Case Digest (G.R. No. L-60126)
Facts:
The case involves Cagayan Electric Power & Light Co., Inc. (petitioner) as the appellant against the Commissioner of Internal Revenue and the Court of Tax Appeals (respondents). The dispute centers on the petitioner’s liability for income tax amounting to P75,149.73 for the period of more than seven months in the year 1969, in addition to the franchise tax it was already paying. The petitioner operates under a legislative franchise granted by Republic Act No. 3247, which stipulates that it is subject to a 3% tax on its gross earnings from the sale of electric current, explicitly exempting it from all other taxes and assessments related to its privileges, earnings, income, franchise, and related properties.
On June 27, 1968, Republic Act No. 5431 amended Section 24 of the Tax Code, imposing income tax on all corporate taxpayers not specifically exempted, notwithstanding any existing laws to the contrary. This amendment effectively subjected franchise companies, includin...
Case Digest (G.R. No. L-60126)
Facts:
Petitioner's Franchise and Tax Exemption
- Petitioner, Cagayan Electric Power & Light Co., Inc., holds a legislative franchise under Republic Act No. 3247.
- Section 3 of its franchise exempts it from all taxes, including income tax, in lieu of a 3% franchise tax on gross earnings from the sale of electric current.
Amendment to the Tax Code
- On June 27, 1968, Republic Act No. 5431 amended Section 24 of the Tax Code, making all corporate taxpayers liable for income tax unless specifically exempted.
- This amendment overrode existing special or general laws, including franchise tax exemptions.
Amendment to Petitioner's Franchise
- On August 4, 1969, Republic Act No. 6020 amended petitioner's franchise, expanding its service area and reenacting its original tax exemption.
- This effectively restored petitioner's tax exemption, neutralizing the earlier amendment by Republic Act No. 5431.
Tax Assessment and Dispute
- The Commissioner of Internal Revenue issued a demand letter on February 15, 1973, requiring petitioner to pay deficiency income taxes for 1968 to 1971.
- The Commissioner later canceled assessments for 1970 and 1971 but insisted on those for 1968 and 1969.
- Petitioner contested the assessments, arguing that its franchise tax already included income tax and that its franchise was not impaired by Republic Act No. 5431.
Tax Court Decision
- The Court of Tax Appeals held petitioner liable for income tax only for the period from January 1 to August 3, 1969, before the enactment of Republic Act No. 6020.
- Petitioner appealed to the Supreme Court.
Issue:
- Whether the franchise tax paid by petitioner is a commutative tax that already includes income tax.
- Whether Republic Act No. 5431 altered or repealed petitioner's franchise tax exemption.
- Whether petitioner's franchise is a contract that can be impaired by an implied repeal.
- Whether Section 24(d) of the Tax Code should be construed strictly against the Government.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)