Tax court orders lower court to determine Napocor’s tax liability
MANILA, Philippines–The Court of Tax Appeals has ordered the Tuguegarao City Regional Trial Court to hear the protest of the National Power Corporation (Napocor) regarding the Cagayan’s claim that it is liable to pay P20.8 million franchise tax from 2001 to 2007.
Napocor has been assessed by the Province of Cagayan of P20,8266,367.64 franchise tax from 2001 to 2007. It filed a protest letter to the provincial government saying under Republic Act 9136 or the Electric Power Industry Reform Act of 2001 (Epira), the power generation it is being undertaken is no longer considered a public utility operation for which a franchise is required.
But with the local government’s failure to resolve the protest within the timeframe required by law, Napocor took the case to the Tuguegarao City RTC which ruled that it is liable to pay over P20 million franchise tax. Napocor, then elevated the case to the Tax Court.
In its 18-page decision, the Tax Court said Napocor’s function is not limited to power generation and electrical transmission “since its charter has vested it with certain powers, which are not available to ordinary corporations.”
The court explained that although its franchise has been modified with the passage of Epira, Napocor can still be held liable for franchise tax since Epira has given it missionary electrification function.
Napocor, however, argued that the missionary electrification function cannot be considered as a business activity that generates revenues. It also pointed that it does not have a power plant in Cagayan.
Assuming that it has, Napocor said Epira specifically designated the Power Sector Assets and Liabilities Management Corporation (Psalm) to take ownership of all existing generation assets, liabilities, IPP contracts, real estate and other disposable assets of Napocor.
The Tax Court said evidence should be presented on the claims of Napocor which was not done in the lower court.
“Consequently, the issues of whether petitioner (Napocor) no longer operates or conducts business within the territorial jurisdiction of the Province of Cagayan and whether [Napocor] generates revenues in said province were not heard and substantiated,” the tax court said.
“In view of the foregoing, for the purpose of determining [Napocor’s liability for franchise tax, the court has no other recourse but to remand the case to the [Tuguegarao Court] for further proceedings,” it added.
