GR L 9685; (October, 1957) (Digest)
G.R. No. L-9685. October 30, 1957.
VISAYAN ELECTRIC CO., S. A., petitioner, vs. THE COLLECTOR OF INTERNAL REVENUE, respondent.
FACTS
On October 20, 1952, the petitioner, Visayan Electric Co., S.A., filed three requests with the Collector of Internal Revenue for the refund of several sums. These sums were P2,186.12, P5,979.32, and P260.46, representing alleged overpayments of franchise taxes for the period from April 1, 1950, to June 30, 1952. Additionally, the petitioner sought a refund of P2,046.92, representing income tax paid for its Dipolog electric plant for the year 1950.
ISSUE
1. Whether the petitioner is entitled to a refund of the alleged overpaid franchise taxes.
2. Whether the petitioner is entitled to a refund of the income tax paid.
RULING
1. On the franchise tax refund: The petition for the refund of the franchise taxes (P2,186.12, P5,979.32, and P260.46) is denied. The Court, citing its prior decision in Carcar Electric and Ice Plant Company, Inc. v. Collector of Internal Revenue, ruled that Congress in 1950 intended to impose a 5% franchise tax on businesses operating under franchises like the petitioner’s. Although the petitioner’s franchise referred to the terms and conditions of Act No. 3636 (which originally provided for a 2% franchise tax in its Section 10), this reference did not incorporate the 2% rate. By 1950, the original 2% tax under Act 3636 had already been increased to 5% by Section 259 of the National Internal Revenue Code, as amended by Republic Acts 39 and 418. Therefore, the petitioner was correctly subject to the 5% franchise tax and is not entitled to a refund of the amounts paid under that rate.
2. On the income tax refund: The petition for the refund of the income tax (P2,046.92) is granted. The Court, again relying on the Carcar case, held that holders of electric franchises are exempt from income tax. The Court found that Section 259 of the Tax Code, as amended, was silent regarding tax exemptions and therefore could not have amended the exemption from “any and all other taxes” granted under Section 10 of Act 3636. There is no conflict between the increased 5% franchise tax under Section 259 and the broader tax exemption under Act 3636; the exemption remains as an inducement for accepting the franchise and rendering public service.
DISPOSITIVE PORTION:
The appealed decision is affirmed in all respects except for the income tax refund. The Collector of Internal Revenue is ordered to return to the petitioner the sum of P2,046.92, representing the income tax paid for the Dipolog electric plant during 1950. Costs are assessed against the petitioner.