Facts
The Burgergemeinde (civic corporation) of Zermatt operated an electricity plant together with the Munizipalgemeinde (municipal corporation) of Zermatt. On December 31, 1994, they converted the plant into a private limited company. Before the municipalities contributed the plant as a contribution in kind to the newly established limited company, they revalued the largely depreciated assets up to the official cadastral values. The book value of the recorded assets thus increased by CHF 30,453,024.40 to an amount of CHF 48,554,369.02.
The Einwohnergemeinde (residential corporation) of Zermatt was considered completely tax-exempt by the tax administration of the Canton of Valais for the direct federal tax. However, the cantonal administration has fiscally recorded that half of the revaluation gain which is attributable to the Burgergemeinde. On March 13, 1996, it issued an annual tax assessment of CHF 609,060 for 1995 to the Burgergemeinde.
The objection filed by the Burgergemeinde of Zermatt against this was rejected by the tax administration of the Canton of Valais. Upon appeal by the Burgergemeinde of Zermatt, the cantonal Tax Appeal Commission overturned the contested objection decision.
Against this, the Federal Tax Administration has filed an administrative court appeal with the Federal Supreme Court, requesting that the decision of the Tax Appeal Commission be overturned and the objection decision be confirmed.
Considerations
The Federal Supreme Court dismissed the administrative court appeal. It concluded that the Burgergemeinden of the Canton of Valais are "other territorial authorities" within the meaning of Art. 56 lit. c DBG and are therefore generally exempt from direct federal…