Misamis Oriental vs.

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.

CIR vs. CA, CTA and GCL Retirement Plan

FACTS: Private respondent, GCL Retirement Plan (GCL, for brevity) is an employees' trust maintained by the employer,
GCL Inc., to provide retirement,npension, disability and death benefits to its employees. The Plan as submitted was
approved and qualified as exempt from income tax by Petitioner Commissioner of Internal Revenue in accordance with
Rep. Act No. 4917. In 1984, Respondent GCL made investsments and earned therefrom interest income from which was
witheld the fifteen per centum (15%) final withholding tax imposed by Pres. Decree No. 1959. GCL filed a claim for refund
but this was denied.
ISSUES: WON the GCL Retirement is exempt from this tax
RULING: YES. The GCL Plan was qualified as exempt from income tax by the Commissioner of Internal Revenue in
accordance with Rep. Act No. 4917. This law specifically provided that the retirement benefits received by officials and
employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan
maintained by the employer shall In so far as employees' trusts are concerned, the foregoing law should be taken in
relation to then Section 56(b) (now 53[b]) of the Tax Code, as amended by Rep. Act No. 1983. This provision specifically
exempted employee's trusts from income tax. The tax-exemption privilege of employees' trusts, as distinguished from any
other kind of property held in trust, springs from the foregoing. It is unambiguous. Manifest there from is that the tax law
has singled out employees' trusts for tax exemption and rightly so, by virtue of the raison de'etre behind the creation of
employees' trusts. Employees' trusts or benefit plans normally provide economic assistance to employees upon the
occurrence of certain contingencies, particularly, old age retirement, death, sickness, or disability. It provides security
against certain hazards to which members of the Plan may be exposed. It is an independent and additional source of
protection for the working group. What is more, it is established for their exclusive benefit and for no other purpose.
Otherwise, taxation of those earnings would result in amdiminution accumulated income and reduce whatever the trust
beneficiaries would receive out of the trust fund. This would run afoul of the very intendment of the law.

Philippine Acetylene Co. Inc. vs. Commissioner

GR L-19707, 17 August 1967
En Banc, Castro (J): 7 concur, 2 took no part
Facts: Philippine Acetylene Co. Inc. is engaged in the manufacture and sale of oxygen and acetylene gases. It
sold its products to the National Power Corporation (Napocor), an agency of the Philippine Government, and the Voice of
America (VOA), an agency of the United States Government. The Commissioner assessed deficiency sales tax and
surcharges against the company. The company denied liability for the payment of tax
on the ground that both Napocor and VOA are exempt from taxes.
Issue: Whether Philippine Acetylene Co. is exempt from the tax.
Held: Sales tax are paid by the manufacturer or producer who must make a true and complete return of the amount of his,
her or its gross monthly sales, receipts or earnings or gross value of output actually removed from the factory or mill,
warehouse and to pay the tax due thereon. The tax imposed by Section 186 of the
Tax Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably in a very remote and
inconsequential sense. Accordingly, its levy on the sales made to tax-exempt entities like the
Napocor is permissible. On the other hand, there is nothing in the language of the Military Bases Agreement to warrant
the general exemption granted by General Circular V-41 (1947). Thus, the expansive construction of the tax exemption is
void; and the sales to the VOA are subject to the payment of percentage taxes under Section 186 of the Tax Code.
Therefore, tax exemption is strictly construed and exemption will nbot be held to be conferred unless the terms under
which it is granted clearly and distinctly show that such was the intention.