Commissioner on Internal Revenue V.

Court of Tax Appeals

Facts

In Commissioner of Internal Revenue V. Manila Hotel Corporation, SC

overruled Court of Tax Appeals decision that caterer’s tax under RA
6110 is illegal because it was vetoed by Former President Marcos and
Congress had not taken steps to override the veto. SC ruled in this
case that the law has always imposed a 3% caterer’s tax, as provided
in Par 1, Sec 206 of the Tax Code.

Presently, Manila Golf and Country Club, a non-stock corporation

claims that it is exempt from the 3% on gross receipts because
President Marcos vetoed Sec 191-A of RA 6110 (Omnibus Tax Law).
President Marcos vetoed Sec 191-A because according to him it would
1) shift the burden of taxation to the consuming public and 2) restrain
the development of hotels which are essential to the tourist industry.
The protestation of the club was denied by petitioners saying that Sec
42 was not entirely vetoed but merely the words “hotels, motels,
resthouses.” House of Ways and Means concurred with petitioners
stating that veto message only seems to object with certain portions
of 191-A and that can be gleaned by the reasons given by the
President.

Issue

WON veto referred to the entire section or merely the 20% tax on
gross receipts of operators and proprietors of eating places within
hotels, motels and resthouses.

Held and Ratio

President does not have the power to repeal an existing tax.

Therefore, he could not have repealed the 2% caterer’s tax.

CTA agreed with respondent club that president vetoed only a certain
part. CTA mentioned that President can veto only an entire item, and
not just words. The President intentionally only vetoed a few words in
Sec 191-A. Assuming that the veto could not apply to just one
provision but all would render the Presidential veto void and still in
favor of petitioner.

Inclusion of “hotels, motels, resthouses” in the 20% caterer’s tax

bracket are items. President has the right to veto such item, that
which is subject to tax and tax rate. It does not refer to an entire
section. To construe item as an entire section would be to tie his
hands to either completely agree with a section he has objections
with or to disagree with an entire section where he only has a portion
he disagrees with.