J.A.B. Bulao & Associates

DISPOSITIVE:

ACCORDINGLY, EXECUTIVE JUDGE ERWIN VIRGILIO P.
FERRER (ret.), Branch 20, Regional Trial Court, Naga City, Camarines Sur,
is found LIABLE for violation of Administrative Circular No. 5 dated
October 4, 1988 and DIRECTED to pay the fine of PHP 35,000.00 to the
Court within three months from promulgation of this Decision. Should he fail
to do so, such amount shal I be deducted from his salaries and benefits,
including his accrued leave credits which he has earned by reason of his
government service.

The other charges are DISMISSED for lack of merit.

SUBJECTS/DOCTRINES/DIGEST:

In ascertaining the imposable penalty here, we consider the following
factors, to wit: 1) Executive Judge Ferrer (ret.) inherited the business from his
father; 2) He never used his position to solicit business for his company; 3)
The insurance business was situated in Daet, Camarines Norte, well outside
the te1Titorial jurisdiction of his court; 4) The relevant lease contracts and
public documents, such as BIR forms transparently bore his name and
signature as business owner/insurance agent; 5) He consistently declared his
business interest in his SALN; and 6) He was not involved in the day-to-day
operations of the business.

Based on these circumstances, therefore, it cannot be said that
Executive Judge Ferrer (ret.) had any intention of circumventing
Administrative Circular No. 5. He never hid that he owns an insurance
business, which he inherited from his father. His only fault was that upon his
appointment as judge, he did not divest his financial interest therein. Thus, the
Court imposes on him the minimum fine of PHP 35,000.00.

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DISPOSITIVE:

ACCORDINGLY, the Petition for Review on Certiorari is PARTLY GRANTED. The Decision dated July 12, 2016 and Resolution dated January 17, 2017 of the Com1 of Tax Appeals En Banc in CTA EB No. 1408, are REVERSED and SET ASIDE.

Item 11 of Revenue Memorandum Circular No. 46-2008 and Revenue Memorandum Circular No. 31-2011 are DECLARED NULL and VOID insofar as they imposed additional conditions which are not found in Section 108(B )( 4) of the 1997 National Internal Revenue Code, as amended by Republic Act No. 9337.

The case is REMANDED to the Court of Tax Appeals Third Division for the proper dete1mination of the refundable or creditable amount due to petitioner Manila Peninsula Hotel, Inc., if any.

The other charges are DISMISSED for lack of merit

SO ORDERED.”

SUBJECTS/DOCTRINES/DIGEST:

It is of no moment that the accommodation services were rendered
within the physical confines of Manila Peninsula. The core consideration
anchors on the fact that the service was rendered to a juridical person engaged
in international air transport operations and that is exclusively for its
international operations. The CTA EB, thus, erred when it concluded that Manila Peninsula’s sale of services to Delta Air could not be deemed zerorated
because the services rendered to the pilots and cabin crew of Delta Air
did not cross the Philippine territory. II4 The first requisite to qualify for zerorating
under Section I 08(B)( 4) of the NIRC, as amended, is that the service
was performed in the Philippines by a VAT-registered person. It is, therefore,
not required that the service be performed outside the Philippines.

In light of the foregoing observations, it is evident that the services
rendered by Manila Peninsula to its flight crew members in the form of hotel
room accommodations and food and beverages services during layovers
qualify for zero-rated VAT under Section 108(B)( 4) of the NIRC, as
amended. Consequently, the services were not appropriately subject to the
imposition of 12% VAT.

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