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COMMISSIONER OF INTERNAL REVENUE VS. ALGUE INC.

GR No. L-28896 | Feb. 17, 1988


Facts:
· Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities
· On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes
from 1958-1959, amtg to P83,183.85
· A letter of protest or reconsideration was filed by Algue Inc on Jan 18
· On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty.
Guevara, who refused to receive it on the ground of the pending protest
· Since the protest was not found on the records, a file copy from the corp was produced and given
to BIR Agent Reyes, who deferred service of the warrant
· On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and it
was only then that he accepted the warrant of distraint and levy earlier sought to be served
· On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax Appeals
· CIR contentions:
o the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary
reasonable or necessary business expense
o payments are fictitious because most of the payees are members of the same family in control
of Algue and that there is not enough substantiation of such payments
· CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in the form of
promotional fees. These were collected by the Payees for their work in the creation of the Vegetable
Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the
Philippine Sugar Estate Development Company.
Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by
Algue as legitimate business expenses in its income tax returns
Ruling:
· Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance, made in accordance with law.
· RA 1125: the appeal may be made within thirty days after receipt of the decision or ruling challenged
· During the intervening period, the warrant was premature and could therefore not be served.
· Originally, CIR claimed that the 75K promotional fees to be personal holding company income, but
later on conformed to the decision of CTA
· There is no dispute that the payees duly reported their respective shares of the fees in their income
tax returns and paid the corresponding taxes thereon. CTA also found, after examining the evidence,
that no distribution of dividends was involved
· CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary
deduction
· Algue Inc. was a family corporation where strict business procedures were not applied and
immediate issuance of receipts was not required. at the end of the year, when the books were to be
closed, each payee made an accounting of all of the fees received by him or her, to make up the
total of P75,000.00. This arrangement was understandable in view of the close relationship among
the persons in the family corporation
· The amount of the promotional fees was not excessive. The total commission paid by the Philippine
Sugar Estate Development Co. to Algue Inc. was P125K. After deducting the said fees, Algue still
had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was
60% of the total commission. This was a reasonable proportion, considering that it was the payees
who did practically everything, from the formation of the Vegetable Oil Investment Corporation to
the actual purchase by it of the Sugar Estate properties.
· Sec. 30 of the Tax Code: allowed deductions in the net income – Expenses - All the ordinary and
necessary expenses paid or incurred during the taxable year in carrying on any trade or business,
including a reasonable allowance for salaries or other compensation for personal services actually
rendered xxx
· the burden is on the taxpayer to prove the validity of the claimed deduction
· In this case, Algue Inc. has proved that the payment of the fees was necessary and reasonable in
the light of the efforts exerted by the payees in inducing investors and prominent businessmen to
venture in an experimental enterprise and involve themselves in a new business requiring millions
of pesos.
· Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed
for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to
surrender part of one's hard earned income to the taxing authorities, every person who is able to
must contribute his share in the running of the government. The government for its part, is expected
to respond in the form of tangible and intangible benefits intended to improve the lives of the people
and enhance their moral and material values
· Taxation must be exercised reasonably and in accordance with the prescribed procedure. If it is not,
then the taxpayer has a right to complain and the courts will then come to his succor

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY V MARCOS GR No 120082, September 11,


1996
FACTS:
Petitioner was created by virtue of RA 6958. Section 1 thereof states that the authority shall be exempt from
realty taxes imposed by the National Government or any of its political subdivisions, agencies and
instrumentalities. However, the Treasurer of Cebu City demanded payment for realty taxes from petitioner.
Petitioner filed a declaratory relief before the Regional Trial Court. The trial court dismissed the petitioner
ruling that the Local Government Code withdrew the tax exemption granted to Government owned and
controlled corporation.
ISSUE:
Whether the city of Cebu has the power to impose taxes on petitioner
RULING:
Yes. Taxation is the rule and exemption is the exception, the exemption may thus be withdrawn at the
pleasure of the taxing authority. As to tax exemptions or incentives granted to or presently enjoyed by
natural or juridical persons, including government- owned and controlled corporations, section 193 of the
LGC prescribes the general rule, viz, they are withdrawn upon the effectivity of the LGC, except those
granted to local water districts, cooperatives, duly registered under RA 6938, non stock and nonprofit
hospitals and educational institutions and unless otherwise provided in the LGC.

PRODUCT V. FERTIPHIL CORP.


G.R. No. 166006 March 14, 2008
Lessons Applicable: Bet. private and public suit, easier to file public suit, Apply real party in interest test
for private suit and direct injury test for public suit, Validity test varies depending on which inherent power
FACTS:
President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among
others, for the imposition of a capital recovery component (CRC) on the domestic sale of all grades of
fertilizers which resulted in having Fertiphil paying P 10/bag sold to the Fertilizer and Perticide Authority
(FPA).
FPA remits its collection to Far East Bank and Trust Company who applies to the payment of corporate
debts of Planters Products Inc. (PPI)
After the Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Upon return of
democracy, Fertiphil demanded a refund but PPI refused. Fertiphil filed a complaint for collection and
damages against FPA and PPI with the RTC on the ground that LOI No. 1465 is unjust, unreaonable
oppressive, invalid and unlawful resulting to denial of due process of law.
FPA answered that it is a valid exercise of the police power of the state in ensuring the stability of the
fertilizing industry in the country and that Fertiphil did NOT sustain damages since the burden imposed fell
on the ultimate consumers.
RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation ad is as such because
it is NOT for public purpose as PPI is a private corporation.
ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather the police power
HELD:
1. Yes. In private suits, locus standi requires a litigant to be a "real party in interest" or party who stands to
be benefited or injured by the judgment in the suit. In public suits, there is the right of the ordinary citizen
to petition the courts to be freed from unlawful government intrusion and illegal official action subject to the
direct injury test or where there must be personal and substantial interest in the case such that he has
sustained or will sustain direct injury as a result. Being a mere procedural technicality, it has also been
held that locus standi may be waived in the public interest such as cases of transcendental importance or
with far-reaching implications whether private or public suit, Fertiphil has locus standi.
2. As a seller, it bore the ultimate burden of paying the levy which made its products more expensive and
harm its business. It is also of paramount public importance since it involves the constitutionality of a tax
law and use of taxes for public purpose.
3. Yes. Police power and the power of taxation are inherent powers of the state but distinct and have
different tests for validity. Police power is the power of the state to enact the legislation that may interfere
with personal liberty on property in order to promote general welfare. While, the power of taxation is the
power to levy taxes as to be used for public purpose. The main purpose of police power is the regulation
of a behavior or conduct, while taxation is revenue generation. The lawful subjects and lawful means tests
are used to determine the validity of a law enacted under the police power. The power of taxation, on the
other hand, is circumscribed by inherent and constitutional limitations.
In this case, it is for purpose of revenue. But it is a robbery for the State to tax the citizen and use the funds
generation for a private purpose. Public purpose does NOT only pertain to those purpose which are
traditionally viewed as essentially governmental function such as building roads and delivery of basic
services, but also includes those purposes designed to promote social justice. Thus, public money may
now be used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform.

MACEDA V MACARAIG
GR No 88291, May 31, 1991
FACTS:
Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the development of
hydraulic power and the production of power from other sources. RA 358 granted NAPOCOR tax and duty
exemption privileges. RA 6395 revised the charter of the NAPOCOR, tasking it to carry out the policy of the
national electrification and provided in detail NAPOCOR’s tax exceptions. PD 380 specified that
NAPOCOR’s exemption includes all taxes, etc. imposed “directly or indirectly.” PD 938 dated May 27, 1976
further amended the aforesaid provision by integrating the tax exemption in general terms under one
paragraph.
ISSUE:
Whether or not NPC has ceased to enjoy indirect tax and duty exemption with the enactment of PD 938 on
May 27, 1976 which amended PD 380 issued on January 11, 1974
RULING:
No, it is still exempt.
NAPOCOR is a non-profit public corporation created for the general good and welfare, and wholly owned
by the government of the Republic of the Philippines. From the very beginning of the corporation’s
existence, NAPOCOR enjoyed preferential tax treatment “to enable the corporation to pay the indebtedness
and obligation” and effective implementation of the policy enunciated in Section 1 of RA 6395.
From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be interpreted
liberally so as to enhance the tax exempt status of NAPOCOR.
It is recognized that the rule on strict interpretation does not apply in the case of exemptions in favor of
government political subdivision or instrumentality. In the case of property owned by the state or a city or
other public corporations, the express exception should not be construed with the same degree of strictness
that applies to exemptions contrary to the policy of the state, since as to such property “exception is the
rule and taxation the exception.”

PHILIPPINE PETROLEUM CORPORATION VS MUNICIPALITY OF PILILLA RIZAL


198 SCRA 82 [GR No. 90776 June 3, 1991]

Facts: Philippine Petroleum Corporation is a business enterprise engaged in the manufacture of lubricated
oil base stocks which is a petroleum product, with its refinery plant situated at Malaya, Pilillia Rizal,
conducting its business activities within the territorial jurisdiction of municipality of Pilillia, Rizal and is in
continuous operation up to the present. PPC owns and maintains an oil refinery including 49 storage tanks
for its petroleum products in Malaya, Pililla, Rizal. Under section 142 of NIRC of 1939, manufactured oils
and other fuels are subject to specific tax. Respondent municipality of Pilillia, Rizal through municipal
council resolution no. 25-s-1974 enacted municipal tax ordinance no. 1-s-1974 otherwise known as “The
Pililla Tax Code Of 1974” on June 14, 1974 which took effect on July 1, 1974. Sections 9 and 10 of the said
ordinance imposed a tax on business, except for those which fixed taxes are provided in the local tax code
on manufacturers, importers, or producers of any article of commerce of whatever kind or nature, including
brewers, distiller, rectifiers, repackers and compounders of liquors distilled spirits and/or wines in
accordance with the schedule found in the local tax code, as well as mayor’s permit sanitary inspection fee
and storage permit fee for flammable, combustible or explosive substances, while section 139 of the
disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges. Enforcing the
provisions of the above mentioned ordinance, the respondent filed a complaint on April 4, 1986 docketed
as civil case no. 057-T against PPC for the collection of the business tax from 1979 to 1986; storage permit
fees from 1975 to 1986; mayor’s permit fee and sanitary permit inspection fees from 1975 to 1984. PPC,
however, have already paid the last named fees starting 1985.

Issue: Whether or not the Municipality may validly impose taxes on petitioner’s business.

Held: No. While section 2 of PD 436 prohibits the imposition of local taxes on petroleum products, said
decree did not amend sections 19 and 19 (a) of PD 231 as amended by PD 426, wherein the municipality
is granted the right to levy taxes on business of manufacturers, importers, producers of any article of
commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if
the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared
national policy, it should have been expressly stated in PD No. 436.

The exercise by local governments of the power to tax is ordained by the present constitution. To allow the
continuous effectivity of the prohibition set forth in PC no. 26-73 would be tantamount to restricting their
power to tax by mere administrative issuances. Under section 5, article X of the 1987 constitution, only
guidelines and limitations that may be established by congress can define and limit such power of local
governments.

The storage permit fee being imposed by Pilillia’s tax ordinance is a fee for the installation and keeping in
storage of any flammable, combustible or explosive substances. In as much as said storage makes use of
tanks owned not by the Municipality of Pilillia but by petitioner PPC, same is obviously not a charge for any
service rendered by the municipality as what is envisioned in section 37 of the same code.

PEPSI COLA BOTTLING COMPANY VS MUNICIPALITY OF TANAUAN


69 SCRA 460 – Taxation – Delegation to Local Governments – Double Taxation
Pepsi Cola has a bottling plant in the Municipality of Tanauan, Leyte. In September 1962, the Municipality
approved Ordinance No. 23 which levies and collects “from soft drinks producers and manufacturers a tai
of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked.”
In December 1962, the Municipality also approved Ordinance No. 27 which levies and collects “on soft
drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of one centavo
P0.01) on each gallon of volume capacity.”
Pepsi Cola assailed the validity of the ordinances as it alleged that they constitute double taxation in two
instances: a) double taxation because Ordinance No. 27 covers the same subject matter and impose
practically the same tax rate as with Ordinance No. 23, b) double taxation because the two ordinances
impose percentage or specific taxes.
Pepsi Cola also questions the constitutionality of Republic Act 2264 which allows for the delegation of taxing
powers to local government units; that allowing local governments to tax companies like Pepsi Cola is
confiscatory and oppressive.
The Municipality assailed the arguments presented by Pepsi Cola. It argued, among others, that only
Ordinance No. 27 is being enforced and that the latter law is an amendment of Ordinance No. 23, hence
there is no double taxation.
ISSUE: Whether or not there is undue delegation of taxing powers. Whether or not there is double taxation.
HELD: No. There is no undue delegation. The Constitution even allows such delegation. Legislative
powers may be delegated to local governments in respect of matters of local concern. By necessary
implication, the legislative power to create political corporations for purposes of local self-government
carries with it the power to confer on such local governmental agencies the power to tax. Under the New
Constitution, local governments are granted the autonomous authority to create their own sources of
revenue and to levy taxes. Section 5, Article XI provides: “Each local government unit shall have the power
to create its sources of revenue and to levy taxes, subject to such limitations as may be provided by law.”
Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the
legislative power to enact and vest in local governments the power of local taxation.
There is no double taxation. The argument of the Municipality is well taken. Further, Pepsi Cola’s assertion
that the delegation of taxing power in itself constitutes double taxation cannot be merited. It must be
observed that the delegating authority specifies the limitations and enumerates the taxes over which local
taxation may not be exercised. The reason is that the State has exclusively reserved the same for its own
prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law unlike in other
jurisdictions. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of
the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where
one tax is imposed by the State and the other by the city or municipality.

FELS ENERGY, INC. V THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL
ASSESSOR OF BATANGAS
G.R. No. 168557 February 16, 2007
FACTS
Two consolidated cases were filed by FELS Energy, Inc. (FELS) and National Power Corporation (NPC),
respectively.
NPC entered into a lease contract with Polar Energy, Inc. over diesel engine power barges moored at
Batangas. The contract, denominated as an Energy Conversion Agreement, was for a period of five years
wherein, NPC shall be responsible for the payment of:
(a) all taxes, import duties, fees, charges and other levies imposed by the National Government
(b) all real estate taxes and assessments, rates and other charges in respect of the Power Barges
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. Thereafter, FELS
received an assessment of real property taxes on the power barges. The assessed tax, which likewise
covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC,
reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full
power and authority to represent it in any conference regarding the real property assessment of the
Provincial Assessor.
NPC sought reconsideration of the Provincial Assessor’s decision to assess real property taxes on the
power barges. However, the motion was denied. The Local Board of Assessment Appeals (LBAA) ruled
that the 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 permanency.
FELS appealed the LBAA’s ruling to the Central Board of Assessment Appeals (CBAA). The CBAA
rendered a Decision finding the power barges exempt from real property tax.
It was later reversed by the cbaa upon reconsideration and affirmed by the CA
ISSUE
Whether power barges, which are floating and movable, are personal properties and therefore, not subject
to real property tax.
RULING
No. 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, being in
the nature of machinery and other implements intended by the owner for an industry or work which may be
carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or
work.
The findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS is the entity
being taxed by the local government. As stipulated under the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings,
machinery and equipment on the Site used in connection with the Power Barges which have been supplied
by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of
converting Fuel of NAPOCOR into electricity.
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption
in Section 234 (c) of R.A. No. 7160,
…the law states that the machinery must be actually, directly and exclusively used by the government
owned or controlled corporation;
The agreement POLAR undertakes that until the end of the Lease Period, it will operate the Power Barges
to convert such Fuel into electricity. Therefore, FELS shall be liable for the realty taxes and not the NPC
who is not actually, directly and exclusively using the same. It is a basic rule that obligations arising from a
contract have the force of law between the parties

PETRON vs. TIANGCO G.R. No. 158881 April 16, 2008 Taxation, LGC
JANUARY 16, 2018
FACTS:
Petron maintains a depot or bulk plant at the Navotas Fishport Complex, and through that depot, it has
engaged in the selling of diesel fuels to vessels used in commercial fishing in and around Manila Bay.
Petron received a letter from the office of Navotas Mayor, respondent Toby Tiangco, wherein the
corporation was assessed taxes relative to the figures covering sale of diesel, stating the total amount due
of P6,259,087.62, a figure derived from the gross sales of the depot from 1997 to 2001. The computation
sheets that were attached to the letter made reference to Ordinance 92-03, or the New Navotas Revenue
Code (Navotas Revenue Code), though such enactment was not cited in the letter itself.
Petron filed with the Malabon RTC a Complaint for Cancellation of Assessment for Deficiency Taxes with
Prayer for the Issuance of a Temporary Restraining Order (TRO) and/or Preliminary Injunction. The RTC
rendered its Decision dismissing Petron’s complaint and ordering the payment of the assessed amount.
Petron has opted to assail the RTC Decision directly before this Court since the matter at hand involves
pure questions of law, a characterization conceded by the RTC Decision itself. Particularly, the controversy
hinges on the correct interpretation of Section 133(h) of the LGC, and the applicability of Article 232 (h) of
the IRR.
Section 133(h) of the LGC reads as follows:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and Barangays shall
not extend to the levy of the following:
xxx
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes,
fees or charges on petroleum products;
ISSUE:
Whether a local government unit is empowered under the Local Government Code to impose business
taxes on persons or entities engaged in the sale of petroleum products.
RULING:
Evidently, Section 133 prescribes the limitations on the capacity of local government units to exercise their
taxing powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions
two kinds of taxes which cannot be imposed by local government units, namely: excise taxes on articles
enumerated under the NIRC; and taxes, fees or charges on petroleum products.
The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the
provision, a municipality is authorized to impose business taxes on a whole host of business activities.
Suffice it to say, unless there is another provision of law which states otherwise, Section 143, broad in
scope as it is, would undoubtedly cover the business of selling diesel fuels, or any other petroleum product
for that matter.
As earlier observed, Section 133(h) provides two kinds of taxes which cannot be imposed by local
government units: excise taxes on articles enumerated under the NIRC, as amended; and taxes, fees or
charges on petroleum products. There is no doubt that among the excise taxes on articles enumerated
under the NIRC are those levied on petroleum products, per Section 148 of the NIRC.
The power of a municipality to impose business taxes derives from Section 143 of the Code that specifically
enumerates several types of business on which it may impose taxes, including manufacturers, wholesalers,
distributors, dealers of any article of commerce of whatever nature; those engaged in the export or
commerce of essential commodities; retailers; contractors and other independent contractors; banks and
financial institutions; and peddlers engaged in the sale of any merchandise or article of commerce. This
obviously broad power is further supplemented by paragraph (h) of Section 143 which authorizes the
sanggunian to impose taxes on any other businesses not otherwise specified under Section 143 which the
sanggunian concerned may deem proper to tax.
This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987
Constitution. Section 5, Article X assures that [e]ach local government unit shall have the power to create
its own sources of revenues and to levy taxes, fees and charges, though the power is subject to such
guidelines and limitations as the Congress may provide. There is no doubt that following the 1987
Constitution and the Code, the fiscal autonomy of local government units has received greater affirmation
than ever. Previous decisions that have been skeptical of the viability, if not the wisdom of reposing fiscal
autonomy to local government units have fallen by the wayside.
Respondents cite our declaration in City Government of San Pablo v. Reyes that following the 1987
Constitution the rule thenceforth in interpreting statutory provisions on municipal fiscal powers, doubts will
have to be resolved in favor of municipal corporations. Such policy is also echoed in Section 5(a) of the
Code, which states that any provision on a power of a local government unit shall be liberally interpreted in
its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and
of the lower local government unit. But somewhat conversely, Section 5(b) then proceeds to assert that [i]n
case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local
government unit enacting it, and liberally in favor of the taxpayer. And this latter qualification has to be
respected as a constitutionally authorized limitation which Congress has seen fit to provide. Evidently, local
fiscal autonomy should not necessarily translate into abject deference to the power of local government
units to impose taxes.

CITY GOVERNMENT OF QUEZON CITY V. BAYAN TELECOMMUNICATIONS, INC. [G.R. No.162015.


March 6, 2006]
FACTS
Respondent Bayan Telecommunications, Inc. (Bayantel) is a legislative franchise holder under Republic
Act (R.A.) No. 3259 (1961) to establish and operate radio stations for domestic telecommunications,
radiophone, broadcasting and telecasting. Section 14 (a) of R.A. No. 3259 states: “The grantee shall be
liable to pay the same taxes on its real estate, buildings and personal property, exclusive of the franchise,
xxx”. In 1992, R.A. No. 7160, otherwise known as the “Local Government Code of 1991” (LGC) took effect.
Section 232 of the Code grants local government units within the Metro Manila Area the power to levy tax
on real properties. Barely few months after the LGC took effect, Congress enacted R.A. No. 7633,
amending Bayantel’s original franchise. The Section 11 of the amendatory contained the following tax
provision: “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, xxx“. In 1993, the government of Quezon City
enacted an ordinance otherwise known as the Quezon City Revenue Code withdrawing tax exemption
privileges.
ISSUE
Whether or not Bayantel’s real properties in Quezon City are exempt from real property taxes under its
franchise.
RULING
YES. A clash between the inherent taxing power of the legislature, which necessarily includes the power to
exempt, and the local government’s delegated power to tax under the aegis of the 1987 Constitution must
be ruled in favor of the former. 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.
The legislative intent expressed in the phrase “exclusive of this franchise” cannot be construed other than
distinguishing between two (2) sets of properties, be they real or personal, owned by the franchisee,
namely, (a) those actually, directly and exclusively used in its radio or telecommunications business, and
(b) those properties which are not so used. It is worthy to note that the properties subject of the present
controversy are only those which are admittedly falling under the first category.
Since R. A. No. 7633 was enacted subsequent to the LGC, perfectly aware that the LGC has already
withdrawn Bayantel’s former exemption from realty taxes, the Congress using, Section 11 thereof with
exactly the same defining phrase “exclusive of this franchise” is the basis for Bayantel’s exemption from
realty taxes prior to the LGC. In plain language, 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 LGC’s delegated taxing
power, all of the franchisee’s (Bayantel’s) properties that are actually, directly and exclusively used in the
pursuit of its franchise.

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