By REY G. PANALIGAN
The Supreme Court (SC) has ruled that the National Power Corp. (NPC) is not exempt from the P288 million taxes imposed on the machineries and equipment used in the construction of the 215 megawatt power plant in Bauang, La Union under a Build-Operate-Transfer (BOT) agreement with a private firm in 1993.
In a decision written by Justice Arturo D. Brion, the SC affirmed the ruling of the Court of Tax Appeals (CTA) that denied the petitions of both the NPC and its contractor, Bauang Private Power Corp. (BPPC), to nullify the tax assessment imposed by the provincial government of La Union.
Senior Justice Leonardo A. Quisumbing and Justices Renato C. Corona, Conchita Carpio Morales, and Dante O. Tinga concurred in the decision.
NPC had claimed it is the actual owner and user of the machineries and equipment used in the construction of the power plant under the BOT scheme and thus it is exempt from taxes under Republic Act No. 7160, the Local Government Code (LGC).
The LCG exempts from payment of real property tax “all machineries that are actually, directly, and exclusively used by local water districts and government-owned or -controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power.”
According to the NPC, its BOT agreement with BPPC is a financing agreement that makes it the beneficial owner and the actual, direct and exclusive user of the power plant, while the contractor is the lender/creditor that retains the plant’s legal ownership until it is fully paid.
In upholding the CTA ruling, the SC said that a review of the BOT agreement between the NPC and the BPPC showed that the latter has complete ownership — both legal and beneficial — of the power plant project which would be turned over to the former once the obligations are fully paid.