PASCUAL VS SECRETARY OF WORKS

REFER TO SHEKINA
LRTA V. CBAA

PETITIONER:

The LRTA is a government-owned and controlled corporation created and organized under
Executive Order No. 603 primarily responsible for the construction, operation, maintenance
and/or lease of light rail transit system in the Philippines, giving due regard to the reasonable
requirements of the public transportation of the country. The petitioner, LRTA, paid its real
property taxes on all its real property holdings, except the carriageways and passenger
terminal stations including the land where it is constructed contending that the same are not
real properties under the Real Property Tax Code, and if the same are real property, these are
for public use/purpose, therefore, exempt from realty taxation

SUPREME COURT:

The Petition has no merit. Though the creation of the LRTA was impelled by public service --
to provide mass transportation to alleviate the traffic and transportation situation in Metro
Manila -- its operation undeniably partakes of ordinary business. Petitioner is clothed with
corporate status and corporate powers in the furtherance of its proprietary objectives.9Indeed,
it operates much like any private corporation engaged in the mass transport industry. Given
that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal
stations are patrimonial property subject to tax, notwithstanding its claim of being a
government-owned or controlled corporation. True, petitioner's carriageways and terminal
stations are anchored, at certain points, on public roads. However, it must be emphasized that
these structures do not form part of such roads, since the former have been
constructed over the latter in such a way that the flow of vehicular traffic would not be
impeded. These carriageways and terminal stations serve a function different from that of the
public roads. The former are part and parcel of the light rail transit (LRT) system which, unlike
the latter, are not open to use by the general public. The carriageways are accessible only to
the LRT trains, while the terminal stations have been built for the convenience of LRTA itself
and its customers who pay the required fare.

Under the Real Property Tax Code, real property is classified for assessment purposes on the
basis of actual use, which is defined as "the purpose for which the property is principally or
predominantly utilized by the person in possession of the property." Unlike public roads which
are open for use by everyone, the LRT is accessible only to those who pay the required fare. It
is thus apparent that petitioner does not exist solely for public service, and that the LRT
carriageways and terminal stations are not exclusively for public use. Although petitioner is a
public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal
stations in its public utility business and earns money therefrom.

Lastly, the court further ruled that even granting that the national government indeed owns the
carriageways and terminal stations, the exemption would not apply because their beneficial
use has been granted to petitioner, a taxable entity.
MCIAA V. MARCOS

PETITIONER:

Petitioner Mactan Cebu International Airport Authority (MCIAA) enjoyed the privilege of
exemption from payment of realty taxes in accordance with Section 14 of its Charter. Office of
the Treasurer of the City of Cebu demanded payment for realty taxes on several parcels of land
belonging to the petitioner. Petitioner contended that it is exempt from paying realty tax. It
objected to such demand for payment as baseless and unjustified, claiming in its favor 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. Petitioner claimed that while it is indeed a government-owned corporation, it nonetheless
stands on the same footing as an agency or instrumentality of the national government by the very
nature of its powers and functions.

SUPREME COURT:

The Court held that petitioner is not exempt from the payment of realty tax. While it may be true
that under its Charter the petitioner was exempt from the payment of realty taxes, this
exemption was withdrawn by Section 234 of the LGC.

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.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the
LGC, exemptions from real property taxes granted to natural or juridical persons, including
government-owned or controlled corporations, except as provided in the said section, and the
petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its
exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has been
withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge
under any of the exceptions provided in Section 234, but not under Section 133, as it now
asserts, since, as shown above, the said section is qualified by Section 232 and 234.

Finally, even if the petitioner was originally not a taxable person for purposes of real property
tax, in light of the forgoing disquisitions, it had already become even if it be conceded to be an
"agency" or "instrumentality" of the Government, a taxable person for such purpose in view of
the withdrawal in the last paragraph of Section 234 of exemptions from the payment of real
property taxes.

MIAA V. CA, PARANAQUE

PETITIONER:

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903. As
operator of the international airport, MIAA administers the land, improvements and equipment
within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares
of land, including the runways and buildings then under the Bureau of Air Transportation. The
MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed
of through sale or any other mode unless specifically approved by the President of the
Philippines. MIAA received Final Notices of Real Estate Tax Delinquency from the City of
Parañaque for the taxable years 1992 to 2001.

This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA
are exempt from real estate tax under existing laws. If so exempt, then the real estate tax
assessments issued by the City of Parañaque, and all proceedings taken pursuant to such
assessments, are void. In such event, the other issues raised in this petition become moot.

SUPREME COURT:

We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by
local governments. First, MIAA is not a government-owned or controlled corporation but
an instrumentality of the National Government and thus exempt from local taxation. Second,
the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from
real estate tax.

MIAA is not a government-owned or controlled corporation 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 government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test
of economic viability. MIAA is a government instrumentality vested with 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 Local Government Code. Such exception applies only if the beneficial use of real
property owned by the Republic is given to a taxable entity.

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.
MIAA V. PASAY

PETITIONER:

Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy
Aquino International Airport (NAIA) Complex under Executive Order No. 903. 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. MIAA received Final Notices of
Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 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. MIAA filed with the Court of
Appeals a petition for prohibition and injunction with prayer for preliminary injunction or
temporary restraining order. 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.
Hence, the petitioner’s main contention on this case is that its properties subject to realty taxes
are exempt.

SUPREME COURT:

The petition is meritorious.

MIAA is not a government-owned or controlled corporation but a government instrumentality

which is exempt from any kind of tax from the local governments. Indeed, the exercise of the
taxing power of local government units is subject to the limitations enumerated in Section 133
of the Local Government Code. Under Section 133(o) of the Local Government Code, 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.