities contracting with it.
3. RA 9337 amended Sec. 27(c) of the NIRC, which excluded PAGCOR from the GOCCs exempt from
paying corporate income tax. In the case of PAGCOR v. BIR, PAGCOR assailed the constitutionality
of the amendment, but the Court upheld its validity. Hence, PAGCORs exemption was removed.
4. BIR then issued the said RMC to implement RA 9337, which provided that in addition to the 5%
franchise tax on its gross revenue, PAGCOR will now have to pay corporate income tax. The said law
also provides that PAGCORs contractees and licensees, including entities involving
gambling/recreation, are also subject to income tax.
5. Petitioner (direct to SC): PD 1869 (PAGCOR Charter) as amended by RA 9487, is a valid existing law,
expressly exempting PAGCORs contractees and licensees from all taxes except the 5% franchise tax;
that such was not repealed by the deletion of PAGCOR from the list of tax-exempt entities; that BIR
acted with grave abuse of discretion in issuing the RMC as it, in effect, repealed/amended the Charter;
and that the RMC will adversely affect an industry seeking to promote tourism and generate jobs.
6. Petitioner (justifications): this involves a pure question of law; the gaming industry is one involving
national interest; In essence, Petitioner contends that the CIR cannot issue RMCs that are inconsistent
with law; and that since the RMC would affect the exemption granted, it was issued by the CIR with
grave abuse of discretion.
7. Henares: no grave abuse of discretion as the RMC did not alter, modify, or amend the intent of the
Charter. It merely clarified the taxability of PAGCOR and its contractees and licensees for income tax
purposes.

ISSUE: WN the RMC was issued with grave abuse of discretion: - YES
WN the RMC is valid and constitutional despite the exemption granted by the Charter: - YES
WN Petitioner is liable for corporate income tax: - NO
HELD:
1. (As to WN the petition should have been brought directly to SC) Asia International Auctioneers v.
Parayno: RMCs are considered administrative rulings, which are appealable to the CTA, and to no
other Courts. Petitioner should not have brought the petition to the SC directly as it has failed to
have complied with the doctrine of exhaustion of administrative remedies and the rule on hierarchy
of courts. However, pursuant to its jurisdictional prerogative, the SC took cognizance of the case.
2. The Court then referred to the case of PAGCOR v. BIR, wherein it held that (1) RA 9337, which
amended the NIRC and removed the exemption of PAGCOR was valid; (2) PAGCORs income
from gaming operations is subject only to the 5% franchise tax; and PAGCORs income from other
related services is subject to corporate income tax only. RA 9337 merely reinstated the tax liability
of PAGCOR from other related services (shows, entertainment, etc.), without affecting its tax
privilege (5% franchise tax only) on gaming operations. The Court in that case held that the
issuance of the RMC, subjecting BOTH income from gaming operations AND related services to
corporate income tax, as with grave abuse of discretion.
3. (As to WN the provision applies to contractees and licensees of PAGCOR) The Charter provides
for the exemption of PAGCOR and its contractees and licensees from payment of all other taxes
aside from the franchise fee. This includes corporate income tax. The said provision in the Charter
 was not amended or repealed, and is thus, still in effect. Hence, the contractees and licensees are
exempt from payment of corporate income tax.
1. As the charter states in clear terms that the exemptions shall inure to the benefit of and
extend to the corporations, associations, agencies, or individuals with whom PAGCOR has
any contractual relationship in connection with the operations of casinos authorized to be
conducted under the franchise, so it must be that all contractees and licensees of
PAGCOR, upon payment of the franchise fee, shall likewise be exempted from payment of
all kinds of taxes, including corporate income tax, from the operation of casinos.
2. They shall be liable for corporate income tax for income derived from other related services,
similar to how PAGCOR is liable for such.

CONCLUSION: Petition Granted. BIR ordered to Cease and Desist.