Alejandro Ty vs. Trampe and Mun. Assessor of Pasig - Marquez, M. Sec. Drilon vs.

Mayor Lim - De Leon COCA-COLA BOTTLERS PHILIPPINES, INC., CITY OF MANILA, (2006, Chico- Nazario) Facts: Petitioner Coca-Cola Bottlers Philippines, Inc. is a corporation engaged in the business of manufacturing and selling beverages and maintains a sales office located in the City of Manila. On 25 February 2000: the City Mayor of Manila approved Tax Ordinance No. 7988, otherwise known as "Revised Revenue Code of the City of Manila" repealing Tax Ordinance No. 7794 - Tax Ordinance No. 7988 amended certain sections of Tax Ordinance No. 7794 by increasing the tax rates applicable to certain establishments operating within the territorial jurisdiction of the City of Manila, including herein petitioner. Petitioner filed a Petition before the Department of Justice (DOJ), against the City of Manila and its Sangguniang Panlungsod, invoking Section 187 of the Local Government Code of 1991 Said Petition questions the constitutionality or legality of Section 21 of Tax Ordinance No. 7988. On 17 August 2000: then DOJ Tuquero issued a Resolution declaring Tax Ordinance No. 7988 null and void for non-compliance with publication requirements. The City of Manila failed to file a Motion for Reconsideration nor lodge an appeal of said Resolution, thus, said Resolution has lapsed into finality. On 16 November 2000: Atty. Leonardo A. Aurelio wrote the Bureau of Local Government Finance (BLGF) requesting in behalf of his client, Singer Sewing Machine Company, an opinion on whether the Office of the City Treasurer of Manila has the right to enforce Tax Ordinance No. 7988 despite the Resolution of the DOJ Secretary. The BLGF Executive Director issued an Indorsement ordering the City Treasurer of Manila to "cease and desist" from enforcing Tax Ordinance No. 7988. Despite this order, respondents continued to assess petitioner business tax for the year 2001 based on the tax rates prescribed under Tax Ordinance No. 7988. Thus, petitioner filed a Complaint with the RTC praying that respondents be enjoined from implementing the aforementioned tax ordinance. RTC: in favor of petitioner. During the pendency of the said case, the City Mayor of Manila approved on 22 February 2001 Tax Ordinance No. 8011 entitled, "An Ordinance Amending Certain Sections of Ordinance No. 7988." Said tax ordinance was again challenged by

petitioner before the DOJ through a Petition questioning the legality of the aforementioned tax ordinance on the grounds that: 1. said tax ordinance amends a tax ordinance previously declared null and void and without legal effect by the DOJ; and 2. said tax ordinance was likewise not published upon its approval in accordance with Section 188 of the Local Government Code of 1991. On 5 July 2001:DOJ Secretary Hernando Perez issued a Resolution declaring Tax Ordinance No. 8011 null and void and legally not existing: The passage of the assailed ordinance did not have the effect of curing the defects of the Ordinance. RTC: Tax Ordinance No. 8011 valid. Issue: Whether or not Tax Ordinance No. 8011 amending Tax Ordinance 7988 is null and void and of no legal effect? SC: Yes, It is void. Ratio: Tax Ordinance No. 8011 was likewise declared null and void by the DOJ Secretary in a Resolution, dated 5 July 2001, elucidating that instead of amending Ordinance No. 7988, respondent should have enacted another tax measure, which strictly

complies with the requirements of law, both procedural and substantive. - The passage of the assailed ordinance did not have the effect of curing the defects of Ordinance No. 7988 which, any way, does not legally exist." - Said Resolution of the DOJ Secretary had, as well, attained finality by virtue of the dismissal with finality by this Court of respondents Petition for Review on Certiorari in G.R. No. 157490 assailing the dismissal by the RTC of Manila, Branch 17, of its appeal due to lack of jurisdiction in its Order, dated 11 August 2003 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,12 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.13

City of Manila vs. Coca-Cola (GR 181845) - Castillo ICTSI vs. City of Manila - Ruivivar PHIL. MATCH VS CITY OF CEBU 1978, Aquino Facts:

Ordinance 279 (approved by the mayor on Mar. 10, 1960, also approved by the prov. board) imposes a sales tax of 1% on the gross sales, receipts or value of commodities sold, bartered, exchanged or manufactured in Cebu in excess of P2T/quarter. Sec. 9: For purposes of the tax, all deliveries of goods or commodities stored or sold in Cebu shall be considered as sales in the city and shall be taxable. (Sales of matches consummated outside Cebu are taxable as long as the matches sold are taken from the company's stock stored in Cebu) Phil. Match (principal office in Manila) ships matches from Manila to its Cebu branch office for storage, sale and distribution within the territories and districts under the said branch for the whole VisMin region. It assailed the legality of the tax collected on the ff. outof- town deliveries: (1) Sales of matches booked and paid for in Cebu but shipped directly to customers outside Cebu. (2) Transfers of matches to salesmen assigned to different agencies outside Cebu. The salesmen sell the matches within their respective territories; issue cash sales invoices and remit the proceeds of the sales to the Cebu branch office. The value of the unsold matches constitutes their stock liability. (3) Shipments of matches to provincial customers pursuant to salesmen's instructions. Orders (by letter/telegram) sent to the Cebu branch office by the salesmen assigned outside Cebu. The proceeds of the sale, for

which the salesmen are accountable are remitted to the branch office. Phil. Match paid under protest to Cebu P12.8T as the 1% sales tax on those three classes of out-of-town deliveries of matches for the 2nd qtr. of 1961 - 2nd qtr. of 1963. It sought the refund of the sales tax paid for outof-town deliveries of matches, invoking Shell vs. Municipality of Sipocot, CamSur (sales of oil and petroleum products effected outside the territorial limits of Sipocot are not subject to the tax imposed by an ordinance of that municipality) City Treasurer denied. Under Sec. 9 of the Ord., all out-of-town deliveries of matches stored in Cebu are subject to the sales tax imposed by the Ord. Aug. 1963: Phil. Match filed this complaint, praying (1) that the ordinance be declared void insofar as it taxed the deliveries of matches outside Cebu, (2) refund of the P12T as excess sales tax paid. o TC: Sustained the tax on (1) [Such sales were consummated in Cebu bec. delivery to the carrier in Cebu is deemed to be a delivery to the customers outside Cebu]; invalidated the tax on (2) and (3) [Characterized the tax on as a storage tax" and not a sales tax; assumed that the sales were consummated outside Cebu, hence beyond its taxing power]. Issue/Held: W/N Cebu can tax transactions under (1). YES. Cebu can validly tax the sales of matches to customers outside Cebu as long as the orders were

booked and paid for in Phil. Match's branch office in Cebu. Ratio Generally, delivery to the carrier is delivery to the buyer. A different interpretation would encourage tax evasion through the simple expedient of arranging for the delivery of the matches at the outskirts of Cebu, though the purchase was effected and paid for in the Cebu branch office. The municipal board of Cebu is empowered to provide for the levy and collection of taxes for purposes in accordance with law. The taxing power validly delegated to cities and municipalities is defined in the Local Autonomy Act (RA 2264): The prohibition against the imposition of percentage taxes under such law refers to municipalities and municipal districts but not to chartered cities. The taxing power of cities, municipalities and municipal districts may be used (1) upon any person engaged in any occupation or business, or exercising any privilege therein; (2) for services rendered by those political subdivisions or rendered in connection with any business, profession or occupation being conducted therein, and (3) to levy, for public purposes, just and uniform taxes, licenses or fees.

HERE: Sales of matches to customers outside Cebu, which sales were booked and paid for in the branch office, are subject to Cebu's taxing power. [vs. the Shell case where the price was paid outside of the municipality of Sipocot, the entity imposing the tax] Mun. of Jose Panganiban, Camarines Norte vs. Shell (place of delivery determines the taxable situs of the property to be taxed) cannot properly be invoked in this case. In the said case, RA 1435 specifies that the tax may be levied upon oils distributed within the limits of the city or municipality, meaning the place where the oils were delivered. HERE, the fact that the matches were delivered to customers, whose places of business were outside Cebu, would not place those sales beyond Cebu's taxing power. Those sales formed part of the merchandising business being assigned on by the company in Cebu. o Furthermore, because the sellers place of business is in Cebu, it cannot be sensibly argued that such sales should be considered as transactions subject to the taxing power of the political subdivisions where the customers resided and accepted delivery of the matches sold.

PLDT vs. City of Davao - Ko Palma Development vs. Mun. Of Malangas - Bayad PLDT vs. Prov. of Laguna - Dee Smart vs. City of Makati - Dumayas Smart vs. City of Davao - Ferrer

Yamane vs. BA Lepanto - Banaag Ericsson vs. City of Pasig - Quitain FELS Energy v. Batangas (2007) Callejo, Sr. J. 2 consolidated petitions for review on certiorari (FELS v. Province; NPC v. Local Board of Assessment Appeals) In 1993, Polar Energy entered into an Energy Conversion Agreement with Napocor, for the lease of power barges moored in Calaca, Batangas. The agreement was for 5 years and under it, Napocor obligated itself to pay for all real estate taxes on the barges. Polar later assigned its rights under the agreement to FELS. On Aug. 7, 1995, FELS received an assessment of real property taxes on the barges from Prov. Assessor Andaya of Batangas amounting to P56M/year. FELS referred the matter to the Napocor, reminding it of its duty under the Energy Conversion Agreement. It also gave Napocor authority to represent it in conferences with the Prov. Assessor. Prov. Assessor (Reconsideration, filed Sept. 7, 1995): DENIED Local Board of Assessment Appeals (Petition to set aside assessment; for the declaration of barges as non-taxable items): DENIED, on the ff. grounds 1. Power plant facilities, while they may be classified as movable or personal property, are nevertheless considered real property for taxation purposes because they are installed at a specific location with a character of permanence. 2. FELS, a private corporation, isnt covered by the exemption granted to NPC notwithstanding the agreement between them. 3. The action has already prescribed. FELS appealed to the Central Board of Assessment Appeals. Pending the appeal, the Provincial Treasurer issued a Notice of Levy and Warrant by Distraint over the power barges. The CBAA then issued an order lifting the levy and distraint. At this stage, NPC was allowed to intervene in the case. Both FELS and NPC also filed motions to admit bonds to guarantee the payment of the taxes, which was approved by the CBAA. CBAA: power barges were found to be exempt from real property tax! 1. The power barges belong to NPC.

2. Since they are actually, directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c) of R.A. No. 7160. 3. Prescription did not preclude the NPC from pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. CBAA: later completely reversed its earlier decision. FELS (Sept. 20, 2004) and NPC (Oct. 19, 2004) both filed MRs with the CA. This was ultimately denied on the ground of prescription (Aug. 25, 2004). These actions were then filed before the SC. Issues/Held/Ratio: WON their right to appeal has prescribed. YES. FELS: when NPC moved to have the assessment reconsidered on September 7, 1995, the running of the period to file an appeal with the LBAA was tolled. NPC: the 60-day period for appealing to the LBAA should be reckoned from its receipt of the denial of its motion for reconsideration. Section 226 of the LGC provides that any owner/person having legal interest in the property who is unsatisfied with an assessment made by the assessor (provincial, city or municipal) has 60 days

from the receipt of the written notice of assessment to appeal to the BOAA. This was also explicitly stated in the notice of assessment sent by the Provincial Assessor. 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 Assessors decision, a remedy not sanctioned by law. The taxpayers failure to question the assessment in the LBAA renders the assessment of the local assessor final, executory and demandable. The rationale given for this is to discourage corruption in appraisal and assessment, as it gives the assessor the opportunity to set the real property values unreasonably high then reduce it later at the request of the property owner. Whether power barges are considered movables or immovables for the purpose of real property taxation. IMMOVABLES. Article 415 (9) of the New Civil Code provides that [d]ocks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination. WON the barges are exempt from paying real property tax because they are used actually, directly, and exclusively by a GOCC (234.c of the LGC). NO.

According to the terms of the agreement itself, Polar itself was to operate the power barges. The mere undertaking of petitioner NPC under the Agreement does not justify the exemption, as it cannot bind someone not a party to the agreement. Tax

exemptions are construed strictly against the claimant and liberally in favor of the government (in this case, the provincial corporation), and in this case it was not proven.

Lung Center of the Phils. vs. QC - Ruga MCIAA v Marcos Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. 6958, mandated to "principally undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City, . . . and such other Airports as may be established in the Province of Cebu . .. . (Sec. 3, RA 6958). Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter. On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of the Treasurer of the City of Cebu, demanded payment for realty taxes on several parcels of land belonging to the petitioner. Petitioner objected to such demand for payment as baseless and unjustified, claiming in its favor the aforecited Section 14 of RA 6958 which exempt it from payment of realty taxes. It was also asserted that it is an instrumentality of the government performing governmental functions, citing section 133 of the Local Government Code of 1991 which puts limitations on the taxing powers of local government units. Respondent City refused to cancel and set aside petitioner's realty tax account, insisting that the MCIAA is a government-controlled corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193 and 234 of the Local Governmental Code that took effect on January 1, 1992. Whether or not the MCIAA is excempted from realty taxes? 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. Nevertheless, effective limitations thereon may be imposed by the people through their Constitutions. A claim of exemption from tax payment 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. 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 non-impairment clause of the Constitution.

The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the exercise by local government units of their power to tax, the scope thereof or its limitations, and the exemption from taxation. With the repealing clause of RA 7160 the tax exemption provided. All general and special exemption in the charter of the MCIAA has been expressly repealed. Laws, acts, City Charters, decrees, executive orders, proclamations and administrative regulations, or part of parts thereof which are inconsistent with any of the provisions of the Code are hereby repealed or modified accordingly. Therefore the SC affirmed the decision and order of the RTC and herein petitioner has to pay the assessed realty tax of its properties effective January 1, 1992 up to the present.

MIAA v. Court of Appeals (2006) Carpio, J Facts: The Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Paraaque City under Executive Order No. 903 (MIAA Charter). o As such operator, it administers the land, improvements and equipment within the NAIA Complex. In March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061 to the effect that the Local Government Code of 1991 (LGC) withdrew the exemption from real estate tax granted to MIAA under Section 21of its Charter. o MIAA paid some of the real estate tax already due. June 2001, it received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. o The City Treasurer subsequently issued notices of levy and warrants of levy on the airport lands and buildings.

At the instance of MIAA, the OGCC issued Opinion No. 147 clarifying Opinion No. 061, pointing out that Sec. 206 of the LGC requires persons exempt from real estate tax to show proof of exemption. o According to the OGCC, Sec. 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax. MIAA, thus, filed a petition with the Court of Appeals seeking to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the airport lands and buildings, but this was dismissed for having been filed out of time. Hence, MIAA filed this petition for review, pointing out that it is exempt from real estate tax under Sec. 21 of its charter and Sec. 234 of the LGC. o It invokes the principle that the government cannot tax itself as a justification for exemption, since the airport lands and buildings, being devoted to public use and public service, are owned by the Republic of the Philippines. The City of Paraaque invokes Sec. 193 of the LGC, which expressly withdrew the tax exemption privileges of government-owned and controlled corporations (GOCC) upon the effectivity of the LGC. o It asserts that an international airport is not among the exceptions mentioned in the said law.

Meanwhile, the City of Paraaque posted and published notices announcing the public auction sale of the airport lands and buildings. In the afternoon before the scheduled public auction, MIAA applied with the Court for the issuance of a TRO to restrain the auction sale. The Court issued a TRO on the day of the auction sale, however, the same was received only by the City of Paraaque three hours after the sale.

Issue: W/N the airport lands and buildings of MIAA are exempt from real estate tax? YES. Held: Sec. 243(a) of the LGC exempts from real estate tax any real property owned by the Republic of the Philippines. This exemption should be read in relation with Sec.133(o) of the LGC, which provides that the exercise of the taxing powers of local governments shall not extend to the levy of taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities. The basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. This rule

applies with greater force when local governments seek to tax national government instrumentalities. A tax exemption is construed liberally in favor of national government instrumentalities. MIAA is not a GOCC, but an instrumentality of the government. The Republic remains the beneficial owner of the properties. MIAA itself is owned solely by the Republic. 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. As long

as the airport lands and buildings are reserved for public use, their ownership remains with the State. Unless the President issues a proclamation withdrawing these properties from public use, they remain properties of public dominion. As such, they are inalienable, hence, they are not subject to levy on execution or foreclosure sale, and they are exempt from real estate tax. However, portions of the airport lands and buildings that MIAA leases to private entities are not exempt from real estate tax. In such a case, MIAA has granted the beneficial use of such portions for a consideration to a taxable person

MIAA vs. CITY OF PASAY (GR 163072) April 2, 2009 CARPIO, J.:

FACTS: Manila International Airport Authority (MIAA) operates and administers the NAIA Complex under EO 903 (Revised Charter of the MIAA). Under Sections 3 and 22 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and Paraaque City. On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. TOTAL

DEFICIENCY: P1,016,213,836.33 [principal: P642,747,726.20, penalty: P373,466,110.13] o City of Pasay issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain unpaid. On 29 October 2001, MIAA filed with the CA a petition for prohibition and injunction with prayer for preliminary injunction or TRO. The petition sought to enjoin the City of Pasay from imposing

real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties. o CA dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties holding that Sections 1931 and 2342 of the LGC withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including GOCCs, except local water districts, cooperatives duly registered under Republic Act No. 6938, nonstock and non-profit hospitals and educational institutions. Since MIAA is a governmentowned corporation, it follows that its tax
1

exemption under Section 21 of EO 903 has been withdrawn. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence, this petition.

ISSUE: WON the NAIA Pasay properties of MIAA are exempt from Real Property Tax? HELD: YES Ratio: In MIAA v. CA (2006 MIAA case; only difference is it involved the NAIA Paranaque properties), SC already resolved the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. o SC held: MIAA is not a GOCC under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a GOCC under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality3 vested with

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.
2

SECTION 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; xxxxxxx Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all governmentowned or controlled corporations are hereby withdrawn upon the effectivity of this Code.

MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation." As explained in the 2006 MIAA case: A GOCC must be "organized as a stock or nonstock 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. (SEC 3 CORP CODE) MIAA is also not a non-stock corporation because it has no members. (SEC 87 CORP CODE) Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational,

corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the LGC. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. (NCC ART 420) The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.

MIAA is not a GOCC but a government instrumentality which is exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of LGU is subject to the limitations enumerated in Section 133 of the LGC. Under Section 133(o) of the LGC, 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. Furthermore, 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.

Dispositive: Granted. Exempt.

IN SUM:

professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.

City Government Of Quezon City vs. Bayan Telecommunications, Inc. Garcia, J. | 2006 Facts: Respondent Bayan Telecommunications, Inc.3 (Bayantel) is a legislative franchise holder under RA 3259 to establish and operate radio stations for domestic telecommunications, radiophone, broadcasting and telecasting. Within Quezon City, Bayantel owned several real properties on which it maintained various telecommunications facilities. Under RA 3259 Section 14: (a) The grantee shall be liable to pay the same taxes on its real estate, buildings and personal property, exclusive of the franchise, as other persons or corporations are now or hereafter may be required by law to pay. (b) The grantee shall further pay to the Treasurer of the Philippines each year, within ten days after the audit and approval of the accounts as prescribed in this Act, one and one-half per centum of all gross receipts from the business transacted under this franchise by the said grantee Meanwhile in the LGC: SEC. 232. Power to Levy Real Property Tax. A province or city or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, SEC. 11. The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, as other persons or corporations are now or hereafter may be required by law to pay. In addition thereto, the grantee, its successors or assigns shall machinery and other improvements not hereinafter specifically exempted. Complementing the aforequoted provision is the second paragraph of Section 234 of the same Code which withdrew any exemption from realty tax heretofore granted to or enjoyed by all persons, natural or juridical, to wit: SEC. 234 - Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: xxx xxx xxx Except as provided herein, any exemption from payment of real property tax previously granted to, or enjoyed by, all persons, whether natural or juridical, including government-owned-or-controlled corporations is hereby withdrawn upon effectivity of this Code. Few months after LGC took effect, Congress enacted Rep. Act No. 7633, amending Bayantels original franchise:

pay a franchise tax equivalent to three percent (3%) of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee, its successors or assigns and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof. Provided, That the grantee, its successors or assigns shall continue to be liable for income taxes payable under Title II of the National Internal Revenue Code . xxx. Meanwhile, the government of Quezon City, pursuant to the taxing power vested on local government units and in relation to Section 232 of the LGC, enacted City Ordinance No. SP-91, S-93, otherwise known as the Quezon City Revenue Code (QCRC)http://www.lawphil.net/judjuris/juri2006/mar200 6/gr_162015_2006.html - fnt5 imposed under Section 5 thereof, a real property tax on all real properties in Quezon City, and the withdrawal of exemption from real property tax under Section 234 of the LGC. Furthermore, much like the LGC, the QCRC, under its Section 230, withdrew tax exemption privileges in general Pursuant to the QCRC, new tax declarations for Bayantels real properties in Quezon City were issued by the City Assessorand were received by Bayantel. Meanwhile, on March 16, 1995, RA 7925 otherwise known as the "Public Telecommunications Policy Act of the Philippines," took effect and Section 23 of the Act provides: SEC. 23. Equality of Treatment in the Telecommunications Industry. Any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall

ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or the type of service authorized by the franchise. On January 7, 1999, Bayantel wrote the office of the City Assessor seeking the exclusion of its real properties in the city from the roll of taxable real properties. DENIED appeal with the Local Board of Assessment Appeals (LBAA). Bayantel did not pay the real property taxes assessed against it by the Quezon City government. Quezon City Treasurer sent out notices of delinquency for the total amount of P43,878,208.18, followed by the issuance of several warrants of levy against Bayantels properties. Bayantel withdrew its appeal with the LBAA and instead filed with the RTC of Quezon City a petition for prohibition with an urgent application for a temporary restraining order (TRO) and/or writ of preliminary injunction. In the eve of the public auction scheduled the following day, the lower court issued a TRO, followed, after due hearing, by a writ of preliminary injunction via its order of August 20, 2002. RTC decision: Pursuant to the enabling franchise under Section 11 of Republic Act No. 7633, the real estate properties and buildings of Bayantel which have been admitted to be used in the operation of petitioners franchise described in the following tax declarations

are hereby DECLARED EXEMPT from real estate taxation Issue: W/N Bayantels real properties in Quezon City are exempt from real property taxes under its legislative franchise Held: Yes The lower court resolved the issue in the affirmative, basically owing to the phrase "exclusive of this franchise" found in Section 11 of Bayantels amended franchise, Rep. Act No. 7633. To petitioners, however, the language of Section 11 of Rep. Act No. 7633 is neither clear nor unequivocal. The elaborate and extensive discussion devoted by the trial court on the meaning and import of said phrase, they add, suggests as much. It is petitioners thesis that Bayantel was in no time given any express exemption from the payment of real property tax under its amendatory franchise. There seems to be no issue as to Bayantels exemption from real estate taxes by virtue of the term "exclusive of the franchise" qualifying the phrase "same taxes on its real estate, buildings and personal property," found in Section 14, supra, of its franchise, Rep. Act No. 3259, as originally granted. The legislative intent expressed in the phrase "exclusive of this franchise" distinguishes 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. Section 14 of Rep. Act No. 3259 effectively works to grant or delegate to local governments of Congress inherent power to tax the franchisees 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. 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. Ultimately, 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. Bayantels 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. 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. The QCRC just like the LGC, expressly withdrew, under Section 230 thereof all tax exemption privileges in general. This thus raises the question of whether or not the Citys Revenue Code pursuant to which the city treasurer of Quezon City levied real property taxes against Bayantels real properties located within the

City effectively withdrew the tax exemption enjoyed by Bayantel under its franchise, as amended. Bayantel answers that it is only "liable to pay the same taxes, as any other persons or corporations on all its real or personal properties, exclusive of its franchise. Bayantels 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. The power to tax has been delegated by Congress and directly granted by 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. Even if the policy is slanted in favor of local taxation, the power to tax is still primarily vested in the Congress. In net effect, the controversy presently before the Court involves, at bottom, a clash between the inherent taxing power of the legislature, which necessarily includes the power to exempt, and the local governments delegated power to tax under the aegis of the 1987 Constitution. The Quezon City Revenue Code which imposed real estate taxes on all real properties within the citys territory and removed exemptions theretofore "previously granted to, or presently enjoyed by all persons, whether natural or juridical .," there can really be no dispute that the power of the Quezon City

Government to tax is limited by Section 232 of the LGC which expressly provides that "a province or city or municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted." Indeed, the grant of taxing powers to LGUs 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. Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware that the LGC has already withdrawn Bayantels former exemption from realty taxes, Congress opted to pass RA7633 using, under Section 11 thereof, exactly the same defining phrase "exclusive of this franchise" which was the basis for Bayantels exemption from realty taxes prior to the LGC. The Court views this subsequent piece of legislation as an express and real intention on the part of Congress to once again remove from the LGCs delegated taxing power, all of the franchisees (Bayantels) properties that are actually, directly and exclusively used in the pursuit of its franchise. WHEREFORE, the petition is DENIED.

NATIONAL POWER CORPORATIONvs.CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA)

(January 30, 2009, BRION) FACTS: 1993, First Private Power Corporation (FPPC) entered into a Build-Operate-Transfer agreement with NAPOCOR for the construction of the 215 Megawatt Bauang Diesel Power Plant in Payocpoc, Bauang, La Union Pursuant to the BOT Agreement, Bauang Private Power Corporation (BPPC) which will own, manage and operate the power plant/station, and assume and perform FPPCs obligations under the BOT agreement For a fee, BPPC will convert NAPOCORs supplied diesel fuel into electricity and deliver the product to NAPOCOR BOT agreement provision related to the issue in the case: 2.03 NAPOCOR shall make available the Site to CONTRACTOR for the purpose of building and operating the Power Station at no cost to CONTRACTOR for the period commencing on the Effective Date and ending on the Transfer Date and NAPOCOR shall be responsible for the payment of all real estate taxes and assessments, rates, and other charges in respect of the Site and the buildings and improvements thereon. The Officer-in-Charge of the Municipal Assessors Office of Bauang, La Union issued a Declarations of Real Property declaring BPPCs machineries and equipment as tax-exempt. Municipality of Bauang questioned the tax exemption declarationg before the Regional Director of the Bureau of Local Government Finance (BLGF) Deputy Executive Director and Officer-in-Charge of the BLGF, Department of Finance RULING: BPPCs machineries and equipments are subject to real property tax directed the Assessors Office to take appropriate action

The Provincial/Municipal Assessors issued Revised Tax Declarations and cancelled the earlier issued Declarations of Real Property The Municipal Assessor issued a Notice of Assessment and Tax Bill to BPPC assessing/taxing the machineries and equipments amounting to P288,582,848.00 for 1995-1998 period received by BPPCs VicePresident and Plant Manager 1998, NAPOCOR filed a petition with the LBAA asking that retroactive to 1995, the machineries covered by the tax declarations be exempt from real property tax under Section 234(c) LGC and, that these properties be dropped from the assessment roll pursuant to Section 206 of the LGC. LBAA: denied petition exemption provided by Section 234(c) applies only when a GOCC like NAPOCOR owns and/or actually uses machineries and equipment for the generation and transmission of electric power, not so in this case appeal to CBAA BPPC moved to intervene

CBAA: dismissed appeal BPPC, and not NAPOCOR, is the actual, direct and exclusive user of the equipment and machineries; thus, the exemption under Section 234(c) does not apply appeal to CTA CTA: dismissed NAPOCOR is not the registered owner of the machineries and equipment but BPPC

others, to authorize NAPOCOR to enter into BOT contracts with the private sector so that NAPOCOR can carry out its mandate; the tax exemption under Section 234(c) of the LGC must be given effect as the only legal and cogent way of harmonizing it with NAPOCORs Charter and the BOT law ISSUE: Is the BOT Project included in NAPOCORs tax exemption? RULING: NO Section 234(c) LGC is clear and unambiguous o Exempt from real property taxation are: (a) all machineries and equipment; (b) actually, directly, and exclusively used by; (c) [local water districts and] GOCCs engaged in the [supply and distribution of water and/or] generation and transmission of electric power o In FELS Energy, Inc. v. Province of Batangas: Province of Batangas assessed real property taxes against FELS Energy, Inc. the owner of a barge used in generating electricity under an agreement with NAPOCOR, which provided that NAPOCOR shall pay all of FELS real estate taxes and assessments SC RULING: didnt recognize the tax exemption claimed, since NAPOCOR was not the actual, direct and exclusive user of the barge as required by Sec. 234 (c) and since tax exemptions must be strictly construed THUS mere undertaking of NAPOCOR under the Agreement (shall be

NAPOCOR contention: entitled to tax exemption as the actual, direct, and exclusive user of the machineries and equipment because: a. BOT agreement is a financing agreement where NAPOCOR is the beneficial owner and the actual, direct, and exclusive user of the power plant and BPPC is the lender/creditor that retains the plants legal ownership until it is fully paid b. NAPOCORs tax exemption should apply to a BOT project since BOT projects are really government projects and that Congress specifically considered NAPOCORs situation in granting tax exemption to machineries and equipment used in power generation and distribution c. [RELEVANT PART] In interpreting Section 234(c) LGC, related statutes must be considered and the task of the courts is to harmonize all these laws, if possible; specifically, Section 234(c) of the LGC was enacted to clarify or restore NAPOCORs real property tax exemption so that NAPOCOR can perform its public function of supplying electricity to the entire country at affordable rates, while the BOT law was enacted, among

responsible for the payment of all real estate taxes and assessments) does not justify the exemption and the privilege granted to petitioner NAPOCOR cannot be extended to FELS HERE, records show that NAPOCOR admits BPPCs ownership of the machineries and equipment in the power plant and this is supported by provisions of the BOT agreement o Thus real issue here is not ownership but use of the machineries and equipment since the claim under Sec. 234(c) LGC is premised on actual, direct and exclusive use

HERE, BPPC has complete ownership both legal and beneficial of the project, including the machineries and equipment used, subject only to the transfer of these properties without cost to NAPOCOR after the lapse of the period agreed upon UNDENIABLE that there is some kind of "financing" arrangement is contemplated in the sense that the private sector proponent shall initially shoulder the heavy cost of constructing the projects buildings and structures and of purchasing the needed machineries and equipment But the arrangement is not just a simple provision of funds, since the private sector proponent not only constructs and buys the necessary assets to put up the project, but operates and manages it as well during an agreed period that would allow it to recover its basic costs and earn profits Thus, the private sector proponent goes into business for itself, assuming risks and incurring costs for its account. If it receives support from the government at all during the agreed period, these are preagreed items of assistance geared to ensure that the BOT agreements objectives both for the project proponent and for the

NAPOCOR characterizes the BOT Agreement as a mere financing agreement where BPPC is the financier, while NAPOCOR is the actual user of the properties SC disagrees o Build-operate-and-transfer: There is a project proponent who constructs the project at its own cost and subsequently operates and manages it. This proponent secures the return on its investments from those using the projects facilities through appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated. At the end of the fixed term agreed upon, the project proponent transfers the ownership of the facility to the government agency.

government are achieved Thus, a BOT arrangement is sui generis It is different from the usual financing arrangements where funds are advanced to a borrower who uses the funds to establish a project that it owns, subject only to a collateral security arrangement to guard against the nonpayment of the loan It is different from an arrangement where a government agency borrows funds to put a project from a private sector-lender who is thereafter commissioned to run the project for the government agency here, the government agency is the owner of the project from the beginning, and the lender-operator is merely its agent in running the project

of the machineries and equipment are actual, direct, and immediate, while NAPOCORs is contingent and, at this stage of the BOT Agreement, not sufficient to support its claim for tax exemption CONCLUSION: CTA committed no reversible error in denying NAPOCORs claim for tax exemption

SC: for these same reasons also reject NAPOCORs argument that the machineries and equipment must be subjected to a lower assessment level o Since the basis for the application of the claimed differential treatment or assessment level is the same as the claimed tax exemption, the lower tribunals correctly found that there is no basis to apply the lower assessment level of 10%

THUS, consistent with the BOT concept and as implemented, BPPC the ownermanager-operator of the project is the actual user of its machineries and equipment BPPCs ownership and use

The real concern for NAPOCOR in this case is its assumption under the BOT agreement of BPPCs real property tax liability (which in itself is a recognition that BPPCs real properties are not really tax exempt) thus NAPOCOR argues that if no tax exemption will be recognized, the responsibility it assumed carries practical implications that are very difficult to ignore (the alleged detriment to the public interest that will result if the levy, sale, and transfer of the

machineries and equipment were to be completed machineries and equipment have been sold in public auction and the buyer, respondent Province, will consolidate its ownership over these properties on February 1, 2009) o SC: while recognizing these concerns, the same are not relevant to the disposition of the issues in this case Local government real property taxation also has constitutional underpinnings, based on Section 5 of Article X of the Constitution that we cannot simply ignore In FELS case: 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 CONCLUSION: DENY NAPOCORs petition for lack of merit. We AFFIRM the appealed decision of the Court of Tax Appeals.

NATIONAL POWER CORPORATION V. PROVINCE OF QUEZON AND MUNICIPALITY OF PAGBILAO (2009) Brion, J. Facts: The NPC is a GOCC mandated by law to undertake the production of electricity and the transmission of electric power on a nationwide basis. The NPC entered into an Energy Conversion Agreement (ECA) with Mirant Pagbilao Corporation under a build-operate-transfer (BOT) arrangement. Mirant will build a coal-fired thermal power plant on lots owned by the NPC in Pagbilao, Quezon and operate the power plant for 25 years. The NPC will supply the fuel, take the power generated, and use it to supply electric power. At the end of 25 years, Mirant will transfer the power plant to the NPC without compensation. Among the obligations undertaken by the NPC under the ECA was the payment of all taxes that the government may impose on Mirant. Under Article 11.1, the NPC shall be responsible for the payment of (b) all real estate taxes and assessments, rates and other charges in respect of the Site, the buildings and improvements thereon and the Power Station. The Municipality of Pagbilao assessed Mirants real property taxes on the power plant and its machineries as P 1,538,076,000.00 for the period of 1997 to 2000. The NPC filed a petition before the Local Board of Assessment Appeals (LBAA) and objected to the assessment against Mirant on the claim that it (the NPC) is entitled to the tax exemptions provided in Section 234, paragraphs (c) and (e) of the Local Government Code. The LBAA dismissed the NPCs petition. The Central Board of Assessment Appeals (CBAA) and the Court of Tax Appeals affirmed the denial of the NPCs claim for exemption. Issue: WON NPC can claim tax exemption for taxes due from Mirant? No Ruling: The entity liable for tax has the right to protest the assessment.

- A taxpayer's failure to question the assessment before the LBAA renders the assessment of the local assessor final, executory, and demandable, thus precluding the taxpayer from questioning the correctness of the assessment. - Section 226 of LGC lists down two entities vested with personality to contest an assessment: the owner and the person with legal interest in the property. - The liability for taxes generally rests on the owner of the real property at the time the tax accrues. However, personal liability for realty taxes may also expressly rest on the entity with the beneficial use of the real property. - In either case, 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 that person is the owner. - The NPC is neither the owner nor the possessor/user of the machineries. Under Article 12.2 of the ECA, Mirant shall, directly or indirectly, own the Power Station and all the fixtures, fittings, machinery and equipment on the Site. - Legal interest should be an interest that is actual and material, direct and immediate, not simply contingent or expectant. The NPCs 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. - On liability for taxes, the NPC indeed assumed responsibility for the taxes due on the power plant and its machineries. The tax liability we refer to, 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. By law, the tax liability rests on Mirant based on its ownership, use, and possession of the plant and its machineries - The NPC's contractual liability alone cannot be the basis for the enforcement of tax liabilities against it by the local government unit. The NPC is neither the owner, nor the possessor or user of the property taxed. No interest on its part justifies any tax liability on its part other than its voluntary contractual undertaking. 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 to give it personality to protest the tax imposed by law on Mirant.

- The stipulation is between the NPC and Mirant and does not bind third persons who are not privy to the contract. There is no privity between the local government units and the NPC, even though both are public corporations. An LGU is independent and autonomous in its taxing powers. - Section 130 (d) of LGC: d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to disposition by, the local government unit - Only the parties to the ECA can exact and demand the enforcement of the rights and obligations it established. Only Mirant can demand compliance from the NPC for payment of real property tax the NPC assumed to pay. The local government units can not be compelled to recognize the protest of a tax assessment from the NPC, against whom it cannot enforce the tax liability. The test of exemption is nature of use, not ownership, of machineries. - To claim exemption in Sec 234(c) of LGC, a claimant must prove two elements: a. the machineries and equipment are actually, directly, and exclusively used by ... government-owned or controlled corporations; and b. the ... government-owned and controlled corporations claiming exemption must be engaged in the ... generation and transmission of electric power. - The GOCC claiming exemption must be the entity actually, directly, and exclusively using the real properties, and the use must be devoted to the generation and transmission of electric power. Neither the NPC nor Mirant satisfies both requirements. Mirant, a private corporation, uses and operates them. NPC does not actually, directly, and exclusively use them. - It is wrong to allow the NPC to assume in its BOT contracts the liability of the other contracting party for taxes and at the same time allow NPC to turn around and say that no taxes should be collected because the NPC is taxexempt as a GOCC. It is grossly unfair to the people of the Province of Quezon and the Municipality of Pagbilao who stand to benefit from the tax provisions of the LGC. Dispositive: Affirmed the decision of the Court of Tax Appeals en banc.