CTA voids Digos City P4.8-M franchise tax assessment vs. Transco

FILE: Court of Tax Appeals of the Philippines located at Agham Road, National Government Center, Diliman, Quezon City in Metro Manila. (Photo By Judgefloro – Own work, Public Domain)

MANILA – The Court of Tax Appeals (CTA) has ruled in favor of an appeal by the National Transmission Corp. (Transco) against the Digos City government over franchise tax imposed against the firm in 2009 amounting to PHP4.8 million.

In its 10-page decision by Associate Justice Jean Marie A. Bacorro-Villena, dated November 4 and made public on Friday, the tax court’s 2nd Division granted the petition for review filed by Transco and reversed the city’s assessment against the firm “for being null and void.”

In assessing Transco’s franchise tax liabilities, Digos City took account of the company’s receipt of payments from the Davao Del Sur Electric Cooperative, Inc. (Dasureco).

Transco, however, claimed it must have a sub-station/district/branch/regional office and a customer within Digos City to be taxed.

Despite Dasureco being its customer, Transco argued that it holds no facility within Digos City, which thus cannot levy the assessed franchise taxes on it.

Transco supplies energy in bulk to Dasureco, which, in turn, delivers it to its end-users.

In siding with Transco, the tax court cited a precedent case in the Supreme Court (Iriga v. Casureco) where the tribunal disregarded where the taxpayer delivered its service and instead considered where it held its principal place of business.

“Following this principle, it becomes clear that petitioner (Transco) cannot be held liable for local franchise taxes by the city even if it caters its services within the latter’s territory,” the court said.

Associate Justice Juanito C. Castaneda Jr. concurred with the decision.