Case Digest (G.R. No. 155491)
Facts:
Smart Communications, Inc. v. The City of Davao, G.R. No. 155491, September 16, 2008, the Supreme Court Third Division, Nachura, J., writing for the Court.
Petitioner Smart Communications, Inc. (Smart) filed a special civil action for declaratory relief under Rule 63 on February 18, 2002 seeking a judicial determination that its legislative franchise (R.A. No. 7294, which lapsed into law on March 27, 1992) exempted it from the local franchise tax imposed by the City of Davao under its Tax Code (City Ordinance No. 519, amending Ordinance No. 230). Smart relied chiefly on the "in lieu of all taxes" clause in Section 9 of its franchise and argued that Congress intended the clause to exempt Smart from local franchise taxation, that Section 137 of the Local Government Code (R.A. No. 7160) could apply only to exemptions existing before the Code's effectivity, that Section 23 of R.A. No. 7925 (the Public Telecommunications Policy Act) conferred "most favored" treatment to incorporate Globe's broader exemption into Smart's franchise, and that local taxation would impair its contract.
Respondents, the City of Davao, through its Mayor Rodrigo R. Duterte and the Sangguniang Panlungsod, answered contending local taxing power is constitutionally conferred on local government units and that the claimed exemption was not clearly granted by Congress.
The Regional Trial Court (RTC) conducted a pre-trial, treated the case as a legal question and required memoranda. On July 19, 2002, the RTC denied Smart's petition, holding that ambiguities in the "in lieu of all taxes" clause must be resolved against the taxpayer; that tax exemptions are strictly construed against taxpayers and liberally for taxing authorities; and that the City's taxing power derives directly from the Constitution and the Local Government Code such that Smart had not shown a contractual impairment. The RTC denied Smart's motion for reconsideration on September 26, 2002.
Smart brought a petition for review on certiorari under Rule 45 to the Supreme Cou...(Pro-only)
Issues:
- Whether the withdrawal of tax exemptions in Section 193 of R.A. No. 7160 applies prospectively only to exemptions existing before the Code's effectivity or also to franchises granted thereafter.
- Whether the "in lieu of all taxes" clause in Section 9 of Smart's franchise exempts Smart from local franchise taxes.
- Whether Section 23 of R.A. No. 7925 (the equality/most-favored clause) imports Globe's explicit municipal/provincial tax exemption into Smart's franchise.
- Whether imposition of the City of Davao's local franchise tax on Smart would violate the constitutional prohibition against impairment of contracts.
- Whether the ...(Pro-only)
Ruling:
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Ratio:
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Doctrine:
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