Title
Batangas Power Corp. vs. Batangas City
Case
G.R. No. 152675
Decision Date
Apr 28, 2004
A 1990s Philippine power crisis led to a BOT agreement between NPC and Enron, later assigned to BPC. Batangas City demanded business taxes from BPC, which claimed a 6-year tax holiday. The Supreme Court ruled BPC's tax holiday began at BOI registration, NPC's tax exemption was withdrawn, and NPC was liable for taxes under the BOT agreement.
power corporation
court ruling
business taxes

Case Summary (G.R. No. 152675)

Factual Background

In response to the power crisis of the early 1990s, NPC entered into a Fast Track BOT Agreement dated June 29, 1992 with Enron Power Development Corporation, under which NPC agreed to assume payment of taxes on the power station except income taxes and permit fees pursuant to Section 11.02 of the BOT Agreement; Enron later assigned its obligations to Batangas Power Corporation. BPC registered with the Board of Investments and was issued a certificate as a BOI-certified pioneer enterprise, and BPC completed construction and commenced operations of the Batangas City power station. Batangas City assessed business taxes against BPC beginning in 1994 under the 1992 Batangas City Tax Code, later reducing the assessed amount and ultimately demanding payment for 1998–1999. BPC refused payment, asserting a six-year local tax holiday as a BOI pioneer enterprise and alternatively contending that NPC, having assumed tax obligations under the BOT Agreement, was the proper party to pay.

Procedural History

BPC filed a petition for declaratory relief in the Makati RTC seeking a ruling that it was not bound to pay the business taxes asserted by Batangas City; NPC and Batangas City answered. While the action was pending, the city refused to issue BPC’s business permit unless the tax assessments were settled; BPC then sought to convert its declaratory relief action into a petition for injunction to enjoin the city from withholding the permit and from closing the plant. The Makati RTC admitted the supplemental petition but, by decision dated February 27, 2002, dismissed the petition for injunction and held BPC liable for the business taxes, ruled that NPC’s tax exemption had been withdrawn by R.A. No. 7160, and declared that the six-year tax holiday for BOI pioneer enterprises commenced on the date of BOI registration. BPC and NPC filed consolidated petitions for review under Rule 45 with the Supreme Court assailing the RTC decision.

The Parties’ Contentions

Petitioners argued that BPC’s six-year tax holiday should commence on the date of its actual commercial operations as certified by the BOI and not on the date of BOI registration, and that NPC’s charter-based tax exemption survived the Local Government Code because a general law cannot repeal a special law and because Section 13 of R.A. No. 6395 was not specifically repealed. NPC additionally contended that the RTC acted with grave abuse in admitting the supplemental petition for injunction because the RTC lacked jurisdiction over Batangas City. Batangas City maintained that local taxes were properly imposed on BPC as the entity doing business in the city and that NPC’s assumption of tax payment under the BOT Agreement did not relieve BPC of the city’s levy unless NPC itself paid; the city also asserted that BPC’s local tax holiday had expired.

Issues Presented

The Supreme Court identified three principal issues: whether BPC’s six-year local tax holiday commenced on the date of BOI registration or on the date of actual commercial operation as certified by the BOI; whether the Makati RTC had jurisdiction to entertain the converted petition for injunction against Batangas City; and whether NPC’s tax-exemption privileges under its Charter were withdrawn by Section 193 of the Local Government Code.

Ruling

The Supreme Court dismissed the consolidated petitions for lack of merit. The Court held that the six-year local tax holiday under Section 133(g) of the Local Government Code commences from the date of BOI registration, not from the date of commercial operation; that NPC was estopped from contesting the RTC’s jurisdiction to admit BPC’s supplemental petition for injunction because NPC did not raise the objection before the trial court; and that Section 193 of R.A. No. 7160 effectively withdrew the broad tax exemption privileges previously enjoyed by NPC under its Charter, rendering NPC liable for taxes it had undertaken to assume under the 1992 BOT Agreement.

Legal Basis and Reasoning on the Tax Holiday

The Court explained that Section 133(g) of R.A. No. 7160 applies specifically to taxes imposed by local government units and prescribes that BOI-certified pioneer enterprises are exempt from local taxation for a period of six years “from the date of registration.” The Court rejected reliance on Executive Order No. 226 for the local tax claim because the six-year rule in EO 226, Article 39, Title III, concerns national income tax holiday commencement for BOI-certified pioneers and refers to income taxes levied by the national government; EO 226’s commencement-from-operation provision therefore does not govern local business taxes. Applying Section 133(g), the Court concluded that BPC’s six-year local tax exemption commenced as of the date designated by the BOI relevant to registration and thus fixed the exemption period in BPC’s case as beginning on July 16, 1993 and ending on July 15, 1999 as reflected in the record.

Legal Basis and Reasoning on Jurisdiction and Estoppel

The Court found that NPC had not preserved the jurisdictional objection at the trial level, having participated without contesting the RTC’s admission of the supplemental petition; consequently, NPC was estopped from raising lack of jurisdiction before the Supreme Court. The Court applied the settled rule that a party cannot litigate to judgment and then assail the court’s jurisdiction only when the outcome is adverse.

Legal Basis and Reasoning on NPC’s Tax-Exemption

The Court reaffirmed its recent expos

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