b.

Kinds of Tax Exemption

Express or implied, total or partial

Exemption from direct tax, from indirect tax

Atlas Fertilizer vs. Commissioner, 100 SCRA 556 (1980)

Nature:

These two (2) cases are appeals by way of certiorari from the decision dated August 24, 1966 of the
Court of Tax Appeals granting Atlas Fertilizer Corporation a tax credit in the sum of P81,899.00
which may be applied by said corporation in pay — of its outstanding and/or future liability for
internal revenue taxes.

FACTS:

Petitioner Atlas Fertilizer Corporation was granted by the Secretary of Finance a certificate of tax exemption under
Republic Act No. 901 as a new and necessary industry for engaging in the manufacture of fertilizer.

While petitioner was still enjoying partial tax exemption of 50% as a new and necessary industry under Republic Act
No. 901, Republic Act No. 3050, which took effect on June 17, 1961, granted tax exemption to any person,
partnership, company or corporation engaged or which shall engage in the manufacture of of whatever nature from
the payment, among others, of compensating taxes on their importation of capital goods, equipment, snare raw
materials, supplies containers and fuel To implement z Republic Act No. 3050, the Department of Finance issued
Department Order No. 105, dated September 15, 1961, which provides, among others, as follows:

Fertilizer manufacturer ... which are granted tax exemption under Republic Act No. should likewise
file appellant com/implications for tax exemption under Republic Act No. 3050, indicating therein,
among other things, that the applicant waives the benefits of tax exemption authorized under
Republic Act No. 3127.

On the basis of the tax exemption granted by the Secretary of Finance under Republic Act No. 3050, petitioner filed
with responded on June 21, 1963 a claim for tax at of the compensating taxes amounting to P 83,629.00. The
Commissioner's argues that AFC cannot enjoy simultaneous tax exemtions under the two EOs and refused to issue a
letter of tax credit alleging that the 50% tax exemption availed under RA 901 precludes the company from availing full
tax credit from RA 3050. Therefore the tax claim should be adjusted to cover only 50%.

On June 22, 1963, the day after petitioner had filed its for tax credit with respondent, petitioner filed a petition for
review with this Court seek an order to compel respondent to issue the corresponding letter of tax credit.

The Commissioner's argues that AFC cannot enjoy simultaneous tax exemtions under the two EOs.

ISSUE:

WON PETITIONER HAS IN EFFECT ABANDONED AND GIVEN UP ITS PARTIAL EXEMPTION PRIVILEGE
UNDER REPUBLIC ACT NO. 901 BY SEEKING TO APPLY ITS TAX EXEMPTION UNDER REPUBLIC ACT NO.
3050.
RULING:

The Commissioner's contention is without merit. Department, Order No. 105 issued by the Secretary of Finance
expressly directed fertilizer manufacturers enjoying benefits under R.A. No. 901 to likewise apply for the benefits of
R.A. No. 3050.

In compliance with said directive, AFC filed its application for total exemption under R. A. No. 3050 which was
granted by the Secretary of Finance. R. A. No. 901 grants partial exemption while R. A. 3050 grants total exemption.
Once a manufacturer of fertilizer chose to come under R. A. 3050, his partial exemption under R. A. 901 ceased.
When AFC availed of the total exemption under R. A. No. 3050, it has in effect given up the partial exemption which it
was enjoying under R. A. No. 901. In effect, he enjoyed only one exemption benefit, the full exemption under R. A.
No. 3050.

Therefore, the SC affirmed the decision of the Court of Tax Appeals.

COMMlSSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS vs.PHILIPPINE ACE LINES, INC
(Angeles, 1968)

Nature:

On appeal by the Government from the decision — rendered jointly in Tax Cases Nos. 964 & 984 — of the Court of
Tax Appeals, reversing the rulings of the Commissioner of Internal Revenue holding the Philippine Ace Lines, Inc.
liable to pay the aggregate amount of P1,407,724.57 as compensating taxes on four (4) ocean-going cargo vessels
acquired by said company from the Reparations Commission of the Philippines, and of the Commissioner of Customs
to place the four vessels under customs custody until the aforementioned amount claimed by the Government was
first paid.

Facts:

In 1959The Reparations Commission agreed to sell to the Philippine Ace Lines the cargo vessel M/S YAKAL and M/S
MOLAVE which were procured by the Reparations Commission from Japan for its end-use under the 1956
Philippine- Japanese Reparations Agreement at the agreed prices of P4,283,241.48 and P4,292,457.48,
respectively. Similar agreements involving the sale of M/S TINDALO and also M/S NARRA were subsequently
entered into between the same parties. These "Contracts of Conditional Purchase and Sale of Reparations Goods"
stipulated that the Reparations Commission retains title and ownership of the vessels until they were fully paid.
Payment was to be made in ten (10) equal annual installments.The four (4) vessels were delivered to Phil. Ace
Lines then registered in the Bureau of Customs in the name of the Reparations Commission. The vessels were
operated by Phil. Ace Lines in its shipping business, plying between ports of foreign countries and the Philippines.

CIR assessed Phil. Ace lines the amounts of P304,428.00, P256,275.00, P499,948.10 and P305.073.47 as
compensating taxes on the 4 vessels. Customs, joining theCIR, then placed the vessels under its custody at the
different ports of the Philippines where they were found and refused to give due course to the "clearance" of said
vessels unless the compensating taxes were first paid.

Phil. Ace Lines protested, alleging that the legal title and ownership of the vessels were still vested with the
Reparations Commission whichwas exempt from payment of all duties, fees and taxes on all reparations goods
obtained by it under Reparations act. Officials rejected this and ruled that the compensating taxes should first be
paid, per directive of the Secretary of Finance. Phil. Ace Lines filed 2 petitions for review from the above rulings
of CIR and Customs to the CTA. Writs of preliminary injunction were issued upon the Phil. Ace Lines’ filing of
surety bonds to guarantee payment of the amounts claimed.
In the meantime, Congress enacted RA 30791 effective June 17, 1961 amending RA. 1789 (Reparations Act). RA
3079 provided tax exemptions to end users. Invoking the favorable provisions of the new law Phil. Ace Lines then
entered into "Renovated Contract(s) of Conditional Purchase and Sale of Reparations Goods" with the Reparations
Commission, covering the 4 cargo vessels it had previously acquired from the Reparations Commission under the
old Reparations Act. Thereafter, the company filed a "Supplement to the Petition for Review" in each of the cases
before CTA submitting copies of the renovated contracts it had entered with the Reparations Commission with the
allegation that the parties were "expressly implementing section 14 of Republic Act No. 3079 in the aforesaid
renovated contracts."

CIR and Customs:Even if Philippine Ace Lines and the Reparations Commission have agreed to implement the
provisions of Section 14 of RA No. 1789, as amended by RA No. 3079, in the new contract such implementation did
not relieve the Philippine Ace Lines from the payment of the compensating taxes; vessels were acquired from the
Reparations Commission long before the approval of said amendatory Act which, by the way, did not expressly
authorize such exemption;Provisions of RA No. 3079 cannot include exemption from compensating tax, otherwise,
had Congress intended so, it would have provided for such exemption in clear and explicit terms; the tax
exemption contained in Section 14 of the RA No. 3079 cannot have retroactive application in the absence of any
provision for retroactivity; to grant such exemption to end-users who have acquired reparations goods before the
approval of RA No. 3079 would be prejudicial to the Government.

CTA: Cancelled bonds. Philippine Ace and Reparations Commission exempt.

Issue: Is Phil. Ace liable for the compensating tax on the four ocean-going vessels in question?No. It is exempt.

Held: SC answers CIR’s contentions by citing only one case, Commissioner of Internal Revenue vs. Bothelo Shipping
Corporation, which it reproduced at length.

The inherent weakness of the last ground becomes manifest when we consider that, if true,
there could be no tax exemption of any kind whatsoever, even if Congress should wish to create
one, because every such exemption implies a waiver of the right to collect what otherwise would
be due to the Government, and, in this sense, is prejudicial thereto. In fact, however, tax
exemptions may and do exist, such as the one prescribed in section 14 of Republic Act No.
1789, as amended by Republic Act No. 3079, which, by the way, is "clear and explicit," thus,
meeting the first ground of appellant's contention. It may not be amiss to add that no tax
exemption — like any other legal exemption or exception — is given without any reason therefor.
In much the same way as other statutory commands, its avowed purpose is some public benefit
or interest, which the law-making body considers sufficient to offset the monetary loss entailed
in the grant of the exemption. Indeed, section 20 of Republic Act No. 3079 exacts a valuable
consideration for the retroactivity of its favorable provision, namely, the voluntary assumption,
by the end-user, who bought reparations goods prior to June 17, 1961, of "all the new obligations
provided for in" said Act.

The argument adduced in support of the third ground is that the view adopted by the Tax Court
would operate to grant exemption to particular persons, the Buyers therein. It should be noted,
however, that there is no constitutional injunction against granting tax exemptions to
particular persons. In fact, it is not unusual to grant legislative franchises to specific individuals
or entities, conferring tax exemptions thereto. What the fundamental law forbids is the denial of
equal protection such as through unreasonable discrimination or classification.

From the view point of Constitutional Law, especially the equal protection clause, there is
no difference between the grant of exemption to said end-users, and the extension of the
grant to those whose contracts of purchase and sale were made before said date, under
Republic Act No. 1789.

It is true that Republic Act No. 3079 does not explicitly declare that those who purchased
reparations goods prior to June 17, 1961, are exempt from the compensating tax. It does not
 say so, because they donot really enjoy such exemption, unless they comply with the proviso
in Section 20 of said Act, by applying for the renovation of their respective utilization
contracts, "in order to avail of any provision of the Amendatory Act which is more favorable"
to the applicant. In other words, it is manifest, from the language of said section 20, that the
same intended to give such buyers the opportunity to be treated "in like manner and to the same
extent as an end-user filing his application after the approval of this Amendatory Act." Like the
"most favored nation clause" in international agreements, the aforementioned section 20 thus
seeks, not to discriminate or to create an exemption or exceptions, but to abolish the
discrimination, exemption or exception that would otherwise result, in favor of the end-user who
bought after June 17, 1961 and against one who bought prior thereto. Indeed, it is difficult to
find substantial justification for the distinction between the one and the other.

CTA decision affirmed.

SEC. 14. Exemption from tax. — All reparations goods obtained by the Government shall be exempt from the payment of all duties, fees and
taxes. Reparations goods obtained by private parties shall be exempt from the payment of customs duties, compensating tax, consular fees
and the special import tax.
SEC. 20. This Act shall take effect upon its approval, except that the amendment contained in section seven hereof relating to the requirements
for procurement orders including the requirement of down payment by private applicant end-users shall not apply to procurement orders
already duly issued and verified at the time of the passage of this amendatory Act, and except further that the amendment contained in section
ten relating to the insurance of the reparations goods by the end-users upon delivery shall apply also to goods covered by contracts already
entered into by the Commission and the end-user prior to the approval of this amendatory Act as well as goods already delivered to the end-
user, and except further that the amendments contained in sections eleven and twelve hereof relating to the terms of the installment
payments on capital goods disposed of to private parties, and the execution of a performance bond before delivery of reparations goods, shall
not apply to contract for the utilization of reparations goods already entered into by the Commission and the end-users prior to the approval of
this amendatory Act: Provided, That any end-user may apply the renovation of his utilization contract with the commission in order to avail
of any provision of this amendatory Act which is more favorable to an applicant end-user than has heretofore been granted in like manner
and to the same extent as an end-user filing his application after the approval of this amendatory Act, and the Commission may agree to
such renovation on condition that the end-user shall voluntarily assume all the new obligations provided for in this amendatory Act.

Commissioner vs. Rio Tuba Nickel Mining

We find tha the disputed proviso found in Section 5 of RA No. 1435 was drated to favor a particular
group of taxpayers-the miners and the lumbermen-because it was "unfair" to subject them to the
increased rates and in effect make them subsidize the construction of highways from which they did
not directly benefit. This is the raison d'etre for the grant of partial tax exemption under RA No. 1435.
Now, if, by virtue of PD No. 711, the funds that have accrued from the various special funds are
channeled to the so-called General Fund, then there is no need or justification for the continued
special treatment accorded to the miners. With PD No. 711, any government project can be the
beneficiary of such funds as long as it is for the general welafare of the masses. Given the present
concept of the general fund andits wide application, then the proviso in Section 5 of RA No. 1435
has truly become an anachronism. It is inevitable that, sooner or later, the miners will stand to
benefit from any of the government endeavors and it will no longer be correct to asseverate that the
imposition of the increased rates in specific taxes to augment the general fund for government
undertakings is "unfair" to the miners because they are not directly convenienced.

While we generally do not favor repeal by implication, it cannot be denied that situations can and do
arise wherein we are left with no other alternative but to concede the point that an earlier law has
been impliedly repealed or revoked by a later law because of an obvious inconsistency.

Tax measures, in recent years, have proliferated to alarming proportions. More often than not, they
serve to worsen the already growing confusion in the minds of our taxpayers. There is much to be
said about the strong and persuasive arguments of both sides but we are compelled to abide by the
maxim that all doubts must be resolved in favor of the taxing authority and that tax exemptions (or
tax refunds for that matter) must be strictly construed and can only be given force when the grant is
clear and categorical. We therefore hold that the tax refunds in the amounts of P695,216.36 and
P859,076.90 in favor of private respondent Rio Tuba must be set aside.
WHEREFORE, the instant petition is hereby GRANTED. The questioned decision of the Court of
Tax Appeals is SET ASIDE. Private respondent Rio Tuba Mining Corporation's twin claims for
refunds of specific taxes paid on manufactured oils are DENIED. No costs.

Caltex v COA , Supra

Tax exemptions as a general rule are construed strictly against the grantee
and liberally in favour of the taxing authority.[48] The burden of proof rests
upon the party claiming exemption to prove that it is in fact covered by the
exemption so claimed. The party claiming exemption must therefore be
expressly mentioned in the exempting law or at least be within its purview
by clear legislative intent.

c. Nature of the power grant tax exemption

BAsco v. Pagcor , Supra

Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose
taxes and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of local
autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as
the franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees,
charges or levies of whatever nature, whether National or Local."

(2) Income and other taxes. — a) Franchise Holder: No tax of any kind or form, income or
otherwise as well as fees, charges or levies of whatever nature, whether National or Local,
shall be assessed and collected under this franchise from the Corporation; nor shall any form
or tax or charge attach in any way to the earnings of the Corporation, except a franchise tax
of five (5%) percent of the gross revenues or earnings derived by the Corporation from its
operations under this franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind,
nature or description, levied, established or collected by any municipal, provincial or national
government authority (Section 13 [2]).

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is
governmental, which places it in the category of an agency or instrumentality of the Government.
Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local
taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local
government.

The power of local government to "impose taxes and fees" is always subject to "limitations" which
Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed
or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to
the exercise of the power of local governments to impose taxes and fees. It cannot therefore be
violative but rather is consistent with the principle of local autonomy.

MAceda v Macaraig (1993), Supra

The Court rules and declares that the oil companies which supply bunker fuel oil to NPC have to pay
the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of indirect taxation, the
economic burden of such taxation is expected to be passed on through the channels of commerce to
the user or consumer of the goods sold. Because, however, the NPC has been exempted from both
direct and indirect taxation, the NPC must beheld exempted from absorbing the economic burden of
indirect taxation. This means, on the one hand, that the oil companies which wish to sell to NPC
absorb all or part of the economic burden of the taxes previously paid to BIR, which could they shift to
NPC if NPC did not enjoy exemption from indirect taxes. This means also, on the other hand, that the
NPC may refuse to pay the part of the "normal" purchase price of bunker fuel oil which represents all
or part of the taxes previously paid by the oil companies to BIR. If NPC nonetheless purchases such oil
from the oil companies - because to do so may be more convenient and ultimately less costly for NPC
than NPC itself importing and hauling and storing the oil from overseas - NPC is entitled to be
reimbursed by the BIR for that part of the buying price of NPC which verifiably represents the tax
already paid by the oil company-vendor to the BIR

d. Rationale for tax exempt

Davao lights vs Commissioner

FACTS:

These are appeals from the decision of the Court of Tax Appeals in CTA Cases Nos. 1337 and 1551, denying the
claim of Davao Light & Power Co., Inc., for refund of the amount paid by said company as customs duties, special
import taxes, compensating taxes and wharfage fees on the importations of electrical supplies and materials for
installation and use at its power plant.

The Davao Light & Power Co. is the grantee of a legislative franchise to install, operate and maintain an electric light,
heat and power plant in the city of Davao, for a period of 50 years. On two different occasions in 1962, it imported
electrical supplies, materials and equipment for installation in its power plant. The importations arrived in the port of
Cebu City, on which the Collector of Customs imposed, and Davao light paid under protest, customs duties and taxes
in the total amount of P9,928.00. As the Collector of Customs later ruled unfavorably on the protests (Nos. 267, 268,
269 and 278) and denied its claim for refund of the taxes and duties paid on the imported articles, Davao Light
appealed to the Commissioner of Customs. And when said official sued the action of the Collector, Davao Light went
to the Court of Tax Appeals, maintaining its claim to exemption from the taxes and duties imposable on the
aforementioned motions.

The petitioners invoked Section 17 of (pre-Commonwealth) Act No. 3636 (Standard Electric Power & Light
Franchises Law) provides:

"In the event of any competing individual, association of persons or corporation receiving either a franchise
or permission from the Government of the Philippine Islands, or from any province, city or municipality
thereof, to conduct a similar business in all or any substantial portion of the territory covered by this
franchise to that of the grantee, in which franchise or permission there shall be any term or terms more
favorable than those herein granted or tending to place the herein grantee at any disadvantage, then such
 term or terms shall ipso facto become a part of the terms hereof and shall operate equally in favor of the
grantee as in the case of said competing individual asssociation of persons or corporations."

Because the NPC also operated a powerplant in Davao city, Davao light is deemed to be its competitor. It was
petitioner's contention that pursuant to Section 17 of Act 3636, the provision of Republic Act 987 granting tax
exemption privileges to the National Power Corporation ipso facto became part of its franchise; hence, its claim to
exemption from taxes and customs duties on the importations in question.

In its decision of 15 December 1967, the Court of Tax Appeals affirmed the ruling of the Customs Commissioner, the
Court holding that the tax exemption privileges granted to the National Power Corporation were intended to benefit
only said government corporation and did not extend to other bodies or entities. Davao Light thus brought the present
petition for review to the SC.

ISSUE:

WON the tax exemption granted to the NPC ipso facto became part of the franchise of Davao light .

RULING:

In granting such tax exemption, the government actually waived its right to collect taxes from the NPC in order to
facilitate the liquidation by said corporation of its liabilities, and the consequential release by the government itself
from its obligation (as principal obligor) in the transactions entered into by the President on behalf of the NPC. Such
condition, peculiar only to the NPC, cannot be said to exist in petitioner's case; hence, the absolute lack of basis for
awarding of equal privileges (granted to the NPC) to said petitioner.

petitioner can not lay claim to the enjoyment of the tax exemption benefits given to NPC because said corporation
happened to be operating a power plant in the same locality where petitioner has a franchise. The legal principle on
the matter is firmly established and well-observed: exemption from taxation is never presumed; for tax exemption to
be recognized, the grant must be clear and expressed; it cannot be made to rest on vague implications. The
possession by petitioner of a permit to operate an electric plant in Davao City does not entitle it to the same
exemption privileges enjoyed by another operator without an express provision of the law to that effect.

Davao Light did not enjoy the tax exemptions granted to the NPC.

Therefore, the decision of the Court of Tax Appeals is affirmed.

G.R. No. L-18080 April 22, 1963

TAN KIM KEE, petitioner,

vs.
THE COURT OF TAX APPEALS, ET AL., respondents.

NATURE:

Appeal from the majority decision of the Court of Tax Appeals affirming the denial of a claim for refund of fixed and
sales taxes.

FACTS:

The petitioner is a producer of copra in Davao City. Petitioner produces copra in two ways, namely, the sun-dried
method and the kiln-dried method. Under both methods, the copra underwent a certain process of unhusking, cutting
and other physical processes to facilitate its drying whether through the sun or inside a kiln.
For the period from August 24, 1956 to December 31, 1956, petitioner's gross sales of copra produced by him
amounted to P17,917.53 on which he paid to the treasurer of Davao City, on January 10, 1957, the sum of P1,254.24
as the 7% sales tax imposed by section 186 of the National Internal Revenue Code as amended by Republic Act No.
1612.

On September 6, 1957, petitioner filed with respondent a claim for the aforesaid taxes, alleging that the copra making
process was exempt from sales taxes and therefore the amounts levied had been improper. The claim was denied by
the CTA.

This case involves an interpretation of Section 188(b) of the Tax Code, as amended by the shortlived revenue
statute, Republic Act No. 1612, when applied to copra making. Said Act took effect on 24 August 1956 until it was
superseded by Republic Act 1856 on 22 June 1957. This section, as it stood before and during the effectivity of
Republic Act No. 1612, and after subsequent amendment by Republic Act 1856, provides (all emphasis supplied):

Before effectivity of RA No. 1612

(b) Agricultural products and the ordinary salt when sold, bartered, or exchanged in this country by the
producers or owner of the land where produced, as well as fish and its by-products when sold, bartered, or
exchanged by the fisherman or fishing operator, whether in their original state or not.

During the eleven-month effectivity of RA No. 1612

(b) Agricultural products and the ordinary salt in their original form when sold, bartered, or exchanged by the
producer or owner of the land where produced. The term "agricultural products" as used herein shall not
include cultured fish and other products raised or produced in fishponds, and those which have undergone
the process of manufacturing as defined in section one hundred ninety-four (x) of this Code.

After repeal of RA No. 1612 by RA No. 1856

(b) Agricultural products and the ordinary salt whether in their original form or not when sold, bartered, or
exchanged in this country by the producer or owner of the land where produced, as well as all kinds of fish
and its by-products when sold, bartered or exchanged by the fisherman or fishing operator whether in their
original state or not.

The majority of the Tax Court held that because of the unhusking and halving of the coconut fruit, removal and cutting
into several pieces of its meat, and dehydrating by sun or kiln, the fruit in its original form underwent a process of
manufacturing, and, therefore, became taxable; but after the repeal of Republic Act 1612 by Republic Act 1856, the
exempt agricultural products included once more those products "whether in their original state or not". It decided,
therefore, that the taxability of copra making under Republic Act No. 1612 is in accordance with the legislative intent
to increase revenue by imposing taxes on "greater coverage of subjects of taxation",

On the other hand, the petitioner would consider copra as the agricultural product in its original form and the coconut
fruit merely the crop of the producer and because copra is the only product that may be produced from coconut lands
while the process of manufacture involved in the conversion of the coconut fruit to copra is a part of the genuine
agricultural labor of the farmer.

ISSUE:

WON copra making was included in the exemption from taxation.

RULING: The original statute excepted from the tax "Agricultural products xxx whether in their original state or not",
but under the shortlived R.A. No. 1612 it was altered and reduced to "agricultural products in their original form"
exclusively. The change in scope was further emphasized by the qualification in the same Act that "agricultural
products xxx shall not include cultured fish . . . and those which have undergone the process of manufacturing . . . ."
Plainly, R.A. No. 1612 was intended to restrict the exemption and broaden the subject of taxation, in order to increase
the state revenues; and this purpose becomes indubitable when we consider that ordinary salt and fish were also
originally exempt, but the exemption was not restated in R.A. No. 1612.
The legislative intent to increase revenue by widening the coverage of taxable subjects is evident under Republic Act
1612, and by it the exempt agricultural products were only those that remain in their original form, and have not
undergone the process of manufacture and this did not include copra making.

Therefore the decision of the CTA is affirmed.

Copra products are not to be in its original agricultural form and are deemed to have undergone a manufacturing
process. As such, it is not exempt from taxation.

NPC V RTC CAGAYAN DE ORO

On the question of whether or not NAPOCOR is liable to pay real property taxes and special education
fund taxes for the years 1978 to 1984, we rule in the affirmative.

Presidential Decree No. 1177, entitled "REVISING THE BUDGET PROCESS IN ORDER TO
INSTITUTIONALIZE THE BUDGETARY INNOVATIONS OF THE NEW SOCIETY" was passed on July
30, 1977. Section 23 thereof provides:

Section 23. Tax and Duty Exemptions. — All units of govemment, including government-
owned or controlled corporations, shall pay income taxes, customs duties and other taxes
and fees as are imposed under revenue laws; provided, that organizations otherwise
exempted by law from the payment of such taxes/duties may ask for a subsidy from the
General Fund in the exact amount of taxes/duties due; provided, further, that a procedure
shag be established by the Secretary of Finance and the Commissioner of the Budget,
whereby such subsidies shall automatically be considered as both revenue and
expenditure of the General Fund. (Emphasis supplied)

Petitioner alleges that what has been withdrawn is its exemption from taxes, duties, and fees which are
payable to the national government while its exemption from taxes, duties and fees payable to
government branches, agencies and instrumentalities remains unaffected. Considering that real property
taxes are payable to the local government, NAPOCOR maintains that it is exempt therefrom.

We find the above argument untenable. It reads into the law a distinction that is not there. It is contrary to
the clear intent of the law to withdraw from all units of government, including government-owned or
controlled corporations their exemptions from all kinds of taxes. Had it been otherwise, then the law would
have said so. Not having distinguished as to the kinds of tax exemptions withdrawn, the plain meaning is
that all tax exemptions are covered. There the law does not distinguish, neither must we.

Moreover, Presidential Decree No. 1931 entitled "DIRECTING THE RATIONALIZATION OF DUTY AND
TAX EXEMPTION PRIVILEGES GRANTED TO GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS AND ALL OTHER UNITS OF GOVERNMENT" which was passed on June 11, 1984,
categorically states:

WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grunt of
tax privileges to any government-owned or controlled corporation and all other units of
government. (Emphasis supplied )

Thus, any dubiety on NAPOCOR'S liability to pay taxes, duties and fees should be considered
unequivocably resolved by the above provision.

In the case of National Power Corporation vs. The Province of Albay, et. al., 10 herein petitioner was held
liable for real property taxes to the provincial government of Albay for the period June 11, 1984 to March
10, 1987, when it claims to have been enjoying tax exemptions under Resolutions Nos. 10-85, 1-86 and
17-87 of the Fiscal Incentives Review Board (FIRB). It must be noted that Resolution 10-85 was the same
resolution cited by petitioner in its supplemental motion to dismiss 11 inCivil Case No. 9901. If the attempt
(found ineffective for lack of authority in the above-cited case of NPC vs. The Province of Albay) to
restore petitioner's tax exemptions began only in 1985 with the issuance of FIRB Resolution No. 10-85, it
stands to reason that prior thereto, i.e., from 1977 when P.D. 1177 was promulgated up to 1984,
petitioner did not enjoy any tax privilege as would exempt it from the payment of the taxes under
consideration.

In the same case of NPC vs. The Province of Albay, 12 this Court had occasion to state:

Actually, the State has no reason to decry the taxation of NAPOCOR's properties, as and
by way of real property taxes. Real property taxes, after all, form part and parcel of the
financing apparatus of the Government in development and nation-building, particularly in
the local government level.

xxx xxx xxx

To all intents and purposes, real property taxes are funds taken by the State with one
hand and given to the other. In no measure can the Government be said to have lost
anything.

The proceeds of the real property tax are divided among the province, city or municipality where the
property subject to the tax is situated and shall be applied by the respective local government unit for its
own use and benefit. Even the barrio where the property is situated shares in the real property tax
collections. Likewise, the entire proceeds of the additional one per cent (1%) real property tax levied for
the Special Education Fund created under R.A. 5447, are divided among the province, city and
municipalities where the property is situated.

WHEREFORE, the petition is DISMISSED. Petitioner having been found liable for the taxes being
collected in Civil Case No. 9901, the respondent court is hereby directed to proceed with deliberate
dispatch in hearing the case for the purpose of determining the exact liability of petitioner. No Costs.

Chaves PCGG supra