SC rules on tax exemption for electric co-op
The Supreme Court (SC) has affirmed a Court of Appeals (CA) decision that ordered the Davao Oriental Electric Cooperative, Inc. to pay the Davao Oriental provincial government some R1.8 million in real estate taxes, excluding penalties and surcharges, from the time the government lifted the tax exemptions of electric cooperatives in 1984.
In a decision written by Chief Justice Reynato S. Puno, the SC affirmed the Nov. 15, 2005 CA decision that reversed the ruling of the regional trial court (RTC) that dismissed the collection suit filed by the province of Davao Oriental.
At the height of the economic crisis in 1984, the late President Ferdinand Marcos issued Presidential Decree No. 1955 that withdrew all exemptions from the payment of duties, taxes and other charges granted to private business enterprises engaged in any economic activity, including electric cooperatives.
Two years later on Jan. 8, 1986, Marcos issued PD 2008 that required the then Ministry of Finance to immediately restore the tax exemption of all electric cooperatives.
But after Marcos was replaced by then President Corazon C. Aquino, the latter issued Executive Order No. 93 that withdrew all tax and duty exemptions granted to private entities effective March 10, 1987.
The implementation of EO 93 for electric cooperatives was suspended until June 30, 1987.
On July 1, 1987, the government restored the tax and duty exemption privileges under PD 269, the law that created the electric cooperatives.
While the tax exemption was suspended, the Davao Oriental provincial government assessed the value of the province’s electric cooperative.
The assessment became final and executory after the cooperative failed to protest the assessment before the Board of Assessment Appeals.
In May, 2000, the Davao Oriental provincial government filed a collection suit before the RTC which dismissed the case.
On appeal, the CA reversed the RTC and ordered the cooperative to pay the provincial government some R1.8 million in realty taxes, excluding penalties and surcharges, from 1985 to 1989.
The cooperative elevated the case to the SC. The cooperative told the SC that it was exempted from the payment of real estate tax from 1984 to 1989 because the restoration of tax exemptions under Fiscal Incentive Review Board (FIRB) Resolution No. 2487 “retroacts” to the date of withdrawal of said exemptions.
In resolving the issue, the SC said that the CA was correct when the appellate court ruled that FIRB Resolution No. 24-87 “bares no indicia of retroactivity of its application.”
“A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception,” the SC stressed.
At the same time, the SC said that when the electric cooperative failed to exhaust administrative remedies by appealing the assessment of its properties, it cannot assail the validity of the said assessment before the courts.
“Petitioner is deemed to have admitted the correctness of the assessment of its properties. In addition, Section 64 of PD No. 464 requires that the taxpayer must first pay under protest the tax assessed against him before he could seek recourse from the courts to assail its validity,” the SC pointed out.
“In view whereof, petitioner’s appeal is denied. The Nov. 15, 2005 decision of the Court of Appeals in CA-G.R. CV No. 67188 is affirmed,” it ruled.
Justices Antonio T. Carpio, Renato C. Corona, Adolfo S. Azcuna and Teresita J. Leonardo – de Castro concurred in the decision.