BIR Ruling

June 16, 1969 Messrs. Meer, Meer and Meer Attorneys-at-Law 9th Floor, PLDT Bldg. Legaspi St., Makati, Rizal Gentlemen : This refers to your letter dated May 14, 1969, requesting on behalf of your client, the Clavecilla Radio System, Inc., reconsideration of that ruling in Revenue Memorandum Circular No. 41-68, dated November 15, 1968, holding that all corporations enjoying exemption from tax by virtue of the amendment of Section 24 of the Tax Code by Republic Act No. 5431. In reply, I have the honor to inform you that after a thorough and analytical study of the amendatory provision in question, and considering that franchises are of the nature of contracts between the government and the grantees thereof, this Office has arrived at the conclusion that the said amendatory provision could not have contemplated the withdrawal of the tax exemption of franchise grantees for such withdrawal would impair the obligation of contracts between the government and the grantee, which is prohibited by the constitution. In view of the foregoing, and considering that the Secretary of Justice in interpreting a similar provision of law ruled that said law did not apply to the Manila Railroad Company, a franchise grantee, (Opinion No. 227, series of 1948) it is the opinion of this Office that Republic Act No. 5431 did not repeal the exemption granted in the franchise of your client. Accordingly, your client and other franchise grantees similarly situated shall be subject to tax conformably with the provisions of their respective franchises. LLjur Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue