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Angeles City

vs
Angeles City Electric Corporation and Regional Trial Court, Angeles City.
G.R. no. 166134 Promulgated: June 29, 2010

Facts:

June 18, 1964 - AEC was granted a legislative franchise under R.A 4079 to
construct, maintain and operate an electric light, heat and power system for the
purpose of generating and distributing electric light, heat and power for sale in
Angeles City, Pampanga. Pursuant to Sec. 3-A thereof, AECs payment of franchise
tax for gross earnings from electric current sold was in lieu of all taxes, fees and
assessment.
September 11, 1974 - PD 551 reduced the franchise tax of electric franchise
holders. Sec. 1 of PD 551 provided that:
xxxSuch franchise tax shall be payable to the CIR or his duly authorized
representative on or before the twentieth day of the month following the end of each
calendar quarter or month as may be provided in the respective franchise or
pertinent municipal regulation and shall, any provision of the Local Tax Code or any
other law to the contrary notwithstanding, be in lieu of all taxes and assessments of
whatever nature imposed by any national or local authority on earning, receipts
income and privilege of generation, distribution and sale of electric current.xxx
January 1,1992 - R.A 7160 or the LGC of 1991 was passed into law,
conferring upon provinces and cities the power among others, to impose tax on
businesses enjoying franchise. In accordance with the LGC, the sangguniang
panlalawigan of Angeles City enacted on December 23, 1993 Tax Ordinance no. 33,
S-93, otherwise known as the Revised Revenue Code of Angeles City (RRCAC).
July,1995 - has been paying the local franchise tax to the office of the City
treasurer on a quarterly basis, in addition to the national franchise tax it pays every
quarter to the BIR.
January 22, 2004 - the city treasurer issued a Notice of Assessment to AEC
for payment of business tax, license fee and other charges for the period 1993 to
2004 in total of Php 94,861,194.10.
- Within the period prescribed by law AEC protested the assessment claiming
that;
a. R.A 4079, AEC is exempt from paying local business tax;
b. Since it is already paying franchise tax on business, the payment of
business would result to double taxation;
c. The period to assess has prescribed because under the LGC, taxes and
fees can only be assessed and collected within 5 years from the date they become
due, and
d. The assessment and collection of taxes under RRCAC cannot be made
retroactive to 1993 or prior to its effectivity.
February 17, 2004 - City treasurer denied the protest for lack of merit and
requested AEC to settle its tax liabilities.
- Aggrieved, AEC appealed the denial of its protest to the RTC of Angeles City
via a petition for declaratory relief.
April 5, 2004 - The City Treasurer levied on the real Properties of AEC. A
notice of Auction Sale was published announcing that a public auction of the levied
properties of AEC would be held on May 7,2004.
AEC filed with the RTC, an Urgent Motion for Issuance of TRO and/or Writ of
Preliminary Injunction to enjoin Angeles City and its City Treasurer from levying,
annotating the levy, seizing, confiscating, garnishing, selling and disposing at public
auction the properties of AEC.
May 4,2004 - RTC issued a TRO
May 28,2004 - RTC grant the issuance of the Writ of Preliminary Injunction upon the
filing of the bond by the AEC worth Php 10,000.000.00.
Angeles City and its City Treasurer filed a motion for Dissolution of Preliminary
Injunction and Motion for Reconsideration but the RTC found no compelling reason
to disturb and reconsider its previous findings, the RTC denied the joint motion on
Oct. 14, 2004.

Issue:
Whether or not the RTC gravely abused its discretion in issuing the Writ of
Preliminary Injunction enjoining Angeles City and its City Treasurer from levying,
selling, and disposing the properties of AEC.

Ruling:
The Supreme Court find the petition bereft of merit. The LGC does not
specifically prohibit an injunction enjoining the collection of taxes.
The National Internal Revenue Code of 1997 (NIRC) expressly provides that
no court shall have the authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by the code. An exception to
this rule obtains only when in the opinion of the Court of Tax Appeals (CTA) the
collection thereof may jeopardize the interest of the government and/or the taxpayer.
The situation, however, is different in the case of the collection of local taxes
as there is no express provision in the LGC prohibiting courts from issuing an
injunction to restrain local governments from collecting taxes. Thus, in the case of
Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II, cited by the
petitioner, the SC ruled that:
Unlike the National Internal Revenue Code, the Local Tax Code does not
contain any specific provision prohibiting courts from enjoining the collection of local
taxes. Such statutory lapse or intent, however it may be viewed, may have allowed
preliminary injunction where local taxes are involved but cannot negate the
procedural rules and requirements under Rule 58.
Nevertheless, it must be emphasized that although there is no express
prohibition in the LGC, injunctions enjoining the collection of local taxes are frowned
upon. Courts therefore should exercise extreme caution in issuing such injunctions.
In the case at bar records show that before issuing the injunction, the RTC
conducted a hearing where both parties were given the opportunity to present their
arguments. During the hearing, AEC was able to show that it had a clear and
unmistakable legal right over the properties to be levied and that it would sustain
serious damage if these properties, which are vital to its operations, would be sold at
public auction. As we see it then, the writ of injunction was properly issued.

No grave abuse of discretion was committed by the RTC.

ERICSSON TELECOMMUNICATIONS, INC.,


VS.
CITY OF PASIG, represented by
its City Mayor, Hon. Vicente P.
Eusebio, et al.
G.R. NO. 176667 November 22, 2007

Facts:
Ericsson Telecommunications, Inc., a corporation with principal office in Pasig
City, is engaged in the design, engineering, and marketing of telecommunication
facilities/system. In an Assessment Notice dated October 25, 2000 issued by the City
Treasurer of Pasig City, petitioner was assessed a business tax deficiency for the
years 1998 and 1999 amounting to P9,466,885.00 and P4,993,682.00, respectively,
based on its gross revenues as reported in its audited financial statements for the
years 1997 and 1998. Petitioner filed a Protest dated December 21, 2000, claiming
that the computation of the local business tax should be based on gross receipts and
not on gross revenue.
Respondent issued another Notice of Assessment to petitioner on November
19, 2001, this time based on business tax deficiencies for the years 2000 and 2001,
amounting to P4,665,775.51 and P4,710,242.93, respectively, based on its gross
revenues for the years 1999 and 2000.
Again, petitioner filed a Protest, reiterating its position that the local business
tax should be based on gross receipts and not gross revenue. Respondent denied
petitioner’s protest and gave the latter 30 days within which to appeal the denial.
This prompted petitioner to file a petition for review with the Regional Trial
Court of Pasig, Branch 168, praying for the annulment and cancellation of petitioners
deficiency local business taxes totaling P17,262,205.66.
Respondent and its City Treasurer filed a motion to dismiss on the grounds
that the court had no jurisdiction over the subject matter and that petitioner had no
legal capacity to sue. The RTC denied the motion in an Order dated December 3,
2002 due to respondents failure to include a notice of hearing. Thereafter, the RTC
declared respondents in default and allowed petitioner to present evidence ex- parte.
March 8, 2004, the RTC canceled and set aside the assessments made by
respondent and its City Treasurer.
On appeal, the CA rendered its decision setting aside and dismissing the RTC order.

Issue:
Whether or not the local business tax on contractors should be based on
gross receipts or gross revenue.

Ruling:
Respondent assessed deficiency local business taxes on petitioner based on
the latters gross revenue as reported in its financial statements, arguing that gross
receipts is synonymous with gross earnings/revenue, which, in turn, includes
uncollected earnings. Petitioner, however, contends that only the portion of the
revenues which were actually and constructively received should be considered in
determining its tax base.
Respondent is authorized to levy business taxes under Section 143 in relation
to Section 151 of the Local Government Code.
Insofar as petitioner is concerned, the applicable provision is subsection (e), Section
143 of the same Code covering contractors and other independent contractors, to
wit:
SEC. 143. Tax on Business. - The municipality may impose taxes on the following
businesses:
xxxx
(e) On contractors and other independent contractors, in accordance with the
following schedule:
With gross receipts for the
preceding calendar year in the
amount of: Amount of Tax Per Annum
xxxx
The above provision specifically refers to gross receipts which is defined under
Section 131 of the Local Government Code, as follows:
(n) Gross Sales or Receipts include the total amount of money or its equivalent
representing the contract price, compensation or service fee, including the amount
charged or materials supplied with the services and the deposits or advance
payments actually or constructively received during the taxable quarter for the
services performed or to be performed for another person excluding discounts if
determinable at the time of sales, sales return, excise tax, and value-added tax
(VAT);
The law is clear. Gross receipts include money or its equivalent actually or
constructively received in consideration of services rendered or articles sold,
exchanged or leased, whether actual or constructive.

In petitioners case, its audited financial statements reflect income or revenue which
accrued to it during the taxable period although not yet actually or constructively
received or paid. This is because petitioner uses the accrual method of accounting,
where income is reportable when all the events have occurred that fix the taxpayers
right to receive the income, and the amount can be determined with reasonable
accuracy; the right to receive income, and not the actual receipt, determines when to
include the amount in gross income.
The imposition of local business tax based on petitioners gross revenue will
inevitably result in the constitutionally proscribed double taxation taxing of the same
person twice by the same jurisdiction for the same thing inasmuch as petitioners
revenue or income for a taxable year will definitely include its gross receipts already
reported during the previous year and for which local business tax has already been
paid.
Thus, respondent committed a palpable error when it assessed petitioners
local business tax based on its gross revenue as reported in its audited financial
statements, as Section 143 of the Local Government Code and Section 22(e) of the
Pasig Revenue Code clearly provide that the tax should be computed based on
gross receipts.

WHEREFORE, the petition is GRANTED. The Decision dated


November 20, 2006 and Resolution dated February 9, 2007 issued by the Court of
Appeals are SET ASIDE, and the Decision dated March 8, 2004 rendered by the
Regional Trial Court of Pasig, Branch 168 is REINSTATED.