COMMISSIONER OF INTERNAL REVENUE (CIR) VS.

PHILIPPINE
GLOBAL COMMUNICATIONS INC. (Philippine Global)
G.R. No. 144696
August 16, 2006
Carpio Morales
DOCTRINE:
The amendment of a law, being part of the original which is already in
force and effect, must necessarily become effective as part of the amended
law at the time the amendment takes effect.
FACTS:
Respondent operates under a legislative franchise granted by RA 4617
to construct, maintain and operate communications systems by radio, wire,
satellite and other means. It was subject to 3% franchise tax under Section
117 (b) of the NIRC.
Said provision of the NIRC was amended by Section 12 of E-VAT Law
which was passed in 1994, wherein the payment of 3% franchise tax by a
telecommunications company required under Section 117 (b) of the Tax Code
was omitted. After proper publication on May 12, 1994, it therefore became
effective on May 28, 1994.
On June 30, 1994, in the case of Tolentino vs. Sec. of Finance, which
assailed the constitutionality of the E-VAT Law, issued a TRO enjoining the
enforcement and implementation. The TRO was later on lifted.
On account of the suspension of the implementation of the E-VAT Law,
respondent filed with BIR a claim for refund of the 3% franchise tax it
allegedly erroneously paid in the total amount of P70,795,150.51.
Respondent claimed that the passage of the E-VAT law which omitted
the 3% franchise tax. BIR having failed to act of its claim, respondent filed a
petition for review before the CTA. CTA granted the respondents claim, and
ordered petitioner to REFUND the amount of P70,795,150.51.
Petitioner filed a petitioner for review before the CA. The appellate
affirmed that of CTA. Hence this petition.
ISSUE:

Whether or not respondent is liable to pay the 3% franchise tax under

Section 117 (b) of PD No. 1158 or the 1977 National Internal Revenue Code
(NIRC) during the suspension of the enforcement or implementation of RA
No. 7716 or the E-VAT Law which was passed in 1994 amending such
provision of the NIRC.
RULING:
Petition was grated. Respondent is liable to pay the 3% franchise tax.
RATIO DECIDENDI:
Section 12 of the E-VAT Law omitted
respondent for paying such tax under
Section 3 of the E-VAT Law, respondents
VAT on sales of services. The effectivity
because of the TRO.

the 3% franchise tax and excluded

that said provision. However, in
sale of services is subject to 10%
of E-VAT was however suspended

The TRO restrained merely the implementation of those provisions of

the E-VAT Law which need to be implemented by the BIR and not those
provisions which are self-operative.
In the RMC No. 27-94, issued by the CIR on June 30, 1994, said circular
directed all internal revenue officers to comply with the directives that All
Vat and non-VAT persons shall be governed by the provisions of the NIRC
prior to its amendment by Republic Act. No. 7716, and All other
amendment of the NIRC made by RA 7716 shall be considered ineffective
until Supreme Court has declared otherwise.
When the TRO in Tolentino et al. was lifted, the tax liability of
respondent was, following the earlier quoted Revenue Memorandum Circular,
governed by Section 117 (b) of the Tax Code in which case it was liable to
pay the 3% franchise tax. The abolition of the 3% franchise tax on
telecommunications companies, and its replacement by the 10% VAT, was
effective and implemented only on January 1, 1996.
To grant a refund of the franchise tax it paid prior to the effectivity and
implementation of the VAT would create a vacuum and thereby deprive the
government from collecting either the VAT or the franchise tax.