Digital v.

Pangasinan | ema
February 23, 2007
DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC., petitioner 
INC.,  petitioner , vs.
PROVIN
PROVINCE CE OF PANGA
PANGASIN
SINAN
AN repres
represent
ented
ed by RAMON
RAMON A. CRISOS CRISOSTO
TOMO,
MO, PANGASIN
NGASINAN
AN PROVI
PROVINCI
NCIAL
AL
TREASURER, respondent .
Chico-Nazario, J.:
J.:

SUMMARY Digitel
SUMMARY Digitel operated telecou!icatio!s "acilities i! #a!gasi!a! u!der a provi!cial "ra!chise gra!ted i! Nov.
$%%2. Digitel&s provi!cial "ra!chise ade it liable "or provi!cial "ra!chise a!d real property ta'es. (! Dec. $%%2, the
#a!gasi!a! #rovi!cial )oard e!acted a! ordi!a!ce iposi!g real property ta'. *his a""ected Digitel such that it
becae liable "or +#* !ot o!ly o! its la!ds but o! the iprovee!ts o! these la!ds as ell. (! $%%3, the #a!gasi!a!
#rovi!cial )oard passed a "ra!chise ta' ordi!a!ce. (! $%%, Co!gress gra!ted Digitel a !atio!al "ra!chise, u!der 
hich Digitel as ade liable "or "ra!chise ta' a!d real property ta' o! its real estate e'clusive o" its "ra!chise/.
#a!gasi!a! co!ducted a! audit a!d "ou!d that Digitel has !ot paid its "ra!chise ta' si!ce $%%2, so it ordered Digitel
to pay up or have its provi!cial "ra!chise ca!celled. (! $%%, the #ublic *elecou!icatio!s #olicy 1ct +1 7%2 or 
the #*#1
#*#1 too4 e""ect. Digitel used this as basis to clai e'eptio! "ro the #a!gasi!a! "ra!chise a!d real property
ta'es, claii!g that 523 o" the #*#1 e'te!ded the ta' e'eptio!s gra!ted to telecou!icatio!s "ra!chisees to
"ra!chisees ho did !ot have a!y. *hus the ta' e'eptio! gra!ted i! the "ra!chises o" 6art, lobe, a!d )ell has
becoe applicable to Digitel, the argue!t goes. Digitel thus re"used to pay the #a!gasi!a! ta'es. #a!gasi!a! thus
sued Digitel "or the assesse!t a!d collectio! o" the ta'es. *he trial court ruled "or #a!gasi!a! a!d ordered the
assesse!t a!d paye!t o" ta'es by Digitel. Digitel appealed to the 6C. HELD 8!
HELD 8! "ra!chise ta' 9 6C re"erred to its
ruli!g i! PLDT v. Davao City, hich
City,  hich held that the ter e'eptio!/ i! 523 o" the #*#1 as !ot i!te!ded to ea! ta'
e'eptio!s but e'eptio!s "ro registratio! a!d reportorial reuiree!ts. Digitel&s argue!t ill lead to absurd
co!seue!ces. ;oever, because o" the abolitio! o" the "ra!chise ta' a!d its replacee!t ith the <1*, Digitel !o
has to pay <1* o! its operatio!s. 8! real property ta' 9 6C r uled that Digitel is liable to pay real property ta' o!ly ith
respect to properties !ot actually, directly, a!d e'clusively used i! its "ra!chise. *he Co!gress ca! validly gra!t ta'
e'eptio!s to e!tities !otithsta!di!g the ithdraal o" ta' e'eptio!s i! the =ocal over!e!t Code. 6i!ce the
!atio!al "ra!chise o" Digitel is a later la, Co!gress is presued to have i!te!ded to repeal the =C to the e'te!t o" 
gra!ti!g Digitel the ta' e'eptio! gra!ted to it i! the "ra!chise.

DOCTRINE *he ord e'eptio!/ i! +1 7%2523 pertai!s to e'eptio! "ro regulatory or reportorial reuiree!ts
o" the D8*C or the N*C a!d !ot to e'eptio! "ro ta' liability.
*he gra!t o" ta'i!g poers to local gover!e!t u!its u!der the Co!stitutio! a!d the =C does !ot a""ect the poer o" 
Co!gress to gra!t e'eptio!s to certai! perso!s, pursua!t to a declared !atio!al policy. *he legal e""ect o" the
co!stitutio!al gra!t to local gover!e!ts siply ea!s that i! i!terpreti!g statutory provisio!s o! u!icipal ta'i!g
poers, doubts ust be resolved i! "avor o" u!icipal corporatio!s.

NATURE +ule  petitio! "or revie o! certiorari. 8rigi!al case "or a!daus, collectio!, a!d daages

FACTS
• >a!. $, $%%2 - +1 7$?0 =C o" $%%$ too4 e""ect.
o =C $37 ithdre
ithdre all ta' e'eptio!s
e'eptio!s o" busi!esse
busi!essess ith
ith "ra!chises
"ra!chises a!d authorize
authorizedd =@s to
ipose a "ra!chise ta'A hile =C 232 authorized =@s to ipose a real property ta'.
• Nov. $3, $%%2 9 Digital *elecou!icatio!s Corp. D((*B= as gra!ted a #rovi!cial Fra!chise by the
#rovi!ce o" #1N16(N1N.
o *he "ra!chise alloed Digitel to i!stall, ai!tai! a!d operate a telecou!icatio!s syste ithi!
the territorial urisdictio! o" #a!gasi!a!.
o @!der the "ra!chise, Digitel as reuired to pay "ra!chise a!d real property ta'es.
• Dec. 2%, $%%2 9 *he 6a!ggu!ia!g #a!lalaiga! 6# o" #a!gasi!a! e!acted #rovi!cial *a' 8rdi!a!ce No.
$, hich iposed real property ta' o! properties located ithi! #a!gasi!a!.
o *he ordi!a!ce e'te!ded the applicatio! o" 5? o" Digitel&s provi!cial "ra!chise to i!clude achi!eries
a!d other iprovee!ts !ot speci"ically e'epted.
• 6ep. $0, $%%3 9 *he 6# rati"ied the #a!gasi!a! Fra!chisi!g 8rdi!a!ce o" $%%3. 55 , , a!d ? thereo" 
iposed a "ra!chise ta' o! all busi!esses e!oyi!g a "ra!chise ithi! #a!gasi!a!.
• Feb. $7, $%% 9 +1 7?7 9 Digitel&s !atio!al legislative "ra!chise 9 too4 e""ect.
o 5 o" the la ade Digitel liable "or the paye!t o" a "ra!chise ta' E as may be prescribed by law of 
all gross receipts of the telephone or other telecommunications businesses transacted under it by 
the grantee," as well as real property ta "on its real estate, and buildings "eclusive of this
franchise.E
franchise.E
• #a!gasi!a! e'ai!ed its ta' records a!d "ou!d that Digitel had a "ra!chise ta' de"icie!cy "or the years
$%%2-$%%.
 o #a!gasi!a! alleged that apart "ro the #0,000 deposit ade by Digitel as part o" its accepta!ce
o" the provi!cial "ra!chise, it !ever ade a!y other paye!t o" "ra!chise ta' si!ce it started
operati!g i! $%%2.
• 8ct. $, $%% 9 #a!gasi!a! 6# passed +esolutio! 3?. (t directed Digitel to pa y its "ra!chise ta'es ithi! $
days "ro receipt thereo", otherise its "ra!chise shall be declared i!operative a!d its operatio!s teri!ated.
• ar. $?, $%% 9 Co!gress passed +1 7%2 #ublic *elecou!icatio!s #olicy 1ct.
o 523 o" the la provides: !uality of Treatment in the Telecommunications #ndustry. $ny advantage,
favor, privilege, eemption, or immunity granted under eisting 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    
• Digitel did !ot pay the provi!cial "ra!chise a!d real property ta'es.
• 8ct. 30, $%% 9 *he #a!gasi!a! #rovi!cial =egal 8""icer rote to Digitel to dea!d coplia!ce ith the
#a!gasi!a! Fra!chisi!g 8rdi!a!ce. *he #rovi!cial =egal 8""icer&s letter uoted 5 o" the 8rdi!a!ce but
oitted the phrase Eby the Congress of the Philippines, an authori%ed franchising agency or&and 'the
con(unctive word )and) was a later amendment as contained in *rdinance +o. -/0,E as relati!g to a!
additio!al source or gra!tor o" the !ecessary "ra!chise as oitted "ro the provisio! uoted i! the letter.
• Nov. $7, $%% 9 Digitel replied that it did !ot o! telecou!icatio!s "acilities i! #a!gasi!a!.
o (t argues that its operatio! o" telecou!icatio!s systes i! #a!gasi!a! as u!der a Facilities
a!agee!t 1greee!t ith the D8*C, hich reai!ed the o!er o" the "acilities.
o D8*C also provided the budget "or the operatio! o" the "acilities, thus all reve!ues ge!erated "ro
the operatio! o" the "acilities i!ured to the D8*C, a!d all the "ees received by Digitel ere "or 
serives re!dered.
o Furtherore, u!der its !atio!al "ra!chise, the paye!t o" !atio!al "ra!chise ta' as i! lieu o" all
ta'es o! said "ra!chise.
• Dec. , $%% 9 #a!gasi!a! replied that the provisio!s o" Digitel&s !atio!al "ra!chise as subect !ot o!ly to
the Co!stitutio! but also to applicable las, rules, a!d regulatio!s, hich i!clude =C $37 a!d 5? o" the
#a!gasi!a! Fra!chisi!g 8rdi!a!ce. No settlee!t as reached.
• ar. $, 2000 9 #a!gasi!a!, represe!ted by its #rovi!cial *reasurer, "iled the prese!t coplai!t "or 
a!daus, Collectio!, a!d Daages be"ore the =i!gaye! +*C to copel Digitel to:
o 8pe! its boo4s, records a!d other perti!e!t docue!ts so that the provi!cial gover!e!t ca!
a4e the proper assesse!t o" the "ra!chise ta' a!d real property ta' dueA
o #ay the su euivale!t to $G20th o" $H o" the total capital i!veste!t "or the "irst year o" its
operatio! $%%2, a!d therea"ter, "i"ty perce!t 0H o" o!e perce!t $H o" the gross receipts
realized duri!g the precedi!g cale!dar year $%%3, $%%, $%%, $%%?, $%%7, $%% a!d up to the
prese!t, a"ter the deteri!atio! o" DigitelIs capital i!veste!t a!d subseue!t gross receipts.
o #ay +eal #roperty *a' due a"ter its proper coputatio!, pursua!t to 6ectio!  o" the #a!gasi!a!
+eal #roperty *a' 8rdi!a!ce o" $%%2, a"ter deteri!atio! o" all o" DigitelIs real properties
o #ay $ 1 surcharge o" 2H o" the aou!t o" the "ra!chise ta' due or a "ractio! thereo" u!til the
deli!ue!t ta' shall have bee! "ully paidA 2 *o pay a! i!terest o" 2H per o!th o! the u!paid
aou!t or a "ractio! thereo", u!til the deli!ue!t ta' shall have bee! "ully paid, but i! !o case shall
the total i!terest o! the u!paid ta' or proportio! thereo" e'ceed 3? o!thsA
o #ay the costs o" suit.
• >u!e $, 200$ 9 +*C DBC(6(8N
o ra!ted all relie"s sought by #a!gasi!a!.
o +*C held that Digitel&s !atio!al "ra!chise does !ot e'ept it "ro paye!t o" provi!cial "ra!chise
a!d real property ta'es.
o *he provi!cial a!d !atio!al "ra!chises are separate a!d disti!ct "ro each other. Digitel as guilty
o" be!e"iti!g "ro the use o" its !atio!al "ra!chise eve! prior to the gra!ti!g o" such.
o =C $37 had already ithdra! all e'eptio!s. 1s such, the provi!cial =@ ay ipose a ta' o!
a busi!ess e!oyi!g a "ra!chise.
o Digitel&s + as de!iedA he!ce this petitio! ith the 6C.
• D((*B=&6 1+@BN*6
o (ts legislative "ra!chise bei!g a! earlier e!acte!t, by virtue o" +1 7%2523, the ta' e'eptio!
"ou!d i! the "ra!chises o" lobe, 6art a!d )ell, all basically or siilarly co!tai!i!g the phrase
Eshall pay a "ra!chise ta' euivale!t to o" all gross receipts o" the busi!ess tra!sacted u!der this
"ra!chise by the gra!tee, its successors or assig!s a!d the said perce!tage shall be i! lieu o" all
ta'es o! this "ra!chise or ear!i!gs thereo", shall ipso "acto, iediately a!d u!co!ditio!ally apply
to Digitel.
o (! other ords, u!der +1 7%2523, i! relatio! to the perti!e!t provisio!s o" the legislative
"ra!chises o" lobe, 6art a!d )ell, Ethe !atio!al "ra!chise ta' "or hich D((*B= is liable to pay
 o 5 uali"ies or deliits the scope o" its liability "or real property ta'.
• P&n&s$n&n *he phrase e'clusive o" this "ra!chise/ ca!!ot prevail over the provisio!s o" the =ocal
over!e!t Code.
• SC D$$te%/s re&% pr(pert$es $n P&n&s$n&n )*$+* &re &+t#&%%y, d$re+t%y, &nd e+%#s$-e%y #sed $n $ts
'r&n+*$se &re ee0pt 'r(0 re&% pr(perty t&.
o *he prese!t issue is at heart a dispute betee! the i!here!t ta'i!g poer o" Co!gress a!d the
delegated ta'i!g poer o" =@s u!der the $%7 Co!stitutio!.
o *his co!"lict has already bee! resolved i! PLDT v. Davao City , here 6C sustai!ed the poer o" 
Co!gress to gra!t ta' e'eptio!s over a!d above the delegated ta'i!g poer o" the =@s,
!otithsta!di!g the source o" the delegated po er.
o FC v. 8ayantel : TKhe grant of taing powers to local government units under the Constitution and 
the L>C does not affect the power of Congress to grant eemptions 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 taing powers, doubts must be
resolved in favor of municipal corporations./
o ;ad Co!gress i!te!ded to ta' all real properties o" Digitel regardless o" use, it ould !ot have
placed a uali"yi!g phrase i! 5 o" Digitel&s !atio!al "ra!chise. PLDT a!d FC  have already settled
that Co!gress ca! e'ept "ra!chise gra!tees "ro ta' despite the provisio!s o" the =C.
Furtherore, Digitel&s !atio!al "ra!chise is a later la tha! the =C. Co!gress is presued to have
passed the la ith 4!oledge o" the =C&s ithdraal o" ta' e'eptio!s.
o *he real issue is !o the i!te!t o" Co!gress i! passi!g +1 7?7 Digitel&s !atio!al "ra!chise ith
respect to ta' e'eptio!.
o Co!gress, by passi!g the later la restori!g a ta' e'eptio!, chose to restore such iu!ity to a
liited degree, as held i! FC : The Court views this subseuent piece of legislation as an epress
and real intention on the part of Congress to once again remove from the L>C)s delegated taing 
 power, all of the franchisee)s properties that are actually, directly and eclusively used in the pursuit 
of its franchise./
o ;oever, Digitel&s e'eptio! applies o!ly "ro the tie o" the e""ectivity o" its !atio!al "ra!chise
Feb. $7, $%%. (t ca!!ot be ade to retroact.
• Digitel is thus liable "or the "olloi!g:
$ as to provi!cial "ra!chise ta', "ro $3 Noveber $%%2 u!til actually paidA
2 as to real property ta'
 "or the period starti!g "ro $3 Noveber $%%2 u!til 2 Deceber $%%2, it shall be
iposed o!ly o! the la!ds a!d buildi!gs o" D((*B= located ithi! #a!gasi!a!
 "or the period coe!ci!g "ro 2% Deceber $%%2 u!til $? February $%%, i! additio! to
the la!ds a!d buildi!gs a"oree!tio!ed, it shall siilarly be iposed o! achi!eries a!d
other iprovee!tsA a!d, by virtue o" D((*B=&s Natio!al Fra!chise, i! accorda!ce ith
FC v. 8ayantel ,
 "ro the date o" e""ectivity o! $7 February $%% u!til the prese!t, it shall be iposed o!ly
o! real properties N8* actually, directly a!d e'clusively used i! the "ra!chise o" D((*B=.
(! additio! to the "oregoi!g suary, perti!e!t provisio!s o" la respecti!g i!terests,
pe!alties a!d surcharges shall also be ade to apply.

DISPOSITION #etitio! de!ied.