QULZON CI1Y and 1HL CI1Y 1RLASURLR OI QULZON CI1Y v.

ABS-CBN BROADCAS1ING CORPORA1ION

G.R. No. J66408, 06 October 2008, 1HIRD DIVISION, (Reyes, R.1.,J.)

1be ctav.e iv tiev of att tae. aoe. vot ertaiv to 1.1 or av, otber ta. t cavvot at, rbev rbat i. aia i.
a ta otber tbav a fravcbi.e ta. ivce tbe fravcbi.e ta ov tbe broaaca.tivg covavie. ritb ,eart, gro.. receit. eceeaivg
tev vittiov e.o. ba. beev aboti.bea, tbe iv tiev of att tae. ctav.e ba. vor becove fvvctv. officio, revaerea ivoeratire.

Respondent ABS-CBN had been paying local ranchise tax imposed by petitioner Quezon City.
loweer, in iew o the proision in Republic Act ,R.A., 966 that it shall pay a ranchise tax x x x in
lieu o all taxes,` ABS-CBN belieed that it is not liable to pay the local ranchise tax imposed by
Quezon City. Quezon City, haing its own character, also imposes a ranchise tax on businesses
operating within its jurisdiction.

ISSUL:

\hether or not ABS-CBN, by reason o R.A 966, is excused rom paying the ranchise tax
imposed by Quezon City

HLLD:

Petition GRAN1LD.

In the case under reiew, the Philippine Congress enacted R.A. 966 on March 30, 1995,
subsequent to the eectiity o the LGC on January 1, 1992. Under it, ABS-CBN was granted the
ranchise to install and operate radio and teleision broadcasting stations in the Philippines. Likewise,
Section 8 imposed on ABS-CBN the duty o paying 3 ranchise tax. It bears stressing, howeer, that
payment o the percentage ranchise tax shall be in lieu o all taxes` on the said ranchise.

Congress has the inherent power to tax, which includes the power to grant tax exemptions. On
the other hand, the power o Quezon City to tax is prescribed by Section 151 in relation to Section 13
o the LGC which expressly proides that notwithstanding any exemption granted by any law or other
special law, the City may impose a ranchise tax. It must be noted that Section 13 o the LGC does not
prohibit grant o uture exemptions. In Cit, Corervvevt of Qveov Cit, r. a,av 1etecovvvvicatiov., vc.
sustained the power o Congress to grant tax exemptions oer and aboe the power o the local
goernment`s delegated power to tax.

1he more pertinent issue now to consider is whether or not by passing R.A. 966, which
contains the in lieu o all taxes` proision, Congress intended to exempt ABS-CBN rom local ranchise
tax.

1axes are what ciilized people pay or ciilized society. 1hey are the lieblood o the nation.
1hus, statutes granting tax exemptions are construed .trici..ivi ;vri. against the taxpayer and liberally in
aor o the taxing authority. A claim o tax exemption must be clearly shown and based on language in
law too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. 1he
burden o proo rests upon the party claiming the exemption to proe that it is in act coered by the
exemption so claimed.

1he basis or the rule on strict construction to statutory proisions granting tax exemptions or
deductions is to minimize dierential treatment and oster impartiality, airness and equality o treatment
among taxpayers. le who claims an exemption rom his share o common burden must justiy his claim
that the legislature intended to exempt him by unmistakable terms. lor exemptions rom taxation are
not aored in law, nor are they presumed. 1hey must be expressed in the clearest and most
unambiguous language and not let to mere implications. It has been held that exemptions are neer
presumed, the burden is on the claimant to establish clearly his right to exemption and cannot be made
out o inerence or implications but must be laid beyond reasonable doubt. In other words, since
taxation is the rule and exemption the exception, the intention to make an exemption ought to be
expressed in clear and unambiguous terms.

Section 8 o R.A. 966 imposes on ABS-CBN a ranchise tax equialent to three ,3, percent
o all gross receipts o the radio,teleision business transacted under the ranchise and the ranchise tax
shall be in lieu o all taxes` on the ranchise or earnings thereo.

1he in lieu o all taxes` proision in the ranchise o ABS-CBN does not expressly proide
what kind o taxes ABS-CBN is exempted rom. It is not clear whether the exemption would include
both local, whether municipal, city or proincial, and national tax. \hat is clear is that ABS-CBN shall
be liable to pay three ,3, percent ranchise tax and income taxes under 1itle II o the NIRC. But
whether the in lieu o all taxes proision` would include exemption rom local tax is not unequiocal.

As aderted to earlier, the right to exemption rom local ranchise tax must be clearly
established and cannot be made out o inerence or implications but must be laid beyond reasonable
doubt. Verily, the uncertainty in the in lieu o all taxes` proision should be construed against ABS-
CBN. ABS-CBN has the burden to proe that it is in act coered by the exemption so claimed. ABS-
CBN miserably ailed in this regard.

In the case under reiew, ABS-CBN`s ranchise did not embody an exemption similar to
those in Carcar, Mavita Raitroaa, Philippine Raitra,, and 1i.a,av tectric. 1oo, the ranchise ailed to
speciy the taxing authority rom whose jurisdiction the taxing power is withheld, whether municipal,
proincial, or national. In ine, since ABS-CBN ailed to justiy its claim or exemption rom local
ranchise tax, by a grant expressed in terms too plain to be mistaken` its claim or exemption or local
ranchise tax must ail.

1he in lieu o all taxes` clause in the ranchise o ABS-CBN has become fvvctv. officio with the
abolition o the ranchise tax on broadcasting companies with yearly gross receipts exceeding 1en
Million Pesos.

In its decision dated January 20, 1999, the R1C held that pursuant to the in lieu o all taxes`
proision contained in Section 8 o R.A. 966, ABS-CBN is exempt rom the payment o the local
ranchise tax. 1he R1C urther pronounced that ABS-CBN shall instead be liable to pay a ranchise tax
o 3 o all gross receipts in lieu o all other taxes.

On this score, the R1C ruling is lawed. In keeping with the laws that hae been passed since
the grant o ABS-CBN`s ranchise, the corporation should now be subject to VA1, instead o the 3
ranchise tax.

At the time o the enactment o its ranchise on May 3, 1995, ABS-CBN was subject to 3
ranchise tax under Section 11,b, o the 19 National Internal Reenue Code ,NIRC,, as amended,
ri.:

SLC1ION 11. 1a ov fravcbi.e.. - Any proision o general or special laws to the
contrary notwithstanding, there shall be leied, assessed and collected in respect to all ranchise,
upon the gross receipts rom the business coered by the law granting the ranchise, a tax in
accordance with the schedule prescribed hereunder:
x x x
,b, Ov tetebove ava,or tetegrab .,.tev., raaio ava,or broaaca.tivg .tatiov.
1bree ;) ercevt; x x x

On January 1, 1996, R.A. 16, otherwise known as the Lxpanded Value Added 1ax Law, took
eect and subjected to VA1 those serices rendered by radio and,or broadcasting stations. Section 3 o
R.A. 16 proides:

Section 3. Section 102 o the National Internal Reenue Code, as amended is
hereby urther amended to read as ollows:

SLC. 102. 1atveaaaea ta ov .ate of .errice. ava v.e or tea.e of
roertie.. - ,a, Rate ava ba.e of ta. - 1here shall be leied, assessed and
collected, as ratveaaaea ta eqviratevt to 10 of gro.. receit. deried rom
the sale or exchange o serices, including the use or lease o
properties.

1he phrase sale or exchange o serices` means the
perormance o all kinds o serices in the Philippines, or others or a
ee, remuneration or consideration, including those perormed or
rendered by construction and serice contractors, x x x .errice. of
fravcbi.e gravtee. of tetebove ava tetegrab, raaio ava teteri.iov broaaca.tivg ava
att otber fravcbi.e gravtee. except those under Section 11 o this Code, x
x x

Notably, under the same law, telephone and,or telegraph systems, broadcasting stations and
other ranchise grantees` were omitted rom the list o entities subject to ranchise tax. 1he impression
was that these entities were subject to 10 VA1 but not to ranchise tax. Only the ranchise tax on
electric, gas and water utilities` remained.

Subsequently, R.A. 8241 took eect on January 1, 199 containing more amendments to the
NIRC. Radio and,or teleision companies whose annual gross receipts do not exceed P10,000,000.00
were granted the option to choose between paying 3 national ranchise tax or 10 VA1. Section 9
o R.A. 8241 proides:

SLC1ION 9. Section 12 o Republic Act No. 16 is hereby amended to read as
ollows:

Sec. 12. Section 11 o the National Internal Reenue
Code, as amended, is hereby urther amended to read as ollows:

Sec. 11. 1a ov fravcbi.e. - Any proision o general or
special law to the contrary, notwithstanding, tbere .batt be teriea, a..e..ea
ava cottectea iv re.ect to att fravcbi.e. ov raaio ava,or teteri.iov broaaca.tivg
covavie. rbo.e avvvat gro.. receit. of tbe receaivg ,ear does not exceed
1en million pesos ;P10,000,000.00), .vb;ect to ectiov 10;a) of tbi. Coae,
a ta of tbree ercevt ;) and on electric, gas and water utilities, a tax o
two percent ,2, on the gross receipts deried rom the business
coered by the law granting the ranchise: Proided, howeer, 1bat
raaio ava teteri.iov broaaca.tivg covavie. referrea to iv tbi. .ectiov, .batt bare av
otiov to be regi.terea a. a ratveaaaea ta a,er ava a, tbe ta ave tbereov:
Proided, urther, 1hat once the option is exercised, it shall not be
reoked.

R.A. 933 was subsequently enacted and became eectie on July 1, 2005. 1he said law urther
amended the NIRC by increasing the rate o VA1 to 12. 1he eectiity o the imposition o the 12
VA1 was later moed rom January 1, 2006 to lebruary 1, 2006.

In consonance with the aboe surey o pertinent laws on the matter, ABS-CBN is subject to
the payment o VA1. It does not hae the option to choose between the payment o ranchise tax or
VA1 since it is a broadcasting company with yearly gross receipts exceeding 1en Million Pesos
,P10,000,000.00,.

1he clause in lieu o all taxes` does not pertain to VA1 or any other tax. It cannot apply when
what is paid is a tax other than a ranchise tax. Since the ranchise tax on the broadcasting companies
with yearly gross receipts exceeding ten million pesos has been abolished, the in lieu o all taxes` clause
has now become fvvctv. officio, rendered inoperatie.

In sum, ABS-CBN`s claims or exemption must ail on twin grounds. lirst, the in lieu o all
taxes` clause in its ranchise ailed to speciy the taxes the company is sought to be exempted rom.
Neither did it particularize the jurisdiction rom which the taxing power is withheld. Second, the clause
has become fvvctv. officio because as the law now stands, ABS-CBN is no longer subject to a ranchise tax.
It is now liable or VA1.