Case Summary (G.R. No. L-20499)
Factual Background
The case revolves around the Balanga Power Plant Company, Inc., a Filipino corporation that holds multiple municipal franchises to operate an electric power plant in the province of Bataan, specifically in six municipalities including Balanga and Samal. The franchises grant the petitioner the authority to operate under specified tax rates, set at 1% for the first twenty years and 2% for the subsequent fifteen years on gross earnings from the electric power business.
Tax Assessment Overview
The Bureau of Internal Revenue assessed a deficiency franchise tax initially amounting to P12,892.91 for the period from October 1, 1953, to June 30, 1957. This amount was later amended to P26,253.04 based on a subsequent audit. The essential issue in dispute was whether the petitioner should be liable for the 2% franchise tax specified in the municipal franchises or the higher 5% tax imposed by Section 259 of the National Internal Revenue Code.
Legal Issue and Court Appeal
The primary legal question was whether applying the higher 5% franchise tax infringed upon the contractual agreements laid out in the municipal franchises, which explicitly stated a 2% tax. The Court of Tax Appeals ruled in favor of the respondent, concluding that none of the municipal franchises included a provision stating that the 2% tax was exclusive of other taxes, thus allowing for the imposition of the higher tax rate.
Constitutional Considerations
The Court examined whether the enforcement of Section 259 of the National Internal Revenue Code contravened constitutional mandates against the impairment of contractual obligations. The Court determined that the franchises granted to the petitioner were inherently subject to the legislative power to modify or amend, as established under the provisions of Act No. 667. Consequently, the application of the 5% tax was considered valid and consistent with the reserved legislative authority.
Precedent and Judicial Reasoning
The Court referred to the precedential decisions in the Hoa Hin Co. cases, emphasizing the principle that legislative changes to licensing can govern tax obligations. The Court distinguished between the nature of the franchises held by the petitioner and legislative franchises. It reite
...continue readingCase Syllabus (G.R. No. L-20499)
Case Overview
- Petitioner: Balanga Power Plant Co., Inc., a Filipino corporation based in Balanga, Bataan.
- Respondent: Commissioner of Internal Revenue, head of the Bureau of Internal Revenue.
- Date of Decision: June 30, 1965.
- Citation: 121 Phil. 1396, G.R. No. L-20499.
Background Facts
- The petitioner is the grantee of six municipal franchises to operate an electric power plant granted by six municipalities in the Province of Bataan.
- The municipalities and the dates of franchise grants are as follows:
- Balanga: November 5, 1928
- Orion: September 20, 1929
- Abucay: July 16, 1930
- Pilar: July 10, 1930
- Orani: September 20, 1930
- Samal: April 8, 1932
- The franchises for Balanga and Samal were granted under Act No. 667 of the Philippine Commission.
Franchise Tax Provisions
- The municipal franchises for Balanga and Samal stipulate a franchise tax rate of:
- 1% of gross earnings for the first 20 years.
- 2% for the subsequent 15 years.
- The original and amended assessments for deficiency franchise tax were as follows:
- Original demand: P12,892.91 for the period from October 1, 1953, to June 30, 1957.
- Amended assessment: Increased to P26,253.04 based on the audit by the General Auditing Office.
Legal Issues Presented
- The sole issue in dispute is whether the petitioner is subject to the 2% franchise tax as per the municipal franchises or the 5% tax under Section 259 of the National Internal Revenue Code.
- Section 259 states that a tax of 5% shall be collected on gross earnings from franchises