lOMoARcPSD|6937062

NPC vs city of cabanatunan TAX

Introduction To Law (Adamson University)

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(1) NPC vs. City of Cabanatuan GR No. 149110, April 9, 2003

TAXATI ON:Themosteffecti
vemeanst
orai
serev
enues;LGU'sPowerofTaxati
on,
excepti
ont oNon-del
egat
ionoft
axi
ngpower
;TaxExempti
ons,const
ruedst
rongl
y
againstthecl
aimant

Facts:NPC,aGOCC,c reat
edunderCA120asamended,sel l
ingelectr
icpower ,was
assessedbytheCit
yofCabanat uanforfranchisetaxpursuanttosec .37ofOr dinance
No.165-92.NPCrefusedt opayt hetaxassessmentont hegroundst hattheCityof
Cabanatuanhasnoaut horit
ytoimposet axongov ernmententi
tiesandalsot hatiti
s
exemptedasanon-profitorgani
zati
on.Fori t
spar t
,theCitygover nmentallegedthat
NPC’sex empt
ionf
rom local t
axeshasbeenr epealedbys ec.193ofRA7160.

ssue:Whet
I herNPCi
sli
abl
etopayanannual
franchi
set
axt
otheCi
tygov
ernment

Held:Al
t
houghasagener alr
ule,LGUscannoti mposet axes
,feesorchargesofany
ki
ndontheNati
onalGovernment,itsagenc i
esandi ns
trumentali
t
ies,t
hisrul
enow
admit
sanexcepti
on,i
.
e.,whenspec i
ficpr
ovisi
onsoftheLGCaut hori
zetheLGUsto
i
mpos et
axes,f
eesorchargesont heaf or
ementionedent i
t
ies.

Af r
anchi setaxi s"ataxont hepr i
vilegeoft r
ansactingbusi nessinthes tat
eand
exercisingcor por at
efranchisesgrant edbyt hestate."Itisnotlevi
edont hecorporat i
on
simplyf orexistingasacor porat
ion,uponi t
sproper tyori t
sincome,butoni tsex erciseof
therightsorpr i
vilegesgrantedtoi tbyt hegovernment .Hence,acor por ati
onneednot
payf r
anchi set axf r
om thet i
mei tceasedt odobus inessandex erci
seitsf r
anchise.
Iti
swi thinthi
scont extthatthephr ase" taxonbus i
nessesenj oyi
ngaf ranchi se"in
secti
on137oft heLGCdet erminewhet herthepetiti
oneri scoveredbyt hefranchiset ax
i
nquest ion,t
hef oll
owingrequisit
esshoul dconcur:( 1)thatpeti
ti
onerhasa" fr
anchi se"i
n
thesenseofasecondar yorspec ialfranchi
se;and( 2)thatiti
sex er
cisingi t
sr i
ghtsor
pri
vil
egesundert hi
sfranchisewi t
hint heterr
it
oryoft her espondentcitygov ernment .

NPCf
ulfil
l
sbot
hrequi
si
tes
.

Asar ule,t
axexemptionsar econst r
ueds tr
onglyagainsttheclaimant.Ex
empt i
onsmust
beshownt oexistcl
earl
yandcat egorical
ly
,andsuppor t
edbycl earl
egalprovi
si
ons .I
n
thecaseatbar ,thepeti
tioner'
ss olerefugeissecti
on13ofRep.ActNo.6395ex empti
ng
from,amongot hers,"al
lincomet axes,fr
anchi
set axesandr ealtyt
axestobepai dtothe
National Gover
nment,itsprovinces,citi
es,munici
palit
iesandot hergover
nment
agenc iesandinstr
ument al
it
ies."

I
tiswor t
hmentioningthatsection192oft
heLGCempower stheLGUs ,through
ordi
nancesdulyapprov ed,tograntt
axexempti
ons,i
nit
iat
iv
esorr el
i
efs.
77Buti n
enacti
ngsecti
on37ofOr di
nanceNo.165-92whichimposesanannualfranchisetax
"not
withst
andi
nganyex empt i
ongrant
edbylaworotherspeci
allaw,"t
her espondentci
ty
governmentcl
earlydidnotintendtoexemptthepeti
t
ionerf
rom t
hecov er
aget hereof
.

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Doubt less,thepowert ot axi sthemosteffect i

veinst
rumentt or aiseneededr evenuest
o
financeandsuppor tmyr iadact ivi
tiesoft helocalgovernmentuni tsforthedeli
veryof
bas i
cser vicesessent ial tothepr omot ionofthegener alwelfar
eandt heenhancementof
peace,pr ogr ess,andpr osper i
tyoft hepeopl e.AsthisCour tobs ervedintheMact an
case," theor i
ginalreasonsf orthewi thdr awaloftaxexempt i
onpr i
vi
legesgrantedto
gov ernment -ownedorcont rol
ledcor por ati
onsandallot herunit
sofgov er
nmentwer e
thatsuc hpr i
vil
eger esul t
edi nser ioust axbaseer osi
onanddi storti
onsinthetax
treatmentofsi mi l
arl
ysi tuatedent er prises .
"Withtheaddedbur denofdev olut
ion,iti
s
ev enmor ei mper at
ivef orgov ernmentent i
t
iestosharei ntherequi r
ementsof
dev el
opment ,fis
cal orot herwise,bypayi ngtaxesorot herchargesduef r
om them.

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