MARCOS VS SANDIGANBAYAN (273 SCRA 47)

Marcos vs Sandiganbayan
273 SCRA 47 [GR No. 120880 June 5, 1997]

Facts: On September 29, 1989, former President Ferdinand Marcos died in Honolulu,
Hawaii, USA. On June 27, 1990, a special tax audit team was created to conduct
investigations and examinations of the tax liabilities and obligations of the late
President, as well as that of his family, associates and “cronies.” Said audit team
concluded its investigation with a memorandum dated July 26, 1991. The investigation
disclosed that the Marcoses failed to file a written notice of death of the decdent, an
estate tax return, as well as several income tax returns covering the years 1982 to 1986
– all in violation of the National Internal Revenue Code (NIRC). Subsequently, criminal
charges were filed against Mrs. Marcos and the Commissioner of Internal Revenue
thereby caused the preparation and filing of the estate tax return of the late president.
and herein petitioner’s income tax return. On July 26, 1991, the BIR issued assessment
for the deficiency taxes of the Marcoses and the same were constructively delivered at
each last known addresses where their caretaker received the same. A notice to
taxpayer inviting Mrs. Marcos to a conference was also sent to her lawyer. Despite all
notices, no protest were received from the Marcoses causing the BIR’s assessment to
become final and a notice to levy on several real properties were sent to petitioner’s
office.

Issue: Whether or not the BIR has authority to collect by the summary remedy of
levying upon, and sale of real property of the decedent, estate tax deficiencies, without
the cognition and authority of the court sitting in a probate over the supposed will of the
deceased.

Held: Yes. The government has two ways of collecting the taxes in question. One, by
going after all the heirs and collecting from each one of them the amount of the tax
proportionate to the inheritance received. Another remedy, pursuant to the lien created
by section 315 of the tax code upon all the property and rights property belong to the
taxpayer for unpaid income tax, is by subjecting said property of the estate which is in
the hands of an heir or transferee to the payment of the tax due the estate.

From the foregoing it is discernible that the approval of the court, sitting in probate, or as
a settlement tribunal over the deceased is not a mandatory requirement in the collection
of estate taxes. It cannot therefore be argued that the tax bureau erred in proceeding
with the late president, on the ground that it was required to seek first the probate
court’s sanction. There is nothing in the tax code, and in the pertinent remedial laws that
implies the necessity of the probate or estate settlement court’s approval of the state’s
claim for estate taxes, before the same can be enforced and collected.

Such assessment may be protested administratively by filing a request for

reconsideration or reinvestigation in such form and manner as may be prescribed by
implementing regulations within 30 days from receipt of the assessment; otherwise, the
assessment shall become final and unappealable.

If the protest is denied in whole or in part, the individual, association or corporation

adversely affected by the decision on the protest may appeal to the Court of Tax
Appeals within 30 days from receipt of said decision; otherwise, the decision shall
become final, executory, and demandable.

The notices of levy upon real property were issued within the prescriptive period and in
accordance with the provisions of the present tax code. The deficiency tax assessment,
having already become final, executory and demandable, the same can now be
collected through the summary remedy of distraint or levy pursuant to section 205 of the
NIRC.

The omission to file an estate tax return, and the subsequent foreclosure to contest or
appeal the assessment made by the BIR is fatal to the petitioner’s cause, as under the
above cited provision, in case of failure to file a return, the tax may be assessed at any
time within 10 years after the omission, and any tax so assessed may be collected by
levy upon real property within 3 years following the assessment of the tax. Since the
estate tax assessment had become final and unappealable by the petitioner’s default as
regards protesting the validity of said assessment, there is now no reason why the BIR
cannot continue with the collection of the said tax. Any objection against the
assessment should have been pursued following the avenue paved in section 229 of
the NIRC or protest on assessment of internal revenue taxes.

In the absence of proof of any irregularities in the performance of the official duties, an
assessment will not be disturbed. Even an assessment based on estimates is prima
facie valid and lawful where it does not appear to have been arrived at arbitrarily or
capriciously.

REYES VS CA (320 SCRA 486)

Reyes vs Court of Appeals

320 SCRA 486 [GR No. 118233 December 10, 1999]

Facts: The Sangguniang Bayan of San Juan, Metro Manila implemented several tax
ordinances – 87, 91, 95, 100 and 101. On May 21, 1993, petitioners filed an appeal with
the Department of Justice assailing the constitutionality of these tax ordinances
allegedly because they were promulgated without previous public hearings thereby
constituting deprivation of property without due process of law. However the same was
dismissed.

Issue: Whether or not the assailed ordinances are valid.

Held: Yes. A municipal tax ordinance empowers a local government unit to impose
taxes. The power to tax is the most effective way or instrument to raise needed
revenues to finance and support the myriad activities of the local government units for
delivery of basic services essential to the promotion of general welfare and
enhancement of peace, progress and prosperity of the people. Consequently, any delay
in implementing tax measures would be to the detriment of the public. It is for this
reason that protest over tax ordinance are required to be done within certain time
frames. In the instant case, it is our view that the failure of petitioners to appeal to the
secretary of justice within 30 days as required by section 187 of Republic Act No. 7160
is fatal to their cause.

Petitioners have not proved in the case before us that the Sangguniang Bayan of San
Juan failed to conduct the required public hearings before the enactment of Ordinances
87, 95, 91, 100, and 101. Although the Sanggunian had the control of records or better
means of proof regarding the facts alleged, petitioners are not relieved from the burden
of proving their averments. Proof that public hearings were not held falls on the
petitioner’s shoulders. For failing to discharge that burden, their petition was properly
dismissed.

For the purpose of securing certainty where doubt would be intolerable, it is a general
rule that the regularity of the enactment of an officially promulgated statute or ordinance
may not be impeached by parol evidence or oral testimony either of individual officers
and members, or of strangers who may be interested in nullifying legislative action. This
rules supplements the presumption in favor of the regularity of official conduct which we
have upheld repeatedly, absent a clear showing to the contrary.

BULACAN VS CA (299 SCRA 442)

The Province of Bulacan vs Court of Appeals

299 SCRA 442 [GR No. 126232 November 27, 1998]

Facts: On June 26, 1992, the Sangguniang Panlalawigan passed provincial ordinance
no. 3 known as “Ordinance Enacting The Revenue Code Of The Bulacan Province”
which was to take effect on July 1, 1992 Section 21 of the ordinance provides as
follows:

Sec 21. Imposition of Tax – There is hereby levied and collected a tax of 10% of the fair
market value in the locality per cubic meter of ordinary stores, sand, gravel, earth and
other quarry resources, such but not limited to marble, granite, volcanic cinders, basalt,
tuff and rock phosphate, extracted from public lands or from beds of seas, lakes, rivers,
streams, creeks and other public waters within its territorial jurisdiction.

Pursuant thereto, the provincial treasurer of Bulacan in a letter dated November 11,
1992, assessed private respondent Republic Cement Corporation Php2,524,692.13 for
extracting lime stones, shale and silica from several parcels of private land in the
province during the third quarter of 1992 until the second quarter of 1993. Believing that
the province, on the bases of the above-said ordinance, had no authority to impose
taxes on quarry resources extracted from private lands, Republic Cement formally
contested the same on December 23, 1993. The same was, however, denied by the
provincial treasurer on January 17, 1994. Republic Cement, consequently filed a
petition for declaratory relief with the Regional Trial Court (RTC) of Bulacan on February
14, 1993. The province filed a motion to dismiss Republic Cement’s petition which was
granted by the trial court on May 13, 1993, which ruled that declaratory relief was
improper, allegedly because a breach of the ordinance had been committed by Republic
Cement.

Issue: Whether or not provincial ordinance no. 3 is valid to allow the petitioner to
impose taxes on ordinary stones, sand, gravel, earth, and other quarry resources.

Held: No. On the basis of section 134 of Republic Act No. 7169, the local government
code, ruled that a province was empowered to impose taxes only on sand, gravel, and
other quarry resources extracted from public lands, its authority to tax being limited to
by said provision only to those taxes, fees and charges provided in article 1, chapter 2,
title I of Book II of the local government code.

As correctly pointed out by petitioners, section 186 of the same code allows petitioners
to levy taxes other than those specifically enumerated under the code, subject to the
conditions specified therein.

The tax imposed by the province of Bulacan is an excise tax, being a tax upon the
performance, carrying or an excise of an activity. Under section 133 of the local
government code, a province may not, therefore, levy excise taxes on articles already
taxed by the National Internal Revenue Code (NIRC).

The NIRC levies a tax on all quarry resources, regardless of origin, whether extracted
from public or private land. Thus, a province may not ordinarily impose taxes on stones,
sand,gravel, earth and other quarry resources, as the same are already taxed under
NIRC. The province can, however, impose a tax on stones, sand, gravel, earth and
other quarry resources extracted from public lands because it is expressly empowered
to do so under the local government code. As to stones, sand, gravel, earth and other
quarry resources extracted from private land, however it may not do so, because of the
limitation provided by section 133 of the code in relation to section 151 of the NIRC.

Given the above disquisition, petitioners cannot claim that the appellate court unjustly
deprived them of the power to create their sources of revenue, their assessment of
taxes against Republic Cement being ultra vires, traversing as it does the limitations set
by the local government code.

Furthermore, section 21 of provincial ordinance no. 3 is practically only a reproduction

of section 138 of the local government code. A cursory reading of both could show that
both refer to ordinary sand, gravel, stone, earth and other quarry resources extracted
from public lands. Even if we disregard the limitation set by section 133 of the local
government code, petitioners, may not impose taxes on stone, sand, gravel, earth and
other quarry resources extracted from private lands. Petitioners may not involve the
regalian doctrine to extend coverage of their ordinance to quarry resources extracted
from private lands, for taxes, being burdens, are not to be presumed beyond what the
applicable statute expressly and clearly declares, tax statutes being construed
strictissimi juris against the government.

PALMA VS MALANGAS (413 SCRA 572)

Palma Development Corporation vs Municipality of Malangas

413 SCRA 572 [GR No. 152492 October 16, 2003]

Facts: Petitioner Palma Development Corporation is engaged in milling and selling rice
and corn to wholesalers in Zamboanga City. It uses the municipal port of Malangas,
Zamboanga del Sur as transshipment port for its goods. The port, as well as the
surrounding roads leading to it, belong to and are maintained by the Municipality of
Malangas, Zamboanga del Sur. On January 16, 1994, the municipality passed municipal
revenue code no. 09 series of 1993, which was subsequently approved by the
Sangguniang Panlalawigan of Zamboanga del Sur in resolution no. 1330 dated August
4, 1994. Section 56.01 of the ordinance reads as follows:

Sec 56.01 Imposition of Fees. There shall be collected service fee for its use of the
municipal roads or streets leading to the wharf and to any point along the shorelines
within the jurisdiction of the municipality and for police surveillance on all goods and all
equipment harboured or sheltered in the premises of the wharf and other within the
jurisdiction of the municipality [xxx]

Accordingly, the service fees imposed by section 56.01 of the ordinance was paid by
petitioner under protest. It contended that under Republic Act No. 7160, otherwise
known as the local government code of 1991, municipal governments did not have
authority to tax goods and vehicles that passed through their jurisdictions. Thereafter,
before the Regional Trial Court of Pagadian City, petitioner filed against the Municipality
of Malangas on November 29, 1995, an action for declaratory relief assailing the validity
of section 56.01 of the municipal ordinance.

Issue: Whether or not the imposition of service fee is proper and valid.

Held: No. By the express language of section 153 and 155 RA 7160, local government
units, through their sanggunian, may prescribe the terms and conditions for the
imposition of toll fees or charges for the use of any public road, pier or wharf funded and
constructed by them. A service fee imposed on vehicles using municipal roads leading
to the wharf is thus valid, however, section 133 (e) of RA 7160 prohibits the imposition,
in the guise of wharfage fees — as well as other taxes or charges in any form
whatsoever on goods or merchandise. It is therefore irrelevant if the fee imposed are
actually for police surveillance on the goods, because any other form of imposition on
goods passing through the territorial jurisdiction of the municipality is clearly prohibited
by section 133 (e).
PILILIA VS PETRON (198 SCRA 82)

Philippine Petroleum Corporation vs Municipality of Pililla Rizal

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

Facts: Philippine Petroleum Corporation is a business enterprise engaged in the

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

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

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

The exercise by local governments of the power to tax is ordained by the present
constitution. To allow the continuous effectivity of the prohibition set forth in PC no. 26-
73 would be tantamount to restricting their power to tax by mere administrative
issuances. Under section 5, article X of the 1987 constitution, only guidelines and
limitations that may be established by congress can define and limit such power of local
governments.
The storage permit fee being imposed by Pilillia’s tax ordinance is a fee for the
installation and keeping in storage of any flammable, combustible or explosive
substances. In as much as said storage makes use of tanks owned not by the
Municipality of Pilillia but by petitioner PPC, same is obviously not a charge for any
service rendered by the municipality as what is envisioned in section 37 of the same
code.

FIRST HOLDINGS CO. VS BATANGAS CITY (300 SCRA 661)

First Philippine Industrial Corporation vs Court of Appeals

300 SCRA 661 [GR No. 125948 December 29, 1998]

Facts: Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as
amended, to contract, install and operate oil pipelines. The original pipeline concession
was granted in 1967 and renewed by the Energy Regulatory Board in 1992. Some time
in January 1995, petitioner applied for a mayor’s permit with the office of the mayor of
Batangas City. However, before the mayor’s permit could be issued, the respondent city
treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal
year 1993 pursuant to the local government code. The respondent city treasurer
assessed a business tax on the petitioner amounting to Php956,076.04 payable in four
installments based on the gross receipts for products pumped at GPS-1 for the fiscal
year 1993 which amounted to Php181,151. In order not to hamper its operations,
petitioner paid the tax under protest in the amount of Php239,019.01 for the first quarter
of 1993.

Issue: Whether or not petitioner is exempt from paying the alleged business tax as a
common carrier.

Held: Yes. The definition of common carrier in the civil code makes no distinctions as to
the means of transporting, as long as it’s by land, water or air. It does not provide that
the transportation of the passengers or goods should be by motor vehicle. In fact, in the
United States, oil pipe line operations are considered common carriers.

Under the petroleum act of the Philippines (RA 387), petitioner is considered a common
carrier.

In BIR Ruling no. 069-83, the Bureau of Internal Revenue otherwise considers the
petitioners as a common carrier.

From the foregoing disquisitions, there is no doubt that petitioner is a common carrier
and, therefore, exempt from the business tax as provided for in section 133 (j) of the
local government code, to wit:
Sec 133 Common limitations on the taxing power of local government units – Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities and barangays shall not extend to the levy of the following:

xxx

j. Taxes on 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.

It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent
duplication of the so-called common carriers’s tax.

Petitioner is already paying 3% common carrier’s tax on its gross sales/earnings under
the NIRC. To tax petitioner again on its gross receipts in its transportation of petroleum
business would defeat the purpose of the local government code.

NAIA VS PARAÑAQUE (GR NO. 155650 JULY 20, 2006)

Manila International Airport Authority vs Court of Appeals

GR No. 155650 July 20, 2006

Facts: Petitioner Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA) complex in Parañaque City under Executive Order
No. 9303, otherwise known as the revised charter of the MIAA. EO 903 was issued on
July 21, 1983 by then President Ferdinand E. Marcos. Subsequently EO 909 and 298
amended the MIAA charter as operator of the international operator, MIAA administers
the land, improvements, and equipments within the NAIA complex. The MIAA charter
transferred to MIAA approximately 600 hectares of land, including the runways and
buildings then under the Bureau of Air Transportation. The MIAA charter provides that
no portion of the land transferred to MIAA shall be disposed of through sale or any other
mode unless specifically approved by the President of the Philippines. On March 21,
1997, the Office of the Government Corporate Counsel issued opinion no. 061. The
OGCC opined that the local government code of 1991 withdraw the exemption from real
estate tax granted to MIAA under section 21 of the MIAA charter. Thus, MIAA negotiated
with respondent city of Parañaque to pay the real estate tax imposed by the city. MIAA
then paid some of the real estate tax already due. On July 17, 2001, the City of
Parañaque, through its city treasurer issued notices of levy and warrants of levy on the
airport lands and buildings. The mayor of the city of Parañaque threatened to sell at
public auction the airport lands and buildings should MIAA fail to pay the real estate tax
deliquency. MIAA thus sought clarification of OGCC opinion no. 061. On August 9,
2001, the OGCC issued opinion no. 147 clarifying OGCC opinion no. 061. The OGCC
pointed out that section 206 of the local government code requires persons exempt from
real estate tax to show proof of exemption. The OGCC opined that section 21 of the
MIAA charter is the proof that MIAA is exempt from real estate tax.

Issue: Whether or not the airport lands and buildings are exempt from real estate tax.

Held: Yes. MIAA is a government instrumentality vested with corporate powers to

perform efficiently its governmental functions. MIAA is like any other government
instrumentality, the only difference is that MIAA is vested with corporate powers. Section
21 (10) of the introductory provisions of the administrative code defines a government
instrumentality as follows:

Sec 2 General terms defined

xxx

10.) Instrumentality refers to any agency of the national government, not integrated
within the department framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter.

When the law vests in a government instrumentality corporate powers, the

instrumentality does not become a corporation. Unless the government instrumentality
is organized as a stock or non-stock corporation, it remains a government
instrumentality exercising not only governmental but also corporate powers. Thus, MIAA
exercises the governmental powers of eminent domain, police authority and the surging
of fees and charges. At the same time, MIAA exercises all the powers of a corporation
under the corporation law, in so far as these powers are not inconsistent with the
provisions of this executive order.

A government instrumentality like MIAA falls under section 133 (o) of the local
government code, which states:

Sec 133 Common limitations on the taxing powers of the local government
units – Unless otherwise provided herein, the exercise of the taxing power of the
provinces, cities, municipalities and barangays shall not extend to the levy of the
following:

xxx

o.) Taxes, fees or charges of any kind on the national government, its agencies and
instrumentalities and local government units.

Section 133 (0) recognizes the basic principles that local governments cannot tax the
national government, which historically, merely delegated to the local governments the
power to tax. While the 1987 constitution now includes taxation as one of the powers of
the local governments, local governments may only exercise such powers subject to
such guidelines and limitations as the congress may provide.

BASCO VS PAGCOR (197 SCRA 52)

Basco vs Philippine Amusements and Gaming Corporation

197 SCRA 52 [GR No. 91649 May 14, 1991]

Facts: A TV ad proudly announces: “The New PAGCOR – Responding Through

Responsible Gaming.” But the petitioners think otherwise, that is why, they filed the
instant petition seeking to annul the PAGCOR charter – PD 1869, because it is allegedly
contrary to morals, public policy and order, and because –

a. It constitutes a waiver of a right prejudicial to a third person with a right recognized by

law. It waived the Manila city government’s right to impose taxes and license fees,
which is recognized by law;

b. For the same reason stated in the immediately preceeding paragraph, the law has
intruded into the local government’s right to impose local taxes and license fees. This, in
contravention of the constitutionally enshrined principle of local autonomy;

c. It violates the equal protection clause of the constitution in that it legalizes PAGCOR –
conducted gambling, while most other forms of gambling are outlawed, together with
prostitution, drug trafficking and other vices;

d. It violates the avowed trend of the Cory government away from the monopolistic and
crony economy, and toward free enterprise and privatization.

Issue: Whether or not the city of Manila may levy taxes on PAGCOR.

Held: No. The city of Manila, being a mere municipal corporation has no inherent right
to impose taxes. Thus, the charter or statute must plainly show an intent to confer that
power or the municipality cannot assume it. Its power to tax therefore must always yield
to a legislative act which is superior having been passed upon by the state itself which
has the inherent power to tax.

The city of Manila’s power to impose license fees on gambling has long been revoked.
As early as 1975, the power of local governments to regulate gambling thru the grant of
“franchise, licenses or permits” was withdrawn by PD no. 771 and was vested
exclusively on the national government.

Therefore, only the national government has the power to issue “license or permits” for
the operation of gambling. Necessarily the power to demand or collect license fees
which is a consequence of the issuance of “licenses or permits” is no longer vested in
the City of Manila.
Local governments has no power to tax instrumentalities of the National Government.
PAGCOR is a government owned or controlled corporation with an original charter, PD
1869. All of its shares of stocks are owned by the national government.

The power of the local government to “impose taxes and fees” is always subject to
“limitations” which congress may provide by law. Since PD 1869 remains an operative
law until amended, repealed or revoked, its exemption clause remains as an exception
to the exercise of the power of local governments to impose taxes and fees. It cannot
therefore be violative but rather is consistent with the principle of local autonomy.

Besides, the principle of local autonomy under the 1987 constitution simply means
“decentralization.” It does not make local governments sovereign within the state or an
“imperium in imperio.”

What is settled is that the matter of regulating; taxing or otherwise dealing with gambling
in a state concern and hence, it is the sole prerogative of the state to retain it or
delegate it to local governments.

CEBU VS MACTAN (261 SCRA 667)

Mactan Cebu International Airport Authority vs City of Cebu

261 SCRA 667 [GR No. 120082 September 11, 1996]

Facts: Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by
virtue of Republic Act No. 6958 mandated to principally undertake the economical,
efficient and effective control, management and supervision of the MCIAA 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. Since the time of its creation, petitioners MCIAA
enjoyed the privilege of exemption 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 imposed by
the national government or any of its political subdivisions, agencies and
instrumentalities.

On October 11, 1994, however, Mr. Eustaquio B. Cesa, demanded payment for realty
taxes on several parcels of land belonging to the petitioner, located at Barrio Apas and
Barrio Kasambagan, Lahug, Cebu City, in the total amount of Php2,229,078.79.
Petitioner objected to such demand for payment as baseless and unjustified, claiming in
its favor the aforecited in section 14 of RA 6958 which exempts it from payment of realty
taxes. It was also asserted that it is an instrumentality of the government performing
governmental functions, citing section 133 of the local government code of 1991 which
puts limitations on the taxing power of local government code.

Issue: Whether or not MCIAA is exempt from realty taxes.

Held: Yes. As a general rule, the power to tax is an incident of sovereignty and is
unlimited in its range, acknowledge in its very nature no limits, so that security against
its abuse is to be found only in the responsibility of the legislature which imposes the tax
on constituency who are to pay it. Nevertheless, effective limitations thereon may be
imposed by the people through their constitutions. Our constitution, for instance,
provides that the rule of taxation shall be uniform and equitable and congress shall
evolve a progressive system of taxation. So potent indeed is the power that it was once
opined that the power to tax involves the power to destroy. Verily, taxation is a
destructive power which interferes with the personal and property rights of the people
and takes from them a portion of their property for the support of the government.
Accordingly, tax statutes must be construed strictly against the government liberally in
favor of the taxpayer. But since taxes are what we pay for civilized society, as are the
life blood of the nation, the law frowns against exemptions from taxation and statutes
granting tax exemptions are thus construed strictissimi juris against the taxpayer and
liberally in favor of the taxing authority. A claim of exemption from tax payments must be
clearly shown and based on language in the law too plain to be mistaken. Elsewise
stated, taxation is the rule, exemption there from is the exception. However, if the
grantee of the exemption is a political subdivision or instrumentality, the rigid rule of
construction 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 course of
taxation.

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. 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 legislative intent to make it a taxable person subject to all taxes
except real property tax.

Finally, even if the petitioner was originally not a taxable person for purposes of real
property tax, in light of the foregoing disquisitions, it had already become, even if it be
conceded to be an agency or instrumentality of the government, a taxable person for
such purpose in view of the withdrawal in the last paragraph of section 234 of
exemptions from the payment of real property taxes, which, as earlier adverted to,
applies to the petitioner.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical

persons, including government-owned or controlled corporations, section 193 of the
LGC prescribes the general rule, viz, they are withdrawn upon the effectivity of the LGC,
except those granted to local water districts, cooperatives duly registered under RA
6938, non-stock and non-profit hospitals and educational institutions, and unless
otherwise provided in the LGC. The latter proviso could refer to section 234 which
enumerates the properties exempt from real property tax. But the last paragraph of
section 234 further qualifies the retention of the exemption in so far as real property
taxes are concerned by limiting the retention only to those enumerated therein; all
others not included in the enumeration lost the privilege upon the effectivity of the LGC.
Morever, as to even on real property owned by 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 a
taxable person for consideration or otherwise.

LRT VS CITY OF MANILA (342 SCRA 692)

Light Rail Transit Authority vs Central Board of Assessment Appeals

342 SCRA 692 [GR No. 127316 October 12, 2000]

Facts: The LRTA is a government-owned and controlled corporation created and

organized under EO 603, dated July 12, 1980 primarily responsible for the construction,
operation, maintenance and/or lease of light rail transit system in the Philippines, giving
due regard to the reasonable requirements of the public transportation of the country.
LRTA acquired real properties, constructed structional improvements, such as buildings,
carriage ways, passenger terminal stations and installed various kinds of machinery and
equipment and facilities for the purpose of its operations. For an effective maintenance,
operation and management, it entered into a contract of management with the
MERALCO transit organization in which the latter undertook to manage, operate and
maintain the light rail transit system owned by the LRTA subject to the specific
stipulations contained in said agreement, including payments of a management fee and
real property taxes. That it commenced its operations in 1984, and that sometime that
year, respondent-appellee city of assessor of manila assessed the real properties of
petitioner consisting of lands, buildings, carriage ways and passenger terminal stations
machinery and equipment which he considered real property under the real property tax
code, to commence with the year 1985. That petitioner paid its real property taxes on all
its real property holdings, except the carriage ways and passenger terminal stations
including the land where it constructed on the ground that the same are not real
properties under the real property tax code, and if the same are real property, these are
for public use/purpose, therefore exempt from realty taxation which claim was denied by
the respondent-appellee city assessor of Manila.

Issue: Whether or not petitioner’s carriage ways and passenger terminal stations are
subject to real property tax.

Held: No. Under the real property tax code, real property owned by the Republic of the
Philippines or any of its political subdivisions and any government-owned or controlled
corporation so exempt by its charter, provided, however, that this exemption shall not
apply to real property of the above named entities the beneficial use of which has been
granted, for consideration or otherwise, to a taxable person.

EO 603, the charter of petitioner, does not provide for any real estate tax exemption in
its favor. Its exemption is limited to direct and indirect taxes, duties or fees in connection
with the importation of equipment not locally available.
Even granting that the national government indeed owns the carriage ways and terminal
stations, the exemption would not apply because their beneficial use has been granted
to petitioner, a taxable entity.

Taxation is the rule and exemption is the exception. Any claim for tax exemption is
strictly construed against the claimant. LRTA has not shown its eligibility for exemption;
hence, it’s subject to tax.

BUTUAN VS LTO (322 SCRA 805)

Land Transportation Office vs City of Butuan

322 SCRA 805 [GR No. 131512 January 20, 2000]

Facts: Respondent city of Butuan asserts that one of the salient provisions introduced
by the local government code is in the area of local taxation which allows LGUs to
collect registration fees or charges along with, its view, the corresponding issuance of all
kinds of licenses or permits for the driving of tricycles. Relying on the provisions of the
local government code, the sangguniang panlungsod of Butuan, on August 16, 1992
passed SP Ordinance no. 916-42 entitled “An Ordinance Regulating The Operation Of
Tricycles-For-Hire, Providing Mechanism For The Issuance of Franchise, Registration
and Permit and Imposing Penalties For Violations Thereof and for Other Purposes.” The
ordinance provided for among other things, the payment of franchise fees for the grant
of the franchise of tricyles-for-hire, fees for the registration of the vehicle, and fees for
the issuance of a permit for the driving thereof. Petitioner LTO explains that one of the
functions of the national government that, indeed, has been transferred to local
government units is the franchising authority over tricycles-for-hire of the land
transportation franchising and regulatory board but not, it asseverates, the authority of
LTO to register all motor vehicles and to issue qualified persons of licenses to drive
such vehicles.

Issue: Whether or not respondent city of Butuan may issue license and permit and
collect fees for the operation of tricycle.

Held: No. LGUs indubitably now have the power to regulate the operation of tricycles-
for-hire and to grant franchises for the operation thereof. “To regulate” means to fix,
establish or control; to adjust by rule, method or established made; to direct by rule or
restriction; or to subject to governing principles of law. A franchise is defined to be a
special privilege to do certain things conferred by government on an individual or
corporation and which does not belong to citizens generally of common right. On the
other hand, to register means to record formally and exactly, to enroll, or to enter
precisely in a list or the like, and a driver’s license is the certificate or license issued by
the government which authorizes a person to operate a motor vehicle. The devolution of
the functions of the DOTC, performed by the LTFRB, to the LGUs, as so aptly observed
by the solicitor general is aimed at curbing the alarming in on case of accidents in
national highways involving tricycles. It has been the perception that local governments
are in good position to achieve the end desired by the law making body because of their
proximity to the situation that can enable them to address that serious concern better
than the national government.

It may not be amiss to state nevertheless, that under article 458 (a) [3-VI] of the local
government code, the power of the LGUs to regulate the operation of tricycles and to
grant franchises for the operation thereof is still subject to the guidelines prescribed by
the DOTC. In compliance therewith, the Department of Transportation and
Communications (DOTC) issued guidelines to implement the devolution of LTFRBs
franchising authority over tricycles-for-hire to local government units pursuant to the
local government code.

The reliance made by the respondents on the broad taxing power of local government
units, specifically under section 133 of the local government code, is tangential. Police
power and taxation, along with eminent domain, are inherent powers of sovereignty
which the state might share with local government units by delegation or given under a
constitutional or a statutory fiat. All these inherent powers are for a public purpose and
legislative in nature but the similarities just about end there. The basic aim of police
power is public good and welfare. Taxation, in its case, focuses on the power of
government to raise revenue in order to support its existence and carry out its legitimate
objectives. Although correlative to each other in many respects, the grant of one does
not necessarily carry with it the grant of the other. The two powers are by tradition and
jurisprudence separate and distinct powers, varying in their respecting concepts,
character, scopes, and limitations. To construe the tax provisions of section 133 (1)
indistinctively would result in the repeal to that extent of LTOs regulatory power which
evidently has not been intended. If it were otherwise, the law could have just said so in
section 447 and 458 of Book III of the local government code in the same manner that
the specific devolution of LTFRBs power on franchising of tricycles has been provided.
Repeal by implication is not favored. The power over tricycles granted under section
458 (8) (3) (VI) of the local government code to LGUs is the power to regulate their
operation and to grant franchises for the operation thereof. The government’s
exclusionary clause contained in the tax provisions of section 133 (1) of the local
government code must be held to have had the effect of withdrawing the express
powers of LTO to cause the registration of all motor vehicles and the issuance of license
for the driving thereof. These functions of the LTO are essentially regulatory in nature,
exercised pursuant to the police power of the state, whose basic objectives are to
achieve road safety by insuring the road worthiness of these motor vehicles and the
competence of drivers prescribed by RA 4136. Not insignificant is the rule that a statute
must not be construed in isolation but must be taken in harmony with the extent body of
laws.

MISAMIS VS CAGAYAN DE ORO (181 SCRA 38)

The Province of Misamis Oriental vs Cagayan Electric Power and Light Company
181 SCRA 38 [GR No. L-45355 January 12, 1990]
Facts: Cagayan Electric Power and Light Company Inc. was granted a franchise on
June 17, 1961 under Republic Act No. 3247 to install, operate and maintain an electric
light, heat and power system in the City of Cagayan de Oro and its suburbs. Said
franchise was amended on June 21, 1963 by RA 3570 which added the municipalities of
Tagoloan and Opol to CEPALCO’s sphere of operation, and was further amended on
August 4, 1969, by RA 6020 which extended its field of operation to the municipalities of
Villanueva and Jasaan. Pursuant thereto, the province of Misamis Oriental enacted
provincial revenue ordinance no. 9 whose section 12 reads:

Sec 12 Franchise tax – There shall be levied, collected and paid on businesses
enjoying franchise tax of 1/2 of 1% of their gross annual receipts for the preceding
calendar year realized within the territorial jurisdiction of the province of Misamis
Oriental.

The provincial treasurer of Misamis Oriental demanded payment of the provincial

franchise tax from CEPALCO. The company refused to pay, alleging that it is exempt
from all taxes except the franchise tax required by RA 6020. Nevertheless, in view of the
opinion rendered by the provincial fiscal, upon CEPALCO’s request, upholding the
legality of the revenue ordinance, CEPALCO paid under protest on May 27, 1974 the
sum of Php4,276.28 and appealed the fiscal’s ruling to the secretary of justice who
reversed it and ruled in favor of CEPALCO.

Issue: Whether or not CEPALCO is exempt from the payment of franchise tax.

Held: Yes. RA 3247, 3570 and 6020 are special laws applicable only to CEPALCO,
while PD 231 is a general tax law. The presumption is that the special statutes are
exceptions to the general law because they pertain to a special charter granted to meet
a particular set of conditions and circumstances. The franchise of respondent
CEPALCO expressly exempts it from payment of “all taxes of whatever authority” except
the 3% tax on its gross income.

This court pointed out that such exemption is part of the inducement for the acceptance
of the franchise and the rendition of public service by the grantee. As a charter is in the
nature of a private contract, the imposition of another franchise tax on the corporation
by the local authority would constitute an impairment of the contract between the
government and the corporation.

Local tax regulation no. 3-75 issued by the secretary of finance on June 26, 1976, has
made it crystal clear that the franchise tax provided in the local tax code may only be
imposed on companies with franchises that do not contain the exempting clause. Thus it
provides:

The franchise tax imposed under local tax ordinance pursuant to section 9 of the local
tax code, as amended shall be collected from businesses holding franchise but not from
business establishments whose franchise contain the “in lieu of all taxes proviso.”
REYES VS SAN PABLO CITY (305 SCRA 353)

City Government of San Pablo, Laguna vs Reyes

305 SCRA 353 [GR No. 127708 March 25, 1999]

Facts: Act 3648 granted the Escudero Electric Service Company a legislative franchise
to maintain and operate an electric light and power system in the city of San Pablo and
nearby municipalities. Section 10 of said act provides:

In consideration of the franchise and rights hereby granted, the grantee shall pay unto
the municipal treasury of each municipality in which it is supplying electric current to the
public under this franchise, a tax equal to two percentum of the gross earning from
electric current sold or supplied under this franchise in each said municipality. Said tax
shall be due and payable quarterly and shall be in lieu of any and all taxes of any kind
nature or description levied, established or collected by any authority whatsoever,
municipal, provincial or insular, now or in the future, or its pole wires, insulator,
switches, transformers, and structures, installations, conductors and accessories placed
in and over and under all public property, including public streets and highways,
provincial roads, bridges and public squares, and on its franchises, rights, privileges,
receipts, revenues and profits from which taxes the grantee is hereby expressly
exempted.

Escudero’s franchise was transferred to the plaintiff MERALCO under RA 2340.

On October 5, 1992, the sangguniang panlungsod of San Pablo City enacted ordinance
no. 56 otherwise known as the Revenue Code of the City of San Pablo. Pursuant to sec
2.09 article D of the said ordinance, the petitioner city treasurer sent to private
respondent a letter demanding payment of the aforesaid franchise tax.

Issue: Whether or not the city of San Pablo may impose a local franchise tax to
MERALCO.

Held: Yes. A general law cannot be construed to have repealed a special law by mere
implication unless the intent to repeal or alter is manifest and it must be convincingly
demonstrated that the two laws are so clearly repugnant and patently inconsistent that
they cannot co-exist.

It is our view that petitions correctly rely on the provisions of sections 137 and 193 of the
LGC to support their position that MERALCO’s tax exemption has been withdrawn. The
explicit language of section 137 which authorizes the province to impose franchise tax
not withstanding any exemption granted by law or other special law is all encompassing
and clear. The franchise is imposable despite any exemption enjoyed under special law.

Sec 193 buttresses the withdrawal of extant tax exemption privileges. By stating that
unless otherwise provided in this code, tax exemptions or incentives granted to or
presently enjoyed all persons whether natural or juridical, including GOCCs except: 1.)
local water districts; 2.) Cooperatives duly registered under RA 6938; 3.) Non-stock and
non-profit hospitals and education institutions, are withdrawn upon the effectivity of this
code, the obvious import is to limit the exemptions to the 3 enumerated entities. It is a
basic precept of statutory construction that the express mention of one person, thing,
act or consequences excludes all others as expressed in the familiar maxim expressio
unius est exclusio alterus. In the absence of any provision of the code to the contrary,
and we find no other provision in point, any existing tax exemption or incentive enjoyed
by the MERALCO under the existing law was clearly intended to be withdrawn.

Reading together section 193 and 137 of the LGC conclude that under the LGC, the
local government unit may now impose a local tax at a rate not excluding 50% of 1% of
the gross annual receipts for the preceding calendar year based on the incoming
receipts realized within its territorial jurisdiction. The legislative purpose to withdraw tax
privilege only enjoy and an existing law or charter is clearly manifested by the language
used in sections 137 and 193 categorically withdrawing such exemption subject only to
the exceptions enumerated. Since it would be not only tedious and impractical to
attempt to enumerate all the existing statutes providing for special tax exemptions or
privileges, the LGC provided for an express, albeit general withdrawal of such
exemptions or privileges. No more unequivocal language could have been used.

It is true that the phrase “in lieu of all taxes” found in special franchises has been held in
several cases to exempt the franchise holder from payment of tax on its corporate
franchise imposed of the internal revenue code, as the charter is in the nature of a
private contract and the exemption is part of the inducement for the acceptance of the
franchise, and that the imposition of another franchise tax by the local authority would
constitute an impairment of contract between the government and the corporation. But
these “magic words” contained in the phrase “shall be in lieu of all taxes” have to give
way to the premptory language of the LGC specifically providing for the withdrawal of
such exemption privileges.

Meralco vs. Province of Laguna, 306 SCRA 750

Facts:
Certain municipalities of the province of Laguna issued resolution granting franchise infavor of
petitioner MERALCO for the supply of electric light, heat and power within the concernedareas. On 12
September 1991, the Local Government Code of 1991 was enacted to take effecton 01 January
1992 enjoining local government units to create their own sources of revenue andto levy taxes, fees
and charges, subject to the limitations expressed therein, consistent with thebasic policy of local
autonomy. Hence, franchise tax was enacted. On the basis of this ordinance,respondent Provincial
Treasurer sent a demand letter to MERALCO for the corresponding taxpayment. MERALCO paid the
tax under protest. A formal claim for refund was thereafter sent byMERALCO to the Provincial
Treasurer of Laguna claiming that the franchise tax it had paid andcontinued to pay to the National
Government pursuant to P.D. 551 (
LOWERING THE COST TOCONSUMERS OF ELECTRICITY BY REDUCING THE FRANCHISE
TAX PAYABLE BY ELECTRICFRANCHISE HOLDERS AND THE TARIFF ON FUEL OILS FOR
THE GENERATION OF ELECTRICPOWER BY PUBLIC UTILITIES)
 already included the franchise tax imposed by the Provincial TaxOrdinance. The claim for refund of
petitioner was denied.

Issue:
Whether franchise tax ordinance is violative of the non-impairment clause of theConstitution.
Ruling:
No. Tax exemptions, as granted by P.D. 551, of this kind may not be revoked withoutimpairing the
obligations of contracts. These contractual tax exemptions, however, are not to beconfused with tax
exemptions granted under franchises. A franchise partakes of the nature of agrant which is
beyond the purview of the non-impairment clause of the Constitution. While theCourt has referred to
tax exemptions contained in special franchises as being in the natureof
contracts
and a part of the inducement for carrying on the franchise, these exemptions are farfrom being strictly
contractual in nature

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. (PLDT)

vs.
CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as City Treasurer of
Davao

GR. No. 143867

March 25, 2003

____________________________
TAX EXEMPTIONS vs. TAX EXCLUSION; “IN LIEU OF ALL TAXES” PROVISION
____________________________

Facts:

PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise
tax was paid “in lieu of all taxes on this franchise or earnings thereof” pursuant to RA
7082. The exemption from “all taxes on this franchise or earnings thereof” was
subsequently withdrawn by RA 7160 (LGC), which at the same time gave local government
units the power to tax businesses enjoying a franchise on the basis of income received or
earned by them within their territorial jurisdiction. The LGC took effect on January 1,
1992.
The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part
provides: Notwithstanding any exemption granted by law or other special laws, there is
hereby imposed a tax on businesses enjoying a franchise, a rate of seventy-five percent
(75%) of one percent (1%) of the gross annual receipts for the preceding calendar
year based on the income receipts realized within the territorial jurisdiction of Davao City.
Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation
(Globe) and Smart Information Technologies, Inc. (Smart) franchises which contained “in
leiu of all taxes” provisos.
In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines,
Sec. 23 of which provides that any advantage, favor, privilege, exemption, or immunity
granted under existing franchises, or may hereafter be granted, shall ipso facto become
part of previously granted telecommunications franchises and shall be accorded
immediately and unconditionally to the grantees of such franchises. The law took effect on
March 16, 1995.
In January 1999, when PLDT applied for a mayor’s permit to operate its Davao Metro
exchange, it was required to pay the local franchise tax which then had amounted to
P3,681,985.72. PLDT challenged the power of the city government to collect the local
franchise tax and demanded a refund of what had been paid as a local franchise tax for the
year 1997 and for the first to the third quarters of 1998.

Issue:

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.

Held:

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.