DRILON vs LIM

the LGC happens to be subject to excise, value added, or percentage tax

under the NIRC.

The Secretary of Justice is not given the same latitude under Section 187.
All he is permitted to do is ascertain the constitutionality or legality of the
tax measure, without the right to declare that, in his opinion, it is unjust,
excessive, oppressive or confiscatory. He has no discretion on this matter.
In fact, Secretary Drilon set aside the Manila Revenue Code only on two
grounds, to with, the inclusion therein of certain ultra vires provisions
and non-compliance with the prescribed procedure in its enactment.
These grounds affected the legality, not the wisdom or reasonableness, of
the tax measure.

CITY OF MANILA vs COLET

Issue:
WHETHER OR NOT SECTION 21(B) OF [THE MANILA REVENUE
CODE, AS AMENDED,] IS VALID AND CONSTITUTIONAL
Held:
YES. The power to tax is not inherent in LGUs to whom the power must
be delegated by Congress and must be exercised within the guidelines
and limitations that Congress may provide.
Sec. 5 of Article X of the Constitution granted LGUs the power to create
its own sources of revenues and to levy taxes, fees, and charges subject to
such guidelines and limitations as the Congress may provide In
conformity with said Constitutional provision, the LGC was enacted by
Congress.
Section 130 provides for the following fundamental principles governing
the taxing powers of LGUs:
1.

Taxation shall be uniform in each LGU.

2.

Taxes, fees, charges and other impositions shall:

a.

be equitable and based as far as practicable on the

taxpayers ability to pay;

b.

be levied and collected only for public purposes;

c.

not be unjust, excessive, oppressive, or confiscatory;

d.

not be contrary to law, public policy, national

economic policy, or in the restraint of trade.

3.

The collection of local taxes, fees, charges and other

impositions shall in no case be let to any private person.

4.

The revenue collected pursuant to the provisions of the LGC

shall inure solely to the benefit of, and be subject to the
disposition by, the LGU levying the tax, fee, charge or other
imposition unless otherwise specifically provided by the LGC.

The omnibus grant of power to municipalities and cities under Section

143(h) of the LGC cannot overcome the specific exception/exemption in
Section 133(j) of the same Code. This is in accord with the rule on
statutory construction that specific provisions must prevail over general
ones.71 A special and specific provision prevails over a general provision
irrespective of their relative positions in the statute.
In the case at bar, the sanggunian of the municipality or city cannot enact
an ordinance imposing business tax on the gross receipts of transportation
contractors, persons engaged in the transportation of passengers or freight
by hire, and common carriers by air, land, or water, when
said sanggunian was already specifically prohibited from doing so. Any
exception to the express prohibition under Section 133(j) of the LGC
should be just as specific and unambiguous.
The construction adopted by the Court gives effect to both Sections
133(j) and 143(h) of the LGC. ) In case of doubt, any tax ordinance or
revenue measure shall be construed strictly against the local government
unit enacting it, and liberally in favor of the taxpayer. Any tax
exemption, incentive or relief granted by any local government unit
pursuant to the provisions of this Code shall be construed strictly against
the person claiming it

NPC vs CITY OF CABANATUAN

Issue: Whether NAPOCOR is liable to pay annual franchise tax to the
City of Cabanatuan
Held: Yes. The power to tax is no longer vested exclusively on Congress;
local legislative bodies are now given direct authority tolevy taxes, fees
and other charges. Although as a general rule, LGUs cannot impose taxes,
fees or charges of any kind on theNational Government, its agencies and
instrumentalities, this rule now admits of an exception, i.e., when specific
provisions of the LGC authorize the LGUs to impose taxes, fees or
charges on the aforementioned entities. Nothing prevents Congress from
decreeing that even instrumentalities or agencies of the government
performing governmental functions may be subject to tax.
A franchise is a privilege conferred by government authority, which does
not belong to citizens of the country generally as a matter of common
right. It may be construed in two senses: the right vested in the
individuals composing the corporation and the right and privileges
conferred upon the corporation. A franchise tax is understood in the
second sense; it is not levied on the corporation simply for existing as a
corporation but on its exercise of the rights or privileges granted to it by
the government. NAPOCOR is covered by the franchise tax because it
exercises a franchise in the second sense and it is exercising its rights or
privileges under this franchise within the territory of the City.
QUEZON CITY vs. ABS-CBN BROADCASTING CORPORATION

Each LGU shall, as far as practicable, evolve a progressive system of

taxation.

ISSUE:

Section 133 provides for the common limitations on the taxing powers of
LGUs. x x x. (Underscoring and citations omitted.)

Does the in lieu of all taxes provision in ABS-CBNs franchise exempt

it from payment of the local franchise tax?

Among the common limitations on the taxing power of LGUs is Section

133(j) of the LGC, which states that [u]nless otherwise provided
herein, the taxing power of LGUs shall not extend to [t]axes on the
gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by
air, land or water, except as provided in this Code[.]
Section 133(j) of the LGC prevails over Section 143(h) of the same Code,
and Section 21(B) of the Manila Revenue Code, as amended, was
manifestly in contravention of the former.
The succeeding proviso of Section 143(h) of the LGC,
viz., Provided, That on any business subject to the excise, value-added
or percentage tax under the National Internal Revenue Code, as amended,
the rate of tax shall not exceed two percent (2%) of gross sales or receipts
of the preceding calendar year[,] is not a specific grant of power to the
municipality or city to impose business tax on the gross sales or receipts
of such a business. Rather, the proviso only fixes a maximum rate of
imposable business tax in case the business taxed under Section 143(h) of

HELD:
NO. The right to exemption from local franchise tax must be clearly
established beyond reasonable doubt and cannot be made out of inference
or implications.
The "in lieu of all taxes" provision in the franchise of ABS-CBN does not
expressly provide what kind of taxes ABS-CBN is exempted from. It is
not clear whether the exemption would include both local, whether
municipal, city or provincial, and national tax. What is clear is that ABSCBN shall be liable to pay three (3) percent franchise tax and income
taxes under Title II of the NIRC. But whether the "in lieu of all taxes
provision" would include exemption from local tax is not unequivocal.
As adverted to earlier, the right to exemption from local franchise tax
must be clearly established and cannot be made out of inference or
implications but must be laid beyond reasonable doubt. Verily, the
uncertainty in the "in lieu of all taxes" provision should be construed

against ABS-CBN. ABS-CBN has the burden to prove that it is in fact

covered by the exemption so claimed. ABS-CBN miserably failed in this
regard.

Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to

the exemption from payment of the local franchise tax in view of the
grant
of
tax
exemption
to
Globe
and
Smart.

The "in lieu of all taxes" clause in the franchise of ABS-CBN has become
functus officio with the abolition of the franchise tax on broadcasting
companies with yearly gross receipts exceeding Ten Million Pesos.

Held:

.
COCA COLA vs CITY of MANILA
Issue:
Whether or not Tax Ordinance No. 7988 is null and void and of no legal
effect due to the City's failure to satisfy therequirement of publication for
three consecutive days, regardless of the amendmentory ordinance
issued.
Held:
It is undisputed from the facts of the case that Tax Ordinance No. 7988
has already been declared by the DOJ Secretary, in its Order, dated 17
August 2000, as null and void and without legal effect due to respondents
failure to satisfy the requirement that said ordinance be published for
three consecutive days as required by law. Neither is there quibbling on
the fact that the said Order of the DOJ was never appealed by the City of
Manila, thus, it had attained finality after the lapse of the period to
appeal.

Furthermore, the RTC of Manila, Branch 21, in its Decision dated 28

November 2001, reiterated the findings of the DOJ Secretary that
respondents failed to follow the procedure in the enactment of tax
measures as mandated by Section 188 of the Local Government Code of
1991, in that they failed to publish Tax Ordinance No. 7988 for three
consecutive days in a newspaper of local circulation. From the foregoing,
it is evident that Tax Ordinance No. 7988 is null and void as said
ordinance was published only for one day in the 22 May 2000 issue of
the Philippine Post in contravention of the unmistakable directive of the
Local Government Code of 1991
The passage of the assailed ordinance did not have the effect of curing
the defects of Ordinance No. 7988 which, any way, does not legally
exist.
From the foregoing, it is evident that Tax Ordinance No. 7988 is null and
void as said ordinance was published only for one day in the 22 May
2000 issue of the Philippine Post in contravention of the unmistakable
directive of the Local Government Code of 1991.

Despite the nullity of Tax Ordinance No. 7988, RTC went on to dismiss
petitioners case on the force of the enactment of Tax Ordinance No.
8011, amending Tax Ordinance No. 7988. Significantly, said amending
ordinance was likewise declared null and void by the DOJ Secretary in a
Resolution, dated 5 July 2001, elucidating that "[I]nstead of amending
Ordinance No. 7988, the City should have enacted another tax
measure which strictly complies with the requirements of law, both
procedural and substantive. The passage of the assailed ordinance
did not have the effect of curing the defects of Ordinance No. 7988
which, any way, does not legally exist."

Based on the foregoing, this Court must reverse the Order of the RTC of
Manila in dismissing petitioners case as there is no basis in law for such
dismissal. The amending law, having been declared as null and void, in
legal contemplation, therefore, does not exist. Furthermore, even if Tax
Ordinance No. 8011 was not declared null and void, the trial court should
not have dismissed the case on the reason that said tax ordinance had
already amended Tax Ordinance No. 7988. As held by this Court in the
case of People v. Lim, if an order or law sought to be amended is
invalid, then it does not legally exist, there should be no occasion or
need to amend it.

PLDT vs CITY of DAVAO

Issue:

Petitioner contends that because their existing franchises contain in lieu

of all taxes clauses, the same grant of tax exemption must be deemed to
have become ipso facto part of its previously granted telecommunications
franchise. But the rule is that tax exemptions should be granted only by a
clear and unequivocal provision of law expressed in a language too plain
to be mistaken and assuming for the nonce that the charters of Globe
and of Smart grant tax exemptions, then this runabout way of granting tax
exemption to PLDT is not a direct, clear and unequivocal way of
communicating the legislative intent.
Nor does the term exemption in Sec. 23 of RA 7925 mean tax
exemption. The term refers to exemption from regulations and
requirements imposed by the National Telecommunications Commission
(NTC). For instance, RA 7925, Sec. 17 provides: The Commission shall
exempt any specific telecommunications service from its rate or tariff
regulations if the service has sufficient competition to ensure fair and
reasonable rates of tariffs. Another exemption granted by the law in line
with its policy of deregulation is the exemption from the requirement of
securing permits from the NTC every time a telecommunications
company imports equipment.
Tax exemptions should be granted only by clear and unequivocal
provision of law on the basis of language too plain to be mistaken.
ONGSUCO vs MALONES
W/N the imposition of the goodwill fees is valid- NO, it is defective due
to lack of public hearing.

Held:
There is no dispute herein that the notices sent to petitioners and
other stall holders at the municipal public market were sent out,informing
them of the supposed "public hearing" to be held on 11 August 1998.
Even assuming that petitioners received their notice, the"public hearing"
was already scheduled, and actually conducted, only five days later.This
contravenes Article 277 (b) (3) of the Implementing Rules and
Regulations of the Local Government Code which requires that the public
hearing be held no less than ten days from the time the notices were sent
out, posted, or published.When the Sangguniang Bayan of Maasin sought
to correct this procedural defect through Resolution No. 68, series of
1998 vetoed thesaid resolution. Although the Sangguniang Bayan may
have had the power to override respondent's veto, it no longer did so.The
defect in the enactment of Municipal Ordinance No. 98 was not
cured when another public hearing was held on 22 January 1999,after the
questioned ordinance was passed by the Sangguniang Bayan
and approved by respondent on 17 August 1998. Section 186 of theLocal
Government Code prescribes that the public hearing be held prior to
the enactment by a local government unit of an ordinancelevying taxes,
fees, and charges.Since no public hearing had been duly conducted prior
to the enactment of Municipal Ordinance No. 98-01, said ordinance
is void andcannot be given any effect. Consequently, a void
and ineffective ordinance could not have conferred upon respondent the
jurisdiction toorder petitioners' stalls at the municipal public market
vacant.

YAMANE vs BA LEPANTO
ISSUE: Whether or not a RTC deciding an appeal from the decision of a
city treasurer on tax protests is exercising original jurisdiction. Whether
or not a condominium corporation organized solely for the maintenance
of a condominium is liable for local taxation.
HELD:
1.
Yes. Although the LGC (Section 195) provides that the remedy of
the taxpayer whose protest is denied by the local treasurer is to
appeal with the court of competent jurisdiction or in this case the RTC
(considering the amount of tax liability is P1.6 million), such appeal
when decided by the RTC is still in the exercise of its original jurisdiction
and not its appellate jurisdiction. This is because appellate jurisdiction is
defined as the authority of a court higher in rank to re-examine the final
order or judgment of a lower court which tried the case now elevated
for judicial review. Here, the City Treasurer is not a lower court.

The Supreme Court however clarifies that this ruling is only applicable to
similar cases before the passage of Republic Act 9282 (effective April
2004). Under RA 9282, the Court of Tax Appeals (CTA), not CA,
exercises exclusive appellate jurisdiction to review on appeal decisions,
orders or resolutions of the Regional Trial Courts in local tax
cases whether originally decided or resolved by them in the exercise
of their original or appellate jurisdiction.
2.
No. Lepanto was not organized for profit. The fees it was
collecting from the condominium unit owners redound to the owners
themselves because the fees collected are being used for the maintenance
of the condo. Further, it appears that the assessment issued by Yamane
did not state the legal basis for the tax being imposed on Lepanto it
merely states that Makati is authorized to collect business taxes under the
Local Government Code (LGC) but no other reference specific reference
to specific laws were cited.

ERICSSON TELECOMUNICATIONS vs CITY OF PASIG

Issue: What should be the basis of the local business tax? gross receipts
or gross revenue?
Held: The basis should be gross receipts
Paragraph e, Section 143 of the Local Government Code provides that

The municipality may impose taxes on the following businesses:

(e) On contractors and other independent contractors, in
accordance with the following schedule:
With gross receipts for the preceding calendar year in the amount of:
Amount of Tax Per Annum
The above provision specifically refers to gross receipts.
Section 131 of the Local Government Code defines gross sales or receipts
as follows:
"Gross Sales or Receipts"
- include the total amount of money or its equivalent representing the
contract price, compensation or service fee, including the amount charged
or materials supplied with the services and the deposits or advance
payments actually or constructively received during the taxable quarter
for the services performed or to be performed for another person
excluding discounts if determinable at the time of sales, sales return,
excise tax, and value-added tax (VAT);
The law is clear.

LUNG CENTER vs QUEZON CITY

Issue: Is the Lung Center of the Philippines a charitable institutionwithin
the context of the Constitution, and therefore, exempt from
real property tax?
Held: The Lung Center of the Philippines is a charitable institution. To
determine whether an enterprise is a charitable institution or not,the
elements which should be considered include the statute creating the
enterprise, its corporate purposes, its constitution and by-laws,
the methods of administration, the nature of the actual work performed,
that character of the services rendered, the indefiniteness of the
beneficiaries and the use and occupation of the properties.
However, under the Constitution, in order to be entitled to exemption
from real property tax, there must be clear and unequivocal proof that (1)
it is a charitable institution and (2)its real properties are ACTUALLY,
DIRECTLY and EXCLUSIVELY used for charitable purposes. While
portions of the hospital are used for treatment ofpatients and the
dispensation of medical services to them, whether paying or non-paying,
other portions thereof are being leased to private individuals and
enterprises.
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 patients, whether out-patient, or confined in the hospital, or
receives subsidies from the government, so long as the money received is
devoted or used altogether 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.

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 private 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 are construed strictissimi juris against the taxpayer and liberally in
favor of the 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 plain to be mistaken.

Consequently, the constitutional provision is implemented by Section

234(b) of Republic Act No. 7160 (otherwise known as the Local
Government Code of 1991) as follows:
SECTION 234. Exemptions from Real Property Tax. The
following are exempted from payment of the real property tax:

Gross receipts include money or its equivalent actually or constructively

received in consideration of services rendered or articles sold, exchanged
or leased, whether actual or constructive.

...

Gross Revenue
- covers money or its equivalent actually or constructively received,
including the value of services rendered or articles sold, exchanged or
leased, the payment of which is yet to be received. This is in consonance
with the International Financial Reporting Standards, which defines
revenue as the gross inflow of economic benefits (cash, receivables, and
other assets) arising from the ordinary operating activities of an
enterprise (such as sales of goods, sales of services, interest, royalties,
and dividends), which is measured at the fair value of the consideration
received or receivable
In petitioner's case, its audited financial statements reflect income or
revenue which accrued to it during the taxable period although not yet
actually or constructively received or paid. This is because petitioner uses
the accrual method of accounting, where income is reportable when all
the events have occurred that fix the taxpayer's right to receive the
income, and the amount can be determined with reasonable accuracy; the
right to receive income, and not the actual receipt, determines when to
include the amount in gross income. The imposition of local business tax
based on petitioner's gross revenue will inevitably result in the
constitutionally proscribed double taxation taxing of the same person
twice by the same jurisdiction for the same thing inasmuch as
petitioner's revenue or income for a taxable year will definitely include its
gross receipts already reported during the previous year and for which
local business tax has already been paid.

(b) Charitable institutions, churches, parsonages or

convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, andexclusively used
for religious, charitable or educational purposes. 35

GSIS vs CITY OF MANILA

The issues raised may be formulated in the following wise: first, whether
GSIS under its charter is exempt from real property taxation; second,
assuming that it is so exempt, whether GSIS is liable for real property
taxes for its properties leased to a taxable entity; and third, whether the
properties of GSIS are exempt from levy.
Held:
1.

GSIS Exempt from Real Property Tax

the System, its assets, revenues including all accruals

thereto, and benefits paid, shall be exempt from all taxes,
assessments, fees, charges or duties of all kinds. These
exemptions shall continue unless expressly and specifically

revoked and any assessment against the System as of the

approval of this Act are hereby considered paid.

determinative of this case, it is to be noted that prominently

added in GSIS present charter is a paragraph precluding any
implied repeal of the tax-exempt clause so as to protect the
solvency of GSIS funds. Moreover, an express repeal by a
subsequent law would not suffice to affect the full exemption
benefits granted the GSIS, unless the following conditionalities
are met: (1) The repealing clause must expressly, specifically,
and categorically revoke or repeal Sec. 39; and (2) a
provision is enacted to substitute or replace the
exemption referred to herein as an essential factor to maintain
or protect the solvency of the fund. These restrictions for a
future express repeal, notwithstanding, do not make the proviso
an irrepealable law, for such restrictions do not impinge or limit
the carte blanche legislative authority of the legislature to so
amend it. The restrictions merely enhance other provisos in the
law ensuring the solvency of the GSIS fund.

RA 7160 lifted
GSIS tax exemption
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. No. 6938,
non-stock and non-profit hospitals and educational
institutions, are hereby withdrawn upon the
effectivity of this Code.

SEC. 234. Exemption from Real Property

Tax. x x x Except as provided herein, any exemption
from payment of real property tax previously granted
to, or presently enjoyed by, all persons, whether
natural or juridical, including all government-owned
or controlled corporation are hereby withdrawn upon
the effectivity of this Code.
From the foregoing provisos, there can be no serious doubt
about the Congress intention to withdraw, subject to certain
defined exceptions, tax exemptions granted prior to the passage
of RA 7160. The question that easily comes to mind then is
whether or not the full tax exemption heretofore granted to
GSIS under PD 1146, particular insofar as realty tax is
concerned, was deemed withdrawn. We answer in the
affirmative.
Full tax exemption
reenacted through RA
8291
Indeed, almost 20 years to the day after the issuance
of the GSIS charter, i.e., PD 1146, it was further
amended and expanded by RA 8291 which took
effect on June 24, 1997. [18] Under it, the full tax
exemption privilege of GSIS was restored, the
operative provision being Sec. 39 thereof, a virtual
replication of the earlier quoted Sec. 33 of PD 1146.
Sec. 39 of RA 8291
Xxx the GSIS, its assets, revenues including all
accruals thereto, and benefits paid, shall be
exempt from all taxes, assessments, fees, charges
or duties of all kinds. These exemptions shall
continue unless expressly and specifically revoked
and any assessment against the GSIS as of the
approval of this Act are hereby considered paid
xxx

Xxx these exemptions shall not be affected by

subsequent laws to the contrary unless this section
is expressly, specifically and categorically revoked
or repealed by law and a provision is enacted to
substitute or replace the exemption referred to
herein as an essential factor to maintain or protect
the solvency of the fund,xxx
The funds and/or the properties referred to herein
as well as the benefits, sums or monies
corresponding to the benefits under this Act shall
be exempt from attachment, garnishment,
execution, levy or other processes issued by the
courts, quasi-judicial agencies or administrative
bodies

The foregoing exempting proviso, couched as it were in an

encompassing manner, brooks no other construction but that
GSIS is exempt from all forms of taxes. While not

Real property taxes assessed and due from GSIS considered

paid
GSIS an instrumentality of the National Government
2.

Second Core Issue: Beneficial Use Doctrine Applicable

The foregoing notwithstanding, the leased
Katigbak property shall be taxable pursuant
to the beneficial use principle under Sec. 234(a) of
the LGC.

It is true that said Sec. 234(a), quoted below,

exempts from real estate taxes real property
owned by the Republic, unless the beneficial use
of the property is, for consideration, transferred to
a taxable person.
SEC. 234. Exemptions from Real Property
Tax. The following are exempted from payment of
the real property tax:

(a) Real property owned by the Republic

of the Philippines or any of its political
subdivisions except when the beneficial use thereof
has been granted, for consideration or otherwise,
to a taxable person.
This exemption, however, must be read in relation with Sec.
133(o) of the LGC, which prohibits LGUs from imposing taxes
or fees of any kind on the national government, its agencies,
and instrumentalities:

SEC. 133. Common Limitations on the

Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the
following:

xxxx

(o) Taxes, fees or charges of any kinds on

the
National
Government,
its
agencies
and instrumentalities, and local government
units. (Emphasis supplied.)
GSIS, however, lost in a sense that status with
respect to the Katigbak property when it
contracted its beneficial use to MHC, doubtless a
taxable person. Thus, the real estate tax
assessment of PhP 54,826,599.37 covering 1992
to 2002 over the subject Katigbak property is valid
insofar as said tax delinquency is concerned as
assessed over said property.

Taxable entity having beneficial use of

leased property liable for real property taxes
thereon
MHC ought to pay.
As we declared in Testate Estate of Concordia T.
Lim, the unpaid tax attaches to the property and is
chargeable against the taxable person who had
actual or beneficial use and possession of it
regardless of whether or not he is the owner. Of
the same tenor is the Courts holding in the
subsequent Manila
Electric
Company
v.
Barlis[25] and later inRepublic v. City of Kidapawan.
[26]
Actual use refers to the purpose for which the
property is principally or predominantly utilized by
the person in possession thereof.[27]
Being in possession and having actual use of the
Katigbak property since November 1991, MHC is
liable for the realty taxes assessed over the
Katigbak property from 1992 to 2002.
As a matter of law and contract, therefore, MHC
stands liable to pay the realty taxes due on the
Katigbak property. Considering, however, that
MHC has not been impleaded in the instant case,
the remedy of the City of Manila is to serve the
realty tax assessment covering the subject
Katigbak property to MHC and to pursue other
available remedies in case of nonpayment, for
said property cannot be levied upon as shall be
explained below.
3.

Third Core Issue: GSIS Properties Exempt

from Levy

OWNERSHIP OF POWER BARGES. POLAR shall own the Power

Barges and all the fixtures, fittings, machinery and equipment on the Site
used in connection with the Power Barges which have been supplied by it
at its own cost. POLAR shall operate, manage and maintain the Power
Barges for the purpose of converting Fuel of NAPOCOR into
electricity.52
It follows then that FELS cannot escape liability from the payment of
realty taxes by invoking its exemption in Section 234 (c) of R.A. No.
7160, which reads:
SECTION 234. Exemptions from Real Property Tax. The following are
exempted from payment of the real property tax:
xxx
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or
controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power; x x x
Indeed, the law states that the machinery must be actually, directly and
exclusively used by the government owned or controlled corporation;
nevertheless, petitioner FELS still cannot find solace in this provision
because Section 5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of the Lease Period,
subject to the supply of the necessary Fuel pursuant to Article 6 and to
the other provisions hereof, it will operate the Power Barges to convert
such Fuel into electricity in accordance with Part A of Article 7. 53
The mere undertaking of petitioner NPC under Section 10.1 of the
Agreement, that it shall be responsible for the payment of all real estate
taxes and assessments, does not justify the exemption. The privilege
granted to petitioner NPC cannot be extended to FELS. The covenant is
between FELS and NPC and does not bind a third person not privy
thereto, in this case, the Province of Batangas
NAPOCOR vs CBAA
Held:

FELS ENERGY vs PROVINCE OF BATANGAS

ISSUE:
Whether or not local assessor has the jurisdiction to entertain any request
for a review or readjustment.
CAssuming arguendo that the subject power barges are subject to real
estate tax, whether or not it should be NPC which should be made to pay
the same under the law.
HELD:
The appropriate forum where the aggrieved party may bring his appeal is
the LBAA as provided by law. It follows that the 60-day period for
making the appeal to LBAA runs without interruption.
If the taxpayer fails to appeal in due course, the right of the local
government to collect the taxes due with respect to the taxpayers
property becomes absolute upon the expiration of the period to appeal.
Also, failure of taxpayer to question the assessment in the LBAA renders
the assessment of the local assessor final, executory and demandable,
thus precluding the taxpayer from questioning the correctness of the
assessment, or from invoking any defense that would re open the
question of its liability on the merits.
We affirm the findings of the LBAA and CBAA that the owner of the
taxable properties is petitioner FELS, which in fine, is the entity being
taxed by the local government. As stipulated under Section 2.11, Article 2
of the Agreement:

The records show that NAPOCOR, no less, admits BPPCs ownership of

the machineries and equipment in the power plant.
Rather than ownership, NAPOCORs use of the
machineries and equipment is the critical issue, since its
claim under Sec. 234(c) of the LGC is premised
on actual, direct and exclusive use. To support this claim,
NAPOCOR characterizes the BOT Agreement as a mere
financing agreement where BPPC is the financier, while it
(NAPOCOR) is the actual user of the properties.
As in the fact of ownership, NAPOCORs assertion is
belied by the documented arrangements between the
contracting parties, viewed particularly from the prism of
the BOT law.
A reading of the provisions of the parties BOT Agreement
shows that it fully conforms to this concept. By its
express terms, BPPC has complete ownership both legal
and beneficial of the project, including the machineries
and equipment used, subject only to the transfer of
these properties without cost to NAPOCOR after the lapse
of the period agreed upon

Consistent with the BOT concept and as implemented,

BPPC the owner-manager-operator of the project is the
actual user of its machineries and equipment. BPPCs
ownership and use of the machineries and equipment

are actual, direct, and immediate, while NAPOCORs is

contingent and, at this stage of the BOT Agreement, not
sufficient to support its claim for tax exemption. Thus,
the CTA committed no reversible error in denying
NAPOCORs claim for tax exemption

NAPOCOR vs PROVINCE OF QUEZON & MUNICIPALITY OF

PAGBILAO
ISSUES:
(1) Can Petitioner file the protest against the real property tax
assessment?
(2) Can Petitioner claim exemption from the RPT given the BOT
arrangement with Mirant?
(3) Is payment under protest required before an appeal to the LBAA is
made?

HELD:
(1) NO. The two entities vested with personality to contest an assessment
are (a) the owner or (b) the person with legal interest in the property.
NPC is neither the owner nor the possessor/user of the subject
machineries even if it will acquire ownership of the plant at the end of 25
years. The Court said that legal interest should be an interest that is actual
and material, direct and immediate, not simply contingent or expectant.
While the Petitioner does indeed assume responsibility for the taxes due
on the power plant and its machineries, the tax liability referred to is the
liability arising from law that the local government unit can rightfully and
successfully enforce, not the contractual liability that is enforceable
between the parties to a contract. The local government units can neither
be compelled to recognize the protest of a tax assessment from the
Petitioner, an entity against whom it cannot enforce the tax liability.

(2) NO. To successfully claim exemption under Section 234 (c) of the
LGC, the claimant must prove two elements: a) the machineries and
equipment are actually, directly, and exclusively used by local water
districts and government-owned or controlled corporations; and b) the
local water districts and government-owned and controlled corporations
claiming exemption must be engaged in the supply and distribution of
water and/or the generation and transmission of electric power. Since
neither the Petitioner nor Mirant satisfies both requirements, the claim for
exemption must fall.
(3) YES. If a taxpayer disputes the reasonableness of an increase in a real
property tax assessment, he is required to "first pay the tax" under protest.
The case of Ty does not apply as it involved a situation where the
taxpayer was questioning the very authority and power of the assessor,
acting solely and independently, to impose the assessment and of the
treasurer to collect the tax. A claim for tax exemption, whether full or
partial, does not question the authority of local assessors to assess real
property tax.

MIAA VS CITY OF PASAY

Issues:
Whether or not MIAA is an instrumentality of the government and not a
government owned and controlled corporation and as such exempted
from tax.
Whether or not the land and buildings of MIAA are part of the public
dominion and thus cannot be the subject of levy and auction sale.
Held:
Under the Local
government code, government owned and controlled corporat
ions are notexempted from real estate tax. MIAA is not a

government owned and controlled corporation, for to become

one MIAA should either be a stock or non stock corporation. MIAA
is not a stock corporation for its capital is not divided into shares. It is not
a non stock corporation since it has no members. MIAA is an
instrumentality of the government vested with corporate powers and
government functions.
Under the civil code, property may either be under public dominion or
private ownership. Those under public dominion are owned by the State
and are utilized for public use, public service and for the development of
national wealth. The ports included in the public dominion pertain either
to seaports or airports. When properties under public dominion cease to
be for public use and service, they form part of the patrimonial property
of the State. The court held that the land and buildings of
MIAA are part of the public dominion. Since the airport is
devoted for public use, for the domestic and international
travel and transportation. Even if MIAA charge fees, this is for
support of its operation and for regulation and does not change the
character of the land and buildings. of MIAA as part of the public
dominion. As part of the public dominion the land and buildings of
MIAA are outside the commerce of man. To subject them to levy and
public auction is contrary to public policy. Unless the President
issues a proclamation withdrawing the airport land
and buildings from public use, these properties remain to be of public
dominion and are inalienable. As longas the land and buildings are for
public use the ownership is with the Republic of the Philippines.
CITY OF CEBU ASSESSOR vs BENEVOLA
SEC. 10. Actual use of Real Property as basis of
Assessment. Real Property shall be classified, valued and
assessed on the basis of its actual use regardless of where
located, whoever owns it, and whoever uses it. (Sec. 217,
R.A. 7160)

A. Actual use refers to the purpose for which the property is principally
or predominantly utilized by the person in possession of the
property. (Sec. 199 (b), R.A. 7160
Based on these provisions, these physicians holding offices or clinics in
CHHMAC, duly appointed or accredited by CHH, precisely fulfill and
carry out their roles in the hospitals services for its patients through the
CHHMAC. The fact that they are holding office in a separate building,
like at CHHMAC, does not take away the essence and nature of their
services vis--vis the over-all operation of the hospital and the benefits to
the hospitals patients. Given what the law requires, it is clear that
CHHMAC is an integral part of CHH.
These accredited physicians normally hold offices within the premises of
the hospital; in which case there is no question as to the conduct of their
business in the ambit of diagnosis, treatment and/or confinement of
patients. This was the case before 1998 and before CHHMAC was
built. Verily, their transfer to a more spacious and, perhaps, convenient
place and location for the benefit of the hospitals patients does not
remove them from being an integral part of the overall operation of the
hospital.
Conversely, it would have been different if CHHMAC was also open for
non-accredited physicians, that is, any medical practitioner, for then
respondent would be running a commercial building for lease only to
doctors which would indeed subject the CHHMAC to the commercial
level of 35% assessment.
The CHHMAC facility is definitely incidental to and reasonably
necessary for the operations of Chong Hua Hospital
Given our discussion above, the CHHMAC facility, while seemingly not
indispensable to the operations of CHH, is definitely incidental to and
reasonably necessary for the operations of the hospital. Considering the
legal requirements and the ramifications of the medical and clinical
operations that have been transferred to the CHHMAC from the CHH
main building in light of the accredited physicians transfer of offices in
1998 after the CHHMAC building was finished, it cannot be gainsaid that
the services done in CHHMAC are indispensable and essential to the
hospitals operation.
Charging rentals for the offices used by its accredited physicians
cannot be equated to a commercial venture
Respondents explanation on this point is well taken. First, CHHMAC is
only for its consultants or accredited doctors and medical
specialists. Second, the charging of rentals is a practical necessity: (1) to
recoup the investment cost of the building, (2) to cover the rentals for the
lot CHHMAC is built on, and (3) to maintain the CHHMAC building and
its facilities. Third, as correctly pointed out by respondent, it pays the

proper taxes for its rental income. And, fourth, if there is indeed any net
income from the lease income of CHHMAC, such does not inure to any
private or individual person as it will be used for respondents other
charitable projects.

Given the foregoing arguments, we fail to see any reason why the
CHHMAC building should be classified as commercial and be imposed
the commercial level of 35% as it is not operated primarily for profit but
as an integral part of CHH. The CHHMAC, with operations being
devoted for the benefit of the CHHs patients, should be accorded the 10%
special assessment
SEC. 215. Classes of Real Property for
Assessment Purposes.For purposes of
assessment, real property shall be classified
as residential, agricultural, commercial,
industrial, mineral, timberland or special.

himself at the expense of other. Although it is true that Pasig is the

locality sated in the transfer certificates of title of the subject properties,
both taxpayer and the municipality of Cainta averthat the metes and
bounds of the subject properties, as they are described in the certificates,
reveal that they are within Caintas boundaries. This only means that
there may be a conflict between the location as stated and the location as
technically described in the certificates. Mere reliance therefore on the
face of the certificates will not suffice as they can only be conclusive
evidence of the subject properties locations if both the stated and
described locations point to the same area. The Antipolo regional trial
court, wherein the boundary dispute case between Pasig and Cainta is
pending, would be able to best determine once and for all the precise
metes and bounds of both Pasigs and Caintas respective territorial
jurisdictions. The resolution of this dispute would necessarily ascertain
the extent and reach of each local governments authority, a prerequisite
in the proper exercise of their powers, one of which is the power of
taxation.

xxxx

SEC. 216. Special Classes of Real Property.All lands,

buildings, and other improvements thereon actually,
directly and exclusively used for hospitals, cultural or
scientific purposes, and those owned and used by local water
districts, and government-owned or controlled corporations
rendering essential public services in the supply and
distribution of water and/or generation and transmission of
electric power shall be classified as special.

STA. LUCIA vs CITY OF PASIG, MUNICIPALITY OF CAINTA

Local Government Code; real property tax; certificates of title as
evidence of location. (J. Abad)
While a certificate of title is conclusive as to its ownership and location,
this does not preclude the filing of an action for the very purpose of
attacking the statements therein. As the Court proclaimed in the case of
De Pedro vs Romasan Development Corporation: [W]hile certificates of
title are indefeasible, unassailable and binding against the whole world,
including the government itself, they do not create or vest title. They
merely confirm or record title already existing and vested. That cannot be
used to protect a usurper from the true owner, nor can they be used as a
shield for the commission of fraud; neither do they permit one to enrich