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CITY OF DAVAO v. RANDY ALLIED VENTURES

FACTS:

The case involves a petition for review on certiorari questioning the decision of the Court of Tax Appeals En Banc (CTA EB) upholding the grant of a claim for refund or credit of erroneously and illegally collected local business taxes (LBT) to respondent Randy Allied Ventures, Inc. (RAVI) for the taxable year 2010. RAVI is one of the Coconut Industry Investment Fund (CIIF) holding companies that own the shares of stock of San Miguel Corporation. In 2012, the Supreme Court declared the CIIF companies and the SMC shares as "public funds necessarily owned by the Government." RAVI then filed a claim for refund or credit of LBT, asserting that it was mistakenly classified as a non-bank financial intermediary (NBFI) and that the collection of LBT in relation to its dividends from SMC violated the law. The Regional Trial Court (RTC) denied RAVI's claim, ruling that RAVI's dividends and interests are not incidental but the principal sources of its income, making it an NBFI subject to LBT. RAVI appealed to the CTA First Division, which reversed the RTC's decision and held that RAVI is a holding company, not an NBFI. The CTA EB affirmed the CTA First Division's decision, ruling that RAVI does not meet the requisites provided for in the law to be classified as an NBFI and that the COCOFED case settled that RAVI and the SMC shares it holds are government properties beyond the power of the City of Davao to tax. Petitioners filed a motion for reconsideration, but it was denied. Thus, they filed this petition for review. The issue before the court is whether or not the CTA EB erred in finding that RAVI is not an NBFI subject to LBT.

ISSUES:

RULING:

PRINCIPLES:

  • The activities of owning shares and receiving dividends and interest income do not necessarily constitute investing or doing business as a non-bank financial intermediary (NBFI).

  • The provision in RAVI's Amended Articles of Incorporation (AOI), which prohibits it from acting as an investment company, is not conclusive proof that it has not engaged in NBFI activities.

  • The requisites provided under the General Banking Law, Manual of Regulations for Non-Bank Financial Institutions, and the National Internal Revenue Code must be met in order to classify a company as an NBFI subject to taxation.

  • The Coconut Industry Investment Fund (CIIF) companies, including RAVI, and the CIIF block of San Miguel Corporation (SMC) shares are considered public funds necessarily owned by the government and are thus beyond the power of the local government to tax.