Tax 2 Part 4 Doctrines Only

LOCAL AND REAL PROPERTY TAXATION DOCTRINES 11/01/2014

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Taxation; Delegation of Powers; Power of taxation may be

delegated to local governments on matters of local concern.—

The power of taxation x x x may be delegated to local governments

in respect of matters of local concern. This is sanctioned by

immoral practice. By necessary implication, the legislative power to

create political corporations for purposes of local self-government

carries with it the power to confer on such local governmental

agencies the power to tax. x x x The plenary nature of the taxing

power thus delegated, contrary to plaintiff-appellant’s pretense,

would not suffice to invalidate the said law as confiscatory and

oppressive. In delegating the authority, the State is not limited to

the exact meassure of that which is exercised by itself. When it is

said that the taxing power may be delegated to municipalities and

the like, it is meant taxes there may be delegated such measure of

power to impose and collect taxes as the legislature may deem

expedient. Thus, municipalities may be permitted to tax subjects

which for reasons of public policy the State has not deemed wise to

tax for more general purposes.

Same; Due process; Taking of property without due process of

law may not be passed over under the guise of taxing power,

except when the latter is exercised lawfully.—This is not to say

though that the constitutional injunction against deprivation of

property without due process of law may be passed over under the

guise of the taxing power, except when the taking of the property is

in the lawful exercise of the taxing power, as when (1) the tax is for

a public purpose; (2) the rule on uniformity of taxation is observed;

(3) either the person or property taxed is within the jurisdiction of

the government levying the tax; and (4) in the assessment and

collection of certain kinds of taxes notice and opportunity for

hearing are provided.

Same; Same; Delegation of powers; Delegation of taxing power

to local governments may not be assailed on the ground of

double taxation.—There is no validity to the assertion that the

delegated authority can be declared unconstitutional on the theory

of double taxation. It must be observed that the delegating authority

specifies the limitations and enumerates the taxes over which local

taxation may not be exercised. x x x Moreover, double taxation, in

general, is not forbidden by our fundamental law, since We have not

adopted as part thereof the injunction against double taxation found

in the Constitution of the United States and some states of the

Union. Double taxation becomes obnoxious only where the taxpayer

is taxed twice for the benefit of the same governmental entity or by

the same jurisdiction for the same purpose, but not in a case where

one tax is imposed by the State and the other by the city of

municipality.

Taxation; A municipal ordinance which imposes a tax of P0.01

for every gallon of soft drinks produced in the municipality

does not partake of a percentage tax.—The imposition of “a tax

of one centavo (P0.01) on each gallon (128 flued ounces, U.S.) of

volume capacity” on all soft drinks produced or manufactured

under Ordinance No. 27 does not partake of the nature of a

percentage tax on sales, or other taxes in any form based thereon.

The tax is levied on the produce (whether sold or not) and not on

the sales. The volume capacity of the taxpayer’s production of soft

drinks is considered solely for purposes of determining the tax rate

on the products, but there is no set ratio between the volume of

sales and the amount of the tax.

Same; A municipal tax on soft drinks is not a specific tax.—Nor

can the tax levied be treated as a specific tax. Specific taxes are

those imposed on specified articles, such as distilled spirits, wines,

x x x cigars and cigarettes, matches, x x x bunker fuel oil, diesel fuel

oil, cinematographic films, playing cards, saccharine, opium and

other habit-forming drugs. Soft drinks is not one of those specified.

Same; A municipal tax of P0.01 on each gallon of soft drinks

produced is not unfair or oppressive.—The tax of one centavo

(P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on

all soft drinks, produced or manufactured, or an equivalent of 1½

centavos per case, cannot be considered unjust and unfair. An

increase in the tax alone would not support the claim that the tax is

oppressive, unjust and confiscatory. Municipal corporations are

allowed much discretion in determining the rates of imposable

taxes. This is in line with the constitutional policy of according the

widest possible autonomy to local governments in matters of local

taxation, an aspect that is given expression in the Local Tax Code

(PD No. 231, July 1, 1973). Unless the amount is so excessive as to be

prohibitive, courts will go slow in writing off an ordinance as

unreasonable.

Same; Licenses; Municipalities are empowered to impose not

only municipal license but just and uniform taxes for public

purposes.—The municipal license tax of P1,000.00 per corking

machine with five but not more than ten crowners x x x imposed on

manufacturers, producers, importers and dealers of soft drinks

and/or mineral waters x x x appears not to affect the resolution of

the validity of Ordinance No. 27. Municipalities are empowered to

impose, not only municipal license taxes upon persons engaged in

any business or occupation but also to levy for public purposes, just

and uniform taxes. The ordinance in question (Ordinance No. 27)

comes within the second power of a municipality. [Pepsi-Cola

Bottling Co. of the Philippines, Inc. vs. Municipality of Tanauan,

Leyte, 69 SCRA 460(1976)]

Taxation; As a general rule, the power to tax is an incident of

sovereignty and is unlimited in its range, acknowledging in its

very nature no limits, so that security against its abuse is to

be found only in the responsibility of the legislature which

imposes the tax on the constituency who are to pay it.—As a

general rule, the power to tax is an incident of sovereignty and is

unlimited in its range, acknowledging in its very nature no limits, so


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that security against its abuse is to be found only in the

responsibility of the legislature which imposes the tax on the

constituency who are to pay it. Nevertheless, effective limitations

thereon may be imposed by the people through their Constitutions.

Our Constitution, for instance, provides that the rule of taxation

shall be uniform and equitable and Congress shall evolve a

progressive system of taxation. So potent indeed is the power that

it was once opined that “the power to tax involves the power to

destroy.”

Same; Statutory Construction; Since taxation is a destructive

power which interferes with the personal and property rights

of the people and takes from them a portion of their property

for the support of the government, tax statutes must be

construed strictly against the government and liberally in

favor of the taxpayer; But since taxes are what we pay for

civilized society, or are the lifeblood of the nation, the law

frowns against exemptions from taxation and statutes granting

tax exemptions are thus construed strictissimi juris against

the taxpayer and liberally in favor of the taxing authority.—

Verily, taxation is a destructive power which interferes with the

personal and property rights of the people and takes from them a

portion of their property for the support of the government.

Accordingly, tax statutes must be construed strictly against the

government and liberally in favor of the taxpayer. But since taxes

are what we pay for civilized society, or are the lifeblood of the

nation, the law frowns against exemptions from taxation and

statutes granting tax exemptions are thus construed stricissimi

juris against the taxpayer and liberally in favor of the taxing

authority. A claim of exemption from tax payments must be clearly

shown and based on language in the law too plain to be mistaken.

Elsewise stated, taxation is the rule, exemption therefrom is the

exception. However, if the grantee of the exemption is a political

subdivision or instrumentality, the rigid rule of construction does

not apply because the practical effect of the exemption is merely to

reduce the amount of money that has to be handled by the

government in the course of its operations.

Same; Local Government Units; The power to tax is primarily

vested in the Congress but in our jurisdiction, it may be

exercised by local legislative bodies, no longer merely by

virtue of a valid delegation but pursuant to direct authority

conferred by the Constitution.— The power to tax is primarily

vested in the Congress; however, in our jurisdiction, it may be

exercised by local legislative bodies, no longer merely by virtue of a

valid delegation as before, but pursuant to direct authority

conferred by Section 5, Article X of the Constitution. Under the

latter, the exercise of the power may be subject to such guidelines

and limitations as the Congress may provide which, however, must

be consistent with the basic policy of local autonomy.

Same; Same; Non-Impairment Clause; Since taxation is the rule

and exemption therefrom the exception, the exemption may be

withdrawn at the pleasure of the taxing authority, the only

exception being where the exemption was granted to private

parties based on material consideration of a mutual nature,

which then becomes contractual and thus covered by the non-

impairment clause of the Constitution.—There can be no

question that under Section 14 of R.A. No. 6958 the petitioner is

exempt from the payment of realty taxes imposed by the National

Government or any of its political subdivisions, agencies, and

instrumentalities. Nevertheless, since taxation is the rule and

exemption therefrom the exception, the exemption may thus be

withdrawn at the pleasure of the taxing authority. The only

exception to this rule is where the exemption was granted to

private parties based on material consideration of a mutual nature,

which then becomes contractual and is thus covered by the

nonimpairment clause of the Constitution.

Same; Same; Local Government Code; Words and Phrases;

“Fees” and “Charges,” Explained.—Section 133 of the LGC

prescribes the common limitations on the taxing powers of local

government units. Needless to say, the last item (item 0 of Sec. 133

of the LGC) is pertinent to this case. The “taxes, fees or charges”

referred to are “of any kind;” hence, they include all of these, unless

otherwise provided by the LGC. The term “taxes” is well understood

so as to need no further elaboration, especially in light of the above

enumeration. The term “fees” means charges fixed by law or

ordinance for the regulation or inspection of business or activity,

while “charges” are pecuniary liabilities such as rents or fees

against persons or property.

Same; Same; Same; Since the last paragraph of Section 234 of

the LGC unequivocally withdrew, upon the effectivity of the

LGC, exemptions from payment of real property taxes granted

to natural or juridical persons, including government-owned or

controlled corporations, except as provided in the said

section, and Mactan Cebu International Airport Authority is a

government-owned corporation, it necessarily follows that its

exemption from such tax granted it in Section 14 of its Charter,

R.A 6958, has been withdrawn.—Since the last paragraph of

Section 234 unequivocally withdrew, upon the effectivity of the LGC,

exemptions from payment of real property taxes granted to natural

or juridical persons, including government-owned or controlled

corporations, except as provided in the said section, and the

petitioner is, undoubtedly, a government-owned corporation, it

necessarily follows that its exemption from such tax granted it in

Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any

claim to the contrary can only be justified if the petitioner can seek

refuge under any of the exceptions provided in Section 234, but not

under Section 133, as it now asserts, since, as shown above, the

said section is qualified by Sections 232 and 234.


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Same; Words and Phrases; The terms “Republic of the

Philippines” and “National Government” are not

interchangeable—the former is broader and synonymous with

“Government of the Republic of the Philippines” while the latter

refers “to the entire machinery of the central government, as

distinguished from the different forms of local governments."—The

terms “Republic of the Philippines” and “National Government” are

not interchangeable. The former is broader and synonymous with

“Government of the Republic of the Philippines” which the

Administrative Code of 1987 defines as the “corporate

governmental entity through which the functions of government are

exercised throughout the Philippines, including, save as the

contrary appears from the context, the various arms through which

political authority is made effective in the Philippines, whether

pertaining to the autonomous regions, the provincial, city, municipal

or barangay subdivisions or other forms of local government.”

These “autonomous regions, provincial, city, municipal or barangay

subdivisions” are the political subdivisions. On the other hand,

“National Government” refers “to the entire machinery of the

central government, as distinguished from the different forms of

local governments.” The National Government then is composed of

the three great departments: the executive, the legislative and the

judicial.

Same; Same; “Agency” and “Instrumentality,” Explained.—An

“agency” of the Government refers to “any of the various units of

the Government, including a department, bureau, office,

instrumental“ity, or government-owned or controlled corporation,

or a local government or a distinct unit therein;” while an

“instrumentality” refers to “any agency of the National Government,

not integrated within the department framework, vested with

special functions or jurisdiction by law, endowed with some if not all

corporate powers, administering special funds, and enjoying

operational autonomy, usually through a charter. This term includes

regulatory agencies, chartered institutions and government-owned

and controlled corporations.”

Same; Local Government Units; Local Autonomy; The power to

tax is the most effective instrument to raise needed revenues

to finance and support myriad activities of local government

units for the delivery of basic services essential to the

promotion of the general welfare and the enhancement of

peace, progress, and prosperity of the people.—The justification

for this restricted exemption in Section 234(a) seems obvious: to

limit further tax exemption privileges, especially in light of the

general provision on withdrawal of tax exemption privileges in

Section 193 and the special provision on withdrawal of exemption

from payment of real property taxes in the last paragraph of

Section 234. These policy considerations are consistent with the

State policy to ensure autonomy to local governments and the

objective of the LGC that they enjoy genuine and meaningful local

autonomy to enable them to attain their fullest development as

selfreliant communities and make them effective partners in the

attainment of national goals. The power to tax is the most effective

instrument to raise needed revenues to finance and support myriad

activities of local government units for the delivery of basic

services essential to the promotion of the general welfare and the

enhancement of peace, progress, and prosperity of the people. It

may also be relevant to recall that the original reasons for the

withdrawal of tax exemption privileges granted to government-

owned and controlled corporations and all other units of

government were that such privilege resulted in serious tax base

erosion and distortions in the tax treatment of similarly situated

enterprises, and there was a need for these entities to share in the

requirements of development, fiscal or otherwise, by paying the

taxes and other charges due from them.

Same; Mactan Cebu International Airport Authority cannot

claim that it was never a “taxable person” under its Charter—

it was only exempted from the payment of real property taxes.—

Moreover, the petitioner cannot claim that it was never a “taxable

person” under its Charter. It was only exempted from the payment

of real property taxes. The grant of the privilege only in respect of

this tax is conclusive proof of the legislative intent to make it a

taxable person subject to all taxes, except real property tax.

Same; Local Government Units; Local Government Code;

Reliance on Basco vs. Philippine Amusement and Gaming

Corporation, 197 SCRA 52 (1991), is unavailing since it was

decided before the effectivity of the LGC.—Accordingly, the

position taken by the petitioner is untenable. Reliance on Basco vs.

Philippine Amusement and Gaming Corporation is unavailing since it

was decided before the effectivity of the LGC. Besides, nothing can

prevent Congress from decreeing that even instrumentalities or

agencies of the Government performing governmental functions

may be subject to tax. Where it is done precisely to fulfill a

constitutional mandate and national policy, no one can doubt its

wisdom. [Mactan Cebu International Airport Authority vs.

Marcos, 261 SCRA 667(1996)]

Taxation; Municipal Corporations; Local Governments; Local

governments do not have the inherent power to tax except to

the extent that such power might be delegated to them either

by the basic law or by statute.—Prefatorily, it might be well to

recall that local governments do not have the inherent power to tax

except to the extent that such power might be delegated to them

either by the basic law or by statute. Presently, under Article X of

the 1987 Constitution, a general delegation of that power has been

given in favor of local government units.

Same; Same; Same; Under the regime of the 1935 Constitution

local government units derived their tax powers under a

limited statutory authority.—Under the regime of the 1935


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Constitution no similar delegation of tax powers was provided, and

local government units instead derived their tax powers under a

limited statutory authority. Whereas, then, the delegation of tax

powers granted at that time by statute to local governments was

confined and defined (outside of which the power was deemed

withheld), the present constitutional rule (starting with the 1973

Constitution), however, would broadly confer such tax powers

subject only to specific exceptions that the law might prescribe.

Same; Same; Same; Limitations on the Exercise of Taxing

Power by Local Government Units; Under the now prevailing

Constitution, where there is neither a grant nor a prohibition

by statute, the tax power must be deemed to exist although

Congress may provide statutory limitations and guidelines.—

Under the now prevailing Constitution, where there is neither a

grant nor a prohibition by statute, the tax power must be deemed to

exist although Congress may provide statutory limitations and

guidelines. The basic rationale for the current rule is to safeguard

the viability and self-sufficiency of local government units by

directly granting them general and broad tax powers. Nevertheless,

the fundamental law did not intend the delegation to be absolute and

unconditional; the constitutional objective obviously is to ensure

that, while the local government units are being strengthened and

made more autonomous, the legislature must still see to it that (a)

the taxpayer will not be over-burdened or saddled with multiple and

unreasonable impositions; (b) each local government unit will have

its fair share of available resources; (c) the resources of the

national government will not be unduly disturbed; and (d) local

taxation will be fair, uniform, and just.

Same; Same; Same; Indicative of the legislative intent to carry

out the Constitutional mandate of vesting broad tax powers to

local government units, the Local Government Code has

effectively withdrawn tax exemptions or incentives

theretofore enjoyed by certain entities.—Indicative of the

legislative intent to carry out the Constitutional mandate of vesting

broad tax powers to local government units, the Local Government

Code has effectively withdrawn, under Section 193 thereof, tax

exemptions or incentives theretofore enjoyed by certain entities.

This law states: “Section 193. Withdrawal of Tax Exemption

Privileges.—Unless otherwise provided in this Code, tax exemptions

or incentives granted to, or presently enjoyed by all persons,

whether natural or juridical, including government-owned or

controlled corporations, except local water districts, cooperatives

duly registered under R.A. No. 6938, non-stock and non-profit

hospitals and educational institutions, are hereby withdrawn upon

the effectivity of this Code. (Italics supplied for emphasis)

Same; Same; Same; The Supreme Court has viewed its

previous rulings as laying stress more on the legislative intent

of the amendatory law—whether the tax exemption privilege is

to be withdrawn or not—rather than on whether the law can

withdraw, without violating the Constitution, the tax exemption

or not.—In the recent case of the City Government of San Pablo,

etc., et al. vs. Hon. Bienvenido V. Reyes, et al., the Court has held

that the phrase in lieu of all taxes “have to give way to the

peremptory language of the Local Government Code specifically

providing for the withdrawal of such exemptions, privileges,” and

that “upon the effectivity of the Local Government Code all

exemptions except only as provided therein can no longer be

invoked by MERALCO to disclaim liability for the local tax.” In fine,

the Court has viewed its previous rulings as laying stress more on

the legislative intent of the amendatory law—whether the tax

exemption privilege is to be withdrawn or not—rather than on

whether the law can withdraw, without violating the Constitution,

the tax exemption or not.

Same; Same; Same; Non-Impairment Clause; Contractual tax

exemptions, in the real sense of the term and where the non-

impairment clause of the Constitution can rightly be invoked,

are those agreed to by the taxing authority in contracts, such

as those contained in government bonds or debentures,

lawfully entered into by them under enabling laws in which the

government, acting in its private capacity, sheds its cloak of

authority and waives its governmental immunity, which

contractual tax exemptions, however, are not to be confused

with tax exemptions granted under franchises.—While the Court

has not too infrequently, referred to tax exemptions contained in

special franchises as being in the nature of contracts and a part of

the inducement for carrying on the franchise, these exemptions,

nevertheless, are far from being strictly contractual in nature.

Contractual tax exemptions, in the real sense of the term and where

the non-impairment clause of the Constitution can rightly be

invoked, are those agreed to by the taxing authority in contracts,

such as those contained in government bonds or debentures,

lawfully entered into by them under enabling laws in which the

government, acting in its private capacity, sheds its cloak of

authority and waives its governmental immunity. Truly, tax

exemptions of this kind may not be revoked without impairing the

obligations of contracts. These contractual tax exemptions,

however, are not to be confused with tax exemptions granted under

franchises. A franchise partakes the nature of a grant which is

beyond the purview of the non-impairment clause of the

Constitution. Indeed, Article XII, Section 11, of the 1987 Constitution,

like its precursor provisions in the 1935 and the 1973 Constitutions,

is explicit that no franchise for the operation of a public utility shall

be granted except under the condition that such privilege shall be

subject to amendment, alteration or repeal by Congress as and

when the common good so requires. [Manila Electric Company vs.

Province of Laguna, 306 SCRA 750(1999)]

Constitutional Law; Local Governments; Local Government

Code; Taxation; Words and Phrases; “Franchise”, defined.—


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Section 131 (m) of the LGC defines a “franchise” as “a right or

privilege, affected with public interest which is conferred upon

private persons or corporations, under such terms and conditions

as the government and its political subdivisions may impose in the

interest of the public welfare, security and safety.”

Same; Same; Same; Same; Same; “Business”, defined.—On the

other hand, section 131 (d) of the LGC defines “business” as “trade

or commercial activity regularly engaged in as means of livelihood

or with a view to profit.” Petitioner claims that it is not engaged in

an activity for profit, in as much as its charter specifically provides

that it is a “non-profit organization.”

Same; Same; Same; Same; The theory behind the exercise of

the power to tax emanates from necessity.—Taxes are the

lifeblood of the government, for without taxes, the government can

neither exist nor endure. A principal attribute of sovereignty, the

exercise of taxing power derives its source from the very existence

of the state whose social contract with its citizens obliges it to

promote public interest and common good. The theory behind the

exercise of the power to tax emanates from necessity; without

taxes, government cannot fulfill its mandate of promoting the

general welfare and well-being of the people.

Same; Same; Same; Same; The power to tax is no longer vested

exclusively on Congress.—In recent years, the increasing social

challenges of the times expanded the scope of state activity, and

taxation has become a tool to realize social justice and the

equitable distribution of wealth, economic progress and the

protection of local industries as well as public welfare and similar

objectives. Taxation assumes even greater significance with the

ratification of the 1987 Constitution. Thenceforth, the power to tax

is no longer vested exclusively on Congress; local legislative bodies

are now given direct authority to levy taxes, fees and other charges

pursuant to Article X, section 5 of the 1987 Constitution.

Same; Same; Same; Same; One of the most significant

provisions of the Local Government Code is the removal of the

blanket exclusion of instrumentalities and agencies of the

national government from the coverage of local taxation.—One

of the most significant provisions of the LGC is the removal of the

blanket exclusion of instrumentalities and agencies of the national

government from the coverage of local taxation. Although as a

general rule, LGUs cannot impose taxes, fees or charges of any kind

on the National Government, its agencies and instrumentalities, this

rule now admits an exception, i.e., when specific provisions of the

LGC authorize the LGUs to impose taxes, fees or charges on the

aforementioned entities, viz.: “Section 133. Common Limitations on

the Taxing Powers of the Local Government Units.—Unless

otherwise provided herein, the exercise of the taxing powers of

provinces, cities, municipalities, and barangays shall not extend to

the levy of the following: x x x (o) Taxes, fees, or charges of any kind

on the National Government, its agencies and instrumentalities, and

local government units.” (emphasis supplied)

Same; Same; Same; Same; Franchises; A franchise may refer

to a general or primary franchise, or to a special or secondary

franchise.—In its specific sense, a franchise may refer to a

general or primary franchise, or to a special or secondary

franchise. The former relates to the right to exist as a corporation,

by virtue of duly approved articles of incorporation, or a charter

pursuant to a special law creating the corporation. The right under

a primary or general franchise is vested in the individuals who

compose the corporation and not in the corporation itself. On the

other hand, the latter refers to the right or privileges conferred

upon an existing corporation such as the right to use the streets of

a municipality to lay pipes of tracks, erect poles or string wires. The

rights under a secondary or special franchise are vested in the

corporation and may ordinarily be conveyed or mortgaged under a

general power granted to a corporation to dispose of its property,

except such special or secondary franchises as are charged with a

public use.

Same; Same; Same; Same; Words and Phrases; Franchise Tax;

Definition; Requisites.—As commonly used, a franchise tax is “a

tax on the privilege of transacting business in the state and

exercising corporate franchises granted by the state.” It is not

levied on the corporation simply for existing as a corporation, upon

its property or its income, but on its exercise of the rights or

privileges granted to it by the government. Hence, a corporation

need not pay franchise tax from the time it ceased to do business

and exercise its franchise. It is within this context that the phrase

“tax on businesses enjoying a franchise” in section 137 of the LGC

should be interpreted and understood. Verily, to determine whether

the petitioner is covered by the franchise tax in question, the

following requisites should concur: (1) that petitioner has a

“franchise” in the sense of a secondary or special franchise; and

(2) that it is exercising its rights or privileges under this franchise

within the territory of the respondent city government.

Same; Same; Same; Same; The power to tax is the most

effective instrument to raise needed revenues to finance and

support myriad activities of the local government units.—

Doubtless, the power to tax is the most effective instrument to

raise needed revenues to finance and support myriad activities of

the local government units for the delivery of basic services

essential to the promotion of the general welfare and the

enhancement of peace, progress, and prosperity of the people. As

this Court observed in the Mactan case, “the original reasons for

the withdrawal of tax exemption privileges granted to government-

owned or controlled corporations and all other units of government

were that such privilege resulted in serious tax base erosion and

distortions in the tax treatment of similarly situated enterprises.”

With the added burden of devolution, it is even more imperative for


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government entities to share in the requirements of development,

fiscal or otherwise, by paying taxes or other charges due from

them. [National Power Corporation vs. City of Cabanatuan, 401

SCRA 259(2003)]

Taxation; Realty Tax; Franchises; Local Governments; While

Section 14 of Republic Act 3259 may be validly viewed as an

implied delegation of power to tax, the delegation under that

provision, as couched, is limited to impositions over properties

of the franchisee which are not actually, directly and

exclusively used in the pursuit of its franchise.—The legislative

intent expressed in the phrase “exclusive of this franchise” cannot

be construed other than distinguishing between two (2) sets of

properties, be they real or personal, owned by the franchisee,

namely, (a) those actually, directly and exclusively used in its radio

or telecommunications business, and (b) those properties which

are not so used. It is worthy to note that the properties subject of

the present controversy are only those which are admittedly falling

under the first category. To the mind of the Court, Section 14 of Rep.

Act No. 3259 effectively works to grant or delegate to local

governments of Congress’ inherent power to tax the franchisee’s

properties belonging to the second group of properties indicated

above, that is, all properties which, “exclusive of this franchise,” are

not actually and directly used in the pursuit of its franchise. As may

be recalled, the taxing power of local governments under both the

1935 and the 1973 Constitutions solely depended upon an enabling

law. Absent such enabling law, local government units were without

authority to impose and collect taxes on real properties within their

respective territorial jurisdictions. While Section 14 of Rep. Act No.

3259 may be validly viewed as an implied delegation of power to

tax, the delegation under that provision, as couched, is limited to

impositions over properties of the franchisee which are not

actually, directly and exclusively used in the pursuit of its franchise.

Necessarily, other properties of Bayantel directly used in the

pursuit of its business are beyond the pale of the delegated taxing

power of local governments. In a very real sense, therefore, real

properties of Bayantel, save those exclusive of its franchise, are

subject to realty taxes. Ultimately, therefore, the inevitable result

was that all realties which are actually, directly and exclusively

used in the operation of its franchise are “exempted” from any

property tax. Bayantel’s franchise being national in character, the

“exemption” thus granted under Section 14 of Rep. Act No. 3259

applies to all its real or personal properties found anywhere within

the Philippine archipelago.

Same; Same; Same; Same; The realty tax exemption heretofore

enjoyed by Bayantel under its original franchise, but

subsequently withdrawn by force of Section 234 of the Local

Government Code, has been restored by Section 14 of Republic

Act No. 7633.—With the LGC’s taking effect on January 1, 1992,

Bayantel’s “exemption” from real estate taxes for properties of

whatever kind located within the Metro Manila area was, by force of

Section 234 of the Code, expressly withdrawn. But, not long

thereafter, however, or on July 20, 1992, Congress passed Rep. Act

No. 7633 amending Bayantel’s original franchise. Worthy of note is

that Section 11 of Rep. Act No. 7633 is a virtual reenacment of the

tax provision, i.e., Section 14, of Bayantel’s original franchise under

Rep. Act No. 3259. Stated otherwise, Section 14 of Rep. Act No. 3259

which was deemed impliedly repealed by Section 234 of the LGC

was expressly revived under Section 14 of Rep. Act No. 7633. In

concrete terms, the realty tax exemption heretofore enjoyed by

Bayantel under its original franchise, but subsequently withdrawn

by force of Section 234 of the LGC, has been restored by Section 14

of Rep. Act No. 7633.

Same; Same; Same; Same; The power to tax is primarily vested

in the Congress; however, in our jurisdiction, it may be


virtue of a valid delegation as before, but pursuant to direct

authority conferred by Section 5, Article X of the

Constitution.—Bayantel’s posture is well-taken. While the system

of local government taxation has changed with the onset of the 1987

Constitution, the power of local government units to tax is still

limited. As we explained in Mactan Cebu International Airport

Authority: The power to tax is primarily vested in the Congress;

however, in our jurisdiction, it may be exercised by local legislative

bodies, no longer merely by virtue of a valid delegation as before,

but pursuant to direct authority conferred by Section 5, Article X of

the Constitution. Under the latter, the exercise of the power may be

subject to such guidelines and limitations as the Congress may

provide which, however, must be consistent with the basic policy of

local autonomy. (at p. 680; Emphasis supplied.)

Same; Same; Same; Same; The Supreme Court has upheld the

power of Congress to grant exemptions over the power of

local government units to impose taxes.—In Philippine Long

Distance Telephone Company, Inc. (PLDT) vs. City of Davao, 363

SCRA 522 (2001), this Court has upheld the power of Congress to

grant exemptions over the power of local government units to

impose taxes. There, the Court wrote: Indeed, the grant of taxing

powers to local government units under the Constitution and the

LGC does not affect the power of Congress to grant exemptions to

certain persons, pursuant to a declared national policy. The legal

effect of the constitutional grant to local governments simply

means that in interpreting statutory provisions on municipal taxing

powers, doubts must be resolved in favor of municipal

corporations. [City Government of Quezon City vs. Bayan

Telecommunications, Inc., 484 SCRA 169(2006)]

Taxation; Local Government Code; Section 133 prescribes the

limitations on the capacity of local government units to

exercise their taxing powers otherwise granted to them under

the Local Government Code (LGC); Two kinds of taxes which


7

cannot be imposed by local government units.—Section 133

prescribes the limitations on the capacity of local government units

to exercise their taxing powers otherwise granted to them under

the LGC. Apparently, paragraph (h) of the Section mentions two

kinds of taxes which cannot be imposed by local government units,

namely: “excise taxes on articles enumerated under the National

Internal Revenue Code [(NIRC)], as amended”; and “taxes, fees or

charges on petroleum products.”

Same; Same; Excise Tax; The current definition of an excise tax

is that of a tax levied on a specific article rather than one upon

the performance, carrying on, or the exercise of an activity.—

It is evident that Am Jur aside, the current definition of an excise

tax is that of a tax levied on a specific article, rather than one “upon

the performance, carrying on, or the exercise of an activity.” This

current definition was already in place when the LGC was enacted in

1991, and we can only presume that it was what the Congress had

intended as it specified that local government units could not

impose “excise taxes on articles enumerated under the [NIRC].”

This prohibition must pertain to the same kind of excise taxes as

imposed by the NIRC, and not those previously defined “excise

taxes” which were not integrated or denominated as such in our

present tax law.

Same; Same; Same; Starting in 1986, excise taxes in this

jurisdiction refer exclusively to specific or ad valorem taxes,

imposed under the National Internal Revenue Code (NIRC).—It

is quite apparent, therefore, that our current body of taxation law

does not explicitly accommodate the traditional definition of excise

tax offered by Petron. In fact, absent any statutory adoption of the

traditional definition, it may be said that starting in 1986 excise

taxes in this jurisdiction refer exclusively to specific or ad valorem

taxes imposed under the NIRC. At the very least, it is this concept of

excise tax which we can reasonably assume that Congress had in

mind and actually adopted when it crafted the LGC. The palpable

absurdity that ensues should the alternative interpretation prevail

all but strengthens this position.

Same; Same; Same; Congress has the constitutional authority

to impose limitations on the power to tax of local government

units and Section 133 of the Local Government Code (LGC) is

one such limitation.—Congress has the constitutional authority to

impose limitations on the power to tax of local government units,

and Section 133 of the LGC is one such limitation. Indeed, the

provision is the explicit statutory impediment to the enjoyment of

absolute taxing power by local government units, not to mention the

reality that such power is a delegated power. To cite one example,

under Section 133(g), local government units are disallowed from

levying business taxes on “business enterprises certified to by the

Board of Investments as pioneer or non-pioneer for a period of six

(6) and (4) four years, respectively from the date of registration.”

Same; Same; Same; The prohibition with respect to petroleum

products extends not only to excise taxes thereon, but all

“taxes, fees and charges.”—The language of Section 133(h) makes

plain that the prohibition with respect to petroleum products

extends not only to excise taxes thereon, but all “taxes, fees and

charges.” The earlier reference in paragraph (h) to excise taxes

comprehends a wider range of subjects of taxation: all articles

already covered by excise taxation under the NIRC, such as alcohol

products, tobacco products, mineral products, automobiles, and

such non-essential goods as jewelry, goods made of precious

metals, perfumes, and yachts and other vessels intended for

pleasure or sports. In contrast, the later reference to “taxes, fees

and charges” pertains only to one class of articles of the many

subjects of excise taxes, specifically, “petroleum products.” While

local government units are authorized to burden all such other

class of goods with “taxes, fees and charges,” excepting excise

taxes, a specific prohibition is imposed barring the levying of any

other type of taxes with respect to petroleum products.

Same; Same; Same; Even absent Article 232, local government

units cannot impose business taxes on petroleum products.—

Assuming that the LGC does not, in fact, prohibit the imposition of

business taxes on petroleum products, we would agree that the IRR

could not impose such a prohibition. With our ruling that Section

133(h) does indeed prohibit the imposition of local business taxes on

petroleum products, however, the RTC declaration that Article 232

was invalid is, in turn, itself invalid. Even absent Article 232, local

government units cannot impose business taxes on petroleum

products. If anything, Article 232 merely reiterates what the LGC

itself already provides, with the additional explanation that such

prohibition was “in line with existing national policy.” [Petron

Corporation vs. Tiangco, 551 SCRA 484(2008)]

Local Governments; Municipal Corporations; Tax Ordinances;

An appeal of a tax ordinance or revenue measure should be

made to the Secretary of Justice within thirty (30) days from

effectivity of the ordinance and even during its pendency, the

effectivity of the assailed ordinance shall not be suspended.—

The aforecited law requires that an appeal of a tax ordinance or

revenue measure should be made to the Secretary of Justice within

thirty (30) days from effectivity of the ordinance and even during

its pendency, the effectivity of the assailed ordinance shall not be

suspended. In the case at bar, Municipal Ordinance No. 28 took

effect in October 1996. Petitioner filed its appeal only in December

1997, more than a year after the effectivity of the ordinance in 1996.

Clearly, the Secretary of Justice correctly dismissed it for being

time-barred.

Same; Same; Same; Same; The timeframe fixed by law for

parties to avail of their legal remedies before competent

courts is not a “mere technicality” that can be easily brushed

aside—the periods stated in Section 187 of the Local


8

Government Code are mandatory.—At this point, it is apropos to

state that the timeframe fixed by law for parties to avail of their

legal remedies before competent courts is not a “mere

technicality” that can be easily brushed aside. The periods stated in

Section 187 of the Local Government Code are mandatory.

Ordinance No. 28 is a revenue measure adopted by the municipality

of Hagonoy to fix and collect public market stall rentals. Being its

lifeblood, collection of revenues by the government is of paramount

importance. The funds for the operation of its agencies and

provision of basic services to its inhabitants are largely derived

from its revenues and collections. Thus, it is essential that the

validity of revenue measures is not left uncertain for a considerable

length of time. Hence, the law provided a time limit for an aggrieved

party to assail the legality of revenue measures and tax ordinances.

Local Governments; Ordinances; Public Hearings; Public

hearings are conducted by legislative bodies to allow

interested parties to ventilate their views on a proposed law

or ordinance, but these views are not binding on the legislative

bodies—parties who participate in public hearings to give their

opinions on a proposed ordinance should not expect that their views

would be patronized by their lawmakers.—Petitioner cannot gripe

that there was practically no public hearing conducted as its

objections to the proposed measure were not considered by the

Sangguniang Bayan. To be sure, public hearings are conducted by

legislative bodies to allow interested parties to ventilate their views

on a proposed law or ordinance. These views, however, are not

binding on the legislative body and it is not compelled by law to

adopt the same. Sanggunian members are elected by the people to

make laws that will promote the general interest of their

constituents. They are mandated to use their discretion and best

judgment in serving the people. Parties who participate in public

hearings to give their opinions on a proposed ordinance should not

expect that their views would be patronized by their lawmakers.

Same; Same; Section 6c.04 of the 1993 Municipal Revenue

Code and Section 191 of the Local Government Code limiting the

percentage of increase that can be imposed apply to tax rates,

not rentals.—Finally, even on the substantive points raised, the

petition must fail. Section 6c.04 of the 1993 Municipal Revenue Code

and Section 191 of the Local Government Code limiting the

percentage of increase that can be imposed apply to tax rates, not

rentals. Neither can it be said that the rates were not uniformly

imposed or that the public markets included in the Ordinance were

unreasonably determined or classified. To be sure, the Ordinance

covered the three (3) concrete public markets: the two-storey

Bagong Palengke, the burnt but reconstructed Lumang Palengke and

the more recent Lumang Palengke with wet market. However, the

Palengkeng Bagong Munisipyo or Gabaldon was excluded from the

increase in rentals as it is only a makeshift, dilapidated place, with

no doors or protection for security, intended for transient peddlers

who used to sell their goods along the sidewalk. [Hagonoy Market

Vendor Association vs. Municipality of Hagonoy, Bulacan, 376

SCRA 376(2002)]

Municipal law; Taxation; Licenses; Authority to impose licenses;

Kinds.—Under the provisions of Section 1 of Commonwealth Act 472

and pertinent jurisprudence, a municipality is authorized to impose

three kinds of licenses: (1) license for regulation of useful

occupations or enterprises; (2) license for restriction or regulation

of non-usef ul occupations or enterprises; and (3) license for

revenue (Cf. Cu Unjieng v. Patstone, 42 Phil. 818). The first two

easily fall within the broad police power granted under the general

welfare clause (Sec, 2238, Rev. Adm. Code). The third class,

however, is for revenue purposes. It is not a license fee, properly

speaking, and yet it is generally so termed. It rests on the taxing

power. That taxing power must be expressly conferred by statute

upon the municipality (Sec. 2287, Rev. Adm. Code; Cu Unjieng v.

Patstone, supra; People v. Felisarta, L-15346, June 29, 1962, etc.).

Same; Concept of municipal license tax; Designation given does

not decide whether the imposition is a license tax or a license

fee; Determining factors.—The use of the term "municipal license

tax" does not necessarily connote the idea that the tax is imposed

as a revenue measure in the guise of a license tax. For really, this

runs counter to the declared purpose to make money. Besides, the

term "license tax" has not acquired a fixed meaning. It is often

"used indiscriminately to designate impositions exacted for the

exercise of various privileges. In many instances, it refers to

"revenue-raising exactions on privileges or activities". On the other

hand, license fees are commonly called taxes. But legally speaking,

the latter are "'for the purpose of raising revenues", in contrast to

the f ormer which are imposed "in the exercise of the police power

for purposes of regulation". (Compañia General de Tabacos de

Filipinas v. City of Manila, L-16619, June 29, 1963.)

Same; Percentage taxation; Doctrine of preemption; When not

applicable.—What can be said at most is that the national

government has preempted the f ield of percentage taxation.

Section 1 of C. A. 472, while granting municipalities power to levy

taxes, expressly removes from them the power to exact

"percentage taxes".

It is correct to say that preemption in the matter of taxation simply

refers to an instance where the national government elects to tax a

particular area, impliedly withholding from the local government the

delegated power to tax the same field. This doctrine primarily rests

upon the intention of Congress. Conversely, should Congress allow

municipal corporations to cover fields of taxation it already

occupies, then the doctrine of preemption will not apply.

In the case at bar, Section 4 (1) of C. A. 472 clearly and specifically

allows municipal councils to tax persons engaged in "the same


9

businesses or occupation" on which "fixed internal revenue

privilege taxes" are "regularly imposed by the Government".

Same; Ordinance No. 1, Series of 1956, held valid; Case at bar.—

In the case at bar, Ordinance No. 1 was approved by the municipality

of Victorias on September 22, 1956 by way of an amendment to two

municipal ordinances separately imposing license taxes on

operators of sugar centrals and sugar ref ineries. The changes

were: with respect to sugar centrals, by increasing the rates of

license taxes; and so to sugar refineries, by increasing the rates of

license taxes as well as the range of graduated schedule of annual

output capacity.

In the absence of sufficient proof that license taxes are

unreasonable, the presumption of validity subsists. A cash sur-plus

alone cannot stop a municipality from enacting a revenue ordinance

increasing license taxes in anticipation of municipal needs.

Discretion to determine the amount of revenue required for the

needs of the municipality is lodged with the municipal authorities.

Judicial intervention steps in only when there is a flagrant,

oppressive and excessive abuse of power by said municipal

authorities.

Said Ordinance No. 1, series of 1956, is not discriminatory. The

ordinance does not single out Victorias as the only object of the

ordinance. Said ordinance is made to apply to any sugar central or

sugar refinery which may happen to operate in the municipality. So

it is, that the fact that plaintiff is actually the sole operator of a

sugar central and a sugar refinery does not make the ordinance

discriminatory (Cf. also Shell Co. of P.I. v. Vaño, 94 Phil. 389 and

Ormoc Sugar Co., Inc. v. Mun. Board of Ormoc City, L-24322, July 21,

1967)

We, accordingly, rule that Ordinance No. 1, series of 1956, of the

Municipality of Victorias, was promulgated not in the exercise of the

municipality's regulatory power but as a revenue measure—tax on

occupation or business. The authority to impose such tax is backed

by the express grant of power in Section 1 of C.A. No. 472.

Same; Double taxation; Description; Existence; Definition;

Where no double taxation exists; Case at bar.—Double taxation

has been otherwise described as "direct duplicate taxation". For

double taxation to exist, the same property must be taxed twice,

when it should be taxed but once. Double taxation has been also def

ined as taxing the same person twice by the same jurisdiction for

the same thing (Cf. Manila Motor Co., Inc. v. Ciudad de Manila, 72

Phil. 336). In the case at bar, plaintiff's argument on double taxation

does not inspire assent. First. The two taxes cover two different

objects. Section 1 of the ordinance taxes a person operating sugar

centrals or engaged in the manufacture of centrifugal sugar. While

under Section 2, those taxed are the operators of sugar refinery

mills. One occupation or business is different from the other.

Second. The disputed taxes are imposed on occupation or business.

Both taxes are not on sugar. The amount thereof depends on the

annual output capacity of the mills concerned, regardless of the

actual sugar milled. Plaintiff's argument perhaps could make out a

point if the object of taxation here were the sugar it produces, not

the business of producing it. [Victorias Milling Co., Inc. vs. Mun. of

Victorias, Negros Occidental, 25 SCRA 192(1968)]

A close scrutiny of the ordinances complained of reveals that the

fees therein imposed are not by reason of the services performed

by the Mayor or the Veterinary Officer, but as an imposition on

every head of the specified animals to be' transported. The fact that

the ordinances in question make no reference to the purpose for

which they were enacted, and that such purpose was to preserve

the public health or welfare of the residents and people of the City

of Tacloban, is a clear indication that leads this Court to believe that

the fees exacted were not as a regulatory measure in the

exercise of its police power, but for the purpose of raising

revenue under the guise of license or inspection fees. An act

or ordinance imposing a license or license tax under the police

power as a means of regulation is valid only when it is within

the limits of such power and is intended for regulation;

otherwise, it is invalid as where the license or tax is

unnecessarily imposed on an occupation or business not

inherently subject to police regulation (Southwest Utility Ice Co.

vs. Liebmann, 52 F. 2d 349), for an act or ordinance imposing a

license or license tax for revenue purposes, under the guise of a

police or regulatory measure, is invalid (Southern Fruit Co. vs.

Porter, 199 S.E. 537). [AGUSTIN PANALIGAN, CASIMIRO SEBOLINO,

EPIFANIA UDTUJAN, VALENTIN CAMPOSANO, ANGELES

GUANTERO, EsTEBAN JUNTILLA, ClRIACA DE GALAGAR, MARCOS

SAMSON, RAMON HERNANDEZ OR ARANDES, EPIFANIO PABILONA

and PEDRO RODRIGUEZ, petitioners and appellees, vs. THE CITY

OF TACLOBAN and THE CITY TREASURER OF THE CITY OF

TACLOBAN, respondents and appellants., 102 Phil. 1162(1957)]

Taxation; Section 133(e) of RA No. 7160 prohibit the imposition,

in the guise of wharfage, of fees—as well as all other taxes or

charges in any form whatsoever.—By express language of

Sections 153 and 155 of RA No. 7160, local government units,

through their Sanggunian, may prescribe the terms and conditions

for the imposition of toll fees or charges for the use of any public

road, pier or wharf funded and constructed by them. A service fee

imposed on vehicles using municipal roads leading to the wharf is

thus valid. However, Section 133(e) of RA No. 7160 prohibits the

imposition, in the guise of wharfage, of fees—as well as all other

taxes or charges in any form whatsoever—on goods or

merchandise. It is therefore irrelevant if the fees imposed are

actually for police surveillance on the goods, because any other

form of imposition on goods passing through the territorial

jurisdiction of the municipality is clearly prohibited by Section

133(e).


10

Same; A wharfage does not lose its basic character by being

labeled as a service fee “for police surveillance on all

goods.”—Under Section 131 (y) of RA No. 7160, wharfage is defined

as “a fee assessed against the cargo of a vessel engaged in foreign

or domestic trade based on quantity, weight, or measure received

and/or discharged by vessel.” It is apparent that a wharfage does

not lose its basic character by being labeled as a service fee “for

police surveillance on all goods.”

Same; Unjust Enrichment; Two conditions for unjust

enrichment to be deemed present; There is no unjust

enrichment where the one receiving the benefit has a legal

right or entitlement thereto, or when there is no causal

relation between one’s enrichment and the other’s

impoverishment.—Unpersuasive is the contention of respondent

that petitioner would unjustly be enriched at the former’s expense.

Though the rules thereon apply equally well to the government, for

unjust enrichment to be deemed present, two conditions must

generally concur: (a) a person is unjustly benefited, and (b) such

benefit is derived at another’s expense or damage. In the instant

case, the benefits from the use of the municipal roads and the

wharf were not unjustly derived by petitioner. Those benefits

resulted from the infrastructure that the municipality was

mandated by law to provide. There is no unjust enrichment where

the one receiving the benefit has a legal right or entitlement

thereto, or when there is no causal relation between one’s

enrichment and the other’s impoverishment. [Palma Development

Corporation vs. Municipality of Malangas, Zamboanga del Sur,

413 SCRA 572(2003)]

Taxation, Municipal Corporations; The City of Cebu may not

impose an additional amusement tax on top of that already

imposed as would make the City’s amusement tax higher than

that of the Province of Cebu.—Under Section 13 of the Local Tax

Code, the province is authorized to impose an amusement tax of

20% or 30% depending on the amount paid for admission. But

under secs. 57 and 65 (G) of its Tax Ordinance No. 1 now in question,

petitioner Cebu City is authorized to impose an additional P0.05

amusement tax (on top of the amusement tax the city is admittedly

authorized to impose under section 23 of the Local Tax Code). In

effect, Cebu City will have a higher rate of amusement tax than

Cebu province. This disparity in rates is precisely what is

proscribed by the second paragraph of section 23 earlier quoted.

The said section speaks of “uniform for the city and the province or

municipality.” Hence, what is required is uniformity of amusement

taxes between the province and the city; not uniformity of the rates

on the same subject.

Same: Same: Multiple permit fees for engaging in the same

business is unreasonable and oppressive.—As correctly

observed by respondent Court, the law (Section 36) contemplates a

single fee for the issuance of a permit to engage in any business or

occupation. But Sec. 74 (Q) of Tax Ordinance No. 1 imposes another

permit fee on foods and drugs establishments. As a result, the

taxpayer will have to pay another permit fee for conducting the

same business in the same city. Such multiple imposition of permit

fees is unreasonable and oppressive and is definitely not sanctioned

by the Local Tax Code.

Same; Same; The Court finds the sheriff’s storage fees

imposed in Cebu City’s tax ordinance as excessive and

confiscatory.—As illustrated by respondent court in its assailed

decision, quoting the observation of the trial court, a typewriter

with a fair market value of P3,000.00 will have to pay a sheriff’s

storage fee of P5.00 a day. Thus, it would take only 600 days, or

less than two years, for the typewriter to completely eat up its

value on account of storage fees. Being excessive and confiscatory,

the suspension of the imposition of storage fees by the lower court

was correct.

Same; Same: Fish is an agricultural product and an inspection

fee is not allowed to be imposed thereon under the Local Tax

Code, whether in its original form or not.—The aforequoted

provision prohibits a local government from imposing an inspection

fee on agricultural products and fish is an agricultural product.

Contrary to the claim of petitioners, under Section 102 of City

Ordinance No. 1 a fisherman selling his fish within the city has to pay

the inspection fee of P0.03 for every kilo of fish sold. Furthermore,

the imposition of the tax will definitely restrict the free flow of fresh

fish to Cebu City because the price of fish will have to increase.

Same; Same; A local government cannot impose a specific tax

on a product, like beer, which is already subject to a national

specific tax as per P.D. 426.—This power to tax articles subject

to specific tax which was expressly granted to cities by the original

provisions of section 24, was deleted in the amendment. The said

section 24, as it now reads, merely grants the city the power to

“levy any tax, fee or other imposition not specifically enumerated or

otherwise provided for” in the Local Tax Code. The amendment

evinces the intent of the lawmaker to remove such taxing authority

(on articles already subject to the national specific tax) from the

cities like Cebu City. [City of Cebu vs. Urot, 144 SCRA 710(1986)]

Taxation; Municipal Corporations; Local Government Units; A

province has no authority to impose taxes on stones, sand,

gravel, earth and other quarry resources extracted from

private lands.—In any case, the remaining issues raised by

petitioner are likewise devoid of merit, a province having no

authority to impose taxes on stones, sand, gravel, earth and other

quarry resources extracted from private lands.

Same; Same; Same; A province may not levy excise taxes on

articles already taxed by the National Internal Revenue Code.—

The Court of Appeals erred in ruling that a province can impose only

the taxes specifically mentioned under the Local Government Code.


11

As correctly pointed out by petitioners, Section 186 allows a

province to levy taxes other than those specifically enumerated

under the Code, subject to the conditions specified therein. This

finding, nevertheless, affords cold comfort to petitioners as they

are still prohibited from imposing taxes on stones, sand, gravel,

earth and other quarry resources extracted from private lands. The

tax imposed by the Province of Bulacan is an excise tax, being a tax

upon the perfor-mance, carrying on, or exercise of an activity.

Same; Same; Same; A province may not ordinarily impose

taxes on stones, sand, gravel, earth and other quarry

resources, as the same are already taxed under the National

Internal Revenue Code.—It is clearly apparent from the above

provision that the National Internal Revenue Code levies a tax on all

quarry resources, regardless of origin, whether extracted from

public or private land. Thus, a province may not ordinarily impose

taxes on stones, sand, gravel, earth and other quarry resources, as

the same are already taxed under the National Internal Revenue

Code. The province can, however, impose a tax on stones, sand,

gravel, earth and other quarry resources extracted from public

land because it is expressly empowered to do so under the Local

Government Code. As to stones, sand, gravel, earth and other

quarry resources extracted from private land, however, it may not

do so, because of the limitation provided by Section 133 of the Code

in relation to Section 151 of the National Internal Revenue Code.

Same; Same; Same; Natural Resources; Regalian Doctrine; A

province may not invoke the Regalian doctrine to extend the

coverage of its ordinance to quarry resources extracted from

private lands, for taxes, being burdens, are not to be

presumed beyond what the applicable statute expressly and

clearly declares, tax statutes being construed strictissimi

juris against the government.—Section 21 of Provincial Ordinance

No. 3 is practically only a reproduction of Section 138 of the Local

Government Code. A cursory reading of both would show that both

refer to ordinary sand, stone, gravel, earth and other quarry

resources extracted from public lands. Even if we disregard the

limitation set by Section 133 of the Local Government Code,

petitioners may not impose taxes on stones, sand, gravel, earth and

other quarry resources extracted from private lands on the basis

of Section 21 of Provincial Ordinance No. 3 as the latter clearly

applies only to quarry resources extracted from public lands.

Petitioners may not invoke the Regalian doctrine to extend the

coverage of their ordinance to quarry resources extracted from

private lands, for taxes, being burdens, are not to be presumed

beyond what the applicable statute expressly and clearly declares,

tax statutes being construed strictissimi juris against the

government. [Province of Bulacan vs. Court of Appeals, 299

SCRA 442(1998)]

Taxation; Municipal Corporations; Declaratory Relief; In an

action for declaratory relief assailing the validity of a

municipal tax ordinance, the court, in deciding that the

ordinance is void, is authorized to require a refund of taxes

paid thereunder without necessity of converting the

proceeding into an ordinary action there having been no

alleged violation of the ordinance yet.—Under Sec. 6 of Rule 64,

the action for declaratory relief may be converted into an ordinary

action and the parties allowed to file such pleadings as may be

necessary or proper, if before the final termination of the case “a

breach or violation of an . . . ordinance, should take place.” In the

present case, no breach or violation of the ordinance occurred. The

petitioner decided to pay “under protest” the fees imposed by the

ordinance. Such payment did not affect the case; the declaratory

relief action was still proper because the applicability of the

ordinance to future transactions still remained to be resolved,

although the matter could also be threshed out in an ordinary suit

for the recovery of taxes paid (Shell Co. of the Philippines, Ltd. vs.

Municipality of Sipocot, L-12680, March 20, 1959). In its petition for

declaratory relief, petitioner-appellee alleged that by reason of the

enforcement of the municipal ordinance by respondents it was

forced to pay under protest the fees imposed pursuant to the said

ordinance, and accordingly, one of the reliefs prayed for by the

petitioner was that the respondents be ordered to refund all the

amounts it paid to respondent Municipal Treasurer during the

pendency of the case. The inclusion of said allegation and prayer in

the petitioner was not objected to by the respondents in their

answer. During the trial, evidence of the payments made by the

petitioner was introduced. Respondents were thus fully aware of

the petitioner’s claim for refund and of what would happen if the

ordinance were to be declared invalid by the court.

Same; Same; A fixed tax denominated as a “police inspection

fee” of P.30 per sack of cassava starch shipped out of the

municipality is void where it is not for a public purpose, just

and uniform because the police do nothing but count the

number of cassava sacks shipped out.—However, the tax

imposed under the ordinance can be stricken down on another

ground. According to Section 2 of the abovementioned Act, the tax

levied must be “for public purposes, just and uniform” (Italics

supplied.) As correctly held by the trial court, the so-called “police

inspection fee” levied by the ordinance is “unjust and

unreasonable.”

Same; Same; Same.—Said the court a quo: “x x x It has been

proven that the only service rendered by the Municipality of

Malabang, by way of inspection, is for the policeman to verify from

the driver of the trucks of the petitioner passing by at the police

checkpoint the number of bags loaded per trip which are to be

shipped out of the municipality based on the trip tickets for the

purpose of computing the total amount of tax to be collect (sic) and

for no other purpose. The pretention of respondents that the police,

aside from counting the number of bags shipped out, is also


12

inspecting the cassava flour starch contained in the bags to find out

if the said cassava flour starch is fit for human consumption could

not be given credence by the Court because, aside from the fact

that said purpose is not so stated in the ordinance in question, the

policemen of said municipality are not competent to determine if

the cassava flour starch are fit for human consumption. The further

pretention of respondents that the trucks of the petitioner hauling

the bags of cassava flour starch from the mill to the bodega at the

beach of Malabang are escorted by a policeman from the police

checkpoint to the beach for the purpose of protecting the truck and

its cargoes from molestation by undesirable elements could not

also be given credence by the Court because it has been shown,

beyond doubt, that the petitioner has not asked for the said police

protection because there has been no occasion where its trucks

have been molested, even for once, by bad elements from the police

checkpoint to the bodega at the beach, it is solely for the purpose of

verifying the correct number of bags of cassava flour starch loaded

on the trucks of the petitioner as stated in the trip tickets, when

unloaded at its bodega at the beach. The imposition, therefore, of a

police inspection fee of P. 30 per bag, imposed by said ordinance is

unjust and unreasonable. [Matalin Coconut Co., Inc. vs. Municipal

Council of Malabang, Lanao del Sur, 143 SCRA 404(1986)]

Taxation; The power to tax “is an attribute of sovereignty,” and

as such, inheres in the State. Such, however, is not true for

provinces, cities, municipalities and barangays as they are not

the sovereign; rather, they are mere “territorial and political

subdivisions of the Republic of the Philippines.”—The power to

tax “is an attribute of sovereignty,” and as such, inheres in the

State. Such, however, is not true for provinces, cities, municipalities

and barangays as they are not the sovereign; rather, they are mere

“territorial and political subdivisions of the Republic of the

Philippines.” The rule governing the taxing power of provinces,

cities, municipalities and barangays is summarized in Icard v. City

Council of Baguio: It is settled that a municipal corporation unlike a

sovereign state is clothed with no inherent power of taxation. The

charter or statute must plainly show an intent to confer that power

or the municipality, cannot assume it. And the power when granted

is to be construed in strictissimi juris. Any doubt or ambiguity

arising out of the term used in granting that power must be

resolved against the municipality. Inferences, implications,

deductions—all these—have no place in the interpretation of the

taxing power of a municipal corporation.

Same; The power of a province to tax is limited to the extent

that such power is delegated to it either by the Constitution or

by statute.—The power of a province to tax is limited to the extent

that such power is delegated to it either by the Constitution or by

statute. Section 5, Article X of the 1987 Constitution is clear on this

point: Section 5. Each local government unit shall have the power to

create its own sources of revenues and to levy taxes, fees and

charges subject to such guidelines and limitations as the Congress

may provide, consistent with the basic policy of local autonomy.

Such taxes, fees, and charges shall accrue exclusively to the local

governments.

Same; Constitutional Law; Per Section 5, Article X of the 1987

Constitution, “the power to tax is no longer vested exclusively

on Congress; local legislative bodies are now given direct

authority to levy taxes, fees and other charges.”—Per Section

5, Article X of the 1987 Constitution, “the power to tax is no longer

vested exclusively on Congress; local legislative bodies are now

given direct authority to levy taxes, fees and other charges.”

Nevertheless, such authority is “subject to such guidelines and

limitations as the Congress may provide.” In conformity with

Section 3, Article X of the 1987 Constitution, Congress enacted

Republic Act No. 7160, otherwise known as the Local Government

Code of 1991. Book II of the LGC governs local taxation and fiscal

matters. Relevant provisions of Book II of the LGC establish the

parameters of the taxing powers of LGUS found below. First, Section

130 provides for the following fundamental principles governing the

taxing powers of LGUs: 1. Taxation shall be uniform in each LGU. 2.

Taxes, fees, charges and other impositions shall: a. be equitable and

based as far as practicable on the taxpayer’s ability to pay; b. be

levied and collected only for public purposes; c. not be unjust,

excessive, oppressive, or confiscatory; d. not be contrary to law,

public policy, national economic policy, or in the restraint of trade.

3. The collection of local taxes, fees, charges and other impositions

shall in no case be let to any private person. 4. The revenue

collected pursuant to the provisions of the LGC shall inure solely to

the benefit of, and be subject to the disposition by, the LGU levying

the tax, fee, charge or other imposition unless otherwise

specifically provided by the LGC. 5. Each LGU shall, as far as

practicable, evolve a progressive system of taxation.

Same; Percentage Tax; National Internal Revenue Code (R.A.

No. 8424); Words and Phrases; In Commissioner of Internal

Revenue v. Citytrust Investment Phils. Inc., 503 SCRA 398

(2006), the Supreme Court defined percentage tax as a “tax

measured by a certain percentage of the gross selling price or

gross value in money of goods sold, bartered or imported; or

of the gross receipts or earnings derived by any person

engaged in the sale of services.”—In Commissioner of Internal

Revenue v. Citytrust Investment Phils., Inc., 503 SCRA 398 (2006),

the Supreme Court defined percentage tax as a “tax measured by a

certain percentage of the gross selling price or gross value in

money of goods sold, bartered or imported; or of the gross receipts

or earnings derived by any person engaged in the sale of services.”

Also, Republic Act No. 8424, otherwise known as the National

Internal Revenue Code (NIRC), in Section 125, Title V, lists

amusement taxes as among the (other) percentage taxes which are


13

levied regardless of whether or not a taxpayer is already liable to

pay value-added tax (VAT).

Same; Same; Amusement Tax; Local Government Units;

Provinces are not barred from levying amusement taxes even

if amusement taxes are a form of percentage taxes.—

Amusement taxes are fixed at a certain percentage of the gross

receipts incurred by certain specified establishments. Thus,

applying the definition in CIR v. Citytrust and drawing from the

treatment of amusement taxes by the NIRC, amusement taxes are

percentage taxes as correctly argued by Pelizloy. However,

provinces are not barred from levying amusement taxes even if

amusement taxes are a form of percentage taxes. Section 133 (i) of

the LGC prohibits the levy of percentage taxes “except as otherwise

provided” by the LGC.

Same; Same; Same; Same; Section 140, Local Government Code

(R.A. No. 7160) expressly allows for the imposition by

provinces of amusement taxes on “the proprietors, lessees, or

operators of theaters, cinemas, concert halls, circuses, boxing

stadia, and other places of amusement.” However, resorts,

swimming pools, bath houses, hot springs, and tourist spots

are not among those places expressly mentioned by Section

140 of the Local Government Code as being subject to

amusement taxes.—Evidently, Section 140 of the LGC carves a

clear exception to the general rule in Section 133 (i). Section 140

expressly allows for the imposition by provinces of amusement

taxes on “the proprietors, lessees, or operators of theaters,

cinemas, concert halls, circuses, boxing stadia, and other places of

amusement.” However, resorts, swimming pools, bath houses, hot

springs, and tourist spots are not among those places expressly

mentioned by Section 140 of the LGC as being subject to amusement

taxes. Thus, the determination of whether amusement taxes may be

levied on admissions to resorts, swimming pools, bath houses, hot

springs, and tourist spots hinges on whether the phrase ‘other

places of amusement’ encompasses resorts, swimming pools, bath

houses, hot springs, and tourist spots.

Same; Same; Same; In Philippine Basketball Association v.

Court of Appeals, 337 SCRA 358 (2000), the Supreme Court

had an opportunity to interpret a starkly similar provision or

the counterpart provision of Section 140 of the Local

Government Code in the Local Tax Code then in effect.—In

Philippine Basketball Association v. Court of Appeals, 337 SCRA 358

(2000), the Supreme Court had an opportunity to interpret a

starkly similar provision or the counterpart provision of Section 140

of the LGC in the Local Tax Code then in effect. Petitioner Philippine

Basketball Association (PBA) contended that it was subject to the

imposition by LGUs of amusement taxes (as opposed to amusement

taxes imposed by the national government). In support of its

contentions, it cited Section 13 of Presidential Decree No. 231,

otherwise known as the Local Tax Code of 1973, (which is analogous

to Section 140 of the LGC).

Same; Same; Same; Resorts, swimming pools, bath houses, hot

springs and tourist spots do not belong to the same category

or class as theaters, cinemas, concert halls, circuses, and

boxing stadia. It follows that they cannot be considered as

among the ‘other places of amusement’ contemplated by

Section 140 of the Local Government Code and which may

properly be subject to amusement taxes.—As defined in The New

Oxford American Dictionary, ‘show’ means “a spectacle or display of

something, typically an impressive one”; while ‘performance’ means

“an act of staging or presenting a play, a concert, or other form of

entertainment.” As such, the ordinary definitions of the words

‘show’ and ‘performance’ denote not only visual engagement (i.e.,

the seeing or viewing of things) but also active doing (e.g.,

displaying, staging or presenting) such that actions are manifested

to, and (correspondingly) perceived by an audience. Considering

these, it is clear that resorts, swimming pools, bath houses, hot

springs and tourist spots cannot be considered venues primarily

“where one seeks admission to entertain oneself by seeing or

viewing the show or performances”. While it is true that they may

be venues where people are visually engaged, they are not primarily

venues for their proprietors or operators to actively display, stage

or present shows and/or performances. Thus, resorts, swimming

pools, bath houses, hot springs and tourist spots do not belong to

the same category or class as theaters, cinemas, concert halls,

circuses, and boxing stadia. It follows that they cannot be

considered as among the ‘other places of amusement’

contemplated by Section 140 of the LGC and which may properly be

subject to amusement taxes. [Pelizloy Realty Corporation vs.

Province of Benguet, 695 SCRA 491(2013)]

Contracts; Common Carriers; A “common carrier” is one who

holds himself out to the public as engaged in the business of

transporting persons or property from place to place, for

compensation, offering his services to the public generally.—

There is merit in the petition. A “common carrier” may be defined,

broadly, as one who holds himself out to the public as engaged in

the business of transporting persons or property from place to

place, for compensation, offering his services to the public

generally. Article 1732 of the Civil Code defines a “common carrier”

as “any person, corporation, firm or association engaged in the

business of carrying or transporting passengers or goods or both,

by land, water, or air, for compensation, offering their services to

the public.”

Same; Same; Test for determining whether a party is a

common carrier of goods.—The test for determining whether a

party is a common carrier of goods is: 1. He must be engaged in the

business of carrying goods for others as a public employment, and

must hold himself out as ready to engage in the transportation of


14

goods for person generally as a business and not as a casual

occupation; 2. He must undertake to carry goods of the kind to

which his business is confined; 3. He must undertake to carry by the

method by which his business is conducted and over his established

roads; and 4. The transportation must be for hire.

Same; Same; The fact that petitioner has a limited clientele

does not exclude it from the definition of a common carrier.—

Based on the above definitions and requirements, there is no doubt

that petitioner is a common carrier. It is engaged in the business of

transporting or carrying goods, i.e. petroleum products, for hire as

a public employment. It undertakes to carry for all persons

indifferently, that is, to all persons who choose to employ its

services, and transports the goods by land and for compensation.

The fact that petitioner has a limited clientele does not exclude it

from the definition of a common carrier.

Same; Same; Words and Phrases; The definition of “common

carriers” in the Civil Code makes no distinction as to the

means of transporting, as long as it is by land, water or air.—

As correctly pointed out by petitioner, the definition of “common

carriers” in the Civil Code makes no distinction as to the means of

transporting, as long as it is by land, water or air. It does not

provide that the transportation of the passengers or goods should

be by motor vehicle. In fact, in the United States, oil pipe line

operators are considered common carriers.

Same; Same; Taxation; Legislative intent in excluding from the

taxing power of the local government unit the imposition of

business tax against common carriers is to prevent a

duplication of the so-called “common carrier’s tax.”—It is clear

that the legislative intent in excluding from the taxing power of the

local government unit the imposition of business tax against

common carriers is to prevent a duplication of the so-called

“common carrier’s tax.” Petitioner is already paying three (3%)

percent common carrier’s tax on its gross sales/earnings under

the National Internal Revenue Code. To tax petitioner again on its

gross receipts in its transportation of petroleum business would

defeat the purpose of the Local Government Code. [First Philippine

Industrial Corporation vs. Court of Appeals, 300 SCRA

661(1998)]

Local Government; Land Transportation and Traffic Code;

Registration and licensing functions are vested in the Land

Transportation Office while franchising and regulatory

responsibilities had been vested in the Land Transportation

Franchising and Regulatory Board.—The Department of

Transportation and Communications (“DOTC”), through the LTO and

the LTFRB, has since been tasked with implementing laws pertaining

to land transportation. The LTO is a line agency under the DOTC

whose powers and functions, pursuant to Article III, Section 4 (d)

[1], of R.A. No. 4136, otherwise known as Land Transportation and

Traffic Code, as amended, deal primarily with the registration of all

motor vehicles and the licensing of drivers thereof. The LTFRB, upon

the other hand, is the governing body tasked by E.O. No. 202, dated

19 June 1987, to regulate the operation of public utility or “for hire”

vehicles and to grant franchises or certificates of public

convenience (“CPC”). Finely put, registration and licensing functions

are vested in the LTO while franchising and regulatory

responsibilities had been vested in the LTFRB.

Same; Same; LGUs indubitably now have the power to regulate

the operation of tricycles-for-hire and to grant franchises for

the operation thereof.—LGUs indubitably now have the power to

regulate the operation of tricycles-for-hire and to grant franchises

for the operation thereof. “To regulate” means to fix, establish, or

control; to adjust by rule, method, or established mode; to direct by

rule or restriction; or to subject to governing principles or laws. A

franchise is defined to be a special privilege to do certain things

conferred by government on an individual or corporation, and which

does not belong to citizens generally of common right. On the other

hand, “to register” means to record formally and exactly, to enroll,

or to enter precisely in a list or the like, and a “driver’s license” is

the certificate or license issued by the government which

authorizes a person to operate a motor vehicle.

Same; Same; The power of LGUs to regulate the operation of

tricycles and to grant franchises for the operation thereof is

still subject to the guidelines prescribed by the Department of

Transportation and Communications.—It may not be amiss to

state, nevertheless, that under Article 458 (a)[3-VI] of the Local

Government Code, the power of LGUs to regulate the operation of

tricycles and to grant franchises for the operation thereof is still

subject to the guidelines prescribed by the DOTC. In compliance

therewith, the Department of Transportation and Communications

(“DOTC”) issued “Guidelines to Implement the Devolution of LTFRBs

Franchising Authority over Tricycles-For-Hire to Local Government

units pursuant to the Local Government Code.”

Same; Same; The newly delegated powers pertain to the

franchising and regulatory powers theretofore exercised by

the Land Transportation Franchising and Regulatory Board and

not to the functions of the Land Transportation Office relative

to the registration of motor vehicles and issuance of licenses

for the driving thereof.—Such as can be gleaned from the explicit

language of the statute, as well as the corresponding guidelines

issued by DOTC, the newly delegated powers pertain to the

franchising and regulatory powers theretofore exercised by the

LTFRB and not to the functions of the LTO relative to the registration

of motor vehicles and issuance of licenses for the driving thereof.

Clearly unaffected by the Local Government Code are the powers of

LTO under R.A. No. 4136 requiring the registration of all kinds of

motor vehicles “used or operated on or upon any public highway” in


15

the country. [Land Transportation Office vs. City of Butuan, 322

SCRA 805(2000)]

Taxation; Court rules that the Authority is not a GOCC but an

instrumentality of the national government which is generally

exempt from payment of real property tax; The IFPC, being a

property of public dominion cannot be sold at public auction to

satisfy the tax delinquency.—The Court rules that the Authority is

not a GOCC but an instrumentality of the national government which

is generally exempt from payment of real property tax. However,

said exemption does not apply to the portions of the IFPC which the

Authority leased to private entities. With respect to these

properties, the Authority is liable to pay real property tax.

Nonetheless, the IFPC, being a property of public dominion cannot

be sold at public auction to satisfy the tax delinquency.

Same; The Authority should be classified as an instrumentality

of the national government; It is generally exempt from

payment of real property tax, except those portions which

have been leased to private entities.—On the basis of the

parameters set in the MIAA case, the Authority should be classified

as an instrumentality of the national government. As such, it is

generally exempt from payment of real property tax, except those

portions which have been leased to private entities.

Same; Applying Section 234(a) of the Local Government Code,

the Court ruled that when an instrumentality of the national

government grants to a taxable person the beneficial use of a

real property owned by the Republic, said instrumentality

becomes liable to pay real property tax.—The MIAA case held

that unlike GOCCs, instrumentalities of the national government, like

MIAA, are exempt from local taxes pursuant to Section 133(o) of the

Local Government Code. This exemption, however, admits of an

exception with respect to real property taxes. Applying Section

234(a) of the Local Government Code, the Court ruled that when an

instrumentality of the national government grants to a taxable

person the beneficial use of a real property owned by the Republic,

said instrumentality becomes liable to pay real property tax. Thus,

while MIAA was held to be an instrumentality of the national

government which is generally exempt from local taxes, it was at

the same time declared liable to pay real property taxes on the

airport lands and buildings which it leased to private persons. It

was held that the real property tax assessments and notices of

delinquencies issued by the City of Pasay to MIAA are void except

those pertaining to portions of the airport which are leased to

private parties.

Same; The real property tax assessments issued by the City of

Iloilo should be upheld only with respect to the portions leased

to private persons.—The real property tax assessments issued by

the City of Iloilo should be upheld only with respect to the portions

leased to private persons. In case the Authority fails to pay the real

property taxes due thereon, said portions cannot be sold at public

auction to satisfy the tax delinquency. In Chavez v. Public Estates

Authority, 384 SCRA 152 it was held that reclaimed lands are lands

of the public domain and cannot, without Congressional fiat, be

subject of a sale, public or private. [Philippine Fisheries

Development Authority vs. Court of Appeals, 528 SCRA

706(2007)]

Manila International Airport Authority; Taxation; MIAA’s Airport

Lands and Buildings are exempt from real estate tax imposed

by local governments.—We rule that MIAA’s Airport Lands and

Buildings are exempt from real estate tax imposed by local

governments. First, MIAA is not a government-owned or controlled

corporation but an instrumentality of the National Government and

thus exempt from local taxation. Second, the real properties of MIAA

are owned by the Republic of the Philippines and thus exempt from

real estate tax.

Same; Same; While there is no dispute that a government-

owned or controlled corporation is not exempt from real

estate tax, MIAA is not a government-owned or controlled

corporation; A government-owned or controlled corporation

must be “organized as a stock or non-stock corporation,” of

which MIAA is neither; MIAA is not a stock corporation because

it has no capital stock divided into shares.—There is no dispute

that a government-owned or controlled corporation is not exempt

from real estate tax. However, MIAA is not a government-owned or

controlled corporation. Section 2(13) of the Introductory Provisions

of the Administrative Code of 1987 defines a government-owned or

controlled corporation as follows: SEC. 2. General Terms Defined.—x

x x x (13) Government-owned or controlled corporation refers to

any agency organized as a stock or non-stock corporation, vested

with functions relating to public needs whether governmental or

proprietary in nature, and owned by the Government directly or

through its instrumentalities either wholly, or, where applicable as

in the case of stock corporations, to the extent of at least fifty-one

(51) percent of its capital stock: x x x. (Emphasis supplied) A

government-owned or controlled corporation must be “organized

as a stock or non-stock corporation.” MIAA is not organized as a

stock or non-stock corporation. MIAA is not a stock corporation

because it has no capital stock divided into shares.

Same; Same; Manila International Airport Authority (MIAA) is

not a non-stock corporation because it has no members;

Section 11 of the MIAA Charter which mandates MIAA to remit

20% of its annual gross operating income to the National

Treasury prevents it from qualifying as a non-stock

corporation.—MIAA is also not a non-stock corporation because it

has no members. Section 87 of the Corporation Code defines a non-

stock corporation as “one where no part of its income is

distributable as dividends to its members, trustees or officers.” A

non-stock corporation must have members. Even if we assume that


16

the Government is considered as the sole member of MIAA, this will

not make MIAA a non-stock corporation. Non-stock corporations

cannot distribute any part of their income to their members.

Section 11 of the MIAA Charter mandates MIAA to remit 20% of its

annual gross operating income to the National Treasury. This

prevents MIAA from qualifying as a non-stock corporation.

Administrative Law; Manila International Airport Authority

(MIAA) is a government instrumentality vested with corporate

powers to perform efficiently its governmental functions.—

Since MIAA is neither a stock nor a non-stock corporation, MIAA

does not qualify as a government-owned or controlled corporation.

What then is the legal status of MIAA within the National

Government? MIAA is a government instrumentality vested with

corporate powers to perform efficiently its governmental functions.

MIAA is like any other government instrumentality, the only

difference is that MIAA is vested with corporate powers. Section

2(10) of the Introductory Provisions of the Administrative Code

defines a government “instrumentality” as follows: SEC. 2. General

Terms Defined.––x x x x (10) Instrumentality refers to any agency of

the National Government, not integrated within the department

framework, vested with special functions or jurisdiction by law,

endowed with some if not all corporate powers, administering

special funds, and enjoying operational autonomy, usually through a

charter. x x x (Emphasis supplied)

Same; When the law vests in a government instrumentality

corporate powers, the instrumentality does not become a

corporation—unless the government instrumentality is

organized as a stock or non-stock corporation, it remains a

government instrumentality exercising not only governmental

but also corporate powers.—When the law vests in a government

instrumentality corporate powers, the instrumentality does not

become a corporation. Unless the government instrumentality is

organized as a stock or non-stock corporation, it remains a

government instrumentality exercising not only governmental but

also corporate powers. Thus, MIAA exercises the governmental

powers of eminent domain, police authority and the levying of fees

and charges. At the same time, MIAA exercises “all the powers of a

corporation under the Corporation Law, insofar as these powers

are not inconsistent with the provisions of this Executive Order.”

Same; When the law makes a government instrumentality

operationally autonomous, the instrumentality remains part of

the National Government machinery although not integrated

with the department framework.—Likewise, when the law makes

a government instrumentality operationally autonomous, the

instrumentality remains part of the National Government machinery

although not integrated with the department framework. The MIAA

Charter expressly states that transforming MIAA into a “separate

and autonomous body” will make its operation more “financially

viable.”

Same; Manila International Airport Authority; Taxation; Local

Government Code; A government instrumentality like MIAA falls

under Section 133(o) of the Local Government Code, which

provision recognizes the basic principle that local

governments cannot tax the national government.—A

government instrumentality like MIAA falls under Section 133(o) of

the Local Government Code, which states: SEC. 133. Common

Limitations on the Taxing Powers of Local Government Units.—

Unless otherwise provided herein, the exercise of the taxing powers

of provinces, cities, municipalities, and barangays shall not extend

to the levy of the following: x x x x (o) Taxes, fees or charges of any

kind on the National Government, its agencies and instrumentalities

and local government units. (Emphasis and italics supplied) Section

133(o) recognizes the basic principle that local governments cannot

tax the national government, which historically merely delegated to

local governments the power to tax. While the 1987 Constitution now

includes taxation as one of the powers of local governments, local

governments may only exercise such power “subject to such

guidelines and limitations as the Congress may provide.”

Taxation; Local Government Code; Statutory Construction;

When local governments invoke the power to tax on national

government instrumentalities, such power is construed

strictly against local governments, and when Congress grants

an exemption to a national government instrumentality from

local taxation, such exemption is construed liberally in favor of

the national government instrumentality.—Section 133(o)

recognizes the basic principle that local governments cannot tax

the national government, which historically merely delegated to

local governments the power to tax. While the 1987 Constitution now

includes taxation as one of the powers of local governments, local

governments may only exercise such power “subject to such

guidelines and limitations as the Congress may provide.” When local

governments invoke the power to tax on national government

instrumentalities, such power is construed strictly against local

governments. The rule is that a tax is never presumed and there

must be clear language in the law imposing the tax. Any doubt

whether a person, article or activity is taxable is resolved against

taxation. This rule applies with greater force when local

governments seek to tax national government instrumentalities.

Another rule is that a tax exemption is strictly construed against

the taxpayer claiming the exemption. However, when Congress

grants an exemption to a national government instrumentality from

local taxation, such exemption is construed liberally in favor of the

national government instrumentality. As this Court declared in

Maceda v. Macaraig, Jr.: The reason for the rule does not apply in

the case of exemptions running to the benefit of the government

itself or its agencies. In such case the practical effect of an

exemption is merely to reduce the amount of money that has to be

handled by government in the course of its operations. For these

reasons, provisions granting exemptions to government agencies


17

may be construed liberally, in favor of non tax-liability of such

agencies. There is, moreover, no point in national and local

governments taxing each other, unless a sound and compelling

policy requires such transfer of public funds from one government

pocket to another.

Same; Same; Taxation; Local Government Code; There is also

no reason for local governments to tax national government

instrumentalities for rendering essential public services to

inhabitants of local governments, the only exception being

when the legislature clearly intended to tax government

instrumentalities for the delivery of essential services for

sound and compelling policy considerations.—There is also no

reason for local governments to tax national government

instrumentalities for rendering essential public services to

inhabitants of local governments. The only exception is when the

legislature clearly intended to tax government instrumentalities for

the delivery of essential public services for sound and compelling

policy considerations. There must be express language in the law

empowering local governments to tax national government

instrumentalities. Any doubt whether such power exists is resolved

against local governments.

Manila International Airport Authority; The Airport Lands and

Buildings of the MIAA are property of public dominion and

therefore owned by the State or the Republic of the

Philippines.—The Airport Lands and Buildings of MIAA are property

of public dominion and therefore owned by the State or the Republic

of the Philippines. The Civil Code provides: ARTICLE 419. Property is

either of public dominion or of private ownership. ARTICLE 420. The

following things are property of public dominion: (1) Those intended

for public use, such as roads, canals, rivers, torrents, ports and

bridges constructed by the State, banks, shores, roadsteads, and

others of similar character; (2) Those which belong to the State,

without being for public use, and are intended for some public

service or for the development of the national wealth. (Emphasis

supplied) ARTICLE 421. All other property of the State, which is not

of the character stated in the preceding article, is patrimonial

property. ARTICLE 422. Property of public dominion, when no longer

intended for public use or for public service, shall form part of the

patrimonial property of the State.

Same; Words and Phrases; The term “ports” in Article 420 (1)

of the Civil Code includes seaports and airports—the MIAA

Airport Lands and Buildings constitute a “port” constructed by

the State.—No one can dispute that properties of public dominion

mentioned in Article 420 of the Civil Code, like “roads, canals,

rivers, torrents, ports and bridges constructed by the State,” are

owned by the State. The term “ports” includes seaports and

airports. The MIAA Airport Lands and Buildings constitute a “port”

constructed by the State. Under Article 420 of the Civil Code, the

MIAA Airport Lands and Buildings are properties of public dominion

and thus owned by the State or the Republic of the Philippines.

Same; Same; The Airport Lands and Buildings are devoted to

public use because they are used by the public for

international and domestic travel and transportation; The

charging of fees to the public does not determine the

character of the property whether it is of public dominion or

not.—The Airport Lands and Buildings are devoted to public use

because they are used by the public for international and domestic

travel and transportation. The fact that the MIAA collects terminal

fees and other charges from the public does not remove the

character of the Airport Lands and Buildings as properties for

public use. The operation by the government of a tollway does not

change the character of the road as one for public use. Someone

must pay for the maintenance of the road, either the public

indirectly through the taxes they pay the government, or only those

among the public who actually use the road through the toll fees

they pay upon using the road. The tollway system is even a more

efficient and equitable manner of taxing the public for the

maintenance of public roads. The charging of fees to the public does

not determine the character of the property whether it is of public

dominion or not. Article 420 of the Civil Code defines property of

public dominion as one “intended for public use.” Even if the

government collects toll fees, the road is still “intended for public

use” if anyone can use the road under the same terms and

conditions as the rest of the public. The charging of fees, the

limitation on the kind of vehicles that can use the road, the speed

restrictions and other conditions for the use of the road do not

affect the public character of the road.

Same; Taxation; User’s Tax; Words and Phrases; The terminal

fees MIAA charges passengers, as well as the landing fees

MIAA charges airlines, are often termed user’s tax; A user’s

tax is more equitable—a principle of taxation mandated by the

1987 Constitution.—The terminal fees MIAA charges to

passengers, as well as the landing fees MIAA charges to airlines,

constitute the bulk of the income that maintains the operations of

MIAA. The collection of such fees does not change the character of

MIAA as an airport for public use. Such fees are often termed user’s

tax. This means taxing those among the public who actually use a

public facility instead of taxing all the public including those who

never use the particular public facility. A user’s tax is more

equitable—a principle of taxation mandated in the 1987 Constitution.

Same; The Airport Lands and Buildings of MIAA, as properties

of public dominion, are outside the commerce of man.—The

Airport Lands and Buildings of MIAA are devoted to public use and

thus are properties of public dominion. As properties of public

dominion, the Airport Lands and Buildings are outside the

commerce of man. The Court has ruled repeatedly that properties

of public dominion are outside the commerce of man. As early as


18

1915, this Court already ruled in Municipality of Cavite v. Rojas that

properties devoted to public use are outside the commerce of man,

thus: According to article 344 of the Civil Code: “Property for public

use in provinces and in towns comprises the provincial and town

roads, the squares, streets, fountains, and public waters, the

promenades, and public works of general service supported by said

towns or provinces.”

Same; Public Auctions; Property of public dominion, being

outside the commerce of man, cannot be the subject of an

auction sale; Any encumbrance, levy on execution or auction

sale of any property of public dominion is void for being

contrary to public policy.—Again in Espiritu v. Municipal Council,

the Court declared that properties of public dominion are outside

the commerce of man: x x x Town plazas are properties of public

dominion, to be devoted to public use and to be made available to

the public in general. They are outside the commerce of man and

cannot be disposed of or even leased by the municipality to private

parties. While in case of war or during an emergency, town plazas

may be occupied temporarily by private individuals, as was done

and as was tolerated by the Municipality of Pozorrubio, when the

emergency has ceased, said temporary occupation or use must

also cease, and the town officials should see to it that the town

plazas should ever be kept open to the public and free from

encumbrances or illegal private constructions. (Emphasis supplied)

The Court has also ruled that property of public dominion, being

outside the commerce of man, cannot be the subject of an auction

sale. Properties of public dominion, being for public use, are not

subject to levy, encumbrance or disposition through public or

private sale. Any encumbrance, levy on execution or auction sale of

any property of public dominion is void for being contrary to public

policy. Essential public services will stop if properties of public

dominion are subject to encumbrances, foreclosures and auction

sale. This will happen if the City of Parañaque can foreclose and

compel the auction sale of the 600-hectare runway of the MIAA for

non-payment of real estate tax.

Same; Unless the President issues a proclamation withdrawing

the Airport Lands and Buildings from public use, these

properties remain properties of public dominion and are

inalienable.—Before MIAA can encumber the Airport Lands and

Buildings, the President must first withdraw from public use the

Airport Lands and Buildings. Sections 83 and 88 of the Public Land

Law or Commonwealth Act No. 141, which “remains to this day the

existing general law governing the classification and disposition of

lands of the public domain other than timber and mineral lands,”

provide: x x x Thus, unless the President issues a proclamation

withdrawing the Airport Lands and Buildings from public use, these

properties remain properties of public dominion and are inalienable.

Since the Airport Lands and Buildings are inalienable in their

present status as properties of public dominion, they are not

subject to levy on execution or foreclosure sale. As long as the

Airport Lands and Buildings are reserved for public use, their

ownership remains with the State or the Republic of the Philippines.

Same; Trusts; MIAA is merely holding title to the Airport Lands

and Buildings in trust for the Republic.—MIAA is merely holding

title to the Airport Lands and Buildings in trust for the Republic.

Section 48, Chapter 12, Book I of the Administrative Code allows

instrumentalities like MIAA to hold title to real properties owned by

the Republic.

Same; The transfer of the Airport Lands and Buildings from the

Bureau of Air Transportation to MIAA was not meant to

transfer beneficial ownership of these assets from the

Republic to MIAA—the Republic remains the beneficial owner of

the Airport Lands and Buildings.—The transfer of the Airport

Lands and Buildings from the Bureau of Air Transportation to MIAA

was not meant to transfer beneficial ownership of these assets

from the Republic to MIAA. The purpose was merely to reorganize a

division in the Bureau of Air Transportation into a separate and

autonomous body. The Republic remains the beneficial owner of the

Airport Lands and Buildings. MIAA itself is owned solely by the

Republic. No party claims any ownership rights over MIAA’s assets

adverse to the Republic. The MIAA Charter expressly provides that

the Airport Lands and Buildings “shall not be disposed through sale

or through any other mode unless specifically approved by the

President of the Philippines.” This only means that the Republic

retained the beneficial ownership of the Airport Lands and Buildings

because under Article 428 of the Civil Code, only the “owner has the

right to x x x dispose of a thing.” Since MIAA cannot dispose of the

Airport Lands and Buildings, MIAA does not own the Airport Lands

and Buildings. At any time, the President can transfer back to the

Republic title to the Airport Lands and Buildings without the

Republic paying MIAA any consideration. Under Section 3 of the

MIAA Charter, the President is the only one who can authorize the

sale or disposition of the Airport Lands and Buildings. This only

confirms that the Airport Lands and Buildings belong to the

Republic.

Taxation; Local Government Code; Section 234(a) of the Local

Government Code exempts from real estate tax any “real

property owned by the Republic of the Philippines.”—Section

234(a) of the Local Government Code exempts from real estate tax

any “[r]eal property owned by the Republic of the Philippines.”

Section 234(a) provides: SEC. 234. Exemptions from Real Property

Tax.—The following are exempted from payment of the real property

tax: (a) Real property owned by the Republic of the Philippines or

any of its political subdivisions except when the beneficial use

thereof has been granted, for consideration or otherwise, to a

taxable person; x x x. (Emphasis supplied) This exemption should be

read in relation with Section 133(o) of the same Code, which

prohibits local governments from imposing “[t]axes, fees or


19

charges of any kind on the National Government, its agencies and

instrumentalities x x x.” The real properties owned by the Republic

are titled either in the name of the Republic itself or in the name of

agencies or instrumentalities of the National Government. The

Administrative Code allows real property owned by the Republic to

be titled in the name of agencies or instrumentalities of the national

government. Such real properties remain owned by the Republic

and continue to be exempt from real estate tax.

Manila International Airport Authority; Local Government Code;

The Republic may grant the beneficial use of its real property

to an agency or instrumentality of the national government, an

arrangement which does not result in the loss of the tax

exemption; MIAA, as a government instrumentality, is not a

taxable person under Section 133(o) of the Local Government

Code.—The Republic may grant the beneficial use of its real

property to an agency or instrumentality of the national

government. This happens when title of the real property is

transferred to an agency or instrumentality even as the Republic

remains the owner of the real property. Such arrangement does not

result in the loss of the tax exemption. Section 234(a) of the Local

Government Code states that real property owned by the Republic

loses its tax exemption only if the “beneficial use thereof has been

granted, for consideration or otherwise, to a taxable person.” MIAA,

as a government instrumentality, is not a taxable person under

Section 133(o) of the Local Government Code. Thus, even if we

assume that the Republic has granted to MIAA the beneficial use of

the Airport Lands and Buildings, such fact does not make these real

properties subject to real estate tax.

Same; Same; Taxation; Portions of the Airport Lands and

Buildings that MIAA leases to private entities are not exempt

from real estate tax.—Portions of the Airport Lands and Buildings

that MIAA leases to private entities are not exempt from real estate

tax. For example, the land area occupied by hangars that MIAA

leases to private corporations is subject to real estate tax. In such

a case, MIAA has granted the beneficial use of such land area for a

consideration to a taxable person and therefore such land area is

subject to real estate tax. In Lung Center of the Philippines v.

Quezon City, 433 SCRA 119, 138 (2004), the Court ruled: Accordingly,

we hold that the portions of the land leased to private entities as

well as those parts of the hospital leased to private individuals are

not exempt from such taxes. On the other hand, the portions of the

land occupied by the hospital and portions of the hospital used for

its patients, whether paying or non-paying, are exempt from real

property taxes.

Same; Taxation; By express mandate of the Local Government

Code, local governments cannot impose any kind of tax on

national government instrumentalities like the MIAA.—By

express mandate of the Local Government Code, local governments

cannot impose any kind of tax on national government

instrumentalities like the MIAA. Local governments are devoid of

power to tax the national government, its agencies and

instrumentalities. The taxing powers of local governments do not

extend to the national government, its agencies and

instrumentalities, “[u]nless otherwise provided in this Code” as

stated in the saving clause of Section 133. The saving clause refers

to Section 234(a) on the exception to the exemption from real

estate tax of real property owned by the Republic.

Same; Same; The determinative test whether MIAA is exempt

from local taxation is not whether MIAA is a juridical person,

but whether it is a national government instrumentality under

Section 133(o) of the Local Government Code.—The minority’s

theory violates Section 133(o) of the Local Government Code which

expressly prohibits local governments from imposing any kind of

tax on national government instrumentalities. Section 133(o) does

not distinguish between national government instrumentalities with

or without juridical personalities. Where the law does not

distinguish, courts should not distinguish. Thus, Section 133(o)

applies to all national government instrumentalities, with or without

juridical personalities. The determinative test whether MIAA is

exempt from local taxation is not whether MIAA is a juridical person,

but whether it is a national government instrumentality under

Section 133(o) of the Local Government Code. Section 133(o) is the

specific provision of law prohibiting local governments from

imposing any kind of tax on the national government, its agencies

and instrumentalities.

Taxation; The saving clause in Section 133 of the Local

Government Code refers to the exception to the exemption in

Section 234(a) of the Code, which makes the national

government subject to real estate tax when it gives the

beneficial use of its real properties to a taxable entity; The

exception to the exemption in Section 234(a) is the only

instance when the national government, its agencies and

instrumentalities are subject to any kind of tax by local

governments.—The saving clause in Section 133 refers to the

exception to the exemption in Section 234(a) of the Code, which

makes the national government subject to real estate tax when it

gives the beneficial use of its real properties to a taxable entity.

Section 234(a) of the Local Government Code provides: SEC. 234.

Exemptions from Real Property Tax.—The following are exempted

from payment of the real property tax: (a) Real property owned by

the Republic of the Philippines or any of its political subdivisions

except when the beneficial use thereof has been granted, for

consideration or otherwise, to a taxable person. x x x. (Emphasis

supplied) Under Section 234(a), real property owned by the

Republic is exempt from real estate tax. The exception to this

exemption is when the government gives the beneficial use of the

real property to a taxable entity. The exception to the exemption in

Section 234(a) is the only instance when the national government,


20

its agencies and instrumentalities are subject to any kind of tax by

local governments. The exception to the exemption applies only to

real estate tax and not to any other tax. The justification for the

exception to the exemption is that the real property, although

owned by the Republic, is not devoted to public use or public service

but devoted to the private gain of a taxable person.

Same; Statutory Construction; When a provision of law grants

a power but withholds such power on certain matters, there is

no conflict between the grant of power and the withholding of

power.—There is no conflict whatsoever between Sections 133 and

193 because Section 193 expressly admits its subordination to other

provisions of the Code when Section 193 states “[u]nless otherwise

provided in this Code.” By its own words, Section 193 admits the

superiority of other provisions of the Local Government Code that

limit the exercise of the taxing power in Section 193. When a

provision of law grants a power but withholds such power on

certain matters, there is no conflict between the grant of power

and the withholding of power. The grantee of the power simply

cannot exercise the power on matters withheld from its power.

Same; Words and Phrases; By their very meaning and purpose,

the “common limitations” on the taxing power prevail over the

grant or exercise of the taxing power.—Since Section 133

prescribes the “common limitations” on the taxing powers of local

governments, Section 133 logically prevails over Section 193 which

grants local governments such taxing powers. By their very

meaning and purpose, the “common limitations” on the taxing power

prevail over the grant or exercise of the taxing power. If the taxing

power of local governments in Section 193 prevails over the

limitations on such taxing power in Section 133, then local

governments can impose any kind of tax on the national

government, its agencies and instrumentalities—a gross absurdity.

Administrative Law; The Administrative Law is the governing

law defining the status and relationship of government

departments, bureaus, offices, agencies and

instrumentalities.—The third whereas clause of the Administrative

Code states that the Code “incorporates in a unified document the

major structural, functional and procedural principles and rules of

governance.” Thus, the Administrative Code is the governing law

defining the status and relationship of government departments,

bureaus, offices, agencies and instrumentalities. Unless a statute

expressly provides for a different status and relationship for a

specific government unit or entity, the provisions of the

Administrative Code prevail.

Same; The government-owned or controlled corporations

created through special charters are those that meet the two

conditions prescribed in Section 16, Article XII of the

Constitution, regarding their creation in the interest of

common good and their being subject to the test of economic

viability.—The government-owned or controlled corporations

created through special charters are those that meet the two

conditions prescribed in Section 16, Article XII of the Constitution.

The first condition is that the government-owned or controlled

corporation must be established for the common good. The second

condition is that the government-owned or controlled corporation

must meet the test of economic viability. Section 16, Article XII of

the 1987 Constitution provides: SEC. 16. The Congress shall not,

except by general law, provide for the formation, organization, or

regulation of private corporations. Government-owned or

controlled corporations may be created or established by special

charters in the interest of the common good and subject to the test

of economic viability.

Same; The test of economic viability applies only to

government-owned or controlled corporations that perform

economic or commercial activities and need to compete in the

market place—government instrumentalities vested with

corporate powers and performing governmental or public functions

need not meet the test of economic viability.—The Constitution

expressly authorizes the legislature to create “government-owned

or controlled corporations” through special charters only if these

entities are required to meet the twin conditions of common good

and economic viability. In other words, Congress has no power to

create government-owned or controlled corporations with special

charters unless they are made to comply with the two conditions of

common good and economic viability. The test of economic viability

applies only to government-owned or controlled corporations that

perform economic or commercial activities and need to compete in

the market place. Being essentially economic vehicles of the State

for the common good—meaning for economic development

purposes—these government-owned or controlled corporations

with special charters are usually organized as stock corporations

just like ordinary private corporations. In contrast, government

instrumentalities vested with corporate powers and performing

governmental or public functions need not meet the test of

economic viability. These instrumentalities perform essential public

services for the common good, services that every modern State

must provide its citizens. These instrumentalities need not be

economically viable since the government may even subsidize their

entire operations. These instrumentalities are not the “government-

owned or controlled corporations” referred to in Section 16, Article

XII of the 1987 Constitution.

Manila International Airport Authority; Administrative Law; The

MIAA need not meet the test of economic viability because the

legislature did not create MIAA to compete in the market

place.—The MIAA need not meet the test of economic viability

because the legislature did not create MIAA to compete in the

market place. MIAA does not compete in the market place because

there is no competing international airport operated by the private


21

sector. MIAA performs an essential public service as the primary

domestic and international airport of the Philippines.

Same; Words and Phrases; The terminal fees that MIAA

charges every passenger are regulatory or administrative

fees and not income from commercial transactions.—MIAA

performs an essential public service that every modern State must

provide its citizens. MIAA derives its revenues principally from the

mandatory fees and charges MIAA imposes on passengers and

airlines. The terminal fees that MIAA charges every passenger are

regulatory or administrative fees and not income from commercial

transactions. [Manila International Airport Authority vs. Court

of Appeals, 495 SCRA 591(2006)]

Administrative Agencies; Manila International Airport

Authority; Manila International Airport Authority (MIAA) is a

government “instrumentality” that does not qualify as a

“government-owned or controlled corporation.”—A close

scrutiny of the definition of “government-owned or controlled

corporation” in Section 2(13) will show that MIAA would not fall

under such definition. MIAA is a government “instrumentality” that

does not qualify as a “government-owned or controlled

corporation.” As explained in the 2006 MIAA case: “A government-

owned or controlled corporation must be “organized as a stock or

non-stock corporation.” MIAA is not organized as a stock or non-

stock corporation. MIAA is not a stock corporation because it has

no capital stock divided into shares. MIAA has no stockholders or

voting shares. x x x”

Same; Same; Taxation; Tax Exemptions; Local Government

Code; Manila International Airport Authority (MIAA) is not a

government-owned or controlled corporation but a

government instrumentality which is exempt from any kind of

tax from the local governments.—MIAA is not a government-

owned or controlled corporation but a government instrumentality

which is exempt from any kind of tax from the local governments.

Indeed, the exercise of the taxing power of local government units

is subject to the limitations enumerated in Section 133 of the Local

Government Code. Under Section 133(o) of the Local Government

Code, local government units have no power to tax instrumentalities

of the national government like the MIAA. Hence, MIAA is not liable to

pay real property tax for the NAIA Pasay properties.

Same; Same; Same; Property; The airport lands and buildings

of Manila International Airport Authority (MIAA) are properties

of public dominion intended for public use; and as such are

exempt from real property tax under Section 234(a) of the

Local Government Code (LGC); Only those portions of the Ninoy

Aquino International Airport (NAIA) Pasay properties which

are leased to taxable persons like private parties are subject

to real property tax by the City of Pasay.—The airport lands and

buildings of MIAA are properties of public dominion intended for

public use, and as such are exempt from real property tax under

Section 234(a) of the Local Government Code. However, under the

same provision, if MIAA leases its real property to a taxable person,

the specific property leased becomes subject to real property tax.

In this case, only those portions of the NAIA Pasay properties which

are leased to taxable persons like private parties are subject to

real property tax by the City of Pasay. [Manila International

Airport Authority vs. City of Pasay, 583 SCRA 234(2009)]

Taxation; Exemptions; Local Government Units (LGUs); Local

Government Code; The Court, in ruling Mactan-Cebu

International Airport Authority (MCIAA) non-exempt from

realty taxes, considered that Section 133 of the Local

Government Code qualified the exemption of the National

Government, its agencies and instrumentalities from local

taxation with the phrase “unless otherwise provided herein.”—

The Court, in ruling MCIAA non-exempt from realty taxes,

considered that Section 133 qualified the exemption of the National

Government, its agencies and instrumentalities from local taxation

with the phrase “unless otherwise provided herein.” The Court then

considered the other relevant provisions of the Local Government

Code.

Same; Same; Same; Same; Section 133 was not intended to be

so absolute a prohibition on the power of LGUs to tax the

National Government, its agencies and instrumentalities.—

Section 133 was not intended to be so absolute a prohibition on the

power of LGUs to tax the National Government, its agencies and

instrumentalities, as evidenced by these cited provisions which

“otherwise provided.” But what was the extent of the limitation

under Section 133? This is how the Court, in a discussion of far-

reaching consequence, defined the parameters in Mactan: The

foregoing sections of the LGC speak of: (a) the limitations on the

taxing powers of local government units and the exceptions to such

limitations; and (b) the rule on tax exemptions and the exceptions

thereto. The use of exceptions or provisos in these sections, as

shown by the following clauses: (1) “unless otherwise provided

herein” in the opening paragraph of Section 133; (2) “Unless

otherwise provided in this Code” in Section 193; (3) “not hereafter

specifically exempted” in Section 232; and (4) “Except as provided

herein” in the last paragraph of Section 234.

Same; Same; Same; Same; The exemptions from real property

taxes are enumerated in Section 234, which specifically states

that only real properties owned “by the Republic of the

Philippines or any of its political subdivisions” is exempted

from payment of the tax. Clearly, instrumentalities or GOCCs

do not fall within the exceptions under Section 234.—This Court,

in Mactan, acknowledged that under Section 133, instrumentalities

were generally exempt from all forms of local government taxation,

unless otherwise provided in the Code. On the other hand, Section

232 “otherwise provides” insofar as it allowed local government


22

units to levy an ad valorem real property tax, irrespective of who

owned the property. At the same time, the imposition of real

property taxes under Section 232 is in turn qualified by the phrase

“not hereinafter specifically exempted.” The exemptions from real

property taxes are enumerated in Section 234, which specifically

states that only real properties owned “by the Republic of the

Philippines or any of its political subdivisions” are exempted from

the payment of the tax. Clearly, instrumentalities or GOCCs do not

fall within the exceptions under Section 234.

Same; Same; Constitutional Law; Statutes; Only the constitution

may operate to preclude or place restrictions on the

amendment or repeal of laws—constitutional dicta are of higher

order than legislative statutes, and the latter should always yield to

the former in cases of irreconcilable conflict.—The second

paragraph of Section 33 of P.D. No. 1146, as amended, effectively

imposes restrictions on the competency of the Congress to enact

future legislation on the taxability of the GSIS. This places an undue

restraint on the plenary power of the legislature to amend or repeal

laws, especially considering that it is a lawmaker’s act that imposes

such burden. Only the Constitution may operate to preclude or

place restrictions on the amendment or repeal of laws.

Constitutional dicta is of higher order than legislative statutes, and

the latter should always yield to the former in cases of

irreconcilable conflict.

Same; Same; Same; Same; It is a basic precept that among the

implied substantive limitations on the legislative powers is the

prohibition against the passage of irrepealable laws.—It is a

basic precept that among the implied substantive limitations on the

legislative powers is the prohibition against the passage of

irrepealable laws. Irrepealable laws deprive succeeding legislatures

of the fundamental best senses carte blanche in crafting laws

appropriate to the operative milieu. Their allowance promotes an

unhealthy stasis in the legislative front and dissuades dynamic

democratic impetus that may be responsive to the times. As Senior

Associate Justice Reynato S. Puno once observed, “[t]o be sure,

there are no irrepealable laws just as there are no irrepealable

Constitutions. Change is the predicate of progress and we should

not fear change.”

Same; Same; The express withdrawal of all tax exemptions

accorded to all persons natural or juridical, as stated in

Section 193 of the Local Government Code applies, without

impediment to the present case.—The two conditionalities of

Section 33 cannot bear relevance on whether the Local Government

Code removed the tax-exempt status of the GSIS. The express

withdrawal of all tax exemptions accorded to all persons, natural or

juridical, as stated in Section 193 of the Local Government Code,

applies without impediment to the present case. Such position is

bolstered by the other cited provisions of the Local Government

Code, and by the Mactan ruling.

Same; Same; The State is mandated to ensure local autonomy

of local governments, and local governments are empowered

to levy taxes, fees, and charges that accrue exclusively to

them, subject to congressional guidelines and limitations.—Also

worthy of note is that the Constitution itself promotes the principles

of local autonomy as embodied in the Local Government Code. The

State is mandated to ensure the autonomy of local governments,

and local governments are empowered to levy taxes, fees and

charges that accrue exclusively to them, subject to congressional

guidelines and limitations. The principle of local autonomy is no

mere passing dalliance but a constitutionally enshrined precept that

deserves respect and appropriate enforcement by this Court. [City

of Davao vs. RTC, Branch XII, Davao City, 467 SCRA

280(2005)]




































23



































public use.


































SCRA 259(2003)]

Tax Exemptions; Statutory Construction; The basis for the rule

on strict construction to statutory provisions granting tax

exemptions or deductions is to minimize differential treatment

and foster impartiality, fairness and equality of treatment

among taxpayers.—The basis for the rule on strict construction to

statutory provisions granting tax exemptions or deductions is to

minimize differential treatment and foster impartiality, fairness and

equality of treatment among taxpayers. He who claims an exemption

from his share of common burden must justify his claim that the

legislature intended to exempt him by unmistakable terms. For

exemptions from taxation are not favored in law, nor are they

presumed. They must be expressed in the clearest and most

unambiguous language and not left to mere implications. It has been

held that “exemptions are never presumed, the burden is on the

claimant to establish clearly his right to exemption and cannot be

made out of inference or implications but must be laid beyond

reasonable doubt. In other words, since taxation is the rule and

exemption the exception, the intention to make an exemption ought

to be expressed in clear and unambiguous terms.

Same; Franchise Tax; The right to exemption from local

franchise tax must be clearly established and cannot be made

out of inference or implications but must be laid beyond

reasonable doubt.—Section 8 of R.A. No. 7966 imposes on ABS-

CBN a franchise tax equivalent to three (3) percent of all gross

receipts of the radio/television business transacted under the

franchise and the franchise tax shall be “in lieu of all taxes” on the

franchise or earnings thereof. The “in lieu of all taxes” provision in

the franchise of ABS-CBN does not expressly provide what kind of

taxes ABS-CBN is exempted from. It is not clear whether the


24

exemption would include both local, whether municipal, city or

provincial, and national tax. What is clear is that ABS-CBN shall be

liable to pay three (3) percent franchise tax and income taxes

under Title II of the NIRC. But whether the “in lieu of all taxes

provision” would include exemption from local tax is not

unequivocal. As adverted to earlier, the right to exemption from

local franchise tax must be clearly established and cannot be made

out of inference or implications but must be laid beyond reasonable

doubt. Verily, the uncertainty in the “in lieu of all taxes” provision

should be construed against ABS-CBN. ABS-CBN has the burden to

prove that it is in fact covered by the exemption so claimed. ABS-

CBN miserably failed in this regard.

Same; Franchise Tax; Value Added Tax (VAT); In keeping with

the laws that have been passed since the grant of ABS-CBN’s

franchise, the corporation should now be subject to Value

Added Tax (VAT), instead of the 3% franchise tax.—In its

decision dated January 20, 1999, the RTC held that pursuant to the

“in lieu of all taxes” provision contained in Section 8 of R.A. No.

7966, ABS-CBN is exempt from the payment of the local franchise

tax. The RTC further pronounced that ABS-CBN shall instead be

liable to pay a franchise tax of 3% of all gross receipts in lieu of all

other taxes. On this score, the RTC ruling is flawed. In keeping with

the laws that have been passed since the grant of ABS-CBN’s

franchise, the corporation should now be subject to VAT, instead of

the 3% franchise tax.

Same; Same; Same; Value Added Tax (VAT) is a percentage tax

imposed on any person whether or not a franchise grantee,

who in the course of trade or business, sells, barters,

exchanges, leases, goods or properties, renders services,

while the franchise tax is a percentage tax imposed only on

franchise holders.—VAT is a percentage tax imposed on any

person whether or not a franchise grantee, who in the course of

trade or business, sells, barters, exchanges, leases, goods or

properties, renders services. It is also levied on every importation

of goods whether or not in the course of trade or business. The tax

base of the VAT is limited only to the value added to such goods,

properties, or services by the seller, transferor or lessor. Further,

the VAT is an indirect tax and can be passed on to the buyer. The

franchise tax, on the other hand, is a percentage tax imposed only

on franchise holders. It is imposed under Section 119 of the Tax Code

and is a direct liability of the franchise grantee. The clause “in lieu

of all taxes” does not pertain to VAT or any other tax. It cannot

apply when what is paid is a tax other than a franchise tax. Since

the franchise tax on the broadcasting companies with yearly gross

receipts exceeding ten million pesos has been abolished, the “in lieu

of all taxes” clause has now become functus officio, rendered

inoperative. [Quezon City vs. ABS-CBN Broadcasting

Corporation, 567 SCRA 496(2008)]

Taxation; Cooperatives; Electric Cooperatives; The tax

privileges granted to electric cooperatives registered with

National Electrification Administration (NEA) under P.D. 269

were validly withdrawn and only those registered with the

Cooperative Development Authority (CDA) under R.A. 6938

may continue to enjoy the tax privileges under the Cooperative

Code.—In Philippine Rural Electric Cooperatives Association, Inc.

(PHILRECA) v. The Secretary, Department of Interior and Local

Government, 403 SCRA 558 (2003), the Court held that the tax

privileges granted to electric cooperatives registered with NEA

under PD 269 were validly withdrawn and only those registered

with the CDA under RA 6938 may continue to enjoy the tax

privileges under the Cooperative Code. Therefore, CASURECO III can

no longer invoke PD 269 to evade payment of local taxes. Moreover,

its provisional registration with the CDA which granted it exemption

for the payment of local taxes was extended only until May 4, 1992.

Thereafter, it can no longer claim any exemption from the payment

of local taxes, including the subject franchise tax.

Same; Local Taxation; The power of the local government units

to impose and collect taxes is derived from the Constitution

itself which grants them “the power to create its own sources

of revenues and to levy taxes, fees and charges subject to

such guidelines and limitation as the Congress may provide.”—

The power of the local government units to impose and collect taxes

is derived from the Constitution itself which grants them “the

power to create its own sources of revenues and to levy taxes, fees

and charges subject to such guidelines and limitation as the

Congress may provide.” This explicit constitutional grant of power

to tax is consistent with the basic policy of local autonomy and

decentralization of governance. With this power, local government

units have the fiscal mechanisms to raise the funds needed to

deliver basic services to their constituents and break the culture of

dependence on the national government. Thus, consistent with these

objectives, the LGC was enacted granting the local government

units, like petitioner, the power to impose and collect franchise tax.

Same; Franchise Tax; Words and Phrases; A franchise tax is a


exercising corporate franchises granted by the state.—In

National Power Corporation v. City of Cabanatuan, 401 SCRA 259

(2003), the Court declared that “a franchise tax is ‘a tax on the

privilege of transacting business in the state and exercising

corporate franchises granted by the state.’ ” It is not levied on the

corporation simply for existing as a corporation, upon its property

or its income, but on its exercise of the rights or privileges granted

to it by the government. “It is within this context that the phrase tax

on businesses enjoying a franchise in Section 137 of the LGC should

be interpreted and understood.”

Same; Same; Requisites That Must Concur in Order to be Liable

for Local Franchise Tax.—To be liable for local franchise tax, the


25

following requisites should concur: (1) that one has a “franchise” in

the sense of a secondary or special franchise; and (2) that it is

exercising its rights or privileges under this franchise within the

territory of the pertinent local government unit.

Same; Same; Franchise tax shall be based on gross receipts

precisely because it is a tax on business, rather than on

persons or property.—It should be stressed that what the

petitioner seeks to collect from CASURECO III is a franchise tax,

which as defined, is a tax on the exercise of a privilege. As Section

137 of the LGC provides, franchise tax shall be based on gross

receipts precisely because it is a tax on business, rather than on

persons or property. Since it partakes of the nature of an excise

tax, the situs of taxation is the place where the privilege is

exercised, in this case in the City of Iriga, where CASURECO III has

its principal office and from where it operates, regardless of the

place where its services or products are delivered. Hence,

franchise tax covers all gross receipts from Iriga City and the

Rinconada area. [City of Iriga vs. Camarines Sur III Electric

Cooperative, Inc. (CASURECO III), 680 SCRA 236(2012)]

Taxation; Public Utilities; Franchises; Republic Act No. 7294;

Statutory Construction; The grant of tax exemption by R.A. No.

7294 is not to be interpreted from a consideration of a single

portion or of isolated words or clauses, but from a general

view of the act as a whole.—The “in lieu of all taxes” clause in

Smart’s franchise is put in issue before the Court. In order to

ascertain its meaning, consistent with fundamentals of statutory

construction, all the words in the statute must be considered. The

grant of tax exemption by R.A. No. 7294 is not to be interpreted

from a consideration of a single portion or of isolated words or

clauses, but from a general view of the act as a whole. Every part of

the statute must be construed with reference to the context.

Same; Same; Same; Same; Same; Words and Phrases; The

uncertainty in the “in lieu of all taxes” clause in R.A. No. 7294

on whether Smart is exempted from both local and national

franchise tax must be construed strictly against Smart which

claims the exemption—in the instant case, the “in lieu of all

taxes” clause applies only to national internal revenue taxes

and not to local taxes.—The uncertainty in the “in lieu of all taxes”

clause in R.A. No. 7294 on whether Smart is exempted from both

local and national franchise tax is construed strictly against Smart

who is claiming the exemption. Smart has the burden of proving

that, aside from the imposed 3% franchise tax, Congress intended

it to be exempted from all kinds of franchise taxes—whether local

or national. However, Smart failed in this regard. Tax exemptions

are never presumed and are strictly construed against the

taxpayer and liberally in favor of the taxing authority. They can only

be given force when the grant is clear and categorical. The

surrender of the power to tax, when claimed, must be clearly shown

by a language that will admit of no reasonable construction

consistent with the reservation of the power. If the intention of the

legislature is open to doubt, then the intention of the legislature

must be resolved in favor of the State. In this case, the doubt must

be resolved in favor of the City of Davao. The “in lieu of all taxes”

clause applies only to national internal revenue taxes and not to

local taxes.

Same; Same; Same; Same; Same; Value-Added Tax; It should be

noted that the “in lieu of all taxes” clause in R.A. No. 7294 has

become functus officio with the abolition of the franchise tax

on telecommunications companies—the “in lieu of all taxes”

clause in R.A. No. 7294 was rendered ineffective by the advent of

the Value-Added Tax (VAT) Law.—It should be noted that the “in lieu

of all taxes” clause in R.A. No. 7294 has become functus officio with

the abolition of the franchise tax on telecommunications companies.

As admitted by Smart in its pleadings, it is no longer paying the 3%

franchise tax mandated in its franchise. Currently, Smart along with

other telecommunications companies pays the uniform 10% value-

added tax. The VAT on sale of services of telephone franchise

grantees is equivalent to 10% of gross receipts derived from the

sale or exchange of services. R.A. No. 7716, as amended by the

Expanded Value Added Tax Law (R.A. No. 8241), the pertinent portion

of which is hereunder quoted, amended Section 9 of R.A. No. 7294:

x x x R.A. No. 7716, specifically Section 20 thereof, expressly

repealed the provisions of all special laws relative to the rate of

franchise taxes. It also repealed, amended, or modified all other

laws, orders, issuances, rules and regulations, or parts thereof

which are inconsistent with it. In effect, the “in lieu of all taxes”

clause in R.A. No. 7294 was rendered ineffective by the advent of

the VAT Law.

Same; Same; Same; Same; Same; The findings of the Bureau of

Local Government Finance (BLGF) are not conclusive on the

courts.—In support of its argument that the “in lieu of all taxes”

clause is to be construed as an exemption from local franchise

taxes, Smart submits the opinion of the Department of Finance,

through the BLGF, dated August 13, 1998 and February 24, 1998,

regarding the franchises of Smart and Globe, respectively. Smart

presents the same arguments as the Philippine Long Distance

Telephone Company in the previous cases already decided by this

Court. As previously held by the Court, the findings of the BLGF are

not conclusive on the courts.

Same; Same; Same; Words and Phrases; Tax Exclusion and Tax

Exemption; Both in their nature and effect, there is no

essential difference between a tax exemption and a tax

exclusion—an exclusion is also an immunity or privilege which

frees a taxpayer from a charge to which others are

subjected.—Smart gives another perspective of the “in lieu of all

taxes” clause in Section 9 of R.A. No. 7294 in order to avoid the

payment of local franchise tax. It says that, viewed from another

angle, the “in lieu of all taxes” clause partakes of the nature of a tax


26

exclusion and not a tax exemption. A tax exemption means that the

taxpayer does not pay any tax at all. Smart pays VAT, income tax,

and real property tax. Thus, what it enjoys is more accurately a tax

exclusion. However, as previously held by the Court, both in their

nature and effect, there is no essential difference between a tax

exemption and a tax exclusion. An exemption is an immunity or a

privilege; it is the freedom from a charge or burden to which others

are subjected. An exclusion, on the other hand, is the removal of

otherwise taxable items from the reach of taxation, e.g., exclusions

from gross income and allowable deductions. An exclusion is, thus,

also an immunity or privilege which frees a taxpayer from a charge

to which others are subjected. Consequently, the rule that a tax

exemption should be applied in strictissimi juris against the

taxpayer and liberally in favor of the government applies equally to

tax exclusions.

Same; Same; Same; Public Telecommunications Policy Act (R.A.

No. 7925); Most Favored Treatment Clause or Equality Clause;

Statutory Construction; The term “exemption” in Section 23 of

R.A. No. 7925 does not mean tax exemption—it refers to

exemption from certain regulations and requirements imposed

by the National Telecommunications Commission.—We find no

reason to disturb the previous pronouncements of this Court

regarding the interpretation of Section 23 of R.A. No. 7925. As aptly

explained in the en banc decision of this Court in Philippine Long

Distance Telephone Company, Inc. v. City of Davao, 363 SCRA 522

(2001), and recently in Digital Telecommunications Philippines, Inc.

(Digitel) v. Province of Pangasinan, 516 SCRA 541 (2007), Congress,

in approving Section 23 of R.A. No. 7925, did not intend it to operate

as a blanket tax exemption to all telecommunications entities. The

language of Section 23 of R.A. No. 7925 and the proceedings of both

Houses of Congress are bereft of anything that would signify the

grant of tax exemptions to all telecommunications entities, including

those whose exemptions had been withdrawn by R.A. No. 7160. The

term “exemption” in Section 23 of R.A. No. 7925 does not mean tax

exemption. The term refers to exemption from certain regulations

and requirements imposed by the National Telecommunications

Commission.

Same; Same; Same; Contract Clause; Not only are existing laws

read into contracts in order to fix obligations as between

parties, but the reservation of essential attributes of

sovereign power is also read into contracts as a basic

postulate of the legal order—the Contract Clause has never been

thought as a limitation on the exercise of the State’s power of

taxation save only where a tax exemption has been granted for a

valid consideration.—Smart’s franchise was granted with the

express condition that it is subject to amendment, alteration, or

repeal. As held in Tolentino v. Secretary of Finance, 235 SCRA 630

(1994): It is enough to say that the parties to a contract cannot,

through the exercise of prophetic discernment, fetter the exercise

of the taxing power of the State. For not only are existing laws read

into contracts in order to fix obligations as between parties, but the

reservation of essential attributes of sovereign power is also read

into contracts as a basic postulate of the legal order. The policy of

protecting contracts against impairment presupposes the

maintenance of a government which retains adequate authority to

secure the peace and good order of society. In truth, the Contract

Clause has never been thought as a limitation on the exercise of the

State’s power of taxation save only where a tax exemption has been

granted for a valid consideration. x x x. [Smart Communications,

Inc. vs. The City of Davao, 565 SCRA 237(2008)]

Mines and Mining; Taxation; Local Governments; Authority to

impose taxes and fees for extraction of sand and gravel

belongs to the Province, not to the municipality where they are

found.—Under the above-quoted provisions of the Local Tax Code,

there is no question that the authority to impose the license fees in

dispute, properly belongs to the province concerned and not to the

Municipality of Luna which is specifically prohibited under Section

22 of the same Code "from levying taxes, fees and charges that the

province or city is authorized to levy in this Code." On the other

hand, the Municipality of San Fernando cannot extract sand and

gravel from the Municipality of Luna without paying the

corresponding taxes or fees that may be imposed by the province

of La Union. [Mun. of San Fernando, La Union vs. Sta. Romana,

149 SCRA 27(1987)]

Taxation; Local Tax Code; Local Government Units; Amusement

Tax; Professional Sports; The province can only impose tax on

admission from the proprietors, lessees, or operators of

theaters, cinematographs, concert halls, circuses and other

places of amusement, and has no authority to tax professional

basketball games.—The laws on the matter are succinct and

clear and need no elaborate disquisition. Section 13 of the

Local Tax Code provides: “Sec. 13. Amusement tax on

admission.—The province shall impose a tax on admission to be

collected from the proprietors, lessees, or operators of theaters,

cinematographs, concert halls, circuses and other places of

amusement x x x.” The foregoing provision of law in point indicates

that the province can only impose a tax on admission from the

proprietors, lessees, or operators of theaters, cinematographs,

concert halls, circuses and other places of amusement. The

authority to tax professional basketball games is not therein

included, as the same is expressly embraced in PD 1959, which

amended PD 1456.

Same; Same; Same; Same; Same; Statutory Construction;

Ejusdem Generis; While Section 13 of the Local Tax Code

mentions “other places of amusement,” professional

basketball games are definitely not within its scope—under the

principle of ejusdem generis, where general words follow an

enumeration of persons or things, by words of a particular and


27

specific meaning, such general words are not to be construed in

their widest extent, but are to be held as applying only to persons

or things of the same kind or class as those specifically

mentioned.—While Section 13 of the Local Tax Code mentions “other

places of amusement,” professional basketball games are definitely

not within its scope. Under the principle of ejusdem generis, where

general words follow an enumeration of persons or things, by

words of a particular and specific meaning, such general words are

not to be construed in their widest extent, but are to be held as

applying only to persons or things of the same kind or class as

those specifically mentioned. Thus, in determining the meaning of

the phrase “other places of amusement,” one must refer to the

prior enumeration of theaters, cinema-tographs, concert halls and

circuses with artistic expression as their common characteristic.

Professional basketball games do not fall under the same category

as theaters, cinematographs, concert halls and circuses as the

latter basically belong to artistic forms of entertainment while the

former caters to sports and gaming.

Same; Same; Same; Same; Same; Same; A historical analysis of

pertinent laws does reveal the legislative intent to place

professional basketball games within the ambit of a national

tax.—A historical analysis of pertinent laws does reveal the

legislative intent to place professional basketball games within the

ambit of a national tax. The Local Tax Code, which became effective

on June 28, 1973, allowed the province to collect a tax on admission

from the proprietors, lessees, or operators of theaters,


amusement. On January 6, 1976, the operation of petitioner was

placed under the supervision and regulation of the Games and

Amusement Board by virtue of PD 871, with the proviso (Section 8)

that “x x x all professional basketball games conducted by the

Philippine Basketball Association shall only be subject to amusement

tax of five per cent of the gross receipts from the sale of admission

tickets.” Then, on June 11, 1978, PD 1456 came into effect, increasing

the amusement tax to ten per cent, with a categorical referral to PD

871, to wit, “[t]en per centum in the case of professional basketball

games as envisioned in Presidential Decree No. 871 x x x.” Later in

1984, PD 1959 increased the rate of amusement tax to fifteen

percent by making reference also to PD 871. With the reference to

PD 871 by PD 1456 and PD 1959, there is a recognition under the

laws of this country that the amusement tax on professional

basketball games is a national, and not a local, tax. Even up to the

present, the category of amusement taxes on professional

basketball games as a national tax remains the same. This is so

provided under Section 125 of the 1997 National Internal Revenue

Code. Section 140 of the Local Government Code of 1992 (Republic

Act 7160), meanwhile, retained the areas (theaters,


amusement) where the province may levy an amusement tax

without including therein professional basketball games.

Taxation; Public Officers; Estoppel; The government can never

be in estoppel, particularly in matters involving taxes—

erroneous application and enforcement of the law by public

officers do not preclude subsequent correct application of the

statute, and the Government is never estopped by mistake or

error on the part of its agents.—It bears stressing that the

government can never be in estoppel, particularly in matters

involving taxes. It is a well-known rule that erroneous application

and enforcement of the law by public officers do not preclude

subsequent correct application of the statute, and that the

Government is never estopped by mistake or error on the part of

its agents.

Same; Amusement Tax; Gross Receipts; Income from the

cession of streamer and advertising spaces is subject to

amusement tax.—Untenable is the contention that income from the

cession of streamer and advertising spaces to VEI is not subject to

amusement tax. The questioned proviso may be found in Section 1 of

PD 1456 which states: “SECTION 1. Section 268 of the National

Internal Revenue Code of 1977, as amended, is hereby further

amended to read as follows: ‘Sec. 268. Amusement taxes.—There

shall be collected from the proprietor, lessee or operator of

cockpits, cabarets, night or day clubs, boxing exhibitions,

professional basketball games, Jai-Alai, race tracks and bowling

alleys, a tax equivalent to: x x x x x x x x x of their gross receipts,

irrespective of whether or not any amount is charged or paid for

admission. For the purpose of the amusement tax, the term gross

receipts’ embraces all the receipts of the proprietor, lessee or

operator of the amusement place. Said gross receipts also include

income from television, radio and motion picture rights, if any. (A

person, or entity or association conducting any activity subject to

the tax herein imposed shall be similarly liable for said tax with

respect to such portion of the receipts derived by him or it.)”

(italics ours) The foregoing definition of gross receipts is broad

enough to embrace the cession of advertising and streamer spaces

as the same embraces all the receipts of the proprietor, lessee or

operator of the amusement place. The law being clear, there is no

need for an extended interpretation. [Philippine Basketball

Association vs. Court of Appeals, 337 SCRA 358(2000)]

Taxation; Business Taxes; Words and Phrases; “Gross

Receipts” Defined; Gross receipts include money or its

equivalent actually or constructively received in consideration

of services rendered or articles sold, exchanged or leased,

whether actual or constructive.—The above provision specifically

refers to gross receipts which is defined under Section 131 of the

Local Government Code, as follows: x x x x (n) “Gross Sales or

Receipts” include the total amount of money or its equivalent

representing the contract price, compensation or service fee,

including the amount charged or materials supplied with the

services and the deposits or advance payments actually or


28

constructively received during the taxable quarter for the services

performed or to be performed for another person excluding

discounts if determinable at the time of sales, sales return, excise

tax, and value-added tax (VAT); x x x x The law is clear. Gross

receipts include money or its equivalent actually or constructively

received in consideration of services rendered or articles sold,

exchanged or leased, whether actual or constructive.

Same; Same; Same; “Gross receipts” includes those which are

actually or constructively received.—In Commissioner of

Internal Revenue v. Bank of Commerce, 459 SCRA 638 (2005), the

Court interpreted gross receipts as including those which were

actually or constructively received, viz.: Actual receipt of interest

income is not limited to physical receipt. Actual receipt may either

be physical receipt or constructive receipt. When the depository

bank withholds the final tax to pay the tax liability of the lending

bank, there is prior to the withholding a constructive receipt by the

lending bank of the amount withheld. From the amount

constructively received by the lending bank, the depository bank

deducts the final withholding tax and remits it to the government

for the account of the lending bank. Thus, the interest income

actually received by the lending bank, both physically and

constructively, is the net interest plus the amount withheld as final

tax. The concept of a withholding tax on income obviously and

necessarily implies that the amount of the tax withheld comes from

the income earned by the taxpayer. Since the amount of the tax

withheld constitutes income earned by the taxpayer, then that

amount manifestly forms part of the taxpayer’s gross receipts.

Because the amount withheld belongs to the taxpayer, he can

transfer its ownership to the government in payment of his tax

liability. The amount withheld indubitably comes from income of the

taxpayer, and thus forms part of his gross receipts. (Emphasis

supplied)

Same; Same; Same; Constructive receipt occurs when the

money consideration or its equivalent is placed at the control

of the person who rendered the service without restrictions

by the payor; There is constructive receipt, when the

consideration for the articles sold, exchanged or leased, or the

services rendered has already been placed under the control

of the person who sold the goods or rendered the services

without any restriction by the payor.—Revenue Regulations No.

16-2005 dated September 1, 2005 defined and gave examples of

“constructive receipt,” to wit: SEC. 4. 108-4. Definition of Gross

Receipts.—x x x “Constructive receipt” occurs when the money

consideration or its equivalent is placed at the control of the person

who rendered the service without restrictions by the payor. The

following are examples of constructive receipts: (1) deposit in banks

which are made available to the seller of services without

restrictions; (2) issuance by the debtor of a notice to offset any

debt or obligation and acceptance thereof by the seller as payment

for services rendered; and (3) transfer of the amounts retained by

the payor to the account of the contractor. There is, therefore,

constructive receipt, when the consideration for the articles sold,

exchanged or leased, or the services rendered has already been

placed under the control of the person who sold the goods or

rendered the services without any restriction by the payor.

Same; Same; Same; “Gross Revenue” Defined; Gross revenue

covers money or its equivalent actually or constructively

received, including the value of services rendered or articles

sold, exchanged or leased, the payment of which is yet to be

received.—Gross revenue covers money or its equivalent actually

or constructively received, including the value of services rendered

or articles sold, exchanged or leased, the payment of which is yet to

be received. This is in consonance with the International Financial

Reporting Standards, which defines revenue as the gross inflow of

economic benefits (cash, receivables, and other assets) arising

from the ordinary operating activities of an enterprise (such as

sales of goods, sales of services, interest, royalties, and dividends),

which is measured at the fair value of the consideration received or

receivable.

Same; Same; Double Taxation; Municipal Corporations; The

imposition of local business tax based on gross revenue

inevitably results in double taxation—taxing of the same person

twice by the same jurisdiction over the same thing.—In petitioner’s

case, its audited financial statements reflect income or revenue

which accrued to it during the taxable period although not yet

actually or constructively received or paid. This is because

petitioner uses the accrual method of accounting, where income is

reportable when all the events have occurred that fix the taxpayer’s

right to receive the income, and the amount can be determined with

reasonable accuracy; the right to receive income, and not the

actual receipt, determines when to include the amount in gross

income. The imposition of local business tax based on petitioner’s

gross revenue will inevitably result in the constitutionally

proscribed double taxation—taxing of the same person twice by the

same jurisdiction for the same thing—inasmuch as petitioner’s

revenue or income for a taxable year will definitely include its gross

receipts already reported during the previous year and for which

local business tax has already been paid. Thus, respondent

committed a palpable error when it assessed petitioner’s local

business tax based on its gross revenue as reported in its audited

financial statements, as Section 143 of the Local Government Code

and Section 22(e) of the Pasig Revenue Code clearly provide that

the tax should be computed based on gross receipts. [Ericsson

Telecommunications, Inc. vs. City of Pasig, 538 SCRA

99(2007)]

Taxation; Appeals; Local Governments; The Local Government

Code, or any other statute for that matter, does not expressly

confer appellate jurisdiction on the part of regional trial


29

courts from the denial of a tax protest by a local treasurer.—

Yet significantly, the Local Government Code, or any other statute

for that matter, does not expressly confer appellate jurisdiction on

the part of regional trial courts from the denial of a tax protest by a

local treasurer. On the other hand, Section 22 of B.P. 129 expressly

delineates the appellate jurisdiction of the Regional Trial Courts,

confining as it does said appellate jurisdiction to cases decided by

Metropolitan, Municipal, and Municipal Circuit Trial Courts. Unlike in

the case of the Court of Appeals, B.P. 129 does not confer appellate

jurisdiction on Regional Trial Courts over rulings made by non-

judicial entities.

Same; Same; Same; Statutes; Courts; Court of Tax Appeals;

Republic Act No. 9282 definitively proves in its Section 7(a)(3)

that the Court of Tax Appeals exercises exclusive appellate

jurisdiction to review on appeal decisions, orders or

resolutions of the Regional Trial Courts in local tax cases

originally decided or resolved by them in the exercise of their

original or appellate jurisdiction.—Republic Act No. 9282

definitively proves in its Section 7(a)(3) that the CTA exercises

exclusive appellate jurisdiction to review on appeal decisions,

orders or resolutions of the Regional Trial Courts in local tax cases

original decided or resolved by them in the exercise of their

originally or appellate jurisdiction. Moreover, the provision also

states that the review is triggered “by filing a petition for review

under a procedure analogous to that provided for under Rule 42 of

the 1997 Rules of Civil Procedure.”

Same; Same; Courts; Court of Tax Appeals; There is wider

latitude on the part of the Court of Tax Appeals to refuse

cognizance over a petition for review under Rule 42 than it

would have over an ordinary appeal under Rule 41.—We

recognize that the Corporation’s error in elevating the RTC decision

for review via Rule 42 actually worked to the benefit of the City

Treasurer. There is wider latitude on the part of the Court of

Appeals to refuse cognizance over a petition for review under Rule

42 than it would have over an ordinary appeal under Rule 41. Under

Section 13, Rule 41, the stated grounds for the dismissal of an

ordinary appeal prior to the transmission of the case records are

when the appeal was taken out of time or when the docket fees

were not paid. On the other hand, Section 6, Rule 42 provides that in

order that the Court of Appeals may allow due course to the petition

for review, it must first make a prima facie finding that the lower

court has committed an error that would warrant the reversal or

modification of the decision under review. There is no similar

requirement of a prima facie determination of error in the case of

ordinary appeal, which is perfected upon the filing of the notice of

appeal in due time.

Same; Constitutional Law; Local Governments; The power of

local government units to impose taxes within its territorial

jurisdiction derives from the Constitution itself, which

recognizes the power of these units “to create its own sources

of revenue and to levy taxes, fees, and charges subject to such

guidelines and limitations as the Congress may provide,

consistent with the basic policy of local autonomy.”—The power

of local government units to impose taxes within its territorial

jurisdiction derives from the Constitution itself, which recognizes

the power of these units “to create its own sources of revenue and

to levy taxes, fees, and charges subject to such guidelines and

limitations as the Congress may provide, consistent with the basic

policy of local autonomy.” These guidelines and limitations as

provided by Congress are in main contained in the Local

Government Code of 1991 (the “Code”), which provides for

comprehensive instances when and how local government units

may impose taxes. The significant limitations are enumerated

primarily in Section 133 of the Code, which include among others, a

prohibition on the imposition of income taxes except when levied on

banks and other financial institutions. None of the other general

limitations under Section 133 find application to the case at bar.

Same; Local Governments; Statutes; The most well-known

mode of local government taxation is perhaps the real

property tax, which is governed by Title II, Book II of the Code,

and which bears no application in this case.—The most well-

known mode of local government taxation is perhaps the real

property tax, which is governed by Title II, Book II of the Code, and

which bears no application in this case. A different set of provisions,

found under Title I of Book II, governs other taxes imposable by

local government units, including business taxes. Under Section 151

of the Code, cities such as Makati are authorized to levy the same

taxes fees and charges as provinces and municipalities. It is in

Article II, Title II, Book II of the Code, governing municipal taxes,

where the provisions on business taxation relevant to this petition

may be found. [Yamane vs. BA Lepanto Condominium


Double Taxation; Words and Phrases; Double taxation means

taxing the same property twice when it should be taxed only

once, that is, “taxing the same person twice by the same

jurisdiction for the same thing”; Otherwise described as

“direct duplicate taxation,” the two taxes must be imposed on

the same subject matter, for the same purpose, by the same

taxing authority, within the same jurisdiction, during the same

taxing period, and the taxes must be of the same kind or

character.—Petitioners obstinately ignore the exempting proviso

in Section 21 of Tax Ordinance No. 7794, to their own detriment. Said

exempting proviso was precisely included in said section so as to

avoid double taxation. Double taxation means taxing the same

property twice when it should be taxed only once; that is, “taxing the

same person twice by the same jurisdiction for the same thing.” It

is obnoxious when the taxpayer is taxed twice, when it should be but

once. Otherwise described as “direct duplicate taxation,” the two


30

taxes must be imposed on the same subject matter, for the same

purpose, by the same taxing authority, within the same jurisdiction,

during the same taxing period; and the taxes must be of the same

kind or character. Using the aforementioned test, the Court finds

that there is indeed double taxation if respondent is subjected to

the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794,

since these are being imposed: (1) on the same subject matter—the

privilege of doing business in the City of Manila; (2) for the same

purpose—to make persons conducting business within the City of

Manila contribute to city revenues; (3) by the same taxing

authority—petitioner City of Manila; (4) within the same taxing

jurisdiction—within the territorial jurisdiction of the City of Manila;

(5) for the same taxing periods—per calendar year; and (6) of the

same kind or character—a local business tax imposed on gross

sales or receipts of the business.

Same; Same; Municipal Corporations; Local Government Units;

It is apparent from a perusal of Section 143 of the Local

Government Code—the very source of the power of

municipalities and cities to impose a local business tax—that

when a municipality or city has already imposed a business tax on

manufacturers, etc. of liquors, distilled spirits, wines, and any other

article of commerce, pursuant to Section 143(a) of the Local

Government Code (LGC), said municipality or city may no longer

subject the same manufacturers, etc. to a business tax under

Section 143(h) of the same Code.—The distinction petitioners

attempt to make between the taxes under Sections 14 and 21 of Tax

Ordinance No. 7794 is specious. The Court revisits Section 143 of

the LGC, the very source of the power of municipalities and cities to

impose a local business tax, and to which any local business tax

imposed by petitioner City of Manila must conform. It is apparent

from a perusal thereof that when a municipality or city has already

imposed a business tax on manufacturers, etc. of liquors, distilled

spirits, wines, and any other article of commerce, pursuant to

Section 143(a) of the LGC, said municipality or city may no longer

subject the same manufacturers, etc. to a business tax under

Section 143(h) of the same Code. Section 143(h) may be imposed

only on businesses that are subject to excise tax, VAT, or

percentage tax under the NIRC, and that are “not otherwise

specified in preceding paragraphs.” In the same way, businesses

such as respondent’s, already subject to a local business tax under

Section 14 of Tax Ordinance No. 7794 [which is based on Section

143(a) of the LGC], can no longer be made liable for local business

tax under Section 21 of the same Tax Ordinance [which is based on

Section 143(h) of the LGC]. [City of Manila vs. Coca-Cola Bottlers

Philippines, Inc., 595 SCRA 299(2009)]

Taxation; Tax Ordinance; The law requires that the dissatisfied

taxpayer who questions the validity or legality of a tax

ordinance must file his appeal to the Secretary of Justice,

within 30 days from effectivity thereof. In case the Secretary

decides the appeal, a period also of 30 days is allowed for an

aggrieved party to go to court. But if the Secretary does not

act thereon, after the lapse of 60 days, a party could already

proceed to seek relief in court.—CEPALCO ignored our ruling in

Reyes v. Court of Appeals on the mandatory nature of the statutory

periods: Clearly, the law requires that the dissatisfied taxpayer who

questions the validity or legality of a tax ordinance must file his

appeal to the Secretary of Justice, within 30 days from effectivity

thereof. In case the Secretary decides the appeal, a period also of

30 days is allowed for an aggrieved party to go to court. But if the

Secretary does not act thereon, after the lapse of 60 days, a party

could already proceed to seek relief in court. These three separate

periods are clearly given for compliance as a prerequisite before

seeking redress in a competent court. Such statutory periods are

set to prevent delays as well as enhance the orderly and speedy

discharge of judicial functions. For this reason the courts construe

these provisions of statutes as mandatory. A municipal tax

ordinance empowers a local government unit to impose taxes. The

power to tax is the most effective instrument to raise needed

revenues to finance and support the myriad activities of local

government units for the delivery of basic services essential to the

promotion of the general welfare and enhancement of peace,

progress, and prosperity of the people. Consequently, any delay in

implementing tax measures would be to the detriment of the public.

It is for this reason that protests over tax ordinances are required

to be done within certain time frames. In the instant case, it is our

view that the failure of petitioners to appeal to the Secretary of

Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal

to their cause.

Same; Constitutional Law; Local Government Units; Each local

government unit shall have the power to create its own

sources of revenues and to levy taxes, fees, and charges


provide, consistent with the basic policy of local autonomy.—

Section 5, Article X of the 1987 Constitution provides that “[e]ach

local government unit shall have the power to create its own

sources of revenues and to levy taxes, fees, and charges subject to

such guidelines and limitations as the Congress may provide,

consistent with the basic policy of local autonomy. Such taxes, fees,

and charges shall accrue exclusively to the local government.” The

Local Government Code supplements the Constitution with Sections

151 and 186: SEC. 151. Scope of Taxing Powers.—Except as otherwise

provided in this Code, the city may levy the taxes, fees and charges

which the province or municipality may impose: Provided, however,

That the taxes, fees and charges levied and collected by highly

urbanized and independent component cities shall accrue to them

and distributed in accordance with the provisions of this Code. The

rates of taxes that the city may levy may exceed the maximum

rates allowed for the province or municipality by not more than fifty

percent (50%) except the rates of professional and amusement


31

taxes. SEC. 186. Power to Levy Other Taxes, Fees or Charges.—Local

government units may exercise the power to levy taxes, fees or

charges on any base or subject not otherwise specifically

enumerated herein or taxed under the provisions of the National

Internal Revenue Code, as amended, or other applicable laws:

Provided, That the taxes, fees, or charges shall not be unjust,

excessive, oppressive, confiscatory or contrary to declared

national policy: Provided, further, That the ordinance levying such

taxes, fees, or charges shall not be enacted without any prior public

hearing conducted for the purpose.

Same; Business; Words and Phrases; CEPALCO’s act of leasing

for a consideration the use of its posts, poles or towers to

other pole users falls under the Local Government Code’s

definition of business. Business is defined by Section 131(d) of

the Local Government Code as trade or commercial activity

regularly engaged in as a means of livelihood or with a view to

profit.—Unfortunately for CEPALCO, we agree with the ruling of the

trial and appellate courts that Ordinance No. 9503-2005 is a tax on

business. CEPALCO’s act of leasing for a consideration the use of its

posts, poles or towers to other pole users falls under the Local

Government Code’s definition of business. Business is defined by

Section 131(d) of the Local Government Code as “trade or

commercial activity regularly engaged in as a means of livelihood or

with a view to profit.” In relation to Section 131(d), Section 143(h) of

the Local Government Code provides that the city may impose

taxes, fees, and charges on any business which is not specified in

Section 143(a) to (g) and which the sanggunian concerned may

deem proper to tax.

Same; Tax Exemptions; Franchise Tax; The Local Government

Code withdrew tax exemption privileges previously given to

natural or juridical persons, and granted local government

units the power to impose franchise tax.—The Local Government

Code withdrew tax exemption privileges previously given to natural

or juridical persons, and granted local government units the power

to impose franchise tax, thus: SEC. 137. Franchise Tax.—

Notwithstanding any exemption granted by any law or other special

law, the province may impose a tax on businesses enjoying a

franchise, at a rate not exceeding fifty percent (50%) of one

percent (1%) of the gross annual receipts for the preceding

calendar year based on the incoming receipt, or realized, within its

territorial jurisdiction. x x x x SEC. 193. Withdrawal of Tax Exemption

Privileges.—Unless otherwise provided in this Code, tax exemptions

or incentives granted to, or presently enjoyed by all persons,

whether natural or juridical, including government-owned or

controlled corporations, except local water districts, cooperatives

duly registered under R.A. No. 6938, non-stock and nonprofit

hospitals and educational institutions, are hereby withdrawn upon

the effectivity of this Code. SEC. 534. Repealing Clause.—x x x. (f) All

general and special laws, acts, city charters, decrees, executive

orders, proclamations and administrative regulations, or part or

parts thereof which are inconsistent with any of the provisions of

this Code are hereby repealed or modified accordingly.

Same; Same; It is hornbook doctrine that tax exemptions are

strictly construed against the claimant.—It is hornbook doctrine

that tax exemptions are strictly construed against the claimant. For

this reason, tax exemptions must be based on clear legal

provisions. The separate opinion in PLDT v. City of Davao is

applicable to the present case, thus: Tax exemptions must be clear

and unequivocal. A taxpayer claiming a tax exemption must point to

a specific provision of law conferring on the taxpayer, in clear and

plain terms, exemption from a common burden. Any doubt whether

a tax exemption exists is resolved against the taxpayer. Tax

exemptions cannot arise by mere implication, much less by an

implied re-enactment of a repealed tax exemption clause.

Same; Franchise Tax; Section 151 of the Local Government Code

states that, subject to certain exceptions, a city may exceed by

“not more than 50%” the tax rates allowed to provinces and

municipalities. A province may impose a franchise tax at a rate

“not exceeding 50% of 1% of the gross annual receipts.” A

municipality may impose a business tax at a rate not exceeding

“two percent of gross sales or receipts.”—CEPALCO is mistaken

when it states that a city can impose a tax up to only one-half of

what the province or city may impose. A more circumspect reading

of the Local Government Code could have prevented this error.

Section 151 of the Local Government Code states that, subject to

certain exceptions, a city may exceed by “not more than 50%” the

tax rates allowed to provinces and municipalities. A province may

impose a franchise tax at a rate “not exceeding 50% of 1% of the

gross annual receipts.” Following Section 151, a city may impose a

franchise tax of up to 0.0075 (or 0.75%) of a business’ gross

annual receipts for the preceding calendar year based on the

incoming receipt, or realized, within its territorial jurisdiction. A

municipality may impose a business tax at a rate not exceeding

“two percent of gross sales or receipts.” Following Section 151, a

city may impose a business tax of up to 0.03 (or 3%) of a business’

gross sales or receipts of the preceding calendar year.

Same; Value-Added Tax; Any person, who in the course of trade

or business leases goods or properties shall be subject to the

value-added tax, the imposable tax rate should not exceed two

percent of gross receipts of the lease of poles of the

preceding calendar year.—More importantly, because “any

person, who in the course of trade or business x x x leases goods

or properties x x x shall be subject to the value-added tax,” the

imposable tax rate should not exceed two percent of gross receipts

of the lease of poles of the preceding calendar year. Section 143(h)

states that “on any business subject to x x x value-added x x x tax

under the National Internal Revenue Code, as amended, the rate of

tax shall not exceed two percent (2%) of gross sales or receipts of


32

the preceding calendar year” from the lease of goods or properties.

Hence, the 10% tax rate imposed by Ordinance No. 9503-2005

clearly violates Section 143(h) of the Local Government Code.

[Cagayan Electric Power and Light Co., Inc. vs. City of Cagayan

de Oro, 685 SCRA 609(2012)]

Taxation; While business taxes imposed in the exercise of

police power for regulatory purposes are paid for the

privilege of carrying on a business in the year the tax was

paid, income tax is a tax on all yearly profits arising from

property, professions, trades or offices, or as a tax on a

person’s income, emoluments, profits and the like—it is a tax on

income, whether net or gross realized in one taxable year.—

Prefatorily, it is necessary to distinguish between a business tax

vis-à-vis an income tax. Business taxes imposed in the exercise of

police power for regulatory purposes are paid for the privilege of

carrying on a business in the year the tax was paid. It is paid at the

beginning of the year as a fee to allow the business to operate for

the rest of the year. It is deemed a prerequisite to the conduct of

business. Income tax, on the other hand, is a tax on all yearly profits

arising from property, professions, trades or offices, or as a tax on

a person’s income, emoluments, profits and the like. It is tax on

income, whether net or gross realized in one taxable year. It is due

on or before the 15th day of the 4th month following the close of the

taxpayer’s taxable year and is generally regarded as an excise tax,

levied upon the right of a person or entity to receive income or

profits.

Same; The respondent city treasurer erroneously treated the

assessment and collection of business tax as if it were income

tax.—For the year 1998, petitioner paid a total of P2,262,122.48 to

the City Treasurer of Makati as business taxes for the year 1998.

The amount of tax as computed based on petitioner’s gross sales

for 1998 is only P1,331,638.84. Since the amount paid is more than

the amount computed based on petitioner’s actual gross sales for

1998, petitioner upon its retirement is not liable for additional taxes

to the City of Makati. Thus, we find that the respondent erroneously

treated the assessment and collection of business tax as if it were

income tax, by rendering an additional assessment of P1,331,638.84

for the revenue generated for the year 1998. [Mobil Philippines,

Inc. vs. The City Treasurer of Makati, 463 SCRA 379(2005)]

The decision is assailed in so far as it sustains the imposition and

collection of the additional tax upon sales of manufactured oils and

other petroleum products stored in the Sipocot depot, for delivery

outside the said municipality. The evidence presented shows that

the customers place their orders either at the Sipocot depot, or at

the main office of the appellant company in Manila, depending on the

volume of gas intended to be purchased. The invoice is prepared in

the meantime, wherein, among other things, the place of delivery is

stated. Said invoice is given to the truck driver, who upon arrival at

the destination, is instructed to present the same to the customer,

requiring the latter to acknowledge receipt of the products

delivered, in the condition upon which they were received. Payment

is made after delivery and acceptance of the goods by the

buyer. It is evident that delivery to the carrier is not

considered by the parties as amounting to a delivery to the

consumer within the meaning of Article 1423 of the Civil Code

of the Philippines; here the carrier is merely an agent of the

appellant company. Accordingly, these sales should not be

subjected to additional tax, being transactions effected outside

the municipality's territorial limits. Appellee questions the

propriety of this action for declaratory relief, contending that the

issue had become moot on account of the payments made by the

company to the municipality pursuant to the tax ordinance. [Shell

Company of the Philippines, Ltd. vs. Municipality of Sipocot,

Camarines Sur, et al., 105 Phil. 1263(1959)]

Taxation; Local Taxation; Tax on Manufacture of Softdrinks; For

tax purposes, a manufacturer does not necessarily become

engage in the separate business of selling simply because it

sells the products it manufactures.—This Court has always

recognized that the right to manufacture implies the right to

sell/distribute the manufactured products [See Central Azucarera

de Don Pedro v. City of Manila and Sarmiento, 97 Phil. 627 (1955);

Caltex (Philippines), Inc. v. City of Manila and Cudiamat, G.R. No. L-

22764, July 28, 1969, 28 SCRA 840, 843.] Hence, for tax purposes, a

manufacturer does not necessarily become engaged in the

separate business of selling simply because it sells the products it

manufactures. In certain cases, however, a manufacturer may also

be considered as engaged in the separate business of selling its

products.

Same; Same; Same; In determining whether a manufacturer is

engaged in the separate business of selling, the company’s

marketing system must be considered.—To determine whether

an entity engaged in the principal business of manufacturing, is

likewise engaged in the separate business of selling, its marketing

system or sales operations must be looked into. In several cases

[See Central Azucarera de Don Pedro v. City of Manila and

Sarmiento, supra; Cebu Portland Cement Co. v. City of Manila and

the City Treasurer, 108 Phil. 1063 (1960); Caltex (Philippines), Inc. v.

City of Manila and Cudiamat, supra], this Court had occasion to

distinguish two marketing systems: Under the first system, the

manufacturer enters into sales transactions and invoices the sales

at its main office where purchase orders are received and

approved before delivery orders are sent to the company’s

warehouses, where in turn actual deliveries are made. No

warehouse sales are made; nor are separate stores maintained

where products may be sold independently from the main office.

The warehouses only serve as storage sites and delivery points of

the products earlier sold at the main office. Under the second

system, sales transactions are entered into and perfected at stores


33

or warehouses maintained by the company. Any one who desires to

purchase the product may go to the store or warehouse and there

purchase the merchandise. The stores and warehouses serve as

selling centers. Entities operating under the first system are NOT

considered engaged in the separate business of selling or dealing in

their products, independent of their manufacturing business.

Entities operating under the second system are considered engaged

in the separate business of selling.

Same; Same; Same; Same; Iloilo Bottlers, as shown by its

marketing system and sales operations, is engaged in the

separate business of selling softdrinks.—In the case at bar, the

company distributed its softdrinks by means of a fleet of delivery

trucks which went directly to customers in the different places in

Iloilo province. Sales transactions with customers were entered

into and sales were perfected and consummated by route salesmen.

Truck sales were made independently of transactions in the main

office. The delivery trucks were not used solely for the purpose of

delivering softdrinks previously sold at Pavia. They served as selling

units. They were what were called, until recently, “rolling stores”.

The delivery trucks were therefore much the same as the stores

and warehouses under the second marketing system. Iloilo Bottlers,

Inc. thus falls under the second category above. That is, the

corporation was engaged in the separate business of selling or

distributing softdrinks, independently of its business of bottling

them.

Same; Same; Excise Tax; Excise Tax can be levied by the taxing

authority only when the acts, privileges or business are

performed within the jurisdiction of said authority.—The tax

imposed under Ordinance No. 5 is an excise tax. It is a tax on the

privilege of distributing, manufacturing or bottling softdrinks. Being

an excise tax, it can be levied by the taxing authority only when the

acts, privileges or businesses are done or performed within the

jurisdiction of said authority [Commissioner of Internal Revenue v.

British Overseas Airways Corp. and Court of Tax Appeals, G.R. Nos.

65773-74, April 30, 1987, 149 SCRA 395, 410.] Specifically, the situs

of the act of distributing, bottling or manufacturing softdrinks must

be within city limits, before an entity engaged in any of the activities

may be taxed in Iloilo City. [Iloilo Bottlers, Inc. vs. City of Iloilo,

164 SCRA 607(1988)]

Local Governments; Municipal Corporation; Republic Act No.

7160; R.A. 7160, §186 provides that an ordinance levying taxes,

fees, or charges “shall not be enacted without any prior public

hearing conducted for the purpose.”—Petitioner is right in

contending that public hearings are required to be conducted prior

to the enactment of an ordinance imposing real property taxes. R.A.

No. 7160, §186 provides that an ordinance levying taxes, fees, or

charges “shall not be enacted without any prior public hearing

conducted for the purpose.”

Same; Same; Same; The lack of a public hearing is a negative

allegation to which the party asserting has the burden of

proof.—The lack of a public hearing is a negative allegation

essential to petitioner’s cause of action in the present case. Hence,

as petitioner is the party asserting it, she has the burden of proof.

Since petitioner failed to rebut the presumption of validity in favor

of the subject ordinances and to discharge the burden of proving

that no public hearings were conducted prior to the enactment

thereof, we are constrained to uphold their constitutionality or

legality.

Same; Same; Same; An ordinance imposing real property taxes

must be posted or published as required by R.A. No. 7160,

§188.—An ordinance imposing real property taxes (such as

Ordinance Nos. 119 and 135) must be posted or published as

required by R.A. No. 7160, §188 which provides: Section 188.

Publication of Tax Ordinances and Revenue Measures.—Within

ten (10) days after their approval, certified true copies of all

provincial, city, and municipal tax ordinances or revenue measures

shall be published in full for three (3) consecutive days in a

newspaper of local circulation: Provided, however, That in

provinces, cities and municipalities where there are no newspapers

of local circulation, the same may be posted in at least two (2)

conspicuous and publicly accessible places.

Same; Same; Same; Ordinances which fix the assessment

levels, being in the nature of a tax ordinance, §188 likewise

applies.—With respect to ordinances which fix the assessment

levels (such as Ordinance No. 125), being in the nature of a tax

ordinance, §188 likewise applies. Moreover, as Ordinance No. 125, §7

provides for a penal sanction for violations thereof by means of a

fine of not less than P1,000.00 nor more than P5,000.00, or

imprisonment of not less than one (1) month nor more than six (6)

months, or both, in the discretion of the court, not only §188 but

§511(a) also must be observed: Ordinances with penal sanctions

shall be posted at prominent places in the provincial capitol, city,

municipal or barangay hall, as the case may be, for a minimum

period of three (3) consecutive weeks. Such ordinances shall also

be published in a newspaper of general circulation, where available,

within the territorial jurisdiction of the local government unit

concerned, except in the case of barangay ordinances. Unless

otherwise provided therein, said ordinances shall take effect on the

day following its publication, or at the end of the period of posting,

whichever occurs later.

Same; Same; Same; Ordinance which fixes the assessment

levels applicable to the different classes of real property in a

local government unit and imposing penal sanctions for

violations thereof should be published in full.—In view of §§188

and 511(a) of R.A. No. 7160, an ordinance fixing the assessment

levels applicable to the different classes of real property in a local

government unit and imposing penal sanctions for violations thereof


34

(such as Ordinance No. 125) should be published in full for three (3)

consecutive days in a newspaper of local circulation, where

available, within ten (10) days of its approval, and posted in at least

two (2) prominent places in the provincial capitol, city, municipal, or

barangay hall for a minimum of three (3) consecutive weeks.

Same; Same; Same; In the absence of proof that the

ordinances were not enacted in accordance with such

regulations, said ordinances must be presumed to have been

enacted in accordance with such regulations.—Also without

merit is the contention of petitioner that Ordinance No. 119 and

Ordinance No. 135 are void for not having been enacted in

accordance with Local Assessment Regulation No. 1-92, dated

October 6, 1992, of the Department of Finance, which provides

guidelines for the preparation of proposed schedules of fair market

values of the different classes of real property in a local

government unit, such as time tables for obtaining information from

owners of affected lands and buildings regarding the value thereof.

As in the case of the procedural requirements for the enactment of

tax ordinances and revenue measures, however, petitioner has not

shown that the ordinances in this case were not enacted in

accordance with the applicable regulations of the Department of

Finance. The Municipality of Mandaluyong claims that, although the

regulations are merely directory, it has complied with them. Hence,

in the absence of proof that the ordinances were not enacted in

accordance with such regulations, said ordinances must be

presumed to have been enacted in accordance with such

regulations. [Figuerres vs. Court of Appeals, 305 SCRA

206(1999)]

Taxation; Tax Code; The Tax Code provision withdrawing the tax

exemption was not construed as prohibiting future grants of

exemptions from all taxes.—The trial court held that, under these

provisions, all exemptions granted to all persons, whether natural

and juridical, including those which in the future might be granted,

are withdrawn unless the law granting the exemption expressly

states that the exemption also applies to local taxes. We disagree.

Sec. 137 does not state that it covers future exemptions. In

Philippine Airlines, Inc. v. Edu, where a provision of the Tax Code

enacted on June 27, 1968 (R.A. 5431) withdrew the exemption

enjoyed by PAL, it was held that a subsequent amendment of PAL’s

franchise, exempting it from all other taxes except that imposed by

its franchise, again entitled PAL to exemption from the date of the

enactment of such amendment. The Tax Code provision withdrawing

the tax exemption was not construed as prohibiting future grants of

exemptions from all taxes.

Same; Same; The grant of taxing powers to local government

units under the Constitution and the LGC does not affect the

power of Congress to grant exemptions to certain persons,

pursuant to a declared national policy.—Indeed, the grant of

taxing powers to local government units under the Constitution and

the LGC does not affect the power of Congress to grant exemptions

to certain persons, pursuant to a declared national policy. The legal




corporations.

Same; Same; Tax exemption must be expressed in the statute

in clear language; The exemption must be interpreted in

strictissimi juris against the taxpayer and liberally in favor of

the taxing authority.—The tax exemption must be expressed in the

statute in clear language that leaves no doubt of the intention of the

legislature to grant such exemption. And, even if it is granted, the

exemption must be interpreted in strictissimi juris against the

taxpayer and liberally in favor of the taxing authority. [Philippine

Long Distance Telephone Company, Inc. vs. City of Davao, 363

SCRA 522(2001)]


35





































































public use.






























36






SCRA 259(2003)]

Constitutional Law; Judicial Review; Courts; Lower courts have

jurisdiction to consider the constitutionality of laws, this

authority being embraced in the general definition of the

judicial power to determine what are valid and binding laws by

the criterion of their conformity to the fundamental law.—We

stress at the outset that the lower court had jurisdiction to

consider the constitutionality of Section 187, this authority being

embraced in the general definition of the judicial power to

determine what are the valid and binding laws by the criterion of

their conformity to the fundamental law. Specifically, BP 129 vests

in the regional trial courts jurisdiction over all civil cases in which

the subject of the litigation is incapable of pecuniary estimation,

even as the accused in a criminal action has the right to question in

his defense the constitutionality of a law he is charged with violating

and of the proceedings taken against him, particularly as they

contravene the Bill of Rights. Moreover, Article X, Section 5 (2), of

the Constitution vests in the Supreme Court appellate jurisdiction

over final judgments and orders of lower courts in all cases in

which the constitutionality or validity of any treaty, international or

executive agreement, law, presidential decree, proclamation, order,

instruction, ordinance, or regulation is in question.

Same; Same; Same; In the exercise of the jurisdiction to

consider constitutionality of laws, it will be prudent for lower

courts to defer to the higher judgment of the Supreme Court in

the consideration of their validity, which is better determined

after a thorough deliberation by a collegiate body and with the

concurrence of the majority of those who participated in its

discussion; Every court is charged with the duty of purposeful

hesitation before declaring a law unconstitutional.—In the

exercise of this jurisdiction, lower courts are advised to act with

the utmost circumspection, bearing in mind the consequences of a

declaration of unconstitutionality upon the stability of laws, no less

than on the doctrine of separation of powers. As the questioned act

is usually the handiwork of the legislative or the executive

departments, or both, it will be prudent for such courts, if only out

of a becoming modesty, to defer to the higher judgment of this

Court in the consideration of its validity, which is better determined

after a thorough deliberation by a collegiate body and with the

concurrence of the majority of those who participated in its

discussion. It is also emphasized that every court, including this

Court, is charged with the duty of a purposeful hesitation before

declaring a law unconstitutional, on the theory that the measure

was first carefully studied by the executive and the legislative

departments and determined by them to be in accordance with the

fundamental law before it was finally approved. To doubt is to

sustain. The presumption of constitutionality can be overcome only

by the clearest showing that there was indeed an infraction of the

Constitution, and only when such a conclusion is reached by the

required majority may the Court pronounce, in the discharge of the

duty it cannot escape, that the challenged act must be struck down.

Same; Local Governments; Control and Supervision; Taxation;

Where the Secretary of Justice reviews, pursuant to law, a tax

measure enacted by a local government unit to determine if

the officials performed their functions in accordance with law,

that is, with the prescribed procedure for the enactment of tax

ordinances and the grant of powers under the Local

Government Code, the same is an act of mere supervision, not

control.—Section 187 authorizes the Secretary of Justice to review

only the constitutionality or legality of the tax ordinance and, if

warranted, to revoke it on either or both of these grounds. When he

alters or modifies or sets aside a tax ordinance, he is not also

permitted to substitute his own judgment for the judgment of the

local government that enacted the measure. Secretary Drilon did

set aside the Manila Revenue Code, but he did not replace it with his

own version of what the Code should be. He did not pronounce the

ordinance unwise or unreasonable as a basis for its annulment. He

did not say that in his judgment it was a bad law. What he found only

was that it was illegal. All he did in reviewing the said measure was

determine if the petitioners were performing their functions in

accordance with law, that is, with the prescribed procedure for the

enactment of tax ordinances and the grant of powers to the city

government under the Local Government Code. As we see it, that

was an act not of control but of mere supervision.

Same; Same; Same; Control and Supervision, distinguished.—

An officer in control lays down the rules in the doing of an act. If

they are not followed, he may, in his discretion, order the act

undone or re-done by his subordinate or he may even decide to do

it himself. Supervision does not cover such authority. The

supervisor or superintendent merely sees to it that the rules are

followed, but he himself does not lay down such rules, nor does he

have the discretion to modify or replace them. If the rules are not

observed, he may order the work done or re-done but only to

conform to the prescribed rules. He may not prescribe his own

manner for the doing of the act. He has no judgment on this matter

except to see to it that the rules are followed. In the opinion of the

Court, Secretary Drilon did precisely this, and no more nor less

than this, and so performed an act not of control but of mere

supervision.

Same; Same; City Ordinances; The procedural requirements in

the enactment of Ordinance 7794 (Manila Revenue Code) have

been observed.—To get to the bottom of this question, the Court

acceded to the motion of the respondents and called for the


37

elevation to it of the said exhibits. We have carefully examined every

one of these exhibits and agree with the trial court that the

procedural requirements have indeed been observed. Notices of the

public hearings were sent to interested parties as evidenced by

Exhibits G-1 to 17. The minutes of the hearings are found in Exhibits

M, M-1, M-2, and M-3. Exhibits B and C show that the proposed

ordinances were published in the Balita and the Manila Standard on

April 21 and 25, 1993, respectively, and the approved ordinance was

published in the July 3, 4, 5, 1993 issues of the Manila Standard and

in the July 6, 1993 issue of Balita, as shown by Exhibits Q, Q-1, Q-2,

and Q-3. The only exceptions are the posting of the ordinance as

approved but this omission does not affect its validity, considering

that its publication in three successive issues of a newspaper of

general circulation will satisfy due process. It has also not been

shown that the text of the ordinance has been translated and

disseminated, but this requirement applies to the approval of local

development plans and public investment programs of the local

government unit and not to tax ordinances. [Drilon vs. Lim, 235

SCRA 135(1994)]

Taxation; Local Taxation; Failure to follow the procedure in

enactment of tax measures renders the same null and void;

Respon-dents’ failure to follow the procedure in enactment of

tax measures as mandated by Section 188 of the Local

Government Code of 1991, in that they failed to publish Tax

Ordinance No. 7988 for three consecutive days in a

newspaper of local circulation renders the same null and

void.—The RTC of Manila, Branch 21, in its Decision dated 28

November 2001, reiterated the findings of the DOJ Secretary that

respondents failed to follow the procedure in the enactment of tax

measures as mandated by Section 188 of the Local Government

Code of 1991, in that they failed to publish Tax Ordinance No. 7988

for three consecutive days in a newspaper of local circulation. From

the foregoing, it is evident that Tax Ordinance No. 7988 is null and

void as said ordinance was published only for one day in the 22 May

2000 issue of the Philippine Post in contravention of the

unmistakable directive of the Local Government Code of 1991.

Same; Same; If an order or law sought to be amended is

invalid, then it does not legally exist, there should be no

occasion or need to amend it.—This Court must reverse the

Order of the RTC of Ma-nila, Branch 21, dismissing petitioner’s case

as there is no basis in law for such dismissal. The amending law,

having been declared as null and void, in legal contemplation,

therefore, does not exist. Furthermore, even if Tax Ordinance No.

8011 was not declared null and void, the trial court should not have

dismissed the case on the reason that said tax ordinance had

already amended Tax Ordinance No. 7988. As held by this Court in

the case of People v. Lim, if an order or law sought to be amended

is invalid, then it does not legally exist, there should be no occasion

or need to amend it. [Coca-Cola Bottlers Philippines, Inc. vs. City

of Manila, 493 SCRA 279(2006)]

Taxation; Local Government Code; Under Section 195 of the

Local Government Code, a taxpayer who disagrees with a tax

assessment made by a local treasurer may file a written

protest thereof, and from a denial of the same, either appeal

the assessment before the court of competent jurisdiction or

pay the tax and then seek a refund.—Under Section 195 of the

Local Government Code which is quoted immediately below, a

taxpayer who disagrees with a tax assessment made by a local

treasurer may file a written protest thereof: SECTION 195. Protest

of Assessment.—When the local treasurer or his duly authorized

representative finds that the correct taxes, fees, or charges have

not been paid, he shall issue a notice of assessment stating the

nature of the tax, fee, or charge, the amount of deficiency, the

surcharges, interests and penalties. Within sixty (60) days from the

receipt of the notice of assessment, the taxpayer may file a written

protest with the local treasurer contesting the assessment;

otherwise, the assessment shall become final and executory. The

local treasurer shall decide the protest within sixty (60) days from

the time of its filing. If the local treasurer finds the protest to be

wholly or partly meritorious, he shall issue a notice cancelling

wholly or partially the assessment. However, if the local treasurer

finds the assessment to be wholly or partly correct, he shall deny

the protest wholly or partly with notice to the taxpayer. The

taxpayer shall have thirty (30) days from the receipt of the denial

of the protest or from the lapse of the sixty-day (60) period

prescribed herein within which to appeal with the court of

competent jurisdiction, otherwise the assessment becomes

conclusive and unappealable. (Emphasis and italics supplied) That

petitioner protested in writing against the assessment of tax due

and the basis thereof is on record as in fact it was on that account

that respondent sent him the above-quoted July 15, 2005 letter

which operated as a denial of petitioner’s written protest. Petitioner

should thus have, following the earlier above-quoted Section 195 of

the Local Government Code, either appealed the assessment before

the court of competent jurisdiction or paid the tax and then sought

a refund.

Same; Mandamus; Mandamus does not lie to compel the City

Treasurer to accept as full compliance of tax payment which in

his reasoning and assessment is deficient and incorrect.—

Petitioner did not observe any of these remedies available to him,

however. He instead opted to file a petition for mandamus to compel

respondent to accept payment of transfer tax as computed by him.

Mandamus lies only to compel an officer to perform a ministerial

duty (one which is so clear and specific as to leave no room for the

exercise of discretion in its performance) but not a discretionary

function (one which by its nature requires the exercise of

judgment). Respondent’s argument that “[m]andamus cannot lie to


38

compel the City Treasurer to accept as full compliance a tax

payment which in his reasoning and assessment is deficient and

incorrect” is thus persuasive. [San Juan vs. Castro, 541 SCRA

526(2007)]

Taxation; Injunction; Taxes being the lifeblood of the

government should be collected promptly; No court shall have

the authority to grant an injunction to restrain the collection of

any national internal revenue tax, fee or charge imposed by

the National Internal Revenue Code.—A principle deeply

embedded in our jurisprudence is that taxes being the lifeblood of

the government should be collected promptly, without unnecessary

hindrance or delay. In line with this principle, the National Internal

Revenue Code of 1997 (NIRC) expressly provides that no court shall

have the authority to grant an injunction to restrain the collection

of any national internal revenue tax, fee or charge imposed by the

code. An exception to this rule obtains only when in the opinion of

the Court of Tax Appeals (CTA) the collection thereof may jeopardize

the interest of the government and/or the taxpayer.

Same; Same; In the case of the collection of local taxes, there

is no express provision in the Local Government Code (LGC)

prohibiting courts from issuing an injunction to restrain local

governments from collecting taxes.—The situation, however, is

different in the case of the collection of local taxes as there is no

express provision in the LGC prohibiting courts from issuing an

injunction to restrain local governments from collecting taxes. Thus,

in the case of Valley Trading Co., Inc. v. Court of First Instance of

Isabela, Branch II, 171 SCRA 501 (1989), cited by the petitioner, we

ruled that: Unlike the National Internal Revenue Code, the Local Tax

Code does not contain any specific provision prohibiting courts

from enjoining the collection of local taxes. Such statutory lapse or

intent, however it may be viewed, may have allowed preliminary

injunction where local taxes are involved but cannot negate the

procedural rules and requirements under Rule 58.

Remedial Law; Injunction; Requisites to warrant the issuance of

a writ of the preliminary injunction.—Two requisites must exist

to warrant the issuance of a writ of preliminary injunction, namely:

(1) the existence of a clear and unmistakable right that must be

protected; and (2) an urgent and paramount necessity for the writ

to prevent serious damage.

Same; Same; As a rule, the issuance of preliminary injunction

rests entirely within the discretion of the court taking

cognizance of the case and will not be interfered with, except

where there is grave abuse of discretion committed by the

court.—As a rule, the issuance of a preliminary injunction rests

entirely within the discretion of the court taking cognizance of the

case and will not be interfered with, except where there is grave

abuse of discretion committed by the court. For grave abuse of

discretion to prosper as a ground for certiorari, it must be

demonstrated that the lower court or tribunal has exercised its

power in an arbitrary and despotic manner, by reason of passion or

personal hostility, and it must be patent and gross as would amount

to an evasion or to a unilateral refusal to perform the duty enjoined

or to act in contemplation of law. In other words, mere abuse of

discretion is not enough. [Angeles City vs. Angeles Electric


"A 'real estate tax' is a tax in rem against realty without

personal liability therefor on part of owner thereof, and a

judgment recovered in proceedings for enforcement of real

estate tax is one in rem against the realty without personal

liability against the owner." (36 Words and Phrases, 286, citing

Land O'Lakes Dairy Co. vs. Wadena County, 39 N. W. 2d. 164, 171, 229

Minn. 263)

A real estate tax is a direct tax on the ownership of lands and

buildings or other improvements thereon, not specially

exempted, and is payable regardless of whether the property

is used or not, although the value may vary in accordance with

such factor. The tax is usually single or indivisible, although

the land and building or improvements erected thereon are

assessed separately, except when the land and building or

improvements belong to separate owners. It is a fixed

proportion11 of the assessed value of the property taxed, and

requires, therefore, the intervention of assessors. It is

collected or payable at appointed times, and it constitutes a

superior lien on and is enforceable against the property

subject to such taxation, and not by imprisonment of the

owner.

The tax imposed by the ordinance in question does not possess the

aforestated attributes. It is not a tax on the land on which the

tenement houses are erected, although both land and tenement

houses may belong to the same owner. The tax is not a fixed

proportion of the assessed value of the tenement houses, and does

not require the intervention of assessors or appraisers. It is not

payable at a designated time or date, and is not enf orceable

against the tenement houses either by sale or distraint. Clearly,

therefore, the tax in question is not a real estate tax. [Villanueva

vs. City of Iloilo, 26 SCRA 578(1968)]

Taxation; Real Estate Tax; An installment purchaser of land and

building within a housing project of the GSIS is liable to pay

real estate taxes from the time possession of such property

was transferred to him, although pending full payment of the

purchase price, the seller GSIS retains ownership and title

over the property; Reasons.—What is determinative was its

rulings on the merits (not on the nomenclature or classification of

the contract), wherein it correctly held that purchaser-appellant

agreed to the contractual stipulation “to pay and shoulder all taxes

and assessments on the lot and building or improvements thereon


39

and insurance during the term of the contract. In view of his

acceptance of this condition, he is now estopped to deny his liability

to pay the taxes. And, on the other hand, when the GSIS sold the

property and imposed said condition, the agency altho exempt from

the payment of taxes clearly indicated that the property became

taxable upon its delivery to the purchaser” and that “the sole

determinative factor for exemption from realty taxes is the ‘use’ to

which the property is devoted. And where ‘use’ is the test, the

ownership is immaterial. (Martin on the Rev. Adm. Code, 1961, Vol. II,

p. 487, citing Apostolic Prefect of Mt. Province vs. Treasurer of

Baguio City, 71 Phil. 547). In the instant case, altho the property was

still in the name of the GSIS pending the payment of the full price its

use and possession was already transferred to the defendant.”

Such contractual stipulation that the purchaser on installments pay

the real estate taxes pending completion of payments, although the

seller who retained title is exempt from such taxes, is valid and

binding, absent any law to the contrary and none has been cited by

appellant. Thus, the delivery of possession by the seller GSIS to the

purchaser was clearly with the intention of passing to the latter the

possession, use of and control over said property, and all the other

attributes of ownership, short of the naked ownership, such that it

included in said transfer the incidental obligation to pay the taxes

thereon, for nothing more was left to the GSIS except its right to

receive full payment of the purchase price.

Same; Same; Same; Interpretation; Interpretative regulation by

the GSIS of Commonwealth Act 186 exempting the GSIS from

payment of taxes carries great weight.—The fact that in the

contract to sell, the GSIS, although aware of its own exemption from

taxation stipulated and exacted from the purchaser the payment of

taxes amounts to an interpretation on its part that such an

immunity was not to be transmitted to a private person who

becomes the beneficial owner and user of the property. Verily, this

interpretative regulation by the administrative agency officially

charged with the duty of administering and enforcing

Commonwealth Act 186 which contains tax-exempting provision at

issue carries great weight in determining the operation of said

provision.

Same; Same; Same; Same; Exemption of the GSIS from

payment of taxes does not cover its property the beneficial

use of which is granted to a taxable person; PD 464, although

inexistent at the time taxes were assessed against purchaser,

aids in determining legislative intent in the enactment of

Commonwealth Act 186; Case at bar.—Thus under this provision,

while the GSIS may be exempt from real estate tax the exemption

does not cover property belonging to it “where the beneficial use

thereof has been granted for consideration or otherwise to a

taxable person.” There can be no doubt that under the provisions of

the contract in question, the purchaser to whose possession the

property had been transferred was granted beneficial use thereof.

It follows on the strength of the provision Sec. 40(a) of PD 464 that

the said property is not exempt from the real property tax. While

this decree just cited was still inexistent at the time the taxes at

issue were assessed on the herein appellant, indeed its above

quoted provision sheds light upon the legislative intent behind the

provision of Commonwealth Act 186, pertaining to exemption of the

GSIS from taxes.

Same; Same; Same; Tax Exemptions; Tax exemptions are

strictly constituted against the taxpayer and liberally in favor

of the taxing authority.—The end result is but in consonance with

the established rule in taxation that exemption are held strictly

against the taxpayer and liberally in favor of the taxing authority.

[City of Baguio vs. Busuego, 100 SCRA 116(1980)]

The unpaid realty tax attaches to the property but is directly

chargeable against the taxable person who has actual and

beneficial use and possession of the property regardless of

whether or not that person is the owner.—The liability for taxes

generally rests on the owner of the real property at the time the tax

accrues. This is a necessary consequence that proceeds from the

fact of ownership. However, personal liability for realty taxes may

also expressly rest on the entity with the beneficial use of the real

property, such as the tax on property owned by the government but

leased to private persons or entities, or when the tax assessment is

made on the basis of the actual use of the property. In either case,

the unpaid realty tax attaches to the property but is directly

chargeable against the taxable person who has actual and beneficial

use and possession of the property regardless of whether or not

that person is the owner.

Legal interest should be an interest that is actual and material,

direct and immediate, not simply contingent or expectant.—In

Cariño v. Ofilado (217 SCRA 206 [1993]), we declared that legal

interest should be an interest that is actual and material, direct and

immediate, not simply contingent or expectant. The concept of the

directness and immediacy involved is no different from that

required in motions for intervention under Rule 19 of the Rules of

Court that allow one who is not a party to the case to participate

because of his or her direct and immediate interest, characterized

by either gain or loss from the judgment that the court may render.

In the present case, the NPC’s ownership of the plant will happen

only after the lapse of the 25-year period; until such time arrives,

the NPC’s claim of ownership is merely contingent, i.e., dependent

on whether the planttime. Prior to this event, the NPC’s real

interest is only in the continued operation of the plant for the

generation of electricity.

Same; Tax Liability; The tax liability referred to is the liability

arising from law that the local government unit can rightfully

and successfully enforce, not the contractual liability that is

enforceable between the parties to a contract.—On liability for


40

taxes, the NPC indeed assumed responsibility for the taxes due on

the power plant and its machineries, specifically, “all real estate

taxes and assessments, rates and other charges in respect of the

site, the buildings and improvements thereon and the [power

plant].” At first blush, this contractual provision would appear to

make the NPC liable and give it standing to protest the assessment.

The tax liability we refer to above, however, is the liability arising

from law that the local government unit can rightfully and

successfully enforce, not the contractual liability that is

enforceable between the parties to a contract as discussed below.

By law, the tax liability rests on Mirant based on its ownership, use,

and possession of the plant and its machineries.

Same; National Power Corporation (NPC) is neither the owner,

nor the possessor or user of the property taxed; No interest

on its part thus justifies any tax liability on its part other than

its voluntary contractual undertaking.—The NPC is neither the

owner, nor the possessor or user of the property taxed. No interest

on its part thus justifies any tax liability on its part other than its

voluntary contractual undertaking. Under this legal situation, only

Mirant as the contractual obligor, not the local government unit, can

enforce the tax liability that the NPC contractually assumed; the

NPC does not have the “legal interest” that the law and

jurisprudence require to give it personality to protest the tax

imposed by law on Mirant.

Same; Tax Exemptions; Two Elements to Successfully Claim

Exemption under Section 234(c) of the Local Government Code

(LGC).—The NPC’s claim of tax exemptions is completely without

merit. To successfully claim exemption under Section 234(c) of the

LGC, the claimant must prove two elements: a. the machineries and

equipment are actually, directly, and exclusively used by local water

districts and government-owned or controlled corporations; and b.

the local water districts and government-owned and controlled

corporations claiming exemption must be engaged in the supply and

distribution of water and/or the generation and transmission of

electric power.

Same; Same; Based on the clear wording of the law, it is the

machineries that are exempted from the payment of real

property tax, not the water or electricity that these

machineries generate and distribute.—Nor will NPC find solace in

its claim that it utilizes all the power plant’s generated electricity in

supplying the power needs of its customers. Based on the clear

wording of the law, it is the machineries that are exempted from the

payment of real property tax, not the water or electricity that these

machineries generate and distribute.

Same; Same; The test of exemption is the use, not the

ownership of the machineries devoted to generation and

transmission of electric power.—Even the NPC’s claim of

beneficial ownership is unavailing. The test of exemption is the use,

not the ownership of the machineries devoted to generation and

transmission of electric power. The nature of the NPC’s ownership

of these machineries only finds materiality in resolving the NPC’s

claim of legal interest in protesting the tax assessment on Mirant.

As we discussed above, this claim is inexistent for tax protest

purposes. [National Power Corporation vs. Province of Quezon,

593 SCRA 47(2009)]

Local Taxation; Tax Liability; The tax liability must be a liability

that arises from law, which the local government unit can

rightfully and successfully enforce, not the contractual liability

that is enforceable only between the parties to the contract.—

We further stated that the tax liability must be a liability that arises

from law, which the local government unit can rightfully and

successfully enforce, not the contractual liability that is

enforceable only between the parties to the contract. In the present

case, the Province of Quezon is a third party to the BOT Agreement

and could thus not exact payment from Napocor without violating

the principle of relativity of contracts. Corollarily, for reasons of

fairness, the local government units cannot be compelled to

recognize the protest of a tax assessment from Napocor, an entity

against whom it cannot enforce the tax liability.

Definition of Legal Interest; National Power Corporation

(Napocor) is clearly not vested with the requisite interest to

protest the tax assessment as it is not an entity having the

legal title over the machineries.—Legal interest is defined as

interest in property or a claim cognizable at law, equivalent to that

of a legal owner who has legal title to the property. Given this

definition, Napocor is clearly not vested with the requisite interest

to protest the tax assessment, as it is not an entity having the legal

title over the machineries. It has absolutely no solid claim of

ownership or even of use and possession of the machineries, as our

July 15, 2009 Decision explained.

Same; The phrase “person having legal interest in the

property” in Section 226 of the Local Government Code (LGC)

can include an entity that assumes another person’s tax

liability by contract.—While a real property owner’s failure to

comply with Sections 202 and 206 does not necessarily negate its

tax obligation nor invalidate its legitimate claim for tax exemption,

Napocor’s omission to do so in this case can be construed as

contradictory to its claim of ownership of the subject machineries.

That it assumed liability for the taxes that may be imposed on the

subject machineries similarly does not clothe it with legal title over

the same. We do not believe that the phrase “person having legal

interest in the property” in Section 226 of the LGC can include an

entity that assumes another person’s tax liability by contract.

Taxation; Assessment; Tax Exemptions; A claim for tax

exemption whether full or partial does not question the

authority of local assessor to assess real property tax.—Like


41

Olivarez, Napocor, by claiming exemption from realty taxation, is

simply raising a question of the correctness of the assessment. A

claim for tax exemption, whether full or partial, does not question

the authority of local assessor to assess real property tax. This

may be inferred from Section 206. [National Power Corporation

vs. Province of Quezon and Municipality of Pagbilao, 611 SCRA

71(2010)]

Government Service Insurance System; Legal Research; In

1936, Commonwealth Act No. (CA) 186 was enacted abolishing

the then pension systems under Act No. 1638, as amended, and

establishing the Government Service Insurance System (GSIS)

to manage the pension system, life and retirement insurance,

and other benefits of all government employees.—In 1936,

Commonwealth Act No. (CA) 186 was enacted abolishing the then

pension systems under Act No. 1638, as amended, and establishing

the GSIS to manage the pension system, life and retirement

insurance, and other benefits of all government employees. Under

what may be considered as its first charter, the GSIS was set up as

a non-stock corporation managed by a board of trustees. Notably,

Section 26 of CA 186 provided exemption from any legal process

and liens but only for insurance policies and their proceeds, thus:

Section 26. Exemption from legal process and liens.—No policy of

life insurance issued under this Act, or the proceeds thereof, when

paid to any member thereunder, nor any other benefit granted

under this Act, shall be liable to attachment, garnishment, or other

process, or to be seized, taken, appropriated, or applied by any

legal or equitable process or operation of law to pay any debt or

liability of such member, or his beneficiary, or any other person

who may have a right thereunder, either before or after payment;

nor shall the proceeds thereof, when not made payable to a named

beneficiary, constitute a part of the estate of the member for

payment of his debt. x x x

Same; Taxation; It is to be noted that prominently added in

Government Service Insurance System’s (GSIS’s) present

charter is a paragraph precluding any implied repeal of the

tax-exempt clause so as to protect the solvency of GSIS funds;

Restrictions in the Government Service Insurance System

(GSIS) Charter which for a future express repeal do not make

the proviso an irrepealable law, for such restrictions do not

impinge or limit the carte blanche legislative authority of the

legislature to so amend it.—The foregoing exempting proviso,

couched as it were in an encompassing manner, brooks no other

construction but that GSIS is exempt from all forms of taxes. While

not determinative of this case, it is to be noted that prominently

added in GSIS’ present charter is a paragraph precluding any

implied repeal of the tax-exempt clause so as to protect the

solvency of GSIS funds. Moreover, an express repeal by a

subsequent law would not suffice to affect the full exemption

benefits granted the GSIS, unless the following conditionalities are

met: (1) The repealing clause must expressly, specifically, and

categorically revoke or repeal Sec. 39; and (2) a provision is

enacted to substitute or replace the exemption referred to herein

as an essential factor to maintain or protect the solvency of the

fund. These restrictions for a future express repeal,

notwithstanding, do not make the proviso an irrepealable law, for

such restrictions do not impinge or limit the carte blanche

legislative authority of the legislature to so amend it. The

restrictions merely enhance other provisos in the law ensuring the

solvency of the GSIS fund.

Same; Same; While recognizing the exempt status of

Government Service Insurance System (GSIS) owing to the

reenactment of the full tax exemption clause under Sec. 39 of

Republic Act No. 8291 in 1997, the ponencia in City of Davao v.

RTC, Branch XII, Davao City, 467 SCRA 280 (2005), appeared

to have failed to take stock of and fully appreciate the all-

embracing condoning proviso in the very same Sec. 39 which,

for all intents and purposes, considered as paid “any

assessment against the GSIS as of the approval of this Act.”—

While recognizing the exempt status of GSIS owing to the

reenactment of the full tax exemption clause under Sec. 39 of RA

8291 in 1997, the ponencia in City of Davao appeared to have failed

to take stock of and fully appreciate the all-embracing condoning

proviso in the very same Sec. 39 which, for all intents and

purposes, considered as paid “any assessment against the GSIS as

of the approval of this Act.” If only to stress the point, we hereby

reproduce the pertinent portion of said Sec. 39: SEC. 39. Exemption

from Tax, Legal Process and Lien.—x x x Taxes imposed on the GSIS

tend to impair the actuarial solvency of its funds and increase the

contribution rate necessary to sustain the benefits of this Act.

Accordingly, notwithstanding, any laws to the contrary, the GSIS, its

assets, revenues including all accruals thereto, and benefits paid,

shall be exempt from all taxes, assessments, fees, charges or

duties of all kinds. These exemptions shall continue unless expressly

and specifically revoked and any assessment against the GSIS as of

the approval of this Act are hereby considered paid. Consequently,

all laws, ordinances, regulations, issuances, opinions or

jurisprudence contrary to or in derogation of this provision are

hereby deemed repealed, superseded and rendered ineffective and

without legal force and effect.

Same; Same; The Court’s fairly recent ruling in Manila

International Airport Authority v. Court of Appeals, 495 SCRA

591 (2006), a case likewise involving real estate tax

assessments by a Metro Manila city on the real properties

administered by Manila International Airport Authority (MIAA),

argues for the non-tax liability of Government Service

Insurance System (GSIS) for real estate taxes.—Apart from the

foregoing consideration, the Court’s fairly recent ruling in Manila

International Airport Authority v. Court of Appeals, 495 SCRA 591


42

(2006), a case likewise involving real estate tax assessments by a

Metro Manila city on the real properties administered by MIAA,

argues for the non-tax liability of GSIS for real estate taxes. There,

the Court held that MIAA does not qualify as a GOCC, not having

been organized either as a stock corporation, its capital not being

divided into shares, or as a non-stock corporation because it has no

members. MIAA is rather an instrumentality of the National

Government and, hence, outside the purview of local taxation by

force of Sec. 133 of the LGC providing in context that “unless

otherwise provided,” local governments cannot tax national

government instrumentalities. And as the Court pronounced in

Manila International Airport Authority, the airport lands and

buildings MIAA administers belong to the Republic of the Philippines,

which makes MIAA a mere trustee of such assets. No less than the

Administrative Code of 1987 recognizes a scenario where a piece of

land owned by the Republic is titled in the name of a department,

agency, or instrumentality.

Same; Same; Government Service Insurance System (GSIS), as

a government instrumentality, is not a taxable juridical person

under Sec. 133(o) of the Local Government Code.—Thus read

together, the provisions allow the Republic to grant the beneficial

use of its property to an agency or instrumentality of the national

government. Such grant does not necessarily result in the loss of

the tax exemption. The tax exemption the property of the Republic

or its instrumentality carries ceases only if, as stated in Sec.

234(a) of the LGC of 1991, “beneficial use thereof has been granted,

for a consideration or otherwise, to a taxable person.” GSIS, as a

government instrumentality, is not a taxable juridical person under

Sec. 133(o) of the LGC. GSIS, however, lost in a sense that status

with respect to the Katigbak property when it contracted its

beneficial use to MHC, doubtless a taxable person. Thus, the real

estate tax assessment of PhP 54,826,599.37 covering 1992 to 2002

over the subject Katigbak property is valid insofar as said tax

delinquency is concerned as assessed over said property.

Same; Same; The unpaid tax attaches to the property and is

chargeable against the taxable person who had actual or

beneficial use and possession of it regardless of whether or

not he is the owner.—The next query as to which between GSIS, as

the owner of the Katigbak property, or MHC, as the lessee thereof,

is liable to pay the accrued real estate tax, need not detain us long.

MHC ought to pay. As we declared in Testate Estate of Concordia T.

Lim, “the unpaid tax attaches to the property and is chargeable

against the taxable person who had actual or beneficial use and

possession of it regardless of whether or not he is the owner.” Of

the same tenor is the Court’s holding in the subsequent Manila

Electric Company v. Barlis, 357 SCRA 832 (2001) and later in

Republic v. City of Kidapawan, 477 SCRA 324 (2005). Actual use

refers to the purpose for which the property is principally or

predominantly utilized by the person in possession thereof. Being in

possession and having actual use of the Katigbak property since

November 1991, MHC is liable for the realty taxes assessed over the

Katigbak property from 1992 to 2002.

Same; Same; A valid tax levy presupposes a corresponding tax

liability; Even granting arguendo that Government Service

Insurance System’s (GSIS’s) liability for realty taxes attached

from 1992, when Republic Act No. 7160 effectively lifted its tax

exemption under Presidential Decree Nos. 1146 to 1996, when

Republic Act No. 8291 restored the tax incentive, the levy on

the subject properties to answer for the assessed realty tax

delinquencies cannot still be sustained for the simple reason

that the governing law, Republic Act No. 8291, in force at the

time of the levy prohibits it.—In light of the foregoing disquisition,

the issue of the propriety of the threatened levy of subject

properties by the City of Manila to answer for the demanded realty

tax deficiency is now moot and academic. A valid tax levy

presupposes a corresponding tax liability. Nonetheless, it will not be

remiss to note that it is without doubt that the subject GSIS

properties are exempt from any attachment, garnishment,

execution, levy, or other legal processes. This is the clear import of

the third paragraph of Sec. 39, RA 8291, which we quote anew for

clarity: x x x The Court would not be indulging in pure speculative

exercise to say that the underlying legislative intent behind the

above exempting proviso cannot be other than to isolate GSIS funds

and properties from legal processes that will either impair the

solvency of its fund or hamper its operation that would ultimately

require an increase in the contribution rate necessary to sustain

the benefits of the system. Throughout GSIS’ life under three

different charters, the need to ensure the solvency of GSIS fund has

always been a legislative concern, a concern expressed in the tax-

exempting provisions. Thus, even granting arguendo that GSIS’

liability for realty taxes attached from 1992, when RA 7160

effectively lifted its tax exemption under PD 1146, to 1996, when RA

8291 restored the tax incentive, the levy on the subject properties

to answer for the assessed realty tax delinquencies cannot still be

sustained. The simple reason: The governing law, RA 8291, in force

at the time of the levy prohibits it. And in the final analysis, the

proscription against the levy extends to the leased Katigbak

property, the beneficial use doctrine, notwithstanding.

[Government Service Insurance System vs. City Treasurer of

the City of Manila, 609 SCRA 330(2009)]

Property; Immovable Property by Destination; Two requisites

before movables may be deemed to have immobilized; Tools

and equipments merely incidental to business not subject to

real estate tax.—Movable equipments, to be immobilized in

contemplation of Article 415 of the Civil Code, must be the essential

and principal elements of an industry or works which are carried on

in a building or on a piece of land. Thus, where the business is one

of transportation, which is carried on without a repair or service


43

shop, and its rolling equipment is repaired or serviced in a shop

belonging to another, the tools and equipments in its repair shop

which appear movable are merely incidentals and may not be

considered immovables, and, hence, not subject to assessment as

real estate for purposes of the real estate tax. [Mindanao Bus Co.

vs. City Assessor and Treasurer, 6 SCRA 197(1962)]

Taxation; Property; Courts; Jurisdiction; The Central Board of

Assessment Appeals, and not the Court of Tax Appeals has

appellate jurisdiction over decisions of the provincial or city

boards of assessment appeals.—The Solicitor General’s

contention that the Court of Tax Appeals has exclusive appellate

jurisdiction over this case is not correct. When Republic Act No. 1125

created the Tax Court in 1954, there was as yet no Central Board of

Assessment Appeals Section 7(3) of that law in providing that the

Tax Court had jurisdiction to review by appeal decisions of

provincial or city boards of assessment appeals had in mind the

local boards of assessment appeals but not the Central Board of

Assessment Appeals which under the Real Property Tax Code has

appellate jurisdiction over decisions of the said local boards of

assessment appeals and is. therefore, in the same category as the

Tax Court.

Same; Same; Same; Same; Supreme Court; Certiorari; The Heal

Property Tax Code does not provide for Supreme Court review

of decisions of the Central Board of Assessment Appeals. The

only remedy for Supreme Court review of the Central Board’s

decision is by Special Civil Action of Certiorari.—Section 36 of

the Real Property Tax Code provides that the decision of the Central

Board of Assessment Appeals shall become final and executory

after the lapse of fifteen days from the receipt of its decision by the

appellant. Within that fifteen-day period, a petition for

reconsideration may be filed. The Code does not provide for the

review of the Board’s decision by this Court. Consequently, the only

remedy available for seeking a review by this Court of the decision

of the Central Board of Assessment Appeals is the special civil

action of certiorari, the recourse resorted to herein by Caltex

(Philippines), Inc.

Same; Same; Gasoline station equipments and machineries are

subject to the real property tax.—We hold that the said

equipment and machinery, as appurtenances to the gas station

building or shed owned by Caltex (as to which it is subject to realty

tax) and which fixtures are necessary to the operation of the gas

station, for without them the gas station would be useless, and

which have been attached or affixed permanently to the gas station

site or embedded therein, are taxable improvements and machinery

within the meaning of the Assessment Law and the Real Property

Tax Code.

Same; Same; Gasoline station equipments and machineries are

permanent fixtures for purposes of realty taxation.—Here, the

question is whether the gas station equipment and machinery

permanently affixed by Caltex to its gas station and pavement

(which are indubitably taxable realty) should be subject to the realty

tax. This question is different from the issue raised in the Davao

Saw Mill case. Improvements on land are commonly taxed as realty

even though for some purposes they might be considered

personalty (84 C.J.S. 181-2, Notes 40 and 41). “It is a familiar

phenomenon to see things classed as real property for purposes of

taxation which on general principle might be considered personal

property” (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630,

633). [Caltex (Phil.) Inc. vs. Central Board of Assessment

Appeals, 114 SCRA 296(1982)]

Real property, for taxation purposes, defined.—For purposes of

taxation, the term “real property” may include things which should

generally be regarded as personal property (84 C.J.S. 171, Note 8). It

is a familiar phenomenon to see things classed as real property for

purposes of taxation which on general principle might be

considered personal property (Standard Oil Co. of New York vs.

Jaramillo, 44 Phil. 630, 633). [Manila Electric Co. vs. Central

Board of Assessment Appeals, 114 SCRA 273(1982)]

Taxation; Real property tax; Steel towers of Meralco exempt

under its franchise.—The tax exemption privilege of the Meralco

on its poles, as granted by its franchise (Act No. 484), is held to

include its steel towers.

Same; Same; Term "pole" includes steel towers.—The term

"pole" refers to an upright standard to the top of which something

is affixed or by which something is supported, and includes a steel

tower of an electric power company, like the Meralco.

Same; Same; Steel towers of electric company not real

property.—The steel towers of an electric company do not

constitute real property for the purpose of the real property tax.

Same; Same; Refund; City Treasurer held responsible.—The City

Treasurer of Quezon City is held responsible for the refund of real

property taxes, despite his contention that Quezon City, which was

not made a party to the suit, is the real party in interest, not only

because this question was not raised in the lower court but also

because, factually, actually, it was he who had insisted that the

taxpayer pay the taxes now to be refunded. [Board of Assessment

Appeals vs. Manila Electric Company, 10 SCRA 68(1964)]

Taxation; Zoning; Tax declaration is not conclusive of the

nature of the property for zoning purposes.—The reversal by

the Court of Appeals of the trial court’s decision was based on

Tepoot’s building being declared for taxation purposes as

residential. It is our considered view, however, that a tax

declaration is not conclusive of the nature of the property for

zoning purposes. A property may have been declared by its owner

as residential for real estate taxation purposes but it may well be


44

within a commercial zone. A discrepancy may thus exist in the

determination of the nature of property for real estate taxation

purposes vis-a-vis the determination of a property for zoning

purposes.

Same; Same; Real Estate Tax Code; Under Section 22 of Real

Estate Tax Code, appraisal and assessment are based on the

actual use irrespective of any previous assessment or

taxpayer’s valuation.—Needless to say, even if we are to examine

the evidentiary value of a tax declaration under the Real Property

Tax Code, a tax declaration only enables the assessor to identify the

same for assessment levels. In fact, a tax declaration does not bind

a provincial/city assessor, for under Sec. 22 of the Real Estate Tax

Code, appraisal and assessment are based on the actual use

irrespective of “any previous assessment or taxpayer’s valuation

thereon,” which is based on a taxpayer’s declaration. In fact, a piece

of land declared by a taxpayer as residential may be assessed by

the provincial or city assessor as commercial because its actual

use is commercial.

Same; Same; Even if a building declared for taxation purposes

as residential, once a local government has reclassified an

area as commercial, that determination for zoning purposes

must prevail.—The trial court’s determination that Mr. Tepoot’s

building is commercial and, therefore, Sec. 8 is inapplicable, is

strengthened by the fact that the Sangguniang Panlungsod has

declared the questioned area as commercial or C-2. Consequently,

even if Tepoot’s building was declared for taxation purposes as

residential, once a local government has reclassified an area as

commercial, that determination for zoning purposes must prevail.

While the commercial character of the questioned vicinity has been

declared thru the ordinance, private respondents have failed to

present convincing arguments to substantiate their claim that

Cabaguio Avenue, where the funeral parlor was constructed, was

still a residential zone. Unquestionably, the operation of a funeral

parlor constitutes a “commercial purpose,” as gleaned from

Ordinance No. 363.

Same; Same; Constitutional Law; Police Power; Declaration of

an area as a commercial zone thru a municipal ordinance is an

exercise of police power.—The declaration of the said area as a

commercial zone thru a municipal ordinance is an exercise of police

power to promote the good order and general welfare of the people

in the locality. Corollary thereto, the state, in order to promote the

general welfare, may interfere with personal liberty, with property,

and with business and occupations. Thus, persons may be subjected

to certain kinds of restraints and burdens in order to secure the

general welfare of the state and to this fundamental aim of

government, the rights of the individual may be subordinated. The

ordinance which regulates the location of funeral homes has been

adopted as part of comprehensive zoning plans for the orderly

development of the area covered thereunder. [Patalinghug vs.

Court of Appeals, 229 SCRA 554(1994)]

Taxation; Tax Assessment; Section 5 of PD 464 provides that

all real property, shall be appraised at the current and fair

market value prevailing in the locality where the property is

situated.—We cannot sustain petitioner’s contention. The cited

provision merely defines “market value.” It does not in any way

direct that the market value as defined therein should be used as

basis in determining the value of a property for purposes of real

property taxation. On the other hand, Section 5 of PD 464 provides

unequivocally that “(a)ll real property, whether taxable or exempt,

shall be appraised at the current and fair market value prevailing in

the locality where the property is situated.”

Same; Same; A general revision of real property assessment is

required by law every five (5) years to ensure that real

properties are assessed at their current and fair market

values.—Other circumstances militate against the acceptance of

petitioner’s argument. Unscrupulous sellers of real estate often

understate the selling price in the deed of sale to minimize their tax

liability. Moreover, the value of real property does not remain

stagnant; it is unrealistic to expect that the current market value of

a property is the same as its cost of acquisition ten years ago. In

this light, a general revision of real property assessment is

required by law every five (5) years to ensure that real properties

are assessed at their current and fair market values.

Same; Same; It is a matter of plain common sense that a

building with more floors, has a higher market value than one

with fewer floors, provided that both are of the same

materials.—It is a matter of plain common sense that a building

with more floors has a higher market value than one with fewer

floors, provided that both are of the same materials. Hence, the tax

declaration of the building in question should have accurately

reflected its actual area and number of floors, these being

necessary for the accurate valuation thereof. [Sesbreño vs.

Central Board of Assessment Appeals, 270 SCRA 360(1997)]

Taxation; Real Property Tax; Assessments; Local Government

Units; Steps to be Followed for the Mandatory Conduct of

General Revision of Real Property Assessments.—Based on the

evidence presented by the parties, the steps to be followed for the

mandatory conduct of General Revision of Real Property

assessments, pursuant to the provision of Sec. 219 of R.A. No. 7160

are as follows: “1. The preparation of Schedule of Fair Market

Values. 2. The enactment of Ordinances: a) levying an annual “ad

valorem” tax on real property and an additional tax accruing to the

SEF; b) fixing the assessment levels to be applied to the market

values of real properties; c) providing necessary appropriation to

defray expenses incident to general revision of real property


45

assessments; and d) adopting the Schedule of Fair Market Values

prepared by the assessors.”

Same; Same; Same; Procedure in Computing the Real Property

Tax.—Coming down to specifics, we find it desirable to lay down the

procedure in computing the real property tax. With the introduction

of assessment levels, tax rates could be maintained, although tax

payments can be made either higher or lower depending on their

percentage (assessment level) applied to the fair market value of

property to derive its assessed value which is subject to tax.

Moreover, classes and values of real properties can be given

proper consideration, like assigning lower assessment levels to

residential properties and higher levels to properties used in

business. The procedural steps in computing the real property tax

are as follows: “1) Ascertain the assessment level of the property;

2) Multiply the market value by the applicable assessment level of

the property; 3) Find the tax rate which corresponds to the class

(use) of the property and multiply the assessed value by the

applicable tax rates.”

Same; Same; Same; Due Process; Manila Ordinance No. 7905 is

favorable to the taxpayers when it specifically states that the

reduced assessment levels shall be applied retroactively; In

enacting Ordinance No. 7905, the due process of law was

considered by the City of Manila so that the increase in realty

tax will not amount to the confiscation of property.—Although,

we are in full accord with the ruling of the trial court, it is likewise

necessary to stress that Manila Ordinance No. 7905 is favorable to

the taxpayers when it specifically states that the reduced

assessment levels shall be applied retroactively to January 1, 1996.

The reduced assessment levels multiplied by the schedule of fair

market values of real properties, provided by Manila Ordinance No.

7894, resulted to decrease in taxes. To that extent, the ordinance is

likewise, a social legislation intended to soften the impact of the

tremendous increase in the value of the real properties subject to

tax. The lower taxes will ease, in part, the economic predicament of

the low and middle-income groups of taxpayers. In enacting this

ordinance, the due process of law was considered by the City of

Manila so that the increase in realty tax will not amount to the

confiscation of the property. [Lopez vs. City of Manila, 303 SCRA

448(1999)]

Taxation; Hospitals; Physicians; The fact alone that the doctors

and medical specialists holding clinics in a separate Medical

Arts Center are those duly accredited by the Hospital—they are

consultants of the hospital and the ones who can treat the

Hospital’s patients confined in it—takes away the said Medical Arts

Center from being categorized as “commercial” since a tertiary

hospital is required by law to have a pool of physicians who

comprise the required medical departments in various medical

fields.—We so hold that CHHMAC is an integral part of CHH. It is

undisputed that the doctors and medical specialists holding clinics

in CHHMAC are those duly accredited by CHH, that is, they are

consultants of the hospital and the ones who can treat CHH’s

patients confined in it. This fact alone takes away CHHMAC from

being categorized as “commercial” since a tertiary hospital like

CHH is required by law to have a pool of physicians who comprises

the required medical departments in various medical fields.

Same; Same; Same; The fact that the physicians are holding

office in a separate building does not take away the essence

and nature of their services vis-à-vis the over-all operation of

the hospital and the benefits to the hospital’s patients—given

what the law requires, it is clear that the Medical Arts Center

is an integral part of the Hospital.—Sec. 6.3, Administrative

Order No. (AO) 68-A, Series of 1989, Revised Rules and Regulations

Governing the Registration, Licensure and Operation of Hospitals in

the Philippines pertinently provides: Tertiary Hospital—is fully

departmentalized and equipped with the service capabilities needed

to support certified medical specialists and other licensed

physicians rendering services in the field of Medicine, Pediatrics,

Obstetrics and Gynecology, Surgery, their subspecialties and

ancillary services. (Emphasis supplied.) Moreover, AO 68-A likewise

provides what clinic service and medical ancillary service are, thus:

11.3.2Clinical Service—The medical services to patients shall be

performed by the medical staff appointed by the governing body of

the institution. x x x 11.3.3 Medical Ancillary Service—These are

support services which include Anesthesia Department, Pathology

Department, Radiology Department, Out-Patient Department (OPD),

Emergency Service, Dental, Pharmacy, Medical Records and Medical

Social Services. Based on these provisions, these physicians holding

offices or clinics in CHHMAC, duly appointed or accredited by CHH,

precisely fulfill and carry out their roles in the hospital’s services

for its patients through the CHHMAC. The fact that they are holding

office in a separate building, like at CHHMAC, does not take away the

essence and nature of their services vis-à-vis the over-all

operation of the hospital and the benefits to the hospital’s patients.

Given what the law requires, it is clear that CHHMAC is an integral

part of CHH.

Same; Same; Same; The exemption in favor of property used

exclusively for charitable or educational purposes is “not

limited to property actually indispensable” therefore but

extends to facilities which are “incidental to and reasonably

necessary for” the accomplishment of said purposes, such as,

in the case of hospitals, “a school for training nurses, a

nurses’ home, property use to provide housing facilities for

interns, resident doctors, superintendents, and other

members of the hospital staff, and recreational facilities for

student nurses, interns and residents” such as “athletic

fields,” including “a farm used for the inmates of the

institution.”—The CHHMAC, being hundred meters away from the

CHH main building, does not denigrate from its being an integral


46

part of the latter. As aptly applied by the CBAA, the Herrera ruling

on what constitutes property exempt from taxation is indeed

applicable in the instant case, thus: Moreover, the exemption in

favor of property used exclusively for charitable or educational

purposes is “not limited to property actually indispensable”

therefore (Cooley on Taxation, Vol. 2, p. 1430), but extends to

facilities which are “incidental to and reasonably necessary for” the

accomplishment of said purposes, such as, in the case of hospitals,

“a school for training nurses, a nurses’ home, property use to

provide housing facilities for interns, resident doctors,

superintendents, and other members of the hospital staff, and

recreational facilities for student nurses, interns and residents”

(84 C.J.S., 621), such as “athletic fields,” including “a farm used for

the inmates of the institution” (Cooley on Taxation, Vol. 2, p. 1430).

Verily, being an integral part of CHH, CHHMAC should be under the

same special assessment level of as that of the former.

Same; Same; Same; Indubitably, the operation of the hospital is

not only for confinement and surgical operations where

hospital beds and operating theaters are required—the usual

course is that patients have to be diagnosed, and then treatment

and follow-up consultations follow or are required, while other

cases may necessitate surgical operations or other medical

intervention and confinement.—The operation of the hospital is not

only for confinement and surgical operations where hospital beds

and operating theaters are required. Generally, confinement is

required in emergency cases and where a patient necessitates

close monitoring. The usual course is that patients have to be

diagnosed, and then treatment and follow-up consultations follow or

are required. Other cases may necessitate surgical operations or

other medical intervention and confinement. Thus, the more the

patients, the more important task of diagnosis, treatment, and care

that may or may not require eventual confinement or medical

operation in the CHHMAC. Thus, the importance of CHHMAC in the

operation of CHH cannot be over-emphasized nor disputed. Clearly,

it plays a key role and provides critical support to hospital

operations.

Same; Same; Same; A hospital’s charge of rentals for the

offices and clinics its accredited physicians occupy cannot be

equated to a commercial venture, which is mainly for profit.—

Respondent’s charge of rentals for the offices and clinics its

accredited physicians occupy cannot be equated to a commercial

venture, which is mainly for profit. Respondent’s explanation on this

point is well taken. First, CHHMAC is only for its consultants or

accredited doctors and medical specialists. Second, the charging of

rentals is a practical necessity: (1) to recoup the investment cost of

the building, (2) to cover the rentals for the lot CHHMAC is built on,

and (3) to maintain the CHHMAC building and its facilities. Third, as

correctly pointed out by respondent, it pays the proper taxes for its

rental income. And, fourth, if there is indeed any net income from

the lease income of CHHMAC, such does not inure to any private or

individual person as it will be used for respondent’s other

charitable projects. Given the foregoing arguments, we fail to see

any reason why the CHHMAC building should be classified as

“commercial” and be imposed the commercial level of 35% as it is

no t operated primarily for profit but as an integral part of CHH. The

CHHMAC, with operations being devoted for the benefit of the CHH’s

patients, should be accorded the 10% special assessment. [City

Assessor of Cebu City vs. Association of Benevola de Cebu,

Inc., 524 SCRA 128(2007)]

Taxation; Real Estate Taxes; Unpaid real estate taxes attaches

to the property and is chargeable against the taxable person

who had actual or beneficial use and possession of it,

regardless of whether or not he is the owner.—The records

show that the subject properties were leased to other persons

during the time when GSIS held their titles, as was the case during

the ownership of the late Concordia Lim. However, the real estate

taxes later assessed on the said properties for the years 1977, 1978

and the first quarter of 1979 were charged against the plaintiff-

appellant even if the latter was not the beneficial user of the

parcels of land. In real estate taxation, the unpaid tax attaches to

the property and is chargeable against the taxable person who had

actual or beneficial use and possession of it regardless of whether

or not he is the owner. (Sections 3(a) and 19 of P.D. No. 464;

Province of Nueva Ecija v. Imperial Mining Co., Inc., 118 SCRA 632

[1982]).

Same; Same; Courts; Jurisdiction; The Regional Trial Court has

jurisdiction over actions for refund or reimbursement of taxes

paid under protest.—The Court rules that the plaintiff-appellant

correctly filed the action for refund/reimbursement with the lower

court as it is the courts which have jurisdiction to try cases

involving the right to recover sums of money. Section 30 of the Real

Property Tax Code is not applicable because what is questioned is

the imposition of the tax assessed and who should shoulder the

burden of the tax. There is no dispute over the amount assessed on

the properties for tax purposes. Section 30 pertains to the

administrative act of listing and valuation of the property for

purposes of real estate taxation. It provides: “Sec-tion 30. Local

Board of Assessment Appeals—Any owner who is not satisfied with

the action of the provincial or city assessor in the assessment of

his property may, within sixty days from the date of receipt by him

of the written notice of assessment as provided in this Code, appeal

to the Board of Assessment Appeals of the province or city, by filing

with it a petition under oath using the form prescribed for the

purpose, together with copies of the tax declarations and such

affidavit or documents submitted in support of the appeal.” In

further support of the conclusion that the lower court has

jurisdiction to try the instant case, we note Section 64 of the Real

Property Tax Code which provides that a “court shall entertain a


47

suit assailing the validity of a tax assessed” after the taxpayer shall

have paid under protest.

Same; Same; The real estate taxes assessed and collected

from appellants for the periods prior to the date of

repurchase, not valid and a refund by the City Government is

in order; Appellant, however, is not entitled to reimbursement

from the GSIS.—The facts of the case constrain us to rule that the

plaintiff-appellant is not liable to pay the real property tax due for

the years 1977, 1978 and first quarter of 1979. The clause in the

Deed of Sale cannot be interpreted to include taxes for the periods

prior to April 11, 1979, the date of repurchase. To impose the real

property tax on the estate which was neither the owner nor the

beneficial user of the property during the designated periods would

not only be contrary to law but also unjust. If plaintiff-appellant

intended to assume the liability for realty taxes for the prior

periods, the contract should have specifically stated “real estate

taxes” due for the years 1977, 1978 and first quarter of 1979. The

payments made by the plaintiff-appellant cannot be construed to be

an admission of a tax liability since they were paid under protest

and were done only in compliance with one of the requirements for

the consummation of the sale as directed by the City Treasurer of

Manila. Hence, the tax assessed and collected from the plaintiff-

appellants is not valid and arefund by the City government is in

order. The Court rules, however, that the plaintiff-appellant is not

entitled to a reimbursement from the respondent GSIS because: (1)

the GSIS is exempt from payment of the real property tax under

Sec. 33 of the Revised Charter of the GSIS; and (2) the tax should

be based on “actual use” of the property. Section 40 of the Real

Property Tax Code supports the view that not even the GSIS is liable

to pay real property tax on public land leased to other persons.

[Testate Estate of Concordia T. Lim vs. City of Manila, 182 SCRA

482(1990)]

Taxation; Given that petitioner is engaged in a service-oriented

commercial endeavor, its carriageways and terminal stations

are patrimonial property subject to tax, notwithstanding its

claim of being a government-owned or controlled

corporation.—Though the creation of the LRTA was impelled by

public service—to provide mass transportation to alleviate the

traffic and transportation, situation in Metro Manila—its operation

undeniably partakes of ordinary business. Petitioner is clothed with

corporate status and corporate powers in the furtherance of its

proprietary objectives. Indeed, it operates much like any private

corporation engaged in the mass transport industry. Given that it is

engaged in a service-oriented commercial endeavor, its

carriageways and terminal stations are patrimonial property

subject to tax, notwithstanding its claim of being a government-

owned or controlled corporation.

Same; Under the Real Property Tax Code, real property is

classified for assessment purposes on the basis of actual

use.—Under the Real Property Tax Code, real property is classified

for assessment purposes on the basis of actual use, which is

defined as “the purpose for which the property is principally or

predominantly utilized by the person in possession of the property.”

Same; Petitioner does not exist solely for public service, and

the LRT carriageways and terminal stations are not exclusively

for public use.—Unlike public roads which are open for use by

everyone, the LRT is accessible only to those who pay the required

fare. It is thus apparent that petitioner does not exist solely for

public service, and that the LRT carriageways and terminal stations

are not exclusively for public use. Although petitioner is a public

utility, it is nonetheless profit-earning. It actually uses those

carriageways and terminal stations in its public utility business and

earns money therefrom.

Same; Any claim for tax exemption is strictly construed

against the claimant.—Taxation is the rule and exemption is the

exception. Any claim for tax exemption is strictly construed against

the claimant. LRTA has not shown its eligibility for exemption; hence,

it is subject to the tax. [Light Rail Transit Authority vs. Central

Board of Assessment Appeals, 342 SCRA 692(2000)]

Local Government Units; Municipal Corporations; Taxation;

Local Assessment Regulations No. 1-92 suggests three

approaches in estimating the fair market value, namely (1) the

sales analysis or market data approach; (2) the income

capitalization approach; and (3) the replacement or

reproduction cost approach.—Local Assessment Regulations No.

1-92 suggests three approaches in estimating the fair market value,

namely: (1) the sales analysis or market data approach; (2) the

income capitalization approach; and (3) the replacement or

reproduction cost approach. Under the sales analysis approach, the

price paid in actual market transactions is considered by taking into

account valid sales data accumulated from among the various

sources stated in Sections 202, 203, 208, 209, 210, 211 and 213 of

the Code. In the income capitalization approach, the value of an

income-producing property is no more than the return derived

from it. An analysis of the income produced is necessary in order to

estimate the sum which might be invested in the purchase of the

property. The reproduction cost approach, on the other hand, is a

factual approach used exclusively in appraising man-made

improvements such as buildings and other structures, based on

such data as materials and labor costs to reproduce a new replica

of the improvement.

Same; Same; Same; Statutes; An ordinance that contravenes

any statute is ultra vires and void.—This Court holds that the

proviso directing that the real property tax be based on the actual

amount reflected in the deed of conveyance or the prevailing BIR

zonal value is invalid not only because it mandates an exclusive rule

in determining the fair market value but more so because it departs


48

from the established procedures stated in the Local Assessment

Regulations No. 1-92 and unduly interferes with the duties

statutorily placed upon the local assessor by completely dispensing

with his analysis and discretion which the Code and the regulations

require to be exercised. An ordinance that contravenes any statute

is ultra vires and void.

Taxation; Fair Market Value; Words and Phrases; “Fair market

value” is the price at which a property may be sold by a seller

who is not compelled to sell and bought by a buyer who is not

compelled to buy, taking into consideration all uses to which

the property is adapted and might in reason be applied.—Fair

market value” is the price at which a property may be sold by a

seller who is not compelled to sell and bought by a buyer who is not

compelled to buy, taking into consideration all uses to which the

property is adapted and might in reason be applied. The criterion

established by the statute contemplates a hypothetical sale. Hence,

the buyers need not be actual and existing purchasers. [Allied

Banking Corporation vs. Quezon City Government, 472 SCRA

303(2005)]

Taxation; Republic Act No. 7160; Tax Exemptions; The exemption

granted under Sec. 234(e) of Republic Act No. 7160 to

machinery and equipment used for pollution control and

environmental protection is based on usage. The term usage

means direct, immediate and actual application of the property

itself to the exempting purpose.—As held in Mactan, the

exemption granted under Sec. 234(e) of R.A. No. 7160 to

“[m]achinery and equipment used for pollution control and

environmental protection” is based on usage. The term usage


itself to the exempting purpose. Section 199 of R.A. No. 7160 defines

actual use as “the purpose for which the property is principally or

predominantly utilized by the person in possession thereof.” It

contemplates concrete, as distinguished from mere potential, use.

Thus, a claim for exemption under Sec. 234(e) of R.A. No. 7160

should be supported by evidence that the property sought to be

exempt is actually, directly and exclusively used for pollution

control and environmental protection.

Same; Same; Same; The burden is upon the taxpayer to prove,

by clear and convincing evidence, that his claim for exemption

has legal and factual basis.—The burden is upon the taxpayer to

prove, by clear and convincing evidence, that his claim for

exemption has legal and factual basis. [Provincial Assessor of

Marinduque, The vs. Court of Appeals, 587 SCRA 285(2009)]

Taxation; Lung Center of the Philippines; Charitable

Institutions; Test of Charitable Character; Words and Phrases;

To determine whether an enterprise is a charitable

institution/entity or not, the elements which should be

considered include the statute creating the enterprise, its

corporate purpose, its constitution and by-laws, the methods

of administration, the nature of the actual work performed, the

character of the services rendered, the indefiniteness of the

beneficiaries, and the use and occupation of the properties; In

the legal sense, a charity may be fully defined as a gift, to be

applied consistently with existing laws, for the benefit of an

indefinite number of persons, either by bringing their minds

and hearts under the influence of education or religion, by

assisting them to establish themselves in life or otherwise

lessening the burden of government. The test whether an

enterprise is charitable or not is whether it exists to carry out

a purpose recognized in law as charitable or whether it is

maintained for gain, profit, or private advantage.—On the first

issue, we hold that the petitioner is a charitable institution within

the context of the 1973 and 1987 Constitutions. To determine

whether an enterprise is a charitable institution/entity or not, the

elements which should be considered include the statute creating

the enterprise, its corporate purposes, its constitution and by-laws,

the methods of administration, the nature of the actual work

performed, the character of the services rendered, the

indefiniteness of the beneficiaries, and the use and occupation of

the properties. In the legal sense, a charity may be fully defined as

a gift, to be applied consistently with existing laws, for the benefit of

an indefinite number of persons, either by bringing their minds and

hearts under the influence of education or religion, by assisting

them to establish themselves in life or otherwise lessening the

burden of government. It may be applied to almost anything that

tend to promote the well-doing and well-being of social man. It

embraces the improvement and promotion of the happiness of man.

The word “charitable” is not restricted to relief of the poor or sick.

The test of a charity and a charitable organization are in law the

same. The test whether an enterprise is charitable or not is

whether it exists to carry out a purpose reorganized in law as

charitable or whether it is maintained for gain, profit, or private

advantage.

Same; Same; Same; The Lung Center of the Philippines was

organized for the welfare and benefit of the Filipino people

principally to help combat the high incidence of lung and

pulmonary diseases in the Philippines; Any person, the rich as

well as the poor, may fall sick or be injured or wounded and

become a subject of charity.—Under P.D. No. 1823, the petitioner

is a non-profit and non-stock corporation which, subject to the

provisions of the decree, is to be administered by the Office of the

President of the Philippines with the Ministry of Health and the

Ministry of Human Settlements. It was organized for the welfare and

benefit of the Filipino people principally to help combat the high

incidence of lung and pulmonary diseases in the Philippines. The

raison d’etre for the creation of the petitioner is stated in the

decree, viz: x x x Hence, the medical services of the petitioner are

to be rendered to the public in general in any and all walks of life


49

including those who are poor and the needy without discrimination.

After all, any person, the rich as well as the poor, may fall sick or be

injured or wounded and become a subject of charity.

Same; Same; Same; As a general principle, a charitable

institution does not lose its character as such and its

exemption from taxes simply because it derives income from

paying patients, whether out-patient, or confined in the

hospital, or receives subsidies from the government, so long

as the money received is devoted or used altogether to the

charitable object which it is intended to achieve, and no money

inures to the private benefit of the persons managing or

operating the institution.—As a general principle, a charitable

institution does not lose its character as such and its exemption

from taxes simply because it derives income from paying patients,

whether out-patient, or confined in the hospital, or receives

subsidies from the government, so long as the money received is

devoted or used altogether to the charitable object which it is

intended to achieve; and no money inures to the private benefit of

the persons managing or operating the institution. In

Congregational Sunday School, etc. v. Board of Review, the State

Supreme Court of Illinois held, thus: … [A]n institution does not lose

its charitable character, and consequent exemption from taxation,

by reason of the fact that those recipients of its benefits who are

able to pay are required to do so, where no profit is made by the

institution and the amounts so received are applied in furthering its

charitable purposes, and those benefits are refused to none on

account of inability to pay therefor. The fundamental ground upon

which all exemptions in favor of charitable institutions are based is

the benefit conferred upon the public by them, and a consequent

relief, to some extent, of the burden upon the state to care for and

advance the interests of its citizens.

Same; Same; Same; The Lung Center of the Philippines does not

lose its character as a charitable institution simply because

the gift or donation is in the form of subsidies granted by the

government.—Under P.D. No. 1823, the petitioner is entitled to

receive donations. The petitioner does not lose its character as a

charitable institution simply because the gift or donation is in the

form of subsidies granted by the government. As held by the State

Supreme Court of Utah in Yorgason v. County Board of Equalization

of Salt Lake County: Second, the … government subsidy payments

are provided to the project. Thus, those payments are like a gift or

donation of any other kind except they come from the government.

In both Intermountain Health Care and the present case, the crux is

the presence or absence of material reciprocity. It is entirely

irrelevant to this analysis that the government, rather than a

private benefactor, chose to make up the deficit resulting from the

exchange between St. Mark’s Tower and the tenants by making a

contribution to the landlord, just as it would have been irrelevant in

Intermountain Health Care if the patients’ income supplements had

come from private individuals rather than the government.

Therefore, the fact that subsidization of part of the cost of

furnishing such housing is by the government rather than private

charitable contributions does not dictate the denial of a charitable

exemption if the facts otherwise support such an exemption, as

they do here.

Same; Same; Same; Those portions of Lung Center’s real

property that are leased to private entities are not exempt

from real property taxes as these are not actually, directly

and exclusively used for charitable purposes.—Even as we find

that the petitioner is a charitable institution, we hold, anent the

second issue, that those portions of its real property that are

leased to private entities are not exempt from real property taxes

as these are not actually, directly and exclusively used for

charitable purposes.

Same; Same; Same; Statutory Construction; Taxation is the

rule and exemption is the exception—the effect of an

exemption is equivalent to an appropriation.—The settled rule in

this jurisdiction is that laws granting exemption from tax are

construed strictissimi juris against the taxpayer and liberally in

favor of the taxing power. Taxation is the rule and exemption is the

exception. The effect of an exemption is equivalent to an

appropriation. Hence, a claim for exemption from tax payments

must be clearly shown and based on language in the law too plain to

be mistaken. As held in Salvation Army v. Hoehn: An intention on the

part of the legislature to grant an exemption from the taxing power

of the state will never be implied from language which will admit of

any other reasonable construction. Such an intention must be

expressed in clear and unmistakable terms, or must appear by

necessary implication from the language used, for it is a well

settled principle that, when a special privilege or exemption is

claimed under a statute, charter or act of incorporation, it is to be

construed strictly against the property owner and in favor of the

public. This principle applies with peculiar force to a claim of

exemption from taxation . …

Same; Same; Same; Same; It is plain as day that under P.D.

1823, the Lung Center of the Philippines does not enjoy any

property tax exemption privileges for its real properties as

well as the building constructed thereon.—It is plain as day that

under the decree (P.D. 1823), the petitioner does not enjoy any

property tax exemption privileges for its real properties as well as

the building constructed thereon. If the intentions were otherwise,

the same should have been among the enumeration of tax exempt

privileges under Section 2: It is a settled rule of statutory

construction that the express mention of one person, thing, or

consequence implies the exclusion of all others. The rule is

expressed in the familiar maxim, expressio unius est exclusio

alterius. The rule of expressio unius est exclusio alterius is

formulated in a number of ways. One variation of the rule is the


50

principle that what is expressed puts an end to that which is

implied. Expressium facit cessare tacitum. Thus, where a statute, by

its terms, is expressly limited to certain matters, it may not, by

interpretation or construction, be extended to other matters. ... The

rule of expressio unius est exclusio alterius and its variations are

canons of restrictive interpretation. They are based on the rules of

logic and the natural workings of the human mind. They are

predicated upon one’s own voluntary act and not upon that of

others. They proceed from the premise that the legislature would

not have made specified enumeration in a statute had the intention

been not to restrict its meaning and confine its terms to those

expressly mentioned.

Same; Same; Same; Same; The exemption must not be so

enlarged by construction.—The exemption must not be so

enlarged by construction since the reasonable presumption is that

the State has granted in express terms all it intended to grant at all,

and that unless the privilege is limited to the very terms of the

statute the favor would be intended beyond what was meant.

Same; Same; Same; Same; The tax exemption under Section 28

(3), Article VI of the 1987 Constitution covers property taxes

only.—Section 28(3), Article VI of the 1987 Philippine Constitution

provides, thus: (3) Charitable institutions, churches and parsonages

or convents appurtenant thereto, mosques, non-profit cemeteries,

and all lands, buildings, and improvements, actually, directly and

exclusively used for religious, charitable or educational purposes

shall be exempt from taxation. The tax exemption under this

constitutional provision covers property taxes only. As Chief Justice

Hilario G. Davide, Jr., then a member of the 1986 Constitutional

Commission, explained: “. . . what is exempted is not the institution

itself . . .; those exempted from real estate taxes are lands,

buildings and improvements actually, directly and exclusively used

for religious, charitable or educational purposes.”

Same; Same; Same; Same; Under the 1973 and the present

Constitutions, for “lands, buildings, and improvements” of the

charitable institution to be considered exempt, the same

should not only be “exclusively” used for charitable

purposes—it is required that such property be used “actually”

and “directly” for such purposes.—We note that under the 1935

Constitution, “. . . all lands, buildings, and improvements used

‘exclusively’ for . . . charitable . . . purposes shall be exempt from

taxation.” However, under the 1973 and the present Constitutions,

for “lands, buildings, and improvements” of the charitable

institution to be considered exempt, the same should not only be

“exclusively” used for charitable purposes; it is required that such

property be used “actually” and “directly” for such purposes. In

light of the foregoing substantial changes in the Constitution, the

petitioner cannot rely on our ruling in Herrera v. Quezon City Board

of Assessment Appeals which was promulgated on September 30,

1961 before the 1973 and 1987 Constitutions took effect.

Same; Same; Same; Same; Words and Phrases; If real property

is used for one or more commercial purposes, it is not

exclusively used for the exempted purposes but is subject to

taxation—the words “dominant use” or “principal use” cannot

be substituted for the words “used exclusively” without doing

violence to the Constitutions and the law.—Under the 1973 and

1987 Constitutions and Rep. Act No. 7160 in order to be entitled to

the exemption, the petitioner is burdened to prove, by clear and

unequivocal proof, that (a) it is a charitable institution; and (b) its

real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for

charitable purposes. “Exclusive” is defined as possessed and

enjoyed to the exclusion of others; debarred from participation or

enjoyment; and “exclusively” is defined, “in a manner to exclude; as

enjoying a privilege exclusively.” If real property is used for one or

more commercial purposes, it is not exclusively used for the

exempted purposes but is subject to taxation. The words “dominant

use” or “principal use” cannot be substituted for the words “used

exclusively” without doing violence to the Constitutions and the law.

Solely is synonymous with exclusively. What is meant by actual,

direct and exclusive use of the property for charitable purposes is

the direct and immediate and actual application of the property

itself to the purposes for which the charitable institution is

organized. It is not the use of the income from the real property

that is determinative of whether the property is used for tax-

exempt purposes.

Same; Same; Same; Portions of the land leased to private

entities as well as those parts of Lung Center leased to private

individuals are not exempt from taxes but portions of the land

occupied by the hospital and portions of the hospital used for

its patients, whether paying or non-paying, are exempt from

real property taxes.—We hold that the portions of the land leased

to private entities as well as those parts of the hospital leased to

private individuals are not exempt from such taxes. On the other

hand, the portions of the land occupied by the hospital and portions

of the hospital used for its patients, whether paying or non-paying,

are exempt from real property taxes. [Lung Center of the

Philippines vs. Quezon City, 433 SCRA 119(2004)]

Taxation; Real Property Tax Code; Appeals; Assessments; The

remedy of appeal to the Local Board of Assessment Appeals

(LBAA) is available from an adverse ruling or action of the

provincial, city or municipal assessor in the assessment of the

property.—Instead of appealing to the Board of Assessment

Appeals (as stated in the notice), NPC opted to file a motion for

reconsideration of the Provincial Assessor’s decision, a remedy not

sanctioned by law. The remedy of appeal to the LBAA is available

from an adverse ruling or action of the provincial, city or municipal

assessor in the assessment of the property. It follows then that the

determination made by the respondent Provincial Assessor with

regard to the taxability of the subject real properties falls within its


51

power to assess properties for taxation purposes subject to appeal

before the LBAA.

Same; Same; Same; Same; Under Section 226 of R.A. No. 7160,

the last action of the local assessor on a particular

assessment shall be the notice of assessment.—We fully agree

with the rationalization of the CA in both CA-G.R. SP No. 67490 and

CA-G.R. SP No. 67491. The two divisions of the appellate court cited

the case of Callanta v. Office of the Ombudsman, 285 SCRA 648

(1998), where we ruled that under Section 226 of R.A. No 7160, the

last action of the local assessor on a particular assessment shall

be the notice of assessment; it is this last action which gives the

owner of the property the right to appeal to the LBAA. The

procedure likewise does not permit the property owner the remedy

of filing a motion for reconsideration before the local assessor.

Same; Same; Same; Same; The taxpayer’s failure to question

the assessment in the Local Board of Assessment Appeals

(LBAA) renders the assessment of the local assessor final,

executory and demandable.—If the taxpayer fails to appeal in due

course, the right of the local government to collect the taxes due

with respect to the taxpayer’s property becomes absolute upon the

expiration of the period to appeal. It also bears stressing that the

taxpayer’s failure to question the assessment in the LBAA renders

the assessment of the local assessor final, executory and

demandable, thus, precluding the taxpayer from questioning the

correctness of the assessment, or from invoking any defense that

would reopen the question of its liability on the merits.

Same; Same; Same; Same; Taxation is the rule and exemption

is the exception.—Time and again, the Supreme Court has stated

that taxation is the rule and exemption is the exception. The law

does not look with favor on tax exemptions and the entity that would

seek to be thus privileged must justify it by words too plain to be

mistaken and too categorical to be misinterpreted. Thus, applying

the rule of strict construction of laws granting tax exemptions, and

the rule that doubts should be resolved in favor of provincial

corporations, we hold that FELS is considered a taxable entity.

Same; Same; Same; Same; The right of local government units

to collect taxes due must always be upheld to avoid severe tax

erosion.—It must be pointed out that the protracted and circuitous

litigation has seriously resulted in the local government’s

deprivation of revenues. The power to tax is an incident of

sovereignty and is unlimited in its magnitude, acknowledging in its

very nature no perimeter so that security against its abuse is to be

found only in the responsibility of the legislature which imposes the

tax on the constituency who are to pay for it. The right of local

government units to collect taxes due must always be upheld to

avoid severe tax erosion. This consideration is consistent with the

State policy to guarantee the autonomy of local governments and

the objective of the Local Government Code that they enjoy genuine

and meaningful local autonomy to empower them to achieve their

fullest development as self-reliant communities and make them

effective partners in the attainment of national goals. [FELS

Energy, Inc. vs. Province of Batangas, 516 SCRA 186(2007)]

Taxation; Tax Exemptions; Local Government Code; Manila

International Airport Authority (MIAA) is not a government-

owned or controlled corporation but a government

instrumentality which is exempt from any kind of tax from the

local governments.—MIAA is not a government-owned or

controlled corporation but a government instrumentality which is

exempt from any kind of tax from the local governments. Indeed, the

exercise of the taxing power of local government units is subject to

the limitations enumerated in Section 133 of the Local Government

Code. Under Section 133(o) of the Local Government Code, local

government units have no power to tax instrumentalities of the

national government like the MIAA. Hence, MIAA is not liable to pay

real property tax for the NAIA Pasay properties.

Same; Same; Same; Property; The airport lands and buildings

of Manila International Airport Authority (MIAA) are properties

of public dominion intended for public use; and as such are

exempt from real property tax under Section 234(a) of the

Local Government Code (LGC); Only those portions of the Ninoy

Aquino International Airport (NAIA) Pasay properties which

are leased to taxable persons like private parties are subject

to real property tax by the City of Pasay.—The airport lands and

buildings of MIAA are properties of public dominion intended for

public use, and as such are exempt from real property tax under

Section 234(a) of the Local Government Code. However, under the

same provision, if MIAA leases its real property to a taxable person,

the specific property leased becomes subject to real property tax.

In this case, only those portions of the NAIA Pasay properties which

are leased to taxable persons like private parties are subject to

real property tax by the City of Pasay. [Manila International

Airport Authority vs. City of Pasay, 583 SCRA 234(2009)]

Taxation; Republic Act No. 7160; Tax Exemptions; The exemption

granted under Sec. 234(e) of Republic Act No. 7160 to

machinery and equipment used for pollution control and

environmental protection is based on usage. The term usage


itself to the exempting purpose.—As held in Mactan, the

exemption granted under Sec. 234(e) of R.A. No. 7160 to

“[m]achinery and equipment used for pollution control and

environmental protection” is based on usage. The term usage


itself to the exempting purpose. Section 199 of R.A. No. 7160 defines

actual use as “the purpose for which the property is principally or

predominantly utilized by the person in possession thereof.” It

contemplates concrete, as distinguished from mere potential, use.

Thus, a claim for exemption under Sec. 234(e) of R.A. No. 7160


52

should be supported by evidence that the property sought to be

exempt is actually, directly and exclusively used for pollution

control and environmental protection.

Same; Same; Same; The burden is upon the taxpayer to prove,

by clear and convincing evidence, that his claim for exemption

has legal and factual basis.—The burden is upon the taxpayer to

prove, by clear and convincing evidence, that his claim for

exemption has legal and factual basis. [Provincial Assessor of

Marinduque, The vs. Court of Appeals, 587 SCRA 285(2009)]

Taxation; Local Taxation; Real Estate Tax; Properties owned by

the Republic of the Philippines are exempt from real property

tax “except when the beneficial use thereof has been granted,

for consideration or otherwise, to a taxable person”—the

portions of the properties not leased to taxable entities are exempt

from real estate tax while the portions of the properties leased to

taxable entities are subject to real estate tax.—Even as the Republic

of the Philippines is now the owner of the properties in view of the

voluntary surrender of MPLDC by its former registered owner,

Campos, to the State, such transfer does not prevent a third party

with a better right from claiming such properties in the proper

forum. In the meantime, the Republic of the Philippines is the

presumptive owner of the properties for taxation purposes. Section

234(a) of Republic Act No. 7160 states that properties owned by the

Republic of the Philippines are exempt from real property tax

“except when the beneficial use thereof has been granted, for

consideration or otherwise, to a taxable person.” Thus, the portions

of the properties not leased to taxable entities are exempt from

real estate tax while the portions of the properties leased to

taxable entities are subject to real estate tax. The law imposes the

liability to pay real estate tax on the Republic of the Philippines for

the portions of the properties leased to taxable entities. It is, of

course, assumed that the Republic of the Philippines passes on the

real estate tax as part of the rent to the lessees.

Same; Same; Same; Public Auctions; Properties of public

dominion are not only exempt from real estate tax, they are

exempt from sale at public auction—property of public

dominion, which generally includes property belonging to the

State, cannot be subject of the commerce of man.—Article 420

of the Civil Code classifies as properties of public dominion those

that are “intended for public use, such as roads, canals, rivers,

torrents, ports and bridges constructed by the State, banks,

shores, roadsteads” and those that “are intended for some public

service or for the development of the national wealth.” Properties

of public dominion are not only exempt from real estate tax, they

are exempt from sale at public auction. In Heirs of Mario Malabanan

v. Republic, 587 SCRA 172 (2009), the Court held that, “It is clear

that property of public dominion, which generally includes property

belonging to the State, cannot be x x x subject of the commerce of

man.”

Same; Same; Same; Same; Where the parcels of land owned by

the Republic are not properties of public dominion, portions of

the properties leased to taxable entities are not only subject to

real estate tax, they can also be sold at public auction to

satisfy the tax delinquency.—In the present case, the parcels of

land are not properties of public dominion because they are not

“intended for public use, such as roads, canals, rivers, torrents,

ports and bridges constructed by the State, banks, shores,

roadsteads.” Neither are they “intended for some public service or

for the development of the national wealth.” MPLDC leases portions

of the properties to different business establishments. Thus, the

portions of the properties leased to taxable entities are not only

subject to real estate tax, they can also be sold at public auction to

satisfy the tax delinquency. In sum, only those portions of the

properties leased to taxable entities are subject to real estate tax

for the period of such leases. Pasig City must, therefore, issue to

respondent new real property tax assessments covering the

portions of the properties leased to taxable entities. If the Republic

of the Philippines fails to pay the real property tax on the portions

of the properties leased to taxable entities, then such portions may

be sold at public auction to satisfy the tax delinquency. [City of

Pasig vs. Republic, 656 SCRA 271(2011)]

Philippine Reclamation Authority (PRA); Taxation; Real

Property Taxes; Tax Exemptions; Philippine Reclamation

Authority (PRA) is a government instrumentality vested with

corporate powers and performing an essential public service

pursuant to Section 2(10) of the Introductory Provisions of the

Administrative Code. Being an incorporated government

instrumentality, it is exempt from payment of real property

tax.—This Court is convinced that PRA is not a GOCC either under

Section 2(3) of the Introductory Provisions of the Administrative

Code or under Section 16, Article XII of the 1987 Constitution. The

facts, the evidence on record and jurisprudence on the issue

support the position that PRA was not organized either as a stock

or a non-stock corporation. Neither was it created by Congress to

operate commercially and compete in the private market. Instead,

PRA is a government instrumentality vested with corporate powers

and performing an essential public service pursuant to Section

2(10) of the Introductory Provisions of the Administrative Code.

Being an incorporated government instrumentality, it is exempt

from payment of real property tax.

Same; Same; Same; Same; Local Government Code; It is clear

from Section 234 of the Local Government Code that real

property owned by the Republic of the Philippines (the

Republic) is exempt from real property tax unless the

beneficial use thereof has been granted to a taxable person.—

It is clear from Section 234 that real property owned by the

Republic of the Philippines (the Republic) is exempt from real

property tax unless the beneficial use thereof has been granted to a


53

taxable person. In this case, there is no proof that PRA granted the

beneficial use of the subject reclaimed lands to a taxable entity.

There is no showing on record either that PRA leased the subject

reclaimed properties to a private taxable entity. This exemption

should be read in relation to Section 133(o) of the same Code, which

prohibits local governments from imposing “[t]axes, fees or

charges of any kind on the National Government, its agencies and

instrumentalities x x x.” The Administrative Code allows real

property owned by the Republic to be titled in the name of agencies

or instrumentalities of the national government. Such real

properties remain owned by the Republic and continue to be exempt

from real estate tax.

Foreshore Lands; Public Domain; Foreshore and submerged

areas irrefutably belonged to the public domain and were

inalienable unless reclaimed, classified as alienable lands open

to disposition and further declared no longer needed for public

service. The fact that alienable lands of the public domain were

transferred to the Public Estates Authority (PEA) (now

Philippine Reclamation Authority [PRA]) and issued land

patents or certificates of title in PEA’s name did not

automatically make such lands private.—The subject lands are

reclaimed lands, specifically portions of the foreshore and offshore

areas of Manila Bay. As such, these lands remain public lands and

form part of the public domain. In the case of Chavez v. Public

Estates Authority and AMARI Coastal Development Corporation, 403

SCRA 1 (2002), the Court held that foreshore and submerged areas

irrefutably belonged to the public domain and were inalienable

unless reclaimed, classified as alienable lands open to disposition

and further declared no longer needed for public service. The fact

that alienable lands of the public domain were transferred to the

PEA (now PRA) and issued land patents or certificates of title in

PEA’s name did not automatically make such lands private. This

Court also held therein that reclaimed lands retained their inherent

potential as areas for public use or public service. [Republic vs.

City of Parañaque, 677 SCRA 246(2012)]

Taxation; Tax Exemptions; R.A. No. 6055 granted tax

exemptions to educational institutions like petitioner which

converted to non-stock, non-profit educational foundations.—

R.A. No. 6055 granted tax exemptions to educational institutions like

petitioner which converted to non-stock, non-profit educational

foundations. Section 8 of said law provides: SECTION 8. The

Foundation shall be exempt from the payment of all taxes, import

duties, assessments, and other charges imposed by the

Government on all income derived from or property, real or

personal, used exclusively for the educational activities of the

Foundation.

National Building Code (P.D. No. 1096); The National Building

Code requires every person, firm or corporation, including any

agency or instrumentality of the government to obtain a

building permit for any construction, alteration or repair of

any building or structure.—On February 19, 1977, Presidential

Decree (P.D.) No. 1096 was issued adopting the National Building

Code of the Philippines. The said Code requires every person, firm

or corporation, including any agency or instrumentality of the

government to obtain a building permit for any construction,

alteration or repair of any building or structure. Building permit

refers to “a document issued by the Building Official x x x to an

owner/applicant to proceed with the construction, installation,

addition, alteration, renovation, conversion, repair, moving,

demolition or other work activity of a specific

project/building/structure or portions thereof after the

accompanying principal plans, specifications and other pertinent

documents with the duly notarized application are found

satisfactory and substantially conforming with the National Building

Code of the Philippines x x x and its Implementing Rules and

Regulations (IRR).” Building permit fees refers to the basic permit

fee and other charges imposed under the National Building Code.

Same; Building Permits; Exempted from the payment of

building permit fees are: (1) public buildings and (2) traditional

indigenous family dwellings.—Exempted from the payment of

building permit fees are: (1) public buildings and (2) traditional

indigenous family dwellings. Not being expressly included in the

enumeration of structures to which the building permit fees do not

apply, petitioner’s claim for exemption rests solely on its

interpretation of the term “other charges imposed by the National

Government” in the tax exemption clause of R.A. No. 6055.

Same; Same; That a building permit fee is a regulatory

imposition is highlighted by the fact that in processing an

application for a building permit, the Building Official shall see

to it that the applicant satisfies and conforms with approved

standard requirements on zoning and land use, lines and

grades, structural design, sanitary and sewerage,

environmental health, electrical and mechanical safety as well

as with other rules and regulations implementing the National

Building Code.—That a building permit fee is a regulatory

imposition is highlighted by the fact that in processing an

application for a building permit, the Building Official shall see to it

that the applicant satisfies and conforms with approved standard

requirements on zoning and land use, lines and grades, structural

design, sanitary and sewerage, environmental health, electrical and

mechanical safety as well as with other rules and regulations

implementing the National Building Code. Thus, ancillary permits

such as electrical permit, sanitary permit and zoning clearance

must also be secured and the corresponding fees paid before a

building permit may be issued. And as can be gleaned from the

implementing rules and regulations of the National Building Code,

clearances from various government authorities exercising and

enforcing regulatory functions affecting buildings/structures, like


54

local government units, may be further required before a building

permit may be issued.

Same; Same; A charge of a fixed sum which bears no relation

at all to the cost of inspection and regulation may be held to be

a tax rather than an exercise of the police power.—A charge of

a fixed sum which bears no relation at all to the cost of inspection

and regulation may be held to be a tax rather than an exercise of

the police power. In this case, the Secretary of Public Works and

Highways who is mandated to prescribe and fix the amount of fees

and other charges that the Building Official shall collect in

connection with the performance of regulatory functions, has

promulgated and issued the Implementing Rules and Regulations

which provide for the bases of assessment of such fees, as follows:

1. Character of occupancy or use of building 2. Cost of construction

“ 10,000/sq.m (A,B,C,D,E,G,H,I), 8,000 (F), 6,000 (J) 3. Floor area 4.

Height

Tax Exemption; Real Property Taxes; Hospitals; In Lung Center

of the Philippines v. Quezon City, 433 SCRA 119 (2004), the

Supreme Court held that only portions of the hospital actually,

directly and exclusively used for charitable purposes are

exempt from real property taxes, while those portions leased

to private entities and individuals are not exempt from such

taxes.—In Lung Center of the Philippines v. Quezon City, 433 SCRA

119 (2004), this Court held that only portions of the hospital actually,

directly and exclusively used for charitable purposes are exempt

from real property taxes, while those portions leased to private

entities and individuals are not exempt from such taxes. We

explained the condition for the tax exemption privilege of charitable

and educational institutions, as follows: Under the 1973 and 1987

Constitutions and Rep. Act No. 7160 in order to be entitled to the

exemption, the petitioner is burdened to prove, by clear and

unequivocal proof, that (a) it is a charitable institution; and (b) its

real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for

charitable purposes. “Exclusive” is defined as possessed and

enjoyed to the exclusion of others; debarred from participation or

enjoyment; and “exclusively” is defined, “in a manner to exclude; as

enjoying a privilege exclusively.” If real property is used for one or

more commercial purposes, it is not exclusively used for the

exempted purposes but is subject to taxation. The words “dominant

use” or “principal use” cannot be substituted for the words “used

exclusively” without doing violence to the Constitutions and the law.

Solely is synonymous with exclusively. What is meant by actual,

direct and exclusive use of the property for charitable purposes is

the direct and immediate and actual application of the property

itself to the purposes for which the charitable institution is

organized. It is not the use of the income from the real property

that is determinative of whether the property is used for tax-

exempt purposes. [Angeles University Foundation vs. City of

Angeles, 675 SCRA 359(2012)]

Statutory Construction; P.D. 1271; The intent of the law makes

the certificate of titles over the land valid from the time they

were issued and recognizes the effects of certain acts of

ownership done in good faith by persons with torrens titles

issued in their favor before the cut-off date, believing that they

had validly acquired the lands.—The petitioner submits that:

“upon compliance with certain requirements the titles so issued are

validated and deemed to have been conveyed in fee simple. The

validation of the title retroacts to the very day the title was

originally issued” (pp. 4–5, Rollo). We agree with the petitioner. The

intent of the law necessarily makes such titles valid from the time

they were issued. x x x The foregoing necessarily implies that the

intent of the law is to recognize the effects of certain acts of

ownership done in good faith by persons with torrens titles issued

in their favor before the cut-off date stated, honestly believing that

they had validly acquired the lands. And such would be possible only

by validating all the said titles issued before 31 July 1973, effective

on their respective dates of issue. However, the validity of these

titles would not become operative unless and after the conditions

stated in PD 1271 are met. Hence, the phrase “upon a showing, and

compliance with, the following conditions.” (Sec. 1, PD 1271)

Same; Land Titles; Tax sale of property, prematurely

conducted; Oppositor is not yet liable for real property taxes

over the land which was still part of the public domain; Validity

of oppositor’s title would take effect retroactively only after

having complied with the conditions in P.D. 1271.—Considering,

however, that during the years 1971–1977 the land in question was

still part of the public domain, the oppositor-appellee could not, in

those years, obviously be held liable for real property taxes over

the land in question. Since the validity of her title would take effect

retroactively only after having complied with the conditions set in

PD 1271, only then could she be held liable for taxes for the period

starting 1971 to 1977. It would be absurd then to hold the oppositor-

appellee liable for taxes over a piece of land which she did not own

(it being public land) or use. Consequently, the tax sale was

prematurely conducted. The oppositor-appellee should have first

been given the opportunity to settle the taxes assessed for the

years 1971–1977 after having complied with PD 1271.

Same; Same; Same; Due process; Auction sale; Holding of the

tax sale despite absence of requisite notice to the oppositor

was tantamount to a violation of her substantial right to due

process.—As to the validity of the auction sale, We reiterate that it

was prematurely held, hence, null and void for the above reasons.

But even on the evidence presented by the parties, assuming that

the sale was properly and seasonably held, it has been clearly

shown by the trial court and the IAC that the oppositor-appellee was

not properly notified. The holding of the tax sale despite the absence

of the requisite notice was tantamount to a violation of her

substantial right to due process.


55

Same; Same; Findings of fact; The findings of fact of both the

trial court and the appellate court not being contrary to the

evidence, should be accorded respect.—We do not see the above

findings of fact of the trial court, as adopted by the IAC, to be

contrary to the evidence presented nor tainted with partiality or

indiscretion. Hence, We accord them great respect (Premier

Insurance and Surety Corporation v. IAC, 141 SCRA 423; Vda. de

Roxas v. IAC, 143 SCRA 77; Republic v. IAC, 144 SCRA 705.)

Administrative proceedings established for the sale of private lands

for non-payment of taxes being in personam (Pantaleon v. Santos,

L-10289, July 31, 1957), it is essential that there be actual notice

to the delinquent, otherwise the sale is null and void although

preceded by proper advertisement or publication.'" (Vivencio v.

Quintos, CA-G.R. No. 44697, [Puzon vs. Abellera, 169 SCRA

789(1989)]

Taxation; Auction Sale; Although preceded by proper

advertisement and publication, an auction sale is void absent

an actual notice to a delinquent taxpayer.—The auction sale of

real property for the collection of delinquent taxes is in personam,

not in rem. Although sufficient in proceedings in rem like land

registration, mere notice by publication will not satisfy the

requirements of proceedings in personam. “[P]ublication of the

notice of delinquency [will] not suffice, considering that the

procedure in tax sales is in personam.” It is still incumbent upon the

city treasurer to send the notice directly to the taxpayer—the

registered owner of the property—in order to protect the latter’s

interests. Although preceded by proper advertisement and

publication, an auction sale is void absent an actual notice to a

delinquent taxpayer.

Civil Law; Property; Ownership; Torrens System; A certificate

of title under the Torrens system serves as evidence of an

indefeasible title to the property in favor of the person whose

name appears on it.—A certificate of title under the Torrens

system serves as evidence of an indefeasible title to the property in

favor of the person whose name appears on it. While it is true that

Transfer Certificates of Title have already been issued in the names

of the subsequent purchasers, they should nonetheless be

invalidated. Considering the failure to abide by the mandatory

requirements of a proceeding in personam, no better title than that

of the original owner can be assumed by the transferees.

Taxation; Auction Sale; Notice of sale to the delinquent

landowners and to the public, in general, is an essential and

indispensable requirement of law, the non-fulfillment of which

vitiates the sale.—With greater significance is the categorical and

unrefuted statement in it that the “[s]ealed envelope containing a

copy of the petition addressed to Gorgonia Bantegui x x x was

returned to sender unclaimed x x x.” That statement definitely

confirms the lack of notices, without which the subsequent

proceeding to sell the property produces no legal effect. “Notice of

sale to the delinquent landowners and to the public[,] in general[,]

is an essential and indispensable requirement of law, the non-

fulfillment of which vitiates the sale.”

Same; Same; Statutes; Section 80 of PD 464 provides that

“any balance of the proceeds of the sale left after deducting

the amount of the taxes and penalties due and the costs of

sale, shall be returned to the owner or his representative.”—

Section 80 of PD 464 provides that “any balance of the proceeds of

the sale left after deducting the amount of the taxes and penalties

due and the costs of sale, shall be returned to the owner or his

representative.” Again contrary to the mandate of the law, the

balance of the proceeds from the tax sale was not even returned to

Respondent Bantegui or her representative after the issuance of

the final bill of sale. The failure to return the proceeds reinforced

the apparent irregularity not only in the conduct of the tax sale, but

also in its subsequent disposition.

Same; Same; A purchaser of real estate at the tax sale obtains

only such title as that held by the taxpayer; the principle of

caveat emptor applies. The defense of indefeasibility of a

Torrens title does not extend to a transferee who takes the

title despite a notice of the flaw in it.—“A purchaser of real

estate at the tax sale obtains only such title as that held by the

taxpayer[;] the principle of caveat emptor applies.” Purchasers

cannot close their eyes to facts that should have put any

reasonable person upon guard, and then claim that they “acted in

good faith under the belief that there was no defect in the title.” If

petitioners do not investigate or take precaution despite knowing

certain facts, they cannot be considered in good faith. The defense

of indefeasibility of a Torrens title does not extend to a transferee

who takes the title despite a notice of the flaw in it. From a vendor

who does not have any title to begin with, no right is passed to a

transferee. [Tan vs. Bantegui, 473 SCRA 663(2005)]

Taxation; Real Estate Taxes; Refund of real estate taxes paid by

mistake; Protest not required for recovery; No waiver of

taxpayer’s right to refund of taxes in the absence of protest;

Case at bar.—We agree with petitioner. Protest is not a

requirement in order that a taxpayer who paid under a mistaken

belief that it is required by law, may claim for a refund Section 54

of Commonwealth Act No. 470 does not apply to petitioner which

could conceivably not have been expected to protest a payment it

honestly believed to be due. The same refers only to the case where

the taxpayer, despite his knowledge of the erroneous or illegal

assessment, still pays and fails to make the proper protest, for in

such case, he should manifest an unwillingness to pay, and failing

so, the taxpayer is deemed to have waived his right to claim a

refund. In the case at bar, petitioner, therefore, cannot be said to

have waived his right. He had no knowledge of the fact that it was

exempted from payment of the realty tax under Commonwealth Act


56

No. 470. Payment was made through error or mistake, in the honest

belief that petitioner was liable, and therefore could not have been

made under protest, but with complete voluntariness. In any case, a

taxpayer should not be held to suffer loss by his good intention to

comply with what he believes is his legal obligation, where such

obligation does not really exist.

Same; Same; Civil Law; Quasi-Contracts; Solutio Indebiti;

Application of the principle of solutio indebiti to mistaken

payment of realty taxes; Case at bar.—The quasi-contract of

solutio indebiti, is one of the concrete manifestations of the ancient

principle that no one shall enrich himself unjustly at the expense of

another. Hence, it would seem unedifying for the government, that

knowing it has no right at all to collect or to receive money for

alleged taxes paid by mistake, it would be reluctant to return the

same.

Same; Same; Same; Same; Same; Solutio indebiti meaning of.—

Solutio indebiti is a quasi-contract, and the instant case being in the

nature of solutio indebiti, the claim for refund must be commenced

within six (6) years from date of payment pursuant to Article

1145(2) of the New Civil Code.

Same; Same; Same; Prescription; Prescriptive period for filing

of claim for refund of real estate taxes of the nature of a

solutio indebiti case; Taxpayer’s right to recovery not barred

by Sec. 359 of Revised Manual of Instructions to Treasurers;

Effect of Revised Manual.—Respondent’s contention that

petitioner’s right to recover real estate taxes has prescribed in

accordance with Section 359 of the Revised Manual of Instructions

to Treasurers x x x is without merit. The said provision applies to

taxes paid under ordinance subsequently declared illegal or taxes

illegally assessed and collected under such ordinance, but not to

payments of real estate taxes mistakenly made, as in the present

case. Furthermore, the Revised Manual of Instructions to

Treasurers is a mere compilations of existing accounting

instructions affecting the finance and administration of local

government. Section 359, particularly, has no force and effect of a

law, and the same can not prevail over the provisions of the New

Civil Code.

Same; Same; Same; Sec. 17 of Commonwealth Act 470 not

applicable where taxpayer satisfied with assessment of his

property.—Equally not applicable is Section 17 of Commonwealth

Act No. 470 cited by respondent in relation to the right of a

property owner to contest the validity of assessment. x x x

Petitioner is not unsatisfied in the assessment of its property.

Assessment having been made, it paid the real estate taxes without

knowing that it is exempt. [Ramie Textiles, Inc. vs. Mathay, Sr.,

89 SCRA 586(1979)]

For real estate tax payments already made, “the taxpayer may

file a written claim for refund or credit for taxes and

interests.”—In view of the foregoing ruling, the question may be

asked: what happens to real estate tax payments already made

prior to its promulgation and finality? Under the law, “the taxpayer

may file a written claim for refund or credit for taxes and interests

x x x.”

Same; Same; Same; Administrative Law; Exhaustion of

Administrative Remedies; Although as a rule, administrative

remedies must first be exhausted before resort to judicial

action can prosper, there is a well-settled exception in cases

where the controversy does not involve question of fact but

only of law.—Respondents argue that this case is premature

because petitioners neither appealed the questioned assessments

on their properties to the Board of Assessment Appeal, pursuant to

Sec. 226, nor paid the taxes under protest, per Sec. 252. We do not

agree. Although as a rule, administrative remedies must first be

exhausted before resort to judicial action can prosper, there is a

wellsettled exception in cases where the controversy does not

involve questions of fact but only of law. In the present case, the

parties, even during the proceedings in the lower court on 11 April

1994, already agreed “that the issues in the petition are legal,” and

thus, no evidence was presented in said court.

Same; Same; Same; Same; Same; Board of Assessment

Appeals; The protest contemplated under Sec. 252 of R.A. 7160

is needed where there is a question as to the reasonableness

of the amount assessed, not where the question raised is on

the very authority and power of the assessor to impose the

assessment and of the treasurer to collect the tax.—In laying

down the powers of the Local Board of Assessment Appeals, R.A.

7160 provides in Sec. 229 (b) that “(t)he proceedings of the Board

shall be conducted solely for the purpose of ascertaining the facts x

x x.” It follows that appeals to this Board may be fruitful only where

the questions of fact are involved. Again, the protest contemplated

under Sec. 252 of R.A. 7160 is needed where there is a question as

to the reasonableness of the amount assessed. Hence, if a taxpayer

disputes the reasonableness of an increase in a real estate tax

assessment, he is required to “first pay the tax” under protest.

Otherwise, the city or municipal treasurer will not act on his

protest. In the case at bench however, the petitioners are

questioning the very authority and power of the assessor, acting

solely and independently, to impose the assessment and of the

treasurer to collect the tax. These are not questions merely of

amounts of the increase in the tax but attacks on the very validity of

any increase. [Ty vs. Trampe, 250 SCRA 500(1995)]

Taxation; Protest; Taxpayer should first pay the tax before his

protest can be entertained.—Thus, should the taxpayer/real

property owner question the excessiveness or reasonableness of

the assessment, Section 252 directs that the taxpayer should first

pay the tax due before his protest can be entertained. There shall

be annotated on the tax receipts the words “paid under protest.” It


57

is only after the taxpayer has paid the tax due that he may file a

protest in writing within thirty days from payment of the tax to the

Provincial, City or Municipal Treasurer, who shall decide the protest

within sixty days from receipt. In no case is the local treasurer

obliged to entertain the protest unless the tax due has been paid.

Same; Same; Appeals; An appeal shall not suspend the

collection of the tax assessed without prejudice to a later

adjustment pending the outcome of the appeal.—Under the

doctrine of primacy of administrative remedies, an error in the

assessment must be administratively pursued to the exclusion of

ordinary courts whose decisions would be void for lack of

jurisdiction. But an appeal shall not suspend the collection of the tax

assessed without prejudice to a later adjustment pending the

outcome of the appeal. [Olivares vs. Marquez, 438 SCRA

679(2004)]

Taxation; Local Taxation; Local Government Code of 1991 (R.A.

No. 7160); Section 252 of the Local Government Code

emphatically directs that the taxpayer/real property owner

questioning the assessment should first pay the tax due before

his protest can be entertained.—Section 252 of the Local

Government Code emphatically directs that the taxpayer/real

property owner questioning the assessment should first pay the tax

due before his protest can be entertained. As a matter of fact, the

words “paid under protest” shall be annotated on the tax receipts.

Consequently, only after such payment has been made by the

taxpayer may he file a protest in writing (within thirty [30] days

from said payment of tax) to the provincial, city, or municipal

treasurer, who shall decide the protest within sixty (60) days from

its receipt. In no case is the local treasurer obliged to entertain the

protest unless the tax due has been paid.

Same; Same; Payment Under Protest; The requirement of

“payment under protest” is a condition sine qua non before a

protest or an appeal questioning the correctness of an

assessment of real property tax may be entertained.—It is

clear that the requirement of “payment under protest” is a

condition sine qua non before a protest or an appeal questioning the

correctness of an assessment of real property tax may be

entertained. Moreover, a claim for exemption from payment of real

property taxes does not actually question the assessor’s authority

to assess and collect such taxes, but pertains to the

reasonableness or correctness of the assessment by the local

assessor, a question of fact which should be resolved, at the very

first instance, by the LBAA.

Same; Same; The burden of proving exemption from local

taxation is upon whom the subject real property is declared;

thus, said person shall be considered by law as the taxpayer

thereof.—Section 206 of RA No. 7160 or the LGC of 1991,

categorically provides that every person by or for whom real

property is declared, who shall claim exemption from payment of

real property taxes imposed against said property, shall file with

the provincial, city or municipal assessor sufficient documentary

evidence in support of such claim. Clearly, the burden of proving

exemption from local taxation is upon whom the subject real

property is declared; thus, said person shall be considered by law

as the taxpayer thereof. Failure to do so, said property shall be

listed as taxable in the assessment roll.

Same; Same; The duty to declare the true value of real

property for taxation purposes is imposed upon the owner, or

administrator, or their duly authorized representatives.—It is

an accepted principle in taxation that taxes are paid by the person

obliged to declare the same for taxation purposes. As discussed

above, the duty to declare the true value of real property for

taxation purposes is imposed upon the owner, or administrator, or

their duly authorized representatives. They are thus considered the

taxpayers. Hence, when these persons fail or refuse to make a

declaration of the true value of their real property within the

prescribed period, the provincial or city assessor shall declare the

property in the name of the defaulting owner and assess the

property for taxation. In this wise, the taxpayer assumes the

character of a defaulting owner, or defaulting administrator, or

defaulting authorized representative, liable to pay back taxes. For

that reason, since petitioner herein is the declared owner of the

subject buildings being assessed for real property tax, it is

therefore presumed to be the person with the obligation to shoulder

the burden of paying the subject tax in the present case; and

accordingly, in questioning the reasonableness or correctness of

the assessment of real property tax, petitioner is mandated by law

to comply with the requirement of payment under protest of the tax

assessed, particularly Section 252 of RA No. 7160 or the LGC of 1991.

Same; Same; Time and again, the Supreme Court has stated

that taxation is the rule and exemption is the exception.—Time

and again, the Supreme Court has stated that taxation is the rule

and exemption is the exception. The law does not look with favor on

tax exemptions and the entity that would seek to be thus privileged

must justify it by words too plain to be mistaken and too categorical

to be misinterpreted. Thus applying the rule of strict construction

of laws granting tax exemptions, and the rule that doubts should be

resolved in favor of provincial corporations, this Court holds that

petitioner is considered a taxable entity in this case.

Same; Same; The right of local government units to collect

taxes due must always be upheld to avoid severe erosion.—The

restriction upon the power of courts to impeach tax assessment

without a prior payment, under protest, of the taxes assessed is

consistent with the doctrine that taxes are the lifeblood of the

nation and as such their collection cannot be curtailed by injunction

or any like action; otherwise, the state or, in this case, the local

government unit, shall be crippled in dispensing the needed


58

services to the people, and its machinery gravely disabled. The right

of local government units to collect taxes due must always be

upheld to avoid severe erosion. This consideration is consistent

with the State policy to guarantee the autonomy of local

governments and the objective of RA No. 7160 or the LGC of 1991

that they enjoy genuine and meaningful local autonomy to empower

them to achieve their fullest development as self-reliant

communities and make them effective partners in the attainment of

national goals. [Camp John Hay Development Corporation vs.

Central Board of Assessment Appeals, 706 SCRA 547(2013)]

Taxation; Tax Refunds; Entitlement to a tax refund does not

necessarily call for the automatic payment of the sum

claimed—the amount must still be proven in the normal course

and in accordance with the administrative procedure.—

Petitioner and all those similarly situated are entitled to a tax

refund/credit corresponding to the difference between the

assessed value based on the proviso and the assessed value based

on the then prevailing schedule of fair market values prepared by

the City Assessor. It bears stressing, however, that entitlement to a

tax refund does not necessarily call for the automatic payment of

the sum claimed. The amount of the claim being a factual matter, it

must still be proven in the normal course and in accordance with

the administrative procedure for obtaining a refund of real

property taxes, as provided under the Local Government Code.

Under Section 253 of the Local Government Code, the claim for

refund or credit for taxes must be filed before the city treasurer

who shall decide the claim based on the tax declarations, affidavits,

documents and other documentary evidence to be presented by

petitioner. [Allied Banking Corporation vs. Quezon City

Government, 502 SCRA 113(2006)]

Civil Procedure; Appeals; Prohibitions; One of the recognized

exceptions to the exhaustion-of-administrative remedies rule

is when only legal issues are to be resolved.—Petitioners argue

that Bayantel had failed to avail itself of the administrative

remedies provided for under the LGC, adding that the trial court

erred in giving due course to Bayantel’s petition for prohibition. To

petitioners, the appeal mechanics under the LGC constitute

Bayantel’s plain and speedy remedy in this case. The Court does not

agree. With the reality that Bayantel’s real properties were already

levied upon on account of its nonpayment of real estate taxes

thereon, the Court agrees with Bayantel that an appeal to the LBAA

is not a speedy and adequate remedy within the context of the

aforequoted Section 2 of Rule 65. This is not to mention of the

auction sale of said properties already scheduled on July 30, 2002.

Moreover, one of the recognized exceptions to the exhaustion-of-

administrative remedies rule is when, as here, only legal issues are

to be resolved. In fact, the Court, cognizant of the nature of the

questions presently involved, gave due course to the instant

petition. As the Court has said in Ty vs. Trampe, 250 SCRA 500

(1995): x x x. Although as a rule, administrative remedies must first

be exhausted before resort to judicial action can prosper, there is a

well-settled exception in cases where the controversy does not

involve questions of fact but only of law. x x x.

Taxation; Realty Tax; Franchises; Local Governments; While

Section 14 of Republic Act 3259 may be validly viewed as an

implied delegation of power to tax, the delegation under that

provision, as couched, is limited to impositions over properties

of the franchisee which are not actually, directly and

exclusively used in the pursuit of its franchise.—The legislative

intent expressed in the phrase “exclusive of this franchise” cannot

be construed other than distinguishing between two (2) sets of

properties, be they real or personal, owned by the franchisee,

namely, (a) those actually, directly and exclusively used in its radio

or telecommunications business, and (b) those properties which

are not so used. It is worthy to note that the properties subject of

the present controversy are only those which are admittedly falling

under the first category. To the mind of the Court, Section 14 of Rep.

Act No. 3259 effectively works to grant or delegate to local

governments of Congress’ inherent power to tax the franchisee’s

properties belonging to the second group of properties indicated

above, that is, all properties which, “exclusive of this franchise,” are

not actually and directly used in the pursuit of its franchise. As may

be recalled, the taxing power of local governments under both the

1935 and the 1973 Constitutions solely depended upon an enabling

law. Absent such enabling law, local government units were without

authority to impose and collect taxes on real properties within their

respective territorial jurisdictions. While Section 14 of Rep. Act No.

3259 may be validly viewed as an implied delegation of power to

tax, the delegation under that provision, as couched, is limited to

impositions over properties of the franchisee which are not

actually, directly and exclusively used in the pursuit of its franchise.

Necessarily, other properties of Bayantel directly used in the

pursuit of its business are beyond the pale of the delegated taxing

power of local governments. In a very real sense, therefore, real

properties of Bayantel, save those exclusive of its franchise, are

subject to realty taxes. Ultimately, therefore, the inevitable result

was that all realties which are actually, directly and exclusively

used in the operation of its franchise are “exempted” from any

property tax. Bayantel’s franchise being national in character, the

“exemption” thus granted under Section 14 of Rep. Act No. 3259

applies to all its real or personal properties found anywhere within

the Philippine archipelago.

Same; Same; Same; Same; The realty tax exemption heretofore

enjoyed by Bayantel under its original franchise, but

subsequently withdrawn by force of Section 234 of the Local

Government Code, has been restored by Section 14 of Republic

Act No. 7633.—With the LGC’s taking effect on January 1, 1992,

Bayantel’s “exemption” from real estate taxes for properties of


59

whatever kind located within the Metro Manila area was, by force of

Section 234 of the Code, expressly withdrawn. But, not long

thereafter, however, or on July 20, 1992, Congress passed Rep. Act

No. 7633 amending Bayantel’s original franchise. Worthy of note is

that Section 11 of Rep. Act No. 7633 is a virtual reenacment of the

tax provision, i.e., Section 14, of Bayantel’s original franchise under

Rep. Act No. 3259. Stated otherwise, Section 14 of Rep. Act No. 3259

which was deemed impliedly repealed by Section 234 of the LGC

was expressly revived under Section 14 of Rep. Act No. 7633. In

concrete terms, the realty tax exemption heretofore enjoyed by

Bayantel under its original franchise, but subsequently withdrawn

by force of Section 234 of the LGC, has been restored by Section 14

of Rep. Act No. 7633.

Same; Same; Same; Same; The power to tax is primarily vested

in the Congress; however, in our jurisdiction, it may be


virtue of a valid delegation as before, but pursuant to direct

authority conferred by Section 5, Article X of the

Constitution.—Bayantel’s posture is well-taken. While the system

of local government taxation has changed with the onset of the 1987

Constitution, the power of local government units to tax is still

limited. As we explained in Mactan Cebu International Airport

Authority: The power to tax is primarily vested in the Congress;

however, in our jurisdiction, it may be exercised by local legislative

bodies, no longer merely by virtue of a valid delegation as before,

but pursuant to direct authority conferred by Section 5, Article X of

the Constitution. Under the latter, the exercise of the power may be


provide which, however, must be consistent with the basic policy of

local autonomy. (at p. 680; Emphasis supplied.)

Same; Same; Same; Same; The Supreme Court has upheld the

power of Congress to grant exemptions over the power of

local government units to impose taxes.—In Philippine Long

Distance Telephone Company, Inc. (PLDT) vs. City of Davao, 363

SCRA 522 (2001), this Court has upheld the power of Congress to

grant exemptions over the power of local government units to

impose taxes. There, the Court wrote: Indeed, the grant of taxing

powers to local government units under the Constitution and the

LGC does not affect the power of Congress to grant exemptions to

certain persons, pursuant to a declared national policy. The legal




corporations. [City Government of Quezon City vs. Bayan

Telecommunications, Inc., 484 SCRA 169(2006)]

Taxation; An assessment fixes and determines the tax liability

of a taxpayer; It is a notice to the effect that the amount

therein stated is due as tax and a demand for payment thereof;

Assessor mandated under Section 27 of P.D. 464 to give

written notice within thirty days of such assessment, to the

person in whose name the property is declared.—An

assessment fixes and determines the tax liability of a taxpayer. It is

a notice to the effect that the amount therein stated is due as tax

and a demand for payment thereof. The assessor is mandated

under Section 27 of the law to give written notice within thirty days

of such assessment, to the person in whose name the property is

declared. The notice should indicate the kind of property being

assessed, its actual use and market value, the assessment level and

the assessed value. The notice may be delivered either personally

to such person or to the occupant in possession, if any, or by mail,

to the last known address of the person to be served, or through

the assistance of the barrio captain. The issuance of a notice of

assessment by the local assessor shall be his last action on a

particular assessment. For purposes of giving effect to such

assessment, it is deemed made when the notice is released, mailed

or sent to the taxpayer. As soon as the notice is duly served, an

obligation arises on the part of the taxpayer to pay the amount

assessed and demanded.

Same; If the taxpayer is not satisfied with the action of the

local assessor in the assessment of his property, he has the

right, under Section 30 of P.D No. 464, to appeal to the Local

Board of Assessment Appeals by filing a verified petition within

sixty (60) days from service of said notice of assessment;

Failure to do so, the right of the local government to collect

the taxes due becomes absolute upon the expiration of such

period, with respect to the taxpayer’s property.—If the

taxpayer is not satisfied with the action of the local assessor in the

assessment of his property, he has the right, under Section 30 of

P.D. No. 464, to appeal to the Local Board of Assessment Appeals by

filing a verified petition within sixty (60) days from service of said

notice of assessment. If the taxpayer fails to appeal in due course,

the right of the local government to collect the taxes due becomes

absolute upon the expiration of such period, with respect to the

taxpayer’s property. The action to collect the taxes due is akin to an

action to enforce a judgment. It bears stressing, however, that

Section 30 of P.D. No. 464 pertains to the assessment and valuation

of the property for purposes of real estate taxation. Such provision

does not apply where what is questioned is the imposition of the tax

assessed and who should shoulder the burden of the tax. [Manila

Electric Company vs. Barlis, 433 SCRA 11(2004)]

Local Governments; Local Board of Assessment Appeals;

Appeals; The remedy of appeal to the Local Board of

Assessment Appeals is available from an adverse ruling or

action of the provincial, city or municipal assessor in the

assessment of property.—Under Section 226 of RA 7160, the

remedy of appeal to the Local Board of Assessment Appeals is

available from an adverse ruling or action of the provincial, city or

municipal assessor in the assessment of property.


60

Same; Same; Same; The determination by the respondent City

Assessor with regard to the taxability of the subject real

properties is subject to appeal before the Local Board of

Assessment Appeals.—Under Section 199(f), Title II, Book II, of the

Local Government Code of 1991, “assessment” is defined as the act

or process of determining the value of a property, or proportion

thereof subject to tax, including the discovery, listing, classification

and appraisal of properties. Viewed from this broader perspective,

the determination made by the respondent City Assessor with

regard to the taxability of the subject real properties squarely falls

within its power to assess properties for taxation purposes subject

to appeal before the Local Board of Assessment Appeals.

Same; Same; Same; Doctrine of exhaustion of administrative

remedies; Before seeking the intervention of the courts, it is a

precondition that Systems Plus Computer College of Caloocan

City vs. Local Government of Caloocan City petitioner should

first avail of all the means afforded by the administrative

processes.—The petitioner cannot bypass the authority of the

concerned administrative agencies and directly seek redress from

the courts even on the pretext of raising a supposedly pure

question of law without violating the doctrine of exhaustion of

administrative remedies. Hence, when the law provides for

remedies against the action of an administrative board, body, or

officer, as in the case at bar, relief to the courts can be made only

after exhausting all remedies provided therein. Otherwise stated,

before seeking the intervention of the courts, it is a precondition

that petitioner should first avail of all the means afforded by the

administrative processes. [Systems Plus Computer College of

Caloocan City vs. Local Government of Caloocan City, 408

SCRA 494(2003)]

Tax 2 Part 4 Doctrines Only

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