Case Digest (G.R. No. 155491)
Facts:
Smart Communications, Inc. v. The City of Davao, G.R. No. 155491, July 21, 2009, Supreme Court Third Division, Nachura, J., writing for the Court.On February 18, 2002, Smart Communications, Inc. (Smart) filed a special civil action for declaratory relief under Rule 63 questioning its obligation to pay a local franchise tax imposed by the City of Davao, which the City levied on businesses enjoying a franchise within its territorial jurisdiction. Smart contended that the tax was not due because Section 9 of its legislative franchise under Republic Act No. 7294 (RA 7294) contained an "in lieu of all taxes" clause that exempted its telecenter in Davao City from local franchise taxation.
The Regional Trial Court (RTC) of Davao City denied Smart's petition in a Decision dated July 19, 2002. The RTC likewise denied Smart's motion for reconsideration in an Order dated September 26, 2002. Smart elevated the matter to the Supreme Court by appeal; the Court denied the appeal in a decision dated September 16, 2008.
Smart filed the present Motion for Reconsideration of the Supreme Court's September 16, 2008 decision, raising four principal grounds: (1) the "in lieu of all taxes" clause in Section 9 of RA 7294 covers local taxes and should be construed in its favor; (2) the advent of Republic Act No. 7716 (Expanded VAT Law) did not render the "in lieu" clause ineffective as to local franchise tax; (3) Section 23 of Republic Act No. 7925 (RA 7925) — the "most favored treatment" or equality clause — includes “exemption” and therefore grants tax exemption to existing franchisees; and (4) levying a local franchise tax on Smart would impair the obligation of contracts.
In resolving the motion the Court reviewed its prior jurisprudence, notably Digital Telecommunications Philippines, Inc. (Digitel) v. Province of Pangasinan (G.R. No. 152534, Feb. 23, 2007, 516 SCRA 541), PLDT v. City of Davao (415 Phil. 764 (2001)), PLDT v. Province of Laguna (G.R. No. 151899, Aug. 16, 2005, 467 SCRA 93), and PLDT v. City of Bacolod...(Pro-only)
Issues:
- Does the "in lieu of all taxes" clause in Section 9 of RA 7294 exempt Smart from payment of local franchise tax?
- Did the Expanded VAT Law (RA 7716) and the imposition of VAT on telecommunications replace or abolish the obligation to pay local franchise tax?
- Does Section 23 of RA 7925 — the equality/most-favored-treatment clause — operate as a tax exemption that entitles franchise holders to exemption from local franchise taxes?
- Would imposition of local franchise tax on Smart constitute an impairment of the ...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)