The National Transmission Corp. (Transco) has lost a P102-million tax-refund case against the municipality of Labrador, Pangasinan, because it did not comply with the judicial remedies in protesting a tax assessment as provided by the Local Government Code of 1991.
The Court of Tax Appeals (CTA) reversed the order of the Regional Trial Court (RTC) in Lingayen, Pangasinan, which granted the P102-million refund to Transco representing the allegedly erroneous collection of business taxes by the municipality of Labrador for the taxable years 2006 to 2008.
Transco presented the argument before the RTC in Lingayen that, as a government instrumentality, it should not pay local taxes and that the municipality of Labrador has no power to impose local taxes on Transco because it has a franchise and that only provinces and cities have the power to levy local business taxes.
The RTC overlooked the fact that Transco did not appeal the tax assessments within the period prescribed by the Local Government Code. The RTC said that since the municipality cannot validly impose the said taxes, then there can be no business-tax assessments to speak of and that these assessments were void from the beginning.
But the CTA ruled that Transco did not follow the correct process in perfecting a judicial appeal on tax assessments issued by local government units, thus the assessments issued by Labrador against Transco had ripened into assessments that are conclusive and unappealable.
The CTA cited Section 195 of the Local Government Code, which provides the procedure in protesting an assessment. Section 195 provides that the taxpayer has 60 days within which to file an administrative protest of an assessment by the local treasurer. The treasurer would then have another 60 days to decide on whether to deny or grant the administrative protest.
Then, “the taxpayer shall have 30 days from the receipt of the denial of the protest or from the lapse of the 60-day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.”
What Transco did was to defend itself in the collection suits instituted by the municipality of Labrador even before the lapse of the 60-day period during which the local treasurer should have issued a decision on the administrative protest. Transco did not institute an original action with the RTC to judicially appeal the tax assessments issued by the municipality.
“In view of respondent’s failure to appeal the assessment notices issued by petitioners, the said assessment notices from which the alleged illegal collection of taxes was based were already final, executory and unappealable pursuant to Section 195 of the Local Government Code,” the CTA decision said.
“In this case, respondent should have appealed the denial of its protest within 30 days from the receipt of the denial or from the lapse of the 60-day period within which to appeal with the court of competent jurisdiction. Due to respondent’s failure in this regard, the assessment notices issued by petitioners against respondent became conclusive and unappealable,” it added.
David Cagahastian

TransCo still owes Labrador P208 million,