Ifugao town-power plant compromise approved

Posted on July 13, 2015

THE COURT OF APPEALS (CA) has approved a compromise agreement between the private owner of Magat Hydroelectric Power Plant and the town of Alfonso Lista, Ifugao, over a disputed local business tax, reversing a local judge’s decision.

AERIAL VIEW of the Magat Hydroelectric Power Plant -- WWW.ABOITIZPOWER.COM
In a recently released 12-page decision dated June 3, the court’s Fourth Division granted the petition by SN Aboitiz Power-Magat, Inc. (SNAPM), in a bid to enforce the compromise agreement to settle a dispute over local business tax (LBT) it said it should be exempted from.

The May 2011 pact executed with Mayor Glenn D. Prudenciano settled the dispute over the local business tax, when the town agreed to recognize SNAPM’s exemption as a Board of Investments (BoI)-certified “pioneer” and the company agreed to waive its right to be refunded P12.26 million it previously had to pay.

This was supposed to settle three pending cases contesting LBT assessments before the Alfonso Lista Regional Trial Court Branch 15, to end a dispute that turned so bitter, the previous mayor threatened to padlock the power plant.

But Judge Rufus G. Malecdan, Jr. denied the two parties’ joint motion for judgment and ordered a full-blown trial commence because the agreement was contrary to law.

In denying SNAPM’s subsequent appeal, Mr. Malecdan explained that BoI’s certifications was vague and did not specifically classify the power plant as a “pioneer enterprise.” He also said the compromise agreement was an invalid grant of tax exemption for the lack of a municipal ordinance.

The CA decision, penned by Associate Justice Hakim S. Abdulwahid, said Mr. Malecdan may have prejudged the matter when he issued his findings, even as the proceedings in the settled tax cases were only about to enter the pre-trial stage.

“Judge Malecdan seems to have already prejudged the merits of the cases when he ruled that the Certificate of Registration issued by the BoI is invalid and issued without due process,” the decision read.

It pointed out that such a finding would have inevitably led to the conclusion that SNAPM was not exempted from LBT.

But since an executive order provided for protests against BoI registrations to be appealed to the Office of the President first, the appeals court said “the invalidity of the Certificate of Registration cannot be the subject of inquiry in the proceedings before Judge Malecdan’s court.”

Regarding the judge’s finding the tax exemption illegal for the lack of an ordinance, the appeals court said that under the BoI registration, SNAPM was already exempted in the first place.

“The Compromise Agreement is merely a formal recognition by the Municipality of Alfonso Lista of SNAPM’s entitlement to the tax exemption,” the decision read.

The appeals court acknowledged that “Judge Malecdan may have good reasons for issuing the assailed Joint Resolutions,” having “courageously expressed his dismay over the perceived capitulation of the current mayor” and “bewailed the possible loss of opportunity to collect taxes.”

But it said SNAPM came to court with specific legal rights already granted by BoI’s Investment Priorities Plan, with the compromise agreement recognizing the validity of the tax exemption made under it.

“A judge may disagree with the wisdom of BoI’s investment plan but it is beyond the duty of the courts to venture into the field of social and economic policy making,” the appeals court said. -- Vince Alvic Alexis F. Nonato