G.R. No. 144486.
April 13, 2005 Held: RCPI is liable for franchise tax and real property tax; no exemption
RCPI vs. PROVINCIAL ASSESOR OF SOUTH COTABATO
Facts:
Section 14 of RA 2036 (the law granting its franchise), as amended by Republic Act No.
4054 (“RA 4054”) in 1964, reads:
Sec. 14. In consideration of the franchise and rights hereby granted and any
provision of law to the contrary notwithstanding, the grantee shall pay the same
taxes as are now or may hereafter be required by law from other individuals,
copartnerships, private, public or quasi-public associations, corporations or joint
stock companies, on real estate, buildings and other personal property except
radio equipment, machinery and spare parts needed in connection with the
business of the grantee, which shall be exempt from customs duties, tariffs and
other taxes, as well as those properties declared exempt in this section. In
consideration of the franchise, a tax equal to one and one-half per centum of all
gross receipts from the business transacted under this franchise by the grantee
shall be paid to the Treasurer of the Philippines each year, within ten days after
the audit and approval of the accounts as prescribed in this Act. Said tax shall
be in lieu of any and all taxes of any kind, nature or description levied,
established or collected by any authority whatsoever, municipal, provincial
or national, from which taxes the grantee is hereby expressly exempted.
(Emphasis supplied)
On 1985, the municipal treasurer of Tupi South Cotabato demanded that RCPI pay
P166,810 as real property tax on its radio station building in Barangay Kablon, as well as
on its machinery shed, radio relay station tower and its accessories, and generating sets
LBAA: RCPI is liable to pay the real proeperty taxes.
CBAA: held that RCPI’s liability for the franchise tax does not exempt RCPI from the real
property tax. Under RCPI’s franchise, only personal properties such as radio equipment,
machinery and spare parts are exempt from customs duties, tariffs and other taxes. The
CBAA ruled that RCPI was liable for the real property tax on the assessed properties
CA: The appellate court modified the ruling of the Central Board of Assessment Appeals
(“CBAA”) and exempted petitioner Radio Communications of the Philippines, Inc.
(“RCPI”) from paying real property tax assessed on its machinery and radio equipment
mounted on its relay station tower as accessories. However, the appellate court held
RCPI liable for real property tax on its radio station building, machinery shed, and
relay station tower.
The tower upon which these different types of radio equipment are mounted or attached
is, however, subject to real property tax since a tower is not strictly a radio equipment nor
could it be classified as machinery,
As RCPI’s tax exemption covers only its radio equipment, machinery, and spare parts
essential to its business, it is liable for realty tax on its radio station building. The
machinery shed is likewise taxable as the same is a kind of real property falling within
the classification of buildings or permanent structures.
Issue RCPI filed its petition for review before this Court.
1. The appellate court erred when it excluded RCPI’s tower, relay station building
and machinery shed from tax exemption; and
RCPI earlier maintained that its radio relay station tower, radio station building, and
machinery shed are personal properties and are thus not subject to the real property
tax. RCPI now argues that its radio relay station tower, radio station building, and
machinery shed are tax-exempt because of the “in lieu of all taxes” clause in its
franchise, which exempts RCPI from the real estate tax.
RCPI contends that the “in lieu of all taxes” clause in its amended franchise exempts it
from paying all taxes other than franchise tax, also states that legislative enactments
during the pendency of this petition caused it to lose and then regain its tax-exempt
status.
As found by the appellate court, RCPI’s radio relay station tower, radio station building,
and machinery shed are real properties and are thus subject to the real property
tax. The clear language of Section 14 states that RCPI shall pay the real estate
tax.
Subsequent legislations have radically amended the “in lieu of all taxes” clause in
franchises of public utilities. As RCPI correctly observes, the Local Government Code
of 1991 “withdrew all the tax exemptions existing at the time of its passage —
including that of RCPI’s” with respect to local taxes like the real property tax. Also,
Republic Act No. 7716 (“RA 7716”) abolished the franchise tax on telecommunications
companies effective 1 January 1996. To replace the franchise tax, RA 7716 imposed a
10 percent value-added-tax on telecommunications companies under Section 102 of
the National Internal Revenue Code. After the VAT on telecommunications companies
took effect on January 1, 1996, the existing legislative policy is clearly against the
revival of the “in lieu of all taxes” clause in franchises of telecommunications
companies. Congress never again included the “in lieu of all taxes” clause in any
telecommunications franchise it subsequently approved. Also, from September 2000 to
July 2001, all the fourteen telecommunications franchises approved by Congress
uniformly and expressly state that the franchisee shall be subject to all taxes under
the National Internal Revenue Code and taxes under applicable laws (the Local
Government Code of 1991, which empowers local governments to impose a
franchise tax on telecommunications companies); Congress refused to grant
any tax exemption to telecommunications companies that sought new
franchises from Congress, except the exemption from specific tax.
Provisions of subsequent telecommunication franchises imposing the real estate tax
on franchisees only confirm that RCPI is subject to the real estate tax. Otherwise,
RCPI will stick out like a sore thumb,not to mention the violation of the constitutional
rule on uniformity of taxation.
Exemptions are strictly construed against the taxpayer and liberally in favor of the
taxing authority. Petition denied.'''