BIR Ruling No. 122-61

March 17, 1961 BIR RULING NO. 122-61 The Municipality of Pagsanjan Laguna Attention : Municipal Council Gentlemen : In connection with the minutes of the meeting of the Municipal Council of the Municipality of Pagsanjan, Laguna, held on November 27, 1960 under Resolution No. 113, wherein it was resolved "to request the Hon. Commissioner of Internal Revenue thru the Hon. the Secretary of Justice that the Pagsanjan Electric Service be exempt from the payment of the percentage tax on the gross receipts of the services", it is hereby informed that the same is hereby denied for the reason that it will contravene with Sec. 182, 183, in relation to Sec. 191 of the National Internal Revenue Code and Sec. 1 of R.A. 104, quote: "All corporations, agencies or instrumentalities owned or controlled by the Government shall pay such duties, taxes, fees and other charges upon their transaction, business, industry, sale or income as are imposed by law upon individuals, associations, or corporations engaged in any taxable business, industry or activity . . ." That the above quoted provision of law is amply sustained by the Secretary of Justice in his Op. No. 65, Ser. of 1951, quote: "Republic Act No. 104 was intended by Congress to apply to corporations or agencies owned or controlled by the government engaged in business or industry for profit . . .". "In the operation of a public utility, a municipal corporation acts in a proprietary rather than a governmental capacity (37 Am. Jur. 729) and no distinction is to be drawn between the business of selling light, water, or gas when indulged in by a municipality and when engaged in by a private corporation both being conducted for profit (City of Chicago v. Ames, 365 III, 529). When a municipality is engaged in operation of a municipal plant, it acts in a business capacity and stands upon the same footing as a private individual or business corporation similarly situated (Traveler's Insurance Co. v. Wadsworth, 142 H.E. 900) and becomes subject to the same burdens, responsibilities and liabilities as a private corporation acting in the same capacity" (State v. Homes, Pac. 2d, 624; City of Lakeland v. Ames, 106 Fla. 873)." cdtech All the foregoing considered demand is hereby reiterated that the total sum of P8,838.95 representing fixed and percentage taxes as operator of the Pagsanjan Electric Service covering the period from December 1, 1956 to May 31, 1960 be paid within ten (10) days from your receipt of this communication. In this connection, please be further informed that the payment of the amount above demanded may be made with the Provincial Treasurer of Laguna or his deputy. cdt Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue