GR L 55236; (December, 1986) (Digest)
G.R. No. L-55236 December 12, 1986
Philippine Telegraph and Telephone Corporation, petitioner, vs. The Commission on Audit and Hon. Francisco S. Tantuico, Jr., Acting Chairman, Commission on Audit, respondents.
FACTS
Petitioner Philippine Telegraph and Telephone Corporation (PT&T) was granted a franchise under Republic Act No. 4161, requiring it to pay a franchise tax of 1.5% on gross receipts. A subsequent law, R.A. No. 5048, included a “most favored treatment clause,” stipulating that if a competitor receives a more favorable franchise term, that term automatically extends to PT&T. Later, Domestic Satellite Philippines, Inc. (DOMSAT) was granted a franchise under Presidential Decree No. 947, with a franchise tax rate of only 0.5%. The Commission on Audit (COA), examining PT&T’s books, found a franchise tax deficiency for 1979 computed at the 1.5% rate. PT&T contested this, invoking the clause to claim it should only pay 0.5%, aligning with DOMSAT’s rate.
ISSUE
Whether the COA letters finding a tax deficiency and rejecting PT&T’s claim constitute a final, appealable order reviewable by the Supreme Court, and whether PT&T is entitled to the lower franchise tax rate under the “most favored treatment clause.”
RULING
The Supreme Court dismissed the petition. First, on procedural grounds, the COA letters dated June 4, 1980 and August 26, 1980 were not final, appealable orders or decisions. They were mere opinions or recommendations, specifically advising that the tax deficiency be brought to the Bureau of Internal Revenue (BIR) for assessment. Jurisdiction over the substantive tax dispute lies with the BIR, with appeals properly taken to the Court of Tax Appeals, not directly to the Supreme Court from a COA communication.
On the substantive issue, assuming arguendo the matter was reviewable, the Court ruled PT&T could not invoke the “most favored treatment clause.” The clause requires actual competition. Examining the franchises, DOMSAT operates as a “carrier’s carrier,” providing satellite relay services to other telecommunications entities. In contrast, PT&T provides direct communication services to end-users. Their customer bases and operational roles are distinct; one serves carriers, the other serves the public. Therefore, they are not competitors. The principle of the clause is fair play and competitive equality, which does not apply here. Furthermore, tax reductions must be strictly construed and granted only by clear legislative intent, which is absent. The petition was dismissed for lack of merit.