May 25, 1998
DAR OPINION NO. 65-98
MA. CYNTHIA N. ADAO-PRAT
Adao & Adao-Prat Law Office
2F PVL Bldg., Rizal St.
Davao City, 8000
Dear Atty. Adao-Prat:
This refers to your letter of 16 April 1998, requesting opinion on the queries posed therein relative to your application for an exemption under Administrative Order No. 3, Series of 1995, summarized as follows:
1. Are we obliged to pay the profit incentive of 7.5% net income before tax for the years 1995, 1996 and 1997?
2. Is there a deadline for filing of the application for exemption for fishpond farms?
3. Is there a deadline for filing of the application of exemption clearance pursuant to DOJ Opinion No. 44, Series of 1990 (Administrative Order No. 6, Series of 1994)?
As stated, you are now applying for an exemption under Administrative Order No. 3, Series of 1995, specifically, the profit incentive of 7.5% net income before tax for the years 1995, 1996 and 1997. You believe that since the Supreme Court has in 1995 suspended the implementation of R.A. No. 7881 and DAR A.O. No. 3, Series of 1995, said law was on status quo and was put on hold, thus, payment of the profit incentive in issue for the years 1995, 1996 and 1997 is no longer necessary or required.
Republic Act. No. 7881, An Act Amending Certain Provisions of Republic Act No. 6657, Entitled "An Act Instituting a Comprehensive Agrarian Reform Program to Promote Social Justice and Industrialization, Providing the Mechanism for Its Implementation, and for Other Purposes", took effect on 12 March 1995. Its efficacy was suspended and held in abeyance by the Supreme Court during the pendency of the SENTRA case when it issued a Temporary Restraining Order (TRO) dated 13 November 1995 enjoining the DAR from enforcing the challenged provisions of R.A. No. 7881 and DAR Administrative Order No. 3, Series of 1995. Subsequently, Memorandum Circular No. 32, Series of 1997 was issued by the DAR on the basis of the Court of Appeals' Entry of Judgment dated 23 September 1997 certifying that its Decision dated 7 January 1997 denying due course and dismissing the petition of SENTRA has become final and executory on 06 August 1997. Said Memorandum Circular ordered: the lifting of the suspension of the implementation of R.A. No. 7881 and DAR Administrative Order No. 3, Series of 1995; the revocation of DAR Memorandum Circular No. 27, Series of 1995; and the resumption of the processing of applications for exemption/exclusion of fishponds and prawn farms pursuant to R.A. No. 7881 and A.O. No. 3, Series of 1995.
Relative to your first query, please be informed that R.A. No. 7881 requires the execution of incentive plan within six (6) months from the effectivity of said law. The implementation of R.A. No. 7881 was suspended only on 13 November 1995, hence, the deadline for execution of incentive plan has expired before said law was suspended. Therefore, fishpond operators are still obliged to pay profit incentive for the year 1995, that is, from the effectivity of R.A. No. 7881 on 12 March 1995 up to the date the law was suspended on 13 November 1995. This is in keeping with the spirit and intent of the law pursuant to Article 1702 of the New Civil Code which provides that in case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. Consequently, fishpond operators are not obliged to pay the profit incentive reckoned from the date of suspension on 13 November 1995 up to the time of lifting thereof on 6 August 1997 when the Decision of the Court of Appeals had become final and executory, afterwhich payment of said profit incentive shall again resume. It is believed that this way and manner of computation of the subject profit incentive under the peculiar circumstances of the instant case is the best possible and most practicable set up for all concern both in point of law and equity.
As regards your second query and third query, pertinent agrarian laws and regulations do not provide for a deadline for filing of the application for exemption of fishpond farms and of the application for exemption clearance pursuant to DOJ Opinion No. 44, Series of 1990.
Thank you for communicating with us and we hope to have clarified the matters with you.
Very truly yours,
(SGD.) ARTEMIO A. ADASA, JR.
Undersecretary for Legal Affairs, and Policy and Planning
Copy furnished:
OSEC
Doc. No. 98040293