Davao Oriental Electric Cooperative v. Province of Davao Oriental
REITERATIONFacts
The Antecedents: Petitioner Davao Oriental Electric Cooperative, Inc. (DOECO), organized under PD No. 269, enjoyed tax and duty exemptions. PD No. 1955 withdrew these exemptions. Subsequently, various issuances reiterated this withdrawal. PD No. 2008 mandated the restoration of tax exemptions for electric cooperatives, but EO No. 93 later withdrew all tax and duty exemptions for private entities effective March 10, 1987. Memorandum Order No. 65 suspended EO No. 93 for cooperatives until June 30, 1987. FIRB Resolution No. 24-87, effective July 1, 1987, restored the tax and duty exemption privileges of electric cooperatives under PD No. 269, with certain conditions. Procedural History: Respondent Province of Davao Oriental filed a complaint for collection of delinquent real property taxes against DOECO for the years 1984-1989. The Regional Trial Court (RTC) dismissed the complaint, ruling that DOECO was exempt from realty taxes from 1985 to December 31, 1987, based on the restoration of exemptions under FIRB Resolution No. 24-87. The Court of Appeals (CA) set aside the RTC decision, holding that FIRB Resolution No. 24-87 was effective only from July 1, 1987, and had no retroactive effect. The CA ordered DOECO to pay delinquent real property taxes from January 1, 1985, to December 31, 1989. The Petition: DOECO appealed to the Supreme Court, arguing that the restoration of tax exemptions under FIRB Resolution No. 24-87 was retroactive, that it should not be liable for unpaid taxes due to alleged failure to submit financial statements, and that its properties were erroneously assessed as real properties.
Issue(s)
Whether the Court of Appeals erred in ruling that the restoration of tax exemption under FIRB Resolution No. 24-87 was not retroactive to the date of effectivity of PD 1955. Whether DOECO could be made liable for unpaid taxes, encompassing both the alleged failure to submit financial statements to the FIRB and the assessment of its real properties, considering the required administrative procedures.
Ruling
The Supreme Court denied the appeal and affirmed the decision of the Court of Appeals. It held that FIRB Resolution No. 24-87 was effective July 1, 1987, and not retroactive. It also ruled that DOECO failed to exhaust administrative remedies by not protesting the tax assessment before the Board of Assessment Appeals, rendering the assessment final.
Ratio Decidendi
On the retroactivity of FIRB Resolution No. 24-87: The Court affirmed the CA's ruling that FIRB Resolution No. 24-87 was not retroactive. The resolution explicitly states that the tax and duty exemption privileges of electric cooperatives were restored "effective July 1, 1987." The language of the resolution is plain and unambiguous, and when the language of the law is clear, it must be taken to mean exactly what it says. The Court reiterated the doctrine that taxes are the lifeblood of the nation, and claims for exemption must be clearly shown and based on language in the law too plain to be mistaken; taxation is the rule, and exemption is the exception. Therefore, DOECO was liable for real property taxes from January 1, 1985, to June 30, 1987, as the exemption was not yet restored during this period. On the issue of DOECO's liability for unpaid taxes, including the failure to submit financial statements and the assessment of real properties: The Court ruled that DOECO failed to exhaust its administrative remedies regarding the assessment of its real properties. DOECO received the Notice of Assessment on October 8, 1985, but did not file a protest before the Board of Assessment Appeals as required by Section 30 of PD No. 464. This failure rendered the tax assessment final and binding. Furthermore, Section 64 of PD No. 464 mandates that a taxpayer must pay the assessed tax under protest before seeking recourse from the courts to assail its validity. Since DOECO did not comply with these procedural requirements, it could not question the validity of the tax assessment before the courts. The Court found no merit in DOECO's contention that its properties were personal, not real, as this issue should have been raised through the proper administrative channels. Regarding the alleged failure to submit financial statements, while FIRB Resolution No. 24-87 stipulated that electric cooperatives must furnish the FIRB with annual statistical and financial statements for effective availment of exemptions, the primary basis for the ruling against DOECO was the failure to exhaust administrative remedies regarding the assessment itself.
Main Doctrine
FIRB Resolution No. 24-87, which restored tax and duty exemption privileges for electric cooperatives, was effective July 1, 1987, and did not retroact to the date of withdrawal of such exemptions. Furthermore, failure to exhaust administrative remedies by not protesting the tax assessment before the Board of Assessment Appeals renders the assessment final and binding.