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    National Power Corp VS City of Cabanatuan

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    This case involves a dispute between the National Power Corporation (NAPOCOR) and the City of Cabanatuan over franchise taxes. NAPOCOR argued it was exempt from local taxes based on its charter, while the city argued the Local Government Code withdrew such exemptions. The Court of Appeals ruled the city could impose the tax based on sections of the LGC. The Supreme Court affirmed, finding the LGC clearly withdrew tax exemptions and allowed local governments to impose franchise taxes on all entities, including government corporations like NAPOCOR.

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    National Power Corp VS City of Cabanatuan

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    Empty Cup
    13 views3 pages
    This case involves a dispute between the National Power Corporation (NAPOCOR) and the City of Cabanatuan over franchise taxes. NAPOCOR argued it was exempt from local taxes based on its charter, while the city argued the Local Government Code withdrew such exemptions. The Court of Appeals ruled the city could impose the tax based on sections of the LGC. The Supreme Court affirmed, finding the LGC clearly withdrew tax exemptions and allowed local governments to impose franchise taxes on all entities, including government corporations like NAPOCOR.

    Original Title

    123. NATIONAL POWER CORP VS CITY OF CABANATUAN

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    This case involves a dispute between the National Power Corporation (NAPOCOR) and the City of Cabanatuan over franchise taxes. NAPOCOR argued it was exempt from local taxes based on its charter, while the city argued the Local Government Code withdrew such exemptions. The Court of Appeals ruled the city could impose the tax based on sections of the LGC. The Supreme Court affirmed, finding the LGC clearly withdrew tax exemptions and allowed local governments to impose franchise taxes on all entities, including government corporations like NAPOCOR.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    13 views3 pages

    National Power Corp VS City of Cabanatuan

    Uploaded by

    Empty Cup
    This case involves a dispute between the National Power Corporation (NAPOCOR) and the City of Cabanatuan over franchise taxes. NAPOCOR argued it was exempt from local taxes based on its charter, while the city argued the Local Government Code withdrew such exemptions. The Court of Appeals ruled the city could impose the tax based on sections of the LGC. The Supreme Court affirmed, finding the LGC clearly withdrew tax exemptions and allowed local governments to impose franchise taxes on all entities, including government corporations like NAPOCOR.

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    of 3

    SYSLLABUS:LIFEBLOOD OF DOCTRINE

    NATIONAL POWER CORPORATION, petitioner, vs. CITY OF CABANATUAN, respondent.

    G.R. No. 149110April 9, 2003THIRD DIVISION(PUNO, J.)

    Sec. 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other
    special law, the province may impose a tax on businesses enjoying a franchise, at a rate not
    exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the
    preceding calendar year based on the incoming receipt, or realized, within its territorial
    jurisdiction.

    In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one
    percent (1%) of the capital investment. In the succeeding calendar year, regardless of when
    the business started to operate, the tax shall be based on the gross receipts for the
    preceding calendar year, or any fraction thereof, as provided herein." (emphasis supplied)

    Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in this Code,
    tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural
    or juridical, including government-owned or controlled corporations, except local water
    districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit
    hospitals and educational institutions, are hereby withdrawn upon the effectivity of this
    Code.

    FACTS:

    ● NATIONAL POWER CORPORATION Is a government-owned and controlled corporation


    created under Commonwealth Act No. 120, as amended.
    o 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
    o NAPOCOR SELLS ELECTRIC power to the city of Cabanatuan
    o Wholy owned by the Philippine Government
    ● City of Cabanatuan assessed the petitioner franchise tax amounting to P808,606.41,
    representing 75% of 1% of the latter's gross receipts for the preceding year.
    ● NATIONAL POWER CORPORATION refused to pay the tax assessment. It argued that the
    respondent has no authority to impose tax on government entities. Petitioner also contended
    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 Rep. Act No. 6395, as amended, viz:

    o "Sec.13. Non-profit Character of the Corporation; Exemption from all Taxes, Duties,


    Fees, Imposts and Other Charges by Government and Governmental
    Instrumentalities.- The Corporation shall be non-profit and shall devote all its return
    from its capital investment, as well as excess revenues from its operation, for
    expansion. To enable the Corporation to pay its indebtedness and obligations and in
    furtherance and effective implementation of the policy enunciated in Section one of
    this Act, the Corporation is hereby exempt:
    ▪ (a) From the payment of all taxes, duties, fees, imposts, charges, costs
    and service fees in any court or administrative proceedings in which it
    may be a party, restrictions and duties to the Republic of the
    Philippines, its provinces, cities, municipalities and other government
    agencies and instrumentalities;
    ▪ (b) From all income taxes, franchise taxes and realty taxes to be paid to the
    National Government, its provinces, cities, municipalities and other
    government agencies and instrumentalities;
    ▪ (c) From all import duties, compensating taxes and advanced sales tax, and
    wharfage fees on import of foreign goods required for its operations and
    projects; and
    ▪ (d) From all taxes, duties, fees, imposts, and all other charges imposed by
    the Republic of the Philippines, its provinces, cities, municipalities and other
    government agencies and instrumentalities, on all petroleum products used
    by the Corporation in the generation, transmission, utilization, and sale of
    electric power."1
    ● Respondent (CITY OF CABANATUAN) alleged that petitioner's exemption from local taxes
    has been repealed by section 193 of Rep. Act No. 7160, which reads as follows:
    o "Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in
    this Code, tax exemptions or incentives granted to, or presently enjoyed by all
    persons, whether natural or juridical, including government owned or controlled
    corporations, except local water districts, cooperatives duly registered under R.A. No.
    6938, non-stock and non-profit hospitals and educational institutions, are hereby
    withdrawn upon the effectivity of this Code."
    ● January 25, 1996, the trial court issued an Order dismissing the case. It ruled that the tax
    exemption privileges granted to petitioner subsist despite the passage of Rep. Act No. 7160
    for the following reasons: (1) Rep. Act No. 6395 is a particular law and it may not be
    repealed by Rep. Act No. 7160 which is a general law; (2) section 193 of Rep. Act No. 7160
    is in the nature of an implied repeal which is not favored; and (3) local governments have no
    power to tax instrumentalities of the national government.
    o “Local governments have no power to tax instrumentalities of the National
    Government. PAGCOR is a government owned or controlled corporation with an
    original charter, PD 1869. All of its shares of stocks are owned by the National
    Government. xxx Being an instrumentality of the government, PAGCOR should be
    and actually is exempt from local taxes. Otherwise, its operation might be burdened,
    impeded or subjected to control by mere local government.'
    ● Court of Appeals reversed the trial court order on the ground that section 193, in relation to
    sections 137 and 151 of the LGC, expressly withdrew the exemptions granted to the
    petitioner. It ordered the petitioner to pay the respondent city government the following: (a)
    the sum of P808,606.41 representing the franchise tax due based on gross receipts for the
    year 1992, (b) the tax due every year thereafter based in the gross receipts earned by NPC,
    (c) in all cases, to pay a surcharge of 25% of the tax due and unpaid, and (d) the sum of P
    10,000.00 as litigation expense.
    ● April 4, 2001, the petitioner filed a Motion for Reconsideration on the Court of Appeal's
    Decision. This was denied by the appellate court

    Issues:
    WON the decision on March 12 and July 10, 2001 Decision of court of appeals are correct for obliging
    the Napocor to pay the Franchise tax to Local Government City of Cabanatuan

    Ruling

    Yes the decision of theCA is correct LGC clearly states that the LGUs can impose franchise tax
    "notwithstanding any exemption granted by any law or other special law." This particular provision of
    the LGC does not admit any exception.

    Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local
    government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual
    receipts for the preceding calendar based on the incoming receipts realized within its territorial
    jurisdiction. The legislative purpose to withdraw tax privileges enjoyed under existing law or charter
    is clearly manifested by the language used on (sic) 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.

    IN VIEW WHEREOF, the instant petition is DENIED and the assailed Decision and Resolution of the
    Court of Appeals dated March 12, 2001 and July 10, 2001, respectively, are hereby AFFIRMED.

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