Category: Other Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

144104 June 29, 2004 LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessor of Quezon City, respondents. D E C I S I O N CALLEJO, SR., J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of the Decision1 dated July 17, 2000 of the Court of Appeals in CAG.R. SP No. 57014 which affirmed the decision of the Central Board of Assessment Appeals holding that the lot owned by the petitioner and its hospital building constructed thereon are subject to assessment for purposes of real property tax. The Antecedents The petitioner Lung Center of the Philippines is a non-stock and non-profit enti ty established on January 16, 1981 by virtue of Presidential Decree No. 1823.2 I t is the registered owner of a parcel of land, particularly described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495, located at Quezon Avenue corner Elliptical Road , Central District, Quezon City. The lot has an area of 121,463 square meters an d is covered by Transfer Certificate of Title (TCT) No. 261320 of the Registry o f Deeds of Quezon City. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to med ical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. Almost one-hal f of the entire area on the left side of the building along Quezon Avenue is vac ant and idle, while a big portion on the right side, at the corner of Quezon Ave nue and Elliptical Road, is being leased for commercial purposes to a private en terprise known as the Elliptical Orchids and Garden Center. The petitioner accepts paying and non-paying patients. It also renders medical s ervices to out-patients, both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from the government. On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes in the amount of P4,554,860 by the City Assesso r of Quezon City.3 Accordingly, Tax Declaration Nos. C-021-01226 (16-2518) and C -021-01231 (15-2518-A) were issued for the land and the hospital building, respe ctively.4 On August 25, 1993, the petitioner filed a Claim for Exemption5 from r eal property taxes with the City Assessor, predicated on its claim that it is a charitable institution. The petitioner?s request was denied, and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon City ( QC-LBAA, for brevity) for the reversal of the resolution of the City Assessor. T he petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitutio n, the property is exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The petiti oner contends that it is a charitable institution and, as such, is exempt from r eal property taxes. The QC-LBAA rendered judgment dismissing the petition and ho lding the petitioner liable for real property taxes.6 The QC-LBAA?s decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of Quezon City (CBAA, for brevity)7 which ruled that the pet itioner was not a charitable institution and that its real properties were not a ctually, directly and exclusively used for charitable purposes; hence, it was no t entitled to real property tax exemption under the constitution and the law. Th e petitioner sought relief from the Court of Appeals, which rendered judgment af

firming the decision of the CBAA.8 Undaunted, the petitioner filed its petition in this Court contending that: A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX E XEMPTIONS ON THE GROUND THAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF ASS ESSMENT, ARE NOT ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR CHARITABLE PURPO SES. B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS CHARTE R, PD 1823, SAID EXEMPTION MAY NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION. The petitioner avers that it is a charitable institution within the context of S ection 28(3), Article VI of the 1987 Constitution. It asserts that its character as a charitable institution is not altered by the fact that it admits paying pa tients and renders medical services to them, leases portions of the land to priv ate parties, and rents out portions of the hospital to private medical practitio ners from which it derives income to be used for operational expenses. The petit ioner points out that for the years 1995 to 1999, 100% of its out-patients were charity patients and of the hospital?s 282-bed capacity, 60% thereof, or 170 bed s, is allotted to charity patients. It asserts that the fact that it receives su bsidies from the government attests to its character as a charitable institution . It contends that the "exclusivity" required in the Constitution does not neces sarily mean "solely." Hence, even if a portion of its real estate is leased out to private individuals from whom it derives income, it does not lose its charact er as a charitable institution, and its exemption from the payment of real estat e taxes on its real property. The petitioner cited our ruling in Herrera v. QC-B AA9 to bolster its pose. The petitioner further contends that even if P.D. No. 1 823 does not exempt it from the payment of real estate taxes, it is not preclude d from seeking tax exemption under the 1987 Constitution. In their comment on the petition, the respondents aver that the petitioner is no t a charitable entity. The petitioner?s real property is not exempt from the pay ment of real estate taxes under P.D. No. 1823 and even under the 1987 Constituti on because it failed to prove that it is a charitable institution and that the s aid property is actually, directly and exclusively used for charitable purposes. The respondents noted that in a newspaper report, it appears that graft charges were filed with the Sandiganbayan against the director of the petitioner, its a dministrative officer, and Zenaida Rivera, the proprietress of the Elliptical Or chids and Garden Center, for entering into a lease contract over 7,663.13 square meters of the property in 1990 for only P20,000 a month, when the monthly renta l should be P357,000 a month as determined by the Commission on Audit; and that instead of complying with the directive of the COA for the cancellation of the c ontract for being grossly prejudicial to the government, the petitioner renewed the same on March 13, 1995 for a monthly rental of only P24,000. They assert tha t the petitioner uses the subsidies granted by the government for charity patien ts and uses the rest of its income from the property for the benefit of paying p atients, among other purposes. They aver that the petitioner failed to adduce su bstantial evidence that 100% of its out-patients and 170 beds in the hospital ar e reserved for indigent patients. The respondents further assert, thus: 13. That the claims/allegations of the Petitioner LCP do not speak well of its r ecord of service. That before a patient is admitted for treatment in the Center, first impression is that it is pay-patient and required to pay a certain amount as deposit. That even if a patient is living below the poverty line, he is char ged with high hospital bills. And, without these bills being first settled, the poor patient cannot be allowed to leave the hospital or be discharged without fi rst paying the hospital bills or issue a promissory note guaranteed and indorsed by an influential agency or person known only to the Center; that even the rema ins of deceased poor patients suffered the same fate. Moreover, before a patient is admitted for treatment as free or charity patient, one must undergo a series of interviews and must submit all the requirements needed by the Center, usuall y accompanied by endorsement by an influential agency or person known only to th e Center. These facts were heard and admitted by the Petitioner LCP during the h

earings before the Honorable QC-BAA and Honorable CBAA. These are the reasons of indigent patients, instead of seeking treatment with the Center, they prefer to be treated at the Quezon Institute. Can such practice by the Center be called c haritable?10 The Issues The issues for resolution are the following: (a) whether the petitioner is a cha ritable institution within the context of Presidential Decree No. 1823 and the 1 973 and 1987 Constitutions and Section 234(b) of Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt from real property taxe s. The Court?s Ruling The petition is partially granted. On the first issue, we hold that the petitioner is a charitable institution with in the context of the 1973 and 1987 Constitutions. To determine whether an enter prise is a charitable institution/entity or not, the elements which should be co nsidered include the statute creating the enterprise, its corporate purposes, it s constitution and by-laws, the methods of administration, the nature of the act ual work performed, the character of the services rendered, the indefiniteness o f the beneficiaries, and the use and occupation of the properties.11 In the legal sense, a charity may be fully defined as a gift, to be applied cons istently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds and hearts under the influence of education or r eligion, by assisting them to establish themselves in life or otherwise lessenin g the burden of government.12 It may be applied to almost anything that tend to promote the well-doing and well-being of social man. It embraces the improvement and promotion of the happiness of man.13 The word "charitable" is not restricte d to relief of the poor or sick.14 The test of a charity and a charitable organi zation are in law the same. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or private advantage. Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation wh ich, subject to the provisions of the decree, is to be administered by the Offic e of the President of the Philippines with the Ministry of Health and the Minist ry of Human Settlements. It was organized for the welfare and benefit of the Fil ipino people principally to help combat the high incidence of lung and pulmonary diseases in the Philippines. The raison d?etre for the creation of the petition er is stated in the decree, viz: Whereas, for decades, respiratory diseases have been a priority concern, having been the leading cause of illness and death in the Philippines, comprising more than 45% of the total annual deaths from all causes, thus, exacting a tremendous toll on human resources, which ailments are likely to increase and degenerate i nto serious lung diseases on account of unabated pollution, industrialization an d unchecked cigarette smoking in the country;lavvph!l.net Whereas, the more common lung diseases are, to a great extent, preventable, and curable with early and adequate medical care, immunization and through prompt an d intensive prevention and health education programs; Whereas, there is an urgent need to consolidate and reinforce existing programs, strategies and efforts at preventing, treating and rehabilitating people affect ed by lung diseases, and to undertake research and training on the cure and prev ention of lung diseases, through a Lung Center which will house and nurture the above and related activities and provide tertiary-level care for more difficult and problematical cases; Whereas, to achieve this purpose, the Government intends to provide material and financial support towards the establishment and maintenance of a Lung Center fo r the welfare and benefit of the Filipino people.15 The purposes for which the petitioner was created are spelled out in its Article s of Incorporation, thus: SECOND: That the purposes for which such corporation is formed are as follows:

1. To construct, establish, equip, maintain, administer and conduct an integrate d medical institution which shall specialize in the treatment, care, rehabilitat ion and/or relief of lung and allied diseases in line with the concern of the go vernment to assist and provide material and financial support in the establishme nt and maintenance of a lung center primarily to benefit the people of the Phili ppines and in pursuance of the policy of the State to secure the well-being of t he people by providing them specialized health and medical services and by minim izing the incidence of lung diseases in the country and elsewhere. 2. To promote the noble undertaking of scientific research related to the preven tion of lung or pulmonary ailments and the care of lung patients, including the holding of a series of relevant congresses, conventions, seminars and conference s; 3. To stimulate and, whenever possible, underwrite scientific researches on the biological, demographic, social, economic, eugenic and physiological aspects of lung or pulmonary diseases and their control; and to collect and publish the fin dings of such research for public consumption; 4. To facilitate the dissemination of ideas and public acceptance of information on lung consciousness or awareness, and the development of fact-finding, inform ation and reporting facilities for and in aid of the general purposes or objects aforesaid, especially in human lung requirements, general health and physical f itness, and other relevant or related fields; 5. To encourage the training of physicians, nurses, health officers, social work ers and medical and technical personnel in the practical and scientific implemen tation of services to lung patients; 6. To assist universities and research institutions in their studies about lung diseases, to encourage advanced training in matters of the lung and related fiel ds and to support educational programs of value to general health; 7. To encourage the formation of other organizations on the national, provincial and/or city and local levels; and to coordinate their various efforts and activ ities for the purpose of achieving a more effective programmatic approach on the common problems relative to the objectives enumerated herein; 8. To seek and obtain assistance in any form from both international and local f oundations and organizations; and to administer grants and funds that may be giv en to the organization; 9. To extend, whenever possible and expedient, medical services to the public an d, in general, to promote and protect the health of the masses of our people, wh ich has long been recognized as an economic asset and a social blessing; 10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the people in any and all walks of life, including those who are po or and needy, all without regard to or discrimination, because of race, creed, c olor or political belief of the persons helped; and to enable them to obtain tre atment when such disorders occur; 11. To participate, as circumstances may warrant, in any activity designed and c arried on to promote the general health of the community; 12. To acquire and/or borrow funds and to own all funds or equipment, educationa l materials and supplies by purchase, donation, or otherwise and to dispose of a nd distribute the same in such manner, and, on such basis as the Center shall, f rom time to time, deem proper and best, under the particular circumstances, to s erve its general and non-profit purposes and objectives;lavvphil.net 13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and di spose of properties, whether real or personal, for purposes herein mentioned; an d 14. To do everything necessary, proper, advisable or convenient for the accompli shment of any of the powers herein set forth and to do every other act and thing incidental thereto or connected therewith.16 Hence, the medical services of the petitioner are to be rendered to the public i n general in any and all walks of life including those who are poor and the need y without discrimination. After all, any person, the rich as well as the poor, m ay fall sick or be injured or wounded and become a subject of charity.17

As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying p atients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogethe r to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.18 I n Congregational Sunday School, etc. v. Board of Review,19 the State Supreme Court of Illinois held, thus: ? [A]n institution does not lose its charitable character, and consequent exempt ion from taxation, by reason of the fact that those recipients of its benefits w ho are able to pay are required to do so, where no profit is made by the institu tion and the amounts so received are applied in furthering its charitable purpos es, and those benefits are refused to none on account of inability to pay theref or. The fundamental ground upon which all exemptions in favor of charitable inst itutions are based is the benefit conferred upon the public by them, and a conse quent relief, to some extent, of the burden upon the state to care for and advan ce the interests of its citizens.20 As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital Association of South Dakota v. Baker:21 ? [T]he fact that paying patients are taken, the profits derived from attendance upon these patients being exclusively devoted to the maintenance of the charity , seems rather to enhance the usefulness of the institution to the poor; for it is a matter of common observation amongst those who have gone about at all among st the suffering classes, that the deserving poor can with difficulty be persuad ed to enter an asylum of any kind confined to the reception of objects of charit y; and that their honest pride is much less wounded by being placed in an instit ution in which paying patients are also received. The fact of receiving money fr om some of the patients does not, we think, at all impair the character of the c harity, so long as the money thus received is devoted altogether to the charitab le object which the institution is intended to further.22 The money received by the petitioner becomes a part of the trust fund and must b e devoted to public trust purposes and cannot be diverted to private profit or b enefit.23 Under P.D. No. 1823, the petitioner is entitled to receive donations. The petiti oner does not lose its character as a charitable institution simply because the gift or donation is in the form of subsidies granted by the government. As held by the State Supreme Court of Utah in Yorgason v. County Board of Equalization o f Salt Lake County:24 Second, the ? government subsidy payments are provided to the project. Thus, tho se payments are like a gift or donation of any other kind except they come from the government. In both Intermountain Health Care and the present case, the crux is the presence or absence of material reciprocity. It is entirely irrelevant t o this analysis that the government, rather than a private benefactor, chose to make up the deficit resulting from the exchange between St. Mark?s Tower and the tenants by making a contribution to the landlord, just as it would have been ir relevant in Intermountain Health Care if the patients? income supplements had co me from private individuals rather than the government. Therefore, the fact that subsidization of part of the cost of furnishing such ho using is by the government rather than private charitable contributions does not dictate the denial of a charitable exemption if the facts otherwise support suc h an exemption, as they do here.25 In this case, the petitioner adduced substantial evidence that it spent its inco me, including the subsidies from the government for 1991 and 1992 for its patien ts and for the operation of the hospital. It even incurred a net loss in 1991 an d 1992 from its operations. Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those portions of its real property that are leased to pr ivate entities are not exempt from real property taxes as these are not actually

, directly and exclusively used for charitable purposes. The settled rule in this jurisdiction is that laws granting exemption from tax a re construed strictissimi juris against the taxpayer and liberally in favor of t he taxing power. Taxation is the rule and exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too pl ain to be mistaken.26 As held in Salvation Army v. Hoehn:27 An intention on the part of the legislature to grant an exemption from the taxin g power of the state will never be implied from language which will admit of any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by necessary implication from the language u sed, for it is a well settled principle that, when a special privilege or exempt ion is claimed under a statute, charter or act of incorporation, it is to be con strued strictly against the property owner and in favor of the public. This prin ciple applies with peculiar force to a claim of exemption from taxation . ?28 Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specif ically provides that the petitioner shall enjoy the tax exemptions and privilege s: SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock corporation organized primarily to help combat the high incidence of lung and pulmonary dis eases in the Philippines, all donations, contributions, endowments and equipment and supplies to be imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and benefit of the Lung Center, shall be exempt from income and gift taxes, the same further deductible in full for the purpose of determining the maximum deductibl e amount under Section 30, paragraph (h), of the National Internal Revenue Code, as amended. The Lung Center of the Philippines shall be exempt from the payment of taxes, ch arges and fees imposed by the Government or any political subdivision or instrum entality thereof with respect to equipment purchases made by, or for the Lung Ce nter.29 It is plain as day that under the decree, the petitioner does not enjoy any prop erty tax exemption privileges for its real properties as well as the building co nstructed thereon. If the intentions were otherwise, the same should have been a mong the enumeration of tax exempt privileges under Section 2: It is a settled rule of statutory construction that the express mention of one p erson, thing, or consequence implies the exclusion of all others. The rule is ex pressed in the familiar maxim, expressio unius est exclusio alterius. The rule of expressio unius est exclusio alterius is formulated in a number of w ays. One variation of the rule is the principle that what is expressed puts an e nd to that which is implied. Expressium facit cessare tacitum. Thus, where a sta tute, by its terms, is expressly limited to certain matters, it may not, by inte rpretation or construction, be extended to other matters. ... The rule of expressio unius est exclusio alterius and its variations are canons of restrictive interpretation. They are based on the rules of logic and the natu ral workings of the human mind. They are predicated upon one?s own voluntary act and not upon that of others. They proceed from the premise that the legislature would not have made specified enumeration in a statute had the intention been n ot to restrict its meaning and confine its terms to those expressly mentioned.30 The exemption must not be so enlarged by construction since the reasonable presu mption is that the State has granted in express terms all it intended to grant a t all, and that unless the privilege is limited to the very terms of the statute the favor would be intended beyond what was meant.31 Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus: (3) Charitable institutions, churches and parsonages or convents appurtenant the

reto, mosques, non-profit cemeteries, and all lands, buildings, and improvements , actually, directly and exclusively used for religious, charitable or education al purposes shall be exempt from taxation.32 The tax exemption under this constitutional provision covers property taxes only .33 As Chief Justice Hilario G. Davide, Jr., then a member of the 1986 Constitut ional Commission, explained: ". . . what is exempted is not the institution itse lf . . .; those exempted from real estate taxes are lands, buildings and improve ments actually, directly and exclusively used for religious, charitable or educa tional purposes."34 Consequently, the constitutional provision is implemented by Section 234(b) of R epublic Act No. 7160 (otherwise known as the Local Government Code of 1991) as f ollows: SECTION 234. Exemptions from Real Property Tax. ? The following are exempted fro m payment of the real property tax: (b) Charitable institutions, churches, parsonages or convents appurtenant theret o, mosques, non-profit or religious cemeteries and all lands, buildings, and imp rovements actually, directly, and exclusively used for religious, charitable or educational purposes.35 We note that under the 1935 Constitution, "... all lands, buildings, and improve ments used ?exclusively? for ? charitable ? purposes shall be exempt from taxati on."36 However, under the 1973 and the present Constitutions, for "lands, buildi ngs, and improvements" of the charitable institution to be considered exempt, th e same should not only be "exclusively" used for charitable purposes; it is requ ired that such property be used "actually" and "directly" for such purposes.37 In light of the foregoing substantial changes in the Constitution, the petitione r cannot rely on our ruling in Herrera v. Quezon City Board of Assessment Appeal s which was promulgated on September 30, 1961 before the 1973 and 1987 Constitut ions took effect.38 As this Court held in Province of Abra v. Hernando:39 ? Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusivel y for religious, charitable, or educational purposes shall be exempt from taxati on." The present Constitution added "charitable institutions, mosques, and non-p rofit cemeteries" and required that for the exemption of "lands, buildings, and improvements," they should not only be "exclusively" but also "actually" and "di rectly" used for religious or charitable purposes. The Constitution is worded di fferently. The change should not be ignored. It must be duly taken into consider ation. Reliance on past decisions would have sufficed were the words "actually" as well as "directly" not added. There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitabl e purposes to be exempt from taxation. ? Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entit led to the exemption, the petitioner is burdened to prove, by clear and unequivo cal proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as possessed and enjoyed to the exclusion of others; debarred from p articipation or enjoyment; and "exclusively" is defined, "in a manner to exclude ; as enjoying a privilege exclusively."40 If real property is used for one or mo re commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation.41 The words "dominant use" or "principal use" cannot be substituted for the words "used exclusively" without doing violence to the Cons titutions and the law.42 Solely is synonymous with exclusively.43 What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property its elf to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether t he property is used for tax-exempt purposes.44

The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitable purposes . While portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other po rtions thereof are being leased to private individuals for their clinics and a c anteen. Further, a portion of the land is being leased to a private individual f or her business enterprise under the business name "Elliptical Orchids and Garde n Center." Indeed, the petitioner?s evidence shows that it collected P1,136,483. 45 as rentals in 1991 and P1,679,999.28 for 1992 from the said lessees. Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exemp t from such taxes.45 On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes. IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent Quezon City Assessor is hereby DIRECTED to determine, after due hearing, the pr ecise portions of the land and the area thereof which are leased to private pers ons, and to compute the real property taxes due thereon as provided for by law. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 120082 September 11, 1996 MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. HON. FERDINAND J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial Court, Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor H ON. TOMAS R. OSMEA, and EUSTAQUIO B. CESA, respondents. DAVIDE, JR., J.: For review under Rule 45 of the Rules of Court on a pure question of law are the decision of 22 March 1995 1 of the Regional Trial Court (RTC) of Cebu City, Bra nch 20, dismissing the petition for declaratory relief in Civil Case No. CEB-169 00 entitled "Mactan Cebu International Airport Authority vs. City of Cebu", and its order of 4, May 1995 2 denying the motion to reconsider the decision. We resolved to give due course to this petition for its raises issues dwelling o n the scope of the taxing power of local government-owned and controlled corpora tions. The uncontradicted factual antecedents are summarized in the instant petition as follows: Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by vi rtue of Republic Act No. 6958, mandated to "principally undertake the economical , efficient and effective control, management and supervision of the Mactan Inte rnational 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). It is also mandated to: a) encourage, promote and develop international and domestic air traffic in the Central Visayas and Mindanao regions as a means of making the regions centers of international trade and tourism, and accelerating the development of the means of transportation and communication in the country; and b) upgrade the services and facilities of the airports and to formulate internat

ionally acceptable standards of airport accommodation and service. Since the time of its creation, petitioner MCIAA enjoyed the privilege of exempt ion from payment of realty taxes in accordance with Section 14 of its Charter. Sec. 14. Tax Exemptions. ? The authority shall be exempt from realty taxes impos ed by the National Government or any of its political subdivisions, agencies and instrumentalities . . . On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office o f the Treasurer of the City of Cebu, demanded payment for realty taxes on severa l parcels of land belonging to the petitioner (Lot Nos. 913-G, 743, 88 SWO, 948A, 989-A, 474, 109(931), I-M, 918, 919, 913-F, 941, 942, 947, 77 Psd., 746 and 9 91-A), located at Barrio Apas and Barrio Kasambagan, Lahug, Cebu City, in the to tal amount of P2,229,078.79. Petitioner objected to such demand for payment as baseless and unjustified, clai ming in its favor the aforecited Section 14 of RA 6958 which exempt it from paym ent of realty taxes. It was also asserted that it is an instrumentality of the g overnment performing governmental functions, citing section 133 of the Local Gov ernment Code of 1991 which puts limitations on the taxing powers of local govern ment units: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. ? U nless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangay shall not extend to the levy of the follow ing: o) Taxes, fees or charges of any kind on the National Government, its agencies a nd instrumentalities, and local government units. (Emphasis supplied) Respondent City refused to cancel and set aside petitioner's realty tax account, insisting that the MCIAA is a government-controlled corporation whose tax exemp tion privilege has been withdrawn by virtue of Sections 193 and 234 of the Local Governmental Code that took effect on January 1, 1992: Sec. 193. Withdrawal of Tax Exemption Privilege. ? 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 c orporations, except local water districts, cooperatives duly registered under RA No. 6938, non-stock, and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. (Emphasis supplied) xxx xxx xxx Sec. 234. Exemptions from Real Property taxes. ? . . . (c) . . . Except as provided herein, any exemption from payment of real property tax previ ously granted to, or presently enjoyed by all persons, whether natural or juridi cal, including government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code. As the City of Cebu was about to issue a warrant of levy against the properties of petitioner, the latter was compelled to pay its tax account "under protest" a nd thereafter filed a Petition for Declaratory Relief with the Regional Trial Co urt of Cebu, Branch 20, on December 29, 1994. MCIAA basically contended that the taxing powers of local government units do not extend to the levy of taxes or f ees of any kind on an instrumentality of the national government. Petitioner ins isted that while it is indeed a government-owned corporation, it nonetheless sta nds on the same footing as an agency or instrumentality of the national governme nt. Petitioner insisted 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. Respondent City, however, asserted that MACIAA is not an instrumentality of the government but merely a government-owned corporation performing proprietary func tions As such, all exemptions previously granted to it were deemed withdrawn by operation of law, as provided under Sections 193 and 234 of the Local Government Code when it took effect on January 1, 1992. 3

The petition for declaratory relief was docketed as Civil Case No. CEB-16900. In its decision of 22 March 1995, 4 the trial court dismissed the petition in li ght of its findings, to wit: A close reading of the New Local Government Code of 1991 or RA 7160 provides the express cancellation and withdrawal of exemption of taxes by government owned a nd controlled corporation per Sections after the effectivity of said Code on Jan uary 1, 1992, to wit: [proceeds to quote Sections 193 and 234] Petitioners claimed that its real properties assessed by respondent City Governm ent of Cebu are exempted from paying realty taxes in view of the exemption grant ed under RA 6958 to pay the same (citing Section 14 of RA 6958). However, RA 7160 expressly provides that "All general and special laws, acts, ci ty charters, decress [sic], executive orders, proclamations and administrative r egulations, or part or parts thereof which are inconsistent with any of the prov isions of this Code are hereby repealed or modified accordingly." ([f], Section 534, RA 7160). With that repealing clause in RA 7160, it is safe to infer and state that the ta x exemption provided for in RA 6958 creating petitioner had been expressly repea led by the provisions of the New Local Government Code of 1991. So that petitioner in this case has to pay the assessed realty tax of its proper ties effective after January 1, 1992 until the present. This Court's ruling finds expression to give impetus and meaning to the overall objectives of the New Local Government Code of 1991, RA 7160. "It is hereby decl ared the policy of the State that the territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to at tain their fullest development as self-reliant communities and make them more ef fective partners in the attainment of national goals. Towards this end, the Stat e shall provide for a more responsive and accountable local government structure instituted through a system of decentralization whereby local government units shall be given more powers, authority, responsibilities, and resources. The proc ess of decentralization shall proceed from the national government to the local government units. . . . 5 Its motion for reconsideration having been denied by the trial court in its 4 Ma y 1995 order, the petitioner filed the instant petition based on the following a ssignment of errors: I RESPONDENT JUDGE ERRED IN FAILING TO RULE THAT THE PETITIONER IS VESTED WITH G OVERNMENT POWERS AND FUNCTIONS WHICH PLACE IT IN THE SAME CATEGORY AS AN INSTRUM ENTALITY OR AGENCY OF THE GOVERNMENT. II RESPONDENT JUDGE ERRED IN RULING THAT PETITIONER IS LIABLE TO PAY REAL PROPER TY TAXES TO THE CITY OF CEBU. Anent the first assigned error, the petitioner asserts that although it is a gov ernment-owned or controlled corporation it is mandated to perform functions in t he same category as an instrumentality of Government. An instrumentality of Gove rnment is one created to perform governmental functions primarily to promote cer tain aspects of the economic life of the people. 6 Considering its task "not mer ely to efficiently operate and manage the Mactan-Cebu International Airport, but more importantly, to carry out the Government policies of promoting and develop ing the Central Visayas and Mindanao regions as centers of international trade a nd tourism, and accelerating the development of the means of transportation and communication in the country," 7 and that it is an attached agency of the Depart ment of Transportation and Communication (DOTC), 8 the petitioner "may stand in [sic] the same footing as an agency or instrumentality of the national governmen t." Hence, its tax exemption privilege under Section 14 of its Charter "cannot b

e considered withdrawn with the passage of the Local Government Code of 1991 (he reinafter LGC) because Section 133 thereof specifically states that the taxing p owers of local government units shall not extend to the levy of taxes of fees or charges of any kind on the national government its agencies and instrumentaliti es." As to the second assigned error, the petitioner contends that being an instrumen tality of the National Government, respondent City of Cebu has no power nor auth ority to impose realty taxes upon it in accordance with the aforesaid Section 13 3 of the LGC, as explained in Basco vs. Philippine Amusement and Gaming Corporat ion; 9 Local governments have no power to tax instrumentalities of the National Governm ent. PAGCOR is a government owned or controlled corporation with an original cha racter, PD 1869. All its shares of stock are owned by the National Government. . . . PAGCOR has a dual role, to operate and regulate gambling casinos. The latter jok e is governmental, which places it in the category of an agency or instrumentali ty of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be bu rdened, impeded or subjected to control by a mere Local government. The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress t o carry into execution the powers vested in the federal government. (McCulloch v . Maryland, 4 Wheat 316, 4 L Ed. 579). This doctrine emanates from the "supremacy" of the National Government over loca l government. Justice Holmes, speaking for the Supreme Court, make references to the entire ab sence of power on the part of the States to touch, in that way (taxation) at lea st, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a feder al instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them. (Antieau Modern Constitutional Law, Vol. 2, p. 140) Otherwise mere creature of the State can defeat National policies thru extermina tion of what local authorities may perceive to be undesirable activities or ente rprise using the power to tax as "a toll for regulation" (U.S. v. Sanchez, 340 U S 42). The power to tax which was called by Justice Marshall as the "power to de stroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an instrumenta lity or creation of the very entity which has the inherent power to wield it. (E mphasis supplied) It then concludes that the respondent Judge "cannot therefore correctly say that the questioned provisions of the Code do not contain any distinction between a governmental function as against one performing merely proprietary ones such tha t the exemption privilege withdrawn under the said Code would apply to all gover nment corporations." For it is clear from Section 133, in relation to Section 23 4, of the LGC that the legislature meant to exclude instrumentalities of the nat ional government from the taxing power of the local government units. In its comment respondent City of Cebu alleges that as local a government unit a nd a political subdivision, it has the power to impose, levy, assess, and collec t taxes within its jurisdiction. Such power is guaranteed by the Constitution 10 and enhanced further by the LGC. While it may be true that under its Charter th e petitioner was exempt from the payment of realty taxes, 11 this exemption was withdrawn by Section 234 of the LGC. In response to the petitioner's claim that such exemption was not repealed because being an instrumentality of the National Government, Section 133 of the LGC prohibits local government units from imposi ng taxes, fees, or charges of any kind on it, respondent City of Cebu points out

that the petitioner is likewise a government-owned corporation, and Section 234 thereof does not distinguish between government-owned corporation, and Section 234 thereof does not distinguish between government-owned corporation, and Secti on 234 thereof does not distinguish between government-owned or controlled corpo rations performing governmental and purely proprietary functions. Respondent cit y of Cebu urges this the Manila International Airport Authority is a governmenta l-owned corporation, 12 and to reject the application of Basco because it was "p romulgated . . . before the enactment and the singing into law of R.A. No. 7160, " and was not, therefore, decided "in the light of the spirit and intention of t he framers of the said law. As a general rule, the power to tax is an incident of sovereignty and is unlimit ed in its range, acknowledging in its very nature no limits, so that security ag ainst its abuse is to be found only in the responsibility of the legislature whi ch imposes the tax on the constituency who are to pay it. Nevertheless, effectiv e limitations thereon may be imposed by the people through their Constitutions. 13 Our Constitution, for instance, provides that the rule of taxation shall be u niform and equitable and Congress shall evolve a progressive system of taxation. 14 So potent indeed is the power that it was once opined that "the power to tax involves the power to destroy." 15 Verily, taxation is a destructive power whic h interferes with the personal and property for the support of the government. A ccordingly, tax statutes must be construed strictly against the government and l iberally in favor of the taxpayer. 16 But since taxes are what we pay for civili zed society, 17 or are the lifeblood of the nation, the law frowns against exemp tions from taxation and statutes granting tax exemptions are thus construed stri ctissimi juris against the taxpayers and liberally in favor of the taxing author ity. 18 A claim of exemption from tax payment must be clearly shown and based on language in the law too plain to be mistaken. 19 Elsewise stated, taxation is t he rule, exemption therefrom is the exception. 20 However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of cons truction 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 co urse of its operations. 21 The power to tax is primarily vested in the Congress; however, in our jurisdicti on, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by S ection 5, Article X of the Constitution. 22 Under the latter, the exercise of th e power may be subject to such guidelines and limitations as the Congress may pr ovide which, however, must be consistent with the basic policy of local autonomy . There can be no question that under Section 14 of R.A. No. 6958 the petitioner i s 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 exemptio n may thus be withdrawn at the pleasure of the taxing authority. The only except ion 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. 23 The LGC, enacted pursuant to Section 3, Article X of the constitution provides f or the exercise by local government units of their power to tax, the scope there of or its limitations, and the exemption from taxation. Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units as follows: Sec. 133. Common Limitations on the Taxing Power of Local Government Units. ? Un less otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the follow ing:

(a) Income tax, except when levied on banks and other financial institutions; (b) Documentary stamp tax; (c) Taxes on estates, "inheritance, gifts, legacies and other acquisitions morti s causa, except as otherwise provided herein (d) Customs duties, registration fees of vessels and wharfage on wharves, tonnag e dues, and all other kinds of customs fees charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned: (e) Taxes, fees and charges and other imposition upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise or charges for wharfages, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise; (f) Taxes fees or charges on agricultural and aquatic products when sold by marg inal farmers or fishermen; (g) Taxes on business enterprise certified to be the Board of Investment as pion eer or non-pioneer for a period of six (6) and four (4) years, respectively from the date of registration; (h) Excise taxes on articles enumerated under the National Internal Revenue Code , as amended, and taxes, fees or charges on petroleum products; (i) Percentage or value added tax (VAT) on sales, barters or exchanges or simila r transactions on goods or services except as otherwise provided herein; (j) Taxes on the gross receipts of transportation contractor and person engage i n the transportation of passengers of freight by hire and common carriers by air , land, or water, except as provided in this code; (k) Taxes on premiums paid by ways reinsurance or retrocession; (l) Taxes, fees, or charges for the registration of motor vehicles and for the i ssuance of all kinds of licenses or permits for the driving of thereof, except, tricycles; (m) Taxes, fees, or other charges on Philippine product actually exported, excep t as otherwise provided herein; (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprise and Cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixt y nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines; and (o) TAXES, FEES, OR CHARGES OF ANY KIND ON THE NATIONAL GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES, AND LOCAL GOVERNMENT UNITS. (emphasis supplied) Needless to say the last item (item o) is pertinent in this case. The "taxes, fe es or charges" referred to are "of any kind", hence they include all of these, u nless otherwise provided by the LGC. The term "taxes" is well understood so as t o need no further elaboration, especially in the light of the above enumeration. The term "fees" means charges fixed by law or Ordinance for the regulation or i nspection of business activity, 24 while "charges" are pecuniary liabilities suc h as rents or fees against person or property. 25 Among the "taxes" enumerated in the LGC is real property tax, which is governed by Section 232. It reads as follows: Sec. 232. Power to Levy Real Property Tax. ? A province or city or a municipalit y within the Metropolitan Manila Area may levy on an annual ad valorem tax on re al property such as land, building, machinery and other improvements not hereaft er specifically exempted. Section 234 of LGC provides for the exemptions from payment of real property tax es and withdraws previous exemptions therefrom granted to natural and juridical persons, including government owned and controlled corporations, except as provi ded therein. It provides: Sec. 234. Exemptions from Real Property Tax. ? The following are exempted from p ayment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its politic al subdivisions except when the beneficial use thereof had been granted, for rec onsideration or otherwise, to a taxable person; (b) Charitable institutions, churches, parsonages or convents appurtenants there to, mosques nonprofits or religious cemeteries and all lands, building and impro vements actually, directly, and exclusively used for religious charitable or edu

cational purposes; (c) All machineries and equipment that are actually, directly and exclusively us ed by local water districts and government-owned or controlled corporations enga ged in the supply and distribution of water and/or generation and transmission o f electric power; (d) All real property owned by duly registered cooperatives as provided for unde r R.A. No. 6938; and; (e) Machinery and equipment used for pollution control and environmental protect ion. Except as provided herein, any exemptions from payment of real property tax prev iously granted to or presently enjoyed by, all persons whether natural or juridi cal, including all government owned or controlled corporations are hereby withdr awn upon the effectivity of his Code. These exemptions are based on the ownership, character, and use of the property. Thus; (a) Ownership Exemptions. Exemptions from real property taxes on the basis of ow nership are real properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered cooperatives. (b) Character Exemptions. Exempted from real property taxes on the basis of thei r character are: (i) charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents appurtenant thereto, mosques, and (iii) no n profit or religious cemeteries. (c) Usage exemptions. Exempted from real property taxes on the basis of the actu al, direct and exclusive use to which they are devoted are: (i) all lands buildi ngs and improvements which are actually, directed and exclusively used for relig ious, charitable or educational purpose; (ii) all machineries and equipment actu ally, directly and exclusively used or by local water districts or by government -owned or controlled corporations engaged in the supply and distribution of wate r and/or generation and transmission of electric power; and (iii) all machinery and equipment used for pollution control and environmental protection. To help provide a healthy environment in the midst of the modernization of the c ountry, all machinery and equipment for pollution control and environmental prot ection may not be taxed by local governments. 2. Other Exemptions Withdrawn. All other exemptions previously granted to natura l or juridical persons including government-owned or controlled corporations are withdrawn upon the effectivity of the Code. 26 Section 193 of the LGC is the general provision on withdrawal of tax exemption p rivileges. It provides: Sec. 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. 6938, non stock and non profit hospitals and educational constitutions, are hereby withdrawn upon the effectivity of this Code. On the other hand, the LGC authorizes local government units to grant tax exempt ion privileges. Thus, Section 192 thereof provides: Sec. 192. Authority to Grant Tax Exemption Privileges. ? Local government units may, through ordinances duly approved, grant tax exemptions, incentives or relie fs under such terms and conditions as they may deem necessary. The foregoing sections of the LGC speaks of: (a) the limitations on the taxing p owers of local government units and the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. The use of exceptions of provisos in these section, as shown by the following clauses: (1) "unless otherwise provided herein" in the opening paragraph of Section 133; (2) "Unless otherwise provided in this Code" in section 193; (3) "not hereafter specifically exempted" in Section 232; and (4) "Except as provided herein" in the last paragraph of Section 234 initially hampers a ready understanding of the sections. Note, too, that the afo rementioned clause in section 133 seems to be inaccurately worded. Instead of th e clause "unless otherwise provided herein," with the "herein" to mean, of cours

e, the section, it should have used the clause "unless otherwise provided in thi s Code." The former results in absurdity since the section itself enumerates wha t are beyond the taxing powers of local government units and, where exceptions w ere intended, the exceptions were explicitly indicated in the text. For instance , in item (a) which excepts the income taxes "when livied on banks and other fin ancial institutions", item (d) which excepts "wharfage on wharves constructed an d maintained by the local government until concerned"; and item (1) which except s taxes, fees, and charges for the registration and issuance of license or permi ts for the driving of "tricycles". It may also be observed that within the body itself of the section, there are exceptions which can be found only in other par ts of the LGC, but the section interchangeably uses therein the clause "except a s otherwise provided herein" as in items (c) and (i), or the clause "except as o therwise provided herein" as in items (c) and (i), or the clause "excepts as pro vided in this Code" in item (j). These clauses would be obviously unnecessary or mere surplus-ages if the opening clause of the section were" "Unless otherwise provided in this Code" instead of "Unless otherwise provided herein". In any eve nt, even if the latter is used, since under Section 232 local government units h ave the power to levy real property tax, except those exempted therefrom under S ection 234, then Section 232 must be deemed to qualify Section 133. Thus, reading together Section 133, 232 and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133 the taxing powers of local governmen t units cannot extend to the levy of inter alia, "taxes, fees, and charges of an y kind of the National Government, its agencies and instrumentalties, and local government units"; however, pursuant to Section 232, provinces, cities, municipa lities in the Metropolitan Manila Area may impose the real property tax except o n, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial used thereof has been gra nted, for consideration or otherwise, to a taxable person", as provided in item (a) of the first paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Sect ion 193 of the LGC prescribes the general rule, viz., they are withdrawn upon th e effectivity of the LGC, except upon the effectivity of the LGC, except those g ranted to local water districts, cooperatives duly registered under R.A. No. 693 8, non stock and non-profit hospitals and educational institutions, and unless o therwise provided in the LGC. The latter proviso could refer to Section 234, whi ch enumerates the properties exempt from real property tax. But the last paragra ph of Section 234 further qualifies the retention of the exemption in so far as the real property taxes are concerned by limiting the retention only to those en umerated there-in; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as the real property is owned b y the Republic of the Philippines, or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to taxable person for cons ideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effecti vity of the LGC, exemptions from real property taxes granted to natural or jurid ical persons, including government-owned or controlled corporations, except as p rovided in the said section, and the petitioner is, undoubtedly, a government-ow ned 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 t o 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 an d 234. In short, the petitioner can no longer invoke the general rule in Section 133 th at the taxing powers of the local government units cannot extend to the levy of: (o) taxes, fees, or charges of any kind on the National Government, its agencies

, or instrumentalities, and local government units. I must show that the parcels of land in question, which are real property, are a ny one of those enumerated in Section 234, either by virtue of ownership, charac ter, or use of the property. Most likely, it could only be the first, but not un der any explicit provision of the said section, for one exists. In light of the petitioner's theory that it is an "instrumentality of the Government", it could only be within be first item of the first paragraph of the section by expanding the scope of the terms Republic of the Philippines" to embrace . . . . . . "inst rumentalities" and "agencies" or expediency we quote: (a) real property owned by the Republic of the Philippines, or any of the Philip pines, or any of its political subdivisions except when the beneficial use there of has been granted, for consideration or otherwise, to a taxable person. This view does not persuade us. In the first place, the petitioner's claim that it is an instrumentality of the Government is based on Section 133(o), which exp ressly mentions the word "instrumentalities"; and in the second place it fails t o consider the fact that the legislature used the phrase "National Government, i ts agencies and instrumentalities" "in Section 133(o),but only the phrase "Repub lic of the Philippines or any of its political subdivision "in Section 234(a). The terms "Republic of the Philippines" and "National Government" are not interc hangeable. The former is boarder and synonymous with "Government of the Republic of the Philippines" which the Administrative Code of the 1987 defines as the "c orporate governmental entity though which the functions of the government are ex ercised through at the Philippines, including, saves as the contrary appears fro m the context, the various arms through which political authority is made effect ive in the Philippines, whether pertaining to the autonomous reason, the provinc ial, city, municipal or barangay subdivision or other forms of local government. " 27 These autonomous regions, provincial, city, municipal or barangay subdivisi ons" are the political subdivision. 28 On the other hand, "National Government" refers "to the entire machinery of the central government, as distinguished from the different forms of local Governmen ts." 29 The National Government then is composed of the three great departments the executive, the legislative and the judicial. 30 An "agency" of the Government refers to "any of the various units of the Governm ent, including a department, bureau, office instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein;" 3 1 while an "instrumentality" refers to "any agency of the National Government, n ot integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administerin g special funds, and enjoying operational autonomy; usually through a charter. T his term includes regulatory agencies, chartered institutions and government-own ed and controlled corporations". 32 If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption from payment of real property taxes under the last sentence of the said section to the agencies and instrumentalities of the National Government m entioned in Section 133(o), then it should have restated the wording of the latt er. Yet, it did not Moreover, that Congress did not wish to expand the scope of the exemption in Section 234(a) to include real property owned by other instrume ntalities or agencies of the government including government-owned and controlle d corporations is further borne out by the fact that the source of this exemptio n is Section 40(a) of P.D. No. 646, otherwise known as the Real Property Tax Cod e, which reads: Sec 40. Exemption from Real Property Tax. ? The exemption shall be as follows: (a) Real property owned by the Republic of the Philippines or any of its politic

al subdivisions and any government-owned or controlled corporations so exempt by is charter: Provided, however, that this exemption shall not apply to real prop erty of the above mentioned entities the beneficial use of which has been grante d, for consideration or otherwise, to a taxable person. Note that as a reproduced in Section 234(a), the phrase "and any government-owne d or controlled corporation so exempt by its charter" was excluded. The justific ation for this restricted exemption in Section 234(a) seems obvious: to limit fu rther tax exemption privileges, specially in light of the general provision on w ithdrawal of exemption from payment of real property taxes in the last paragraph of property taxes in the last paragraph of Section 234. These policy considerat ions are consistent with the State policy to ensure autonomy to local government s 33 and the objective of the LGC that they enjoy genuine and meaningful local a utonomy to enable them to attain their fullest development as self-reliant commu nities and make them effective partners in the attainment of national goals. 34 The power to tax is the most effective instrument to raise needed revenues to fi nance and support myriad activities of local government units for the delivery o f basic services essential to the promotion of the general welfare and the enhan cement of peace, progress, and prosperity of the people. It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privile ges granted to government-owned and controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, and there wa s a need for this entities to share in the requirements of the development, fisc al or otherwise, by paying the taxes and other charges due from them. 35 The crucial issues then to be addressed are: (a) whether the parcels of land in question belong to the Republic of the Philippines whose beneficial use has been granted to the petitioner, and (b) whether the petitioner is a "taxable person" . Section 15 of the petitioner's Charter provides: Sec. 15. Transfer of Existing Facilities and Intangible Assets. ? All existing p ublic airport facilities, runways, lands, buildings and other properties, movabl e or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interests and privileges relating on airport works, or a ir operations, including all equipment which are necessary for the operations of air navigation, acrodrome control towers, crash, fire, and rescue facilities ar e hereby transferred to the Authority: Provided however, that the operations con trol of all equipment necessary for the operation of radio aids to air navigatio n, airways communication, the approach control office, and the area control cent er shall be retained by the Air Transportation Office. No equipment, however, sh all be removed by the Air Transportation Office from Mactan without the concurre nce of the authority. The authority may assist in the maintenance of the Air Tra nsportation Office equipment. The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International AirPort in the Province of Cebu", 36 which belonged to the Republ ic of the Philippines, then under the Air Transportation Office (ATO). 37 It may be reasonable to assume that the term "lands" refer to "lands" in Cebu Ci ty then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section i nvolves a "transfer" of the "lands" among other things, to the petitioner and no t just the transfer of the beneficial use thereof, with the ownership being reta ined by the Republic of the Philippines. This "transfer" is actually an absolute conveyance of the ownership thereof beca use the petitioner's authorized capital stock consists of, inter alia "the value of such real estate owned and/or administered by the airports." 38 Hence, the petitioner is now the owner of the land in question and the exception in Section 234(c) of the LGC is inapplicable. Moreover, the petitioner cannot claim that it was never a "taxable person" under

its Charter. It was only exempted from the payment of real property taxes. The grant of the privilege only in respect of this tax is conclusive proof of the le gislative intent to make it a taxable person subject to all taxes, except real p roperty tax. 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 be come even if it be conceded to be an "agency" or "instrumentality" of the Govern ment, a taxable person for such purpose in view of the withdrawal in the last pa ragraph of Section 234 of exemptions from the payment of real property taxes, wh ich, as earlier adverted to, applies to the petitioner. Accordingly, the position taken by the petitioner is untenable. Reliance on Basc o vs. Philippine Amusement and Gaming Corporation 39 is unavailing since it was decided before the effectivity of the LGC. Besides, nothing can prevent Congress from decreeing that even instrumentalities or agencies of the government perfor ming governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisd om. WHEREFORE, the instant petition is DENIED. The challenged decision and order of the Regional Trial Court of Cebu, Branch 20, in Civil Case No. CEB-16900 are AFF IRMED. No pronouncement as to costs. SO ORDERED.