8/20/2019 Smart vs City of Davao
1/3
G.R. No. 155491 July 21, 2009
SMART COMMUNICATIONS, INC., Petitioner,
vs.
THE CITY OF DAVAO, !"!#!$%!& '!!($ )y (%# M*yo Ho$. RODRIGO
DUTERTE, *$&
%'! SANGGUNIANG +ANUNSOD OF DAVAO CITY, Respondents.
FACTS:
1. On February 18, 2002, Smart i!ed a spe"ia! "ivi! a"tion or
de"!aratory re!ie # or t$e
as"ertainment o its ri%$ts and ob!i%ations under t$e Ta&
Code o t$e City o 'avao ('A)AO*.
2. T$e ta& bein% imposed is a ta& on businesses en+oyin%
a ran"$ise, at t$e rate o seventyive
per"ent o one per"ent o t$e %ross annua! re"eipts or t$e
pre"edin% "a!endar year based on t$e
in"ome or re"eipts rea!i-ed it$in t$e territoria! +urisdi"tion o
'avao City.
#. Amon% t$e ob+e"tions raised by Smart ere:
a. T$e issuan"e o its ran"$ise under RA /o. 2, $i"$ is
subse3uent to RA 140
(5o"a! 6overnment Code* s$os t$e "!ear !e%is!ative intent to
e&empt it rom t$e provisions o
RA 140
b. Se". 1# o t$e 56C is meant to app!y to e&emptions
a!ready e&istin% at t$e time o its
ee"tivity and not to uture e&emption
". T$e poer o t$e City o 'avao to impose a ran"$ise ta& is
sub+e"t to statutory
!imitation su"$ as t$e 7($ l(!u o- *ll %*!# "!ause ound in RA
2
d. T$e imposition o ran"$ise ta& by t$e City o 'avao ou!d
amount to a vio!ation o
t$e "onstitutiona! provision a%ainst impairment o "ontra"t.
. 'avao, $oever, invo9ed t$e poer %ranted by t$e Constitution to
!o"a! %overnment units
(56* to "reate t$eir on sour"es o revenue.
;. T$e RTC $e!d a de"ision in avor o 'avao statin% t$at t$e
ambi%uity in RA 2 re%ardin%
7in !ieu o a!! ta&es must be reso!ved a%ainst t$e
ta&payer. Ta& e&emptions are "onstrued in
stri"t!y a%ainst t$e ta&payer and !ibera!!y in avor o t$e
ta&in% aut$ority.
4. T$e RTC a!so $e!d t$at t$ere as no vio!ation o t$e
nonimpairment "!ause o t$eConstitution sin"e t$e poer to ta& is
based not mere!y on a va!id de!e%ation o !e%is!ative poer
but on t$e dire"t aut$ority %ranted to it by t$e
undamenta! !a.
8/20/2019 Smart vs City of Davao
2/3
@=5':
1. Smart a!!e%es t$at t$e 7in !ieu o a!! ta&es "!ause o its
ran"$ise e&empts it rom a!! ta&es,
bot$ !o"a! and nationa!, e&"ept t$e nationa! ran"$ise
ta& (no )AT*, in"ome ta& and rea!
property ta&. T$e un"ertainty in t$e 7in !ieu o a!!
ta&es "!ause in RA /o. 2 on $et$er
Smart is e&empted rom bot$ !o"a! and nationa! ran"$ise
ta& must be "onstrued stri"t!y a%ainstSmart $i"$ "!aims
e&emption. Smart $as t$e burden o providin% t$at, aside rom t$e
imposed
# ran"$ise ta&, Con%ress intended it to be e&empt rom
a!! 9inds o ran"$ise ta&es$et$er
!o"a! or nationa!. Smart, ai!ed in t$is re%ard.
2. Ta& e&emptions "an on!y be %iven or"e i t$ey are
"!ear and "ate%ori"a!.
