SECOND DIVISION

[G.R. No. 183505. February 26, 2010.]

COMMISSIONER OF INTERNAL REVENUE,  petitioner, vs. SM PRIME

HOLDINGS, INC. and FIRST ASIA REALTY DEVELOPMENT
CORPORATION,  respondents.

DECISION

DEL CASTILLO, J  p:

When the intent of the law is not apparent as worded, or when the application of the
law would lead to absurdity or injustice, legislative history is all important. In such cases,
courts may take judicial notice of the origin and history of the law, 1 the deliberations during
the enactment, 2 as well as prior laws on the same subject matter 3 to ascertain the true
intent or spirit of the law.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court, in relation
to Republic Act (RA) No. 9282, 4 seeks to set aside the April 30, 2008 Decision 5 and the
June 24, 2008 Resolution 6 of the Court of Tax Appeals (CTA).
Factual Antecedents
Respondents SM Prime Holdings, Inc. (SM Prime) and First Asia Realty
Development Corporation (First Asia) are domestic corporations duly organized and existing
under the laws of the Republic of the Philippines. Both are engaged in the business of
operating cinema houses, among others. 7
CTA Case No. 7079
On September 26, 2003, the Bureau of Internal Revenue (BIR) sent SM Prime a
Preliminary Assessment Notice (PAN) for value added tax (VAT) deficiency on cinema ticket
sales in the amount of P119,276,047.40 for taxable year 2000. 8 In response, SM Prime filed
a letter-protest dated December 15, 2003. 9
On December 12, 2003, the BIR sent SM Prime a Formal Letter of Demand for the
alleged VAT deficiency, which the latter protested in a letter dated January 14, 2004. 10
On September 6, 2004, the BIR denied the protest filed by SM Prime and ordered it
to pay the VAT deficiency for taxable year 2000 in the amount of
P124,035,874.12. 11 SAcCIH
On October 15, 2004, SM Prime filed a Petition for Review before the CTA docketed
as CTA Case No. 7079. 12
CTA Case No. 7085
On May 15, 2002, the BIR sent First Asia a PAN for VAT deficiency on cinema ticket
sales for taxable year 1999 in the total amount of P35,823,680.93. 13 First Asia protested the
PAN in a letter dated July 9, 2002. 14
Subsequently, the BIR issued a Formal Letter of Demand for the alleged VAT
deficiency which was protested by First Asia in a letter dated December 12, 2002. 15
 On September 6, 2004, the BIR rendered a Decision denying the protest and
ordering First Asia to pay the amount of P35,823,680.93 for VAT deficiency for taxable year
1999. 16
Accordingly, on October 20, 2004, First Asia filed a Petition for Review before the
CTA, docketed as CTA Case No. 7085. 17
CTA Case No. 7111
On April 16, 2004, the BIR sent a PAN to First Asia for VAT deficiency on cinema
ticket sales for taxable year 2000 in the amount of P35,840,895.78. First Asia protested the
PAN through a letter dated April 22, 2004. 18
Thereafter, the BIR issued a Formal Letter of Demand for alleged VAT
deficiency. 19 First Asia protested the same in a letter dated July 9, 2004. 20
On October 5, 2004, the BIR denied the protest and ordered First Asia to pay the
VAT deficiency in the amount of P35,840,895.78 for taxable year 2000. 21
This prompted First Asia to file a Petition for Review before the CTA on December
16, 2004. The case was docketed as CTA Case No. 7111. 22
CTA Case No. 7272
Re: Assessment Notice No. 008-02
A PAN for VAT deficiency on cinema ticket sales for the taxable year 2002 in the total
amount of P32,802,912.21 was issued against First Asia by the BIR. In response, First Asia
filed a protest-letter dated November 11, 2004. The BIR then sent a Formal Letter of
Demand, which was protested by First Asia on December 14, 2004. 23
Re: Assessment Notice No. 003-03
A PAN for VAT deficiency on cinema ticket sales in the total amount of
P28,196,376.46 for the taxable year 2003 was issued by the BIR against First Asia. In a letter
dated September 23, 2004, First Asia protested the PAN. A Formal Letter of Demand was
thereafter issued by the BIR to First Asia, which the latter protested through a letter dated
November 11, 2004. 24 cECaHA
On May 11, 2005, the BIR rendered a Decision denying the protests. It ordered First
Asia to pay the amounts of P33,610,202.91 and P28,590,826.50 for VAT deficiency for
taxable years 2002 and 2003, respectively. 25
Thus, on June 22, 2005, First Asia filed a Petition for Review before the CTA,
docketed as CTA Case No. 7272. 26
Consolidated Petitions
The Commissioner of Internal Revenue (CIR) filed his Answers to the Petitions filed
by SM Prime and First Asia. 27
On July 1, 2005, SM Prime filed a Motion to Consolidate CTA Case Nos. 7085, 7111
and 7272 with CTA Case No. 7079 on the grounds that the issues raised therein are identical
and that SM Prime is a majority shareholder of First Asia. The motion was granted. 28
Upon submission of the parties' respective memoranda, the consolidated cases were
submitted for decision on the sole issue of whether gross receipts derived from admission
tickets by cinema/theater operators or proprietors are subject to VAT. 29
Ruling of the CTA First Division
On September 22, 2006, the First Division of the CTA rendered a Decision granting
the Petition for Review. Resorting to the language used and the legislative history of the law,
it ruled that the activity of showing cinematographic films is not a service covered by VAT
under the National Internal Revenue Code (NIRC) of 1997, as amended, but an activity
subject to amusement tax under RA 7160, otherwise known as the Local Government Code
(LGC) of 1991. Citing House Joint Resolution No. 13, entitled "Joint Resolution Expressing
the True Intent of Congress with Respect to the Prevailing Tax Regime in the Theater and
Local Film Industry Consistent with the State's Policy to Have a Viable, Sustainable and
Competitive Theater and Film Industry as One of its Partners in National
Development," 30 the CTA First Division held that the House of Representatives resolved
that there should only be one business tax applicable to theaters and movie houses, which is
the 30% amusement tax imposed by cities and provinces under the LGC of 1991. Further, it
held that consistent with the State's policy to have a viable, sustainable and competitive
theater and film industry, the national government should be precluded from imposing its own
business tax in addition to that already imposed and collected by local government units. The
CTA First Division likewise found that Revenue Memorandum Circular (RMC) No. 28-2001,
which imposes VAT on gross receipts from admission to cinema houses, cannot be given
force and effect because it failed to comply with the procedural due process for tax issuances
under RMC No. 20-86. 31 Thus, it disposed of the case as follows:
IN VIEW OF ALL THE FOREGOING, this Court hereby GRANTS the
Petitions for Review. Respondent's Decisions denying petitioners' protests
against deficiency value-added taxes are hereby REVERSED. Accordingly,
Assessment Notices Nos. VT-00-000098, VT-99-000057, VT-00-000122, 003-
03 and 008-02 are ORDERED cancelled and set aside.
SO ORDERED. 32
Aggrieved, the CIR moved for reconsideration which was denied by the First Division
in its Resolution dated December 14, 2006. 33
Ruling of the CTA En Banc
Thus, the CIR appealed to the CTA En Banc. 34 The case was docketed as CTA EB
No. 244. 35 The CTA En Banc however denied 36 the Petition for Review and
dismissed 37 as well petitioner's Motion for Reconsideration.
The CTA En Banc  held that Section 108 of the NIRC actually sets forth an
exhaustive enumeration of what services are intended to be subject to VAT. And since the
showing or exhibition of motion pictures, films or movies by cinema operators or proprietors is
not among the enumerated activities contemplated in the phrase "sale or exchange of
services," then gross receipts derived by cinema/theater operators or proprietors from
admission tickets in showing motion pictures, film or movie are not subject to VAT. It
reiterated that the exhibition or showing of motion pictures, films, or movies is instead subject
to amusement tax under the LGC of 1991. As regards the validity of RMC No. 28-2001, the
CTA En Banc agreed with its First Division that the same cannot be given force and effect for
failure to comply with RMC No. 20-86. TaSEHD
Issue
Hence, the present recourse, where petitioner alleges that the CTA En
Banc  seriously erred:
(1) In not finding/holding that the gross receipts derived by
operators/proprietors of cinema houses from admission tickets [are]
subject to the 10% VAT because:
(a) THE EXHIBITION OF MOVIES BY CINEMA
OPERATORS/PROPRIETORS TO THE PAYING PUBLIC IS A
SALE OF SERVICE;
(b) UNLESS EXEMPTED BY LAW, ALL SALES OF SERVICES ARE
EXPRESSLY SUBJECT TO VAT UNDER SECTION 108 OF
THE NIRC OF 1997;
 (c) SECTION 108 OF THE NIRC OF 1997 IS A CLEAR PROVISION
OF LAW AND THE APPLICATION OF RULES OF
STATUTORY CONSTRUCTION AND EXTRINSIC AIDS IS
UNWARRANTED;
(d) GRANTING WITHOUT CONCEDING THAT RULES OF
CONSTRUCTION ARE APPLICABLE HEREIN, STILL THE
HONORABLE COURT ERRONEOUSLY APPLIED THE
SAME AND PROMULGATED DANGEROUS PRECEDENTS;
(e) THERE IS NO VALID, EXISTING PROVISION OF LAW
EXEMPTING RESPONDENTS' SERVICES FROM THE VAT
IMPOSED UNDER SECTION 108 OF THE NIRC OF 1997;
(f) QUESTIONS ON THE WISDOM OF THE LAW ARE NOT PROPER
ISSUES TO BE TRIED BY THE HONORABLE COURT; and
(g) RESPONDENTS WERE TAXED BASED ON THE PROVISION OF
SECTION 108 OF THE NIRC.
(2) In ruling that the enumeration in Section 108 of the NIRC of 1997 is
exhaustive in coverage;
(3) In misconstruing the NIRC of 1997 to conclude that the showing of motion
pictures is merely subject to the amusement tax imposed by the Local
Government Code; and
(4) In invalidating Revenue Memorandum Circular (RMC) No. 28-2001. 38  
Simply put, the issue in this case is whether the gross receipts derived by operators
or proprietors of cinema/theater houses from admission tickets are subject to VAT. AEIHaS
Petitioner's Arguments
Petitioner argues that the enumeration of services subject to VAT in Section 108 of
the NIRC is not exhaustive because it covers all sales of services unless exempted by law.
He claims that the CTA erred in applying the rules on statutory construction and in using
extrinsic aids in interpreting Section 108 because the provision is clear and unambiguous.
Thus, he maintains that the exhibition of movies by cinema operators or proprietors to the
paying public, being a sale of service, is subject to VAT.
Respondents' Arguments
Respondents, on the other hand, argue that a plain reading of Section 108 of
the NIRC of 1997 shows that the gross receipts of proprietors or operators of
cinemas/theaters derived from public admission are not among the services subject to VAT.
Respondents insist that gross receipts from cinema/theater admission tickets were never
intended to be subject to any tax imposed by the national government. According to them, the
absence of gross receipts from cinema/theater admission tickets from the list of services
which are subject to the national amusement tax under Section 125 of the NIRC of
1997 reinforces this legislative intent. Respondents also highlight the fact that RMC No. 28-
2001 on which the deficiency assessments were based is an unpublished administrative
ruling.
Our Ruling
The petition is bereft of merit.
The enumeration of services subject to VAT under Section 108 of the  NIRC  is not exhaustive
Section 108 of the NIRC of 1997 reads:
 SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties. —
(A) Rate and Base of Tax. — There shall be levied, assessed and
collected, a value-added tax equivalent to ten percent (10%) of gross receipts
derived from the sale or exchange of services, including the use or lease of
properties.
The phrase "sale or exchange of services" means the performance
of all kinds of services in the Philippines for others for a fee, remuneration or
consideration, including those performed or rendered by construction and
service contractors; stock, real estate, commercial, customs and immigration
brokers; lessors of property, whether personal or real; warehousing
services; lessors or distributors of cinematographic films; persons
engaged in milling, processing, manufacturing or repacking goods for others;
proprietors, operators or keepers of hotels, motels, rest houses, pension
houses, inns, resorts; proprietors or operators of restaurants, refreshment
parlors, cafes and other eating places, including clubs and caterers; dealers in
securities; lending investors; transportation contractors on their transport of
goods or cargoes, including persons who transport goods or cargoes for hire
and other domestic common carriers by land, air and water relative to their
transport of goods or cargoes; services of franchise grantees of telephone and
telegraph, radio and television broadcasting and all other franchise grantees
except those under Section 119 of this Code; services of banks, non-bank
financial intermediaries and finance companies; and non-life insurance
companies (except their crop insurances), including surety, fidelity, indemnity
and bonding companies; and similar services regardless of whether or not the
performance thereof calls for the exercise or use of the physical or mental
faculties. The phrase "sale or exchange of services" shall likewise
include: ECAaTS
(1) The lease or the use of or the right or privilege to use any copyright,
patent, design or model, plan, secret formula or process, goodwill, trademark,
trade brand or other like property or right;
xxx xxx xxx
(7) The lease of motion picture films, films, tapes and discs; and
(8) The lease or the use of or the right to use radio, television, satellite
transmission and cable television time.
xxx xxx xxx (Emphasis supplied)
A cursory reading of the foregoing provision clearly shows that the enumeration of
the "sale or exchange of services" subject to VAT is not exhaustive. The words, "including,"
"similar services," and "shall likewise include," indicate that the enumeration is by way of
example only. 39
Among those included in the enumeration is the "lease of motion picture films, films,
tapes and discs." This, however, is not the same as the showing or exhibition of motion
pictures or films. As pointed out by the CTA En Banc:
"Exhibition" in Black's Law Dictionary is defined as "To show or display.
. . . To produce anything in public so that it may be taken into possession" (6th
ed., p. 573). While the word "lease" is defined as "a contract by which one
owning such property grants to another the right to possess, use and enjoy it
on specified period of time in exchange for periodic payment of a stipulated
price, referred to as rent (Black's Law Dictionary, 6th ed., p. 889). . . . 40
 Since the activity of showing motion pictures, films or movies by cinema/theater
operators or proprietors is not included in the enumeration, it is incumbent upon the court to
the determine whether such activity falls under the phrase "similar services." The intent of the
legislature must therefore be ascertained.
The legislature never intended operators
or proprietors of cinema/theater houses to be covered by VAT
Under the NIRC of 1939 41 the national government imposed amusement tax on
proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses, boxing
exhibitions, and other places of amusement, including cockpits, race tracks, and
cabaret. 42 In the case of theaters or cinematographs, the taxes were first deducted,
withheld, and paid by the proprietors, lessees, or operators of such theaters or
cinematographs before the gross receipts were divided between the proprietors, lessees, or
operators of the theaters or cinematographs and the distributors of the cinematographic films.
Section 11 43 of the Local Tax Code, 44 however, amended this provision by transferring the
power to impose amusement tax 45 on admission from theaters, cinematographs, concert
halls, circuses and other places of amusements exclusively to the local government. Thus,
when the NIRC of 1977 46 was enacted, the national government imposed amusement tax
only on proprietors, lessees or operators of cabarets, day and night clubs, Jai-Alai and race
tracks. 47 ADTCaI
On January 1, 1988, the VAT Law 48 was promulgated. It amended certain
provisions of the NIRC of 1977 by imposing a multi-stage VAT to replace the tax on original
and subsequent sales tax and percentage tax on certain services. It imposed VAT on sales of
services under Section 102 thereof, which provides:
SECTION 102. Value-added tax on sale of services. — (a) Rate and
base of tax. — There shall be levied, assessed and collected, a value-added
tax equivalent to 10% percent of gross receipts derived by any person engaged
in the sale of services. The phrase "sale of services" means the performance of
all kinds of services for others for a fee, remuneration or consideration,
including those performed or rendered by construction and service contractors;
stock, real estate, commercial, customs and immigration brokers; lessors of
personal property; lessors or distributors of cinematographic films;
persons engaged in milling, processing, manufacturing or repacking goods for
others; and similar services regardless of whether or not the performance
thereof calls for the exercise or use of the physical or mental faculties:
Provided That the following services performed in the Philippines by VAT-
registered persons shall be subject to 0%:
(1) Processing manufacturing or repacking goods for other persons
doing business outside the Philippines which goods are subsequently
exported, . . .
xxx xxx xxx
"Gross receipts" means the total amount of money or its equivalent
representing the contract price, compensation or service fee, including the
amount charged for materials supplied with the services and deposits or
advance payments actually or constructively received during the taxable
quarter for the service performed or to be performed for another person,
excluding value-added tax.
(b) Determination of the tax. — (1) Tax billed as a separate item in the
invoice. — If the tax is billed as a separate item in the invoice, the tax shall be
based on the gross receipts, excluding the tax.
(2) Tax not billed separately or is billed erroneously in the invoice. — If
the tax is not billed separately or is billed erroneously in the invoice, the tax
 shall be determined by multiplying the gross receipts (including the amount
intended to cover the tax or the tax billed erroneously) by 1/11. (Emphasis
supplied)
Persons subject to amusement tax under the NIRC of 1977, as amended, however, were
exempted from the coverage of VAT. 49
On February 19, 1988, then Commissioner Bienvenido A. Tan, Jr. issued RMC 8-88,
which clarified that the power to impose amusement tax on gross receipts derived from
admission tickets was exclusive with the local government units and that only the gross
receipts of amusement places derived from sources other than from admission tickets were
subject to amusement tax under the NIRC of 1977, as amended. Pertinent portions of RMC
8-88 read: DAEaTS
Under the Local Tax Code (P.D. 231, as amended), the jurisdiction to
levy amusement tax on gross receipts arising from admission to places of
amusement has been transferred to the local governments to the exclusion of
the national government.
xxx xxx xxx
Since the promulgation of the Local Tax Code which took effect on
June 28, 1973 none of the amendatory laws which amended the National
Internal Revenue Code, including the value added tax law under Executive
Order No. 273, has amended the provisions of Section 11 of the Local Tax
Code. Accordingly, the sole jurisdiction for collection of amusement tax on
admission receipts in places of amusement rests exclusively on the local
government, to the exclusion of the national government. Since the Bureau of
Internal Revenue is an agency of the national government, then it follows that it
has no legal mandate to levy amusement tax on admission receipts in the said
places of amusement. 
Considering the foregoing legal background, the provisions under
Section 123 of the National Internal Revenue Code as renumbered by
Executive Order No. 273 (Sec. 228, old NIRC) pertaining to amusement taxes
on places of amusement shall be implemented in accordance with BIR
RULING, dated December 4, 1973 and BIR RULING NO. 231-86 dated
November 5, 1986 to wit:
". . . Accordingly, only the gross receipts of the amusement places
derived from sources other than from admission tickets shall be subject
to . . . amusement tax prescribed under Section 228 of the Tax Code, as
amended (now Section 123, NIRC, as amended by E.O. 273). The tax on
gross receipts derived from admission tickets shall be levied and
collected by the city government pursuant to Section 23 of Presidential
Decree No. 231, as amended x x x" or by the provincial government,
pursuant to Section 11 of P.D. 231, otherwise known as the Local Tax
Code. (Emphasis supplied)
On October 10, 1991, the LGC of 1991 was passed into law. The local government
retained the power to impose amusement tax on proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a
rate of not more than thirty percent (30%) of the gross receipts from admission fees under
Section 140 thereof. 50 In the case of theaters or cinemas, the tax shall first be deducted and
withheld by their proprietors, lessees, or operators and paid to the local government before
the gross receipts are divided between said proprietors, lessees, or operators and the
distributors of the cinematographic films. However, the provision in the Local Tax
Code expressly excluding the national government from collecting tax from the proprietors,
lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of
amusements was no longer included. DEaCSA
In 1994, RA 7716 restructured the VAT system by widening its tax base and
enhancing its administration. Three years later, RA 7716 was amended by RA 8241. Shortly
thereafter, the NIRC of 1997 51 was signed into law. Several amendments 52 were made to
expand the coverage of VAT. However, none pertain to cinema/theater operators or
proprietors. At present, only lessors or distributors of cinematographic films are subject to
VAT. While persons subject to amusement tax 53 under the NIRC of 1997 are exempt from
the coverage of VAT. 54 Based on the foregoing, the following facts can be established:
(1) Historically, the activity of showing motion pictures, films or movies by
cinema/theater operators or proprietors has always been considered
as a form of entertainment subject to amusement tax.
(2) Prior to the Local Tax Code, all forms of amusement tax were imposed by
the national government.
(3) When the Local Tax Code was enacted, amusement tax on admission
tickets from theaters, cinematographs, concert halls, circuses and
other places of amusements were transferred to the local government.
(4) Under the NIRC of 1977, the national government imposed amusement tax
only on proprietors, lessees or operators of cabarets, day and night
clubs, Jai-Alai and race tracks.
(5) The VAT law was enacted to replace the tax on original and subsequent
sales tax and percentage tax on certain services.
(6) When the VAT law was implemented, it exempted persons subject to
amusement tax under the NIRC from the coverage of VAT.
(7) When the Local Tax Code was repealed by the LGC of 1991, the local
government continued to impose amusement tax on admission tickets
from theaters, cinematographs, concert halls, circuses and other
places of amusements.
(8) Amendments to the VAT law have been consistent in exempting persons
subject to amusement tax under the NIRC from the coverage of VAT.
(9) Only lessors or distributors of cinematographic films are included in the
coverage of VAT.
These reveal the legislative intent not to impose VAT on persons already covered by
the amusement tax. This holds true even in the case of cinema/theater operators taxed under
the LGC of 1991 precisely because the VAT law was intended to replace the percentage tax
on certain services. The mere fact that they are taxed by the local government unit and not by
the national government is immaterial. The Local Tax Code, in transferring the power to tax
gross receipts derived by cinema/theater operators or proprietor from admission tickets to the
local government, did not intend to treat cinema/theater houses as a separate class. No
distinction must, therefore, be made between the places of amusement taxed by the national
government and those taxed by the local government. EIAScH
To hold otherwise would impose an unreasonable burden on cinema/theater houses
operators or proprietors, who would be paying an additional 10% 55 VAT on top of the 30%
amusement tax imposed by Section 140 of the LGC of 1991, or a total of 40% tax. Such
imposition would result in injustice, as persons taxed under the NIRC of 1997 would be in a
better position than those taxed under the LGC of 1991. We need not belabor that a literal
application of a law must be rejected if it will operate unjustly or lead to absurd
results. 56 Thus, we are convinced that the legislature never intended to include
cinema/theater operators or proprietors in the coverage of VAT.
On this point, it is apropos  to quote the case of Roxas v. Court of Tax Appeals, 57 to
wit:
The power of taxation is sometimes called also the power to destroy.
Therefore, it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and
uniformly, lest the tax collector kill the "hen that lays the golden egg." And, in
order to maintain the general public's trust and confidence in the Government
this power must be used justly and not treacherously.
The repeal of the Local Tax Code by the  LGC of 1991  is not a legal basis for the imposition
of VAT
Petitioner, in issuing the assessment notices for deficiency VAT against respondents,
ratiocinated that:
Basically, it was acknowledged that a cinema/theater operator was
then subject to amusement tax under Section 260 of Commonwealth Act No.
466, otherwise known as the National Internal Revenue Code of 1939,
computed on the amount paid for admission. With the enactment of the Local
Tax Code under Presidential Decree (PD) No. 231, dated June 28, 1973, the
power of imposing taxes on gross receipts from admission of persons to
cinema/theater and other places of amusement had, thereafter, been
transferred to the provincial government, to the exclusion of the national or
municipal government (Sections 11 & 13, Local Tax Code). However, the said
provision containing the exclusive power of the provincial government to
impose amusement tax, had also been repealed and/or deleted by Republic
Act (RA) No. 7160, otherwise known as the Local Government Code of 1991 ,
enacted into law on October 10, 1991. Accordingly, the enactment of RA No.
7160, thus, eliminating the statutory prohibition on the national
government to impose business tax on gross receipts from admission of
persons to places of amusement, led the way to the valid imposition of
the VAT pursuant to Section 102 (now Section 108) of the old Tax Code,
as amended by the Expanded VAT Law (RA No. 7716) and which was
implemented beginning January 1, 1996. 58 (Emphasis supplied)
We disagree.
The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for the
imposition of VAT on the gross receipts of cinema/theater operators or proprietors derived
from admission tickets. The removal of the prohibition under the Local Tax Code did not grant
nor restore to the national government the power to impose amusement tax on
cinema/theater operators or proprietors. Neither did it expand the coverage of VAT. Since the
imposition of a tax is a burden on the taxpayer, it cannot be presumed nor can it be extended
by implication. A law will not be construed as imposing a tax unless it does so clearly,
expressly, and unambiguously. 59 As it is, the power to impose amusement tax on
cinema/theater operators or proprietors remains with the local government. IDSaTE
Revenue Memorandum Circular No. 28-2001  is invalid
Considering that there is no provision of law imposing VAT on the gross receipts of
cinema/theater operators or proprietors derived from admission tickets, RMC No. 28-
2001 which imposes VAT on the gross receipts from admission to cinema houses must be
struck down. We cannot overemphasize that RMCs must not override, supplant, or modify the
law, but must remain consistent and in harmony with, the law they seek to apply and
implement. 60
 In view of the foregoing, there is no need to discuss whether RMC No. 28-
2001 complied with the procedural due process for tax issuances as prescribed under RMC
No. 20-86.
Rule on tax exemption does not apply
Moreover, contrary to the view of petitioner, respondents need not prove their
entitlement to an exemption from the coverage of VAT. The rule that tax exemptions should
be construed strictly against the taxpayer presupposes that the taxpayer is clearly subject to
the tax being levied against him. 61 The reason is obvious: it is both illogical and impractical
to determine who are exempted without first determining who are covered by the
provision. 62 Thus, unless a statute imposes a tax clearly, expressly and unambiguously,
what applies is the equally well-settled rule that the imposition of a tax cannot be
presumed. 63 In fact, in case of doubt, tax laws must be construed strictly against the
government and in favor of the taxpayer. 64
WHEREFORE, the Petition is hereby DENIED. The assailed April 30, 2008 Decision
of the Court of Tax Appeals En Banc  holding that gross receipts derived by respondents from
admission tickets in showing motion pictures, films or movies are not subject to value-added
tax under Section 108 of the National Internal Revenue Code of 1997 , as amended, and its
June 24, 2008 Resolution denying the motion for reconsideration are AFFIRMED. 
SO ORDERED.
Carpio, Brion, Abad and Perez, JJ., concur.

Footnotes

1.United States v. De Guzman, 30 Phil. 416, 419-420 (1915).

2.People v. Degamo, 450 Phil. 159, 179 (2003).
3.Celestial Nickel Mining Exploration Corporation v. Macroasia Corporation , G.R. Nos. 169080,
172936, 176226 & 176319, December 19, 2007, 541 SCRA 166, 195.
4.An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to
the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership,
Amending for the Purpose Certain Sections of Republic Act No. 1125, As Amended,
otherwise known as the Law Creating the Court of Tax Appeals, and for Other
Purposes.
5.Rollo, pp. 98-120; penned by Associate Justice Olga Palanca-Enriquez and concurred in by
Presiding Justice Ernesto D. Acosta and Associate Justices Juanito C. Castañeda, Jr.,
Lovell R. Bautista, and Caesar A. Casanova. Associate Justice Erlinda P. Uy was on
official business.
6.Id. at 121-123; penned by Associate Justice Olga Palanca-Enriquez and concurred in by
Presiding Justice Ernesto D. Acosta and Associate Justices Juanito C. Castañeda, Jr.,
Lovell R. Bautista, Erlinda P. Uy, and Caesar A. Casanova.
7.Id. at 772.
8.Id. at 100.
9.Id.
10.Id. at 101.
11.Id.
12.Id.
13.Id.
14.Id.
15.Id.
16.Id. at 102.
17.Id.
18.Id.
19.Id.
20.Id.
21.Id. at 25-26.
22.Id. at 103.
23.Id.
24.Id. at 104.
25.Id. at 700.
26.Id. at 104.
27.Id. at 28.
28.Id. at 104-105.
29.Id. at 29.
30.Approved by the House on the Third Reading on November 15, 2005. Its counterpart in the
Senate, Senate Joint Resolution No. 6, entitled "Joint Resolution Expressing the True
Intent of Congress Regarding the Imposition of the Value-Added Tax Particularly on
the Theater Industry,"  is pending in the Committee.
31.Notice, Publication and Effectivity of Internal Revenue Tax Rules and Regulations , issued by
then Commissioner Bienvenido A. Tan, Jr. on July 24, 1986.
32.Rollo, p. 247.
33.Id. at 249-257.
34.Id. at 32.
35.Id.
36.Id. at 119.
37.Id. at 122.
38.Id. at 35-36.
39.See  Binay v. Sandiganbayan, 374 Phil. 413, 440 (1999).
40.Rollo, p. 420.
41.Commonwealth Act No. 466.
42.SECTION 260.  Amusement taxes. — There shall be collected from the proprietor, lessee, or
operator of theaters, cinematographs, concert halls, circuses, boxing exhibitions, and
other places of amusement the following taxes:
 (a) When the amount paid for admission exceeds twenty centavos but does not exceed
twenty-nine centavos, two centavos on each admission.
xxx xxx xxx
(i) When the amount paid for admission exceeds ninety-nine centavos, ten centavos on
each admission.
In the case of theaters or cinematographs, the taxes herein prescribed shall first be
deducted and withheld by the proprietors, lessees, or operators of such theaters or
cinematographs and paid to the Collector of Internal Revenue before the gross receipts
are divided between the proprietors, lessees, or operators of the theaters or
cinematographs and the distributors of the cinematographic films.
In the case of cockpits, race tracks, and cabarets, . . . . For the purpose of the
amusement tax, the term "gross receipts" embraces all the receipts of the proprietor,
lessee, or operator of the amusement place, excluding the receipts derived by him from
the sale of liquors, beverages, or other articles subject to specific tax, or from any
business subject to tax under this Code.
xxx xxx xxx
43.SECTION 11. Taxes transferred. — The imposition of the taxes provided in Sections 12, 13,
14, 15, and 16 of this Code heretofore exercised by the national government or the
municipal government, shall henceforth be exercised by the provincial government, to
the exclusion of the national or municipal government. To avoid any revenue loss, the
province shall levy and collect such taxes as provided in said Sections 12, 13 and 14.
44.Presidential Decree No. 231 (1973).
45.SECTION 13. Amusement tax on admission. — The province shall impose a tax on
admission to be collected from the proprietors, lessees, or operators of theaters,
cinematographs, concert halls, circuses and other places of amusements at the
following rates:
(a) When the amount paid for admission is one peso or less, twenty per cent; and
(b) When the amount paid for admission exceeds one peso, thirty per cent.
In the case of theaters or cinematographs, the taxes herein prescribed shall first be
deducted and withheld by the proprietors, lessees, or operators of the theaters or
cinematographs and paid to the provincial treasurer concerned thru the municipal
treasurer before the gross receipts are divided between the proprietors, lessees, or
operators of the theaters or cinematographs and the distributors of the cinematographic
films.
xxx xxx xxx
46.Presidential Decree No. 1158.
47.SECTION 268. Amusement taxes. — There shall be collected from the proprietor, lessee or
operator of cabarets, day and night clubs, Jai-Alai and race tracks, a tax equivalent
to . . .
48.Executive Order No. 273.
49.SECTION 103. Exempt Transactions. — The following shall be exempt from the value-
added tax:
(a) Sale of nonfood agricultural; marine and forest products in their original state by the
primary producer or the owner of the land where the same are produced.
 xxx xxx xxx
j) Services rendered by persons subject to percentage tax under Title V;
xxx xxx xxx
50.SECTION 140. Amusement Tax. — (a) The province may levy an amusement tax to be
collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls,
circuses, boxing stadia, and other places of amusement at a rate of not more than thirty
percent (30%) of the gross receipts from admission fees.
b) In the case of theaters or cinemas, the tax shall first be deducted and withheld by
their proprietors, lessees, or operators and paid to the provincial treasurer before the
gross receipts are divided between said proprietors, lessees, or operators and the
distributors of the cinematographic films.
xxx xxx xxx
51.Republic Act No. 8424.
52.See Republic Act No. 8761, Republic Act No. 9010, Republic Act No. 9238 and Republic Act
No. 9337.
53.SECTION 125. Amusement Taxes. — There shall be collected from the proprietor, lessee or
operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional
basketball games, Jai-Alai and racetracks, a tax equivalent to:
(a) Eighteen percent (18%) in the case of cockpits;
(b) Eighteen percent (18%) in the case of cabarets, night or day clubs;
(c) Ten percent (10%) in the case of boxing exhibitions: Provided, however, That
boxing exhibitions wherein World or Oriental Championships in any division is at stake
shall be exempt from amusement tax: Provided, further, That at least one of the
contenders for World or Oriental Championship is a citizen of the Philippines and said
exhibitions are promoted by a citizen/s of the Philippines or by a corporation or
association at least sixty percent (60%) of the capital of which is owned by such
citizens;
(d) Fifteen percent (15%) in the case of professional basketball games as envisioned
in Presidential Decree No. 871: Provided, however, That the tax herein shall be in lieu
of all other percentage taxes of whatever nature and description; and
(e) Thirty percent (30%) in the case of Jai-Alai and racetracks of their gross receipts,
irrespective of whether or not any amount is charged for admission.
For the purpose of the amusement tax, the term 'gross receipts' embraces all the
receipts of the proprietor, lessee or operator of the amusement place. Said gross
receipts also include income from television, radio and motion picture rights, if any. A
person or entity or association conducting any activity subject to the tax herein imposed
shall be similarly liable for said tax with respect to such portion of the receipts derived
by him or it.
The taxes imposed herein shall be payable at the end of each quarter and it shall be
the duty of the proprietor, lessee or operator concerned, as well as any party liable,
within twenty (20) days after the end of each quarter, to make a true and complete
return of the amount of the gross receipts derived during the preceding quarter and pay
the tax due thereon.
54.SECTION 109. Exempt Transactions. — The following shall be exempt from the value-
added tax:
 (a) Sale of nonfood agricultural products; marine and forest products in their original
state by the primary producer or the owner of the land where the same are produced;
xxx xxx xxx
(j) Services subject to percentage tax under Title V;
55.Now 12%.
56.Commissioner of Internal Revenue v. Solidbank Corp., 462 Phil. 96, 130 (2003).
57.131 Phil. 773, 780-781 (1968).
58.Rollo, pp. 671-672; 681 and 693.
59.Commissioner of Internal Revenue v. Court of Appeals, 338 Phil. 322, 330 (1997).
60.Commissioner of Internal Revenue v. Court of Appeals, 310 Phil. 392, 397 (1995).
61.Commissioner of Internal Revenue v. The Phil. American Accident Insurance Company,
Inc., 493 Phil. 785, 793 (2005).
62.Commissioner of Internal Revenue v. Court of Appeals, supra note 59.
63.Commissioner of Internal Revenue v. The Phil. American Accident Insurance Company,
Inc., supra.
64.Id. 
|||  (Commissioner of Internal Revenue v. SM Prime Holdings, Inc., G.R. No. 183505, [February
26, 2010], 627 PHIL 581-605)