THE PHILIPPINES INTERNATIONAL FAIR, INC., PETITIONER VS. THE COLLECTOR OF INTERNAL REVENUE, ET AL., RESPONDENTS.

The Philippines International Fair, Inc. — hereinafter referred to
as the PIF — is a duly organized domestic corporation, domiciled in the
City of Manila. The Philippine Government is its principal stockholder,
controlling between 45% to 55% of its capital stock. One of its main
purposes, according to paragraph 2 of its Articles of Incorporation, is
the establishment, operation and management of international fairs and
expositions depicting the social, political, cultural and economic
life, history, progress and development of all countries, particularly
the Philippines, and their trade, political, and other relations with
one another.

During the months of February, March, April and May, 1953, the PIF
held in Manila an international fair and exposition. Within its fair
grounds were booths for the exhibition of the industrial and
agricultural products of the different provinces of the Philippines as
well as of foreign countries. Aside from side shows and various other
attractions, the fair and exposition had an amusement zone divided into
four compounds, the biggest attraction therein being the “Aquacade
Show” and the “Xavier Cugat Show.” In addition, there was a large
auditorium where balls and dances were” held. Fees were charged for
admission to the exposition and amusement grounds and the auditorium.

In 1954, it conducted in the same premises a National Fair where gate and auditorium entrance fees were likewise charged.

In his letters dated April 12, 1954, July 20, 1954 and June 28,
1954, the Collector of Internal Revenue demanded of the PIF the sum of
P132,220.00 as amusement tax on its gross receipts derived from admission
tickets to the exposition and amusement grounds, Aquacade Show, and
benefit dances, from February to March 1953, and those derived from its
gate and auditorium entrance fees from April 23 to May 9, 1954; the sum
of P33,055.12 as 25% surcharge thereon for late payment; the sum of P13,200.00 as compromise penalty. The total demand amounted to P178,475.59.

A request for an investigation having been made by the PIF, the
Collector of Internal Revenue referred the case to the Conference
Staff. After a hearing before the latter it recommended the enforcement
of the assessment. Notice of the adverse decision was received by the
PIF on April 20, 1956, and on May 19, 1956, the latter appealed to the
Court of Tax Appeals which rendered on April 29, 1957 the decision
subject matter of this review.

In G. R. No. L-12928, the PIF appeals from the following portion of the decision of the Court of Tax Appeals:

“The petitioner is ordered to pay to the respondent
the amounts of P97,972.65 and P24,493.16 as amusement tax and
surcharge, respectively, on its gross receipts from admission tickets
to the exposition ground and auditorium during the months of March,
April and May, 1953; and, Pl,370.16 and P342.54, as amusement tax and
surcharge, respectively, on its gross receipts from admission tickets
to the benefit dances held at the National Fair Auditorium from April
23 to May 9, 1954, or a total sum of P124,178.51.”

In G. R. No. L-12932, the Collector of Internal Revenue, in turn, appeals from the following portion of said decision:

“The petitioner is hereby held exempt from the
payment of the amounts of P32,877.66 and P8,219.42 or a total of
P41,097.08 representing amusement tax and surcharge, respectively, on
its receipts from admission tickets to the Aquacade Show for the month
of February, 1953.

“Likewise, the petitioner is not liable
for the payment of the compromise penalty in the total sum of
P13,200.00 on the three basic assessments.”

The PIF, petitioner in G. R. No. L-12928, contends that it is not
subject to the amusement tax on the ground that its activities were
sponsored by the Philippine Government, and further claims that the
exemption in its favor is inferable from the spirit of Republic Act No.
722 which exempts operas, concerts, recitals, dramas, painting and art
exhibitions, flower shows, and literary, oratorical or musical
programs, except film exhibitions and radio or phonographic records
thereof, from the payment of any national or municipal amusement tax on
the receipts derived therefrom.

In G. R. No. L-12932, the Collector of Internal Revenue contends
that the Court of Tax Appeals erred in holding that the Aquacade Show
is a water ballet and therefore within the term “art exhibition” which
falls under the exemptions provided for in Republic Act No. 722, and in
exempting the respondent from the payment of the sum of P13,200.00 as
compromise penalty.

The PIF admits that there is no legal provision expressly exempting
it from paying the amusement tax prescribed in ?Section 260 of the Tax
Code, but argues that its case for exemption is inferable from the
spirit of the exemptions provided for in Republic Act 722; from the
fact that the fairs in question were undertaken officially and actually
formed part of the activities of the government; that the government
had consistently refrained from collecting any tax from the Philippine
Carnival Association whenever the latter held expositions of national
character; and lastly, that it had an understanding with the Secretary
of Finance that no amusement tax would be levied against and collected
from the admission fees during the 1953 International Exposition. We
find these contentions to be without merit.

The well settled rule is that legal provisions providing for tax
exemptions are to be construed strictly against the grant and liberally
in favor of the taxing power (Sutherland, Statutory Construction, Vol.
3, pp. 183-190; House vs. Posadas, 53 Phil., 338; Asiatic Petroleum Co.
w. Llanos, 49 Phil., 466). It is not denied that the fairs held by the
PIF mentioned heretofore had amusement zones with stateside side shows,
auditorium for dances and balls and other features of a similar nature.
While this circumstance amply justifies considering the PIF as a
proprietor and operator of a place of amusement and, as such, subject
to the amusement tax on all its gate receipts, it cannot be denied that
some of the activities and performances inside the fair grounds, for
which separate admission fees were charged, are clearly covered by the
exemption clause of Republic Act No. 722. In view of these
circumstances, the Court of Tax Appeals was of the opinion—with which
we agree—that—

“x x x the most reasonable and logical course of
action to take under the circumstances would be to consider separately
each particular entertainment, performance or exhibition for which a
corresponding admission fee was charged for the purpose of determining
a whether the receipts derived therefrom are exempt or not from
amusement tax.

“It appears that the vast exposition and
amusement grounds operated and managed by the petitioner during the
International Fair in 1953, had several gates and entrances a few of
which led directly to special attractions particularly the big ones. In
most instances, however, the minor attractions and side shows were
within the exposition ground itself without any direct connection to
the outside area for which the customers were required to pay a gate fee to gain entrance to the main exposition and amusement grounds and another admission fee to the particular attraction or side show.

“We
take it that not all of the millions of persons who flocked to the
International Fair in 1953 and the National Fair in 1954, went there
and paid the corresponding admission fee to gain entrance to the main
grounds of the fair, solely for cultural purposes or for the sake of
art. The thousands of children who patronized the fair must have gone
there principally to frolic in the compound of Pedro Taguba and Company
where thrill rides of all sorts were offered for their entertainment.
The pickpockets must have gone there principally to ply their trade
within the premises. The disciples of Bacchus, to patronize and make
merry in the Beer Garden of concessionaire J. Ponce de Leon where all
kinds of drinks and beverages were served. And the devotees of the muse
Terpsichore, to tread the light fantastic at the Fair Auditorium with
their partners.

x x x x

“Following
the literal interpretation as well as the spirit behind the enactment
of Republic Act No. 722, we hold, therefore, that the petitioner is not
exempt from payment of amusement taxes and surcharges in the amounts of
P97,972.65 and P24,493.16, respectively, on its receipts from admission
tickets sold to the exposition ground and auditorium during the months
of March, April and May, 1953. “Likewise, the petitioner is not exempt
from payment of amusement tax and surcharge in the amounts of Pl,370.16
and P342.54, respectively, on its receipts from admission tickets to
the benefit dances held at the National Fair Auditorium from April 23
to May 9, 1954.”

The PIF is a private stock corporation organized for profit by
business elements in the Philippines. While it is true that its
organization was encouraged by the government and some activities of
the fairs organized and held under its auspices were cultural,
educational or artistic in nature, these circumstances did not make its
activities and purposes official, much less governmental in character.
In this regard the PIF’s contention stretches the real meaning of the
terms “official” and “governmental” beyond the bounds of logic,
particularly if applied to a case like the present where, as already
stated, many other features of the fairs were purely for amusement.

That the Philippine Carnival Association had never been made to pay
taxes as an operator of an amusement center, is no reason to hold the
PIF exempt, considering that when Congress enacted Republic Act 722 it
expressly enumerated the performances that should enjoy exemption from
the payment of the amusement tax prescribed under Section 260 of the
Tax Code. Many features of the fairs held by the PIF did not fall under
the exemptions thus enumerated. On the other hand, the alleged verbal
assurances of certain government officials that the PIF would not be
required to pay amusement tax cannot bind the State, it being well
known that tax exemption can be granted only by the Legislative Branch
of the Government.

The above would seem to be sufficient to dispose of the appeal of the PIF.

The appeal of the Collector (G. R. No. L-12932 is also without
merit. Whether the “Aquacade Show” is within the purview of the legal
exemptions established by Republic Act No. 722 or not was already
decided by us in Collector, etc. vs. The Philippine International Fair,
Inc. et al. (106 Phil., 107) promulgated August 28, 1959, where among
other things, we said:

“In the Court of Tax Appeals, the following
questions of fact were resolved: that the main or predominant feature
of the show in question was the “water ballet” performance and that
“water ballet” falls within the concept of art. In support of its.
claims, respondent presented as expert witnesses, Miss Anita Kane, a
danseuse and ballet instructress, Mr  Arsenio Luz, a business-man and
newspaperman, and Mr. Enrique Davila, a veteran impresario, who
testified favorably to the facts resolved above. On December 26, 1956
the Court of Tax Appeals rendered a decision in which it declared that
the “Aquacade Show was principally a “water ballet” performance, and
therefore, an art; and that being an art, it is within the purview of
the presentations exempted from the amusement tax under Republic Act
No. 722. From this decision, the Collector of Internal Revenue has
appealed to this Court.

“The sole question at issue centers
on whether “ballet” or in this particular case “water ballet” is
covered .within purview of the 5legal exemption under Republic Act No.
722, section 1 of which provides that the “holding of operas, concerts,
recitals, dramas, painting and art exhibitions, flower shows, and
literary, oratorical and musical programs, except film exhibitions and
radio or phonographic records thereof, shall be exempt from the payment
of any national or municipal tax on the receipts derived therefrom.’

“It
is contended by the petitioner that ballet performance is not expressly
enumerated as one of the presentations entitled to tax exemption and
applying the principle of “expressio unius est exclusio alterius”, the
enumeration in Republic Act No. 722 should be considered exclusive and
that grants of tax exemption should be construed liberally in favor of
the government and strictly against the taxpayer.

“In answer to the above contention, this Court has already decided that:

‘It
is conceded that ballet is an art; that under our Constitution (Article
XXV, Sec. 4) arts are under the patronage of the State; that Republic
Act No. 722 seeks to implement the constitutional provision x x x x.

‘The
conclusion is thus inevitable that ballet performance, besides being
truly an art par excellence, is in fact included in the terms
“concert”, “opera” or “recital” and therefore exempted” from the
payment of amusement tax.’ (Collector of Internal Revenue V8. Totoy
Oteyza, G. R. No. L-10290, prom. May 28, 1958).

“The decision of the Court of Tax Appeals is hereby affirmed, without costs.”

But the Collector also contends that the Court of Tax 4 Appeals
erred in not holding the PIF liable for the payment of the sum of P13,200.00 as compromise penalty. Regarding this matter, the decision
appealed from says:

“However with respect to the compromise penalty in
the total sum of P13,200.00, we have repeatedly held that this Court
has no jurisdiction to compel a taxpayer to pay the same because by.
its very nature it implies a mutual agreement between the parties in
respect to the thing or subject matter which is so compromised.
(Brifias vs. Collector of Internal Revenue; C. T. A. Case No. 16,
September 14, 1955; Central Azucarera de Tarlac vs. Collector of
Internal Revenue, C. T. A. Case No. 90, July 9, 1956) and the choice of
paying or not paying it distinctly belongs to the taxpayer. (Cosmos
Kapok Factory vs. Araneta, C. T. A. Case No. 125, March 29, 1957).”

In support of his contention, the Collector points to Section 309 of
the Tax Code which gives him authority to compromise any civil or other
case arising under the Tax Code or other law or part of law
administered by the Bureau of Internal Revenue, and to the decisions
rendered in Macondray vs. Collector, 90 Phil., 123 arid Sanchez vs.
Collector, G.R. No. L-7521, Oct. 18, 1955.

In the brief submitted by the Solicitor General (p. 34) it is stated
that the sum of P13,200.00 was the “compromise fee x x x suggested in
extrajudicial settlement of the taxpayer’s violation of Section 260, in
relation to Section 352 of the Tax Code”.

The present is not a criminal action instituted against the PIF or
its officers for having violated the provisions of Section 260, in
relation to Section 352 of the Tax Code, but a tax assessment or demand
made by the Collector of Internal Revenue upon the PIF, from which the
latter appealed to the Court of Tax Appeals and ultimately to this
Court. It is clear, therefore, that the PIF resisted the assessment.
Consequently, the result of the proceedings can not be considered as a
“compromise”, because the decision of the Court of Tax Appeals as well
as the present decision constitute an adjudication upon the issue
arising from the assessment made by the Collector of Internal Revenue,
on the one hand, and the PIF’s refusal to pay the same, on the other.

Furthermore, the brief submitted by the Solicitor General in behalf
of the Collector (p. 34) also admits that the alleged “compromise” is
really a “penalty for violation of the provisions of the Tax Code”. The
present not being a criminal case charging the PIF with having violated
the provisions of the Tax Code, we agree with the Court of Tax Appeals
that the payment of the alleged compromise cannot be imposed upon the
taxpayer in the present proceedings. The cases relied upon by the
Collector of Internal Revenue are not applicable to the present because
the taxpayer involved in the Macondray case voluntarily paid the
“multas” demanded or imposed on him to avoid further imposition of
“multas”. In the Sanchez case the taxpayer paid the tax demanded of her
plus the sum of P50.00 as compromise, under protest, but does not
appear to have specifically raised any objection against the said
compromise either in the lower court or in this Court. Our decisions
affirming those rendered by the lower court in said cases cannot,
therefore, be cited to support the proposition that in proceedings like
the present the Court of Tax Appeals or this Court may render judgment
in favor of the government and against the taxpayer for the payment of
the alleged “compromise” which, as the Solicitor General admits, is
really a “penalty” to avoid prosecution for violation of the provisions
of the Tax Code—unless, of course, the taxpayer gives his consent
thereto.

WHEREFORE, the decision appealed from is affirmed in toto without costs.

Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, and De Leon, JJ., concur.
Bengzon, C.J., took no part.