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    NPC Vs City of Cabanatuan

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    Edmund Diaz
    The NPC was assessed a franchise tax by the City of Cabanatuan. NPC refused to pay, arguing it was exempt as a government entity and non-profit organization. The City claimed NPC's exemptions were repealed by the Local Government Code. The Court held that NPC fulfilled the requirements to be subject to franchise tax as it had a franchise to do business within the City's territory. Tax exemptions must be clearly established, and NPC's sole claimed exemption did not apply in this case. Therefore, NPC was liable to pay the annual franchise tax to the City government.

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    NPC Vs City of Cabanatuan

    Uploaded by

    Edmund Diaz
    555 views1 page
    The NPC was assessed a franchise tax by the City of Cabanatuan. NPC refused to pay, arguing it was exempt as a government entity and non-profit organization. The City claimed NPC's exemptions were repealed by the Local Government Code. The Court held that NPC fulfilled the requirements to be subject to franchise tax as it had a franchise to do business within the City's territory. Tax exemptions must be clearly established, and NPC's sole claimed exemption did not apply in this case. Therefore, NPC was liable to pay the annual franchise tax to the City government.

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    NPC vs City of Cabanatuan

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    NPC vs City of Cabanatuan

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    The NPC was assessed a franchise tax by the City of Cabanatuan. NPC refused to pay, arguing it was exempt as a government entity and non-profit organization. The City claimed NPC's exemptions were repealed by the Local Government Code. The Court held that NPC fulfilled the requirements to be subject to franchise tax as it had a franchise to do business within the City's territory. Tax exemptions must be clearly established, and NPC's sole claimed exemption did not apply in this case. Therefore, NPC was liable to pay the annual franchise tax to the City government.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    555 views1 page

    NPC Vs City of Cabanatuan

    Uploaded by

    Edmund Diaz
    The NPC was assessed a franchise tax by the City of Cabanatuan. NPC refused to pay, arguing it was exempt as a government entity and non-profit organization. The City claimed NPC's exemptions were repealed by the Local Government Code. The Court held that NPC fulfilled the requirements to be subject to franchise tax as it had a franchise to do business within the City's territory. Tax exemptions must be clearly established, and NPC's sole claimed exemption did not apply in this case. Therefore, NPC was liable to pay the annual franchise tax to the City government.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    NPC v.

    City of Cabanatuan
    G.R. No. 149110, April 9, 2003

    Doctrine:
    Tax Exemptions, construed strongly against the claimant

    Facts:

    NPC, a GOCC, created under CA 120 as amended, selling electric power, was assessed by the
    City of Cabanatuan for franchise tax pursuant to sec. 37 of Ordinance No. 165-92. NPC refused to pay
    the tax assessment on the grounds that the City of Cabanatuan has no authority to impose tax on
    government entities and also that it is exempted as a non-profit organization. For its part, the City
    government alleged that NPC’s exemption from local taxes has been repealed by sec. 193 of RA 7160.

    Issue:
    Whether NPC is liable to pay an annual franchise tax to the City government

    Held:
    As commonly used, a franchise tax is "a tax on the privilege of transacting business in the state
    and exercising corporate franchises granted by the state." It is not levied on the corporation simply
    for existing as a corporation, upon its property or its income, but on its exercise of the rights or
    privileges granted to it by the government. Hence, a corporation need not pay franchise tax from the
    time it ceased to do business and exercise its franchise. It is within this context that the phrase "tax
    on businesses enjoying a franchise" in section 137 of the LGC should be interpreted and understood.
    Verily, to determine whether the petitioner is covered by the franchise tax in question, the following
    requisites should concur: (1) that petitioner has a "franchise" in the sense of a secondary or special
    franchise; and (2) that it is exercising its rights or privileges under this franchise within the territory of
    the respondent city government.

    NPC fulfills both requisites. To stress, a franchise tax is imposed based not on the ownership
    but on the exercise by the corporation of a privilege to do business. The taxable entity is the
    corporation which exercises the franchise, and not the individual stockholders. By virtue of its charter,
    petitioner was created as a separate and distinct entity from the National Government

    We also do not find merit in the petitioner's contention that its tax exemptions under its
    charter subsist despite the passage of the LGC.

    As a rule, tax exemptions are construed strongly against the claimant. Exemptions must be
    shown to exist clearly and categorically, and supported by clear legal provisions. In the case at bar, the
    petitioner's sole refuge is section 13 of Rep. Act No. 6395 exempting from, among others, "all income
    taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities,
    municipalities and other government agencies and instrumentalities."

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