TITLE:

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
HON. COURT OF TAX APPEALS and MANILA GOLF & COUNTRY CLUB, INC., respondents.

G.R. NO. L-47421 DATE: May 14, 1990

PONENTE: NATURE:
FACTS:

In Commissioner of Internal Revenue V. Manila Hotel Corporation, SC overruled Court of Tax Appeals
decision that caterer’s tax under RA 6110 is illegal because it was vetoed by Former President Marcos and
Congress had not taken steps to override the veto. SC ruled in this case that the law has always imposed a
3% caterer’s tax, as provided in Par 1, Sec 206 of the Tax Code.

Presently, Manila Golf and Country Club, a non-stock corporation claims that it is exempt from the 3% on
gross receipts because President Marcos vetoed Sec 191-A of RA 6110 (Omnibus Tax Law). President
Marcos vetoed Sec 191-A because according to him it would 1) shift the burden of taxation to the
consuming public and 2) restrain the development of hotels which are essential to the tourist industry. The
protestation of the club was denied by petitioners saying that Sec 42 was not entirely vetoed but merely the
words “hotels, motels, resthouses.” House of Ways and Means concurred with petitioners stating that veto
message only seems to object with certain portions of 191-A and that can be gleaned by the reasons given
by the President.

ISSUE/S:

WON veto referred to the entire section or merely the tax on gross receipts of operators and proprietors of
eating places within hotels, motels and resthouses.

DOCTRINES | HELD:

President does not have the power to repeal an existing tax. Therefore, he could not have repealed the 2%
caterer’s tax.
CTA agreed with respondent club that president vetoed only a certain part. CTA mentioned that President
can veto only an entire item, and not just words. The President intentionally only vetoed a few words in Sec
191-A. Assuming that the veto could not apply to just one provision but all would render the Presidential
veto void and still in favor of petitioner.

1
Inclusion of “hotels, motels, resthouses” in the 20% caterer’s tax bracket are items. President has the right
to veto such item, that which is subject to tax and tax rate. It does not refer to an entire section. To construe
item as an entire section would be to tie his hands to either completely agree with a section he has
objections with or to disagree with an entire section where he only has a portion he disagrees with.

An "item" in a revenue bill does not refer to an entire section imposing a particular kind of tax, but rather to the subject
of the tax and the tax rate. In the portion of a revenue bill which actually imposes a tax, a section identifies the tax and
enumerates the persons liable therefor with the corresponding tax rate. To construe the word "item" as referring to the
whole section would tie the President's hand in choosing either to approve the whole section at the expense of also
approving a provision therein which he deems unacceptable or veto the entire section at the expense of foregoing the
collection of the kind of tax altogether. The evil which was sought to be prevented in giving the President the power to
disapprove items in a revenue bill would be perpetrated rendering that power inutile (See Commonwealth ex rel. Elkin v.
Barnett, 199 Pa. 161, 55 LRA 882 [1901]).

ACCORDINGLY, the petition is GRANTED and the decision of the Court of Tax Appeals in CTA Case No. 2630 is set
aside. Section 191-A of RA No. 6110 is valid and enforceable and, hence, the Manila Golf & Country Club Inc. is liable
for the amount assessed against it.

SO ORDERED.

RULING:

NOTES:
Sec. 191-A. Caterer. — A caterer's tax is hereby imposed as follows:

(1) On proprietors or operators of restaurants, refreshment parlors and other eating places, including clubs, and caterers,
three per cent of their gross receipts.

(2) On proprietors or operators of restaurants, bars, cafes and other eating places, including clubs, where distilled spirits,
fermented liquors, or wines are served, three per cent of their gross receipts from sale of food or refreshments and seven
per cent of their gross receipts from sale of distilled spirits, fermented liquors or wines. Two sets of commercial invoices
or receipts serially numbered in duplicate shall be separately prepared and issued, one for sale of refreshments served,
and another for each sale of distilled spirits, fermented liquors or wines served, the originals of the invoices or receipts
to be issued to the purchaser or customer.

(3) On proprietors or operators of restaurants, refreshment parlors, bars, cafes and other eating places which are
maintained within the preferences or compound of a hotel, motel, resthouse, cockpit, race track, jai-alai, cabaret, night
or day club by means of a connecting door or passage twenty per cent of their gross receipts.

Where the establishments are operated or maintained by clubs of any kind or nature (irrespective of the disposition of
their net income and whether or not they cater exclusively to members or their guests) the keepers of the establishments
shall pay the corresponding tax at the rate fixed above. (Emphasis supplied)