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    Province of Misamis Oriental V Cepalco

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    Rhea Barroga
    CEPALCO was granted a franchise by the national government to operate an electric power system in Cagayan de Oro City. The franchise law exempted CEPALCO from all taxes except a 3% franchise tax on gross earnings. However, the province of Misamis Oriental later demanded payment of a provincial franchise tax based on a new Local Tax Code. The Supreme Court ruled that CEPALCO was exempt from the provincial franchise tax because the tax exemption was part of the original franchise agreement between CEPALCO and the national government, and imposing an additional tax would impair that contract.

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    Province of Misamis Oriental V Cepalco

    Uploaded by

    Rhea Barroga
    794 views1 page
    CEPALCO was granted a franchise by the national government to operate an electric power system in Cagayan de Oro City. The franchise law exempted CEPALCO from all taxes except a 3% franchise tax on gross earnings. However, the province of Misamis Oriental later demanded payment of a provincial franchise tax based on a new Local Tax Code. The Supreme Court ruled that CEPALCO was exempt from the provincial franchise tax because the tax exemption was part of the original franchise agreement between CEPALCO and the national government, and imposing an additional tax would impair that contract.

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    Province of Misamis Oriental v Cepalco

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    CEPALCO was granted a franchise by the national government to operate an electric power system in Cagayan de Oro City. The franchise law exempted CEPALCO from all taxes except a 3% franchise tax on gross earnings. However, the province of Misamis Oriental later demanded payment of a provincial franchise tax based on a new Local Tax Code. The Supreme Court ruled that CEPALCO was exempt from the provincial franchise tax because the tax exemption was part of the original franchise agreement between CEPALCO and the national government, and imposing an additional tax would impair that contract.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    794 views1 page

    Province of Misamis Oriental V Cepalco

    Uploaded by

    Rhea Barroga
    CEPALCO was granted a franchise by the national government to operate an electric power system in Cagayan de Oro City. The franchise law exempted CEPALCO from all taxes except a 3% franchise tax on gross earnings. However, the province of Misamis Oriental later demanded payment of a provincial franchise tax based on a new Local Tax Code. The Supreme Court ruled that CEPALCO was exempt from the provincial franchise tax because the tax exemption was part of the original franchise agreement between CEPALCO and the national government, and imposing an additional tax would impair that contract.

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    of 1

    PROVINCE OF MISAMIS ORIENTAL v.

    CAGAYAN ELECTRIC POWER AND LIGHT


    COMPANY, INC. (CEPALCO)
    G.R. No. L-45355 January 12, 1990

    FACTS: CEPALCO was given a franchise to install, operate and maintain an electric light, heat and
    power system in the City of Cagayan de Oro and its suburbs. RA 3247 (as amended by RA 3570 and RA
    6020), the law which granted CEPALCO the franchise, provides that CEPALCO should pay a franchise
    tax which is equal to three percentum of the gross earnings for electric current sold under the franchise.
    CEPALCO was also exempted from all taxes and assessments of whatever authority upon privileges,
    earnings, income, franchise, and poles, wires, transformers, and insulators.

    However, the Local Tax Code was subsequently promulgated in 1973 and it provided that the province
    may impose a tax on businesses enjoying franchise. Because of this, the province of Misamis Oriental
    demanded payment of the provincial franchise tax from CEPALCO. The company refused to pay,
    alleging that it is exempt from all taxes except the franchise tax required under RA 6020.

    ISSUE: Whether or not a corporation whose franchise expressly provides that the payment of the
    "franchise tax of three per centum 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" is exempt from paying a provincial franchise tax.

    HELD: Yes. Such exemption is part of the inducement for the acceptance of the franchise and the
    rendition of public service by the grantee. As a charter is in the nature of a private contract, the imposition
    of another franchise tax on the corporation by the local authority would constitute an impairment of the
    contract between the government and the corporation.

    Republic Acts Nos. 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while P.D. No.
    231 is a general tax law. The presumption is that the special statutes are exceptions to the general law
    (P.D. No. 231) because they pertain to a special charter granted to meet a particular set of conditions and
    circumstances.

    In an earlier case, the phrase "shall be in lieu of all taxes and at any time levied, established by, or
    collected by any authority" found in the franchise of the Visayan Electric Company was held to exempt
    the company from payment of the 5% tax on corporate franchise provided in Section 259 of the Internal
    Revenue Code .

    Local Tax Regulation No. 3-75 issued by the Secretary of Finance on June 26, 1976, has made it crystal
    clear that the franchise tax provided in the Local Tax Code (P.D. No. 231, Sec. 9) may only be imposed
    on companies with franchises that do not contain the exempting clause. Thus it provides:

    The franchise tax imposed under local tax ordinance pursuant to Section
    9 of the Local Tax Code, as amended, shall be collected from businesses
    holding franchise but not from business establishments whose franchise
    contain the "in-lieu-of-all-taxes-proviso".

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