G.R. No. L-21832. May 29, 1971
VISAYAN ELECTRIC COMPANY, INC., PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
DIZON, J.:
This is an appeal from a decision of the Court of Tax Appeals in
C.T.A. Case No. 1105 sentencing petitioner to pay respondent Commissioner of
Internal Revenue or his authorized representative the sum of P78,670.55 as deficiency
franchise tax and surcharge.
The material facts are
not disputed, the case having been submitted for decision on the pleadings.
According to the record, petitioner, a holder of a legislative
franchise (Act No. 2701) authorizing it to operate and maintain an electric
light, heat and power system in
the City of Dumeguete, Oriental Negros,
realized more than two million pesos as gross receipts from the operation of
its electrical plant during the period from April 1, 1952 to December 31, 1959,
having paid thereon the 2% franchise tax prescribed in its franchise (Section 8 of Act 2701)
instead of the 5% franchise tax prescribed in Section 259 of the National
Internal Revenue Code, as amended by Republic Act 418. Accordingly, on December 14, 1960, the respondent
Commissioner assessed and demanded from petitioner the payment of the sum of
P62,936.44 as deficiency franchise tax, plus the sum
of P15,734.11 as 26% surcharge, or a
total sum of P78,670.55. Upon denial of petitioner’s request far a
reconsideration of the assessment it interposed an appeal to the Court of Tax
Appeals where, as already stated, the parties submitted the case for decision
on the pleadings. Thereafter the Court
of Tax Appeals rendered the appealed decision, and subsequently also denied the
motion for reconsideration seasonably filed by petitioner. Petitioner contends (First Assignment of
Error) that the Court of Tax Appeals erred in holding that it should pay the 5%
franchise tax prescribed in Section 259 of the National Internal Revenue Code
instead of the 2% tax provided for in its franchise. It is its contention in this connection that
our ruling in Hoa Hin Co.,
Inc. (G.R. Nos. L-9616 and L-11783, May 25, 1959) and Lealda
Electric Co., Inc. (G.R. L-16428, April 30, 1963) does not apply to the instant
case because its franchise is different from the franchises of the taxpayers
involved in said cases.
We find petitioner’s contention to be without merit, it appearing
that the provisions concerning the imposition and collection of taxes contained
in the franchises involved in the two cases mentioned
above and in the present case are substantially the same.
Section 7 of Act No. 1256 (Hoa Hin Franchise) provides:
“The grantee of this license, his lessees, grantees, or
successors in interest, shall pay annually to the Government of the Philippine
Islands one-half of one per centum per annum of the gross receipts derived from
the operation of said slipway or marine railway from and after the date of the
acceptance or this license. Said payment
shall be made in the fifteenth day of January of each and every year for the
year preceding and any accredited officer of the Insular Government shall, upon
demand, have the right to examine and inspect the books of the grantee, his
successors or assigns, for the purpose of ascertaining the gross receipts of
the said slipway or marine railway for any year; but nothing in this section
shall be construed to interfere with the rights of the municipal, provincial
or Insular Government to assess taxes upon the land in question or improvements
thereon, nor shall it affect the right of the
Government to assess and collect any business or income tax on his
business.” (Italics ours.).”
It is obvious that the section of the law quoted above does not
contain any provision to the effect that the franchise tax imposed upon the
grantee shall be “in lieu of all taxes of every name and nature –
municipal, provincial or central –, upon its capital stock, franchise, right of
way, earnings, and all other property owned or operated by the grantee under
this concession or franchise.” For this reason, We
ruled that the franchise holder Hoa Hin was subject to the higher rate of franchise tax
prescribed in Section 259 of the Tax Code.
Stating the reasons in support of our ruling, We
said:
“While the then Philippine Commission fixed the yearly tax to
be paid to the Government by the original grantee, his successor and assigns
at the rate of 1/2 of 1% of the gross earnings derived from the operation of
the slipway or marine railway, the grantor reserved its right to assess and
collect other business or income tax on the grantees’ business. Section 259 of the National Internal Revenue
Code, as amended, provides that ‘whichever is higher between the rate imposed
by the special charter of the grantee and the National Internal Revenue Code,
shall apply to and be imposed upon, and paid by, the grantee of the
franchise. The rate imposed by Section
259 of the National Internal Revenue Code, as amended, being higher than that
imposed in the petitioner’s charter, Act No. 1256, the
petitioner has to pay the rate imposed by Section 259 of the National Internal
Revenue Code, as amended. The rule in Manila Railroad Company v. Rafferty, 40 Phil. 224;
Philippine Railway Company v. Collector of Internal Revenue, G.R. No. L-3859, 25 March 1952; Visayan Electric Company v. David, 49 Off. Gaz. 1385; and Carcar Electric and Ice Plant v. Collector of Internal
Revenue, 53 Off. Gaz. 1068, cannot be invoked
by the petitioner, because in the grantee’s respective franchises there is a
provision that ‘Such annual payments, when promptly and fully made by the
grantee shall be in lieu of all taxes of every name and nature– municipal, provincial or central —,upon
its capital stock, franchise, right of way, earnings, and all other property
owned or operated by the grantee under this concession or franchise.’ The
petitioner’s franchise, Act No. 1256, does not embody such exemption
clause.” (Italics ours.).”
In the Lealda case, the relevant
provision of the taxpayer’s franchise (Act No. 2475) reads as follows:
“x x x Entendiendose, que en consideracion del privilegio concedido por Ia
presente el concesionario, sus sucesoras, o cesionarios
abonara trimestralmente a
la tesoreria de Albay o en
la de Daraga y Legaspi en el caso de qua estos dos ultimos fuesan segregados por autoridad competente
en municipios independiente,
con rentas correspondientes
de acuerdo con la ley, por sus entradas
en bruto tales como se exigen a las demas
franquicias y privilegios hoy existentes,”
Petitioner’s franchise does not, as the franchises involved in
Has Hin and Lealda did not,
contain any provision to the effect that the payment of the franchise tax
therein prescribed shall be “in lieu of all taxes of every name and nature
— municipal, provincial or central —, upon its capital stock, franchise, right
of way, earnings, and all other property owned or operated by the grantee under
this concession or franchise,” The absence of such provision clearly
indicates – as We held in the two cases mentioned heretofore – that
petitioner’s franchise is not a bar to the imposition of a higher rate of
franchise tax. Accordingly, Section 259
of the Tax Code which applies to franchises existing at the time of its
enactment as well as to future franchises, should apply to petitioner herein.
Petitioner’s second contention is that the Court of Tax Appeals
erred in holding that petitioner’s franchise was deemed amended by Section 259
of the Tax Code, said franchise being in the nature of a contract between the State and the franchise holder.
It is enough to say in this connection that petitioner’s
franchise (Article 11, Act No. 2701) allows amendments or even repeal. Petitioner and its predecessor in interest,
the original grantee “La Electra” were fully aware of and accepted
this condition, and have no reason to
complain.
Petitioner’s last contention is that the Court of Tax Appeals
erred in requiring it to pay deficiency taxes, with penalties, for the years
already barred by prescription.
Upon the facts disclosed by the record, this point merits no
extensive discussion as it appears that petitioner did not raise the defense
of prescription neither in the Bureau of Internal Revenue, nor in the Court of
Tax Appeals, nor in the petition for review filed in this case. It is the settled law in this jurisdiction
that prescription as a defense is deemed waived if not seasonably raised
(Section 2, Rule 9, Rules of Court; Republic of the Philippines vs. Mambulao Lumber Company, et al., G.R. No. L-18942, November 30, 1962).
Petitioner’s contention that the defense of prescription assumed
a subsidiary and alternative role because of the prayer for general relief made
in its petition for review in the Court
of Tax Appeals is, likewise, without merit. Well known is the rule that the prayer for
relief made in a pleading (complaint or petition for review) does not form part
of the body thereof where the ultimate facts constituting the cause of action or defense must be set
forth. The only legal effect of a prayer
for general relief is to authorize the court,
upon rendering judgment, to grant such relief as may
be justified by the pleadings and the evidence, although such relief was not
one of those specifically prayed
for in the winning party’s affirmative pleading.
WHEREFORE, the decision appealed from being in accordance
with law, the same is hereby affirmed, with
costs.
Concepcion, C.J., Reyes, Makalintal, Zaldivar, Ruiz Castro,
Fernando, Teehankee, Barredo,
Villamor, and Makasiar, JJ., concur.