Professional Documents
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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. CEPALCOs franchise i.e. RA 3247, 3571 and 6020 (Section 3 thereof), uniformly provides
that in consideration of 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.