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ABS-CBN Broadcasting Corp. v. CTA G.R. No.

52306, October 12, 1981 Doctrine: Under Section 246 of the 1997 Tax Code, the Commissioner of Internal Revenue is precluded from adopting a position contrary to one previously taken where injustice would result to the taxpayer. Hence, where an assessment for deficiency withholding income taxes was made, three years after a new BIR Circular reversed a previous one upon which the taxpayer had relied upon, such an assessment was prejudicial to the taxpayer. To rule otherwise, opined the Court, would be contrary to the tenets of good faith, equity, and fair play. Facts: ABS-CBN was engaged in the business of telecasting local as well as foreign films acquired from foreign corporations not engaged in trade or business within the Philippines, for which petitioner paid rentals after withholding income tax of 30% of onehalf of the film rentals. In implementing Section 4(b) of the Tax Code, the CIR issued General Circular V-334. Pursuant thereto, ABS-CBN Broadcasting Corp. dutifully withheld and turned over to the BIR 30% of ½ of the film rentals paid by it to foreign corporations not engaged in trade or business in the Philippines. The last year that the company withheld taxes pursuant to the Circular was in 1968. In June 1968, RA 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30% to 35% and revising the tax basis from “such amount” referring to rents, etc. to “gross income.” In 1971, the Commissioner issued a letter of assessment and demand for deficiency withholding income tax for years 1965 to 1968. The company requested for reconsideration but the Commissioner did not act upon the same. Issue: W/N Revenue Memorandum Circular 4-71, revoking General Circular V-334, may be retroactively applied. Held/Ratio: Rulings or circulars promulgated by the Commissioner have no retroactive application where to so apply them would be prejudicial to taxpayers. Herein ,the prejudice the company of the retroactive application of Memorandum Circular 4-71 is beyond question. It was issued only in 1971, or three years after 1968, the last year that ABSCBN had withheld taxes under General Circular No. V-334. The assessment and demand on ABS-CBN to pay deficiency withholding income tax was also made three years after 1968 for a period of time commencing in 1965. Obviously, ABS-CBN was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and had no longer control over them when the new circular was issued.

2. However. A tax exemption. or franchise. stating that the exemption provided by Section 234(c) of the LGC applies only when a government-owned or controlled corporation like NPC owns and/or actually uses machineries and equipment for the generation and transmission of electric power (in this case. some time later. through the BOT agreement. for the creation of the Bauang Private Power Corporation (BPPC) that will own. 2009 Facts: In 1993. originally. Issue: 1. as it is a personal privilege and it must be strictly construed. NPC tried to intervene and say that the machineries were exempt under Sec. if and when granted. manage and operate the power plant/station. No. But the LBAA did not find NPC’s argument meritorious. thus directly addressing and disproving NAPOCOR’s “actual. 234(c) of the LGC. W/N. NPC can pass on its tax-exempt status to its BOT partner. NPC does not own or use the facilities). 2. No. under the terms of the BOT. The BOT agreement cannot likewise be the basis for the claimed exemption. statute.NPC v. a private corporation. as it must be expressly granted by the Constitution. and assume and perform FPPC’s obligations under the BOT agreement. the GOCC can be deemed the actual. First Private Power Corporation (FPPC) entered into a BOT agreement with NAPOCOR for the construction of the a power plant in La Union. 171470. The exemption under the law does not apply because BPPC is not a GOCC — it is an independent power corporation currently operating and maintaining the power plant pursuant to the BOT Agreement. things changed and the machineries were declared to be subject to tax. and exclusive use” argument. direct. Held: 1.R. Now. assuming that NPC cannot be deemed to be the user of the equipment. The BOT Agreement provided. Clear from the BOT Agreement is that BPPC owns and uses the machineries and equipment in the power station. The contract stated that NPC will assume all tax liabilities. . W/N. BPPC’s machineries were declared to be tax-exempt. is also not transferrable. tax exemption cannot be agreed upon by mere contract between the parties (BPPC and NPC). January 30. and exclusive user of machineries and equipment for tax exemption purposes. Section 234(c) of the LGC is clear. direct. No. Central Board of Assessment Appeals G.