REPUBLICOF THE PHILIPPINES

REGIONALTRIALCOURT
NATIONALCAPITALJI'DICIAL REGION
BRANCH146. MAKATI CITY

IN THE MATTEROF DEC1AMTORY

RELIEFON THEVAIJDITYOF BIR
REVENUE
CIRCUI.AR

MEMORANDUM
6s-2012
NO.

" CIARIMNG THE TN(ABITJTYOF

DUES,MEMBERSHIP
ASSOCIATION
OTHER
AND
FEES
ASSESSMENTS/CHARGES
COLTECTEDBY CONDOMINIUM
CORPOMTION,

FIRST

E.BANK

TOWER

AS
CORPOMTION,
CONDQMINIUM
BY
ITS
REPRESENTED
HEREIN

j,

CHAIRMAN/Pf,.ESIDENT ENGR.
VICTORIO.{. AMANTE,
Petltloner,
.vrBusBUREAUOF INTERNALREVENUE
(BIR) , AS HEREINREPRESENTED
KIM S.
BY TTS COMMISSIONER
REVENUE
and
IACINTO-HENARES
DISTRICT OFFICER RICARDO B.
ESPERmJ,

',.|

Respondents.
X----------'.'

-'-------X

praylngthat thls court rendere JudEmt

No.65-20
Clrcular
Memorandum
Revenue
part of
the
on
and dutleb thereunder
pronouncerirent
on wtlo betweenpetluonen
of Internal Revenuels entltled to th a
Incorntax and VATlh custodtaleglsby'
conslgnauon.

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

Bureau
rsepondent
amounb of
nulngJudlclal

atlegedthrt rspondntBureuof InternalRwcnuc,

Petltloner
of?lclally
rcpresentdby lts coffimlsslonrKlm S. iactrfio-Henares

lssuedlast Octotrer31, 2012 and made lmmcdlatetyeffrctiveon thq

ram da)/,RevenuelrlentsrandumCircularNg. 65-20i2 (RMC-2012)
'Clarlfytngthe Taxabllttyd AssoclatlonDues.,MembershlpF5rnd
um Corporation.
ls/ Charges Collected by Condorntnl
Otler Assessrr'en
-prollt
condomlnlumcorporatlon
Fotltionerwhlch ls a non-stocknon
possessed
by th mmberc tftsrlselves
of ofllce bulf,Jingowned and
wlll be adverselvNfected by the hplcmntatlon 6nd enforcernantof
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.

Petltloneraverrsdthat tfis operatlvsmandrt of R,MCNo. 552012 is ur'Just,oppresslveand confiscatory.lt lr unjust becauselt

dlrcctly and ac.tunllyburdens the unlt ownart comprlslng tfie
condornlnlumcolpora0on wlth lncomc tax and VAT on thCr own
monoy pooled togther and epent excluglv.tyfor ths purpose of
rnalntalningand preservtngthe butldhg and lts prmlssswhlch they
themselvesown 8nd possss.FurtherpN$tlonetallegedthat to tax
the cotlectad assoclatlon dues, rnemberehlp ,nees and other
.rsssmentsls to dlmhlsh rnd lmpalrthc laglflmrte exerclseol the
owners' righi to po&gssend en]sy one's sYtn propertY. It i5
oppresslveand conffscatorybecauselt dlrectty and actuallyeracts
corporatlsnwlth
uponihe iinit uwfiers, comprlsingihe condornlulum
the duty to sheuout addltlonalsums of moneyto pay for IncometEx
and VAT v'rheriin truth and in fact pstl$oner,Just tlke any other
csrPor$tionls alreadyIn dlre financlalstratt and
typlcalcondomitrium
hard up in its every day corporatee{lstnce,hnce,tri pay a 32%
tncomtax and 12% VAT- as espousedby RttC ilo. 65-2012 ls to
put to the edge of the sword the very ltfe of petltioner. Hence,
patltlonerrnalntainsthat malnlydue to RMCt{o. 55-2012'soperatlva
m.ndat to be unjust, opprsslveand conllscatoryand unfawfully
dcstructlve, then ipeo tacto lts imPlsmentatlon and cnforcemnt
wauldvlolateths du proaBssclausefound In Artlde lil, Sectlon1 sf
our Constltufloncommandng" th.t no personshall be deprlvedof
propcrtywlifroutdueproceseof lsw".
Petltlonerthrough th Makttl CommrdelE5tatsAssoclagon'
Incorporateil hiii sen'ra letter dated Decefiiber5, 2'012,to the tslR
Commissionerrequestlngfor dcferment of tho irnPtsnntetionof the
subJectciicuiarand anotherfetier datd Daca.nber19, aOlf for tha
attention of Makatl Clty RevsnueDlstrlct Offlcer RlcardoB' splrltur
announciriqcoiii.lnulnqjudiclat consignattonof the lncorr,etax and
VAT amounts purportedlydue under thc ques$oncdRl"lC-No' 65e0i;. it was iu,'thet'aliegedthst petitlofierhas not commlttedany
act to breach RMCNe, 05-201? constdertngthat any or nll of the
amsunts of lnco|r iax and '#.T purpoftadly due uniiei ihe
qustionadRMC-2012are *t the momant placedln custodialegisby

way of conUnulng
TheJudldrldetcrmlnatlon
sf
Judldrl conslgnrtlon.
the valldityof RMCNo. 65-2012as wdl as the dcdareUonof rlghts
and dutlegthere und6r on thc part of pdltlonr, F ncca$ry md
propr under the drcumstrnces, for suctr detsrmlnatlon and
dechmUonwould termlnate t}tc uncartrlnty or controversywhlch
grve rlseto the lnstantectlon.
ln lts Comrnnt,thc Buroru of Internrl R.venuo (BIR),
throughthe Offlceof th. Solldtor Generalavcrrcdtiat thc rerncdy
of dcclrratoryrellrf, ls no longerproptr rlrrcotha ercrllcd R.y.nue
Clrculrr already took effcct la* Octobr 31, 2072. Reepondcnt
allogcdthrt the hrury whlch pc00onersceksto avoE pryrnent of
lncomc tax and value added tax lmposod by BIR Rorcnue
lrlcrnorandum
Clrcular65-2012(RMCNo -65-2012)on thr collectlon
of assocladonduee, Hownver,by petldoneis own allegrtlonc,tJt
acsalldlcsuancealrcrdy took cllect on October31, 2012. It hm
alreadypald, throughJudlclalconslgnmert,the valuc addedtax
lmposedby RMCNo.65-2012and gavcrlseto the InJurysoughtto
be avoldedby the peUUon.Hnce,dedaratoryrellaf ls no longer
Propr.
Respondents
BIR throughthdr own LlUgrilonDlvldonalso
fllad a separatoCommenton thc petltlon.Repondentsallcgodthat
thc petltlon lacks proper verlllcauon slnce thcn ls lnsufidffit
verlflcaUon,
the peUUon
ehouldbe dccmedas an undgnedpleadlng.
Respondentsalso averrcd that the peUUonrhould bc dlrrnlsecd
applylngth6 doctrh of prlmaryJurlsdlcuon,
Respond.nts
malnbln
that courtscannotand wlll not ddcrmlner controvemy
Involvlnga
questlonwhlchls wlthln theJurlsdlcflonof the rdndnlitreUvtrlbunal
prlorto the rasolutlon
of thrt que3uonby thr ldmlnlstruUve
trlbunal,
where the quastlondernandsthe excrclscof sound admlnlstratlvc
dlscreUonrsqulrlngthe spclrl knowledge,or;rdrlcnccrnd ssrvlccs
of the admlnlstratfvctrlbunal to determlnetechnlcaland Intrlcate
mattsrs of fact. It ls notLvorthy
that hcreln peutloncrl edmltedly
addrcssedthe mattcr to rspondent Commtssloncrof Intemal
R.venue (GR) wlthout wrltlng for rn approprht ruply from the
latter. In fact, eeveralcondornfnlurn
corporatlonsrdcrrd th tssrJGs
prassedby petltlonersto th Ltw Dlvlslonof thc Bureauof Intcmal
Revenuefor further darlflca$on.UlUmatdy, tt would be the
Secretaryof the Departrnentof Flnancethrt wlll exerdse prlmery
Jurlsdldlonover the lesuesralsd In the lnstantpcdUon.The lssue
requlr$ the technlcal knowledgc and xprlncc of theee
admlnlstratlve agcncles concerned.Clearly, petlUoner has not
exhaustcdall admlnlgtrrtlveremedleeprlorto lts r$ort to thls Court.
further rrgued ln lB Commentthat Declarutory
Respondent
Rellefls not avallablcwhenthere le breachof etrtute bcforel?llngof
tctlon. The complalntfor dcclrratoryrellsf wlll not prosperlf filed
aftsr a contract,statute or rlght has been breachedor vlolated.In
the presentcascsuchls prcclsdythe Cturtlon rrlslng from the frcte
aflegedIn the petltlon for declaratoryrClf. Wlthholdlngof taxss
lrwfullydue to thc aovernmcntls r blatantbreachof RMC65-2012.

Under thc s!m6 perspctlvgth aeumulated amounteof lncome

tax and VATIn custodtateglsshoutdheve bffin r.rnltted dlrcUy to
the BIRbrcluse tho latter, bdng rn ldmlnlstrtflvo bodysnfbfcdto
collect taxes, tts functlonr should not be unduly ddryed or
hamperedby Incldentl mrttcm.Thc conUnulng
Judlclttcondgneuon
ls In vlolatJon of the fundamsntal precepts of texa$on and
consequenUy,
a brelch of the rtght of th rtghtof thc Stateto collect
taxes.
Flnolly,RsvnueMemorandum
Clrcular6F-2012ls alrerdy a
clarlflcatorylssuancsof persnntlaws underthe HIRC.Rorpondnt
argudthat the sald RevonuaMemorandum
Orcularwtc bsudto
darfi the taxabllltyof assoclailon
dues,menbershlpfea, and other
es$essmcnts/charge
collectedby condomlnlumcorporruonsffom
Its mernbersandtenants.
ThcdlsputedRMCwas lssuoddmply 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 RMCprovldes
that rssoclaflon dues, membershlp fes3, rnd
othcr
asEessrnnB/charges
are colleted by the condomlnlumcorporr$on
a8sodrtlon rs compengaUon
for benefldalssvlc rgrdmd to ltg
members. Benelldal srvlcesrncn5 any servlcr Inctudlng$c
operutlon, manegenTlent, 8nd malntenanc of common
areas/communltyfaclllfleq provtded for by a condomlnlum
corporttlonsfor the benellt of lts mernbers.In rocordancwlth
Sacuonl0 of RepubllcAd (R.A.)No. 4726 othrurlsknownas the
Condornlnlgm
Act, the act of managementof the proJcctconsiltutes
beneflclalbsvlc. Payment,ln returnfor suchsofylsas,comeln the
form of amountp.ld In as due6or feesby mernbus andtcnentsof r
condomlnlumcorporatlon,formlng part of the froes Incomeof the
latter aubjectto Incomatrx. Slncsthey consfltuteIncomepaymcnts
or componsatlon
for beneficlalservlces,thy shouldbe aubJactto
VAT, RGopondents
allegedthrt peflUonerts d!cted merely by the
abandonrnent
of prevlousBIR Rullngsto the d?ad that assoclaUon
dues are fundawhlchare merelyheld In trust by a condomlnlum
corporaUon.Howevgr, reepondentsargued that 8ny erronoous
appllcatlonand enforcsncntof tax laws does not prcdudc Ure
subseguent
corrctappllcatlonof sucfrlawr. Tharule holdstru even
lf thE rectlflcaHonpicJudlcsspartlca who had manwhtlerecelved
baneflts.Furthcr, lt ls axlomatlcthat the State can nBver be ln
estoppel,and thls ls partlcularly
true In matter3lnvolvlngtrxrflon.
Flnally,th Court,cannotIn th abinceof eoundbaslsthercfore
dlsturbthe dlscretlonthrt has bcenexerdsdby Rerpon&nt CIRIn
determlnlng,aft,ermaklng a comparlson,rtudy and waluaUonof
prvlou8BIR Rullngssxsnptlng chargescdlectcdby corporuuon
condomlnlums
frorn lncomtax and VAT,and thet R.MC65-2012ts
proper
the
lnterprdatlonof the law and rnore advrntagcousto th
Government.

In FrsReply, peUdonerargucd that repondent't lntarpretatlon

of the comeguenceof Judlclal conBlgnattonl3 ab6olutdy rronoous'
Petlfloner malntalns that In lleu of ddtvrhg tho moncy to tlro
respondent, the patlUoner aought the legrl rcfuge of Judldal
conslgnatlon,so much 30 thtt the act of Judldalcondgnagonlr rkln
to thc payment under Prot66tprovldGdln ths c.t$ ol Departmentof
Budgt and Manrgrncnt v3. Manlls'sRn6t Rctlf$t Assoclltlon, Inc.
G.R- No. 169466,09 May 2007, ctUngthe casc of l{atalln Coconut
Co., Inc. vs. Mun|clpalC.ouncllof Mtlab.ng, Lanaodel Sur, 8o thrt
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
purportedlydue and payablendther $(ungulthesth. obllgNtlonnor
iutimattcatly releases the obtlgor. Thus, lt 13 errongous for the
rBpondent to argue that when psu$onr mrdc the Judlclrl
conslgnatlon, lt automattcally becomes paymcnt of the VAT
purportsdlydue under R!'tC65-2012. Judldal ondgndlon 3lmfly
means puttlng the controYrtedamosnt In custod|r legls - zubJcctto
th dlsposltlon by thle Court upon ddsrmlnttlon of the rlghts and
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'
rGglstratlonas a VAT pcrson, and of courscthe non-avallrnentof tJte
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
After submlsslonof the rspectlveMemorundum
dellneatlngthelr rsspcctlveposltlonsand arguments,thls Courtwlll
ow regolveth peUUon.
Stappdof non Qtsnutlsthe lssusIn thls cts botleddown
to the followlng:
Rellefls props;
1. Whethera Pqtltlonfor Declaratory
Clrcular65-2012ls valld'
Flernorundum
2. WhetherRevenue
Rul63 Sectlon1 (1) of the Rulesof Courtprovldos:
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

constructlrn or vetld/ty arrsltlgi,eN far a da{Ja/r'.tlo'l
of hB ngm s dtrtlgF7therl un*r.
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
CsntorrInc. vs. Rrpubllc,190SCRATSA).
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
lntsrestln ths controversy;and
4) thc h6u lnvolvqdmu3t be rlp6 lor Judldrl dd*rnlnruon
(IolonUnovs. 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.
No. 179579,FSruary 1,2012).
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 $ns lsrnd wflfiout dse pntcss sf faw.
P.dtontr mslntrlnsthrt lt lg rn uqfurl tnd opprlfdw lsturns, rnd
imposer eddltlonaltax burdm upon tlte condonSnlurncorponilonc
whcn lt dcclrrcg thrt thc grott twptr of condomldumcotpoftUons
lndudlng &ssodatlon ducs, mornbg|3hlp fca6 and o$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 $3
rppruprlatercmorlyglvcn tho obt ln|ng elrcumdanaarnd thlt court
hts Jurlsdlctlonto t k cogntslnccof thc samc. Al Sl3 nqulr.rndtts
for llHng! c!3c lbr dscleretoryrulld.re prsutt In thtr crrc. Th.
ls6ue propoundd by prftuoner t5 ,uEtlchblq b) the ontfovatEy
bdrrcn pcfrUonrr and nepondent rre rdvrma b erch othu, c)
pdlttonq haer legalfnt{|$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.
Prtlssner3ecnBrllyrrlsod th vdldlty tnd sn3utuuonelltyof
Sre subJectmenrorandumdrcular, tflhldl rnsttor l5 rlp for Judlclrl

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$xFrrds 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,lltyd Vp
govafirment.'
PettUonrrhrs not yC ornrdtEd wlltul breech of thr subJect
lseu6nc.Petluonerle not asralllnCIan |56ssrnnt bst&3a s of th*
tlme of ths lssusnccof tho drcular tio ccndornlnlumcorporluont
and otts
coflecilon of Nesocleuondue rnd membweflp lk
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

angl'ged ttr be'dr tr hdncg

ln the Phttlp#nesshalltan6, h d$Fr'!e,, a

trr
lnn and tcrurt$t $rr,rfrrfr ,fat[t

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 QusrtedyCorporate
IncomeTax (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 .Safrtons75 and
76 sheil be pald at the uma tt' dxlarutbn or
return ln a manner prwnfud
W the
Cammisslonar.

Petltioneradoptedan accounungprloduslng the calendrr

year method.Thlswas showntn its IncomcTtx Returnflledfor the
year 2011,(Exh."H"-Prelhhary InJunc$on)rnd lyar usedagthelr
vldflce during the appflcaflonfor thc lscuancior a wrlt of
prellmlnarylnjundlon.The Memorandum
ClrEularwas lssucdon .
October31, 2012 maklngthe same afiecHvelmmcdlately.Slnce
pHtloneradoptedcalendrryear accounUng
perlod,rnd lrollowlng
the above clt6d rgulrmentsfor corporatflflng rnd payfng ol
Incomtax due on the corporcUon,
pcflilonefsll.blfity to pay the
tax for the year 2012 wlll aocrueon April of 2013, on the flnal
edjustmentrturn. Thua,rt the flmc of the fillngof the peflUonon
December26, 2OL2,peuuonerl5 not yt obftgatedto pay and flle lts
Incometax andvat returnand broach has nst yt 3etIn.
On the matteqof Judlclrlconstgnailon
rrlsed by pefliloner,
thls court In lts evaluaHon
of the caeahs not found proof that
petltlonerin fact made . Judlclalcon$tgnailon
of the purported
lncomotax andvalueaddedtax duefor December
2012. Howeyer,
svn lf lt dld, lt ls of no momntrslncat the Umethe pililonfor
declaratory rellef was flled, the corporat lncome tax for the
corporatlon
wasnotyet duefor payment.
As to th valldltyof tho MernonndumClrculrrl$rued,tt ls
rospondent'scontentlonthat lt merely clarffird and was slmply
lssuedto restatoandclarlfrtlre prevallingpluon and rullngof the

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
qlsung
m-imonnaumclrcu'larnot merdy Intsrpded or drrficd thc
BIi iullng but ln fact legl6latsdor lntroducsda.ntr leglslatlonundcr
ir," mintti of tts quasFlegldrweruthorlty. The BIR commbconor,
unaertne gulseoi clarlfyhg Incorrptex on aisode0ondue, mado
ievcnu" MimorandumCitrcutarr{'lectlvctnrnedlatdy. In so dolng,
mandateof due proces
the conoUtutlonal
the passagecontravenee
of law.
It becrs to sttte herdn tho perflnent poftton of the rullng
Clrcular65'2012thue:
Memorandum
In Revenuo
contalncd
"Thls Ctrcularts tssl.frdb cltrfi the txailllty
of asctatton dlw, nanbetslrtp {bea' and &rcr
assaecnrcnt/cfraryns @,lEctucl by andomlnlum
arwntion from lts tnemDersand tan|tts'
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
aggrlsntanfs/charyrltaFGmcraly hald ln 6nrt 0o Dc
ln
exryn*r
&bty for dmtn&rattw
ixa
tB pur,ogcs 1.e.. b gpGnt'Ftrytntfi
tmplGmcnttng

arii nanteti tte'oiaomntum rroftrt tb Hny the

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,.

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
andomlnlum cptpp,ratF,nfurnblus tE mcrt0g'rgaN
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.
Norcsver' srnd e d/n&'mlnlum @rpo1'.tb,n ls

suljEct fp incone trx, ,n@f'e paymentstn*

t0 ,t

ara subjocf to epplJcab&wtthhddng ttxcs wder

existlng reflulatta'ls.
tsc/atfon
IL VALUEADDEDrN VAD ofhar
,be6,
and
membersfi{p
d{e&,
rssrssmGnfs/c/targmallectad by r wrdunlntum
*r4ratlan ere suDJsctb VAT slne tlpy an*ltute
lncorne pdwncat ar emg6{Eildm

,br tha b'l'tci?f,lal

servicsit provider to its mcrnkls erd ienant* "

ThEabovecltd porton of the MsrtorartdurnClrcularfrlled to
sfrowryfiatpartlcularlasdlt chrflled. Ineieadlt Eftsr* that lt mcrsly
departedfrom the cvaralrullng3of thc Bursru exernpdngfrom
Income tax ths assessrnents/chergecollcld by condornlnlwn
corporrUonsfrcm ltr membQrt,on the groundthat tfie collccfionof
$ssdaUondriesand other rcsegrnwts/cnorgesare rnerCyhdd In
trust to be usedsdely for ddmlnlstrauvacxpnsecIn lmpleNrlQntlng
tts pur?ose"The new rJrcularln E{fed mad A$ cwn legilsldbn
rbandonlngthe prvlou*rullngeof tha BIR whlch becamcthc
pracficeof the conCom,nlum
corporailoneIndudlnghflnptlUonar.
The RevenueClrcularchangedrnd depertedlrom the long $rndlng
ruling of th BIR that assodruondu6Bndothst f** and charg3
coltxtad from mstrbss .rs tar axenrpt, ln to dolng, lt rbru$ly
cfiarg*sfrorn taxpayeran lrnposlUonwftHhwas thn not odt0ng,
and worssmade lt lmmedlrtelyel'ibstlvswhlch lE Prgudlcltl to St
flghts of the pe$tiorrer"It dtd not mrely lnterpret or clarlfy but
changadnltogetherthe long standlnsrul*s of the Buraeuof Intsnal
Rvnu.
It 13rclvsntto statEherdn the rul|ngof the HIghcourt In tlte
of Intsrnal Revanusvs. Court of Appeals,
cags of Commlsslonr

ll

Court of Tax Appeb and FortuneToboccoCorpor!flon,G.R. N o .

guotedthu6:
119761,29 August1996).whlchls hreunder
'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,
" Ftlg'mlumMora,"aN "Chamfun'c&Eratb gvttih
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,latlveatfrndv. TI7E&E &*rvena
of
tha iaqulrarnanB of natfu, lurdng and ol
publlcat&,nsttwW not hsva&cn lgnarcd.'
In thc lmtsnt c!se, lt was dlsclmadby petlflonerthrt FlrutEBank CondsmlnlumCorporaUonb a msnlEr of thc itfakatl
Comrn3rclef
EsteteAssochtlon,Inc. who elso wrot r ldter to thc
HonorabloBIR Commleslonereoeklngthi d#armsntof the zubJect
MemorandumCtrcular 30 thst crtaln ls,But8msybe properly
addreseed
and the guldClnessn ths samr be put In phcc. Uktvvtss,
patltlonerrppendedto lb Mmorrndumthc vrrlous opfnlom and
rullngr of prevlous BIR Comrnlscloncruend even durlng the
rppllcetlonlbr the lssusnc$of s wrlt of prdlmhtry tn unctlon(Slxto
Group,ln
Legaland Enforccmont
EsqulvlssIV, 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
collectjomand otherasEessrnentr/chargs
Ite mernbcrs,whlch wlll be hrdd ln tru6t rnd rYfkh Nre to bn uscd
soldy for adrnlnl*rauvcxpnses|n lmplsnnunglB puryo6/5and
whlctrths rforessldcouldnot reallzeany galn or proflt rs r mgultof
Its rccdpts thereof, ero not IncludlbleIn tald corporeuon'sgross
Incorne,endtherafore,
thc fund th3|dbrc 8rs not ilbrert to VAT.
Moreover,lt ls slrcady the common buslnes* Fncflc of
petftlonerthat the assoclatlondues, membcrshlpfees snd tha llke

t2
are not Includedas part of lts Incomeand thcrcforeof the VAT' The
advent of the Mamorandum Clrcular 65-2012 lseud by the
commlssionerchangesthe trx lllblllty of pestlonerln the snsathtt
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
shoutdhave accordedpetluonerth oPportunityto be h'rd, whlch
was the bone of contntlonof th lctter sent to the Honorcble
Commlsdonerwhlchwas not actedupon'
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
G.R. No. 179579,dated February1, 201a, 8.Gaseof
Corporatlon,
stmitar tmpdrt also glve lrnportanccto the requtremsntof notlca and
hearlng and pub[Catlon before a regulatlon could be glYen an
lmprimatur of valldity, the guprerneCourt ddarEdl
" ConsldcrlnE that ths queffinad

woud aM

regulttlon

tl'e subtandvetlghtsof rwndent ae

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:

Sectton3. Htlng - (I) Evcgrytgatry shall file

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

Section g. Public hrtalpetion * (1) If not

othenviserqulred by law,en aEencyshnll,as far as
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
been pubtishedln a newspaperaf gcnenl circulatlon
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(

Llkcw&e,ln Tenad,vs, TuYera,we held;

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,'
Slncethe BIR In passlngthe subJectmsnorrndum clrcuhr
falled to accordrespondentor those slmllarlyStuated 8s a tax
pryer due notlc and opportunltyto be heard,bN\orc
lssulngs.ld
clrcularlt fs thlEcourt'soplnlonthat the lssuanccwri arbltr dly and
ln vlolatlon.of the due processclause of the co$tftuHon. Tho
respondentIn lmposlngaddl$onaltax burdenon psUUoncrvlolated
rlghtto dueno0ceand heirlng.
he latter'sconstltuHonNl
Anent the prayer of ptltloner for thls court to meke a
pronouncement
on who betwEenth rspondntBureauof Intmal
Revanueand the former ls entltldto the eumulatd amountof
lncEmetax and yat In custodlclegls,thls courtcannotrt thls polnt
dectarethe same. Flrst, th allegatlonof pfltlonorthat lt elready
mrde a contlnulngJudlclalconCgnsuonon the amount of the
purportedVATwas not substan$ated.
Exceptlof tho bars alhgatlong
ghown
that thr waE Inded a
of ptltlonr no proof was
conrignatlonrnadeto thls court or to 6ny othrcourt. Exceptfor tfie
lottar addrassdto th6 RevenueDlstrtct Offlcer Rlcsrdo $plr{tu
dated Decembert2, 2012 announclngthe conilnulngJudldal
conslgnstlon
of the lncometax and VATcmountspurportcdlydue
RMC65-2012,nowherelnthq recordcoufdwa
underthe qustloned
flnd that a conslgnatlonwas rnedc. Hencs, tharE 13 retson to
detrmlnewho betwcenthe contendlngparflEls enUtledthereto.

t4
In vlew of the foregolng,the DeclaratoryReliefls
WHEREFORE,
glven due course.The lssuanceof RevenueMemorandumClrcularNo.
OS-ZOfZb herebydeclaredto havebeen invalldlylssued.
SOORDERED.
MakatlClty, Septmber5, 2013.

Cc:
Atty. Jo6D. Melgarejo
Counselfor mitionr
BZLA2 LapujapuSt.,
NEwCaoitolEstates I
Ave., QuezonCitY
Commonweahh
Atty. BmardimPaulSomera,Jr'
BIR
ForRespondenrt
Officeof thE.SolicitorGneral
134 AmorsoloSt., LegopiVillaga
Mak ti City
LitigationDivision
Burgaud IntArnalRevEnue
Rm.703, BIRBldg.,
Diliman,QuezonCttY
Mcv/llrct ebank vs. blr'retolution