National Power Corporation vs. City of Cabanatuan

 G.R. No. 149110            April 9, 2003

NATIONAL POWER CORPORATION, petitioner,

vs.

CITY OF CABANATUAN, respondent.

FACTS:

Pursuant to section 37 of Ordinance No. 165-92, the respondent assessed the petitioner a franchise tax.

Petitioner 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. Petitioner further alleges that it is an instrumentality of the National Government, and as such, may not be taxed by the respondent city government. It cites the doctrine in Basco vs. Philippine Amusement and Gaming Corporation where SC held that local governments have no power to tax instrumentalities of the National Government.

Respondent filed a collection suit in the RTC of Cabanatuan City, demanding that petitioner pay the assessed tax due, plus a surcharge. Respondent alleged that petitioner's exemption from local taxes has been repealed by section 193 of Rep. Act No. 7160. The trial court issued an Order dismissing the case. 

On appeal, the CA reversed the trial court's 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. The petitioner filed a Motion for Reconsideration on the Court of Appeal's Decision. This was denied by the appellate court.

Hence, instant petition for review.

ISSUE:

Wherher CA erred in reversing the trial court's 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.

RULING:

No. In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the respondent city government to impose on the petitioner the franchise tax in question.

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.

x       x       x

Sec. 151. Scope of Taxing Powers.- Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes."

Ruling in favor of the local government. We ruled that the franchise tax in question is imposable despite any exemption enjoyed by MERALCO under special laws.

They correctly rely on provisions of Sections 137 and 193 of the LGC to support their position that MERALCO's tax exemption has been withdrawn. The explicit language of section 137 which authorizes the province to impose franchise tax 'notwithstanding any exemption granted by any law or other special law' is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws.

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." (emphases supplied)

Section 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 by all persons, whether natural or juridical, including government-owned or controlled corporations except (1) local water districts, (2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius. 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 MERALCO under existing law was clearly intended to be withdrawn.

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."

Thus, in enacting section 37 of Ordinance No. 165-92 which imposes an annual franchise tax "notwithstanding any exemption granted by law or other special law," the respondent city government clearly did not intend to exempt the petitioner from the coverage thereof.

Furthermore, the doctrine in Basco vs. Philippine Amusement and Gaming Corporation relied upon by the petitioner to support its claim no longer applies. To emphasize, the Basco case was decided prior to the effectivity of the LGC, when no law empowering the local government units to tax instrumentalities of the National Government was in effect. However, as this Court ruled in the case of Mactan Cebu International Airport Authority (MCIAA) vs. Marcos, nothing prevents Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax. In enacting the LGC, Congress exercised its prerogative to tax instrumentalities and agencies of government as it sees fit. Thus, after reviewing the specific provisions of the LGC, this Court held that MCIAA, although an instrumentality of the national government, was subject to real property tax.

The instant petition is DENIED and the assailed Decision and Resolution of the CA are hereby AFFIRMED.