FREAH GENICE A.

TOLOSA LLB 3A

PELIZLOY REALTY CORPORATION, represented herein by its President, GREGORY K. LOY,

vs.
THE PROVINCE OF BENGUET

G.R. No. 183137 April 10, 2013

FACTS:

Petitioner Pelizloy Realty Corporation ("Pelizloy") owns Palm Grove Resort, which is designed for recreation and
which has facilities like swimming pools, a spa and function halls. It is located at Asin, Angalisan, Municipality of
Tuba, Province of Benguet.

On December 8, 2005, the Provincial Board of the Province of Benguet approved Provincial Tax Ordinance No. 05-
107, otherwise known as the Benguet Revenue Code of 2005 ("Tax Ordinance").

Section 59, Article X of the Tax Ordinance levied a ten percent (10%) amusement tax on gross receipts from
admissions to "resorts, swimming pools, bath houses, hot springs and tourist spots

RTC ruling: On the validity of Section 59, Article X of the Tax Ordinance, the RTC noted that, while Section 59,
Article X imposes a percentage tax, Section 133 (i) of the LGC itself allowed for exceptions.

It noted that what the LGC prohibits is not the imposition by LGUs of percentage taxes in general but the
"imposition and levy of percentage tax on sales, barters, etc., on goods and services only." 5It further gave
credence to the Province of Benguet's assertion that resorts, swimming pools, bath houses, hot springs, and
tourist spots are encompassed by the phrase other places of amusement in Section 140 of the LGC.

ISSUES:

1. Whether or not provinces are authorized to impose amusement taxes on admission fees to resorts,
swimming pools, bath houses, hot springs, and tourist spots for being "amusement places" under the Local
Government Code.

LAW APPLICABLE:
The case was decided based on the established jurisprudence, as
follows:

The rule governing the taxing power of provinces, cities, muncipalities and barangays is summarized in Icard v. City
Council of Baguio:

It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of
taxation. The charter or statute must plainly show an intent to confer that power or the municipality, cannot assume
it. And the power when granted is to be construed in strictissimi juris. Any doubt or ambiguity arising out of the term
used in granting that power must be resolved against the municipality. Inferences, implications, deductions all
these have no place in the interpretation of the taxing power of a municipal corporation.

Therefore, the power of a province to tax is limited to the extent that such power is delegated to it either by the
Constitution or by statute.

Section 5, Article X of the 1987 Constitution is clear on this point:

Each local government unit shall have the power to create its own sources of revenues and to levy taxes,
fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic
policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.

Thus, the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct
authority to levy taxes, fees and other charges. Nevertheless, such authority is "subject to such guidelines and
limitations as the Congress may provide".

Commissioner of Internal Revenue v. Citytrust Investment Phils. Inc., the Supreme Court defined
percentage tax as a "tax measured by a certain percentage of the gross selling price or gross value in money of
goods sold, bartered or imported; or of the gross receipts or earnings derived by any person engaged in the sale of
services.

Also, Republic Act No. 8424, otherwise known as the National Internal Revenue Code (NIRC), in Section
125, Title V,lists amusement taxes as among the (other) percentage taxes which are levied regardless of whether or
not a taxpayer is already liable to pay value-added tax (VAT).

Amusement taxes are fixed at a certain percentage of the gross receipts incurred by certain specified establishments.
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Thus, amusement taxes are percentage taxes. However, provinces are not barred from levying amusement taxes
even if amusement taxes are a form of percentage taxes. Section 133 (i) of the LGC prohibits the levy of percentage
taxes "except as otherwise provided" by the LGC.

ARGUMENTS:

PETITIONER
Tax Ordinance's imposition of a 10%
amusement tax on gross receipts from
admission fees for resorts, swimming pools,
bath houses, hot springs, and tourist spots is an
ultra vires act on the part of the Province
of Benguet.
That Section 59, Article X of the Tax Ordinance
imposed a percentage tax in violation of the
limitation on the taxing powers of local
government units (LGUs) under Section 133
(i) of the LGC. Thus, it was null and void ab
initio.
RESPONDENT
On substantive grounds, the Province of
Benguet argued that the phrase other places
of amusement in Section 140 (a) of the LGC
encompasses resorts, swimming pools, bath
houses, hot springs, and tourist spots since
"section 131 (b) of the LGC defines "amusement"
as "pleasurable diversion and entertainment x
x x synonymous to relaxation, avocation,
pastime, or fun.

COURTS RULING:
NO

Amusement taxes are percentage taxes. However, provinces are not barred from levying amusement taxes even if
amusement taxes are a form of percentage taxes. The levying of percentage taxes is prohibited "except as otherwise
provided" by the LGC. Section 140 provides such exception.

Section 140 expressly allows for the imposition by provinces of amusement taxes on "the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement."

However, resorts, swimming pools, bath houses, hot springs, and tourist spots are not among those places expressly
mentioned by Section 140 of the LGC as being subject to amusement taxes. Thus, the determination of whether
amusement taxes may be levied on admissions to these places hinges on whether the phrase other places of
amusement encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots.

Under the principle of ejusdem generis, "where a general word or phrase follows an enumeration of particular and
specific words of the same class or where the latter follow the former, the general word or phrase is to be construed
to include, or to be restricted to persons, things or cases akin to, resembling, or of the same kind or class as those
specifically mentioned."

Section 131 (c) of the LGC already provides a clear definition: "Amusement Places" include theaters,
cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by
seeing or viewing the show or performances.

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LEPANTO CONSOLIDATED MINING COMPANY, vs HON. MAURICIO B. AMBANLOC,

G.R. No. 180639 June 29,2010

Facts:

The national government issued to petitioner Lepanto Consolidated Mining Company (Lepanto) a mining

lease contract covering, among others, its TIKEM leased mining claim at Sitio Nayak, Barrio Palasan

(Suyoc), Municipality of Mankayan, Benguet. The contract granted Lepanto the right to extract and use for its

purposes all mineral deposits within the boundary lines of its mining claim. Upon inquiry, the Mines and Geo-sciences

Bureau of the Department of Environment and Natural Resources (DENR) advised Lepanto that, under its contract, it

did not have to get a permit to extract and use sand and gravel from within the mining claim for its operational and

infrastructure needs. Based on this advice, Lepanto proceeded to extract and remove sand, gravel, and other earth
materials from the mining site.

Lepanto used the quarried materials to back-fill stopesportions of the earth excavated as a result of mining

replacing what had been mined to maintain the integrity of the ground. It also used sand and gravel to construct and

maintain concrete structures needed in its mining operation, such as a tailings dam, access roads, and offices. Its use

of quarry resources, readily available within its mining claim, was more practical and cheaper than having to
outsource them.

Respondent Mauricio Ambanloc, the provincial treasurer of Benguet, sent a demand letter to Lepanto,

asking it to pay the province P1,901,893.22 as sand and gravel tax, for the quarry materials that it extracted from its

mining site from 1997 to 2000. Lepanto sent a letter-protest to the provincial treasurer, but the latter denied the
same, insisting on payment.

Issue: Whether or not Lepanto is liable for the tax imposed by the Province of Benguet on the sand and gravel that
it extracted from within the area of its mining claim and used exclusively in its mining operations.

Law Applicable:

The law applicable in this case according to Supreme Court is the revenue measures itself
which is the Revised Benguet Revenue Code:

Article D. Tax on Sand, Gravel and Other Quarry Resources.

SECTION 3. Imposition of Tax. There shall be levied a tax of ten (10) percent of fair
market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other
quarry resources, x x x applied for and expected to be extracted or removed from public lands x x
x within the territorial jurisdiction of Benguet Province.

This provision may not apply in case of gratuitous permits for government projects
within Benguet Province.

Arguments:

PETITIONER

Lepanto insists that the subject tax intended to cover only commercial extractions since the provincial

revenue code referred to fair market value of the resources, quantity sold or disposed, amount left in

stock, selling price, and buyers information.

Lepanto claims that the tax can only be levied against extractions by persons or entities required to apply
for permits to remove quarry resources.

Since the mining lease contract with the national government granted it the right to extract and utilize all

mineral deposits from within its mining claim, Lepanto claims that it did not need to apply for a separate

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permit from the local government.

Lepanto relies on the principle that when a company is taxed on its main business, it is no longer taxable
for engaging in an activity that is but a part of, incidental to, and necessary to such main business.

Lepanto points out that, since it did not extract and use sand and gravel as independent activities but as

integral parts of its mining operations, it should not be subjected to a separate tax on the same.

The Courts Rulings:

The provincial revenue code provides that the subject tax had to be paid prior to the issuance of the permit
to extract sand and gravel.

Its Article D, Section 2, enumerates four kinds of permits: commercial, industrial, special, and

gratuitous. Special permits covered only personal use of the extracted materials and did not allow the permitees to

sell materials coming from his concession. Among applicants for permits, however, only gratuitous permits were

exempt from the sand and gravel tax. It follows that persons who applied for special permits needed to pay the tax,

even though they did not extract materials for commercial purposes. Thus, the tax needed to be paid regardless of
the applicability of the administrative and reportorial requirements of that revenue code.

On Lepantos claim that he did not need to apply for a separate permit from the local government because
of its Lease agreement from the government, the Supreme Court state that:

It merely declares Lepantos extraction and use of mineral deposits bears the consent of the national

government, in line with the principle that exploration of natural resources can only be done under the control and
supervision of the State. The contract makes no mention of any exemption from securing government permits.

Lepanto invokes the Bureau of Mines and Geo-Sciences view that the mining company did not require it to

get any of the permits that Mines Administrative Order MRD-27 might require. But that Bureaus view applied only to

permits under MRD-27. The Bureau has no authority to determine the applicability of local ordinances. Besides, even

the Bureau itself states that the exemption from MRD-27 is not absolute as it shall not apply if the sand and gravel

were to be disposed of commercially. An exemption from the requirements of the provincial government should have

a clear basis, whether in law, ordinance, or even from the contract itself. Unfortunately for Lepanto, it failed to show
its entitlement to such exemption.

The Petitioners argument that when a company is taxed on its main business it can no longer be taxable
for engaging in an activity that is but part of, incidental to, and necessary to such main business, was held to be
inapplicable. The Court said that the cases where the above principle has been applied involved business taxes and
thus the incidental activities could not be treated as separate and distinct from the main business. Here the tax being
imposed was an excise tax levied on the privilege of extracting gravel and sand.