CIR vs. Lingayen Gulf Electric (G.R. No. L-23771. August 04, 1988)

31 May


Angel Sanchez for Lingayen Electric Power Co., Inc.



The respondent taxpayer operates an electric power plant serving the adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan, pursuant to the municipal franchise granted it by their respective municipal councils, under Resolution Nos. 14 and 25 of June 29 and July 2, 1946, respectively. Bureau of Internal Revenue (BIR) assessed against and demanded from the private respondent deficiency franchise taxes and surcharges for the years 1946 to 1954 applying the franchise tax rate of 5% on gross receipts from March 1, 1948 to December 31, 1954 as prescribed in Section 259 of the National Internal Revenue Code, instead of the lower rates as provided in the municipal franchises.  Respondent submits that R.A. No. 3843 is unconstitutional insofar as it provides for the payment by the private respondent of a franchise tax of 2% of its gross receipts, while other taxpayers similarly situated were subject to the 5% franchise tax imposed in Section 259 of the Tax Code, thereby discriminatory and violative of the rule on uniformity and equality of taxation. Court of tax Appeals ruled in favor of respondent.


Whether or not Section 4 of R.A. No. 3843, assuming it is valid, could be given retroactive effect so as to render uncollected taxes in question which were assessed before its enactment.


YES. Appealed decision was affirmed.


A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike The Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never been deemed violative of the equal protection clause. It is true that the private respondents municipal franchises were obtained under Act No. 667 of the Philippine Commission, but these original franchises have been replaced by a new legislative franchise, i.e. R.A. No. 3843.

Given the validity of said law, it should be applied retroactively so as to render uncollectible the taxes in question which were assessed before its enactment. The question of whether a statute operates retrospectively or only prospectively depends on the legislative intent. In the instant case, Act No. 3843 provides that “effective … upon the date the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts … shall be collected, any provision to the contrary notwithstanding.” Republic Act No. 3843 therefore specifically provided for the retroactive effect of the law.


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