City ordered to pay P2.5 M tax refund

CEBU, Philippines - The Court of Tax Appeals (CTA) En Banc has ordered the Cebu City government to pay a P2.5 million tax refund to the National Grid Corporation of the Philippines (NGCP).

Associate justice Lovell Bautista said the NGCP cannot be made liable to pay real property taxes for the years 2001 to 2008 because the subject properties were owned by the National Power Commission (NPC) and National Transmission Corporation (TRANSCO).

"As discussed earlier, NPC and TRANSCO were the owners of the subject properties before the year 2009. Therefore, not being the owner or the beneficial user during the period before the 2009, petitioner cannot be made liable," Bautista said in her decision.

The associate justice said NGCP is only liable for the real property tax incurred for the year 2009.  From P2,792,862.41 covering taxable years 2001 to 2009, the real estate taxes that NGCP has to pay was reduced to P338,472.67, representing taxable year 2009.

On Sept. 16, 2009, the Office of the City Treasurer of Cebu City issued a Second and Final Notice of Demand against NGCP for incurred tax delinquency in the amount of P1,456,459.68 for taxable years 2003 to 2009.

Six days after, the Office of the City Treasurer again issued two Second and Final Notices of Demand against NGCP for incurred tax delinquencies in the amount of P787,957.11 covering Tax Declaration No. C00-019-05881 for the taxable years 2001 to 2009 and in the amount of P548,445.62 covering Tax Declaration No. C00-019-05580 for the taxable years 2004 to 2009 for its real properties.

The notices dated Sept. 16, 2009 and Sept. 21, 2009 covered a total amount of P2,792,862.41.

Petition for review

The NGCP earlier filed an appeal before the CTA after the Central Board of Assessment Appeals (CBAA) issued an order dismissing their petition for being filed out of time and for lack of merit.

In their petition, the NGCP argued that under Republic Act 9511 (an act granting them a franchise to engage in the business of conveying or transmitting electricity), they were exempt from paying real property taxes.

"…apart from the three percent franchise tax due to the national government, and by the very nature and purpose of the property necessary for the operations and maintenance in its power transmission business, it is exempt from payment of real property tax and any and all taxes, duties, fees and charges of any kind…established or collected by any authority whatsoever, local or national, including local government units," the NGCP stated.

The NGCP also pointed out that from 2001 to 2008, the NPC/TRANSCO had the actual or beneficial use and/or possession of the properties subject of the Final Notices of Demand. It was only on Jan. 15, 2009 that the power transmission operation of TRANSCO was formally turned-over to NGCP under the Concession Agreement.

The NGCP further said that being a concessionaire of TRANSCO, it should only be made to pay the real property tax based on the assessment level of 10 percent.

In her reply, Oliva said the exemptions mentioned under Section 9 of RA 9511 only refers to income tax, business tax, among others, except real property tax. Thereby, the NGCP is subject to pay for real property tax.

The NGCP was left with no choice but to pay the P2,792,862.41 real property taxes demanded by the Cebu City government so that their operations will not be affected since then city treasurer Oliva went through the process of selling the subject properties at a public auction.

"In sum, the Court En Banc finds compelling reason to warrant a partial reversal of the assailed decision and order. Wherefore, the petition for review is hereby partly granted. Accordingly, the decision dated May 30, 2011, and order dated Nov. 16, 2011 issued by the Central Board of Assessment Appeals are hereby reversed and set aside. Respondent is hereby ordered to refund in favor of petitioner the amount of P2,454,389.74," the CTA decision said. -/QSB (FREEMAN)