Estanislao (Sec of Fin) vs.
Costales There is no authority under Section 44 of the Local Tax Code for this conclusion. All
Facts
 The Sangguniang Panglungsod of Zamboanga City passed Ordinance 44
(1982) imposing a P0.01 tax per liter of softdrink produced, manufactured,
and / or bottled within the territorial JD of Zamboanga.
o Considered a tax on “output of production”
 It sent a copy of the ordinance to the minister of finance through registered
mail for review pursuant to the Local Tax Code (PD 231)
o The MOF, through Deputy Minister Roman, sent a letter to the
SPanglungsod suspending the Ordinance for being against Sectoon
19 (a) of the Local Tax Code.
 The City of Zamboanga, through its mayor, appealed to the RTC.
RTC
 The RTC says that the tax levied is NOT among those a Sanggunian can
impose under the Local Tax Code. But! It is valid because the MOF did not
act upon it within 120 days after receipt of copy.
 Finance Secretary Estanislao filed this petition for review on certiorari
alleging that the RTC erred.
Issue #1 – W/N the tax imposed by the ordinance is valid? NO – contravenes the Local
Tax Code.
 According to Section 23 of the LTC - A city such as Zamboanga City may
impose, in lieu of graduated fixed tax prescribed under Section 19 of the LTC,
a percentage tax on the gross sales for the preceding calendar year, for non-
essential commodities
o Not exceeding 2% Gross Sales for non-essential commodities
o Not exceeding 1% Gross Sales for essential commodities
 By fixing a tax on the output tax based on production, instead of a
Percentage Tax on gross sales/receipts, the ordinance imposes an Ultra
Vires Tax.
 While the SC, in the case of Pepsi-Cola Bottling Co vs. Tanauan upheld the
validity of an ordinance imposing a 0.01 tax for every gallon of soft drinks
(output tax), that case was based on the Local Autonomy Act (RA 2264)
which has been superseded by the LTC!
o Under the LAA, Cities and Municipalities could tax “everything and
anything not expressly excluded”
o LTC-64(a) says that “all existing tax ordinances of provinces, cities,
municipalities, and barrios shall be deemed ipso facto nullified on
June 30, 1974.”
 While the Constitution (X-5) provides that Each LGU shall have the power to
create its own resources of revenues, levy taxes, fees, and charges Subject
to such guidelines and limitations as congress may provide, consistent with
the basic policy of local autonomy.
Issue #2 – W/N the tax is valid for the MOF’s failure to act? NO
that is provided therein is that if the Secretary of Finance "takes no action as
authorized in this section, the tax ordinance shall remain in force."
Even if the Secretary of Finance failed to review or act on the Ordinance within the
prescribed period of 120 days it does not follow as a legal consequence thereof that
an otherwise invalid ordinance is thereby validated.
Much less can it be interpreted to mean that the Secretary of Finance can no longer
act by suspending and/or revoking an invalid ordinance even after the lapse of the
120-day period. All that the law says is that after said period the tax ordinance shall
remain in force.
Annex
LTC – Section 19 Tax on business. —The municipality may impose a tax on businesses
as follows:
(a) Tax on the business of manufacturing, importing, exporting, producing,
wholesaling or retailing of, or dealing in, any article of commerce of
whatever kind or nature, except those for which fixed taxes are
provided herein:
LTC – Section 23 - In lieu of the graduated fixed tax prescribed under Section 19 of
this Code as read in relation with this Section, the city may impose a percentage tax
on the sales of non-essential commodities at the rate of not exceeding two per cent
and on the sales of essential commodities at the rate of not exceeding one per cent.
In no case, however, shall the city impose both the graduated fixed tax and the
percentage tax on the same subject.
LTC – 44 - The Secretary of Finance, the provincial treasurer, or the city treasurer, as
the case may be, shall review and have the authority to suspend the effectivity of any
tax ordinance within one hundred and twenty days after receipt of a copy thereof, if,
in his opinion, the tax or fee therein levied or imposed is unjust, excessive,
oppressive, confiscatory, or not among those that the particular local government
may impose in the exercise of its power in accordance with this Code
Philippine Petroleum Corporation vs. Municipality of Pililia, Rizal
Paras
 Petitioner PPC is engaged in the manufacture of lubricated oil basestock, a
petroleum product. Its refinery plant is in Malaya, Pililia, Rizal, and it
conducts its business activities within Pililia.
o Apart from its refinery plant it also has 49 storage tanks for its
petroleum products in the municipality.
 Under NIRC (1939) – 142, manufactured oils and other fuels are subject to
specific tax. PD 231 (1973) provides that municipalities may impose taxes on
business except for those which fixed taxes are provided for
o PD 231 was amended twice, but the provision was retained, except
that the specific taxes were increased (PD 436)
 Due to the increase, provinces, cities, and municipalities
were granted certain shares in said specific tax, in lieu of
local taxes imposed on petroleum products
 BUT! The Secretary of Finance issued Provincial Circular 26-73 directing
treasurers to refrain from collecting any local tax imposed on the business
of manufacturing, wholesaling, retailing, or dealing in petroleum products,
subject to the NIRC specific tax.
o Similar was Provincial Circular 26 A-73
 The Municipality of Pililia enacted a Municipal Tax Ordinance known as the
Pililla Tax Code (1974). It imposed a tax on business for manufacturers,
importers, producers of any article of commerce of whatever kind or nature.
o It required a mayor’s permit sanitary inspection fee, and a storage
permit fee for flammable substances.
 While the Pillila Tax Code was reviewed and approved by the Provincial
Treasurer of Rizal, it could not be implemented because of 26-73 and 26-A-
73.
o Despite this prohibition, PPC filed a complaint against PPC for the
collection of business taxes from 1975-1986
 + storage permit fees + sanitary inspection fees (’75-’84)
RTC
 RTC decided against PPC, ordering it to pay the deficiencies  certiorari to
SC
 The exercise by local governments of the power to tax is ordained by no less
than the Constitution. This power is limited by acts of Congress.
o In this case, however, there was merely a mere administrative
issuance by the Secretary of Finance.
o To allow such prohibition to stand would be to restrict their power
by mere admin issuance. Under the Consti, only Congress can
define and limit the power of local governments to tax.
 BUUUUT since the Local Tax Code does not have its own provisions on
prescriptive periods in collecting taxes, civil code provisions apply.
Particularly NCC 1143 - an action upon an obligation created by law
prescribes within 10 years from the time the right of action accrues. The
MUNICIPALITY thus can enforce collection of business taxes for the period
covering 1976-1986, and not the tax accruing prior to 1976.
Issue #2 – W/N petitioner is liable for storage permit fees?
 The storage permit fee imposed by the MUNICIPALITY tax ordinance is a fee
for the installation and storage of flammable substances. Inasmuch as the
tanks used are owned by PPC, and not the MUNICIPALITY, the fee is thus
not a charge for any service rendered by the municipality.
 Provincial Circular No. 6-77 directed municipal treasurers to refrain from
collecting the storage fee; PPC is thus freed from this obligation.
Issue #3 – Mayor’s Permit Fee
 Allowed by the Local Tax Code
 As to the authority of the mayor to waive payment of the permit and
sanitary inspection fees, such is legislative prerogative; a municipal mayor,
who is an executive officer, may not unilaterally make an exemption.

Issue #1 – Liable for the business tax? YES

 While PD 436 prohibited the imposition of local taxes on petroleum
products, it did not amend the provisions of PD 231 as amended by PD 426
(1st amendment) which granted municipalities the right to levy business
taxes.
o If the imposition of such taxes contravened a declared national
policy, it should have been expressly stated in PD 436 which
amended it. None exist!
Floro Cement Corp vs. Gorospe (CFI Judge) and Municipality of Lugait
Bidin
 The municipality of Lugait, Misamis Oriental (represented by the municipal
and provincial treasurer in this case) filed with CFI a verified complaint for
collection of taxes against the Floro Cement Corporation, a mining operator
of mineral lands.
o “manufacturers” and “exporters” taxes for January 1, 1974 –
September 30, 1975, for a total amount of 161,875 plus 25%
surcharge.
 According to the municipality, the taxes are based on the following:
o Mun. Ordinance 05 (Revenue Code) passed pursuant to PD 231
o Mun. Ordinance 10, pursuant to PD 426, amending 231
 Note: Section 5 of PD 231 - The exercise of taxing power
of provinces, cities, municipalities and barrios shall not
extend to the imposition of the following: xxx xxx xxx (m)
Taxes on mines, mining operations and mineral products
and their by-products when sold domestically by the
operator.
Defense
 It’s not liable because the Municipality’s power to levy taxes is limited by
Section 52 of PD 423 which provides that No
p/c/municipality/barrio/municipal district shall levy and collect taxes, fees,
rentals, royalties, or charges of any kind whatsoever on mines, mining
claims, mineral products, or on any operation, process or activity
connected therewith.
 No legal capacity to sue, no cause of action, no COA stated in the complaint
 Floro Cement was granted by the Secretary of Agriculture and Natural
Resources a certificate of qualification for tax exemption (CQTE)
o CQTE No. 22 – Exemption for 5 years (April 1969-1974) from all
taxes except income tax
o CQTE PD 463-22 – same exemption – 5 years from the “first date of
actual commercial production of saleable mineral products”
 Floro Cement argues that RA 3823 and PD 463 are special laws as opposed
to the Mun. Ordinances based on 231 and 426 which are general
o They say that special laws cannot be amended or repealed by a
general law unless there is express intent to do so.
CFI
 In favor of the municipality, ordered Floro Cement to pay 161,875 as manuf
and exporters taxes and surcharges
Arguments
 Floro – Cement is a mineral product and is thus exempt under PD 231. While
PD 231 only had a partial exemption, it was rendered absolute by Sec. 52 of
PD 463 which expressly prohibits the province, city, municipality, barrio, and
municipal district from levying and collecting taxes, fees, rentals, royalties,
or charges of any kind whatsoever on mines, mining claims, and mineral
products including the operation, process, or activity connected with its
productions (kasama yung paggawa ng cement sa prohibition)
o Manuf of cement inherently connected with the mining operation
undertaken by Floro Cement Corporation.
 Munic – The taxes are being levied not on the operation/exploration but on
the business of manufacturing and exporting cement.
o The power is under PD 231 (Article 2 section 19) as amended by
426 which states that
“"The municipality may impose a tax on business except those for which fixed taxes
are provided for in this Code: (a) On manufacturers, importers, or producers of any
article of commerce of whatever kind or nature, including brewers, distillers,
rectifiers, repackers, and compounders of liquors, distilled spirits and/ or wines in
accordance with the following schedule: xxx xxx xxx (a-1) On retailers, independent
wholesalers and distributors in accordance with the following schedule: xxx xxx xxx”
Cement is a manufactured product, not a mineral product
CIR vs. Cebu Portland Cement - While cement is composed of 80'7c minerals, it is not
merely an admixture or blending of raw materials, as lime, silica, shale and others. It
is the result of a definite process-the crushing of minerals, grinding, mixing, calcining
adding of retarder or raw gypsum. In short, before cement reaches its saleable form,
the minerals had already undergone a chemical change through manufacturing
process
Municipality’s Power of Taxation
The power of taxation is a high prerog of sovereignty, the relinquishment is never
presumed and any reduction or diminution 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.
 In other words, exemption is strictly construed against the Tax Payer.
 The taxpayer claiming exemption must be able to point out some provision
of law creating the right, it cannot be implied through mere inference.
Failure to show exemption
 The exemption mentioned in Sec 52 of PD 463 refers only to machineries,
equipment, tools for production, etc, as provide in Section 53 of the same
decree.
o The process of manufacturing and exporting cement does not fall
under the said provision for it is not a mineral product
Furthermore, by the parties' own stipulation of facts submitted before the court a
quo, it is admitted that Floro Cement Corporation is engaged in the manufacturing
and selling, including exporting of cement.
Tuzon vs. CA  If we were to take it as a Tax Ordinance, then it must be shown to have been
Facts enacted in accordance with the Local Tax Code
 The SB of Camalaniugan Cagayan unanimously adopted Resolution No. 9 o PUBLIC HEARING on the measure
which was a fundraising scheme to help finance the construction of the o APPROVAL by the Secretary of Finance
project, by soliciting 1% donation from the thresher operators who WILL o Usual requisites for PUBLICATION
APPLY for a permit to thresh within the municipality of Camanalaniguin
o 1% of all the palay threshed by them Issue #2 – W/N petitioners are liable for damages? No.
 Private Respondent Jurado sent his agent to the municipal treasurer’s office  The claim for damages in this case is based on Article 27 of the Civil Code -
to pay the license fee of 285 pesos for thresher operators. Any person suffering material or moral loss because a public servant or
 Before Jurado was allowed to pay the license fee, he was told by the employee refuses or neglects, without just cause, to perform his official duty
Municipal Treasurer Mapagu and Mayor Domingo Tuzon that Jurado must may file an action for damages and other relief against the latter, without
first comply with the resolution prejudice to any disciplinary administrative action that may be taken.
o Via signing the agreement b  NCC 27 Presupposes that the refusal or omission of a public official to
o Jurado ignored this requirement  his payment was not accepted. perform his duty is attributable to Malice, Inexcusable negligence
 Jurado filed a Mandamus Case @ CFI-Cagayan + damages. o Neither even ALLEGED in this case moreso proven.
 TC upheld the validity of the ordinance as well as the CA o Within scope of authority and honest interpretation of the
o CA though said na officials should pay damages to Jurado for bad resolution in question.
faith  Since wala namang court decision rendering it invalid, edi
they HAD to enforce it as long as di pa binabawi ng
Issue #1 – W/N the ordinance was valid Sangguniang Bayan or ng Courts
 “we need not concern ourselves with the validity of Resolution 9 and the
implementing agreement because the issue has not been raised in this
petition as an assigned error of the respondent court”
 Note the CA ruling:
o It was passed by the SB in its lawful exercise of legislative powers
pursuant to XI-5 of the 1973 constitution, which provided that each
LGU shall have the power to create its own sources of revenue and
to levy taxes, subject to such limitations as may be provided by law”
o PD 231 (Enacting a Local Tax Code for P/C/M/B) – Section 29
Article 4 - In addition to the above specified taxing and other
revenue-raising powers, the barrio council may solicit monies,
materials, and other contributions from the following sources: x x
x “(c) Monies from private agencies and individuals.”
 The CA statement is an over-simplification – the CA has not offered any
explanation for its conclusion that the challenged measures are valid, nor
does it discuss its own concept of the nature of the resolution.
 Mandatory Donation – while the ordinance is worded simply that the LGU
intends to “solicit” the 1%, the implementing agreement seems to make
the donation obligatory and a condition precedent to the issuance of a
mayor’s permit
o Goes against the very nature of a donation, which is an act of
liberality, and is never obligatory
Drilon vs. Lim
Cruz, J.
 Section 187 of the Local Government Code provides the procedure for
approval and effectivity of tax ordinances and revenue measures +
mandatory public hearings – ANNEX
o It gives the SOJ the power to determine the constitutionality or
legality of tax ordinances or revenue measures
 Four oil companies and a tax-payer appealed to declare ordinance 7794
(Manila Revenue Code) as void. The Secretary of Justice declared it void for:
o #1 – non compliance with the prescribed procedure in the
enactment of tax ordinances ANNEX
 In short, publication and notice requirements not met
o Being ultra vires, contrary to law and public policy.
 On appeal to RTC-Manila, Judge Palattao found the ordinance valid
o Procedural requirements met
o Section 187 of the LGC is unconstitutional bec. it vests the SOJ
with control over LGUs in violation of local autonomy policy and
specific provisions conferring to the President only the power of
supervision
 JUSTICE JUSTICE JUSTICE JUSTICE the SOJ appealed to the SC arguing that
LGC 187 is constitutional and the procedural requirements were not met.
 First SC Case dismissed for non-compliance with SC Circular 1-88 (Solgen
didn’t submit a certified true copy of the challenged decision)
 MORE filed with the required CTC
RTC had JD to rule on the constitutionality of the law
 The authority of the RTC is based on the general definition of Judicial Power
to determine what is valid and binding (w/n complies with the Consti)
 BP 129 vests the RTC with JD over all civil cases where the subject is
incapable of pecuniary estimation even if one of the parties allege the
unconstitutionality of a law.
 That the RTC has JD is also supported by the Consti! X-5(2) gives the SC
appellate JD over FJ and orders of LOWER COURTS in cases involving the
constitutionality or validity of an ordinance.
But it would be more prudent to defer to the higher judgment of the SC
 Since questioned laws are usually the handiwork of the legislative or
executive departments, it would be prudent for lower courts, out of
modesty to defer to the higher judgment of the SC bec. it’s better equipped
to determine since collegiate
Section 187 is Constitutional. It only gives supervision NOT control
Usual control/supervision dichotomy. Set aside, modify, substitute versus see to it
that subordintes perform function in accordance with the law
In this case, the SOJ only reviews the constitutionality or legality of the tax, and if
warranted, revoke it.
 When the SOJ alters or modifies the tax, he does not actually substitute his
own judgment for that of the LGU. He merely sees to it that the rules are
followed
 Control includes the laying down of the rules, which the SOJ does not have
as they merely see to it that the rules are followed.
While SOJ Drilon set aside the Manila Revenue Code, he did not replace it with his
own version of what the code should be.
 He did not say that it was unwise or unreasonable. He did not say it was a
bad law.
 He only found that it was illegal, therefore, all he did was determine if the
City of Manila was acting within its functions in accordance with the LGC
SOF can exercise CONTROL (vs say SOJ Drilon)
Section 2(???) of the LGC is a rule similar to Section 187 – annex
 This section vests the SOF with CONTROL by suspending the effectivity of a
tax ordinance if, in his opinion, the tax or fee levied was unjust, excessive,
oppressive, or confiscatory.
 The determination of unjustness, oppressiveness, or confiscatory-ness (as
opposed to legality/constitutionality) involve the exercise of JUDGMENT
OR DISCRETION
As opposed to SOJ (this case) where supervision lang! determine lang legality or
constitutionality, NOT unjustness, excessiveness, oppressiveness, etc.  no
discretion
 In this case it was set aside because of non-compliance with the law
(procedure) and because it was ultra vires
 Such is a determination of legality, not the wisdom of the tax measure.
Procedural Requirements Substantially Complied with
 The only requirements not complied with are the posting of the ordinance
as approved but this omission does not affect its validity, considering that
its publication in 3 successive issues of a newspaper of general circulation
will satisfy due process.
 It has also not been shown that the text of the ordinance has been translated
and disseminated, but this requirement applies to the approval of local
development plans and public investment programs of the local government
unit and not to tax ordinances.
Annex  The Manila Revenue Code was not translated into Pilipino or Tagalog and
LGC 187 - The procedure for approval of local tax ordinances and revenue measures disseminated among the people for their information and guidance,
shall be in accordance with the provisions of this Code: conformably to Sec. 59(b) of the Code.
 Provided, That public hearings shall be conducted for the purpose prior to
the enactment thereof;
 Provided, further, That any question on the constitutionality or legality of
tax ordinances or revenue measures may be raised on appeal within thirty
(30) days from the effectivity thereof to the Secretary of Justice who shall
render a decision within sixty (60) days from the date of receipt of the
appeal:
 Provided, however, That such appeal shall not have the effect of
suspending the effectivity of the ordinance and the accrual and payment of
the tax, fee, or charge levied therein:
 Provided, finally, that within thirty (30) days after receipt of the decision or
the lapse of the sixty-day period without the Secretary of Justice acting upon
the appeal, the aggrieved party may file appropriate proceedings with a
court of competent jurisdiction.

Section 2(???) used to compare SOF sa SOJ - A tax ordinance shall go into effect on
the fifteenth day after its passage, unless the ordinance shall provide otherwise:
Provided, however, That the Secretary of Finance shall have authority to suspend the
effectivity of any ordinance within one hundred and twenty days after receipt by him
of a copy thereof, if, in his opinion, the tax or fee therein levied or imposed is unjust,
excessive, oppressive, or confiscatory, or when it is contrary to declared national
economy policy, and when the said Secretary exercises this authority the effectivity
of such ordinance shall be suspended, either in part or as a whole, for a period of
thirty days within which period the local legislative body may either modify the tax
ordinance to meet the objections thereto, or file an appeal with a court of competent
jurisdiction; otherwise, the tax ordinance or the part or parts thereof declared
suspended, shall be considered as revoked. Thereafter, the local legislative body may
not reimpose the same tax or fee until such time as the grounds for the suspension
thereof shall have ceased to exist.

Procedure not complied with according to SOF

 No written notices of public hearings on the proposed Manila Revenue
Code that were sent to interested parties as required by Art. 276(b) of the
IRR of LGC
 No copies of the proposed ordinance published in three successive issues of
a newspaper of general circulation pursuant to Art. 276(a).
 No minutes were submitted to show that the obligatory public hearings
had been held.
 No copies of the measure as approved posted in prominent places in the
city in accordance with Sec. 511(a) of LGC.
Mactan Cebu Airport vs. Marcos
Davide, J.
 Petitioner Mactan Cebu International Airport Authority (MCIAA) was
created by virtue of RA 6958 mandated to manage and control and
supervise the Mactan International Airport (MIA) and the Lahug Airport both
in Cebu City, “and such other airports as may be established in the Province
of Cebu)
o “encourage, promote, and dvelop international and domestic air
traffic in Central Visayas and Mindanao as a means of making the
regions centers of international trade and tourism, accelerating the
development of the means of transportation and communication
in the country”
o “upgrade the services and facilities of the airports and to formulate
internationally acceptable standards of airport accommodation
and service”
 Ever since it was created, MCIAA is exempted from realty taxes as per
Section 14 of its charter “exempt from realty taxes imposed by the National
Government or any of its political subdivisions, agencies and
instrumentalities”
 Still, in October 1994, Cesa, OIC of the Office of the Treasurer of Cebu City
demanded payment for realty taxes on parcels of land belonging to MCIAA
o Tax was 2.2 million total
 MCIAA says na the tax demanded is baseless and unjustified, and that it was
an instrumentality of the govt
o It cited LGC -133 w/c put limitations on the taxing powers of LGUS
 “common limitations, the taxing power of pcmb shall not
extend to “on the national governemtn, its agencies and
instrumentalities, and LGUs”
 Cebu City refused to cancel the liability for realty tax, it insisted that MCIAA’s
exempt status has been expressply withdrawn by LGC 193 and 234 ANNEX
o In order to avoid having their properties levied, MCIAA paid under
protest, and thereafter filed a Petition for Declaratory Relief with
the RTC – Cebu
Declaratory Relief at the RTC
 MCIAA contended that the taxing powers of LGUs don’t extend to levying
taxes on any instrumentality of the national government
o MCIAA says that while it’s a GOCC, it stands on the same footing as
an agency/instrumentality.
 Cebu City argues that the MCIAA is not an instrumentality but a GOCC
performing proprietary functions. As a GOCC, its exempt status was
withdrawn by the LGC.
 RTC – dismissed the appeal (upholding the tax) saying na there was an
express cancellation of the exemption in the new LGC (7160)
Issue #1 – W/N MCIAA is liable to pay real taxes to the city of Cebu – YES
 The power to tax is an incident of sovereignty and is unlimited in range, by
its nature no limits, so that security against its abuse can be found only in
the responsibility of the legislature w/c imposes the tax on the
constituency who are to pay it.
o And also the Consti
o So potent that it was termed the “power to destroy” – it is a
destructive power which interferes with rights and takes from them
a portion of property to support the government
 Since taxes are what we pay for a civilized society, exemptions are construed
against the taxpayer, and in favor of the tax.
o A claim for exemption must be clearly shown and based on the
language in the law
o Exception: when the grantee of an exemption is a political
subdivision or instrumentality, the rigid rule of construction does
not apply
 The power to tax is primarily vested n Congress but it may be exercised by
Local Legislative Bodies pursuant to direct authority conferred under X-5.
The exercise of the power may be subject to such guidelines and limitations
as the Congress may provide w/c must be consistent with Local Autonomy
As applied in this case
 Under its charter, the MCIAA is exempt from payment of realty taxes
imposed by the national government or any of its political subdivisions, but
since taxation is the rule, this exemption may be withdrawn at the pleasure
of the taxing authority
o While LGC 133 says what it says, under 232, PCM in Metro Manila
may impose real property taxes except on “real property owned by
the Republic of the Philippines, or any of its political subdivisions,
except when the beneficial use thereof has been granted to a
taxable person (in w/c case taxable na)
 Furthermore, such exemption was withdrawn na nga by the last paragraph
of 234. MCIAA failed to show na applicable yung exemptions under 234.
The parcels of land belong to the MCIAA not to the republic
 The MCIAA charter (section 15) involves a transfer of the lands from the
“ATO” ??? to the MCIAA. This “transfer” is an absolute conveyance of the
ownership because the capital stock of MCIAA is made up of such real
estate owned and administered
 Furthermore MCIAA cannot claim na it’s not a “taxable person” because it
was only exempted from REAL property taxes. Such grant of privilege is even
 more proof na di naman talaga sila non-taxable entity but rather, na exempt
lang from that specific tax
Annex
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.

Section 234. Exemptions from Real Property Taxes. — The following are exempted
from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof had been granted, for
consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all lands, buildings and
improvements actually, directly, and exclusively used for religious, charitable or
educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by
local water districts and government-owned or controlled corporations engaged in
the supply and distribution of water and/or generation and transmission of electric
power;
(d) All real property owned by duly registered cooperatives as provided for under R.A.
No. 6938; and
(e) Machinery and equipment used for pollution control and environmental
protection

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.
Coca Cola Bottlers PH vs. City of Manila
Chico-Nazario
 Coca Cola Bottlers PH is a corporation engaged in the business of
manufacturing and selling beverages. As such it maintains a Sales office in
Manila.
 2000 – the City of Manila approved Tax Ordinance 7988 which is its Revised
Revenue Code
o the RRC increased the tax rates to certain establishments in the
city, including Coca Cola.
o It also amended the old code by deleting the phrase “all registered
business in the City of Manila that are already paying the
aforementioned tax shall be exempted from payment thereof”
 Coca Cola filed a petition before the DOJ (remember Section 187 from the
Drilon case) against the City of Manila and its Sangguniang Panglungsod
questioning the laglity of Said Section 21 of the RRC.
o Coke alleged that the provision imposed additional business tax on
businesses already subject to business tax under other sections of
the RCC, “beyond the taxing powers of the City of Manila”
DOJ
 The DOJ declared the RRC null and void
 The DOJ found that the RRC violated Section 188 of the LGC and the IRR of
the LGC because it failed to comply with the requirements of publication in
full for 3 consecutive days in a newspaper of local circulation, having been
published only ONCE
o “shall”  mandatory hence no choice. The essence of publication
is to inform the people and the entities who will be affected, of the
existence of such as a tax measure
o Strict observance of the procedural requirement is the only
SAFEGUARD against unjust and unreasonable exercise by the taxing
authority, ensuring that the taxpayers are notified through
publication of the existence of the measure, and are therefore able
to voice out their views or objections to the said measure.
The City of Manila failed to file an MR  DOJ decision became final.
On another incident, a certain Atty. Aurelio, in behald of Singer Sewing Machine Co.
requested an opinion from the Bureau of Local Government Finance (BLGF) if the City
of Manila had a right to impose such a tax despite the DOJ decision?
The BLGF issued an indorsement ordering the City Treasurer to cease and desist from
enforcing Tax Ordinance 7988 in view of the DOJ’s resolution
Despite the DOJ resolution (and I guess the BLGF indorsement), the City of Manila
continued to assess such business taxes for 2001 (kay Coke)
 Coke filed a complaint with RTC-Manila to enjoin the City and its treasurer
from implementing the ordinance
 The RTC decided in favor of Coca Cola, declaring the injunction against the
City permanent
During the pendency of the RTC case, the City of Manila approved Tax Ordinance
8011, amending certain sections of 7988 (RRC)
 This new ordinance was likewise assailed by Coke @ DOJ
 The DOJ declared it null as well. DOJ said na dapat in accordance with the
law
The City appealed this new decision (naging final yung sa 7988 diba) before the RC
then the SC. The SC 2003 denied the City’s MR with finality.
On may 2002, before the SC denied the MR with finality, the City of Manila moved
for reconsideration of the RTC decision making the injunction permanent. It was
granted! The RTC granted the MR and dismissed the injunction case.
Issue #1 – W/N the RTC was correct in granting the City’s MR and in dismissing Coke’s
complaint? NO
 It is undisputed that Tax Ordinance 7988 has already been declared by the
DOJ Secretary, in its [Aug 2000] Resolution, as null and void and without
legal effect due to the City’s failure to satisfy the requirement that the
ordinance be published for 3 consecutive days as required by law. The City
never appealed this resolution so it attained finality after the lapse of the
period of appeal.
 Furthermore, the RTC of Manila reiterated this failure to follow procedure
in enactment of tax measures (as mandated by Sec. 188 of the LGC) in its
[Nov. 2001] Decision – therefore Tax 7988 is really null and void. BUT despite
this, in its [May 2002] Ruling – the RTC dismissed COCA-COLA’s complaint on
the basis of Tax Ordinance 8011 – which purportedly amended 7988.
 Tax Ordinance 8011 is likewise null and void. As elucidated by the DOJ:
“respondent should have enacted another tax measure which strictly
complies with the requirements of law, both procedural and substantive.
o The passage of the assailed ordinance did not have the effect of
curing the defects of Ordinance No. 7988 which, any way, does
not legally exist."
 People v. Lim: if an order or law sought to be amended is invalid, then it
does not legally exist, and there should be no occasion or need to amend it.
Petron vs Tiangco
Tinga
 Petron maintains a depot or bulk plant at the Navotas Fishport Complex. It
is used to sell diesel fuels to vessels used in commercial fishing in and around
Manila Bay.
 Petron received a notice of assessment from Mayor Tiangco of Navotas,
apparently, Petron was assessed Business Taxes on the sale of diesel from
1997-2001 amounting to 6.2 million based on gross sales of the depot
 Petron filed a letter-protest pursuant to LGC-195 with Navotas City. Petron
argued that it was exempt from local business taxes in view of IRR-232 as
well as a ruling of the BLG-F of the DOF which stated that sales of petroleum
fuels are not subject to local taxation
o The letter protest was denied by the Navotas Municipal Treasurer.
Petron received another letter requiring it to pay the amount
within 5 days lest their depot be closed for non-payment.
 Petron filed a a Complaint for Cancellation of Assessment for Deficiency
Taxes with prayer for the issuance of a TRO @ Malabon RTC. The complaint
was dismissed.
 Petron received a closure order.
 Appeal directly to the SC (pure QOL)
Issue / Held
W/N an LGU is empowered by the LGC to impose business taxes on persons/entities
engaged in the sale of petroleum products? NO the subject tax is ultra vires and void
 NOT because it’s an excise tax on an article under enumerated under the
NIRC thus prohibited under LGC-133(h)
 Rather, it’s because the challenged act is prohibited by Section 133(h)
under the proviso “Taxes, Fees, or Charges on Petroleum Products”
 IRR 232 (h) no longer discussed bec. void na under “taxes, fees, or charges
on petroleum products”
The controversy hinges on how to interpret LGC-133(h) and how to apply IRR-232(h)
 133 prescribes the limitations on the capacity of LGUs to exercise their
taxing powers otherwise granted to them. Under (h), they cannot impose
taxes on excise taxes on articles enumerated under the NIRC and Taxes,
fees, or charges on petroleum products
 143 provides for the power of a municipality to impose business taxes on a
whole host of business activities. Since it’s broad, it would undoubtedly
cover the business of selling diesel or pertroleum unless another law states
otherwise.
o Further supported by 232 of the IRR - The enumeration that follows
is generally a positive list of businesses which may be subjected to
business taxes, and paragraph (h) of Article 232 does allow the
imposition of local business taxes "[o]n any business not otherwise
specified in the preceding paragraphs which the sanggunian
concerned may deem proper to tax," but subject to this important
qualification – “provided further, that in line with existing national
policy, any business engaged in the production, manufacture,
refining, distribution or sale of oil, gasoline and other petroleum
products shall not be subject to any local tax imposed on this
article.”
o NB: 232 was previously held by Malabon RTC to be void since the
LGC does not contain a provision prohibiting the imposition of
business taxes on petroleum products.
Not an Excise Tax – does not fall under first phrase (yung with reference to NIRC)
 Navotas - Sec. 133 prohibits the imposition of excise taxes on petroleum
products, but not the imposition of business taxes on the same. A tax on
business is distinct from a tax on the article itself.
 Petron’s argument (na the business tax is an excise tax) would have
unwanted consequences. If it were correct, LGUs cannot impose business
taxes on any of the articles subject to excise taxes under the NIRC such as
alcohol, tobacco, mineral products, cars, and non-essentials.
 While Petron’s basis is American Law, our current Tax Law does not
accommodate such definition. Starting from 1986, excise taxes in this JD
refer exclusively to Specific or Ad Valorem Taxes imposed under the NIRC
o Beginning with the NIRC of 1986, the term "excise taxes" was used
and defined as applicable "to goods manufactured or produced in
the Philippines... and to things imported." This definition was
carried over into the present NIRC of 1997.
o These two latest codes categorize two different kinds of excise
taxes: "specific tax" which is imposed and based on weight or
volume capacity or any other physical unit of measurement; and
"ad valorem tax" which is imposed and based on the selling price
or other specified value of the goods.
But cannot be taxed bec. of “taxes, fees, charges on petroleum products” precludes
LGC from imposing business taxes on the SALE of petroleum products
 Navotas – “Taxes, Fees, or Charges on petroleum products” pertains to
excise taxes on petroleum products BUT NOT BUSINESS TAXES
o Also cited the case of San Pablo vs Reyes – doubts as to the power
of an LGU shall be liberally interpreted in its favor.
 SC: The ability of LGUs to impose business and other local taxes is ultimately
rooted in X-5, subject to “such guideleines and limitations as Congress may
provide” including Sec. 5(b) of the LGC wherein “In case of doubt, any tax
ordinance or revenue measure shall be construed strictly against the Local
Governemnt Unit enacting it, and liberally in favor of the taxpayer”
  Evidently, local fiscal autonomy does not necessarily translate into abject
deference to the power of LGUs to impose taxe
 Another limitation is 133 “taxes fees or charges on petroleum products
o If such phrase meant excise taxes and not business taxes (argument
of Navotas) it would be redundant since the preceding phrase
already prohibits excise taxes on articles already subject to excise
tax under the NIRC i.e. petroleum.
 It would make no sense for the legislature to twice
emphasize the prohibition against the imposition of such
a tax
o Side Note: Navotas’s argument is based on PPC vs. Pillila wherein
it was stated that a tax on a business is distinct from a tax on the
article itself
 SC: this has yet to be reprised by any court, it could have
been omitted from te decision without any effect
 Besides, that case varies widely from the instant case.
During Pillila, there was no national law in place similar
to 133(h) of the LGC
 Apart from redundancy, it’s also clear that the law does not make any
qualifications as to what “taxes, fees, or charges” are involved – the absence
of such qualification leads to the conclusion that ALL sorts of taxes on
petroleum products, including business taxes, are prohibited by 133(h)
o Where the law makes no distinction, neither shall the court
On 232 – it’s valid (since 133(h) says the same thing basically)
With our ruling that Sec. 133(h) does indeed prohibit the imposition of local business
taxes on petroleum products, the RTC declaration that Art. 232 was invalid is, in turn,
itself invalid. Even absent Article 232, local government units cannot impose business
taxes on petroleum products. If anything, Article 232 merely reiterates what the Code
itself already provides, with the additional explanation that such prohibition was "in
line with existing national policy.”
Obiter u didn’t read but copy paste
There is one more line of argument raised by Navotas that deserves a remark.
Respondents argue, "assuming... that the Oversight Committee [that drafted the
IRR] can legislate, that the "existing national policy" referred to in Article 232 had
been superseded by Republic Act No. 8180, or the Oil Deregulation Law. Boiled down
to its essence, the argument is that since the oil industry is presently deregulated
the basis for exempting petroleum products from business taxes no longer exists.
The starting premise for this argument, that the IRR can establish a tax or an
exemption, is false and has been flatly rejected by the SC before. The Code itself does
not connect its prohibition on taxation of petroleum products with any existing or
future national oil policy, so the change in such national policy with the regime of
oil deregulation is ultimately of no moment. (exemption not dependent on policy)
The SC stated that the reason behind singling out petroleum products, among all
other commodities, as beyond the power of local government units to levy local taxes
is because oil is a political commodity.
 In this age where unfortunately dependence on petroleum as fuel has yet
no equally feasible alternative, the cost of petroleum products, though fully
controlled by private enterprise, remains an area of public concern.
 It can be reasonably presumed that if municipalities, cities and provinces
were authorized to impose business taxes on manufacturers and retailers of
petroleum products, the resulting losses to these enterprises would be
passed on to the consumers, triggering the chain of increases that normally
accompany the increase in oil prices. No similarly massive trigger effect
would ensue upon the imposition of business taxes on other commodities,
including those already subject to excise taxation under the NIRC.
It cannot be denied that subjecting petroleum products to business taxes apart from
the taxes already imposed by Congress in this age of deregulation would lead to the
same result had they been so taxed during the era of oil regulation - the increase of
oil prices.
Respondents may be bolstered by the constitutional and statutory policy favoring
local fiscal autonomy, but it would be utter indolence to reflexively affirm such policy
when the inevitable effect is an increase in oil prices. Any prudent adjudication should
fully ascertain the mandate of local government units to impose taxes on petroleum
products, and such mandate should be cast in so specific terms as to leave no dispute
as to the legislative intendment to extend such power in the name of local autonomy.
Manila International Airport Authority (MIAA) vs CA
Carpio
 MIAA operates the NAIA complex in Paranaque City, and holds title to its
aiport lands and buildings.
 The office of the government corporate counsel (OGCC) issued an opinion
stating that the enactment of the LGC withdrew the exemption from real
estate tax granted to MIAA under the MIAA charter
 The City of Paranaque, quick to act, sent notices of Real Estate Tax
Delinquencies to MIAA.
o Notices and warrants of levy were issued on the airport lands and
buildings in NAIA
 MIAA sought to clarify the OGCC opinion.
o The OGCC rendered a second opinion stating that Section 21 of the
MIAA charter is proof that MIAA is exempt from real estate tax.
o Since the LGC requires proof of exemption from a person exempt
to pay real estate tax, section 21 of the MIAA charter would
effectively prevail
 Armed with this 2nd opinion, MIAA filed a Prohibition/Injunction suit with
the CA to restrain the City of Paranaque from imposing real estate tax and
imposing levies on their property
 CA dismissed the case. MIAA filed a petition for review with the Supreme
Court where it argued that
o The airport and the lands upon which it is built are devoted to
public use. As public property, they are not subject to reasl estate
tax by LGUs. Moreover, MIAA claimed a tax exemption under the
MIAA charter and LGC-234 invoking the principle that the
government cannot tax itself.
o On the other hand, the City of Paranque was arguing that the LGC
expressly withdrew exemptions to GOCCs, and that MIAA IS a
GOCC
 Moreover, LGC does not exempt international airports
 Also, Mactan Cebu (MCIAA) vs Marcos
 During the pendency of the SC appeal, the City of Paranaque proceeded
with the public auction. While the SC granted a TRO, the City only received
it 3 hours after concluding the auction.
MIAA, not a GOCC, but an instrumentality exempt from local taxation
 A GOCC must either be stock or non-stock. It’s neither because it has no
capital stock divided into shares, and it’s not non-stock because it does not
have members.
 The MIAA, under the charter, is required to remit a certain percentage of its
annual gross operating income to the national treasury, which would be
peculiar if it were a non-stock corporation, since non-stocks cannot
distribute any part of their income to a member
o Further, MIAA not organized for purposes under the Corp Code w/c
state na non-stock is charitable, religious, educational, etc.
 MIAA is a National Government Instrumentality, exempt under LGC –
133(O) based on the principel that LGUs cannot tax the national government
o While it has corporate powers, it does not automatically mean na
it’s a corporation because instrumentalities of the national
government, accdg to its definition sa Admin Code, also have
corporate powers + operational autonomy
o GR: exemption construed against tax-payer EXCEPT when the tax-
payer is an instrumentality of the national government in which
case the strictness reverses – construe Liberallyi n favor of the
instrumentality
o In order for a LGU to tax a national govt instrumentality, there must
be clear legislative intent to tax it for the delivery of essential
public services for sound and compelling policy considerations
 Express provision MUST exist
 Hence puwede but dapat express
Airport Lands and Buildings are properties of the National Governemnt not taxable
and not subject to levy or disposition through an auction sale
 234(a) of the LGC exempts from real estate taxes any real property owned
by the Republic of the Philippines. This should be read together with 133(O)
prohibiting taxes on the Nat Govt and its instrumentalities
o The exemption under 234(a) is when the beneficial use of the
property is granted to a taxable person
o But since MIAA is an instrumentality and is NOT taxable under
133(O), then its beneficial use of the property does not make it
subject to real estate taxes.
 These airport lands and buildings are not subject to levy, encumbrance, or
disposititon through auction sale. Otherwise, essential public services will
cease to operate
o The collection of terminal fees does not change the character of
the airport lands. The terminal fee is charged for maintenance,
often termed a “User’s Tax” such as a toll for a road
 Does not change it from being of public use to not
 The airport lands and buildings are owned by the National Government, not
MIAA. MIAA is merely holding title as a trustee. The Admin. Code allows
government instrumentalities such as the MIAA to merely hold title to real
properties owned by the National Government. Moreover, the National
Government remains the beneficial owner of the airport lands and buildings
since MIAA was merely created pursuant to a reorganization of a division of
the Bureau of Air and Transportation into a separate and autonomous body.
Refutations of the dissenting opinions
 Withdrawal of Exemption by LGC Section 193 of the LGC withdrew the tax
exemption of all persons whether natural or juridical, upon effectivity of the
LGC
o SC: An exception to the rule withdrawing tax exemption of all
persons in Section 193, LGC is if the LGC provides otherwise.
Section 133(o), LGC did expressly provide otherwise by specifically
prohibiting LGUs from imposing any tax on national government
instrumentalities.
o SC: If the exemption were limited to such entities, a violation of sec.
133(o), LGC will arise since sec. 133(o) does not distinguish
between national government instrumentalities with or without
juridical personalities. Sec. 234(a), LGC provides the only instance
when the national government and its instrumentalities may be
subject to local taxation.
 GOCC definition in admin code not controlling, hence not only
corporations organized under corp code but also with special charters (not
just stock/non-stock)
o SC: Section 2, Admin. Code provides that unless the specific words
of a particular statute require a different meaning, the definitions
in the Admin. Code shall apply. The dissenting opinion does not
point to any provision in the LGC defining GOCCs.
o The Admin. Code definition of GOCCs does not distinguish between
one incorporated under the Corp. Code or under a special charter.
o GOCCs must meet the test of economic viability pursuant to
CONST., art. XII, sec. 16.
 MIAA need not meet the test of economic viability
because Congress did not intend MIAA to compete in the
market place. There is no competing international airport
operated by the private sector.
Secretary of Finance vs. Ilarde real property continue to be imposed on provides for a 2% per
 Cabaluna is the Regional Director of Regional Office No 6 of the DOF in Iloilo
City. Cabaluna and his wife own several real property in Iloilo tax shall in no the unpaid tax from the month penalty without
 After Cabaluna retired as regional director of the DOF, he was assessed tax case exceed 24% time the delinquency was any limitation as to
delinquencies on his properties! of the incurred up to the time it the maximum amount
o Apparently, more than 24% of the delinquent taxes were charged
delinquent tax. is paid for in full. thereof, which is
by way of penalties
 Cabaluna paid under protest entirely consistent
o After Cabaluna retired from his post, Cabaluna filed a formal letter with the challenged
of protest with the City Treasurer contending that the Treasurer’s
Regulations.
computation of penalties was erroneous since the rate of penalty
exceeded 24%
 Apparently it’s a rule under the Real Property Tax Code
Issue #1 – W/N the then MOF could legally promulgate regulations prescribing a rate
(Section 66 of PD 464) na di puede mag exceed ng 24%
of penalty on delinquent taxes other than that provided for under the Real Property
 This letter-protest was denied by the Assistant City Treasurer, who cited
Tax Code? No, RTC affirmed
Joint Assessment Regulation No. 1-85 and Local Treasury Regulation 2-85
 The underlying principle behind EO 73 is to advance the date of effectivity
issued by the former Secretary of Finance which reads
of the Real Property Tax Value of 1984, from Jan 1988 as early as 1987.
o “(c) The penalty of 2% per month of delinquency, or 24% per
o EO 73 did not, in any way alter the structure of real property tax
annum, as the case may be, shall continue to be imposed on the
assessments as provided for under PD 464 (RPTC)
unpaid tax from the time the delinquency was incurred up to the
o EO 73 did not touch upon the matter of the rates of delinquent
time it is paid for in full.”
taxes or the amendment of the tax ceiling. It has merely designated
 After exhausting admin remedies, Cabaluna filed a petition for declaratory
the Minister to promulgate the rules and regulations towards the
relief with damages before the RTC.
implementation of EO 73 (particularly, on the application of Real
RTC
Property Values, the general purpose for EO 73)
 Section 4(c) of the Joint Assessment Regulation 1-85 and Local Treasury
 Neither did EO 1019 vest upon the MOF the right to fiddle with the rates of
Regulation 2-85 is null and void
penalty to be assessed on delinquent taxes under the Real Property Tax
 The penalty which should be imposed should be 2% on the amount of the
Code.
delinquent tax for each month of delinquency or a fraction thereof, until it
o Assuming that it did, such authority would be automatically
is paid. But in no case shall the total penalty exceed 24% of the delinquent
stripped upon the express repeal of EO 1019 by EO 73 \
tax as per Section 66 of PD 464.
 Despite the promulgation of EO 73, PD 464 in general, and Section 66 in
partocular, remained to be good law.
Sec. 66 of PD Sec. 4(c) of Joint Justification of the o Repeal of laws (EO 73 of PD 464) should be clear and express.
464 Assessment Regulation Ministry of Finance Implication is not favored since laws are presumed to be passed
with deliberation and full knowledge of all laws existing on the
No. 1-85 and Local
subject.
Treasury Regulation No. o Such repeals are not favored for a law cannot be deemed repealed
2-85 unless it is clearly manifest that the legislature so intended it.
o JP: It is only LGC 1991 which has repealed the RPTC / PD 464
The maximum The penalty of 2% per The Regulations are
 Assuming arguendo that EO 73 authorized the MOF to issue the regulation
penalty for month of delinquency, or sanctioned by EO 73, in question, such power would be void for being repugnant of the well-
delinquency in 24% per annum, as the and its implementing encrusted doctrine that the power of taxation is generally vested with the
legislature.
the payment of case may be, shall guidelines, which
 o The power delegated to the Ministry to lay down the IRR must be
germane to the general law it seeks to apply
o Administrative regulations adopted under legislative authority by a
particular department must be in harmony with the provisions of
the law they are intended to carry into effect, which in this case is
merely to antedate the effectivity of the 1984 Real Property Tax
values inasmuch as this is the raison d’etre of EO 73.
 With respect to the Ministry’s contention that implementing rules of EO 73 applies
merely to simple delinquency in payment, while the Sec. 66 of PD 464 covers cases
wherein there was a failure to promptly pay the real property tax due, including the
increase in tax due and demandable for the tax year as a result of the application of
Issue #1 – W/N Benguet Corp’s Tailings Dam is an improvement that falls within the
the 1984 New Assessment of the value of the subject property, the Court held that
PD 464 makes no distinction as to whether it Is simple delinquency or other forms
contemplation of the Real Property Tax Code? YES
thereof. It is a law of general application.
Benguet Corp vs. CBAA
Facts
 The Provincial Assessor of Zambales assessed Benguet Corp’s tailings dam
(slag dumps found in NCC-415(8)) and the land thereunder as taxable
improvements
o 11.3 million pesos
 Benguet Corporation, a mining company, disagreed with tis realty tax
assessment, claiming that the tailings dam should not be subject to realty
tax because it is not an improvement upon the land within the meaning of
the Real Property Tax Code.
 Benguet Corporation, thereafter, filed an appeal before the Board of
Assessment appeals of the Province of Zambales, which subsequently
dismissed said appeal.
o Board of Assessments of the Province of Zambales – dismissed the
appeal
o Central Board of Assessment Appeals – reversed the initial
dismissal but nonetheless stated that the tailings dam and the
lands submerged thereunder were subject to realty tax.
 Hence this petition before the SC
Arguments
 Benguet – the tailings dam has no value separate from and independent of
the mine. It cannot be considered an improvement which may be assessed
independently. It’s integral to the mine, and also, the fact that it was built
stripped the property of any commercial value as it is now underwater
o Cotabato vs Santos – SC considered dikes and gates constructed by
the taxpayer in connection with a fishpond as INTEGRAL to it
o Bislig Bay vs Surigao – a road constructed by timber concessionaires
was not taxed
o Kendrick vs Twin Lakes – American case; reservoir damn is part of
the reservoir and the dam would be worthless except in connection
with the canal.
 Benguet – it’s a measure against pollution for which it should be
commended rather than punished
 SOLGEN – assessable impreovement bec it enhances the value and utility of
the mine. Its primary function being to receive, retain, and hold the water
coming from the operations of the mine.
 The RPTC does not define realty and it merely states that a tax is imposed
on real property such as lands, buildings, machinery, and other
improvements affixed or attached to real property
o In the absence of such definition, we look at the NCC
 Two grounds which make it an “improvement
o (a) – It is Permanent in Character and enhances the value and
utility of Benguet’s mine – Section 3(k) of the Real Property Tax
Code definses improvement as follows: “a valuable addition made
to property or an amelioration in its condition, amounting to more
than mere repairs or replacement of waste, costing labor or capital
and intended to enhance its value, beauty, or utility, or to adopt it
for new or further purposes.
 There is no doubt that the dam is permanent in character.
In fact, as argued by Benguet Corp, the dam in itself can
be used even long AFTER the mining company has ceased
operations
o (b) the Immovable Nature of the Dam defines its character as real
property under NCC 415 thus making it taxable under Section 38 of
the Real Property Tax Code

Issue #1 – W/N the land and the warehouse are subject to tax? The land is not, the
warehouse is taxable
National Development Corporation vs. Cebu City
Bellosillo, 1992
 NDC is a GOCC created by Commonwealth Act 182 and EO 399. It is
authorized to engage in commercial, industrial, mining, agricultural, and
other enterprises necessary or contributory to economic development or
important to public interest
o NDC also operates subsidiary corporations including the National
Warehousing Corporation (NWC) now defunct
 Earlier in 1939, Proclamation 430 reserving certain lots in Cebu for
warehousing purposes under the admin of the NWC.
 1940, a warehouse was built.
 1947, EO 93 dissolved the NWC, and the NDC took over the assets and
functions of the NWC
 1948, Cebu City assessed and collected from NDC real estate taxes on the
land and the warehouse in question
o NDC paid 100 thousand pesos. Only 3,895 was paid under protest.
 In 1970, the NDC wrote the City assessor, demanding a refund on the
ground that the land and warehouse belonged to the republic and are
therefore exempt from Tx
o Cebu refused to comply with the refund.
 NDC filed suit @ CFI-Manila
o The court ordered Cebu to refund NDC the real estate taxes it paid
for said parcel of land and the warehouse erected thereon from
and after October 25, 1966.
o Cebu appealed to CA. CA certified to SC (pure QOL)
Arguments
 NDC is claiming tax exempt status under Section 3(a) of the assessment law
which states that property owned by the US, the commonwealth, any P/C/M
shall be exempt from tax
 Cebu claims that the reservation of the land in favor of NDC is a form of
disposition of public land therefore subjecting the recipient to real estate
tax under Section 115 of the Public Lands Act and is therefore subject to
ordinary taxes
 The republic, like any individual, may form a corporation with personality
distinct from its own. This allows for the creation of GOCCs which holds and
possesses properties in its own name. It may be said that the tax exemption
of property owned by the republic refers to properties owned by the gov’t
and AGENCIES which do not have separate and distinct personalities (not
incorporated)
o Justice Bautista-Angelo in Gonzales vs. Hechanova – ANNEX
 Hence, for it to be exempt, it’s important that
o (a) the property is owned by the government or its unincorporated
agency, and once government ownership is determined,
o (b) the nature of the use of the property, whether for proprietary
or sovereign purposes, becomes immaterial
 In the instant case, it appears that what was given to NWC is the
administration of the land but NOT its ownership which remains with the
government
o Its characterized as reserved land which is land withheld or kept
back from sale or disposition, but remains an absolute property og
the government. As title remains with the government, it is clearly
covered by the exemption!
o Section 115 in this case is an inapplicable exception to the
exemption since it only talks about homestead, concession, and
contract in which cases even if title remains with the government,
taxable na
o In this case none apply – It was a unilateral act on the part of the
president and walang contract.
o As We view it, the effect of reservation under the Sec. 83 is to
segregate a piece of public land and transform it into non-alienable
or non-disposable under the Public Land Act. Section 115, on the
other hand, applies to disposable public lands. Clearly, therefore,
Sec. 115 does not apply to lands reserved under Sec. 83.
Consequently, the subject reserved public land remains tax
exempt.
 WAREHOUSE but a different rule applies to the warehouse. The exemption
under the Public Lands Act does not extend to improvements on the public
lands made by “pre-emptioners, homesteaders, and other claimants,
occupants, at their own expense”
o So basta taxable.
 Since the reservation is exempt from Realty Tax, the erroneously paid
assessments collected by Ceby should be refunded to the NDC. This is in
 consonance with Section 40 of the Real Property Tax Code which exempted
from taxation real property owned by the Republic of the Philippines or any
of its political subdivisions as well as any GOCC so exempt by its charter
This Ruling is in consonance with our ruling in NDC vs. Nueva ecija where:
 SC held that the properties of NDC were not exempted under the
Assessment law (precursor of the RPTC) because it is a separate entity
entirely different from the government. It is not the Gov’t of the Republic
nor is it a branch or subdivision thereof – it is a GOCC which cannot be said
to exercise a sovereign function but performs purely corporate, proprietary
or business functions.
The Government of the Republic of the Philippines under the Administrative Code
refers to that entity through which the functions of government are exercised,
including the various arms through which political authority is made effective
whether they be provincial, municipal or other form of local gov’t,
whereas a gov’t instrumentality refers to corporations owned or controlled by the
government to promote certain aspects of the economic life of our people.
A government agency therefore, must necessarily refer to the government itself of
the Republic, as distinguished from any government instrumentality which has a
personality distinct and separate from it.”

Refund Issue
CEBU argues that NDC in any case is not entitled to refund because under the Revised
Charter of Cebu – payment under protest is required before resorting to judicial
action for refund.
 NDC sent its demand letter on May 1970 to the Assessor and not the
treasurer – so no proper prior demand, resort to judicial remedy is
premature.
 NDC should also exhaust administrative remedies first (appeal to Dept. of
Finance or Auditor General) before going to court.
NDC: the issue is recovery of erroneous payments and not the validity of tax
assessments, therefore payment under protest requirement under the City Charter
is not applicable.

SC: in Ramie v. Mathay Sr. we held that: Protest is not a requirement in order to
claim for a refund of tax paid under mistaken belief that it is required by law.
Payment was made through error or mistake in the honest belief that he is liable,
and therefore could not have been made under protest. In any case a taxpayer should
not be held to suffer loss by his good intention to comply with what he believes is his
legal obligation, where such obligation does not really exist. Payment thru error and
acceptance by gov’t of payment results in solution indebiti.

Extent of refund: claim for refund must be commenced six years from date of
payment pursuant to Art. 1145 (20 of NCC.
 So refund should be made for an undetermined amount based on date of
payment counted 6 years backwards from Oct. 25, 1972 – when complaint
was filed.

Annex

Gonzalez vs. Hechanova


Province of Tarlac v. Judge Alcantara
Romero
- A complaint was filed by Tarlac Provincial Treasurer Jose M. Meru alleging among
others:
 That defendant TARLAC ENTERPRISES, INC. is a corporation duly organized
under and by virtue of the laws of the Philippines and owns the following
properties located in Mabini, Tarlac, Tarlac:
a) Parcel of land
b) Ice drop factory
c) Machinery shed
d) Various machineries (generators etc.)
 That real estate taxes of the aforesaid taxes from 1974 to Dec 1982 in the
total amount of P532,435.55 including principal and penalties have not been
paid by the defendant per Statement of Realty Taxes issued by the Municipal
Treasurer of Tarlac, Tarlac
- Tarlac Enterprises filed a motion dismiss  motion denied by the RTC
- Petitioner set the auction sale of the properties but Tarlac Enterprises filed a
motion praying that petitioner be directed to desist from proceeding with the
public auction sale  motion granted
- THEORY Tarlac Enterprises filed an Answer admitting the demands for the payment
of real property taxes had been made but it refused to pay the same for the reason
that under Sec. 40(g) of PD 464 in relation to PD 551, as amended, it was exempt
from paying said tax.
RTC – DISMISSED COMPLAINT FOR PAYMENT
1 Lowering the Cost to Consumers of Electricity by Reducing the Franchise Tax Payable by
Electric Franchise Holders and the Tariff on Fuel Oils for the Generation of Electric Power
by Public Utilities
 Ruling that PD 551 expressly exempts Tarlac Enterprises from paying real
property taxes being a grantee of a franchise to generate, distribute and sell
electric current for light. In lieu of said taxes, it is required to pay 2%
franchise tax
 Citing the case Butuan Sawmill Inc. v. City of Butuan, ruled that local
governments are without power to tax the electric companies already
subject to franchise tax unless their franchise allows the imposition of
additional tax
ISSUE: W/N Tarlac Enterprises is exempt from payment of real property tax under
Sec. 40(g) of PD 464 in relation to PD 551, as amended – Yes EXEMPPPTTT
HELD: Decision reversed and set aside. Case is remanded for proper determination
of real property tax liability.
(Side note: The lower court omitted the ice drop factory. Since petitioner failed to
assign such omission as an error, it is considered waived.)
RATIO
Sec. 40(g) of PD 464, the Real Property Code, provides:
“SEC. 40. Exemptions from Real Property Tax. — The exemption shall be as
follows: xxx
(g) Real property exempt under other laws.”
- Tarlac Enterprises contends that the “other laws” referred to in this Section is PD
5511
SECTION 1. Any provision of law or local ordinance to the contrary
notwithstanding, the franchise tax payable by all grantees of franchises to
generate, distribute and sell electric current for light, heat and power shall
be two (2%) of their gross receipts received from the sale of electric current
and from transactions incident to the generation, distribution and sale of
electric current.
Such franchise tax shall be payable to the Commissioner of Internal Revenue
or his duly authorized representative on or before the twentieth day of the
month following the end of each calendar quarter or month as may be
provided in the respective franchise or pertinent municipal regulation and
shall, any provision of the Local Tax Code or any other law to the contrary
notwithstanding, be in lieu of all taxes and assessments of whatever nature
 imposed by any national or local authority on earnings, receipts, income and
privilege of generation, distribution and sale of electric current.
- PD 551 was amended on Dec 19, 1975 by PD 582 with the insertion of the phrase
“and for the manufacture, distribution and sale of city gas” between the phrases
“xxx light, heat and power” and “shall be two (2%) xxx.”
Letter of the then BIR Acting Commissioner addressed to the Matic Law Office
granting exemption to the latter's client from paying the "privilege (fixed) tax which
is an excise tax on the privilege of engaging in business" clearly excludes realty tax
from such exemption.

SC: The phrase “in lieu of all taxes and assessments of whatever nature” in the 2 nd
paragraph of Sec. 1 of PD 551 does not exempt Tarlac Enterprises from paying real
property taxes.
- Said proviso is modified and delimited by the phrase “earnings, receipts, income
and privilege of generation, distribution and sale“ which specifies the kinds of
taxes and assessments which shall not be collected in view of the imposition of
the franchise tax. Said enumerated items, upon which taxes shall not be imposed,
have no relation at all to, and are entirely different from, real properties subject
to tax.
- IF all inclusive na talaga edi sana di na inamend by PD 582. The legislative authority
would have simply stopped after the phrase "national or local authority" by putting
therein a period. On the contrary, it went on to enumerate what should not be
subject to tax thereby delimiting the extent of the exemption.
Re: Tarlac Enterprises’ contention that the real properties being taxed are necessary
for the operation of its business of generation, distribution and sale of electric current
and therefore, they should be exempted from taxation.
Butuan Sawmill, Inc. v. City of Butuan which involved a tax on the gross sales or
receipts of said sawmill while the tax involved here is a real property tax. The City
of Butuan is categorically prohibited therein by Sec. 2(j) of Local Autonomy Act from
imposing "taxes of any kind ... on person paying franchise tax." On the other hand,
PD 551 is not as all-encompassing as said provision of the Local Autonomy Act for
it enumerates the items which are not taxable by virtue of the payment of franchise
tax.
Exemptions from taxation are construed in strictissimi juris against the taxpayer
and liberally in favor of the taxing authority primarily because “taxes are the
lifeblood of government and their prompt and certain availability is an imperious
need.” Thus, to be exempted from payment of taxes, it is the taxpayer’s duty to
justify the exemption “by words too plain to be mistaken and too categorical to be
misrepresented.”

- PD 551 as amended by PD 852 deals with franchise tax and tariff on fuel oils and
the “earnings, receipts, income and privilege of generation, distribution and sale of
electric current” are the items exempted from taxation by the imposition of said
tax or tariff duty

- On the other hand, the collection complaint filed by petitioner specified only taxes
due on real properties

Misplaced reliance on the following:

Dept. Order 35-74 dated Sep. 16, 1974 regulating the implementation of PD 551
which merely reiterates the “in lieu of taxes” proviso.

Local Tax Regulations 3-75 addressed to all Provincial and City Treasurers enjoining
strict compliance with the directive that "the franchise tax imposed under Local Tax
Ordinances pursuant to Sec. 19 of the Local Tax Code, as amended, shall be collected
from business holding franchises but not from establishments whose franchise
contains the 'in lieu of all taxes' provisio," thereby clearly indicating that said
provision exempts taxpayers like Tarlac Enterprises from paying the franchise tax
collected by the provinces under the Local Tax Code.

Manila International Authority vs City of Pasay (2009)
Carpio
 MIAA operates and administers NAIA under EO 903 otherwise known as the
revised charter of MIAA issued by President Marcos.
 Under the EO, around 600 hectares of land including runways, airport
towers, and other airport buildings were transferred to MIAA, located
between Pasay and Paranaque
 MIAA received final notices of Real Property Tax Delinquency from the City
of Pasay for the taxable years 1992 – 2001 for a grand total of 1 billion pesos
wahoooo
o Notices of levy and warrants of levy for NAIA properties. City Mayor
threatened to sell at public auction the NAIA pasay properties.
 MIAA filed for prohibition/injunction @ Court of Appeals
o The CA dismissed the petition and upheld the power of the City of
Pasay to impose and collect realty taxes on the NAIA Pasay
Properties. MIAA filed a MORE CA denied, hence SC
o CA took a look at 193 and 234 of the LGC which withdrew tax
exemption privileges to all persons including GOCCs
 CA considered MIAA a GOCC whose tax exemption has
been withdrawn via EO 903
2006 MIAA case
 The SC already resolved the issue of whether the airport lands and buildings
of MIAA are exempt from tax under existing laws or not. The only difference
now is the 2006 case involved airport lands and buildings in Paranaque
while now it’s the ones in Pasay
 NOT A GOCC To summarize, MIAA is not a government-owned or controlled
corporation under Section 2(13) of the Introductory Provisions of the
Administrative Code because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or controlled
corporation under Section 16, Article XII of the 1987 Constitution because
MIAA is not required to meet the test of economic viability.
o MIAA is a government instrumentality vested with corporate
powers and performing essential public services pursuant to
Section 2(10) of the Introductory Provisions of the Administrative
Code. As a government instrumentality, MIAA is not subject to any
kind of tax by local governments under Section 133(O) of the Local
Government Code. The exception to the exemption in Section
234(a) does not apply to MIAA because MIAA is not a taxable entity
under the Local Government Code. Such exception applies only if
the beneficial use of real property owned by the Republic is given
to a taxable entity.
 Moreover, the Airport Lands and Buildings of MIAA are properties devoted
to public use and are thus of public dominion. As such, they are owned by
the state or the republic (cited NCC – annex)
Note definition of GOCC and of Instrumentality under the Revised Admin Code
 Instrumentality - The definition of "instrumentality" under Section 2(10) of
the Introductory Provisions of the Administrative Code of 1987 uses the
phrase "includes x x x government-owned or controlled corporations" which
means that a government "instrumentality" may or may not be a
"government-owned or controlled corporation."
o Obviously, the term government "instrumentality" is broader than
the term "government-owned or controlled corporation."
 GOCC - any agency organized as a stock or non-stock corporation, vested
with functions relating to public needs whether governmental or proprietary
in nature, and owned by the Government directly or through its
instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) percent of its capital
stock
 Conclusion – While an instrumentality may include a GOCC, an
instrumentality is not always a GOCC. MIAA is not a GOCC, same reasons as
2006 – not stock nor non-stock.
o 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.
o MIAA is not a government-owned or controlled corporation but a
government instrumentality which is exempt from any kind of tax
from the local governments.
Annex
Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of similar
character;

(2) Those which belong to the State, without being for public use, and are intended
for some public service or for the development of the national wealth.