QUEZON CITY vs. ABS-CBN BROADCASTING CORPORATION - Local Franchise Tax

FACTS:

ABS-CBN was granted a franchise which provides that it “shall pay a 3% franchise tax and the said percentage tax shall be “in lieu of all taxes on this franchise or earnings thereof”. It thus filed a complaint against the imposition of local franchise tax.

ISSUE:

Does the “in lieu of all taxes” provision in ABS-CBN’s franchise exempt it from payment of the local franchise tax?

HELD:

NO. The right to exemption from local franchise tax must be clearly established beyond reasonable doubt and cannot be made out of inference or implications.

The uncertainty over whether the “in lieu of all taxes” provision pertains to exemption from local or national taxes, or both, should be construed against Respondent who has the burden to prove that it is in fact covered by the exemption claimed. Furthermore, the “in lieu of all taxes” clause in Respondent’s franchise has become ineffective with the abolition of the franchise tax on broadcasting companies with yearly gross receipts exceeding P10 million as they are now subject to the VAT.