CA allows Muntinlupa to collect franchise tax from Meralco

MANILA, Philippines – The Court of Appeals (CA) has given the Muntinlupa City government the green light to collect franchise tax from the Manila Electric Co. (Meralco).

In a 22-page ruling penned by Associate Justice Rebecca de Guia-Salvador, the CA's Fifth Division reversed and set aside the order issued by the Regional Trial Court of Pasig City Branch 67, which declared null and void the implementation of Section 25 of Municipal Ordinance (MO) No. 93-95, or the Muntinlupa revenue code, for being contrary to law.

Section 25 of the ordinance imposes a franchise tax on public utilities operating within the local government’s jurisdiction.

Muntinlupa had been demanding Meralco to pay the tax starting 1992, following the enactment of MO No. 93-95.

While it affirmed the validity of the ordinance, the CA stressed that the assessment of Meralco's franchise tax should only be computed from March 1, 1995, the date when Republic Act 7926 was enacted, which allowed Muntinlupa's classification and conversion from a municipality to a highly urbanized city.

The appellate court said Section 142 of the Local Government Code (LGC) of 1991 bars towns from levying taxes already levied by provinces.

Thus, the CA noted, when the municipality of Muntinlupa enacted Section 25 of MO No. 93-95, it exceeded its legal authority.

It added that the said provision was also invalid for contravening the provisions of the LGC.

However, the CA stressed that Muntinlupa's conversion into a highly urbanized city "cured the defect" of the ordinance.

The appellate court held that Section 56 of Republic Act 7926 adopted all existing ordinances of the municipality into the newly established city.

The CA that added upon the passage of RA 7926, the ordinance had not yet been declared void by final judgment by any court.

"It is our view that although the ordinance was void when first passed, the legality of its provision was cured by the enactment of R.A. 7926, which converted Muntinlupa into a highly urbanized city," the CA said.

"Thus, appellee's obligation to pay franchise tax to appellants accrued only from the date R.A. 7926 took effect," it added.

In line with its ruling, the CA directed Meralco to comply with Muntinlupa's demand for a certified statement of its gross receipts derived from its business within the city and other documents for the purpose of assessing the franchise tax starting 1995 and pay its liabilities based on the said assessment.

Associate Justices Sesinando Villon and Amy Lazaro-Javier concurred with the ruling. (report from abs-cbnNEWS.com)