City of Iriga vs. Camarines Sur III Electric Cooperative, Inc. Supreme Court (Second Division) G.R. No. 192945 promulgated September 5, 2012
Facts: Respondent Camarines Sur III Electric Cooperative, Inc. (CASURECO), an electric cooperative organized under Presidential Decree (PD) No. 26 9 and registered with the National Electrification Administration Administration (NEA), is engaged in the business of electric power distribution to various end-users and consumers within the City of Iriga and the municipalities of Nabua, Bato, Baao, Buhi, Bula and Balatan of the Province of Camarines Sur (or the Rinconada area). Petitioner City of Iriga assessed CASURECO deficiency franchise tax and RPT covering the periods 1998 to 2003 and 1995 to 2003, respectively. respectively. CASURECO refused to pay and argued that as an electric cooperative provisionally registered with the Cooperative Development Authority (CDA), it is exempt from the payment of local taxes. Petitioner filed a collection complaint against CASURECO with the RTC, which ruled that the city’s right to assess RPT for 1995 - 1999 had already prescribed. The RTC RTC also ruled that CASURECO is liable for franchise taxes for 2000 – 2003 based on its gross receipts from Iriga City and the Rinconada area, on the ground that the “ situs of taxation is the place where the privilege is exercised.” On appeal, the Court of Appeals (CA) reversed the RTC on the ground that CASURECO is a non-profit entity which does not fall within the purview of businesses enjoying a franchise. Issues: 1. Did CASURECO correctly appeal the RTC RTC decision to the CA? NO 2. Is CASURECO liable for franchise tax? YES
Ruling: 1. No. CASURECO should have filed its appeal with the CTA, which has exclusive jurisdiction to review decisions, orders or resolutions of the RTCs in local tax cases originally decided or resolved b y the RTCs in the exercise of their original or appellate jurisdiction. 2. Yes. Yes. CASURECO is liable for franchise tax. PD No. 269, which too k effect on August 6, 1973, granted exemption from the payment of all national and local taxes and fees to electric cooperatives registered with NEA. RA No. 6939, enacted on March 10, 1990, created and authorized the CDA to register cooperatives, while RA No. 6938, enacted on the same day, provides that electric electric cooperatives registered with NEA under PD No. 269 which opt not to register with the CDA shall not be entitled to the benefits and privileges under the law. On January 1, 1992, the LGC took effect and withdrew tax exemptions or incentives previously enjoyed by all persons, natural and judicial, including including GOCCs, except for certain certain entities, entities, such as cooperatives duly registered under RA No. 6938. The provisional registration of CASURECO with the CDA, which granted it exemption from payment of local taxes, was only until May 4, 1992. Thereafter, CASURECO was no longer exempt from the payment of local taxes, including the franchise tax. A franchise tax is “a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state.” It is not levied simply for existing as a corporation upo n its property or on its income, but on its exercise of the rights or privileges granted to it by the government. To be liable for local franchise tax: 1) on e must have a “franchise” in the sense of a secondary or special franchise; and 2) it must exercise its rights or privileges under this franchise within the territory of the pertinent LGU. Both requisites being present, CASURECO is liable to pay franchise tax. Being in the nature of an excise tax, the situs of taxation is the place where the privilege privilege is exercised. exercised. Hence, CASURECO CASURECO is liable for for franchise tax on all its its gross receipts from Iriga Iriga City and the Rinconada area where it operates, regardless of the place where its services or products are delivered.
