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. out-
of- 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 out-
of-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.
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.

HERE: Sales of matches to customers outside Cebu,

which sales were booked and paid for in the branch

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.
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.

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
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
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.
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.
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.
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
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.
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.
o 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
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
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
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 193 1 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, non-
stock and non-profit hospitals and educational
institutions. Since MIAA is a government-
owned corporation, it follows that its tax
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.
1 Section 16, Article XII of the 1987
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 "government-owned or controlled corporation." As explained in the
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 government-
owned or controlled corporations are hereby withdrawn upon the
effectivity of this Code.
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
Constitution because MIAA is not required to
meet the test of economic viability. MIAA is a
government instrumentality3 vested with
3
MIAA is a government "instrumentality" that does not qualify as a
2006 MIAA case: A GOCC 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. (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,
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.
 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.
City Government Of Quezon City vs. Bayan Telecommunications, Inc.
Garcia, J. | 2006
Facts:
IN SUM:
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.
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,
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:
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
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
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
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.
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 Vice-
President 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
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
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
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
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.
o 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 pre-
agreed items of assistance geared
to ensure that the BOT
agreements objectives both for
the project proponent and for the
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
o THUS, consistent with the BOT concept
and as implemented, BPPC the owner-
manager-operator of the project is the
actual user of its machineries and
equipment BPPCs ownership and use
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%
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
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.
of Tax Appeals.
- 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 tax-exempt 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.