Commissioner of Internal Revenue v.

Court of Tax Appeals

still argues that President Marcos has vetoed the whole

provision which now embodies Section 191-A. Petitioner
argues this by saying that the words hotels, motels,
resthouses were the only ones vetoed.

Petitioner:Commissioner of Internal Revenue

Respondents:Court of Tax Appeals
Ponencia: Medialdea
DOCTRINE: 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.
FACTS:
1 A previous decision of the court in the case of CIR v. Manila
Hotel Corporation involved overruling the decision of the
Court of Tax Appeals declaring the collection of the caterers
tax under Section 191-A illegal citing the fact that President
Marcos had already vetoed that portion (Section 42) when it
was still a House Bill.
2

ISSUE:
Whether the presidential veto referred to the entire section or
merely to the imposition of 20% tax on gross receipts of
operators or proprietors of restaurants, refreshment parlors,
bars and other eating places which are maintained within the
premises or compound of a hotel, motel or resthouses?
PROVISION:
Sec. 27, Article VI
(2) The President shall have the power to veto any particular
item or items in an appropriation, revenue, or tariff bill, but
veto shall not affect the item or items which he does not
object

The present petition is similar in that sense, and could be

dispensed with had it not been for the position of the CTA
regarding the veto of the president regarding the item.

Sec. 191-A: A Caterers Tax shall be imposed on:

(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.

Private respondent Manila Golf and Country Club is a non

stock corporation it maintains a golf course and operates a
clubhouse with a lounge, bar and dining room, but these
facilities are for the exclusive use of its members and
accompanied guests, and it charges on cost-plus-expense
basis. As such, it claims it should have been exempt from
payment of privilege taxes were it not for the last paragraph
of Section 191-A of R.A. No. 6110, otherwise known as the
"Omnibus Tax Law."

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.

The petitioner maintains that the private respondent is

subject to the caterers tax , however the private respondent
aw

RULING + RATIO:
As previously mentioned, the SC has already ruled that the
presidential veto referred merely to the inclusion of hotels, motels
and resthouses in the 20% caterer's tax bracket but not to the whole
section. The ineffectual veto by the President rendered the whole
section 191-A as not having been vetoed at all and it, therefore,
became law as an unconstitutional veto has no effect, whatsoever.

Moreover, inclusion of hotels, motels and resthouses in the

20% caterer's tax bracket are "items" in themselves within the
meaning of Sec. 20(3), Art. VI of the 1935 Constitution which,
therefore, the President has the power to veto. 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.

DISPOSITION: 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.