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City Government of San Pablo, Laguna vs Reyes

305 SCRA 353 [GR No. 127708 March 25, 1999]

Facts: Act 3648 granted the Escudero Electric Service Company a legislative franchise to maintain and operate an electric light and
power system in the city of San Pablo and nearby municipalities. Section 10 of said act provides:

In consideration of the franchise and rights hereby granted, the grantee shall pay unto the municipal treasury of each municipality in
which it is supplying electric current to the public under this franchise, a tax equal to two percentum of the gross earning from electric
current sold or supplied under this franchise in each said municipality. Said tax shall be due and payable quarterly and shall be in lieu
of any and all taxes of any kind nature or description levied, established or collected by any authority whatsoever, municipal, provincial
or insular, now or in the future, or its pole wires, insulator, switches, transformers, and structures, installations, conductors and
accessories placed in and over and under all public property, including public streets and highways, provincial roads, bridges and
public squares, and on its franchises, rights, privileges, receipts, revenues and profits from which taxes the grantee is hereby expressly
exempted.

Escuderos franchise was transferred to the plaintiff MERALCO under RA 2340.

On October 5, 1992, the sangguniang panlungsod of San Pablo City enacted ordinance no. 56 otherwise known as the Revenue Code of
the City of San Pablo. Pursuant to sec 2.09 article D of the said ordinance, the petitioner city treasurer sent to private respondent a letter
demanding payment of the aforesaid franchise tax.

Issue: Whether or not the city of San Pablo may impose a local franchise tax to MERALCO.

Held: Yes. A general law cannot be construed to have repealed a special law by mere implication unless the intent to repeal or alter is
manifest and it must be convincingly demonstrated that the two laws are so clearly repugnant and patently inconsistent that they cannot
co-exist.

It is our view that petitions correctly rely on the provisions of sections 137 and 193 of the LGC to support their position that MERALCOs
tax exemption has been withdrawn. The explicit language of section 137 which authorizes the province to impose franchise tax not
withstanding any exemption granted by law or other special law is all encompassing and clear. The franchise is imposable despite any
exemption enjoyed under special law.

Sec 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this code, tax
exemptions or incentives granted to or presently enjoyed all persons whether natural or juridical, including GOCCs except: 1.) local
water districts; 2.) Cooperatives duly registered under RA 6938; 3.) Non-stock and non-profit hospitals and education institutions, are
withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the 3 enumerated entities. It is a basic
precept of statutory construction that the express mention of one person, thing, act or consequences excludes all others as expressed in
the familiar maxim expressio unius est exclusio alterus. In the absence of any provision of the code to the contrary, and we find no other
provision in point, any existing tax exemption or incentive enjoyed by the MERALCO under the existing law was clearly intended to
be withdrawn.

Reading together section 193 and 137 of the LGC conclude that under the LGC, the local government unit may now impose a local tax
at a rate not excluding 50% of 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts realized
within its territorial jurisdiction. The legislative purpose to withdraw tax privilege only enjoy and an existing law or charter is clearly
manifested by the language used in sections 137 and 193 categorically withdrawing such exemption subject only to the exceptions
enumerated. Since it would be not only tedious and impractical to attempt to enumerate all the existing statutes providing for special tax
exemptions or privileges, the LGC provided for an express, albeit general withdrawal of such exemptions or privileges. No more
unequivocal language could have been used.

It is true that the phrase in lieu of all taxes found in special franchises has been held in several cases to exempt the franchise holder
from payment of tax on its corporate franchise imposed of the internal revenue code, as the charter is in the nature of a private contract
and the exemption is part of the inducement for the acceptance of the franchise, and that the imposition of another franchise tax by the
local authority would constitute an impairment of contract between the government and the corporation. But these magic words
contained in the phrase shall be in lieu of all taxes have to give way to the premptory language of the LGC specifically providing for
the withdrawal of such exemption privileges.
NATIONAL POWER CORPORATION vs. CITY OF CABANATUAN

GR. No. 149110, April 9, 2003

Facts:

NAPOCOR, the petitioner, is a government-owed and controlled corporation created under Commonwealth Act 120. It is
tasked to undertake the development of hydroelectric generations of power and the production of electricity from
nuclear, geothermal, and other sources, as well as, the transmission of electric power on a nationwide basis.

For many years now, NAPOCOR sells electric power to the resident Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance No. 165-92, the respondent assessed the petitioner a franchise
tax amounting to P808,606.41, representing 75% of 1% of the formers gross receipts for the preceding year.

Petitioner, whose capital stock was subscribed and wholly paid by the Philippine Government, refused to pay the tax
assessment. It argued that the respondent has no authority to impose tax on government entities. Petitioner also contend
that as a non-profit organization, it is exempted from the payment of all forms of taxes, charges, duties or fees in
accordance with Sec. 13 of RA 6395, as amended. The respondent filed a collection suit in the RTC of Cabanatuan City,
demanding that petitioner pay the assessed tax, plus surcharge equivalent to 25% of the amount of tax and 2% monthly
interest. Respondent alleged that petitioners exemption from local taxes has been repealed by Sec. 193 of RA 7160 (Local
Government Code). The trial court issued an order dismissing the case. On appeal, the Court of Appeals reversed the
decision of the RTC and ordered the petitioner to pay the city government the tax assessment.

Issues:

(1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because its stocks are wholly owned by the
National Government and its charter characterized is as a non-profit organization?

(2) Is the NAPOCORs exemption from all forms of taxes repealed by the provisions of the Local Government Code (LGC)?

Held:

(1) NO. To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a
privilege to do business. The taxable entity is the corporation which exercises the franchise, and not the individual
stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity from the National
Government. It can sue and be sued under its own name, and can exercise all the powers of a corporation under the
Corporation Code. To be sure, the ownership by the National Government of its entire capital stock does not necessarily
imply that petitioner is no engage din business.

(2) YES. One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and
agencies of the National Government from the coverage of local taxation. Although as a general rule, LGUs cannot impose
taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits
an exception, i.e. when specific provisions of the LGC authorize the LGUs to impose taxes, fees, or charges on the
aforementioned entities. The legislative purpose to withdraw tax privileges enjoyed under existing laws or charter is
clearly manifested by the language used on Sec. 137 and 193 categorically withdrawing such exemption subject only to
the exceptions enumerated. Since it would be tedious and impractical to attempt to enumerate all the existing statutes
providing for special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such
exemptions or privileges. No more unequivocal language could have been used
LEPANTO CONSOLIDATED MINING COMPANY vs. AMBANLOC- Local Business Taxation

FACTS:
Lepanto Consolidated Mining had a mining lease contract for a mining claim in Benguet. They used the sand and gravel mined
to construct and maintain concrete structures needed in its mining operations such as a tailings dam, access roads, and
offices. The provincial treasurer of Benguet then asked Lepanto Consolidated Mining to pay sand and gravel tax for the quarry
materials extracted from the mining site. The counterargument was that the said tax applied only to commercial extractions
and since Lepanto did not supply other users for some profit, the tax should not apply.

ISSUE:
Is Lepanto liable for the tax imposed by Benguet on the sand and gravel that it extracted from within the area of its mining
claim used exclusively in its mining operations?

HELD:
YES. The CTA erred in applying the provision of the Local Government Code (Section 138) since the basis of Benguet province
emanates from the Revised Benguet Revenue Code itself. This notwithstanding, the provincial revenue measure still did not
distinguish between commercial and non-commercial extractions.

In addition, the Petitioners argument that when a company is taxed on its main business it can no longer be taxable for
engaging in an activity that is but part of, incidental to, and necessary to such main business, was held to be inapplicable. The
Court said that the cases where the above principle has been applied involved business taxes and thus the incidental activities
could not be treated as separate and distinct from the main business. Here the tax being imposed was an excise tax levied on
the privilege of extracting gravel and sand.

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