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CIR vs. Lingayen Gulf Electric Power Co.


Facts:
The respondent taxpayer, Lingayen Gulf Electric Power Co., Inc., operates an
electric power plant sering the ad!oining "unicipalities in the proince of
Pangasinan pursuant to the "unicipal franchise granted it under #esolution $os.
%& and '(.
The )I# assessed against and de"anded fro" the priate respondent a
deficiency franchise taxes and surcharges for the years %*&+ to %*(& as
prescri,ed in -ection '(* of the $I#C, instead of the lower rates as proided in
the "unicipal franchises. Co""issioner de"anded fro" the respondent another
deficiency franchise tax and surcharges. #espondent.s protest was denied.
Priate respondent then protested the said assess"ents ,ut was denied. Thus, the
appeal to the respondent CT/.
Pending the hearing of the said cases, #./. $o. 01&0 was passed granting to the
priate respondent a legislatie franchise for the operation of the electric light,
heat, and power syste" in the sa"e "unicipalities of Pangasinan.
The respondent court ruled that the proisions of #./. $o. 01&0 should apply
and accordingly dis"issed the clai" of the CI#. The said ruling is now the
su,!ect of the petition at ,ar.
Issue: 2hether or not -ection & of #./. $o. 01&0 is unconstitutional for ,eing
iolatie of the 3unifor"ity and e4uality of taxation3 clause of the Constitution.
5eld: $o
/ tax is unifor" when it operates with the sa"e force and effect in eery place
where the su,!ect of it is found. 6nifor"ity "eans that all property ,elonging to
the sa"e class shall ,e taxed ali7e The Legislature has the inherent power not
only to select the su,!ects of taxation ,ut to grant exe"ptions. Tax exe"ptions
hae neer ,een dee"ed iolatie of the e4ual protection clause. It is true that
the priate respondents "unicipal franchises were o,tained under /ct $o. ++8
of the Philippine Co""ission, ,ut these original franchises hae ,een replaced
,y a new legislatie franchise, i.e. #./. $o. 01&0.
The ,enefits of the tax reduction proided ,y law 9/ct $o. 0+0+ as a"ended ,y
C./. $o. %0' and #./. $o. 01&0: apply to the respondent.s power plant and
others circu"scri,ed within this class. #./;$o. 01&0 "erely transferred the
petitioner.s power plant fro" that class proided for in /ct $o. ++8, as
a"ended, to which it ,elonged until the approal of #./; $o. 01&0, and placed
it within the class falling under /ct $o. 0+0+, as a"ended. Thus, it only effected
the transfer of a taxa,le property fro" one class to another.
2e do not hae the authority to in4uire into the wisdo" of such act.
Further"ore, the (< franchise tax rate proided in -ection '(* of the Tax Code
was neer intended to hae a uniersal application. & 2e note that the said
-ection '(* of the Tax Code expressly allows the pay"ent of taxes at rates
lower than (< when the charter granting the franchise of a grantee, li7e the one
granted to the priate respondent under -ection & of #./. $o. 01&0, precludes
the i"position of a higher tax. #./. $o. 01&0 did not only fix and specify a
franchise tax of '< on its gross receipts, ,ut "ade it 3in lieu of any and all
taxes, all laws to the contrary notwithstanding,3 thus, leaing no roo" for dou,t
regarding the legislatie intent. 3

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