The Court of Tax Appeals (CTA) has partially granted the petition of the National Grid Corporation of the Philippines (NGCP) as it reversed the decision issued by the Quezon City Regional Trial Court (RTC) which dismissed the P22 million claim for refund of city taxes and other business taxes.
On July 12, 2022, the QC RTC Branch 225 dismissed for lack of merit the NGCP's claim for refund in the total amount of P19,306,767.07, Mayor's Fee of P10,000, and Penalty for Delinquency amounting to P2,659,520. The NGCP appealed the decision, but it was denied on Sept. 8, 2022.
In its May 29, 2024 decision, the CTA's special second division ruled:
"Given the pronouncement in the assailed Resolution on establishing the factual basis of petitioner's (NGCP) refund claim, the ends of justice would be better served if this Court remands the instant case to the court a quo for reception of evidence.
"This will allow petitioner to prove that the gross receipts of P2,573,935,608.86, on which respondent based its local tax assessments, were indeed subjected to the three percent franchise tax, as certified in the aforesaid BIR Certifications. Following this, the court a quo (RTC) can already proceed to determine whether petitioner is entitled to its claim for refund.
"Wherefore, premises considered, the Petition for Review filed by National Grid Corporation of the Philippines is partially granted. The assailed Decision dated July 12, 2022 and Resolution dated September 8 , 2022, both rendered by the Regional Trial Court, Branch 225, Quezon City in Civil Case No. R-QZN-21-07791, are reversed and set aside.
"Let this case be remanded to the Regional Trial Court, Branch 225, Quezon City, for further proceedings, more particularly, for the reception of evidence and determination of the amount to be refunded to petitioner, if any. So ordered."
The 25-page CTA decision was written by Associate Justice Lanee S. Cui-David with the concurrence of Associate Justices Jean Marie A. Bacorro-Villena and Corazon G. Ferrer-Flores.
The tax case started on March 19, 2021 when the QC government issued a Tax Bill assessing NGCP with city tax and other business taxes, along with the mayor's fee for 2021, in the total amount of P98,514,993.14.
The NGCP filed a protest on May 18, 2021 before the QC Treasurer's Office Administrative Division. The firm invoked Section 9 of Republic Act No. 9511, and explained it is exempt from the payment of business taxes, including city tax, under RA 9511.
Also on May 18, 2021, the QC Treasurer's Office Administrative Division issued a revised Tax Bill assessing NGCP anew for P19,306,767.07, mayor's fee and other fees of P33,712.80, and penalty for delinquency of P2,659,520.13, for an aggregate amount of P22,000,000 for 2021.
So it could get its business permit, the NGCP paid under protest the said taxes and fees. It then sent a letter dated April 19, 2021 informing the QC government that the payment was made under protest. The NGCP then filed a Written Protest and Claim for Refund before the Treasurer's Office on May 28, 2021.
After the RTC denied its appeal, the NGCP elevated the case to the CTA and filed a Petition for Review on Oct. 19, 2022. The NGCP argued that it religiously paid the three percent franchise tax before the Bureau of Internal Revenue (BIR) since 2009. The payments were religiously made until July 2021, when it filed a petition before the QC RTC.
The NGCP insisted that it fully complied with its obligation to pay the three percent franchise tax, which the QC RTC failed to consider. The NGCP then explained that the payment of local taxes is different from the payment of franchise tax, since the local tax assessment is based on the taxpayer's gross receipts or sales of the immediately preceding year. Meanwhile, franchise tax is based on the taxpayer's gross receipts derived from the franchise operations of the current year, it said.
In resolving the petition, the CTA said that to deny the NGCP's petition outright, given that the BIR Certifications failed to indicate the tax base or the amount of gross receipts on which the franchise tax should have been based, would be "completely unjust." This is especially the case since the three percent franchise tax was never raised as an issue by either of the parties before the QC RTC.
"Given the pronouncement in the assailed Resolution on establishing the factual basis of petitioner's refund claim, the ends of justice would be better served if this Court remands the instant case to the court a quo for reception of evidence," it said.