FIRST DIVISION
G.R. No. 225226, July 07, 2020
THE CITY OF MAKATI, PETITIONER, V. THE MUNICIPALITY OF BAKUN AND LUZON HYDRO CORPORATION, RESPONDENTS.
D E C I S I O N
REYES, J. JR., J.:
Before us is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision1 in CTA EB Case No. 1179 rendered by the Court of Tax Appeals (CTA) En Banc on January 14, 2016 and its Resolution2 dated June 8, 2016 denying reconsideration.
The case sprang from a special civil action for interpleader under Rule 62, with prayer for preliminary injunction and/or temporary restraining order, filed before the Regional Trial Court (RTC) of Makati City, Branch 134 on January 16, 2007.3 Luzon Hydro Corporation (LHC) sought to compel the City of Makati (Makati), the Municipality of Alilem (Alilem), and the Municipality of Bakun (Bakun) to litigate among themselves their conflicting claims on LHC's liability for local business tax under Republic Act (R.A.) No. 7160.4
LHC operates a hydroelectric power plant harnessing the Bakun River that runs through the Provinces of Ilocos Sur and Benguet. The major components of the facility, such as the power station and switch yard are situated in Alilem, Ilocos Sur. Other structures, such as the conveyance tunnel, penstock, weir, intakes, and desander are located in Bakun, Benguet. LHC maintained an office in Makati City.5
Until 2003, LHC enjoyed a six-year tax holiday as an entity engaged in a pioneer area of investment registered with the Board of Investments. In 2004, LHC began paying local business taxes to Alilem, Bakun, and Makati. LHC pays Alilem the 30% portion of its local business tax allocated for the site of the principal office, conformably with Section (Sec.) 150 of R.A. No. 7160,6 given that Alilem is specified as the location of LHC's principal office in its Articles of Incorporation. For three years since 2004, the 70% portion of the local business tax was equally apportioned among Alilem, Bakun, and Makati, such that each local government unit (LGU) received 23.33% -Alilem and Bakun as power plant sites and Makati as a "project office" site.7 It is the sharing in the 70% portion that became the bone of contention among the three LGUs.
Via Resolution No. 168-2004 dated September 20, 2004, Bakun questioned the sharing scheme and claimed the entire 70% portion of the local business tax. The matter was submitted to the Bureau of Local Government and Finance (BLGF) for determination.8
On February 8, 2006, the BLGF opined that only Bakun and Alilem should share in the 70% portion of LHC's local business tax because LHC's Makati office was a mere "administrative office" and not among the sites enumerated in Sec. 150 of R.A. No. 7160.9 According to the BLGF, Makati can only collect the mayor's permit fee and other regulatory fees under its existing local tax ordinances.10
Consequently, Bakun passed Resolution No. 134-2006 requiring LHC to prospectively comply with the BLGF opinion, and assessed LHC deficiency taxes for the years 2004 to 2006. Alilem followed suit and issued Resolution No. 07-02, also requiring LHC to comply with the BLGF opinion. Makati, on the other hand, informed LHC that it would still assess the latter's local business tax notwithstanding the BLGF opinion. To resolve the ensuing uncertainty, LHC filed the action for interpleader.11
The RTC of Makati City found that LHC's Makati office was a "project office," which entitled Makati to an equal share with LHC's power plant sites from the 70% portion of LHC's business tax. In view, however, of Makati's representation12 on the witness stand that it was willing to have its share in the tax reduced, as long as its share is not completely done away with, the RTC reduced its share to 20% instead. Thus, in a Decision dated April 20, 2012, the RTC of Makati City, Branch 134, disposed: ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, the petition for interpleader is hereby given due course. Defendants Municipalities of Alilem and Bakun as well as the City of Makati are all declared entitled to the 70% business tax allocation of the plaintiff to be distributed starting taxable year 2012, as follows:Bakun moved for reconsideration, which was denied by the RTC on September 12, 2012, prompting the said municipality to file a petition for review before the CTA.15
Municipality of Alilem - 25% (as site of the plant)
Municipality of Bakun - 25% (as site of the plant)
City of Makati - 20% (as "project office")
SO ORDERED.14cralawlawlibrary
WHEREFORE, the Petition for Review dated November 14, 2012 filed by petitioner Municipality of Bakun is PARTIALLY GRANTED. Accordingly, the Decision dated April 20, 2012 and the Order dated September 12, 2012 of the RTC in Civil Case No. 07-049 are hereby REVERSED and SET ASIDE. The Municipalities of Bakun and Alilem are hereby declared the only local government units entitled to equally share in the 70% allocation made by LHC for the payment of its local business [tax].Makati sought reconsideration of the CTA Special First Division's Decision on December 23, 2013, while Bakun moved for its partial reconsideration on January 15, 2014. Both these motions were denied for lack of merit in a Resolution18 dated April 30, 2014. Aggrieved by the tax court's reversal of the RTC's decision, Makati filed a Petition for Review19 before the CTA En Banc.
SO ORDERED.17cralawlawlibrary
WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Decision of the Special First Division of this Court in CTA AC No. 100, promulgated on November 8, 2013 and its Resolution, promulgated on April 30, 2014, are hereby AFFIRMED. No pronouncement as to costs.Makati moved for reconsideration of the CTA En Bane's Decision, which was denied for lack of merit on June 8, 2016 via its now assailed Resolution.21
SO ORDERED.20cralawlawlibrary
On October 12, 2016, Bakun filed its Comment23 on the current petition, reiterating that LHC's Makati office was a mere "administrative office" and consequently not entitled to share in LHC's local business tax allocation.
- WHETHER OR NOT THE COURT OF TAX APPEALS EN BANG AND [ITS SPECIAL FIRST DIVISION] GRAVELY ERRED IN IGNORING THE FINDINGS OF [FACT] OF THE TRIAL COURT, RTC-MAKATI CITY, BRANCH 134, WHICH CONDUCTED THE HEARINGS AND TRIALS OF THE PRESENT CASE, WFIEREIN IT WAS ESTABLISHED BY CLEAR AND CONVINCING EVIDENCE IN THE HONORABLE REGIONAL TRIAL COURT THAT LUZON HYDRO CORPORATION'S ("LHC") OFFICE IN MAKATI CITY IS A PRODUCER/POWER GENERATION OFFICE OR "PROJECT OFFICE", NOT A MERE ADMINISTRATIVE OFFICER]
- WHETHER OR NOT THE COURT OF TAX APPEALS EN BANC AND [ITS SPECIAL FIRST DIVISION] GRAVELY ERRED IN APPLYING LOCAL FINANCE CIRCULAR NO. 03-95 ENTITLED "PRESCRIBING GUIDELINES GOVERNING THE POWER OF CITIES AND MUNICIPALITIES TO IMPOSE BUSINESS TAX ON CONSTRUCTION CONTRACTORS PURSUANT TO SECTION 143(e), REPUBLIC ACT NO. 7160, xxx" dated MAY 22, 1995 TO SUPPORT ITS RULING THAT THE OFFICE OF LHC IN MAKATI IS NOT A PROJECT OFFICER]
- WHETHER OR NOT THE BLGF OPINION DATED 08 MARCH 2006 HAS NO BINDING AND MANDATORY EFFECT[;]
- WHETHER OR NOT THE COURT OF TAX APPEALS EN BANC AND [ITS SPECIAL FIRST DIVISION] GRAVELY ERRED IN RULING IN FAVOR OF A PARTY, MUNICIPALITY OF ALILEM, WHICH DID NOT EVEN FILE AN APPEAL BEFORE THE COURT OF TAX APPEALS, AND THEREFORE, AS FAR AS MUNICIPALITY OF ALILEM IS CONCERNED, THE DECISION DATED 20 APRIL 2012 RENDERED BY THE HONORABLE RTC-MAKATI CITY SHOULD HAVE BECOME FINAL AND EXECUTORY[; AND]
- WHETHER OR NOT THE COURT OF TAX APPEALS EN BANC AND [ITS SPECIAL FIRST DIVISION] GRAVELY ERRED IN TAKING COGNIZANCE OF THE PRESENT APPEAL FROM A "SPECIAL CIVIL ACTION FOR INTERPLEADER", WHICH IS NOT WITHIN THE APPELLATE JURISDICTION OF THE COURT OF TAX APPEALS.22
x x x xThat the case filed before the RTC was in the mode of a special civil action for interpleader does not detract from its nature as a local tax case, involving as it does the application of the rules on situs on the payment of local business taxes. There is no need to distinguish it from other local tax cases "considering that the law expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff matters, the role of judicial review over local tax cases without mention of any other court that may exercise such power."26
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction^
x x x x
To be sure, the BLGF is not an administrative agency whose findings on questions of fact are given weight and deference in the courts. The authorities cited by petitioner pertain to the Court of Tax Appeals, a highly specialized court which performs judicial functions as it was created for the review of tax cases. In contrast, the BLGF was created merely to provide consultative services and technical assistance to local governments and the general public on local taxation, real property assessment, and other related matters, among others.27cralawlawlibraryIn tackling what constitutes a project office, it was not erroneous for the CTA to cite Department of Finance-Local Finance Circular No. 3-9528 dated May 22, 1995. On the situs of tax, Sec. 5(a)(3) of the said circular defines a project office as "equivalent to the factory of a manufacturer." While the circular concerned applies to construction contractors, it was nonetheless addressed to all Treasurers of LGUs, clarifying the imposition of business taxes under Sec. 143 of R.A. No. 716029 for a uniform application. While the circular addressed a different economic activity from that of hydroelectric power generation, its definition of a project office is a sound guide for parity of reasoning. A distinction is not even called for, since both activities are covered by local taxation on business and its rules on tax situs. There is nothing in the provisions to support a less than uniform application between construction contractors and power producers. In the present case, LHC's Makati office could not be viewed as equivalent to a factory or a project office.
Indeed, one party's appeal from a judgment will not inure to the benefit of a co-party who failed to appeal; and as against the latter, the judgment will continue to run its course until it becomes final and executory. To this general rule, however, one exception stands out: where both parties have a commonality of interests, the appeal of one is deemed to be the vicarious appeal of the other.32cralawlawlibrary
Endnotes:
1 Penned by Associate Justice Cielito N. Mindara-Grullo, with Presiding Justice Ramon C. Del Rosario and Associate Justices Juanito C. Castafieda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-Victorino, Amelia R. Cotangco-Manalastas and Ma. Belen Ringpis-Liban, concurring; rollo, pp. 37-51.
2 Id. at 52-55.
3 Id. at 56.
4 LOCAL GOVERNMENT Coon OF 1991.
5Rollo, p. 56.
6 Section 150. Situs of the Tax. -(a) For purposes of collection of the taxes under Section 143 of this Code, manufacturers, assemblers, repackers, brewers, distillers, rectifiers and compounders of liquor, distilled spirits and wines, millers, producers, exporters, wholesalers, distributors, dealers, contractors, banks and other financial institutions, and other businesses, maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is located. In cases where there is no such branch or sales outlet in the city or municipality where the sale or transaction is made, the sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality(b) The following sales allocation shall apply to manufacturers, assemblers, contractors, producers, and exporters with factories, project offices, plants, and plantations in the pursuit of their business:
(1) Thirty percent (30%) of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located; and
(2) Seventy percent (70%) of all sales recorded in the principal office shall be taxable by the city or municipality where the factory, project office, plant, or plantation is located.(Emphasis supplied)7Rollo, p. 39.
x x x x
8 Id.
9 Supra note 6.
10 Rollo, pp. 39-40.
11 Id. at 40.
12 Id. at 68.
13 Penned by Presiding Judge Perpetua Atal-Paño; id. at 56-69.
14 Id. at 69.
15 Id. at 83.
16 Id. at 79-95.
17 Id. at 94.
18 Id. at 110-116.
19 Id. at 117-136.
20 Id. at 51.
21 Supra note 2.
22Rollo, pp. 18-20.
23 Id. at 180-188.
24 Id. at 190-198.
25 AN ACT EXPANDING THE JURISDICTION OF THH COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK TO Tin; LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF REPUBLIC ACT NO. i 125, AS AMENDED, OTHERWISE KNOWN AS TIIC LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES, March 30, 2000
26City ofLapu-Lapu v. Phil, Economic Zone Authority, 748 Phil. 481-482. 530 (2014).
27Philippine Long Distance Telephone Company, Inc. v. City of Davao, 415 Phil. 768, 779-780 (2001).
28 PRESCRIBING GUIDELINES GOVERNING THE POWER OF CITIES AND MUNICIPALITIES TO IMPOSE BUSINESS TAX ON CONSTRUCTION CONTRACTORS PURSUANT TO SECTION 143 (c), REPUBLIC ACT NO. 7160, OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE Ol; 1991. AND ITS IMPLEMENTING RULES AND REGULATIONS.
29 Supra note 4.
30 Supra note 5.
31 568 Phil. 219-220, 228 (2008).
32 Id.chanRoblesvirtualLawlibrary