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THIRD DIVISION 

[G.R. No. 155491, September 16, 2008] 

SMART COMMUNICATIONS, INC., PETITIONER, VS. THE CITY OF DAVAO, REPRESENTED HEREIN BY ITS MAYOR HON. RODRIGO R. DUTERTE, AND THE SANGGUNIANG PANLUNGSOD OF DAVAO CITY, RESPONDENTS.

Submitted by:

NOEMI FATIMA A. TADIFA
MGMT 204
July 6,2012

[G.R. No. 155491, September 16, 2008] 

SMART COMMUNICATIONS, INC., PETITIONER, VS. THE CITY OF DAVAO,

FACTS:
Smart Communication filed a civil action for declaratory relief for the ascertainment of its rights and obligations under the Tax Code of Davao on February 18, 2002.Under Rule 63 of the Rules of Court, particularly Section 1, Article 10 thereof, and the pertinent portion of which reads: Notwithstanding any exemption granted by any law or other special law, there is hereby imposed a tax on businesses enjoying a franchise, at a rate of seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the income or receipts realized within the territorial jurisdiction of Davao City. The telecenter of Smart Communication in Davao is exempt from payment of franchise tax to the City on the following grounds:1)The issuance of its franchise under Republic Act (R.A.) No. 7294] subsequent to R.A. No. 7160 shows the clear legislative intent to exempt it from the provisions of R.A. 7160;2)Section 137 of R.A. No. 7160 can only apply to exemptions already existing at the time of its effectivity and not to future exemptions;3)The power of the City of Davao to impose a franchise tax is subject to statutory limitations such as the "in lieu of all taxes" clause found in Section 9 of R.A. No. 7294; and 4)The imposition of franchise tax by the City of Davao would amount to a violation of the constitutional provision against impairment of contracts. Local Government Unit has the power granted by Congress to create its own sources of revenue. The petition has been denied by RTC on July 19, 2002 noting that tax...
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