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SECONDDIVISION

[G.R.No.143867.August22,2001]

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC., petitioner, vs.

CITYOFDAVAOandADELAIDAB.BARCELONA,inhercapacityasthe
CityTreasurerofDavao,respondents.
DECISION
MENDOZA,J.:

ThisisapetitionforreviewoncertiorariunderRule45ofthe1997RulesofCivilProcedureofthe
resolution,[1]datedJune23,2000,oftheRegionalTrialCourt,Branch13,DavaoCity,affirmingthetax
assessmentofpetitionerandthedenialofitsclaimfortaxrefundbytheCityTreasurerofDavao.
Thefactsareasfollows:
On January 1999, petitioner Philippine Long Distance Telephone Co., Inc. (PLDT) applied for a
MayorsPermittooperateitsDavaoMetroExchange.RespondentCityofDavaowithheldactiononthe
applicationpendingpaymentbypetitionerofthelocalfranchisetaxintheamountofP3,681,985.72for
the first to the fourth quarter of 1999.[2] In a letter dated May 31, 1999,[3] petitioner protested the
assessmentofthelocalfranchisetaxandrequestedarefundofthefranchisetaxpaidbyitfortheyear
1997andthefirsttothethirdquartersof1998.Petitionercontendedthatitwasexemptfromthepayment
offranchisetaxbasedonanopinionoftheBureauofLocalGovernmentFinance(BLGF),datedJune2,
1998,whichreadsasfollows:
PLDT:
Section12ofRA7082providesasfollows:
SEC.12.Thegrantee,itssuccessorsorassignsshallbeliabletopaythesametaxesontheirrealestate,
buildings,andpersonalproperty,exclusiveofthisfranchise,asotherpersonsorcorporationsarenowor
hereaftermayberequiredbylawtopay.Inadditionthereto,thegrantee,itssuccessorsorassignsshall
payafranchisetaxequivalenttothreepercent(3%)ofallgrossreceiptsofthetelephoneorother
telecommunicationsbusinessestransactedunderthisfranchisebythegrantee,itssuccessorsorassigns,
andthesaidpercentageshallbeinlieuofalltaxesonthisfranchiseorearningsthereof...
ItappearsthatRA7082furtheramendingActNo.3436whichgrantedtoPLDTafranchisetoinstall,
operateandmaintainatelephonesystemthroughoutthePhilippineIslandswasapprovedonAugust3,
1991.Section12ofsaidfranchise,likewise,containstheinlieuofalltaxesproviso.
Inthisconnection,Section23ofRA7925,quotedhereunder,whichwasapprovedonMarch1,1995,
providesfortheequalityoftreatmentinthetelecommunicationsindustry:
SEC.23.EqualityofTreatmentintheTelecommunicationsIndustry.Anyadvantage,favor,privilege,
exemption,orimmunitygrantedunderexistingfranchises,ormayhereafterbegranted,shallipsofacto
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becomepartofpreviouslygrantedtelecommunicationsfranchisesandshallbeaccordedimmediatelyand
unconditionallytothegranteesofsuchfranchises:Provided,however,Thattheforegoingshallneither
applytonoraffectprovisionsoftelecommunicationsfranchisesconcerningterritorycoveredbythe
franchise,thelifespanofthefranchise,orthetypeofserviceauthorizedbythefranchise.(Underscoring
supplied.)
OnthebasisoftheaforequotedSection23ofRA7925,PLDTasatelecommunicationsfranchiseholder
becomesautomaticallycoveredbythetaxexemptionprovisionsofRA7925,whichtookeffectonMarch
16,1995.
Accordingly,PLDTshallbeexemptfromthepaymentoffranchiseandbusinesstaxesimposableby
LGUsunderSections137and143(sic),respectively,oftheLGC,upontheeffectivityofRA7925on
March16,1995.However,PLDTshallbeliabletopaythefranchiseandbusinesstaxesonitsgross
receiptsrealizedfromJanuary1,1992uptoMarch15,1995,duringwhichperiodPLDTwasnot
enjoyingthemostfavoredclauseprovisoofRA7025(sic).[4]
InaletterdatedSeptember27,1999,respondentAdelaidaB.Barcelona,CityTreasurerofDavao,
denied the protest and claim for tax refund of petitioner,[5] citing the legal opinion of the City Legal
Officer of Davao and Art. 10, 1 of Ordinance No. 230, Series of 1991, as amended by Ordinance No.
519,Seriesof1992,whichprovides:
Notwithstandinganyexemptiongrantedbyanylaworotherspeciallaw,thereisherebyimposeda
taxonbusinessesenjoyingafranchise,atarateofSeventyfivepercent(75%)ofonepercent(1%)
ofthegrossannualreceiptsfortheprecedingcalendaryearbasedontheincomeorreceiptsrealized
withintheterritorialjurisdictionofDavaoCity.[6]
PetitionerreceivedrespondentCityTreasurersorderofdenialonOctober1,1999.OnNovember3,
1999, it filed a petition in the Regional Trial Court of Davao seeking a reversal of respondent City
Treasurersdenialofpetitionersprotestandtherefundofthefranchisetaxpaidbyitfortheyear1998in
theamountofP2,580,829.23.Thepetitionwasfiledpursuantto195and196oftheLocalGovernment
Code(R.A.No.7160).Noclaimforrefundoffranchisetaxespaidin1997wasmadeasthesamehad
alreadyprescribedunder196oftheLGC,whichprovidesthatclaimsfortherefundoftaxespaidunderit
mustbemadewithintwo(2)yearsfromthedateofpaymentofsuchtaxes.[7]
ThetrialcourtdeniedpetitionersappealandaffirmedtheCityTreasurersdecision.Itruledthatthe
LGC withdrew all tax exemptions previously enjoyed by all persons and authorized local government
unitstoimposeataxonbusinessesenjoyingafranchisenotwithstandingthegrantoftaxexemptionto
them. The trial court likewise denied petitioners claim for exemption under R.A. No. 7925 for the
followingreasons:(1)itisclearfromthewordingof193oftheLocalGovernmentCodethatCongress
didnotintendtoexemptanyfranchiseholderfromthepaymentoflocalfranchiseandbusinesstaxes(2)
theopinionoftheExecutiveDirectoroftheBureauofLocalGovernmentFinancetothecontraryisnot
binding on respondents and (3) petitioner failed to present any proof that Globe and Smart were
enjoyinglocalfranchiseandbusinesstaxexemptions.
Hence,thispetitionforreviewbasedonthefollowinggrounds:
I.THELOWERCOURTERREDINAPPLYINGSECTION137OFTHELOCALGOVERNMENT
CODE, WHICH ALLOWS A CITY TO IMPOSE A FRANCHISE TAX, AND SECTION 193
THEREOF,WHICHPROVIDESFORWITHDRAWALOFTAXEXEMPTIONPRIVILEGES.
II. THE LOWER COURT ERRED IN NOT HOLDING THAT UNDER PETITIONERS
FRANCHISE, AS IMPLICITLY AMENDED AND EXPANDED BY SECTION 23 OF
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REPUBLIC ACT NO. 7925 (PUBLIC TELECOMMUNICATIONS POLICY ACT), TAKING

INTO ACCOUNT THE FRANCHISES OF GLOBE TELECOM, INC. AND SMART
COMMUNICATIONS, INC., WHICH WERE ENACTED SUBSEQUENT TO THE LOCAL
GOVERNMENT CODE, NO FRANCHISE AND BUSINESS TAXES MAY BE IMPOSED ON
PETITIONERBYRESPONDENTCITY.
III. THE LOWER COURT ERRED IN NOT GIVING WEIGHT TO THE RULING OF THE
BUREAU OF LOCAL GOVERNMENT FINANCE THAT PETITIONER IS EXEMPT FROM
THEPAYMENTOFFRANCHISEANDBUSINESSTAXES,AMONGOTHERS,IMPOSABLE
BYLOCALGOVERNMENTUNITSUNDERTHELOCALGOVERNMENTCODE.

First.TheLGC,whichtookeffectonJanuary1,1992,provides:
SEC.137.FranchiseTax.Notwithstandinganyexemptiongrantedbyanylaworotherspeciallaw,the
provincemayimposeataxonbusinessesenjoyingafranchise,ataratenotexceedingfiftypercent(50%)
ofonepercent(1%)ofthegrossannualreceiptsfortheprecedingcalendaryearbasedontheincoming
receipt,orrealized,withinitsterritorialjurisdiction.
Inthecaseofanewlystartedbusiness,thetaxshallnotexceedonetwentieth(1/20)ofonepercent(1%)
ofthecapitalinvestment.Inthesucceedingcalendaryear,regardlessofwhenthebusinessstartedto
operate,thetaxshallbebasedonthegrossreceiptsfortheprecedingcalendaryear,oranyfraction
thereof,asprovidedherein.[8]
SEC.193.WithdrawalofTaxExemptionPrivileges.UnlessotherwiseprovidedinthisCode,tax
exemptionsorincentivesgrantedto,orpresentlyenjoyedbyallpersons,whethernaturalorjuridical,
includinggovernmentownedorcontrolledcorporations,exceptlocalwaterdistricts,cooperativesduly
registeredunderR.A.6938,nonstockandnonprofithospitalsandeducationalinstitutions,arehereby
withdrawnupontheeffectivityofthisCode.
The trial court held that, under these provisions, all exemptions granted to all persons, whether
naturalandjuridical,includingthosewhichinthefuturemightbegranted,arewithdrawnunlessthelaw
grantingtheexemptionexpresslystatesthattheexemptionalsoappliestolocaltaxes.Wedisagree.Sec.
137 does not state that it covers future exemptions. In Philippine Airlines, Inc. v. Edu,[9] where a
provision of the Tax Code enacted on June 27, 1968 (R.A. 5431) withdrew the exemption enjoyed by
PAL, it was held that a subsequent amendment of PALs franchise, exempting it from all other taxes
exceptthatimposedbyitsfranchise,againentitledPALtoexemptionfromthedateoftheenactmentof
such amendment. The Tax Code provision withdrawing the tax exemption was not construed as
prohibitingfuturegrantsofexemptionsfromalltaxes.
Indeed, the grant of taxing powers to local government units under the Constitution and the LGC
does not affect the power of Congress to grant exemptions to certain persons, pursuant to a declared
nationalpolicy. The legal effect of the constitutional grant to local governments simply means that in
interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of
municipalcorporations.[10]
The question, therefore, is whether, after the withdrawal of its exemption by virtue of 137 of the
LGC,petitionerhasagainbecomeentitledtoexemptionfromlocalfranchisetax.Petitioneranswersin
theaffirmativeandpointsto23ofR.A.No.7925,inrelationtothefranchisesofGlobeTelecom(Globe)
andSmartCommunications,Inc.(Smart),whichallegedlygrantthelatterexemptionfromlocalfranchise
taxes.
Tobeginwith,taxexemptionsarehighlydisfavored.ThereasonforthiswasexplainedbythisCourt
inAsiaticPetroleumCo.v.Llanes,[11]inwhichitwasheld:
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...Exemptionsfromtaxationarehighlydisfavored,somuchsothattheymayalmostbesaidtobe
odioustothelaw.Hewhoclaimsanexemptionmustbeabletopointtosomepositiveprovisionoflaw
creatingtheright...AswassaidbytheSupremeCourtofTennesseeinMemphisvs.U.&P.Bank(91
Tenn.,546,550),TherightoftaxationisinherentintheState.Itisaprerogativeessentialtothe
perpetuityofthegovernmentandhewhoclaimsanexemptionfromthecommonburdenmustjustifyhis
claimbytheclearestgrantoforganicorstatutelaw.Otherutterancesequallyormoreemphaticcome
readilytohandfromthehighestauthority.InOhioLifeIns.andTrustCo.vs.Debolt(16Howard,416),
itwassaidbyChiefJusticeTaney,thattherightoftaxationwillnotbeheldtohavebeensurrendered,
unlesstheintentiontosurrenderismanifestedbywordstooplaintobemistaken.Inthecaseofthe
DelawareRailroadTax(18Wallace,206,226),theSupremeCourtoftheUnitedStatessaidthatthe
surrender,whenclaimed,mustbeshownbyclear,unambiguouslanguage,whichwilladmitofno
reasonableconstructionconsistentwiththereservationofthepower.Ifadoubtarisesastotheintentof
thelegislature,thatdoubtmustbesolvedinfavoroftheState.InErieRailwayCompanyvs.
CommonwealthofPennsylvania(21Wallace,492,499),Mr.JusticeHunt,speakingofexemptions,
observedthataStatecannotstripitselfofthemostessentialpoweroftaxationbydoubtfulwords.It
cannot,byambiguouslanguage,bedeprivedofthishighestattributeofsovereignty.InTennesseevs.
Whitworth(117U.S.,129,136),itwassaid:Inallcasesofthiskindthequestionisastotheintentofthe
legislature,thepresumptionalwaysbeingagainstanysurrenderofthetaxingpower.InFarringtonvs.
TennesseeandCountyofShelby(95U.S.,679,686),Mr.JusticeSwaynesaid:...Whenexemptionis
claimed,itmustbeshownindubitablytoexist.Attheoutset,everypresumptionisagainstit.Awell
foundeddoubtisfataltotheclaim.Itisonlywhenthetermsoftheconcessionaretooexplicittoadmit
fairlyofanyotherconstructionthatthepropositioncanbesupported.
The tax exemption must be expressed in the statute in clear language that leaves no doubt of the
intention of the legislature to grant such exemption.And, even if it is granted, the exemption must be
interpretedinstrictissimijurisagainstthetaxpayerandliberallyinfavorofthetaxingauthority.[12]
Inthepresentcase,petitionerjustifiesitsclaimoftaxexemptionbystrainedinferences.First,itcites
R.A.No.7925,otherwiseknownasthePublicTelecommunicationsPolicyActofthePhilippines,23of
whichreads:
SEC.23.EqualityofTreatmentintheTelecommunicationsIndustry.Anyadvantage,favor,privilege,
exemption,orimmunitygrantedunderexistingfranchises,ormayhereafterbegranted,shallipsofacto
becomepartofpreviouslygrantedtelecommunicationsfranchisesandshallbeaccordedimmediatelyand
unconditionallytothegranteesofsuchfranchises:Provided,however,Thattheforegoingshallneither
applytonoraffectprovisionsoftelecommunicationsfranchisesconcerningterritorycoveredbythe
franchise,thelifespanofthefranchise,orthetypeofserviceauthorizedbythefranchise.
PetitionerthenclaimsthatSmartandGlobeenjoyexemptionfromthepaymentofthefranchisetax
byvirtueoftheirlegislativefranchisesperopinionoftheBureauofLocalGovernmentFinanceofthe
DepartmentofFinance.Finally,itarguesthatbecauseSmartandGlobeareexemptfromthefranchise
tax,itfollowsthatitmustlikewisebeexemptfromthetaxbeingcollectedbytheCityofDavaobecause
thegrantoftaxexemptiontoSmartandGlobeipsofactoextendedthesameexemptiontoit.
The acceptance of petitioners theory would result in absurd consequences. To illustrate: In its
franchise,Globeisrequiredtopayafranchisetaxofonlyoneandonehalfpercentum(1%)ofallgross
receipts from its transactions while Smart is required to pay a tax of three percent (3%) on all gross
receipts from business transacted.Petitioners theory would require that, to level the playing field, any
advantage, favor, privilege, exemption, or immunity granted to Globe must be extended to all
telecommunicationscompanies,includingSmart.If,later,Congressagaingrantsafranchisetoanother
telecommunications company imposing, say, one percent (1%) franchise tax, then all other
telecommunicationsfranchiseswillhavetobeadjustedtoleveltheplayingfieldsotospeak.Thiscould
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nothavebeentheintentofCongressinenacting23ofRep.Act7925.Petitionerstheorywillleavethe
Governmentwiththeburdenofhavingtokeeptrackofallgrantedtelecommunicationsfranchises,lest
some companies be treated unequally. It is different if Congress enacts a law specifically granting
uniformadvantages,favor,privilege,exemption,orimmunitytoalltelecommunicationsentities.
Thefactisthatthetermexemptionin23istoogeneral.Acardinalruleinstatutoryconstructionis
thatlegislativeintentmustbeascertainedfromaconsiderationofthestatuteasawholeandnotmerelyof
aparticularprovision.For,takenintheabstract,awordorphrasemighteasilyconveyameaningwhich
isdifferentfromtheoneactuallyintended.Ageneralprovisionmayactuallyhavealimitedapplicationif
read together with other provisions.[13] Hence, a consideration of the law itself in its entirety and the
proceedingsofbothHousesofCongressisinorder.[14]
Art.IofRep.ActNo.7925containsthegeneralprovisions,statingthattheActshallbeknownas
the Public Telecommunications Policy Act of the Philippines, and a definition of terms.[15] Art. II
provides for its policies and objectives, which is to foster the improvement and expansion of
telecommunications services in the country through: (1) the construction of telecommunications
infrastructure and interconnection facilities, having in mind the efficient use of the radio frequency
spectrumandextensionofbasicservicestoareasnotyetserved(2)fair,just,andreasonableratesand
tariffcharges(3)stable,transparent,andfairadministrativeprocesses(4)relianceonprivateenterprise
for direct provision of telecommunications services (5) dispersal of ownership of telecommunications
entitiesincompliancewiththeconstitutionalmandatetodemocratizetheownershipofpublicutilities
(6) encouragement of the establishment of interconnection with other countries to provide access to
international communications highways and development of a competitive exportoriented domestic
telecommunications manufacturing industry and (7) development of human resources skills and
capabilitiestosustainthegrowthanddevelopmentoftelecommunications.[16]
Art.IIIprovidesforitsadministration.Theoperationalandadministrativefunctionsaredelegatedto
theNationalTelecommunicationsCommission(NTC),whilepolicymaking,research,andnegotiations
in international telecommunications matters are left with the Department of Transportation and
Communications.[17]
Art.IVclassifiesthecategoriesoftelecommunicationsentitiesas:LocalExchangeOperator,Inter
Exchange Carrier, International Carrier, ValueAdded Service Provider, Mobile Radio Services, and
RadioPagingServices.[18]Art.Vprovidesfortheuseofotherservicesandfacilities,suchascustomer
premisesequipment,whichmaybeusedwithinthepremisesoftelecommunicationssubscriberssubject
only to the requirement that it is typeapproved by the NTC, and radio frequency spectrum, the
assignmentofwhichshallbesubjecttoperiodicreview.[19]
Art.VI,entitledFranchise,RatesandRevenueDetermination,providesfortherequirementtoobtain
afranchisefromCongressandaCertificateofPublicConvenienceandNecessityfromtheNTCbeforea
telecommunications entity can begin its operations. It also provides for the NTCs residual power to
regulate the rates or tariffs when ruinous competition results or when a monopoly or a cartel or
combination in restraint of free competition exists and the rates or tariffs are distorted or unable to
functionfreelyandthepublicisadverselyaffected.Thereisalsoaprovisionrelatingtorevenuesharing
arrangementsbetweeninterconnectingcarriers.[20]
Art.VIIprovidesfortherightsoftelecommunicationsusers.[21]
Art. VIII, entitled Telecommunications Development, where 23 is found, provides for public
ownership of telecommunications entities, privatization of existing facilities, and the equality of
treatmentprovision.[22]
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Art.IXcontainstheFinalProvisions.[23]
R.A. No. 7925 is thus a legislative enactment designed to set the national policy on
telecommunications and provide the structures to implement it to keep up with the technological
advancesintheindustryandtheneedsofthepublic.Thethrustofthelawistopromotegraduallythe
deregulation of the entry, pricing, and operations of all public telecommunications entities and thus
promotealevelplayingfieldinthetelecommunicationsindustry.[24]Thereisnothinginthelanguageof
23norintheproceedingsofboththeHouseofRepresentativesandtheSenateinenactingR.A.No.7925
which shows that it contemplates the grant of tax exemptions to all telecommunications entities,
includingthosewhoseexemptionshadbeenwithdrawnbytheLGC.
What this Court said in Asiatic Petroleum Co. v. Llanes[25]appliesmutatis mutandis to this case:
Whenexemptionisclaimed,itmustbeshownindubitablytoexist.Attheoutset,everypresumptionis
againstit.Awellfoundeddoubtisfataltotheclaim.Itisonlywhenthetermsoftheconcessionaretoo
explicittoadmitfairlyofanyotherconstructionthatthepropositioncanbesupported.Inthiscase,the
word exemption in 23 of R.A. No. 7925 could contemplate exemption from certain regulatory or
reportingrequirements,bearinginmindthepolicyofthelaw.Itisnoteworthythat,inholdingSmartand
Globe exempt from local taxes, the BLGF did not base its opinion on 23 but on the fact that the
franchises granted to them after the effectivity of the LGC exempted them from the payment of local
franchiseandbusinesstaxes.
Second.Inthecaseofpetitioner,theBLGFopinedthat23ofR.A.No.7925amendedthefranchise
ofpetitionerandineffectrestoreditsexemptionsfromlocaltaxes.Petitionercontendsthatcourtsshould
not set aside conclusions reached by the BLGF because its function is precisely the study of local tax
problemsandithasnecessarilydevelopedanexpertiseonthesubject.
Tobesure,theBLGFisnotanadministrativeagencywhosefindingsonquestionsoffactaregiven
weight and deference in the courts. The authorities cited by petitioner pertain to the Court of Tax
Appeals,[26]ahighlyspecializedcourtwhichperformsjudicialfunctionsasitwascreatedforthereview
oftaxcases.[27]Incontrast,theBLGFwascreatedmerelytoprovideconsultativeservicesandtechnical
assistancetolocalgovernmentsandthegeneralpubliconlocaltaxation,realpropertyassessment,and
otherrelatedmatters,amongothers.[28]Thequestionraisedbypetitionerisalegalquestion,towit,the
interpretationof23ofR.A.No.7925.Thereis,therefore,nobasisforclaimingexpertisefortheBLGF
thatadministrativeagenciesaresaidtopossessintheirrespectivefields.
PetitionerlikewisearguesthattheBLGFenjoysthepresumptionofregularityintheperformanceof
itsduty.Itdoesenjoythispresumption,butthishasnothingtodowiththequestioninthiscase.Thiscase
does not concern the regularity of performance of the BLGF in the exercise of its duties, but the
correctnessofitsinterpretationofaprovisionoflaw.
Insum,itdoesnotappearthat,inapproving23ofR.A.No.7925,Congressintendedittooperateas
a blanket tax exemption to all telecommunications entities. Applying the rule of strict construction of
laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal
corporationsininterpretingstatutoryprovisionsonmunicipaltaxingpowers,weholdthat23ofR.A.No.
7925cannotbeconsideredashavingamendedpetitionersfranchisesoastoentitleittoexemptionfrom
the imposition of local franchise taxes. Consequently, we hold that petitioner is liable to pay local
franchisetaxesintheamountofP3,681,985.72fortheperiodcoveringthefirsttothefourthquarterof
1999andthatitisnotentitledtoarefundoftaxespaidbyitfortheperiodcoveringthefirsttothethird
quarterof1998.
WHEREFORE,thepetitionforreviewoncertiorariisDENIEDandthedecisionoftheRegional
TrialCourt,Branch13,DavaoCityisAFFIRMED.
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