Title
Cagayan Electric Power and Light Co., Inc. vs. Commissioner of Internal Revenue
Case
G.R. No. L-60126
Decision Date
Sep 25, 1985
Cagayan Electric contested income tax liability, citing franchise tax exemption. SC ruled liability only for Jan-Aug 1969, pre-RA 6020 restoration.
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Case Digest (G.R. No. L-60126)

Facts:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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:

  1. Whether the franchise tax paid by petitioner is a commutative tax that already includes income tax.
  2. Whether Republic Act No. 5431 altered or repealed petitioner's franchise tax exemption.
  3. Whether petitioner's franchise is a contract that can be impaired by an implied repeal.
  4. Whether Section 24(d) of the Tax Code should be construed strictly against the Government.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)


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