Misamis Oriental vs. Cagayan Electric GR 45355, 12 January 1990 First Division, Grino Aquino (J): 4 concur Facts: Cagayan Electric Power and light Co, Inc. (CEPALCO) was granted a franchise in 1961 under RA3247 to install, operate and maintain an electric light, heat and power system in Cagayan de Oro and its suburbs. In 1973, the Local Tax Code (PD 231) was promulgated, where Section 9 thereof providing for a franchise tax. Pursuant thereto, the province of Misamis Oriental enacted Provincial Revenue Ordinance 19, whose Section 12 also provides for a franchise tax. The Provincial Treasurer demanded payment of theprovincial franchise tax from CEPALCO. CEPALCO paid under protest. Issue: Whether CEPALCO is exempt from the provincial franchise tax. Held: Local Tax Regulation 3-75 issued by the Secretary of Finance in 1976 made it clear that the franchise tax provided in the Local Tax Code may only be imposed on companies with franchise that do not contain the exempting clause, i.e. “in-lieu-of-all-taxes-proviso.” CEPALCO’s franchise i.e. RA 3247, 3571 and 6020 (Section 3 thereof), uniformly provides that “in considerationof the franchise and rights hereby granted, the vgrantee shall pay a franchise tax equal to 3% of the gross earnings for electric current sold under the franchise, of which 2% goes to the national Treasury and 1% goes into the treasury of the municipalities of Tagoloan, Opol, Villanueva, Jasaan, and Cagayan de Oro, as the case may be: Provided, that the said franchise tax of 3% of the gross earnings shall be in lieu of all taxes and assessments of whatever authority upon privileges, earnings, income, franchise and poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted. CIR vs. CA, CTA and GCL Retirement Plan FACTS: Private respondent, GCL Retirement Plan (GCL, for brevity) is an employees' trust maintained by the employer, GCL Inc., to provide retirement,npension, disability and death benefits to its employees. The Plan as submitted was approved and qualified as exempt from income tax by Petitioner Commissioner of Internal Revenue in accordance with Rep. Act No. 4917. In 1984, Respondent GCL made investsments and earned therefrom interest income from which was witheld the fifteen per centum (15%) final withholding tax imposed by Pres. Decree No. 1959. GCL filed a claim for refund but this was denied. ISSUES: WON the GCL Retirement is exempt from this tax RULING: YES. The GCL Plan was qualified as exempt from income tax by the Commissioner of Internal Revenue in accordance with Rep. Act No. 4917. This law specifically provided that the retirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer shall In so far as employees' trusts are concerned, the foregoing law should be taken in relation to then Section 56(b) (now 53[b]) of the Tax Code, as amended by Rep. Act No. 1983. This provision specifically exempted employee's trusts from income tax. The tax-exemption privilege of employees' trusts, as distinguished from any other kind of property held in trust, springs from the foregoing. It is unambiguous. Manifest there from is that the tax law has singled out employees' trusts for tax exemption and rightly so, by virtue of the raison de'etre behind the creation of employees' trusts. Employees' trusts or benefit plans normally provide economic assistance to employees upon the occurrence of certain contingencies, particularly, old age retirement, death, sickness, or disability. It provides security against certain hazards to which members of the Plan may be exposed. It is an independent and additional source of protection for the working group. What is more, it is established for their exclusive benefit and for no other purpose. Otherwise, taxation of those earnings would result in amdiminution accumulated income and reduce whatever the trust beneficiaries would receive out of the trust fund. This would run afoul of the very intendment of the law. Philippine Acetylene Co. Inc. vs. Commissioner GR L-19707, 17 August 1967 En Banc, Castro (J): 7 concur, 2 took no part Facts: Philippine Acetylene Co. Inc. is engaged in the manufacture and sale of oxygen and acetylene gases. It sold its products to the National Power Corporation (Napocor), an agency of the Philippine Government, and the Voice of America (VOA), an agency of the United States Government. The Commissioner assessed deficiency sales tax and surcharges against the company. The company denied liability for the payment of tax on the ground that both Napocor and VOA are exempt from taxes. Issue: Whether Philippine Acetylene Co. is exempt from the tax. Held: Sales tax are paid by the manufacturer or producer who must make a true and complete return of the amount of his, her or its gross monthly sales, receipts or earnings or gross value of output actually removed from the factory or mill, warehouse and to pay the tax due thereon. The tax imposed by Section 186 of the Tax Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably in a very remote and inconsequential sense. Accordingly, its levy on the sales made to tax-exempt entities like the Napocor is permissible. On the other hand, there is nothing in the language of the Military Bases Agreement to warrant the general exemption granted by General Circular V-41 (1947). Thus, the expansive construction of the tax exemption is void; and the sales to the VOA are subject to the payment of percentage taxes under Section 186 of the Tax Code. Therefore, tax exemption is strictly construed and exemption will nbot be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention.
