MANILA – The Court of Tax Appeals (CTA) upheld the exemption from the payment of local business taxes of a local firm that bagged the contract for the Light Rail Transit 1 (LRT1) Cavite Extension project.

In a 31-page decision written by Associate Justice Jean Marie A. Bacorro-Villena and dated Sept. 2 and released Wednesday, the tax court's Second Division granted a petition for review filed by the Light Rail Manila Corporation (LRMC) against the city of Caloocan.

In granting the application for a writ of prohibition, the tax court ordered the Caloocan city government "to desist from further assessing petitioner for local business taxes on its gross receipts,” citing its exemption as a common carrier under the Local Government Code.

Light Rail Transit 1 (LRT-1) was originally under the management of the Light Rail Transit Authority (LRTA), which was primarily responsible for the construction, operation, maintenance, and/ or lease of the country's light rail transit systems.

Subsequently, LRTA decided to cede operation of LRT-1 to a private corporation and conducted public bidding where LRMC participated and eventually won the contract for the Manila LRT-1 Operations and Maintenance Project and was given a notice of award to undergo the construction of the Manila LRT-1 Cavite extension.

In September 2015, the Department of Transportation (DOTr) issued an operating franchise effectively turning over the operation of LRT-1. The Caloocan City government then started to assess it for business taxes for its transportation services.

LRMC protested arguing that as a common carrier or a transportation contractor it is exempted from the payment of business tax under the Local Government Code.

The Caloocan city government, however, assessed the firm's liability for the fourth quarter of 2018 in the amount of PHP1.4 million prompting the firm to bring the case to court.

In its decision, the CTA declared null and void Section 311 of the Updated Caloocan Revenue Code (Ordinance No. 0386 of 2004) for being violative of the Local Government Code and reversed and set aside the June 10, 2019 decision of the Caloocan City Regional Trial Court Branch 232 on the case.

Associate Justice Juanito C. Castañeda, Jr. concurred in the decision. (PNA)