BISAYA LAND TRANSPORTATION Co., INC., petitioner, vs. COLLECTOR OF INTERNAL REVENUE, respondent. COLLECTOR OF INTERNAL REVENUE, petitioner, vs. BlSAYA LAND TRANSPORTATION Co., INC., respondent. GR Nos. L-12100 and L-11812. May 29, 1959

GR Nos. L-12100 and L-11812. May 29, 1959

BISAYA LAND TRANSPORTATION Co., INC., petitioner,

vs.

COLLECTOR OF INTERNAL REVENUE, respondent. COLLECTOR OF INTERNAL REVENUE, petitioner, vs.BlSAYA LAND TRANSPORTATION Co., INC., respondent.

Facts:

Bisaya Land Transportation Co. acquired equipment from the United States Commercial Co. which it used in the operation of its buses, without paying the corresponding compensating and specific taxes. On investigation of its books by revenue agents, it was discovered that its gross receipts of the transportation business from 1946 to 1951 were not declared for taxation. It was also found that from 1945 to 1952, the petitioner issued freight receipts but the corresponding documentary stamps were not affixed thereto. A deficiency additional residence tax was also determined.

After a series of exchange of communications between the petitioner and the Collector of Internal Revenue, the latter assessed the petitioner and demanded the total amount of P4,949.91, consisting of (1) compensating tax; (2) common carrier's percentage tax; (3) documentary stamp tax; and (4) additional residence tax.

The CTA upheld the assessment as to the deficiency common carrier's percentage tax for 1946 and the first quarter of 1947 and the additional residence tax for 1947, it ruled that such had been barred by the statute of limitations. The petitioner alleged that the CTA erred in not holding that the claim for compensating tax and residence tax has already prescribed.

Issues:

(1)   Whether the claim for compensating and residence tax has already prescribed

(2)   Whether the compensating tax, documentary stamp tax and common carrier's percentage tax are not chargeable

Ruling:

(1)   No. Petitioner’s claim that the period of prescription should be computed from the filing of its income tax returns, is without merit.

First, the said returns were not introduced as evidence in court so there was no means to determine the data included in the returns to apprise the Bureau of Internal Revenue that the company should pay the compensating tax.

Second, income tax returns contain a statement of the taxpayer's income for a given year. The taxpayer is not supposed to declare in said returns that he has purchased or received "from without the Philippines", commodities or merchandise that are subject to the compensating tax. Generally, such purchases are not "income," and, hence, have no place in income tax returns.

(2)   No. Bisaya Land Transpo is liable for the said taxes.

The company claimed that the equipment and materials it purchased from agencies of the U. S. Government are not subject to compensating tax because they were acquired, not for business purposes but "in furtherance of the war efforts" since the acquisition was made between June 1945 and January 1947.

However, the hostilities in Japan and Europe ended in 1945. Moreover, the company was engaged in business as a public utility operation and such services as it may have rendered to the armed forces were merely incidental to said business. Neither is it exempt from common carrier's percentage tax by reason of such service to the armed forces, because the party being taxed is not said organization, but the company. This tax is based upon the gross receipts of carriers, independently of the source of such receipts.

THE COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. LINGAYEN GULF ELECTRIC POWER CO., INC. and THE COURT OF TAX APPEALS, respondents. G.R. No. L-23771 August 4, 1988

G.R. No. L-23771 August 4, 1988

THE COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.

LINGAYEN GULF ELECTRIC POWER CO., INC. and THE COURT OF TAX APPEALS, respondents.

Angel Sanchez for Lingayen Electric Power Co., Inc.

SARMIENTO, J.:

FACTS:

Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan, pursuant to the municipal franchise granted it by their respective municipal councils, under Resolution Nos. 14 and 25 of June 29 and July 2, 1946, respectively. Section 10 of these franchises provide that:

...The said grantee in consideration of the franchise hereby granted, shall pay quarterly into the Provincial Treasury of Pangasinan, one per centum of the gross earnings obtained thru this privilege during the first twenty years and two per centum during the remaining fifteen years of the life of said franchise.

On February 24, 1948, the President of the Philippines approved the franchises granted to the private respondent.

On November 21, 1955, the Bureau of Internal Revenue (BIR) assessed against and demanded from the private respondent the total amount of P19,293.41 representing deficiency franchise taxes and surcharges for the years 1946 to 1954 applying the franchise tax rate of 5% on gross receipts from March 1, 1948 to December 31, 1954 as prescribed in Section 259 of the National Internal Revenue Code, instead of the lower rates as provided in the municipal franchises.

In a letter dated August 21, 1962, the Commissioner demanded from the private respondent the payment of P3,616.86 representing deficiency franchise tax and surcharges for the years 1959 to 1961 again applying the franchise tax rate of 5% on gross receipts as prescribed in Section 259 of the National Internal Revenue Code. In a letter dated October 5, 1962, the private respondent protested the assessment and requested reconsideration thereof The same was denied on November 9, 1962. Thus, the appeal to the respondent Court of Appeals on November 29, 1962, docketed as C.T.A. No. 1302.

Pending the hearing of the said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1963, granting to the private respondent a legislative franchise for the operation of the electric light, heat, and power system in the same municipalities of Pangasinan.

On September 15, 1964, the respondent court ruled that the provisions of R.A. No. 3843 should apply and accordingly dismissed the claim of the Commissioner of Internal Revenue. The said ruling is now the subject of the petition at bar.

ISSUES:

1. Whether or not the 5% franchise tax prescribed in Section 259 of the National Internal Revenue Code assessed against the private respondent on its gross receipts realized before the effectivity of R.A- No. 3843 is collectible.

2. Whether or not Section 4 of R.A. No. 3843 is unconstitutional for being violative of the "uniformity and equality of taxation" clause of the Constitution.

3. If the abovementioned Section 4 of R.A. No. 3843 is valid, whether or not it could be given retroactive effect so as to render uncollectible the taxes in question which were assessed before its enactment.

HELD:

1. No. R.A. No. 3843 granted the private respondent a legislative franchise in June, 1963, amending, altering, or even repealing the original municipal franchises, and providing that the private respondent should pay only a 2% franchise tax on its gross receipts, "in lieu of any and all taxes and/or licenses of any kind, nature or description levied, established, or collected by any authority whatsoever, municipal, provincial, or national, now or in the future ... and effective further upon the date the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts ... shall be collected, any provision of law to the contrary notwithstanding." Thus, by virtue of R.A- No. 3843, the private respondent was liable to pay only the 2% franchise tax, effective from the date the original municipal franchise was granted.

2. No. A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike The Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never been deemed violative of the equal protection clause. 1 It is true that the private respondents municipal franchises were obtained under Act No. 667 2 of the Philippine Commission, but these original franchises have been replaced by a new legislative franchise, i.e. R.A. No. 3843. As correctly held by the respondent court, the latter was granted subject to the terms and conditions established in Act No. 3636, 3 as amended by C.A. No. 132. These conditions Identify the private respondent's power plant as falling within that class of power plants created by Act No. 3636, as amended. The benefits of the tax reduction provided by law (Act No. 3636 as amended by C.A. No. 132 and R.A. No. 3843) apply to the respondent's power plant and others circumscribed within this class. R.A-No. 3843 merely transferred the petitioner's power plant from that class provided for in Act No. 667, as amended, to which it belonged until the approval of R.A- No. 3843, and placed it within the class falling under Act No. 3636, as amended. Thus, it only effected the transfer of a taxable property from one class to another.

3. Yes. In the instant case, Act No. 3843 provides that "effective ... upon the date the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts ... shall be collected, any provision to the contrary notwithstanding." Republic Act No. 3843 therefore specifically provided for the retroactive effect of the law.

FRANCIS A. CHURCHILL and STEWART TAIT, ET AL, plaintiffs-appellants, vs. VENANCIO CONCEPCION, as Acting Collector of Internal Revenue, defendant-appellee. G.R. No. 11572 September 22, 1916

G.R. No. 11572           September 22, 1916

FRANCIS A. CHURCHILL and STEWART TAIT, ET AL, plaintiffs-appellants,

vs.

VENANCIO CONCEPCION, as Acting Collector of Internal Revenue, defendant-appellee.

Facts: Petitioners Francis A. Churchill and Stewart Tait, co-partners doing business under the firm name and style of the Mercantile Advertising Agency, are owners of a sign or billboard containing an area of 52 square meters constructed on private property in the city of Manila and exposed to public view.

On February 27, 1914, Act No. 2339 was passed. Section 100 of the said law, imposed an annual tax of P4 per square meter upon "electric signs, billboards, and spaces used for posting or displaying temporary signs, and all signs displayed on premises not occupied by buildings." This section was subsequently amended by Act No. 2432, effective January 1, 1915, by reducing the tax on such signs, billboards, etc., to P2 per square meter or fraction thereof.

Petitioners challenged the validity of Act No. 2339 (as amended by Act No. 2432, as amended by Act No. 2445). They contend that:

(1)    The tax constitutes deprivation of property without compensation or due process of law, because it is confiscatory and unjustly discriminatory; and

(2)    Said tax is void for lack of uniformity, because it is not graded according to value; because the classification on which it is based on any reasonable ground;

(3)    and furthermore, because it constitutes double taxation.

Issue: Whether or not law imposing said tax lacks uniformity?

Held: NO.  The tax herein complained of falls far short of being confiscatory. Consequently, it cannot be held that the Legislature has gone beyond the power conferred upon it by the Philippine Bill in so far as the amount of the tax is concerned.

Uniformity in taxation (as defined in Black on Constitutional Law) means that all taxable articles or kinds of property, of the same class, shall be taxed at the same rate. It does not mean that lands, chattels, securities, incomes, occupations, franchises, privileges, necessities, and luxuries, shall all be assessed at the same rate. Different articles may be taxed at different amounts, provided the rate is uniform on the same class everywhere, with all people, and at all times.

A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity does not signify an intrinsic, but simply a geographical, uniformity, and such uniformity is therefore the only uniformity which is prescribed by the Constitution. A tax is uniform, within the constitutional requirement, when it operates with the same force and effect in every place where the subject of it is found. "Uniformity," as applied to the constitutional provision that all taxes shall be uniform, means that all property belonging to the same class shall be taxed alike. (Various US Jurisprudence)

The statute under consideration imposes a tax of P2 per square meter or fraction thereof upon every electric sign, bill-board, etc., wherever found in the Philippine Islands. Or in other words, "the rule of taxation" upon such signs is uniform throughout the Islands.

Philippine Legislature in the exercise of its taxing power is that found in section 5 of the Philippine Bill, wherein it is declared "that the rule of taxation in said Islands shall be uniform."

The rule, which we have just quoted from the Philippine Bill, does not require taxes to be graded according to the value of the subject or subjects upon which they are imposed, especially those levied as privilege or occupation taxes.

Issue (2): Whether or not said tax on billboards constitute double taxation?

Held (2): NO. We can hardly see wherein the tax in question constitutes double taxation. The fact that the land upon which the billboards are located is taxed at so much per unit and the billboards at so much per square meter does not constitute "double taxation." Double taxation, within the true meaning of that expression, does not necessarily affect its validity.

And again, it is not for the judiciary to say that the classification upon which the tax is based "is mere arbitrary selection and not based upon any reasonable grounds." The Legislature selected signs and billboards as a subject for taxation and it must be presumed that it, in so doing, acted with a full knowledge of the situation.

Additional Notes: What is the Scope of the Legislature’s Taxing Power? The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. It reaches to every trade or occupation; to every object of industry, use, or enjoyment; to every species of possession; and it imposes a burden which, in case of failure to discharge it, may be followed by seizure and sale or confiscation of property. No attribute of sovereignty is more pervading, and at no point does the power of the government affect more constantly and intimately all the relations of life than through the exactions made under it." (Clooey)

JOHN H. OSMEÑA, Petitioner, vs. OSCAR ORBOS, et.al G.R. No. 99886 March 31, 1993

G.R. No. 99886  March 31, 1993
JOHN H. OSMEÑA, Petitioner, vs. OSCAR ORBOS, in his capacity as Executive Secretary; JESUS ESTANISLAO, in his capacity as Secretary of Finance; WENCESLAO DELA PAZ, in his capacity as Head of the Office of Energy Affairs; REX V. TANTIONGCO, and the ENERGY REGULATORY BOARD, Respondents.

DOCTRINE: To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies that the legislature determines matter of principle and lays down fundamental policy.

FACTS: October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Subsequently, the OPSF was reclassified into a "trust liability account,". President Corazon C. Aquino promulgated E. O. 137 expanding the grounds for reimbursement to oil companies for possible cost under recovery incurred as a result of the reduction of domestic prices of petroleum products.

The petitioner argues inter alia that "the monies collected pursuant to . . P.D. 1956, as amended, must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated as a special fund' to be used only for the purpose indicated, and not channeled to another government objective." Petitioner further points out that since "a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created.

ISSUE:

Whether or not there is an undue delegation of the legislative power of taxation?

HELD:

NO, there is no undue delegation of the legislative power of taxation.

It seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF as a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund."

With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB (Energy Regulatory Board) to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund.

"Where the standards set up for the guidance of an administrative officer and the action taken are in fact recorded in the orders of such officer, so that Congress, the courts and the public are assured that the orders in the judgment of such officer conform to the legislative standard, there is no failure in the performance of the legislative functions."

This Court thus finds no serious impediment to sustaining the validity of the legislation; the express purpose for which the imposts are permitted and the general objectives and purposes of the fund are readily discernible, and they constitute a sufficient standard upon which the delegation of power may be justified.

Emphasized ruling from other case in relation to the present case:

In Gaston v. Republic Planters Bank, this Court upheld the legality of the sugar stabilization fees and explained their nature and character, viz.:

The stabilization fees collected are in the nature of a tax, which is within the power of the State to impose for the promotion of the sugar industry (Lutz v. Araneta, 98 Phil. 148). . . . The tax collected is not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide a means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State (Lutz v. Araneta, supra).

CALTEX PHILIPPINES, INC., petitioner, vs. THE HONORABLE COMMISSION ON AUDIT, et al. G.R. No. 92585 May 8, 1992

G.R. No. 92585 May 8, 1992

CALTEX PHILIPPINES, INC., petitioner, vs. THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER BARTOLOME C. FERNANDEZ and HONORABLE COMMISSIONER ALBERTO P. CRUZ, respondents.

Ponente: Davide, Jr. J.

DOCTRINE:

A taxpayer may not offset taxes due from the claims that he may have against the government.

QUICK FACTS

Caltex Philippines questions the decisions of COA for disallowing the offsetting of its claims for reimbursement with its due OPSF remittance

FACTS:

 The Oil Price Stabilization Fund (OPSF) was created under Sec. 8, PD 1956, as amended by EO 137 for the purpose of minimizing frequent price changes brought about by exchange rate adjustments. It will be used to reimburse the oil companies for cost increase and possible cost under recovery incurred due to reduction of domestic prices.COA sent a letter to Caltex directing the latter to remit to the OPSF its collection. Caltex requested COA for an early release of its reimbursement certificates which the latter denied.

COA disallowed recover of financing charges, inventory losses and sales to marcopper and atlas but allowed the recovery of product sale or those arising from export sales. Petitioner’s Contented that Department of Finance issued Circular No. 4-88 allowing reimbursement. Denial of claim for reimbursement would be inequitable. NCC (compensation) and Sec. 21, Book V, Title I-B of the Revised Administrative Code (Retention of Money for Satisfaction of Indebtedness to Government) allows offsetting. Amounts due do not arise as a result of taxation since PD 1956 did not create a source of taxation, it instead established a special fund. This lack of public purpose behind OPSF exactions distinguishes it from tax. Respondent’s Contention is based on Francia v. IAC, that there’s no offsetting of taxes against the claims that a taxpayer may have against the government, as taxes do not arise from contracts or depend on the will of the taxpayer, but are imposed by law.

ISSUE: WON Caltex is entitled to offsetting

DECISION: NO. COA AFFIRMED

HELD:

It is settled that a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

 Technically, the oil companies merely act as agents for the Government in the latter’s collection since the taxes are, in reality, passed unto the end-users – the consuming public. Their primary obligation is to account or and remit the taxes collection to the administrator of the OPSF.

There is not merit in Caltex’s contention that the OPSF contributions are not for a public purpose because they go to a special fund of the government. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to be within the police power of the State.

 The oil industry is greatly imbued with public interest as it vitally affects the general welfare.

PD 1956, as amended by EO No. 137 explicitly provides that the source of OPSF is taxation.

Luzon Stevedoring Corp. vs. Court of Tax Appeals, GR No. L-30232 July 29, 1988

GR No. L-30232 July 29, 1988
Luzon Stevedoring Corp. vs. Court of Tax Appeals 

Facts: Petitioner, for the repair and maintenance of their tugboats, imported various engine parts and other equipment for which it paid, under protest, the assessed compensating tax. Unable to secure a tax refund with the Commissioner of Internal Revenue, it file a petition for review with the Court of Tax Appeals (CTA). It prayed for the refund, amounting to P33,442.13. The CTA however, denied such petition for lacking sufficient legal justification.

Issue: W/N the petitioner’s “tugboats” can be interpreted to be included in the term “cargo vessels” for purposes of the tax exemption under section 190 of the National Internal Revenue Code

Ruling: No, the petitioner’s “tugboats” cannot be interpreted as included in the term “cargo vessels” as mentioned in section 190 of the National Internal Revenue Code.

Petitioner contends that tugboats are embraced and included in the term cargo vessels. In legal contemplation, the tugboat, together with the barge carrying cargoes with the former towing the latter for loading and unloading of a vessel in part, constitute a single vessel.

On the other hand, respondent counters that, since tugboats are neither designed to carry and transport goods and persons, they do not fall in the meaning of “cargo vessels” under section 190 of Internal Revenue Code, and that they are mainly used for towing and pulling purposes.

The court laid the rule that the power of taxation is a high prerogative of sovereignty, therefore its relinquishment is never presumed. Any reduction of diminution thereof, with respect to its rate, must be strictly construed. In short, any claim for exemption must be strictly construed against the taxpayer.

Other info:

This Court has laid down the rule that "as the power of taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any reduction or dimunition thereof with respect to its mode or its rate, must be strictly construed, and the same must be coached in clear and unmistakable terms in order that it may be applied." More specifically stated, the general rule is that any claim for exemption from the tax statute should be strictly construed against the taxpayer.

As correctly analyzed by the Court of Tax Appeals, in order that the importations in question may be declared exempt from the compensating tax, it is indispensable that the requirements of the amendatory law be complied with, namely: (1) the engines and spare parts must be used by the importer himself as a passenger and/or cargo, vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise or oceangoing navigation.

As pointed out by the CTA, the amendatory provisions of RA No. 3176 limit tax exemption from the compensating tax to imported items to be used by the importer himself as operator of passenger and/or cargo vessel.

As quoted in the decision of the Court of Tax Appeals, a tugboat is defined as follows:

              A tugboat is a strongly built, powerful steam or power vessel, used for towing and, now, also used for attendance on vessel.

              A tugboat is a diesel or steam power vessel designed primarily for moving large ships to and from piers for towing barges and lighters in harbors, rivers and canals.

              A tug is a steam vessel built for towing, synonymous with tugboat.

Under the foregoing definitions, petitioner's tugboats clearly do not fall under the categories of passenger and/or cargo vessels. Thus, it is a cardinal principle of statutory construction that where a provision of law speaks categorically, the need for interpretation is obviated, no plausible pretense being entertained to justify non-compliance. All that has to be done is to apply it in every case that falls within its terms

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY vs. HON. FERDINAND J. MARCOS, G.R. No. 120082. September 11, 1996

G.R. No. 120082. September 11, 1996

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY 

vs. 

HON. FERDINAND J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial Court, Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor, HON. TOMAS R. OSMENA, and EUSTAQUIO B. CESA, respondents.;   

Doctrine: 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. Tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood 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

Facts:  Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of RA  No. 6958, mandated to principally undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City. Since the time of its creation, 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 x x x.

On October 11, 1994, the Office of the Treasurer of the City of Cebu, demanded payment for realty taxes on several parcels of land belonging to the petitioner. Petitioner objected to such demand for payment as baseless and unjustified, claiming in its favor the aforecited Section 14 of RA 6958. It was also asserted that it is an instrumentality of the government performing governmental functions, citing Section 133 of the Local Government Code of 1991 which puts limitations on the taxing powers of local government units:

Section 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:

o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units. (underscoring supplied)

Respondent City refused to cancel and set aside petitioners realty tax account, insisting that the MCIAA is a government-controlled corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193 and 234 of the Local Government Code that took effect on January 1, 1992:

Section 193. Withdrawal of Tax Exemption Privilege. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under RA No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. (underscoring supplied)

Section 234.         Exemptions from Real Property Taxes. x x x

(e)          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 government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.

MCIAA basically contended that the taxing powers of local government units do not extend to the levy of taxes or fees of any kind on an instrumentality of the national government. Petitioner insisted that while it is indeed a government-owned corporation, it nonetheless stands on the same footing as an agency or instrumentality of the national government by the very nature of its powers and functions. Respondent City, however, asserted that MCIAA is not an instrumentality of the government but merely a government-owned corporation performing proprietary functions. As such, all exemptions previously granted to it were deemed withdrawn by operation of law, as provided under Sections 193 and 234 of the Local Government Code when it took effect on January 1, 1992.

Issue: 

1.      W/N MCIAA as taxable person

2.      Whether the MCIAA is exempted from realty taxes.

Ruling:

1.      Yes. MCIAA is a taxable person.  the petitioner cannot claim that it was never a taxable person under its Charter. It was only exempted from the payment of real property taxes. The grant of the privilege only in respect of this tax is conclusive proof of the 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.

2.      No. MCIAA is not exempted from realty taxes. If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption from payment of real property taxes under the last sentence of the said section to the agencies and instrumentalities of the National Government mentioned in Section 133(o), then it should have restated the wording of the latter. Yet, it did not.Moreover, that Congress did not wish to expand the scope of the exemption in Section 234(a) to include real property owned by other instrumentalities or agencies of the government including government-owned and controlled corporations is further borne out by the fact that the source of this exemption is Section 40(a) of P.D. No. 464, otherwise known as The Real Property Tax Code, which reads:

SEC. 40.     Exemptions from Real Property Tax. The exemption shall be as follows:

(a) 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-mentioned entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person.

Note that as reproduced in Section 234(a), the phrase and any government-owned or controlled corporation so exempt by its charter was excluded. The justification for this restricted exemption in Section 234(a) seems obvious: to limit further tax exemption privileges, especially in light of the general provision on withdrawal of tax exemption privileges in Section 193 and the special provision on withdrawal of exemption from payment of real property taxes in the last paragraph of Section 234.

.