Iriga v. Casureco Iii
REITERATIONFacts
The Antecedents: The City of Iriga assessed Camarines Sur III Electric Cooperative, Inc. (CASURECO III) for franchise taxes for the period 1998-2003 and real property taxes for 1995-2003. CASURECO III refused to pay, claiming exemption as an electric cooperative provisionally registered with the Cooperative Development Authority (CDA) under RA 6938. Procedural History: The City of Iriga filed a complaint for collection of local taxes. The Regional Trial Court (RTC) ruled that real property taxes for 1995-1999 had prescribed but found CASURECO III liable for franchise taxes for 2000-2003 based on its gross receipts from Iriga City and the Rinconada area. CASURECO III appealed to the Court of Appeals (CA). The Petition: The CA reversed the RTC decision, ruling that CASURECO III, being a non-profit entity, was not subject to franchise tax under Section 137 of the LGC. The City of Iriga filed a petition for review with the Supreme Court.
Issue(s)
Whether or not an electric cooperative registered under PD 269 but not under RA 6938 is liable for the payment of local franchise taxes. Whether or not the situs of taxation is the place where the franchise holder exercises its franchise regardless of the place where its services or products are delivered. Whether or not the motion for reconsideration filed by the petitioner with the Court of Appeals was filed out of time, rendering the decision final.
Ruling
The Supreme Court granted the petition, set aside the decision of the Court of Appeals, and reinstated the decision of the Regional Trial Court. It held that CASURECO III is liable for franchise taxes and that the situs of taxation covers all gross receipts from its operations within the City of Iriga and the Rinconada area.
Ratio Decidendi
On whether CASURECO III is exempt from payment of franchise tax despite its non-profit nature: The Court reiterated that tax privileges granted to electric cooperatives under PD 269 were validly withdrawn by RA 6938 and the LGC. Only those registered with the CDA under RA 6938 could continue to enjoy tax privileges. CASURECO III could no longer invoke PD 269, and its provisional registration with the CDA, which granted exemption, had expired. The LGC, specifically Section 193, withdrew tax exemptions except for specific entities, including cooperatives duly registered under RA 6938. Therefore, CASURECO III, not being registered under RA 6938 at the relevant time, was no longer exempt. The Court clarified that a franchise tax is levied on the exercise of rights or privileges granted by the government, not simply on the existence of a corporation or its income. It is a tax on businesses enjoying a franchise. The requisites for liability are having a franchise and exercising its rights within the local government unit's territory. CASURECO III possessed a franchise under PD 269 and operated within Iriga City, thus it was liable for franchise tax notwithstanding its non-profit nature. On the situs of taxation for franchise tax: The Court held that franchise tax is an excise tax based on gross receipts, and its situs is the place where the privilege is exercised. Since CASURECO III had its principal office and operated within Iriga City, the franchise tax covered all gross receipts from its operations within Iriga City and the Rinconada area, regardless of where the services or products were delivered. This is because the privilege being taxed is the exercise of the franchise within the City of Iriga. On the issue of the proper mode of appeal: The Court noted that RA 9282, which expanded the jurisdiction of the Court of Tax Appeals (CTA) to include appeals from RTC decisions in local tax cases, was already in effect when the RTC rendered its decision. Therefore, CASURECO III should have appealed to the CTA, not the CA. The CA's decision was deemed null and void for want of jurisdiction. Consequently, the belated filing of the motion for reconsideration with the CA was inconsequential as a void decision never acquires finality.
Main Doctrine
An electric cooperative registered under PD 269, even if non-profit, is liable for local franchise tax if it exercises its franchise within the territorial jurisdiction of a local government unit, unless specifically exempted by law. The tax exemption privileges granted under PD 269 were validly withdrawn by RA 6938 and the Local Government Code (LGC). The situs of taxation for franchise tax is the place where the privilege is exercised, which includes all gross receipts from operations within the local government unit's territory.