Local and Real Property Taxes

REGEN VOLOSO| TAXATION II LOCAL & REAL PROPERTY TAX PROVIONS & CASE
I.
DIGEST Nov
7, 2014
PRELIMINARY
MATTERS
A.
POWER TO TAX OF LOCAL GOVERNMENT UNITS

1.
Sec. 5, Art. X, 1987 Constitution

Each local government unit shall have the
power to create its own sources of revenues
and to levy taxes, fees and charges subject to
such guidelines and limitations as the Congress
may provide, consistent with the basic policy of
local autonomy. Such taxes, fees, and charges
shall
accrue
exclusively
to
the
local
governments.
2.
Sec. 129, LGC

Section 129. Power to Create Sources of
Revenue. - Each local government unit shall
exercise its power to create its own sources of
revenue and to levy taxes, fees, and charges
subject to the provisions herein, consistent with
the basic policy of local autonomy. Such taxes,
fees, and charges shall accrue exclusively to
the local government units.
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES,

INC., plaintiff-appellant, vs. MUNICIPALITY OF TANAUAN,
LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant
appellees. G.R. No. L-31156 February 27, 1976 | En Banc
FACTS:
Pepsi-Cola Bottling Company filed a complaint with a

preliminary injunction before the CFI to declare Sec. 2 of
RA No. 2264 (Local Autonomy Act) unconstitutional as an
undue delegation of taxing authority as well as to
declare Ordinance Nos. 23 and 27, series of 1962, of the
Municipality of Tanauan, Leyte, null and void.
Ordinance No. 23 collects from soft drinks producers

and manufacturers a tax of 1/16 of a centavo for every
bottle of soft drink corked
Ordinance No. 27 collects on soft drinks produced or

manufactured within the territorial jurisdiction of the
municipality a tax of one centavo (P0.01) on each gallon
(128 fluid ounces, U.S.) of volume capacity
The tax imposed in both Ordinance Nos. 23 and 27 is

denominated as municipal production tax
CFI upheld the constitutionality of Sec. 2 of RA 2264

and declaring Ordinance Nos. 23 and 27 legal and
constitutional
Pepsi-Cola Bottling Company appealed to the CA which

elevated the case to the SC
ISSUE: Whether Sec. 2 of RA 2264 is unconstitutional on the
ground that it constitutes an undue delegation of power to
tax.
HELD: NO
The power of taxation is an essential and inherent attribute
of sovereignty, belonging as a matter of right to every
independent government, without being expressly conferred
by the people. It is a power that is purely legislative and
which the central legislative body cannot delegate either to
the executive or judicial department of the government
without infringing upon the theory of separation of powers.
The exception, however, lies in the case of municipal
corporations, to which, said theory does not apply.
Legislative powers may be delegated to local governments in
respect of matters of local concern. This is sanctioned by
immemorial practice. By necessary implication, the
legislative power to create political corporations for purposes
of local self-government carries with it the power to confer
on such local governmental agencies the power to tax. 9
Under the New Constitution, local governments are granted
the autonomous authority to create their own sources of
revenue and to levy taxes. Section 5, Article XI provides:
"Each local government unit shall have the power to create
its sources of revenue and to levy taxes, subject to such
limitations as may be provided by law." Withal, it cannot be
said that Section 2 of Republic Act No. 2264 emanated from
beyond the sphere of the legislative power to enact and vest

in local governments the power of local taxation.
The plenary nature of the taxing power thus delegated,
contrary to plaintiff-appellant's pretense, would not suffice to
invalidate the said law as confiscatory and oppressive. In
delegating the authority, the State is not limited to the exact
measure of that which is exercised by itself. When it is said
that the taxing power may be delegated to municipalities
and the like, it is meant that there may be delegated such
measure of power to impose and collect taxes as the
legislature may deem expedient. Thus, municipalities may be
permitted to tax subjects which for reasons of public policy
the State has not deemed wise to tax for more general
purposes.
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY,
petitioner, vs. HON. FERDINAND J. MARCOS, in his
capacity as the Presiding Judge of the Regional Trial
Court, Branch 20, Cebu City, THE CITY OF CEBU,
represented by its Mayor HON. TOMAS R. OSMEA,
and EUSTAQUIO B. CESA, respondents. G.R. No. 120082 |
September 11, 1996 | 3D
FACTS:
Mactan Cebu International Airport Authority (MCIAA) was

created by virtue of RA No. 6958 to undertake the
management
and
supervision
of
the
Mactan
International Airport in Cebu and the Lahug Airport in
Cebu City and such other airports as may be established
in Cebu
Since the time of its creation, MCIAA enjoyed the

privilege of exemption from payment of realty taxes in
accordance with Sec. 14 of its Charter
The Office of the Treasurer of Cebu City demanded

payment for realty taxes on several parcels of land
belonging to MCIAA
MCIAA objected to such demand for payment claiming

that it is exempt from payment of realty taxes citing Sec.
14 of its Charter
MCIAA also asserted thatit is an instrumentality of the

government performing governmental functions citing
Sec. 133 of the LGC of 1991 which puts limitations on
the taxing power of LGUs
Respondent Cebu City refused to cancel MCIAAs realty

tax account, insisting that MCIAA is a GOCC whose tax
exemption has been withdrawn by virtue of Secs. 193
and 234 of the LGC
As Cebu City was about to issue a warrant of levy

against the properties of MCIAA, the latter was
compelled to pay its tax account under protest and
thereafter filed a petition for declaratory relief with the
RTC
RTC dismissed the MCIAAs petition
MCIAA appealed to the SC

ISSUE: Whether Cebu City has power or authority to tax
MCIAA, a GOCC.
HELD: YES
The power to tax is primarily vested in the Congress;
however, in our jurisdiction, it may be exercised by local
legislative bodies, no longer merely by virtue of a valid
delegation as before, but pursuant to direct authority
conferred by Section 5, Article X of the Constitution. Under
the latter, the exercise of the power may be subject to such
guidelines and limitations as the Congress may provide
which, however, must be consistent with the basic policy of
local autonomy.
Accordingly, the position taken by the petitioner is
untenable. Reliance on Basco vs. Philippine Amusement and
Gaming Corporation is unavailing since it was decided before
the effectivity of the LGC. Besides, nothing can prevent
Congress from decreeing that even instrumentalities or
agencies of the Government performing governmental
functions may be subject to tax. Where it is done precisely to
fulfill a constitutional mandate and national policy, no one
can doubt its wisdom.
2
DIGEST Nov 7, 2014
power was deemed withheld), the present constitutional rule
MANILA ELECTRIC COMPANY, petitioner vs. PROVINCE
OF LAGUNA and BENITO R. BALAZO, inhis capacity as
Provincial Treasurer of Laguna, respondents. [GR No.
131359 | May 5, 1999 | 3D]
FACTS:
Certain municipalities of the province of Laguna issued

resolution through their respective municipal councils
granting franchise in favor of Manila Electric Company
(MERALCO) for the supply of electric light, heat and
power within the concerned areas.
On September 12, 1991, Republic Act No. 7160,

otherwise known as the Local Government Code of
1991, was enacted to take effect on January 1, 1992
enjoining local government units to create their own
sources of revenue and to levy taxes, fees and charges,
subject to the limitations expressed therein, consistent
with the basic policy of local autonomy.
Pursuant to the provisions of the Code, the province of

Laguna enacted a franchise tax ordinance.
On the basis of this ordinance, respondent Provincial

Treasurer sent a demand letter to MERALCO for the
corresponding tax payment.
MERALCO paid the tax under protest
A formal claim for refund was thereafter sent by

MERALCO to the Provincial Treasurer of Laguna claiming
that the franchise tax it had paid and continued to pay
to the National Government pursuant to P.D. 551 already
included the franchise tax imposed by the Provincial Tax
Ordinance.
The claim for refund of MERALCO was denied.

In
denying the claim, respondents relied on a more recent
law, i.e., Republic Act No. 7160 or the Local Government
Code of 1991, than the old decree invoked by petitioner.
MERALCO filed with the RTC, a complaint for refund.
RTC dismissed MERALCOs petition
In the instant petition, MERALCO assailed the trial

courts ruling contending that the franchise tax
ordinance is violative of the non-impairment clause of
the Constitution
ISSUE: Whether the franchise tax ordinance enacted by the
Province of Laguna is valid.
HELD: YES
Prefatorily, it might be well to recall that local governments
do not have the inherent power to tax except to the extent
that such power might be delegated to them either by the
basic law or by statute. Presently, under Article X of the 1987
Constitution, a general delegation of that power has been
given in favor of local government units. Thus:
o
Sec. 3. The Congress shall enact a local government
code which shall provide for a more responsive and
accountable local government structure instituted
through a system of decentralization with effective
mechanisms of recall, initiative, and referendum,
allocate among the different local government units
their powers, responsibilities, and resources, and
provide for the qualifications, election, appointment
and removal, term, salaries, powers and functions, and
duties of local officials, and all other matters relating to
the organization and operation of the local units.
o
Sec. 5. Each local government shall have the power to
create its own sources of revenues and to levy taxes,
fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes,
fees and charges shall accrue exclusively to the local
governments.
The 1987 Constitution has a counterpart provision in the
1973 Constitution which did come out with a similar
delegation of revenue making powers to local governments.
Under the regime of the 1935 Constitution no similar
delegation of tax powers was provided, and local
government units instead derived their tax powers under a
limited statutory authority. Whereas, then, the delegation of
tax powers granted at that time by statute to local
governments was confined and defined (outside of which the
(starting with the 1973 Constitution), however, would broadly

confer such tax powers subject only to specific exceptions
that the law might prescribe.
Under the now prevailing Constitution, where there is
neither a grant nor a prohibition by statute, the tax power
must be deemed to exist although Congress may provide
statutory limitations and guidelines. The basic rationale for
the current rule is to safeguard the viability and selfsufficiency of local government units by directly granting
them general and broad tax powers. Nevertheless, the
fundamental law did not intend the delegation to be absolute
and unconditional; the constitutional objective obviously is to
ensure that, while the local government units are being
strengthened and made more autonomous, the legislature
must still see to it that (a) the taxpayer will not be overburdened or saddled with multiple and unreasonable
impositions; (b) each local government unit will have its fair
share of available resources; (c) the resources of the national
government will not be unduly disturbed; and (d) local
taxation will be fair, uniform, and just.
NATIONAL POWER CORPORATION, petitioner, vs. CITY
OF CABANATUAN, respondent.[G.R. No. 149110 | April 9,
2003 | 3D]
FACTS:
National Power Corporation (NPC) is a GOCC created

under CA No. 120, as amended which sells electric
power to the residents of Cabanatuan City
Pursuant to Ordinance No. 165-42, the City of

Cabanatuan assessed NPC of franchise tax
NPC refused to pay the tax assessment arguing that

respondent city has no authority to impose tax on
government entities and that as a non-profit
organization, it is exempted from the payment of all
forms of taxes, charges or fees in accordance with its
Charter
The City of Cabanatuan filed a collection suit with the

RTC demanding NPC to pay the assessed tax alleging
that NPCs exemption from local taxes has been
repealed by Sec. 193 of the LGC of 1991
RTC dismissed the case and ruled that the tax

exemption privileges granted to NPC subsist despite the
passage of the LGC
CA reversed the RTCs order on the ground that Sec.

193, in relation to Sec. 137 and 151 of the LGC expressly
withdrew the exceptions granted to NPC
o
CA denied the NPCs MR
NPC filed the instant petition for review

ISSUE: Whether local governments have power to tax
instrumentalities of the national government such as NPC.
HELD: YES
Taxes are the lifeblood of the government, for without taxes,
the government can neither exist nor endure. A principal
attribute of sovereignty, the exercise of taxing power derives
its source from the very existence of the state whose social
contract with its citizens obliges it to promote public interest
and common good. The theory behind the exercise of the
power to tax emanates from necessity; without taxes,
government cannot fulfill its mandate of promoting the
general welfare and well-being of the people.
In recent years, the increasing social challenges of the times
expanded the scope of state activity, and taxation has
become a tool to realize social justice and the equitable
distribution of wealth, economic progress and the protection
of local industries as well as public welfare and similar
objectives. Taxation assumes even greater significance with
the ratification of the 1987 Constitution. Thenceforth, the
power to tax is no longer vested exclusively on Congress;
local legislative bodies are now given direct authority to levy
taxes, fees and other charges pursuant to Article X, section 5
of the 1987 Constitution, viz:
o
Section 5.- Each Local Government unit shall have the
power to create its own sources of revenue, to levy
taxes, fees and charges subject to such guidelines and
DIGEST
Nov
limitations
as 7,
the2014
Congress may provide, consistent
o
The power to tax is primarily vested
with the basic policy of local autonomy. Such taxes,
fees and charges shall accrue exclusively to the Local
Governments.
Considered as the most revolutionary piece of legislation on

local autonomy, the LGC effectively deals with the fiscal
constraints faced by LGUs. It widens the tax base of LGUs to
include taxes which were prohibited by previous laws such as
the imposition of taxes on forest products, forest
concessionaires, mineral products, mining operations, and
the like. The LGC likewise provides enough flexibility to
impose tax rates in accordance with their needs and
capabilities. It does not prescribe graduated fixed rates but
merely specifies the minimum and maximum tax rates and
leaves the determination of the actual rates to the respective
sanggunian.
THE CITY GOVERNMENT OF QUEZON CITY, AND THE
CITY TREASURER OF QUEZON CITY, DR. VICTOR B.
ENRIGA, Petitioners, vs. BAYAN TELECOMMUNICATIONS,
INC., Respondent. [G.R. No. 162015 March 6, 2006]
FACTS:
Bayantel is a legislative franchise holder under RA 3259

to establish and operate radio stations for domestic
telecommunications, radiophone, broadcasting and
telecasting
RA 7160 or LGC of 1991 took effect on Jan. 1, 1992
After the LGC took effect, Bayantels original franchise

was amended by RA 7633 containing the ff. tax
provision:
o
Sec. 11. The grantee, its successors or assigns shall
be liable to pay the same taxes on their real estate,
buildings and personal property, exclusive of this
franchise, as other persons or corporations are now or
hereafter may be required by law to pay. xxx
The government of Quezon City pursuant to Sec. 5, Art.

X of the 1987 Constitution in relation to Sec. 232 of the
LGC, enacted an ordinance known as the QC Revenue
Code imposing real property tax on all real properties in
QC and reiterating the withdrawal of exemption from
real property tax under Sec. 234 of the LGC
Quezon City issued new tax declarations for Bayantels

real properties
Bayantel sought the exclusion of its real properties in QC

from taxable real properties which was denied
Bayantel interposed an appeal with the LBAA and did

not pay the real property taxes assessed by the QC
As warrants of levy were issued against its properties,

Bayantel withdrew its appeal with the LBAA and file with
the RTC a petition for prohibition with application for TRO
and/or writ of preliminary injunction
RTC issued a TRO and declared that Bayantels real

properties in QC are exempt from real estate taxation
Petitioners elevated the case directly to the SC on pure

questions of law
ISSUE: Whether Bayantels real properties in QC are exempt
from real property taxes under the legislative franchise, as
amended.
HELD: YES
The Court has taken stock of the fact that by virtue of
Section 5, Article X of the 1987 Constitution, local
governments are empowered to levy taxes. And pursuant to
this constitutional empowerment, juxtaposed with Section
232 of the LGC, the Quezon City government enacted in
1993 its local Revenue Code, imposing real property tax on
all real properties found within its territorial jurisdiction. And
as earlier stated, the Citys Revenue Code, just like the LGC,
expressly withdrew, under Section 230 thereof, supra, all tax
exemption privileges in general.
While the system of local government taxation
has changed with the onset of the 1987
Constitution, the power of local government
units to tax is still limited. As we explained in
Mactan Cebu International Airport Authority:
in the Congress;
however, in our jurisdiction, it may be exercised by
local legislative bodies, no longer merely be virtue of a
valid delegation as before, but pursuant to direct
authority conferred by Section 5, Article X of the
Constitution. Under the latter, the exercise of the
power may be subject to such guidelines and
limitations as the Congress may provide which,
however, must be consistent with the basic policy of
local autonomy.
This new perspective is best articulated by Fr. Joaquin G.
Bernas, S.J., himself a Commissioner of the 1986
Constitutional Commission which crafted the 1987
Constitution, thus:
o
What is the effect of Section 5 on the fiscal position of
municipal corporations? Section 5 does not change
the doctrine that municipal corporations do not
possess inherent powers of taxation. What it does is to
confer municipal corporations a general power to levy
taxes and otherwise create sources of revenue. They
no longer have to wait for a statutory grant of these
powers. The power of the legislative authority relative
to the fiscal powers of local governments has been
reduced to the authority to impose limitations on
municipal powers. Moreover, these limitations must be
"consistent with the basic policy of local autonomy."
The important legal effect of Section 5 is thus to
reverse the principle that doubts are resolved against
municipal corporations. Henceforth, in interpreting
statutory provisions on municipal fiscal powers,
doubts will be resolved in favor of municipal
corporations. It is understood, however, that taxes
imposed by local government must be for a public
purpose, uniform within a locality, must not be
confiscatory, and must be within the jurisdiction of the
local unit to pass.
In net effect, the controversy presently before the Court
involves, at bottom, a clash between the inherent taxing
power of the legislature, which necessarily includes the
power to exempt, and the local governments delegated
power to tax under the aegis of the 1987 Constitution.
For sure, in Philippine Long Distance Telephone Company,
Inc. (PLDT) vs. City of Davao, this Court has upheld the
power of Congress to grant exemptions over the power of
local government units to impose taxes. There, the Court
wrote:
o
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
national policy. 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 municipal
corporations.
Admittedly, Rep. Act No. 7633 was enacted subsequent to
the LGC. Perfectly aware that the LGC has already withdrawn
Bayantels former exemption from realty taxes, Congress
opted to pass Rep. Act No. 7633 using, under Section 11
thereof, exactly the same defining phrase "exclusive of this
franchise" which was the basis for Bayantels exemption
from realty taxes prior to the LGC. In plain language, Section
11 of Rep. Act No. 7633 states that "the grantee, its
successors or assigns shall be liable to pay the same taxes
on their real estate, buildings and personal property,
exclusive of this franchise, as other persons or corporations
are now or hereafter may be required by law to pay." The
Court views this subsequent piece of legislation as an
express and real intention on the part of Congress to once
again remove from the LGCs delegated taxing power, all of
the franchisees (Bayantels) properties that are actually,
directly and exclusively used in the pursuit of its franchise.
3.
LOCAL TAXING AUTHORITY (Sec. 132)
Sec. 132. Local Taxing Authority. - The power to impose a

tax, fee, or charge or to generate revenue under this Code
shall be exercised by the sanggunian of the local government
unit concerned through an appropriate ordinance.
4
DIGEST Nov 7, 2014
the provision is the explicit statutory impediment to
a.
CONSTRUCTION OF TAX ORDINANCES

(Sec. 5b)
Sec. 5. Rules of Interpretation. - In the interpretation of the

provisions of this Code, the following rules shall apply:
(a) xxx
(b)In case of doubt, any tax ordinance or revenue measure
shall be construed strictly against the local government unit
enacting it, and liberally in favor of the taxpayer. Any tax
exemption, incentive or relief granted by any local
government unit pursuant to the provisions of this Code shall
be construed strictly against the person claiming it.
xxxxxxx
(e) xxx
PETRON CORPORATION, petitioner,
vs.MAYOR TOBIAS M. TIANGCO, and MUNICIPAL
TREASURER MANUEL T. ENRIQUEZ of the
MUNICIPALITY OF NAVOTAS, METRO MANILA,
respondents.[G.R. No. 158881 | April 16, 2008 | 2D]
FACTS:
Petron maintains a depot or bulk plant at the Navotas

Fishport Complex in Navotas and is engaged in selling
diesel fuels
The municipality of Navotas assessed Petron of

deficiency taxes relative to its sale of diesel with
reference to Ordinance 92-03 or the New Navotas
Revenue Code
Petron filed with Navotas a letter-protestarguing that it

was exempt from local business taxes in view of Art.
232(h) of the IRR of the LGC
Respondent Municipal Treasurer denied the letter-protest
Petron filed with the RTC a complaint for cancellation of

assessment for deficiency taxes
While the case was pending decision, respondents

refused to issue business permit to Petron thus
prompting Petron to file a supplemental complaint
against respondents
RTC dismissed Petrons complaint and ordered the

payment of the assessed amount
Petron filed the present petition raising pure questions of

law
o
Petron the business taxes on its sale
of diesel fuel partakes of an excise tax
o
Respondents the phrase taxes, fees
or charges on petroleum products under
Sec. 133(h) of the LGC pertains to the
imposition of direct or excise taxes on
petroleum products and not business
taxes
ISSUE: How to construct a tax ordinance?
HELD:
Respondents cite our declaration in City Government of San
Pablo v. Reyes that following the 1987 Constitution the rule
thenceforth in interpreting statutory provisions on municipal
fiscal powers, doubts will have to be resolved in favor of
municipal corporations. Such policy is also echoed in
Section 5(a) of the Code, which states that [a]ny provision
on a power of a local government unit shall be liberally
interpreted in its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution of powers
and of the lower local government unit. But somewhat
conversely, Section 5(b) then proceeds to assert that [i]n
case of doubt, any tax ordinance or revenue measure shall
be construed strictly against the local government unit
enacting it, and liberally in favor of the taxpayer.And this
latter qualification has to be respected as a constitutionally
authorized limitation which Congress has seen fit to provide.
Evidently, local fiscal autonomy should not necessarily
translate into abject deference to the power of local
government units to impose taxes.
Congress has the constitutional authority to impose
limitations on the power to tax of local government units,
and Section 133 of the Code is one such limitation. Indeed,
the
enjoyment of absolute taxing power by local government
units, not to mention the reality that such power is a
delegated power.
4.
PROCEDURE FOR APPROVAL AND

EFFECTIVITY OF TAX ORDINANCE (Sec.
187)
Sec. 187. Procedure for Approval and Effectivity of Tax,

Ordinances and Revenue Measures; Mandatory Public
Hearings. - The procedure for approval of local tax
ordinances and revenue measures shall be in accordance
with the provisions of this 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 actingupon the
appeal, the aggrieved party may file appropriate proceedings
with a court of competent jurisdiction.
HAGONOY MARKET VENDOR ASSOCIATION, petitioner,
vs. MUNICIPALITY OF HAGONOY, BULACAN, respondent.
[G.R. No. 137621 | February 6, 2002 | 1D]
FACTS:
Oct. 1, 1996 Sangguniang Bayan of Hagonoy, Bulacan

enacted an ordinance which increased the stall rentals
of market vendors in Hagonoy providing that it shall take
effect upon approval
Subject ordinance was posted from Nov. 4 to 25, 1996
Last week of Nov. 1997 HMVAs members were

personally given copies of the approved ordinance
Dec. 8, 1997 HMVAs president filed an appeal with

the Secretary of Justice assailing the constitutionality of
the tax ordinance claiming that it was unaware of the
posting of the ordinance
Municipality of Hagonoy, Bulacan opposed the appeal

contending that the ordinance took effect on Oct. 6,
1996 and it was posted as required by law; hence, the
appeal was already time-barred
Secretary of Justice
o
dismissed the appeal on the ground that it was filed
out of time i.e., beyond thirty (30) days from the
effectivity of the Ordinance on October 1, 1996, as
prescribed under Section 187 of the 1991 LGC
o
Citing the case of Taada vs. Tuvera, the date of
effectivity of the subject ordinance retroacted to the
date of its approval in October 1996, after the
required publication or posting has been complied
with, pursuant to Section 3 of said ordinance.
HMVA appealed to the CA
CA dismissed the appeal for being formally deficient

as it was not accompanied by certified true copies of the
assailed Resolutions of the Secretary of Justice
ISSUE: Whether the procedural requirements of public
hearing and publication had been complied with.
HELD: YES
The applicable law is Section 187 of the 1991 Local
Government Code which provides:
o
SEC. 187. Procedure for Approval and
Effectivity of Tax Ordinances and Revenue
Measures; Mandatory Public Hearings. - The
procedure for the approval of local tax ordinances
and revenue measures shall be in accordance with
the provisions of this 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
DIGEST
Nov
7, 2014
raised
on appeal
within thirty (30) days from
in three (3) public places, viz: in front
the effectivity thereof to the Secretary of
Justice who shall render a decision within sixty (60)
days from the receipt of the appeal: Provided,
however, That such appeal shall not have the
effect of suspending the effectivity of the
ordinance and 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.
In a last ditch effort to justify its failure to file a timely appeal
with the Secretary of Justice, the petitioner contends that its
period to appeal should be counted not from the time the
ordinance took effect in 1996 but from the time its members
were personally given copies of the approved ordinance in
November 1997. It insists that it was unaware of the
approval and effectivity of the subject ordinance in 1996 on
two (2) grounds: first, no public hearing was conducted prior
to the passage of the ordinance and, second, the approved
ordinance was not posted.
Petitioners bold assertion that there was no public
hearing conducted prior to the passage of Kautusan Blg.
28 is belied by its own evidence. In petitioners two (2)
communications with the Secretary of Justice, it enumerated
the various objections raised by its members before the
passage of the ordinance in several meetings called by the
Sanggunian for the purpose. These show beyond doubt that
petitioner was aware of the proposed increase and in fact
participated in the public hearings therefor. The respondent
municipality likewise submitted the Minutes and Report of
the public hearings conducted by the Sangguniang Bayans
Committee on Appropriations and Market on February 6, July
15 and August 19, all in 1996, for the proposed increase in
the stall rentals.
Petitioner cannot gripe that there was practically no public
hearing conducted as its objections to the proposed measure
were not considered by the Sangguniang Bayan. To be sure,
public hearings are conducted by legislative bodies to allow
interested parties to ventilate their views on a proposed law
or ordinance. These views, however, are not binding on the
legislative body and it is not compelled by law to adopt the
same. Sanggunian members are elected by the people to
make laws that will promote the general interest of their
constituents. They are mandated to use their discretion and
best judgment in serving the people. Parties who participate
in public hearings to give their opinions on a proposed
ordinance should not expect that their views would be
patronized by their lawmakers.
On the issue of publication or posting, Section 188 of the
Local Government Code provides:
Section 188. Publication of Tax Ordinance and Revenue
Measures.
Within ten (10) days after their approval,
certified true copies of all provincial, city, and municipal
tax ordinances or revenue measures shall be published in
full for three (3) consecutive days in a newspaper of local
circulation; Provided, however, That in provinces, cities
and municipalities where there are no newspapers of
local circulation, the same may be posted in at least
two (2) conspicuous and publicly accessible places.
(emphasis supplied)
The records is bereft of any evidence to prove petitioners
negative allegation that the subject ordinance was not
posted as required by law. In contrast, the respondent
Sangguniang Bayan of the Municipality of Hagonoy,
Bulacan, presented evidence which clearly shows that
the procedure for the enactment of the assailed
ordinance was complied with. Municipal Ordinance No.
28 was enacted by the Sangguniang Bayan of Hagonoy on
October 1, 1996. Then Acting Municipal Mayor Maria Garcia
Santos approved the Ordinance on October 7, 1996. After its
approval, copies of the Ordinance were given to the
Municipal Treasurer on the same day.
On November 9,
1996,
the
Ordinance
was
approved
by
the
Sangguniang Panlalawigan.
The Ordinance was
posted during the period from November 4 - 25, 1996
of the municipal
building, at the bulletin board of the Sta. Ana Parish Church
and on the front door of the Office of the Market Master in
the public market. Posting was validly made in lieu of
publication as there was no newspaper of local
circulation in the municipality of Hagonoy. This fact
was known to and admitted by petitioner. Thus, petitioners
ambiguous and unsupported claim that it was only
sometime in November 1997 that the Provincial Board
approved Municipal Ordinance No. 28 and so the posting
could not have been made in November 1996was
sufficiently disproved by the positive evidence of respondent
municipality. Given the foregoing circumstances, petitioner
cannot validly claim lack of knowledge of the approved
ordinance. The filing of its appeal a year after the effectivity
of the subject ordinance is fatal to its cause.
5.
PUBLICATION (Sec. 188)

Sec. 188. Publication of Tax Ordinances and
Revenue Measures. - Within ten (10) days after
their approval, certified true copies of all
provincial, city, and municipal tax ordinances or
revenue measures shall be published in full for
three (3) consecutive days in a newspaper of
local circulation: Provided, however, That in
provinces, cities and municipalities where there
are no newspapers of local circulation, the
same may be posted in at least two (2)
conspicuous and publicly accessible places.
B.
OTHER PRELIMINARY MATTERS

1.
RESIDUAL POWERS OF LGUs POWER TO

LEVY OTHER TAXES, FEES OR CHARGES
(Sec. 186)
Sec. 186. Power To Levy Other Taxes, Fees or Charges. Local government units may exercise the power to levy
taxes, fees or charges on any base or subject not otherwise
specifically enumerated herein or taxed under the provisions
of the National Internal Revenue Code, as amended, or other
applicable laws: Provided, That the taxes, fees, or charges
shall not be unjust, excessive, oppressive, confiscatory or
contrary to declared national policy: Provided, further, That
the ordinance levying such taxes, fees or charges shall not
be enacted without any prior public hearing conducted for
the purpose.
2.
DOCTRINE
OF
PRE-EMPTION
EXCLUSIONARY RULE
OR
VICTORIAS MILLING CO., INC., plaintiff-appellant, vs.THE

MUNICIPALITY OF VICTORIAS, PROVINCE OF NEGROS
OCCIDENTAL,
defendant-appellant.[G.R.
No.
L-21183
September 27, 1968 | En Banc]
FACTS:
The municipality of Victorias, Negros Occidental enacted

Ordinance No. 1, series of 1956 to amend two municipal
ordinances: 1) with respect to sugar centrals, by
increasing the rates of license taxes; and 2) as to sugar
refineries, by increasing the rates of license taxes as
well as the range of graduated schedule of annual
output capacity
Victorias Milling, the only operator of sugar central and

sugar refinery within the municipality, questions the
validity of the said ordinance and seeks refund of all
license taxes paid and to be paid under protest on the
ground, among others, that the national government has
preempted the field of taxation with respect to sugar
central or refineries
The trial court declared the ordinance invalid
Both parties appealed directly to the SC

ISSUE: Whether there is preemption in the case at bar.
HELD: NO
Plaintiff argues that the municipality is bereft of authority to
enact the ordinance in question because the national
DIGEST "had
Novpreempted
7, 2014it from entering the field of
government
taxation of sugar centrals and sugar refineries." Plaintiff
seeks refuge in Section 189 of the National Internal Revenue
Code which subjects proprietors or operators of sugar
centrals or sugar refineries to percentage tax.
The implausibility of this position is at once apparent. We are
not dealing here with percentage tax. Rather, we are
concerned with a tax specifically for operators of sugar
centrals and sugar refineries. The rates imposed are based
on the maximum annual output capacity. Which is not a
percentage. Because it is not a share. Nor is it a tax based on
the amount of the proceeds realized out of the sale of sugar,
centrifugal or refined.
What can be said at most is that the national government
has preempted the field of percentage taxation. Section 1 of
Commonwealth Act 472, while granting municipalities power
to levy taxes, expressly removes from them the power to
exact "percentage taxes".
It is correct to say that preemption in the matter of taxation
simply refers to an instance where the national
government elects to tax a particular area, impliedly
withholding from the local government the delegated
power to tax the same field. This doctrine primarily rests
upon the intention of Congress. Conversely, should Congress
allow municipal corporations to cover fields of taxation it
already occupies, then the doctrine of preemption will not
apply.
In the case at bar, Section 4(1) of Commonwealth Act 472
clearly and specifically allows municipal councils to tax
persons engaged in "the same businesses or occupation" on
which "fixed internal revenue privilege taxes" are "regularly
imposed by the National Government." With certain
exceptions specified in Section 3 of the same statute. Our
case does not fall within the exceptions. It would therefore
be futile to argue that Congress exclusively reserved to the
national government the right to impose the disputed taxes.
We rule that there is no preemption.

II.
GENERAL PROVISIONS
A.
SCOPE OF TAXING POWERS (Sec. 128)

Sec. 128. Scope. - The provisions herein shall
govern
the
exercise
by
provinces,
cities,
municipalities, and barangays of their taxing and
other revenue-raising powers.
B.
FUNDAMENTAL PRINCIPLES (Sec. 130)

Section 130. Fundamental Principles. - The following
fundamental principles shall governthe exercise of
the taxing and other revenue-raising powers of local
government units:
(a) Taxation shall be uniform in each local
government unit;
(b) Taxes, fees, charges and other impositions
shall:
(1) be equitable and based as far as
practicable on the taxpayer's ability to pay;
(2) be levied and collected only for public
purposes;
(3) not be unjust, excessive, oppressive, or
confiscatory;
(4) not be contrary to law, public policy,
national economic policy, or in the restraint
of trade;
(c) The collection of local taxes, fees, charges and
other impositions shall in no case be let to any
private person;
(d) The revenue collected pursuant to the
provisions of this Code shall inure solely to the
benefit of, and be subject to the disposition by,
the local government unit levying the tax, fee,
charge or other imposition unless otherwise
specifically provided herein; and,
(e) Each local government unit shall, as far as

practicable, evolve a progressive system of
taxation.
C.
DEFINITIONS (Sec. 131)

Sec. 131. Definition of Terms. - When used in this
Title, the term:
(a) "Agricultural Product" includes the yield of the
soil, such as corn, rice, wheat, rye, hay,
coconuts, sugarcane, tobacco, root crops,
vegetables, fruits, flowers, and their byproducts; ordinary salt; all kinds of fish; poultry;
and livestock and animal products, whether in
their original form or not.
The phrase "whether in their original form or
not" refers to the transformation of said
products by the farmer, fisherman, producer or
owner through the application of processes to
preserve or otherwise to prepare said products
for market such as freezing, drying, salting,
smoking, or stripping for purposes of preserving
or otherwise preparing said products for
market;
(b) "Amusement" is a pleasurable diversion and
entertainment. It is synonymous to relaxation,
avocation, pastime, or fun;
(c) "Amusement Places" include theaters, cinemas,
concert halls, circuses and other places of
amusement where one seeks admission to
entertain oneself by seeing or viewing the show
or performances;
(d) "Business" means trade or commercial activity
regularly engaged in as a means of livelihood
or with a view to profit;
(e) "Banks and other financial institutions" include
non-bank financial intermediaries, lending
investors, finance and investment companies,
pawnshops,
money
shops,
insurance
companies, stock markets, stock brokers and
dealers in securities and foreign exchange, as
defined under applicable laws, or rules and
regulations thereunder;
(f) "Capital Investment" is the capital which a
person employs in any undertaking, or which
he contributes to the capital of a partnership,
corporation, or any other juridical entity or
association in a particular taxing jurisdiction;
(g) "Charges" refers to pecuniary liability, as rents
or fees against persons or property;
(h) "Contractor" includes persons, natural or
juridical, not subject to professional tax under
Section 139 of this Code, whose activity
consists essentially of the sale of all kinds of
services for a fee, regardless of whether or not
the performance of the service calls for the
exercise or use of the physical or mental
faculties of such contractor or his employees.
As used in this Section, the term "contractor"
shall include general engineering, general
building and specialty contractors as defined
under applicable laws; filling, demolition and
salvage works contractors; proprietors or
operators
of
mine
drilling
apparatus;
proprietors or operators of dockyards; persons
engaged in the installation of water system,
and gas or electric light, heat, or power;
proprietors or operators of smelting plants,
engraving, plating, and plastic lamination
establishments; proprietors or operators of
establishments
for
repairing,
repainting,
upholstering, washing or greasing of vehicles,
heavy equipment, vulcanizing, recapping and
battery charging; proprietors or operators of
furniture shops and establishments for planing
or surfacing and recutting of lumber, and
sawmills under contract to saw or cut logs
belonging to others; proprietors or operators of
DIGEST dry
Nov
7, 2014
cleaning
or dyeing establishments, steam
supplied with the services
laundries, and laundries using washing
machines; proprietors or owners of shops for
the repair of any kind of mechanical and
electrical devices, instruments, apparatus, or
furniture and shoe repairing by machine or any
mechanical
contrivance;
proprietors
or
operators of establishments or lots for parking
purposes; proprietors or operators of tailor
shops, dress shops, milliners and hatters,
beauty parlors, barbershops, massage clinics,
sauna, Turkish and Swedish baths, slenderizing
and building salons and similar establishments;
photographic
studios;
funeral
parlors;
proprietors or operators of hotels, motels, and
lodging houses; proprietors or operators of
arrastre and stevedoring, warehousing, or
forwarding establishments; master plumbers,
smiths, and house or sign painters; printers,
bookbinders, lithographers; publishers except
those engaged in the publication or printing of
any newspaper, magazine, review or bulletin
which appears at regular intervals with fixed
prices for subscription and sale and which is not
devoted principally to the publication and
advertisements; business agents, private
detective or watchman agencies, commercial
and immigration brokers, and cinematographic
film owners, lessors and distributors.
(i)
"Corporation" includes partnerships, no matter

how
created
or
organized,
joint-stock
companies,
joint
accounts
(cuentas
en
participacion),
associations
or
insurance
companies but does not include general
professional partnerships and a joint venture or
consortium formed for the purpose of
undertaking construction projects or engaging
in petroleum, coal, geothermal, and other
energy operations pursuant to an operating or
consortium agreement under a service contract
with the government. General professional
partnership are partnerships formed by persons
for the sole purpose of exercising their common
profession, no part of the income of which is
derived from engaging in any trade or business.
The term "resident foreign" when applied to a
corporation means a foreign corporation not
otherwise organized under the laws of the
Philippines but engaged in trade or business
within the Philippines;
"Countryside
and
Barangay
Business
Enterprise" refers to any business entity,
association, or cooperative registered under the
provisions of Republic Act Numbered Sixty-eight
hundred ten (R.A. No. 6810), otherwise known
as "Magna Carta For Countryside And Barangay
Business Enterprises (Kalakalan 20)";
(k) "Dealer" means one whose business is to buy
and sell merchandise, goods, and chattels as a
merchant. He stands immediately between the
producer or manufacturer and the consumer
and depends for his profit not upon the labor he
bestows upon his commodities but upon the
skill and foresight with which he watches the
market;
(l) "Fee" means a charge fixed by law or ordinance
for the regulation or inspection of a business or
activity;
(m) "Franchise" is a right or privilege, affected with
public interest which is conferred upon private
persons or corporations, under such terms and
conditions as the government and its political
subdivisions may impose in the interest of
public welfare, security, and safety;
(n) "Gross Sales or Receipts" include the total
amount of money or its equivalent representing
the contract price, compensation or service fee,
including the amount charged or materials
(o)
(p)
(q)
(r)
(j)
(s)
(t)
(u)
(v)
and deposits or
advance payments actually or constructively
received during the taxable quarter for the
services performed or to be performed for
another
person
excluding
discounts
if
determinable at the time of sales, sales return,
excise tax, and value-added tax (VAT);
"Manufacturer" includes every person who, by
physical or chemical process, alters the exterior
texture or form or inner substance of any raw
material
or
manufactured
or
partially
manufactured product in such manner as to
have been put in its original condition, or who
by any such process alters the quality of any
such raw material or manufactured or partially
manufactured products so as to reduce it to
marketable shape or prepare it for any of the
use of industry, or who by any such process
combines
any
such
raw
material
or
manufactured
or
partially
manufactured
products with other materials or products of the
same or of different kinds and in such manner
that the finished products of such process or
manufacture can be put to a special use or uses
to which such raw material or manufactured or
partially manufactured products in their original
condition could not have been put, and who in
addition
alters
such
raw
material
or
manufactured
or
partially
manufactured
products, or combines the same to produce
such finished products for the purpose of their
sale or distribution to others and not for his
own use or consumption;
"Marginal Farmer or Fisherman" refers to an
individual engaged in subsistence farming or
fishing which shall be limited to the sale, barter
or exchange of agricultural or marine products
produced by himself and his immediate family;
"Motor Vehicle" means any vehicle propelled by
any power other than muscular power using the
public roads, but excluding road rollers, trolley
cars, street-sweepers, sprinklers, lawn mowers,
bulldozers, graders, fork-lifts, amphibian trucks,
and cranes if not used on public roads, vehicles
which run only on rails or tracks, and tractors,
trailers, and traction engines of all kinds used
exclusively for agricultural purposes;
"Municipal Waters" includes not only streams,
lakes, and tidal waters within the municipality,
not being the subject of private ownership and
not comprised within the national parks, public
forest, timber lands, forest reserves or fishery
reserves,but also marine waters included
between two lines drawn perpendicularly to the
general coastline from points where the
boundary lines of the municipality or city touch
the sea at low tide and a third line parallel with
the general coastline and fifteen (15)
kilometers from it. Where two (2) municipalities
are so situated on the opposite shores that
there is less than fifteen (15) kilometers of
marine waters between them, the third line
shall be equally distant from opposite shores of
their respective municipalities;
"Operator" includes the owner, manager,
administrator, or any other person who
operates or is responsible for the operation of a
business establishment or undertaking;
"Peddler" means any person who, either for
himself or on commission, travels from place to
place and sells his goods or offers to sell and
deliver the same. Whether a peddler is a
wholesale peddler or a retail peddler of a
particular commodity shall be determined from
the definition of wholesale dealer or retail
dealer as provided in this Title;
"Persons" means every natural or juridical
being, susceptible of rights and obligations or
of being the subject of legal relations;
"Residents" refer to natural persons who have
their habitual residence in the province, city, or
DIGEST municipality
Nov 7, 2014
where they exercise their civil
(a) xxx
(w)
(x)
(y)
(z)
D.
rights and fulfill their civil obligations, and to

juridical persons for which the law or any other
provisions creating or recognizing them fixes
their residence in a particular province, city, or
municipality. In the absence of such law,
juridical persons are residents of the province,
city, or municipality where they have their legal
residence or principal place of business or
where they conduct their principal business or
occupation;
"Retail" means a sale where the purchaser buys
the commodity for his own consumption,
irrespective of the quantity of the commodity
sold;
"Vessel" includes every type of boat, craft, or
other artificial contrivance used, or capable of
being used, as a means of transportation on
water;
"Wharfage" means a fee assessed against the
cargo of a vessel engaged in foreign or
domestic trade based on quantity, weight, or
measure received and/or discharged by vessel;
and
"Wholesale" means a sale where the purchaser
buys or imports the commodities for resale to
persons other than the end user regardless of
the quantity of the transaction.
COMMON LIMITATIONS
1.
INCOME TAX
Section 133. Common Limitations on the Taxing Powers of

Local Government Units. - Unless otherwise provided herein,
the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following:
(a) Income tax, except when levied on banks and other
financial institutions;
xxxxxx
(o) xxx
a.
CORRELATE WITH Sec. 143 (f)
Sec. 143. Tax on Business. - The municipality may impose

taxes on the following businesses:
(a) xxx
xxxxxx
(f) On banks and other financial institutions, at a rate
not exceeding fifty percent (50%) of one percent
(1%) on the gross receipts of the preceding calendar
year derived from interest, commissions and
discounts from lending activities, income from
financial leasing, dividends, rentals on property and
profit from exchange or sale of property, insurance
premium.
xxxxxx
(h) xxx
2.
DOCUMENTARY STAMP TAX (Sec. 133 [b])
Sec. 133. Common Limitations on the Taxing Powers of Local

Government Units. - Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities,
the following:
(a) xxx
(b) Documentary stamp tax;
xxxxxx
(o) xxx
3.
TRANSFER TAXES
Sec. 133. Common Limitations on the Taxing
Powers of Local Government Units. - Unless
otherwise provided herein, the exercise of the
taxing
powers
of
provinces,
cities,
municipalities, and barangays shall not extend
to the levy of the following:
(c) Taxes on estates, inheritance, gifts,

legacies and other acquisitions mortis
causa, except as otherwise provided
herein;
xxxxxx
(o) xxx
a.
CORRELATE WITH Sec. 135
Section 135. Tax on Transfer of Real Property Ownership.

(a) The province may impose a tax on the sale,
donation, barter, or on any other mode of
transferring ownership or title of real property at the
rate of not more than fifty percent (50%) of the one
percent (1%) of the total consideration involved in
the acquisition of the property or of the fair market
value in case the monetary consideration involved
in the transfer is not substantial, whichever is
higher. The sale, transfer or other disposition of real
property pursuant to R.A. No. 6657 shall be exempt
from this tax.
(b) For this purpose, the Register of Deeds of the
province concerned shall, before registering any
deed, require the presentation of the evidence of
payment of this tax. The provincial assessor shall
likewise make the same requirement before
cancelling an old tax declaration and issuing a new
one in place thereof, Notaries public shall furnish
the provincial treasurer with a copy of any deed
transferring ownership or title to any real property
within thirty (30) days from the date of notarization.
It shall be the duty of the seller, donor, transferor, executor
or administrator to pay the tax herein imposed within sixty
(60) days from the date of the execution of the deed or from
the date of the decedent's death.
4.
CUSTOMS DUTIES

the following:
(a) xxx
xxxxxx
(d) Customs duties, registration fees of vessel and
wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except
wharfage on wharves constructed and maintained
by the local government unit concerned;
xxxxxx
(o) xxx
5.
TAXES, FEES AND CHARGES (TFC) ON

GOODS PASSING THROUGH THE
TERRITORIAL JURISDICTION OF LGUs

the following:
(a) xxx
xxxxxx
(e) Taxes, fees, and charges and other impositions upon
goods carried into or out of, or passing through, the
territorial jurisdictions of local government units in
the guise of charges for wharfage, tolls for bridges
or otherwise, or other taxes, fees, or charges in any
form whatsoever upon such goods or merchandise;
xxxxxx
(o) xxx
a.
CORRELATE WITH Sec. 155
Sec. 155. Toll Fees or Charges. - The sanggunian concerned

may prescribe the terms and conditions and fix the rates for
DIGEST
of
Nov
7, 2014
the
imposition
toll fees
or charges for the use of any public
road, pier, or wharf, waterway, bridge, ferry or
telecommunication system funded and constructed by the
local government unit concerned: Provided, That no such toll
fees or charges shall be collected from officers and enlisted
men of the Armed Forces of the Philippines and members of
the Philippine National Police on mission, post office
personnel delivering mail, physically-handicapped, and
disabled citizens who are sixty-five (65) years or older.
When public safety and welfare so

requires, the sanggunian concerned may
discontinue the collection of the tolls, and
thereafter the said facility shall be free and
open for public use.
PALMA DEVELOPMENT CORPORATION, petitioner, vs.

MUNICIPALITY OF MALANGAS, ZAMBOANGA DEL SUR,
respondent.
[G.R. No. 152492 | October 16, 2003 | 3D]
FACTS:
Palma Development Corporation (PDC) is engaged in

milling and selling rice and corn to wholesalers using the
municipal port of Malangas, Zambaoanga del Sur as
transshipment point for its goods
The port, as well as the surrounding roads leading to it,

belong to and are maintained by respondent
municipality
Respondent municipality passed an ordinance (Municipal

Revenue Code No. 09)which provides for 1)service fee
for its use of the municipal roads or streets leading to
the wharf and to any point along the shorelines within
the jurisdiction of the municipality and 2) for police
surveillance on all goods and all equipment harbored or
sheltered in the premises of the wharf and other within
the jurisdiction of this municipality
PDC paid the service fees imposed by the ordinance

under protest
PDC then filed against respondent municipality an action

for declaratory relief before the RTC assailing the validity
of the ordinance
RTC ordinance is null and void
CA reversed the RTCs decision and remanded the

case to the trial court
ISSUES:
1. Whether the imposition of service fee for the use of
municipal roads or streets leading to the wharf and
to any point along the shorelines within the
municipality of Malangas under the subject
ordinance is valid.
2. Whether the imposition of service fee for police
surveillance on all goods harbored or sheltered in
the premises of the municipal port of Malangas
under the subject ordinance is valid.
HELD: 1. YES; 2. NO
Petitioner argues that while respondent has the power to tax
or impose fees on vehicles using its roads, it cannot tax the
goods that are transported by the vehicles. The provision of
the ordinance imposing a service fee for police surveillance
on goods is allegedly contrary to Section 133(e) of RA No.
7160, which reads:
o
Section 133. Common Limitations on the Taxing
Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the
following:
x xx
xxx
xxx
e) Taxes, fees and charges and other impositions upon
goods carried into and out of, or passing through, the
territorial jurisdictions of local government units in
the guise of charges for wharfage, tolls for bridges or
otherwise, or other taxes, fees or charges in any form
whatsoever upon such goods or merchandise;
On the other hand, respondent maintains that the subject
fees are intended for services rendered, the use of municipal
roads and police surveillance. The fees are supposedly not

covered by the prohibited impositions under Section 133(e)
of RA No. 7160. It further contends that it was empowered by
the express mandate of Sections 153 and 155 of RA No. 7160
to enact Section 5G.01 of the ordinance. The pertinent
provisions of this statute read as follows:
Section 153. Service Fees and Charges. -- Local
government units may impose and collect such
reasonable fees and charges for services rendered.
xxx
xxx
xxx
Section 155. Toll Fees or Charges. -- The sanggunian
concerned may prescribe the terms and conditions
and fix the rates for the imposition of toll fees or
charges for the use of any public road, pier or wharf,
waterway, bridge, ferry or telecommunication system
funded and constructed by the local government unit
concerned: Provided, That no such toll fees or
charges shall be collected from officers and enlisted
men of the Armed Forces of the Philippines and
members of the Philippine National Police on mission,
post office personnel delivering mail, physicallyhandicapped, and disabled citizens who are sixty-five
(65) years or older.
When public safety and welfare so requires, the

sanggunian
concerned
may discontinue the
collection of the tolls, and thereafter the said facility
shall be free and open for public use.
By express language of Sections 153 and 155 of RA No.
7160, local government units, through their Sanggunian ,
may prescribe the terms and conditions for the imposition of
toll fees or charges for the use of any public road, pier or
wharf funded and constructed by them.
A service fee
imposed on vehicles using municipal roads leading to the
wharf is thus valid.However, Section 133(e) of RA No. 7160
prohibits the imposition, in the guise of wharfage, of fees -as well as all other taxes or charges in any form whatsoever
-- on goods or merchandise. It is therefore irrelevant if the
fees imposed are actually for police surveillance on the
goods, because any other form of imposition on goods
passing through the territorial jurisdiction of the municipality
is clearly prohibited by Section 133(e).
Under Section 131(y) of RA No. 7160, wharfage is defined as
a fee assessed against the cargo of a vessel engaged in
foreign or domestic trade based on quantity, weight, or
measure received and/or discharged by vessel.
It is
apparent that a wharfage does not lose its basic character by
being labeled as a service fee for police surveillance on all
goods.
The imposition of a service fee for police surveillance on all
goods harbored or sheltered in the premises of the municipal
port of Malangas under Sec. 5G.01 of the Malangas Municipal
Revenue Code No. 09, series of 1993, is declared NULL AND
VOID for being violative of Republic Act No. 7160.
6.
TFC ON PRODUCTS SOLD BY MARGINAL

FARMERS OR FISHERMEN

the following:
(a) xxx
xxxxxx
(f) Taxes, fees or charges on agricultural and aquatic
products when sold by marginal farmers or
fishermen;
xxxxxx
(o) xxx
a.
DEFINITION OF MARGINALIZED
FISHERMEN (Sec. 131[p])
Marginal
Farmer
or
Fishermanindividual
engaged in subsistence farming or fishing which shall
be limited to the sale, barter or exchange of
DIGEST
Novor7,
2014products produced by himself
agricultural
marine
and his immediate family (Sec. 131[p], 1991 LGC)
CITY OF CEBU and/or CITY COUNCIL OF THE CITY OF
CEBU, composed of Hon. FLORENCIO S. UROT,
RAYMUNDO A. CRYSTAL, BIENVENIDO B. TUDTUD, JOSE
V. CUENCO, PABLO U. ABELLA, GEORGE M. BALADJAY,
ARTURO L. ABELLANA, JESUS S. GABUYA and MARIO R.
VELOSO,
petitioners,
vs.
HON.
INTERMEDIATE
APPELLATE COURT, HON. CESAR VIRATA and HON.
PEDRO M. ALMANZOR, in their capacities as Secretary
and Acting Secretary, respectively, Department of
Finance, respondents.[G.R. No. 70684 | October 10, 1986 |
2D]
FACTS:
Pursuant to PD No. 231 or the Local Tax Code, the City

Council of Cebu passed Ordinances I and II imposing,
among others, fish inspection fees for every kilo of fish
sold
The ordinances were submitted to respondents

Secretary and Acting Secretary of Finance for review
The respondents ordered the suspension of some of the

provisions of the ordinances
Petitioners filed a petition for review and/or appeal in the

CFI which nullified the said provisions
On appeal, the IAC affirmed the decision of the CFI
Petitioners filed the instant petition

ISSUE: Whether the imposition of an inspection fee of P0.03
for every kilo of fish sold is valid.
HELD: NO
The respondent court held that the final inspection fee under
section 102 of City Tax Ordinance No. 1 is violative of section
5 (K) and section 2 (E) of the Local Tax Code for being
contrary to law, public policy and/or in restraint of trade.
Petitioners assail the aforesaid ruling pointing out that the
said provision is not against the fishermen but rather against
the traders and fish vendors, and that the rate of imposition
is very minimal it being fixed at P0.03 per kilo of fish only.
This contention is not correct. Sec. 5 (K) of the Local Tax
Code limits the taxing powers of Local governments as
follows
o
Sec. 5. Common limitation on the taxing
powers of local government.- The
exercise of the taxing powers of
provinces, cities, municipalities and
barrios shall not extend to the imposition
of the following
(K) Taxes or fees on agricultural products
when sold by the farmers or producers
thereof, whether in their original form or
not
The aforequoted provision prohibits a local government from
imposing an inspection fee on agricultural products and fish
is an agricultural product. Contrary to the claim of
petitioners, under Section 102 of City Ordinance No. 1 a
fisherman selling his fish within the city has to pay the
inspection fee of P0.03 for every kilo of fish sold.
Furthermore, the imposition of the tax will definitely restrict
the free flow of fresh fish to Cebu City because the price of
fish will have to increase.
7.
TAXES ON BOI-REGISTERED ENTERPRISES

the following:
(a) xxx
xxxxxx
(g) Taxes on business enterprises certified to by the
Board of Investments as pioneer or non-pioneer for a
period of six (6) and four (4) years, respectively from the
date of registration;
xxxxxx
(o) xxx
8.
10
EXCISE TAXES UNDER THE NIRC/TFC ON

PETROLEUM PRODUCTS

the following:
(a) xxx
xxxxxx
(h)
Excise taxes on articles enumerated under the
national Internal Revenue Code, as amended, and taxes,
fees or charges on petroleum products;
xxxxxx
(o) xxx
PETRON CORPORATION, petitioner,
vs.MAYOR TOBIAS M. TIANGCO, and MUNICIPAL
TREASURER MANUEL T. ENRIQUEZ of the
MUNICIPALITY OF NAVOTAS, METRO MANILA,
respondents.[G.R. No. 158881 | April 16, 2008 | 2D]
FACTS:
Petron maintains a depot or bulk plant at the

NavotasFishport Complex in Navotas and is engaged in
selling diesel fuels
The municipality of Navotas assessed Petron of

deficiency taxes relative to its sale of diesel with
reference to Ordinance 92-03 or the New Navotas
Revenue Code
Petron filed with Navotas a letter-protest arguing that it

was exempt from local business taxes in view of Art.
232(h) of the IRR of the LGC
Respondent Municipal Treasurer denied the letter-protest
Petron filed with the RTC a complaint for cancellation of

assessment for deficiency taxes
While the case was pending decision, respondents

refused to issue business permit to Petron thus
prompting Petron to file a supplemental complaint
against respondents
RTC dismissed Petrons complaint and ordered the

payment of the assessed amount
Petron filed the present petition raising pure questions of

law
o
Petron the business taxes on its sale of diesel fuel
partakes of an excise taxciting the case of Philippine
Petroleum Corporation v. Municipality of Pililia: A tax
on business is distinct from a tax on the article itself.
o
Respondents the phrase taxes, fees or charges on
petroleum products under Sec. 133(h) of the LGC
pertains to the imposition of direct or excise taxes on
petroleum products and not business taxes
ISSUE: Whether the LGU is empowered under the LGC to
impose business taxes on persons or entities engaged in the
sale of petroleum products.
HELD: NO
I. On Petrons argument that the business taxes on
its sale of diesel duel partakes of an excise tax
Section 133(h) of the LGC reads as follows:
o
Sec. 133. Common Limitations on
the
Taxing
Powers
of
Local
Government Units. - Unless otherwise
provided herein, the exercise of the
taxing powers of provinces, cities,
municipalities, and Barangays shall not
extend to the levy of the following:
xxx
(h) Excise taxes on articles enumerated
under the National Internal Revenue
Code, as amended, and taxes, fees or
charges on petroleum products;
Section 133(h) provides two kinds of taxes which cannot be
imposed by local government units: excise taxes on articles
enumerated under the NIRC, as amended; and taxes, fees
or charges on petroleum products. There is no doubt that
among the excise taxes on articles enumerated under the
DIGEST
Nov
7, on
2014
NIRC
are those
levied
petroleum products, per Section
148 of the NIRC.
Admittedly, the proffered definition of an excise tax as "a tax
upon the performance, carrying on, or exercise of some right,
privilege, activity, calling or occupation" derives from the
compendium American Jurisprudence, popularly referred to
as Am Jur, and has been cited in previous decisions of this
Court, including those cited by Petron itself. Such a definition
would not have been inconsistent with previous incarnations
of our Tax Code, such as the NIRC of 1939, as amended, or
the NIRC of 1977 because in those laws the term "excise tax"
was not used at all. In contrast, the nomenclature used in
those prior laws in referring to taxes imposed on specific
articles was "specific tax." Yet beginning with the National
Internal Revenue Code of 1986, as amended, 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. Further, 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. In other words, the meaning of
"excise tax" has undergone a transformation, morphing from
the Am Jur definition to its current signification which is a tax
on certain specified goods or articles.
The change in perspective brought forth by the use of the
term "excise tax" in a different connotation was not lost on
the departed author Jose Nolledo as he accorded divergent
treatments in his 1973 and 1994 commentaries on our tax
laws. Writing in 1973, and essentially alluding to the Am Jur
definition of "excise tax," Nolledo observed:
o
Are specific taxes, taxes on property or excise taxes
In the case of Meralco v. Trinidad ([G.R.] 16738, 1925)

it was held that specific taxes are property taxes, a
ruling which seems to be erroneous. Specific taxes are
truly excise taxes for the fact that the value of the
property taxed is taken into account will not change
the nature of the tax. It is correct to say that specific
taxes are taxes on the privilege to import,
manufacture and remove from storage certain articles
specified by law.
In contrast, after the tax code was amended to classify
specific taxes as a subset of excise taxes, Nolledo, in his
1994 commentaries, wrote:
1. Excise taxes, as used in the Tax Code, refers to
taxes applicable to certain specified goods or
articles manufactured or produced in the
Philippines for domestic sale or consumption or for
any other disposition and to things imported into
the Philippines. They are either specific or ad
valorem.
2. Nature of excise taxes. They are imposed directly
on certain specified goods. (infra) They are,
therefore, taxes on property. (see Medina vs. City of
Baguio, 91 Phil. 854.)
A tax is not excise where it does not subject directly the
produce or goods to tax but indirectly as an incident to, or in
connection with, the business to be taxed.
In their 2004 commentaries, De Leon and De Leon restate
the Am Jur definition of excise tax, and observe that the term
is synonymous with privilege tax and [both terms] are
often used interchangeably. At the same time, they offer a
caveat that [e]xcise tax, as [defined by Am Jur], is not to be
confused with excise tax imposed [by the NIRC] on certain
specified articles manufactured or produced in, or imported
into, the Philippines, for domestic sale or consumption or for
any other disposition.
It is evident that Am Jur aside, the current definition of an
excise tax is that of a tax levied on a specific article, rather
than one upon the performance, carrying on, or the exercise
of an activity. This current definition was already in place
when the Code was enacted in 1991, and we can only
presume that it was what the Congress had intended as it
specified that local government units could not impose
11
excise taxes on articles enumerated under the [NIRC]. This

prohibition must pertain to the same kind of excise taxes as
imposed by the NIRC, and not those previously defined
excise taxes which were not integrated or denominated as
such in our present tax law.
It is quite apparent, therefore, that our current body of
taxation law does not explicitly accommodate the traditional
definition of excise tax offered by Petron. In fact, absent any
statutory adoption of the traditional definition, it may be said
that starting in 1986 excise taxes in this jurisdiction refer
exclusively to specific or ad valorem taxes imposed under
the NIRC.
Excise taxes, as imposed under the NIRC, do not pertain to
the performance, carrying on, or exercise of an activity, at
least not to the extent of equating excise with business
taxes.
II. Whether the clause taxes, fees or charges on
petroleum products in Section 133(h) precludes
local government units from imposing business
taxes based on the sale of petroleum products
The power of a municipality to impose business taxes derives
from Section 143 of the Code that specifically enumerates
several types of business on which it may impose taxes,
including manufacturers, wholesalers, distributors, dealers of
any article of commerce of whatever nature; those engaged
in the export or commerce of essential commodities;
retailers; contractors and other independent contractors;
banks and financial institutions; and peddlers engaged in the
sale of any merchandise or article of commerce. This
obviously broad power is further supplemented by
paragraph (h) of Section 143 which authorizes the
sanggunian to impose taxes on any other businesses not
otherwise specified under Section 143 which the sanggunian
concerned may deem proper to tax.
Section 133(h) states that local government units shall not
extend to the levy of xxx taxes, fees or charges on petroleum
products. Respondents assert that the phrase taxes, fees
or charges on petroleum products pertains to the imposition
of direct or excise taxes on petroleum products, and not
business taxes. If the phrase actually pertains to excise
taxes, then it would be an exercise in utter redundancy,
since the preceding phrase already prohibits the imposition
of excise taxes on articles already subject to such taxes
under the NIRC, such as petroleum products. There would be
no sense on the part of the legislature to twice emphasize in
the same sentence that excise taxes on petroleum products
are beyond the pale of local government taxation.
It appears that this argument of respondents was fashioned
on the basis of the pronouncement of the Court in Philippine
Petroleum Corporation v. Municipality of Pililla, thus:
o
xxx [W]hile Section 2 of P.D. 436 prohibits the
imposition of local taxes on petroleum products, said
decree did not amend Sections 19 and 19 (a) of P.D.
231 as amended by P.D. 426, wherein the municipality
is granted the right to levy taxes on business of
manufacturers, importers, producers of any article of
commerce of whatever kind or nature. A tax on
business is distinct from a tax on the article
itself. Thus, if the imposition of tax on business of
manufacturers,
etc.
in
petroleum
products
contravenes a declared national policy, it should have
been expressly stated in P.D. No. 436.
The dicta that "[a] tax on a business is distinct from a tax on
the article itself" might at first blush somehow lend support
to respondents position, yet that dicta has not since been
reprised by this Court. It is likewise worth observing that
Pililla did involve a tax ordinance that imposed business
taxes on an enterprise engaged in the manufacture and
storage of petroleum products.
Significantly, the legal milieu governing Pililla is vastly
different from that existing at bar, to the extent that the
earlier case could not be presently controlling.
Nov
7,sought
2014to be collected in Pililla were
AtDIGEST
the time the
taxes
imposed, there was no national law in place similar to
Section 133(h) of the Code that barred local taxes, fees or
charges on petroleum products. There were circulars to that
effect issued by the Finance Department, yet the Court could
not validate such issuances since under the tax laws then
in place no exemptions were given to manufacturers,
wholesalers, retailers, or dealers in petroleum products. In
fact, the Court tellingly observed that if the imposition of
tax on business of manufacturers, etc. in petroleum products
contravenes a declared national policy, it should have been
expressly stated in P.D. No. 436. Such expression
conspiciously missing in P.D. No. 436 is now found in Section
133(h).
In view of the difference in statutory paradigm between this
case and Pililla, the latter case is severely diminished as
applicable precedent at bar. The Court then was correct in
observing that a mere administrative circular could not
prohibit a local tax that is not otherwise barred under a
national statute, yet in this case that conflict is not present
since the Code explicitly prohibits the imposition of several
classes of local taxes, including those on petroleum products.
We can concede that a tax on a business is distinct from a
tax on the article itself, or for that matter, that a business tax
is distinct from an excise tax. However, such distinction is
immaterial insofar as the latter part of Section 133(h) is
concerned, for the phrase taxes, fees or charges on
petroleum products does not qualify the kind of taxes, fees
or charges that could withstand the absolute prohibition
imposed by the provision. It would have been a different
matter had Congress, in crafting Section 133(h), barred
excise taxes or direct taxes, or any category of taxes
only, for then it would be understood that only such specified
taxes on petroleum products could not be imposed under the
prohibition. The absence of such a qualification leads to the
conclusion that all sorts of taxes on petroleum products,
including business taxes, are prohibited by Section 133(h).
Where the law does not distinguish, we should not
distinguish.
The language of Section 133(h) makes plain that the
prohibition with respect to petroleum products extends not
only to excise taxes thereon, but all taxes, fees and
charges. The earlier reference in paragraph (h) to excise
taxes comprehends a wider range of subjects of taxation: all
articles already covered by excise taxation under the NIRC,
such as alcohol products, tobacco products, mineral
products, automobiles, and such non-essential goods as
jewelry, goods made of precious metals, perfumes, and
yachts and other vessels intended for pleasure or sports. In
contrast, the later reference to taxes, fees and charges
pertains only to one class of articles of the many subjects of
excise taxes, specifically, petroleum products. While local
government units are authorized to burden all such other
class of goods with taxes, fees and charges, excepting
excise taxes, a specific prohibition is imposed barring the
levying of any other type of taxes with respect to petroleum
products.
THE
PROVINCE
OF
BULACAN,
ROBERTO
M.
PAGDANGANAN, FLORENCE CHAVEZ, and MANUEL DJ
SIAYNGCO
in
their
capacity
as
PROVINCIAL
GOVERNOR, PROVINCIAL TREASURER, PROVINCIAL
LEGAL ADVISE, respectively, petitioners, vs. THE
HONORABLE COURT OF APPEALS (FORMER SPECIAL
12TH DIVISION), PUBLIC CEMENT CORPORATION,
respondents.[G.R. No. 126232 | November 27, 1998 | 3D]
FACTS:
The SangguniangPanlalawigan of Bulacan passed an

ordinance levying taxes on stones, sand, gravel, earth
and other quarry resources extracted from public lands
Respondent Provincial Treasurer assessed Republic

Cement for extracting limestone, shale and silica from
several parcels private land in the province
RCC contested the same but was denied by respondent

Provincial Treasurer
12
RCC filed a petition for declaratory relief with the RTC

which ruled that the petition was improper because a
breach of the ordinance had been committed by the
former
RCC filed a petition for certiorari with the SC which
referred the case to the CA
The Province of Bulacan issued a warrant of levy against
Republic Cement
RCCagreed to pay the assessed tax under protest in
exchange for the lifting of the warrant of levy
Petitioners and RCC agreed to limit the issued for
resolution by the CA to the question as to whether the
provincial government could impose &/or assess taxes
on quarry resources extracted by Republic Cement from
private lands
CA province of Bulacan under its ordinancehas no
legal authority to impose and assess taxes on quarry
resources extracted by RCC from private lands; hence,
the assessment made by the province against RCC is
null and void
ISSUE: Whether the provincial government could impose

and/or assess taxes on quarry resources extracted from
private lands.
HELD: NO
In any case, the remaining issues raised by petitioner are
likewise devoid of merit, a province having no authority to
impose taxes on stones, sand, gravel, earth and other quarry
resources extracted from private lands. The pertinent
provisions of the Local Government Code are as follows:
o
Sec. 134. Scope of Taxing Powers. Except as
otherwiseprovided in this Code, the province may levy
only the taxes, fees, and charges as provided in this
Article.
o
Sec. 158. Tax on Sand, Gravel and Other Quarry
Resources. The province may levy and collect not
more than ten percent (10%) of fair market value in
the locality per cubic meter of ordinary stones, sand,
gravel, earth, and other quarry resources, as defined
under the National Internal Revenue Code, as
amended, extracted from public lands or from the
beds of seas, lakes, rivers, streams, creeks, and other
public waters within its territorial jurisdiction.
xxxxxxxxx
The Court of Appeals erred in ruling that a province can
impose only the taxes specifically mentioned under the Local
Government Code. As correctly pointed out by petitioners,
Section 186 allows a province to levy taxes other than those
specifically enumerated under the Code, subject to the
conditions specified therein.
This finding, nevertheless, affords cold comfort to petitioners
as they are still prohibited from imposing taxes on stones,
sand, gravel, earth and other quarry resources extracted
from private lands. The tax imposed by the Province of
Bulacan is an excise tax, being a tax upon the performance,
carrying on, or exercise of an activity. The Local Government
Code provides:
o
Sec. 133. Common Limitations on the Taxing
Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the
following:
xxxxxxxxx
o
(h) Excise taxes on articles enumerated under the
National Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;
xxxxxxxxx
A province may not, therefore, levy excise taxes on articles
already taxed by the National Internal Revenue Code.
Unfortunately for petitioners, the National Internal Revenue
Code provides:
o
Sec. 151. Mineral Products.
o
(A) Rates of Tax. There shall be levied, assessed
and collected on minerals, mineral products and
quarry resources, excise tax as follows:
xxxxxxxxx
o
(2) On all nonmetallic minerals and quarry resources,
a tax of two percent (2%) based on the actual market
DIGEST
2014
value ofNov
the 7,
gross
output thereof at the time of
o
o
removal, in case of those locally extracted or

produced; or the values used by the Bureau of
Customs in determining tariff and customs duties, net
of excise tax and value-added tax, in the case of
importation.
xxxxxxxxx
(B) [Definition of Terms]. for purposes of this
Section, the termxxxxxxxxx
(4) Quarry resources shall mean any common stone or
other common mineral substances as the Director of
the Bureau of Mines and Geo-Sciences may declare to
be quarry resources such as, but not restricted to,
marl, marble, granite, volcanic cinders, basalt, tuff
and rock phosphate; Provided, That they contain no
metal or metals or other valuable minerals in
economically workable quantities.
It is clearly apparent from the above provision that the

National Internal Revenue Code levies a tax on all quarry
resources, regardless of origin, whether extracted from
public or private land. Thus, a province may not ordinarily
impose taxes on stones, sand, gravel, earth and other quarry
resources, as the same are already taxed under the National
Internal Revenue Code. The province can, however, impose a
tax on stones, sand, gravel, earth and other quarry resources
extracted from public land because it is expressly
empowered to do so under the Local Government Code. As
to stones, sand, gravel, earth and other quarry resources
extracted from private land, however, it may not do so,
because of the limitation provided by Section 133 of the
Code in relation to Section 151 of the National Internal
Revenue Code.
9.
PERCENTAGE TAXES AND VAT

the following:
(a) xxx
xxxxxx
(i) Percentage or value-added tax (VAT) on sales,
barters or exchanges or similar transactions on goods or
services except as otherwise provided herein;
xxxxxx
(o) xxx
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES,
INC., plaintiff-appellant, vs. MUNICIPALITY OF TANAUAN,
LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant
appellees. G.R. No. L-31156 February 27, 1976 | En Banc
FACTS:
Pepsi-Cola Bottling Company filed a complaint with a

preliminary injunction before the CFI to declare Sec. 2 of
RA No. 2264 (Local Autonomy Act) unconstitutional as an
undue delegation of taxing authority as well as to
declare Ordinance Nos. 23 and 27, series of 1962, of the
Municipality of Tanauan, Leyte, null and void.
Ordinance No. 23 collects from soft drinks producers

and manufacturers a tax of 1/16 of a centavo for every
bottle of soft drink corked
Ordinance No. 27 collects on soft drinks produced or

manufactured within the territorial jurisdiction of the
municipality a tax of one centavo (P0.01) on each gallon
(128 fluid ounces, U.S.) of volume capacity
The tax imposed in both Ordinance Nos. 23 and 27 is

denominated as municipal production tax
CFI upheld the constitutionality of Sec. 2 of RA 2264

and declaring Ordinance Nos. 23 and 27 legal and
constitutional
Pepsi-Cola Bottling Company appealed to the CA which

elevated the case to the SC
ISSUE: Whether Ordinance No. 27 imposes a percentage or a
specific tax.
13
HELD: NO
The plaintiff-appellant submits that Ordinance No. 23 and
constitute double taxation, because these two ordinances
cover the same subject matter and impose practically the
same tax rate. The thesis proceeds from its assumption that
both ordinances are valid and legally enforceable. This is not
so. As earlier quoted, Ordinance No. 23, which was approved
on September 25, 1962, levies or collects from soft drinks
producers or manufacturers a tax of one-sixteen (1/16) of a
centavo for every bottle corked, irrespective of the volume
contents of the bottle used. When it was discovered that the
producer or manufacturer could increase the volume
contents of the bottle and still pay the same tax rate, the
Municipality of Tanauan enacted Ordinance No. 27, approved
on October 28, 1962, imposing a tax of one centavo (P0.01)
on each gallon (128 fluid ounces, U.S.) of volume capacity.
The difference between the two ordinances clearly lies in the
tax rate of the soft drinks produced: in Ordinance No. 23, it
was 1/16 of a centavo for every bottle corked; in Ordinance
No. 27, it is one centavo (P0.01) on each gallon (128 fluid
ounces, U.S.) of volume capacity. The intention of the
Municipal Council of Tanauan in enacting Ordinance No. 27 is
thus clear: it was intended as a plain substitute for the prior
Ordinance No. 23, and operates as a repeal of the latter,
even without words to that effect.
That brings Us to the question of whether the remaining
Ordinance No. 27 imposes a percentage or a specific tax.
Undoubtedly, the taxing authority conferred on local
governments under Section 2, Republic Act No. 2264, is
broad enough as to extend to almost "everything, accepting
those which are mentioned therein." As long as the tax
levied under the authority of a city or municipal ordinance is
not within the exceptions and limitations in the law, the
same comes within the ambit of the general rule, pursuant to
the rules of exclucion attehus and exception firmat regulum
in cabisus non excepti. The limitation applies, particularly, to
the prohibition against municipalities and municipal districts
to impose "any percentage tax on sales or other taxes in any
form based thereon nor impose taxes on articles subject to
specific tax except gasoline, under the provisions of the
National Internal Revenue Code." For purposes of this
particular limitation, a municipal ordinance which prescribes
a set ratio between the amount of the tax and the volume of
sale of the taxpayer imposes a sales tax and is null and void
for being outside the power of the municipality to enact. But,
the imposition of "a tax of one centavo (P0.01) on each
gallon (128 fluid ounces, U.S.) of volume capacity" on all soft
drinks produced or manufactured under Ordinance No. 27
does not partake of the nature of a percentage tax on sales,
or other taxes in any form based thereon. The tax is levied
on the produce (whether sold or not) and not on the sales.
The volume capacity of the taxpayer's production of soft
drinks is considered solely for purposes of determining the
tax rate on the products, but there is no set ratio between
the volume of sales and the amount of the tax.
Nor can the tax levied be treated as a

specific tax. Specific taxes are those
imposed on specified articles, such as
distilled spirits, wines, fermented liquors,
products of tobacco other than cigars and
cigarettes,
matches
firecrackers,
manufactured oils and other fuels, coal,
bunker
fuel
oil,
diesel
fuel
oil,
cinematographic films, playing cards,
saccharine, opium and other habit-forming
drugs. Soft drink is not one of those
specified.
MATALIN COCONUT CO., INC. petitioner-appellee vs. THE
MUNICIPAL COUNCIL OF MALABANG, LANAO DEL SUR,
AMIR M. BALINDONG and HADJI PANGILAMUN
MANALOCON, MUNICIPAL MAYOR and MUNICIPAL
TREASURE
OR
MALABANG,
LANAO
DEL
SUR,
respondents-appellants.
PURAKAN
PLANTATION
COMPANY, intervenor-appellee [G.R. No. L-28138 | August
13, 1986 | 1D]
FACTS:
DIGEST
Nov council
7, 2014
The municipal
of Malabang, Lanao del Sur,
Pelizloy filed an appeal with the Secretary

pursuant to RA 2264 or the Local Autonomy Act, enacted
an ordinance imposing a police inspection fee per sack
of cassava starch produced and shipped out of the
municipality
Matalin Coconut challenged the validity of the ordinance
in a petition for declaratory relief filed with the CFI
Claiming that it was also adversely affected by the
ordinance, Purakan Plantation was granted leave to
intervene in the action
CFI declared the ordinance in question is null and void
and ordered the refund to Matalin Coconut of
its
payments made under the said ordinance
Respondents appealed to the SC
ISSUE: Whether the police inspection fee under the subject

ordinance is a percentage tax on sales or any other form of
tax based on sales
HELD: NO
We agree with the finding of the trial court that the amount
collected under the ordinance in question partakes of the
nature of a tax, although denominated as "police inspection
fee" since its undeniable purpose is to raise revenue.
However, we cannot agree with the trial court's finding that
the tax imposed by the ordinance is a percentage tax on
sales which is beyond the scope of the municipality's
authority to levy under Section 2 of the Local Autonomy Act.
Under the said provision, municipalities and municipal
districts are prohibited from imposing" any percentage tax
on sales or other taxes in any form based thereon. " The tax
imposed under the ordinance in question is not a percentage
tax on sales or any other form of tax based on sales. It is a
fixed tax of P.30 per bag of cassava starch or flour "shipped
out" of the municipality. It is not based on sales.
However, the tax imposed under the ordinance can be
stricken down on another ground. According to Section 2
of the abovementioned Act, the tax levied must be "for
public purposes, just and uniform" (Emphasis supplied.) As
correctly held by the trial court, the so-called "police
inspection fee" levied by the ordinance is "unjust and
unreasonable." Said the court a quo:
o
... It has been proven that the only service rendered
by the Municipality of Malabang, by way of inspection,
is for the policeman to verify from the driver of the
trucks of the petitioner passing by at the police
checkpoint the number of bags loaded per trip which
are to be shipped out of the municipality based on the
trip tickets for the purpose of computing the total
amount of tax to be collect (sic) and for no other
purpose. The imposition, therefore, of a police
inspection fee of P.30 per bag, imposed by said
ordinance is unjust and unreasonable.
o
The Court finally finds the inspection fee of P0.30 per
bag, imposed by the ordinance in question to be
excessive and confiscatory. It has been shown by the
petitioner, Matalin Coconut Company, Inc., that it is
merely realizing a marginal average profit of P0.40,
per bag, of cassava flour starch shipped out from the
Municipality of Malabang because the average
production is P15.60 per bag, including transportation
costs, while the prevailing market price is P16.00 per
bag.
PELIZLOY REALTY CORPORATION, represented herein
by its President, GREGORY K. LOY, Petitioner, vs.
THE PROVINCE OF BENGUET, Respondent. [G.R. No.
183137 | April 10, 2013 | 3D]
FACTS:
Pelizloy owns a resort, which is designed for recreation

and which has facilities like swimming pools, a spa and
function halls
The Provincial Board of the Province of Benguet

approved a tax ordinance known as the Bengue Revenue
Code of 2005 levying a 10% amusement tax on gross
receipts from admissions to resorts, swimming pools,
bath houses, hot springs and tourist spots
14
of Justice
claiming that the tax ordinances imposition of
amusement tax is an ultra vires act on the part of
respondent province
Upon failure of the Secretary of Justice to decide,

Pelizloy filed a petition for declaratory relief before the
RTC
RTC declared the tax ordinance valid
Pelizloy filed the instant petition

o
Pelizloy tax ordinance imposed the prohibited
percentage tax under Sec. 133(i) of the 1991 LGC
o
Province of Benguet the tax ordinance does not levy
a percentage tax and provinces can validly impose
amusement taxes on resorts, swimming pools, bath
houses, hot springs and tourist spots, these being
amusement places under Sec. 140 of the 1991 LGC
ISSUE: Whether
percentage tax.
the
subject
tax
ordinance
levies
HELD: YES
Section 133 provides for the common limitations on the
taxing powers of LGUs. Specifically, Section 133 (i) prohibits
the levy by LGUs of percentage or value-added tax (VAT) on
sales, barters or exchanges or similar transactions on goods
or services except as otherwise provided by the LGC.
In Commissioner of Internal Revenue v. Citytrust Investment
Phils. Inc., the Supreme Court defined percentage tax as a
"tax measured by a certain percentage of the gross selling
price or gross value in money of goods sold, bartered or
imported; or of the gross receipts or earnings derived by any
person engaged in the sale of services." Also, Republic Act
No. 8424, otherwise known as the National Internal Revenue
Code (NIRC), in Section 125, Title V, lists amusement taxes
as among the (other) percentage taxes which are levied
regardless of whether or not a taxpayer is already liable to
pay value-added tax (VAT).
Amusement taxes are fixed at a certain percentage of the
gross receipts incurred by certain specified establishments.
Thus, applying the definition in CIR v. Citytrust and drawing
from the treatment of amusement taxes by the NIRC,
amusement taxes are percentage taxes as correctly argued
by Pelizloy.
However, provinces are not barred from levying amusement
taxes even if amusement taxes are a form of percentage
taxes. Section 133 (i) of the LGC prohibits the levy of
percentage taxes "except as otherwise provided" by the LGC.
10. TAXES ON TRANSPORTATION
CONTRACTORS AND COMMON CARRIERS
the following:
(a) xxx
xxxxxx
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation
of passengers or freight by hire and common carriers by
air, land or water, except as provided in this Code;
xxxxxx
(o) xxx
FIRST
PHILIPPINE
INDUSTRIAL
CORPORATION,
petitioner, vs. COURT OF APPEALS, HONORABLE
PATERNO V. TAC-AN, BATANGAS CITY and ADORACION
C. ARELLANO, in her official capacity as City Treasurer
of Batangas, respondents. [G.R. No. 125948 December 29,
1998 | 2D]
FACTS:
FPIC is a grantee of a pipeline concession under the

Petroleum Act, as amended, to contract, install and
operate oil pipelines
DIGEST
Nov
7, for
2014
(Commonwealth Act No. 1416, as amended)
When FPIC
applied
a Mayors permit, the respondent
city treasurer assessed FPIC a business tax based on
gross receipts
FPIC paid the assessed taxes under protest
FPIC then filed a letter-protest addressed to the
respondent city treasurer who denied the same
City Treasurer FPIC considered engaged in
transportation business, thus cannot claim exemption
under Sec. 133(j) of the LGC
FPIC filed with the RTC a complaint for tax refund against
the respondents
FPIC imposition and collection of business tax on its
gross receipts violates Sec. 133 of the LGC
Respondents FPIC not exempt under Sec. 133 (j) of
the LGC since it is not a transportation contractor and
pipelines are not included in the term common carrier
RTC dismissed the complaint
FPIC filed a petition for review before the SC which
referred the case to the CA
CA affirmed RTCs decision
ISSUE: Whether FPIC is a common carrier or transportation

contractor, hence, exempt under Sec. 133 (j) of the LGC.
HELD: YES
A "common carrier" may be defined, broadly, as one who
holds himself out to the public as engaged in the business of
transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as
"any person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a common carrier
of goods is:
1. He must be engaged in the business of carrying
goods for others as a public employment, and must
hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which
his business is confined;
3. He must undertake to carry by the method by which
his business is conducted and over his established
roads; and
4. The transportation must be for hire.
Based on the above definitions and requirements, there is no
doubt that petitioner is a common carrier. It is engaged in
the business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to
carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by
land and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition of a
common carrier. In De Guzman vs. Court of Appeals we ruled
that:
o
The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business
activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article
1732 . . . avoids making any distinction between
a person or enterprise offering transportation
service on a regular or scheduled basis and one
offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its
services to the "general public," i.e., the
general community or population, and one who
offers services or solicits business only from a
narrow segment of the general population. We
think that Article 1877 deliberately refrained
from making such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act
15
which at least
partially supplements the law on common carriers set forth
in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:
o
every person that now or hereafter may own, operate.
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele,
whether permanent, occasional or accidental, and
done for general business purposes, any common
carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger,
or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system gas,
electric light heat and power, water supply and power
petroleum, sewerage system, wire or wireless
communications
systems,
wire
or
wireless
broadcasting stations and other similar public
services.
Republic Act 387 also regards petroleum operation as a
public utility. Pertinent portion of Article 7 thereof provides:
o
that
everything
relating
to
the
exploration for and exploitation of
petroleum . . . and everything relating to
the manufacture, refining, storage, or
transportation by special methods
of petroleum, is hereby declared to be
a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the
petitioner a "common carrier." In BIR Ruling No. 069-83, it
declared:
o
. . . since [petitioner] is a pipeline concessionaire that
is engaged only in transporting petroleum products, it
is considered a common carrier under Republic Act No.
387 . . . . Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations
No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that
petitioner is a "common carrier" and, therefore, exempt from
the business tax as provided for in Section 133 (j), of the
Local Government Code, to wit:
Sec. 133. Common Limitations on the Taxing Powers of
Local Government Units. Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:
xxxxxxxxx
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation
of passengers or freight by hire and common carriers by
air, land or water, except as provided in this Code.
[Revised Ruling] The deliberations conducted in the House of
Representatives on the Local Government Code of 1991 are
illuminating: Why the transportation business is being
excluded from the taxing powers of the LGUs? To guard
against the imposition of taxes by the LGUs on the carrier
business to prevent duplication of this tax.
It is clear that the legislative intent in excluding from the
taxing power of the local government unit the imposition of
business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common
carrier's tax on its gross sales/earnings under the National
Internal Revenue Code. To tax petitioner again on its gross
receipts in its transportation of petroleum business would
defeat the purpose of the Local Government Code.
11. TAXES ON PREMIUMS
DIGEST Nov
7, 2014shall not extend to the levy of
municipalities,
and barangays
the following:
(a) xxx
xxxxxx
(k) Taxes on premiums paid by way or reinsurance or
retrocession;
xxxxxx
(o) xxx
12. TAXES ON REGISTRATION OF MOTOR

VEHICLES AND ISSUANCE OF LICENSES
FOR DRIVING
the following:
(a) xxx
xxxxxx
(l) Taxes, fees or charges for the registration of motor
vehicles and for the issuance of all kinds of licenses or
permits for the driving thereof, except tricycles;
xxxxxx
(o) xxx
a.
CORRELATE WITH Sec. 458(3)(vi) of

the LGC and Art. 99(3)(vi) of the IRR
of LGC
SEC. 458, LGC. Powers, Duties, Functions and

Compensation. xxx.......xxx.......xxx
(3) Subject to the provisions of Book II of this Code,
enact ordinances granting franchises and authorizing
the issuance of permits or licenses, upon such
conditions and for such purposes intended to promote
the general welfare of the inhabitants of the city and
pursuant to this legislative authority shall:
xxx.......xxx.......xxx.
(VI) Subject to the guidelines prescribed by the
Department of Transportation and Communications,
regulate the operation of tricycles and grant
franchises for the operation thereof within the
territorial jurisdiction of the city."
ARTICLE 99, IRR of LGC. Powers, Duties, and Functions

of the Sangguniang Panlungsod. (a) The
sangguniang panlungsod, as the legislative body of
the city, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the
city and its inhabitants pursuant to Sec. 16 of the
Code and in the proper exercise of the corporate
powers of the city as provided in Rule IX of these
Rules, and shall:
xxxxxx
(3) Subject to the provisions of Book II of the Code,
xxxxxx
(vi) Subject to the guidelines prescribed by the
regulate the operation of tricycles and grant franchises
for the operation thereof within the territorial jurisdiction
of the city; and
xxxxxx
LAND TRANSPORTATION OFFICE [LTO], represented by

Assistant Secretary Manuel F. Bruan, LTO Regional
Office, Region X represented by its Regional Director,
Timoteo A. Garcia; and LTO Butuan represented by
Rosita G. Sadiaga, its Registrar, petitioners, vs. CITY OF
BUTUAN, represented in this case by Democrito D.
Plaza II, City Mayor, respondents.[G. R. No. 131512.
January 20, 2000 | 3D]
FACTS:
16
Relying on Sec. 133(i) of the 1991 LGC, the

SangguniangPanglungsod
of
Butuan
passed
an
ordinance providing for, among others, the payment of
franchise fees for the grant of the franchise of tricyclesfor-hire, fess for the registration of the vehicle and to
issue to qualified persons of licenses to drive such
vehicles
LTO claims that although the franchising authority over
tricycles-for-hire of the LTFRB has been transferred to
LGUs, the authority to register all motor vehicles and to
issue to qualified persons of licenses to drive such
vehicles remains with LTO
The City of Butuan filed a petition before the trial court
seeking the declaration of the validity of the subject
ordinance and the prohibition of the registration of
tricycles-for-hires and issuance of licenses for the driving
thereof by LTO
Trial court rule against LTO
LTO appealed to the CTA
CA affirmed the trial courts decision
ISSUE: Whether the authority of the LTO to register all motor

vehicles (tricycles-for-hire in the present case) and to issue
to qualified persons of licenses to drive such vehicles have
been transferred to the LGUs.
HELD: NO
The Department of Transportation and Communications
("DOTC"), through the LTO and the LTFRB, has since been
tasked with implementing laws pertaining to land
transportation. The LTO is a line agency under the DOTC
whose powers and functions, pursuant to Article III, Section 4
(d) (1), of R.A. No. 4136, otherwise known as Land
Transportation and Traffic Code, as amended, deal primarily
with the registration of all motor vehicles and the licensing of
drivers thereof. The LTFRB, upon the other hand, is the
governing body tasked by E.O. No. 202, dated 19 June 1987,
to regulate the operation of public utility or "for hire" vehicles
and to grant franchises or certificates of public convenience
("CPC"). Finely put, registration and licensing functions are
vested in the LTO while franchising and regulatory
responsibilities had been vested in the LTFRB.
Under the Local Government Code, certain functions of the
DOTC were transferred to the LGUs, thusly:
o
SEC.
458.
Powers,
Duties,
Functions
and
Compensation. xxx.......xxx.......xxx
(3) Subject to the provisions of Book II of this Code,
xxx.......xxx.......xxx.
(VI) Subject to the guidelines prescribed by the
regulate the operation of tricycles and grant
franchises for the operation thereof within the
territorial jurisdiction of the city."
LGUs indubitably now have the power to regulate the
operation of tricycles-for-hire and to grant franchises for the
operation thereof. "To regulate" means to fix, establish, or
control; to adjust by rule, method, or established mode; to
direct by rule or restriction; or to subject to governing
principles or laws. A franchise is defined to be a special
privilege to do certain things conferred by government on an
individual or corporation, and which does not belong to
citizens generally of common right. On the other hand, "to
register" means to record formally and exactly, to enroll, or
to enter precisely in a list or the like, and a "driver's license"
is the certificate or license issued by the government which
authorizes a person to operate a motor vehicle. The
devolution of the functions of the DOTC, performed by the
LTFRB, to the LGUs, as so aptly observed by the Solicitor
General, is aimed at curbing the alarming increase of
accidents in national highways involving tricycles. It has
been the perception that local governments are in good
position to achieve the end desired by the law-making body
because of their proximity to the situation that can enable
DIGEST
Novthat
7, 2014
them
to address
serious concern better than the
national government.
It may not be amiss to state, nevertheless, that under Article
458 (a)[3-VI] of the Local Government Code, the power of
LGUs to regulate the operation of tricycles and to grant
franchises for the operation thereof is still subject to the
guidelines prescribed by the DOTC. In compliance therewith,
the Department of Transportation and Communications
("DOTC") issued "Guidelines to Implement the Devolution of
LTFRBs Franchising Authority over Tricycles-For-Hire to Local
Government units pursuant to the Local Government Code."
As can be gleaned from the explicit language of the statute,
as well as the corresponding guidelines issued by DOTC, the
newly delegated powers pertain to the franchising
and regulatory powers theretofore exercised by the
LTFRB and not to the functions of the LTO relative to
the registration of motor vehicles and issuance of
licenses for the driving thereof. Clearly unaffected by the
Local Government Code are the powers of LTO under R.A.
No.4136 requiring the registration of all kinds of motor
vehicles "used or operated on or upon any public highway" in
the country.
The Court shares the apprehension of the Solicitor General if
the above functions were to likewise devolve to local
government units; he states:
o
If the tricycle registration function of respondent LTO
is decentralized, the incidence of theft of tricycles
will most certainly go up, and stolen tricycles
registered in one local government could be
registered in another with ease. The determination of
ownership thereof will also become very difficult.
o
Fake driver's licenses will likewise proliferate. This
likely scenario unfolds where a tricycle driver, not
qualified by petitioner LTO's testing, could secure a
license from one municipality, and when the same is
confiscated, could just go another municipality to
secure another license.
o
Devolution will entail the hiring of additional
personnel charged with inspecting tricycles for road
worthiness, testing drivers, and documentation.
Revenues raised from tricycle registration may not
be enough to meet salaries of additional personnel
and incidental costs for tools and equipment.
The power over tricycles granted under Section 458(a)(3)(VI)
of the Local Government Code to LGUs is the power to
regulate their operation and to grant franchises for the
operation thereof. The exclusionary clause contained in the
tax provisions of Section 133(1) of the Local Government
Code must not be held to have had the effect of withdrawing
the express power of LTO to cause the registration of all
motor vehicles and the issuance of licenses for the driving
thereof. These functions of the LTO are essentially regulatory
in nature, exercised pursuant to the police power of the
State, whose basic objectives are to achieve road safety by
insuring the road worthiness of these motor vehicles and the
competence of drivers prescribed by R. A. 4136. Not
insignificant is the rule that a statute must not be construed
in isolation but must be taken in harmony with the extant
body of laws.
The Court cannot end this decision without expressing
its own serious concern over the seeming laxity in the
grant of franchises for the operation of tricycles-forhire and in allowing the indiscriminate use by such
vehicles
on
public
highways
and
principal
thoroughfares. Senator Aquilino C. Pimentel, Jr., the
principal author, and sponsor of the bill that eventually has
become to be known as the Local Government Code, has
aptly remarked:
o
Tricycles
are
a
popular
means
of
transportation, specially in the countryside.
They are, unfortunately, being allowed to
drive
along
highways
and
principal
thoroughfares where they pose hazards to
their passengers arising from potential
collisions with buses, cars and jeepneys.
o
The operation of tricycles within a
municipality may be regulated by
17
the Sangguniang Bayan. In this

connection,
the
Sangguniang
concerned would do well to consider
prohibiting
the
operation
of
tricycles along or across highways
invite collisions with faster and
bigger vehicles and impede the flow
of traffic.
13. TAXES, FEES OR CHARGES ON PH
PRODUCTS ACTUALLY EXPORTED
the following:
(a) xxx
xxxxxx
(m) Taxes, fees, or other charges on Philippine products
actually exported, except as otherwise provided herein;
xxxxxx
(o) xxx
a.
CORRELATE WITH Sec. 143(c)
Sec. 143. Tax on Business. - The municipality may impose

(a) xxx
xxxxxx
(c) On exporters, and on manufacturers, millers,
producers, wholesalers, distributors, dealers or
retailers of essential commodities enumerated
hereunder at a rate not exceeding one-half () of
the rates prescribed under subsection (a), (b) and
(d) of this Section:
(1) Rice and corn;
(2) Wheat or cassava flour, meat, dairy products,
locally manufactured, processed or preserved
food, sugar, salt and other agricultural, marine,
and fresh water products, whether in their original
state or not;
(3) Cooking oil and cooking gas;
(4) Laundry soap, detergents, and medicine;
(5) Agricultural implements. equipment and postharvest
facilities,
fertilizers,
pesticides,
insecticides, herbicides and other farm inputs;
(6) Poultry feeds and other animal feeds;
(7) School supplies; and
(8) Cement.
xxxxxx
(h) xxx
14. TFC ON CBBEs UNDER RA 6810 AND RA
6983
the following:
(a) xxx
xxxxxx
(n) Taxes, fees, or charges, on Countryside and
Barangay Business Enterprises and cooperatives duly
registered under R.A. No. 6810 and R.A. No. 6938
otherwise known as the "Cooperative Code of the
Philippines" respectively; and
(o) xxx
xv. TFC on the National Government, its agencies and

instrumentalities and LGUs
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY,
petitioner, vs. COURT OF APPEALS, OFFICE OF THE
PRESIDENT, DEPARTMENT OF FINANCE and the CITY OF
ILOILO, respondents.
G.R. No. 169836
July 31, 2007
DIGEST Nov 7, 2014
G.R. No. 120082 September 11, 1996
FACTS:
On 11 August 1976, then President Ferdinand E. Marcos

issued Presidential Decree No. 977 (PD 977) creating the
Authority and placing it under the direct control and
supervision of the Secretary of Natural Resources. On
February 8, 1982, Executive Order No. 772 (EO 772) was
issued amending PD 977, and renaming the Authority as
the now "Philippine Fisheries Development Authority,"
and attaching said agency to the Ministry of Natural
Resources. Upon the effectivity of the Administrative
Code (EO 292), the Authority became an attached
agency of the Department of Agriculture. Meanwhile,
beginning October 31, 1981, the then Ministry of Public
Works and Highways reclaimed from the sea a 21hectare parcel of land in Barangay Tanza, Iloilo City, and
constructed thereon the IFPC, consisting of breakwater,
a landing quay, a refrigeration building, a market hall, a
municipal shed, an administration building, a water and
fuel oil supply system and other port related facilities
and machineries. Upon its completion, the Ministry of
Public Works and Highways turned over IFPC to the
Authority, pursuant to Section 11 of PD 977, which
places fishing port complexes and related facilities under
the governance and operation of the Authority.
Notwithstanding said turn over, title to the land and
buildings of the IFPC remained with the Republic. The
Authority thereafter leased portions of IFPC to private
firms and individuals engaged in fishing related
businesses. Sometime in May 1988, the City of Iloilo
assessed the entire IFPC for real property taxes. The
assessment remained unpaid until the alleged total tax
delinquency of the Authority for the fiscal years 1988
and 1989 amounted to P5,057,349.67, inclusive of
penalties and interests. To satisfy the tax delinquency,
the City of Iloilo scheduled on August 30, 1990, the sale
at public auction of the IFPC.
ISSUE: Whether the Authority is a liable for municipal taxes.
HELD: QUALIFIED NO.
The Authority which is tasked with the special public function
to carry out the governments policy "to promote the
development of the countrys fishing industry and improve
the efficiency in handling, preserving, marketing, and
distribution of fish and other aquatic products," exercises the
governmental powers of eminent domain, and the power to
levy fees and charges. At the same time, the Authority
exercises "the general corporate powers conferred by laws
upon private and government-owned or controlled
corporations." The MIAA case held that unlike GOCCs,
instrumentalities of the national government, like MIAA, are
exempt from local taxes pursuant to Section 133(o) of the
Local Government Code. This exemption, however, admits of
an exception with respect to real property taxes. Applying
Section 234(a) of the Local Government Code, the Court
ruled that when an instrumentality of the national
government grants to a taxable person the beneficial use of
a real property owned by the Republic, said instrumentality
becomes liable to pay real property tax. The Authority
should be classified as an instrumentality of the national
government which is liable to pay taxes only with respect to
the portions of the property, the beneficial use of which were
vested in private entities. When local governments invoke
the power to tax on national government instrumentalities,
such power is construed strictly against local governments.
The rule is that a tax is never presumed and there must be
clear language in the law imposing the tax. Any doubt
whether a person, article or activity is taxable is resolved
against taxation. This rule applies with greater force when
local governments seek to tax national government
instrumentalities.
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY,

petitioner, vs. HON. FERDINAND J. MARCOS, in his
capacity as the Presiding Judge of the Regional Trial Court,
Branch 20, Cebu City, THE CITY OF CEBU, represented by its
Mayor HON. TOMAS R. OSMEA, and EUSTAQUIO B. CESA,
respondents.
18
THIRD DIVISION
FACTS:
Mactan Cebu International Airport Authority (MCIAA) was

created by virtue of Republic Act No. 6958, mandated to
"principally undertake the economical, efficient and
effective control, management and supervision of the
Mactan International Airport in the Province of Cebu and
the Lahug Airport in Cebu City, . . . and such other
Airports as may be established in the Province of Cebu.
It is also mandated to: a) encourage, promote and
develop international and domestic air traffic in the
Central Visayas and Mindanao regions as a means of
making the regions centers of international trade and
tourism, and accelerating the development of the means
of transportation and communication in the country; and
b) upgrade the services and facilities of the airports and
to formulate internationally acceptable standards of
airport accommodation and service. Since the time of its
creation, MCIAA enjoyed the privilege of exemption from
payment of realty taxes in accordance with Section 14 of
its Charter. On 11 October 1994, however, Mr. Eustaquio
B. Cesa, Officer-in-Charge, Office of the Treasurer of the
City of Cebu, demanded payment for realty taxes on
several parcels of land belonging to MCIAA, located at
Barrio Apas and Barrio Kasambagan, Lahug, Cebu City,
in the total amount of P2,229,078.79. MCIAA objected to
such demand.
ISSUE: Whether MCIAA enjoys exemption from paying real
property taxes to the municipal government.
HELD: NO.
Reading together Section 133, 232 and 234 of the LGC, we
conclude that as a general rule, as laid down in Section 133
the taxing powers of local government units cannot extend
to the levy of inter alia, "taxes, fees, and charges of any kind
of
the
National
Government,
its
agencies
and
instrumentalties, and local government units"; however,
pursuant to Section 232, provinces, cities, municipalities in
the Metropolitan Manila Area may impose the real property
tax except on, inter alia, "real property owned by the
Republic of the Philippines or any of its political subdivisions
except when the beneficial used thereof has been granted,
for consideration or otherwise, to a taxable person", as
provided in item (a) of the first paragraph of Section 234. As
to tax exemptions or incentives granted to or presently
enjoyed by natural or juridical persons, including
government-owned and controlled corporations, Section 193
of the LGC prescribes the general rule, viz., they are
withdrawn upon the effectivity of the LGC, except upon the
effectivity of the LGC, except those granted to local water
districts, cooperatives duly registered under R.A. No. 6938,
non stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the LGC. The
latter proviso could refer to Section 234, which enumerates
the properties exempt from real property tax. But the last
paragraph of Section 234 further qualifies the retention of
the exemption in so far as the real property taxes are
concerned by limiting the retention only to those
enumerated there-in; all others not included in the
enumeration lost the privilege upon the effectivity of the
LGC. Moreover, even as the real property is owned by the
Republic of the Philippines, or any of its political subdivisions
covered by item (a) of the first paragraph of Section 234, the
exemption is withdrawn if the beneficial use of such property
has been granted to taxable person for consideration or
otherwise.
Since the last paragraph of Section 234 unequivocally
withdrew, upon the effectivity of the LGC, exemptions from
real property taxes granted to natural or juridical persons,
including government-owned or controlled corporations,
except as provided in the said section, and the petitioner is,
undoubtedly,
a
government-owned
corporation,
it
necessarily follows that its exemption from such tax granted
it in Section 14 of its charter, R.A. No. 6958, has been
withdrawn.
DIGEST Nov 7, 2014
Manila International Airport Authority

MANILA INTERNATIONAL AIRPORT AUTHORITY,
petitioner, vs. COURT OF APPEALS, CITY OF
PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG
PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF
PARAAQUE, and CITY TREASURER OF PARAAQUE,
respondents.
G.R. No. 155650
July 20, 2006
EN BANC
FACTS:
Manila International Airport Authority (MIAA) operates

the Ninoy Aquino International Airport (NAIA) Complex in
Paraaque City under Executive Order No. 903,
otherwise known as the Revised Charter of the Manila
International Airport Authority ("MIAA Charter").
Executive Order No. 903 was issued on 21 July 1983 by
then President Ferdinand E. Marcos. Subsequently,
Executive Order Nos. 9091 and 2982 amended the MIAA
Charter. On 21 March 1997, the Office of the
Government Corporate Counsel (OGCC) issued Opinion
No. 061. The OGCC opined that the Local Government
Code of 1991 withdrew the exemption from real estate
tax granted to MIAA under Section 21 of the MIAA
Charter. Thus, MIAA negotiated with the City of
Paraaque to pay the real estate tax imposed by the
City. MIAA then paid some of the real estate tax already
due. On 28 June 2001, MIAA received Final Notices of
Real Estate Tax Delinquency from the City of Paraaque
for the taxable years 1992 to 2001. On 17 July 2001, the
City of Paraaque, through its City Treasurer, issued
notices of levy and warrants of levy on the Airport Lands
and Buildings. The Mayor of the City of Paraaque
threatened to sell at public auction the Airport Lands
and Buildings should MIAA fail to pay the real estate tax
delinquency. MIAA thus sought a clarification of OGCC
Opinion No. 061. On 9 August 2001, the OGCC issued
Opinion No. 147 clarifying OGCC Opinion No. 061. The
OGCC pointed out that Section 206 of the Local
Government Code requires persons exempt from real
estate tax to show proof of exemption. The OGCC opined
that Section 21 of the MIAA Charter is the proof that
MIAA is exempt from real estate tax.
ISSUE: Whether MIAA enjoys exemption from paying real
HELD: QUALIFIED YES.
MIAA is a government instrumentality vested with corporate
powers to perform efficiently its governmental functions.
MIAA is like any other government instrumentality, the only
difference is that MIAA is vested with corporate powers. A
government instrumentality like MIAA falls under Section
133(o) of the Local Government Code. Section 133(o)
recognizes the basic principle that local governments cannot
tax the national government, which historically merely
delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the
powers of local governments, local governments may only
exercise such power "subject to such guidelines and
limitations as the Congress may provide." Section 234(a) of
the Local Government Code states that real property owned
by the Republic loses its tax exemption only if the "beneficial
use thereof has been granted, for consideration or otherwise,
to a taxable person." MIAA, as a government instrumentality,
is not a taxable person under Section 133(o) of the Local
Government Code. However, portions of the Airport Lands
and Buildings that MIAA leases to private entities are not
exempt from real estate tax.
MANILA INTERNATIONAL AIRPORT AUTHORITY,
Petitioner, vs. CITY OF PASAY, SANGGUNIANG
PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY
TREASURER OF PASAY, and CITY ASSESSOR OF PASAY,
Respondents.
G.R. No. 163072
April 2, 2009
EN BANC
FACTS:
19
(MIAA) operates
and administers the Ninoy Aquino International Airport
(NAIA) Complex under Executive Order No. 903 (EO
903), otherwise known as the Revised Charter of the
Manila International Airport Authority. EO 903 was issued
on 21 July 1983 by then President Ferdinand E. Marcos.
Under Sections 34 and 225 of EO 903, approximately
600 hectares of land, including the runways, the airport
tower, and other airport buildings, were transferred to
MIAA. The NAIA Complex is located along the border
between Pasay City and Paraaque City. On 28 August
2001, MIAA received Final Notices of Real Property Tax
Delinquency from the City of Pasay for the taxable years
1992 to 2001. On 24 August 2001, the City of Pasay,
through its City Treasurer, issued notices of levy and
warrants of levy for the NAIA Pasay properties. MIAA
received the notices and warrants of levy on 28 August
2001. Thereafter, the City Mayor of Pasay threatened to
sell at public auction the NAIA Pasay properties if the
delinquent real property taxes remain unpaid.
ISSUE: Whether MIAA enjoys exemption from paying real

HELD: QUALIFIED YES.
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. 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. Finally,
the Airport Lands and Buildings of MIAA are properties
devoted to public use and thus are properties of public
dominion. The Airport Lands and Buildings of MIAA are
intended for public use, and at the very least intended for
public service. Whether intended for public use or public
service, the Airport Lands and Buildings are properties of
public dominion. As properties of public dominion, the Airport
Lands and Buildings are owned by the Republic and thus
exempt from real estate tax under Section 234(a) of the
Local Government Code. However, under the same provision,
if MIAA leases its real property to a taxable person, the
specific property leased becomes subject to real property
tax. In this case, only those portions of the NAIA Pasay
properties which are leased to taxable persons like private
parties are subject to real property tax by the City of Pasay.
Section 232. Power to Levy Real Property Tax. - A province
or city or a municipality within the Metropolitan Manila Area
my levy an annual ad valorem tax on real property such as
land, building, machinery, and other improvement not
hereinafter specifically exempted.
Section 234. Exemptions from Real Property Tax. - The
following are exempted from payment of the real property
tax:
(a) Real property owned by the Republic of the Philippines or
any of its political subdivisions except when the beneficial
use thereof has been granted, for consideration or otherwise,
to a taxable person;
(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
DIGESTof water
Nov and/or
7, 2014
distribution
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 all
government-owned or controlled corporations are hereby
withdrawn upon the effectivity of this Code.
THE CITY OF DAVAO, CITY TREASURER AND THE CITY
ASSESSOR OF DAVAO CITY, Petitioners, vs. THE REGIONAL
TRIAL COURT, BRANCH XII, DAVAO CITY AND THE
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS),
Respondent.
G.R. No. 127383 August 18, 2005
SECOND DIVISION
FACTS:
GSIS was established way back in 1937 is a GOCC.

Section 1 of PD 1931 expressly withdrew those
exemptions granted to the GSIS. PD 1931 did allow the
exemption to be restored in special cases through an
application for restoration with the Secretary of Finance,
but otherwise, the exemptions granted to the GSIS prior
to the enactment of PD 1931 were withdrawn. Notably,
PD 1931 was also an exercise of legislative powers then
accorded to President Marcos by virtue of Amendment
No. 6 to the 1973 Constitution. Whether he was aware of
the effect of PD 1931 on the GSISs tax-exempt status or
the ramifications of the decree thereon is unknown; but
apparently, he immediately reconsidered the withdrawal
of the exemptions on the GSIS. Thus, PD 1981 was
enacted, expressly stating that the tax-exempt status of
the GSIS under Section 33 of PD 1146 remained in place,
notwithstanding the passage of PD 1931. However, PD
1981 did not stop there, serving merely as it should to
restore the previous exemptions on the GSIS. It also
attempted to proscribe future attempts to alter the taxexempt status of the GSIS by imposing unorthodox
conditions for its future repeal.
On 8 April 1994, the GSIS Davao City branch office

received a Notice of Public Auction scheduling the public
bidding of GSIS properties located in Matina and Ulas,
Davao City for non-payment of realty taxes for the years
1992 to 1994 totaling P295,721.61. The auction was
subsequently reset by virtue of a deadline extension
allowed by Davao City for the payment of delinquent
real property taxes. On 28 July 1994, the GSIS received
Warrants of Levy and Notices of Levy on three parcels of
land owned by the GSIS. Another Notice of Public
Auction was received by the GSIS on 29 August 1994,
setting the date of auction sale for 20 September 1994.
On 13 September 1994, the GSIS filed a Petition for
Certiorari, Prohibition, Mandamus And/Or Declaratory
Relief with the RTC of Davao City. It also sought the
issuance of a temporary restraining order.
ISSUE: Whether GSIS enjoys exemption from paying real
property taxes to the municipal government from 1992-1994.
HELD: NO.
The second paragraph of Section 33 of P.D. No. 1146, as
amended,
effectively
imposes
restrictions
on
the
competency of the Congress to enact future legislation on
the taxability of the GSIS. This places an undue restraint on
the plenary power of the legislature to amend or repeal laws,
especially considering that it is a lawmakers act that
imposes such burden. Only the Constitution may operate to
preclude or place restrictions on the amendment or repeal of
laws. Constitutional dictais of higher order than legislative
statutes, and the latter should always yield to the former in
cases of irreconcilable conflict. Thus, the two conditionalities
of Section 33 cannot bear relevance on whether the Local
Government Code removed the tax-exempt status of the
GSIS. The express withdrawal of all tax exemptions accorded
to all persons, natural or juridical, as stated in Section 193 of
the Local Government Code, applies without impediment to
20
the present case. Such position is bolstered by the

provisions of the Local Government Code, and by the
Mactan ruling. The GSISs tax-exempt status, in sum, was
withdrawn in 1992 by the Local Government Code but
restored by the Government Service Insurance System Act of
1997, the operative provision of which is Section 39.32. The
subject real property taxes for the years 1992 to 1994 were
assessed against GSIS while the Local Government Code
provisions prevailed and, thus, may be collected by the City
of Davao.
III. TAXING AND OTHER REVENUE RASING POWERS OF
LGUS
a. Provinces
i. Local Transfer Tax (Sec. 135)
Section 135. Tax on Transfer of Real Property Ownership.
(a) The province may impose a tax on the sale , donation,
barter, or on any other mode of transferring ownership or
title of real property at the rate of not more than fifty percent
(50%) of the one percent (1%) of the total consideration
involved in the acquisition of the property or of the fair
market value in case the monetary consideration involved in
the transfer is not substantial, whichever is higher. The sale,
transfer or other disposition of real property pursuant to R.A.
No. 6657 shall be exempt from this tax.
(b) For this purpose, the Register of Deeds of the province
concerned shall, before registering any deed, require the
presentation of the evidence of payment of this tax. The
provincial assessor shall likewise make the same
requirement before cancelling an old tax declaration and
issuing a new one in place thereof, Notaries public shall
furnish the provincial treasurer with a copy of any deed
transferring ownership or title to any real property within
thirty (30) days from the date of notarization.
It shall be the duty of the seller, donor, transferor, executor
or administrator to pay the tax herein imposed within sixty
(60) days from the date of the execution of the deed or from
the date of the decedent's death.
ii. Business Tax on Printing and Publication (Sec. 136)
Section 136. Tax on Business of Printing and Publication. The province may impose a tax on the business of persons
engaged in the printing and/or publication of books, cards,
posters, leaflets, handbills, certificates, receipts, pamphlets,
and others of similar nature, at a rate not exceeding fifty
percent (50%) of one percent (1%) of the gross annual
receipts for the preceding calendar year.
In the case of a newly started business, the tax shall not
exceed one-twentieth (1/20) of one percent (1%) of the
capital investment. In the succeeding calendar year,
regardless of when the business started to operate, the tax
shall be based on the gross receipts for the preceding
calendar year, or any fraction thereof, as provided herein.
The receipts from the printing and/or publishing of books or
other reading materials prescribed by the Department of
Education, Culture and Sports as school texts or references
shall be exempt from the tax herein imposed.
Section 136. Tax on Business of Printing and Publication. The province may impose a tax on the business of persons
engaged in the printing and/or publication of books, cards,
posters, leaflets, handbills, certificates, receipts, pamphlets,
and others of similar nature, at a rate not exceeding fifty
percent (50%) of one percent (1%) of the gross annual
receipts for the preceding calendar year.
calendar year, or any fraction thereof, as provided herein.
DIGEST
Nov
2014and/or publishing of books or
The
receipts
from
the7,
printing
other reading materials prescribed by the Department of
Education, Culture and Sports as school texts or references
shall be exempt from the tax herein imposed.
iii. Franchise Tax (Sec. 137)
Section
137. Franchise
Tax. Notwithstanding
any
exemption granted by any law or other special law, the
province may impose a tax on businesses enjoying a
franchise, at the rate not exceeding fifty percent (50%) of
one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or
realized, within its territorial jurisdiction.
calendar year, or any fraction thereon, as provided herein.
NATIONAL POWER CORPORATION, petitioner, vs. CITY
OF CABANATUAN, respondent.
G.R. No. 149110
April 9, 2003
THIRD DIVISION
FACTS:
National Power Corporation (NPC) is a governmentowned and controlled corporation created under
Commonwealth Act No. 120, as amended. It is tasked to
undertake
the
"development
of
hydroelectric
generations of power and the production of electricity
from nuclear, geothermal and other sources, as well as,
the transmission of electric power on a nationwide
basis." Concomitant to its mandated duty, NPC has,
among others, the power to construct, operate and
maintain power plants, auxiliary plants, power stations
and substations for the purpose of developing hydraulic
power and supplying such power to the inhabitants. For
many years, NPC sells electric power to the residents of
Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992. Pursuant to section 37 of
Ordinance No. 165-92, the City of Cabanatuan assessed
NPC a franchise tax amounting to P808,606.41,
representing 75% of 1% of the latter's gross receipts for
the preceding year.
ISSUE # 1: Whether the City of Cabanatuan is authorized by
the LGC to impose the franchise tax against NPC.
HELD # 1: YES.
Section 151 in relation to section 137 of the LGC clearly
authorizes the city government to impose on NPC the
franchise tax in question. In section 131 (m) of the LGC,
Congress unmistakably defined a franchise in the sense of a
secondary or special franchise. This is to avoid any confusion
when the word franchise is used in the context of taxation.
As commonly used, a franchise tax is "a tax on the privilege
of transacting business in the state and exercising corporate
franchises granted by the state." It is not levied on the
corporation simply for existing as a corporation, upon its
property or its income, but on its exercise of the rights or
privileges granted to it by the government. Hence, a
corporation need not pay franchise tax from the time it
ceased to do business and exercise its franchise. It is within
this context that the phrase "tax on businesses enjoying a
franchise" in section 137 of the LGC should be interpreted
and understood. Verily, to determine whether the petitioner
is covered by the franchise tax in question, the following
requisites should concur: (1) that petitioner has a "franchise"
in the sense of a secondary or special franchise; and (2) that
it is exercising its rights or privileges under this franchise
within the territory of the respondent city government. NPC
fulfills both requisites.
ISSUE # 2: Whether the fact the the NPC is wholly owned by
the National Government exempts it from the imposition of a
franchise tax.
21
HELD # 2: NO.
A franchise tax is imposed based not on the ownership

but on the exercise by the corporation of a privilege to
do business. The taxable entity is the corporation which
exercises the franchise, and not the individual
stockholders. By virtue of its charter, NPC was created
as a separate and distinct entity from the National
Government. It can sue and be sued under its own
name, and can exercise all the powers of a corporation
under the Corporation Code. To be sure, the ownership
by the National Government of its entire capital stock
does not necessarily imply that the NPC is not engaged
in business. Section 2 of Pres. Decree No. 2029 classifies
government-owned or controlled corporations (GOCCs)
into those performing governmental functions and those
performing proprietary functions. Included in the class of
GOCCs performing proprietary functions are "businesslike" entities such as the National Steel Corporation
(NSC), the National Development Corporation (NDC), the
Social Security System (SSS), the Government Service
Insurance System (GSIS), and the National Water
Sewerage Authority (NAWASA), among others.
QUEZON CITY and THE CITY TREASURER OF QUEZON

CITY, petitioners, vs. ABS-CBN BROADCASTING
CORPORATION, respondent.
G.R. No. 166408
October 6, 2008
THIRD DIVISION
FACTS:
The City Government of Quezon City is a local

government unit duly organized and existing by virtue of
Republic Act 537, otherwise known as the Revised
Charter of Quezon City. Under Section 31, Article 13 of
the Quezon City Revenue Code of 1993, a franchise tax
was imposed on businesses operating within its
jurisdiction. On 3 May 1995, ABS-CBN was granted the
franchise to install and operate radio and television
broadcasting stations in the Philippines under R.A. No.
7966.ABS-CBN had been paying local franchise tax
imposed by Quezon City. However, in view of Section 8
in R.A. No. 9766 that it "shall pay a franchise tax x x x in
lieu of all taxes," the corporation developed the opinion
that it is not liable to pay the local franchise tax imposed
by Quezon City. Consequently, ABS-CBN paid under
protest the local franchise tax imposed by Quezon City.
ISSUE # 1: Whether by passing RA 7966, which contains the
"in lieu of all taxes" provision, Congress intended to exempt
ABS-CBN from local franchise tax.
HELD # 1: NO.
The power of the local government of Quezon City to impose
franchise tax is based on Section 151 in relation to Section
137 of the LGC. Section 8 of R.A. No. 7966 imposes on ABSCBN a franchise tax equivalent to three (3) percent of all
gross receipts of the radio/television business transacted
under the franchise and the franchise tax shall be "in lieu of
all taxes" on the franchise or earnings thereof. The "in lieu of
all taxes" provision in the franchise of ABS-CBN does not
expressly provide what kind of taxes ABS-CBN is exempted
from. It is not clear whether the exemption would include
both local, whether municipal, city or provincial, and national
tax. What is clear is that ABS-CBN shall be liable to pay three
(3) percent franchise tax and income taxes under Title II of
the NIRC. But whether the "in lieu of all taxes provision"
would include exemption from local tax is not unequivocal.
The right to exemption from local franchise tax must be
clearly established and cannot be made out of inference or
implications but must be laid beyond reasonable doubt.
Verily, the uncertainty in the "in lieu of all taxes" provision
should be construed against ABS-CBN.
ISSUE # 2: Whether ABS-CBN is liable for payment of
franchise tax or VAT.
HELD # 2: VAT.
VAT is a percentage tax imposed on any person whether or
not a franchise grantee, who in the course of trade or
DIGESTsells,
Nov
7, 2014
business,
barters,
exchanges, leases, goods or
properties, renders services. It is also levied on every
importation of goods whether or not in the course of trade or
business. The tax base of the VAT is limited only to the value
added to such goods, properties, or services by the seller,
transferor or lessor. Further, the VAT is an indirect tax and
can be passed on to the buyer. The franchise tax, on the
other hand, is a percentage tax imposed only on franchise
holders. It is imposed under Section 119 of the Tax Code and
is a direct liability of the franchise grantee.
On January 1, 1998, R.A. No. 8424 was passed confirming the
10% VAT liability of radio and/or television companies with
yearly gross receipts exceeding P10,000,000.00. R.A. No.
9337 was subsequently enacted and became effective on
July 1, 2005. The said law further amended the NIRC by
increasing the rate of VAT to 12%. The effectivity of the
imposition of the 12% VAT was later moved from January 1,
2006 to February 1, 2006. In consonance with the above
survey of pertinent laws on the matter, ABS-CBN is subject to
the payment of VAT. It does not have the option to choose
between the payment of franchise tax or VAT since it is a
broadcasting company with yearly gross receipts exceeding
Ten Million Pesos (P10,000,000.00). The clause "in lieu of all
taxes" does not pertain to VAT or any other tax. It cannot
apply when what is paid is a tax other than a franchise tax.
Since the franchise tax on the broadcasting companies with
yearly gross receipts exceeding ten million pesos has been
abolished, the "in lieu of all taxes" clause has now become
functus officio, rendered inoperative.
In sum, ABS-CBN's claims for exemption must fail on twin
grounds. First, the "in lieu of all taxes" clause in its franchise
failed to specify the taxes the company is sought to be
exempted from. Neither did it particularize the jurisdiction
from which the taxing power is withheld. Second, the clause
has become functus officio because as the law now stands,
ABS-CBN is no longer subject to a franchise tax. It is now
liable for VAT.
CITY OF IRIGA, Petitioner, vs. CAMARINES SUR III

ELECTRIC COOPERATIVE, INC. (CASURECO III), Respondent.
G.R. No. 192945
September 5, 2012
SECOND DIVISION
FACTS:
CASURECO III is an electric cooperative duly organized

and existing by virtue of Presidential Decree (PD) 269,
as amended, and registered with the National
Electrification Administration (NEA). It is engaged in the
business of electric power distribution to various endusers and consumers within the City of Iriga and the
municipalities of Nabua, Bato, Baao, Buhi, Bula and
Balatan of the Province of Camarines Sur, otherwise
known as the "Rinconada area." Sometime in 2003, the
City of Iriga required CASURECO III to submit a report of
its gross receipts for the period 1997-2002 to serve as
the basis for the computation of franchise taxes, fees
and other charges. The latter complied and was
subsequently assessed taxes. On January 7, 2004, the
City made a final demand on CASURECO III to pay the
franchise taxes due for the period 1998-2003 and real
property taxes due for the period 1995-2003. CASURECO
III, however, refused to pay said taxes on the ground
that it is an electric cooperative provisionally registered
with the Cooperative Development Authority (CDA), and
therefore exempt from the payment of local taxes.
ISSUE: Whether CASURECO III is exempt from payment of
franchise tax.
HELD: NO.
PD 269, which took effect on August 6, 1973, granted
electric cooperatives registered with the NEA, like CASURECO
III, several tax privileges, one of which is exemption from the
payment of "all national government, local government and
municipal taxes and fees, including franchise, filing,
recordation, license or permit fees or taxes." On March 10,
1990, Congress enacted into law RA 6938, otherwise known
22
as the "Cooperative Code of the Philippines," and RA 6939

creating the CDA. The latter law vested the power to register
cooperatives solely on the CDA, while the former provides
that electric cooperatives registered with the NEA under PD
269 which opt not to register with the CDA shall not be
entitled to the benefits and privileges under the said law. On
January 1, 1992, the LGC took effect, and Section 193
thereof withdrew tax exemptions or incentives previously
enjoyed by "all persons, whether natural or juridical,
including government-owned or controlled corporations,
except local water districts, cooperatives duly registered
under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions. CASURECO III can no longer invoke
PD 269 to evade payment of local taxes. Moreover, its
provisional registration with the CDA which granted it
exemption for the payment of local taxes was extended only
until May 4, 1992. Thereafter, it can no longer claim any
exemption from the payment of local taxes, including the
subject franchise tax.
SMART COMMUNICATIONS, INC., Petitioner, vs. THE CITY

OF DAVAO, represented herein by its Mayor Hon. RODRIGO
DUTERTE, and the SANGGUNIANG PANLUNSOD OF DAVAO
CITY, Respondents.
G.R. No. 155491
July 21, 2009
THIRD DIVISION
FACTS:
On February 18, 2002, Smart filed a special civil action

for declaratory relief under Rule 63 of the Rules of Court,
for the ascertainment of its rights and obligations under
the Tax Code of the City of Davao, particularly Section 1,
Article 10 thereof. Smart contends that its telecenter in
Davao City is exempt from payment of franchise tax to
the City.
ISSUE # 1: Whether Smart's franchise is affected by the
withdrawal of tax exemption by the LGC.
HELD # 1: NO.
On March 27, 1992, Smarts legislative franchise (R.A. No.
7294) took effect. On January 1, 1992, two months ahead of
Smarts franchise, the Local Government Code (R.A. No.
7160) took effect. Section 137, in relation to Section 151 of
R.A. No. 7160, allowed the imposition of franchise tax by the
local government units; while Section 193 thereof provided
for the withdrawal of tax exemption privileges granted prior
to the issuance of R.A. No. 7160 except for those expressly
mentioned therein. The withdrawal of tax exemptions or
incentives provided in R.A. No. 7160 can only affect those
franchises granted prior to the effectivity of the law. The
intention of the legislature to remove all tax exemptions or
incentives granted prior to the said law is evident in the
language of Section 193 of R.A. No. 7160. No interpretation is
necessary.
ISSUE # 2: Whether Smart is exempted from local franchise
tax.
HELD # 2: NO.
R.A. No. 7294 is not definite in granting exemption to Smart
from local taxation. Section 9 of R.A. No. 7294 imposes on
Smart a franchise tax equivalent to three percent (3%) of all
gross receipts of the business transacted under the franchise
and the said percentage shall be in lieu of all taxes on the
franchise or earnings thereof. R.A. No 7294 does not
expressly provide what kind of taxes Smart is exempted
from. It is not clear whether the "in lieu of all taxes" provision
in the franchise of Smart would include exemption from local
or national taxation. What is clear is that Smart shall pay
franchise tax equivalent to three percent (3%) of all gross
receipts of the business transacted under its franchise. But
whether the franchise tax exemption would include
exemption from exactions by both the local and the national
government is not unequivocal. The uncertainty in the "in
lieu of all taxes" clause in R.A. No. 7294 on whether Smart is
exempted from both local and national franchise tax must be
construed strictly against Smart which claims the exemption.
Smart has the burden of proving that, aside from the
DIGEST
Nov 7, 2014
imposed
3% franchise
tax, Congress intended it to be
exempt from all kinds of franchise taxes whether local or
national. However, Smart failed in this regard.
SMART COMMUNICATIONS, INC., Petitioner, vs. THE CITY
OF DAVAO, represented herein by its Mayor Hon. RODRIGO
DUTERTE, and the SANGGUNIANG PANLUNSOD OF DAVAO
CITY, Respondents.
G.R. No. 155491
July 21, 2009
THIRD DIVISION
Resolution on the MR
ISSUE: Whether the Expanded VAT Law, by replacing the
national franchise tax, abolished the payment of local
franchise tax.
HELD: NO.
The previous decisions in PLDT v. City of Davao and PLDT v.
City of Bacolod, in denying the claim for exemption from the
payment of local franchise tax, suggests that Aside from the
national franchise tax, the franchisee is still liable to pay the
local franchise tax, unless it is expressly and unequivocally
exempted from the payment thereof under its legislative
franchise. The "in lieu of all taxes" clause in a legislative
franchise should categorically state that the exemption
applies to both local and national taxes; otherwise, the
exemption claimed should be strictly construed against the
taxpayer and liberally in favor of the taxing authority.
Republic Act No. 7716, otherwise known as the "Expanded
VAT Law," did not remove or abolish the payment of local
franchise tax. It merely replaced the national franchise tax
that was previously paid by telecommunications franchise
holders and in its stead imposed a ten percent (10%) VAT in
accordance with Section 108 of the Tax Code. VAT replaced
the national franchise tax, but it did not prohibit nor abolish
the imposition of local franchise tax by cities or
municipalities.
iv. Tax on Sand, Gravel and Quarry Resources (Sec. 138)
Section 138. Tax on Sand, Gravel and Other Quarry
Resources. - The province may levy and collect not more
than ten percent (10%) of fair market value in the locality
per cubic meter of ordinary stones, sand, gravel, earth, and
other quarry resources, as defined under the National
Internal Revenue Code, as amended, extracted from public
lands or from the beds of seas, lakes, rivers, streams, creeks,
and other public waters within its territorial jurisdiction.
The permit to extract sand, gravel and other quarry
resources shall be issued exclusively by the provincial
governor, pursuant to the ordinance of the sangguniang
panlalawigan.
The proceeds of the tax on sand, gravel and other quarry
resources shall be distributed as follows:
(1) Province - Thirty percent (30%);
(2) Component City or Municipality where the sand, gravel,
and other quarry resources are extracted - Thirty percent
(30%); and
(3) Barangay where the sand, gravel, and other quarry
resources are extracted - Forty percent (40%).
Municipality of San Fernando vs. Sta. Romana
L-GR No. 30159, Mar. 31, 1987
SECON DIVISION
FACTS:
The Municipality of San Fernando, La Union which was

undertaking a cement road construction around its
Supermarket and other municipal projects, needed
sufficient gravel and sand from their source, the
Municipality of Luna, but its trucks sent to the latter
municipality to haul said road construction materials
were allegedly charged unreasonable fees per truck
load. On March 18, 1968, the Municipality of San
Fernando filed a complaint for Injunction with Writ of
Preliminary Injunction at the Court of First Instance of La
23
Union against the Municipality of Luna and its officials

and authorized agents
ISSUE: Whether the municipality of Luna can impose fees or
taxes for the gravel and sand.
HELD: NO.
Under the provisions of the Local Tax Code, there is no
question that the authority to impose the license fees in
dispute, properly belongs to the province concerned and not
to the Municipality of Luna which is specifically prohibited
under Section 22 of the same Code "from levying taxes, fees
and charges that the province or city is authorized to levy in
this Code. " On the other hand, the Municipality of San
Fernando cannot extract sand and gravel from the
Municipality of Luna without paying the corresponding taxes
or fees that may be imposed by the province of La Union.
PROVINCE OF BULACAN VS. CA
GR No. 126232, November 27, 1998
THIIRD DIVISION
FACTS:
On 26 June 1992, the Sangguniang Panlalawigan of

Bulacan passed Provincial Ordinance No. 3, known as
"An Ordinance Enacting the Revenue Code of the
Bulacan Province." which was to take effect on 1 July
1992. Section 21 of the ordinance provides that "There
is hereby levied and collected a tax of 10% of the fair
market value in the locality per cubic meter of ordinary
stones, sand, gravel, earth and other quarry resources,
such, but not limited to marble, granite, volcanic
cinders, basalt, tuff and rock phosphate, extracted from
public lands or from beds of seas, lakes, rivers, streams,
creeks and other public waters within its territorial
jurisdiction." Pursuant thereto, the Provincial Treasurer of
Bulacan, in a letter dated 11 November 1993, assessed
Republic Cement Corporation P2,524,692.13 for
extracting limestone, shale and silica from several
parcels of private land in the province during the third
quarter of 1992 until the second quarter of 1993.
Believing that the province had no authority to impose
taxes on quarry resources extracted from private lands,
Republic Cement formally contested the same.
ISSUE: Whether the province has the power to impose taxes
on stones, sand, gravel, etc. extracted from private lands.
HELD: NO.
A province may not ordinarily impose taxes on stones, sand,
gravel, earth and other quarry resources, as the same are
already taxed under the National Internal Revenue Code. The
province can, however, impose a tax on stones, sand, gravel,
earth and other quarry resources extracted from public land
because it is expressly empowered to do so under the Local
Government Code. As to stones, sand, gravel, earth and
other quarry resources extracted from private land, however,
it may not do so, because of the limitation provided by
Section 133 of the Code in relation to Section 151 of the
National Internal Revenue Code.
v. Professional Tax (Sec. 139)
Section 139. Professional Tax. (a) The province may levy an annual professional tax on
each person engaged in the exercise or practice of his
profession requiring government examination at such
amount
and
reasonable
classification
as
the
sangguniang panlalawigan may determine but shall in
no case exceed Three hundred pesos (P300.00).
(b) Every person legally authorized to practice his
profession shall pay the professional tax to the province
where he practices his profession or where he maintains
his principal office in case he practices his profession in
several places: Provided, however, That such person
who has paid the corresponding professional tax shall be
entitled to practice his profession in any part of the
Philippines without being subjected to any other national
24
DIGEST
Nov
7, 2014
or local tax,
license,
or fee for the practice of such
Tax Appeals questioning the denial by the Commissioner
profession.
(c) Any individual or corporation employing a person
subject to professional tax shall require payment by that
person of the tax on his profession before employment
and annually thereafter.
(d) The professional tax shall be payable annually, on or
before the thirty-first (31st) day of January. Any person
first beginning to practice a profession after the month
of January must, however, pay the full tax before
engaging therein. A line of profession does not become
exempt even if conducted with some other profession
for which the tax has been paid. Professionals
exclusively employed in the government shall be
exempt from the payment of this tax.
(e) Any person subject to the professional tax shall write
in deeds, receipts, prescriptions, reports, books of
account, plans and designs, surveys and maps, as the
case may be, the number of the official receipt issued to
him.
1. Definition of Professionals (Sec. 238 (f) IRR of the LGC)
2. Professional practices his profession in several places
(Sec. 228 (b) IRR
of LGC)
(b) Every person legally authorized to practice his profession
shall pay the professional tax to the province where he
practice his profession or where he maintains his principal
office in case he practices his profession in several places,
provided, however, that such person who has paid the
corresponding professional tax shall be entitled to practice
his profession in any part the Philippines without being
subjected to any other national or local tax, license, or fee
for the practice of such profession.
vi. Amusement Tax (Sec. 140) as amended by RA No. 9640
dated May 21, 2009
Section 140. Amusement Tax. (a) The province may levy an amusement tax to be collected
from the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and other
places of amusement at a rate of not more than thirty
percent (30%) of the gross receipts from admission fees.
(b) In the case of theaters or cinemas, the tax shall first be
deducted and withheld by their proprietors, lessees, or
operators and paid to the provincial treasurer before the
gross receipts are divided between said proprietors, lessees,
or operators and the distributors of the cinematographic
films.
(c) The holding of operas, concerts, dramas, recitals, painting
and art exhibitions, flower shows, musical programs, literary
and oratorical presentations, except pop, rock, or similar
concerts shall be exempt from the payment of the tax
hereon imposed.
(d) The sangguniang panlalawigan may prescribe the time,
manner, terms and conditions for the payment of tax. In case
of fraud or failure to pay the tax, the sangguniang
panlalawigan may impose such surcharges, interest and
penalties as it may deem appropriate.
(e) The proceeds from the amusement tax shall be shared
equally by the province and the municipality where such
amusement places are located.
PBA vs. CA
GR No. 119122, August 8, 2000
THIRD DIVISION
FACTS:
On June 21, 1989, the Philippine Basketball Association

received an assessment letter from the Commissioner of
Internal Revenue for the payment of deficiency
amusement tax. On July 18, 1989, PBA contested the
assessment by filing a protest with the Commissioner
who denied the same on November 6, 1989. On January
8, 1990, PBA filed a petition for review with the Court of
of its tax protest.

ISSUE: Whether the power to collect amusement taxes of
PBA games is vested upon the local governments.
HELD: NO.
It is clear that the "proprietor, lessee or operator of . . .
professional basketball games" is required to pay an
amusement tax equivalent to fifteen per centum (15%) of
their gross receipts to the Bureau of Internal Revenue, which
payment is a national tax. The said payment of amusement
tax is in lieu of all other percentage taxes of whatever nature
and description. While Section 13 of the Local Tax Code
mentions "other places of amusement", professional
basketball games are definitely not within its scope. Thus, in
determining the meaning of the phrase "other places of
amusement", one must refer to the prior enumeration of
theaters, cinematographs, concert halls and circuses with
artistic expression as their common characteristic.
Professional basketball games do not fall under the same
category as theaters, cinematographs, concert halls and
circuses as the latter basically belong to artistic forms of
entertainment while the former caters to sports and gaming.
PELIZLOY REALTY CORPORATION, represented herein by
its President, GREGORY K. LOY, Petitioner, vs. THE
PROVINCE OF BENGUET, Respondent.
G.R. No. 183137
April 10, 2013
THIRD DIVISION
FACTS:
Pelizloy Realty Corporation owns Palm Grove Resort,

which is designed for recreation and which has facilities
like swimming pools, a spa and function halls. It is
located at Asin, Angalisan, Municipality of Tuba, Province
of Benguet. On 8 December 2005, the Provincial Board
of the Province of Benguet approved Provincial Tax
Ordinance No. 05-107, otherwise known as the Benguet
Revenue Code of 2005. Section 59, Article X of the Tax
Ordinance levied a ten percent (10%) amusement tax on
gross receipts from admissions to "resorts, swimming
pools, bath houses, hot springs and tourist spots."
Section 162 of the Tax Ordinance provided that the Tax
Ordinance shall take effect on 1 January 2006. It was
Pelizloy's position that the Tax Ordinance's imposition of
a 10% amusement tax on gross receipts from admission
fees for resorts, swimming pools, bath houses, hot
springs, and tourist spots is an ultra vires act on the part
of the Province of Benguet. Thus, it filed an
appeal/petition before the Secretary of Justice on
January 27, 2006.
ISSUE: Whether resorts, swimming pools, bath houses, hot
springs and tourist spots can be subject of amusement taxes
by the Province of Benguet.
HELD: NO.
Section 140 expressly allows for the imposition by provinces
of amusement taxes on "the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement." Resorts,
swimming pools, bath houses, hot springs and tourist spots
cannot be considered venues primarily "where one seeks
admission to entertain oneself by seeing or viewing the show
or performances". While it is true that they may be venues
where people are visually engaged, they are not primarily
venues for their proprietors or operators to actively display,
stage or present shows and/or performances. Thus, resorts,
swimming pools, bath houses, hot springs and tourist spots
do not belong to the same category or class as theaters,
cinemas, concert halls, circuses, and boxing stadia. It follows
that they cannot be considered as among the other places
of amusement contemplated by Section 140 of the LGC and
which may properly be subject to amusement taxes.
vii. Annual Fixed Tax on Delivery Trucks / Vans (Sec. 141)
DIGEST
Annual
Nov 7,
2014
Section
141.
Fixed
Tax For Every Delivery Truck or
Van of Manufacturers or Producers, Wholesalers of, Dealers,
or Retailers in, Certain Products. (a) The province may levy an annual fixed tax for every
truck, van or any vehicle used by manufacturers, producers,
wholesalers, dealers or retailers in the delivery or distribution
of distilled spirits, fermented liquors, soft drinks, cigars and
cigarettes, and other products as may be determined by the
sangguniang panlalawigan, to sales outlets, or consumers,
whether directly or indirectly, within the province in an
amount not exceeding Five hundred pesos (P500.00).
(b) The manufacturers, producers, wholesalers, dealers and
retailers referred to in the immediately foregoing paragraph
shall be exempt from the tax on peddlers prescribed
elsewhere in this Code.
b. Municipalities
i. Business Taxes (Sec. 143)
ERICSSON TELECOMMUNICATION VS. CITY OF PASIG
GR No. 176667, November 22. 2007
THIRD DIVISION
FACTS:
Ericsson Telecommunications, Inc., a corporation with

principal office in Pasig City, is engaged in the design,
engineering, and marketing of telecommunication
facilities/system. In an Assessment Notice dated October
25, 2000 issued by the City Treasurer of Pasig City,
Ericsson Telecommunications was assessed a business
tax deficiency for the years 1998 and 1999 amounting
to P9,466,885.00 and P4,993,682.00, respectively,
based on its gross revenues as reported in its audited
financial statements for the years 1997 and 1998.
Ericsson Telecommunications filed a Protest dated
December 21, 2000, claiming that the computation of
the local business tax should be based on gross receipts
and not on gross revenue. The City of Pasig (respondent)
issued another Notice of Assessment to petitioner on
November 19, 2001, this time based on business tax
deficiencies for the years 2000 and 2001, amounting to
P4,665,775.51 and P4,710,242.93, respectively, based
on its gross revenues for the years 1999 and 2000.
Again, Ericsson Telecommunications filed a Protest on
January 21, 2002, reiterating its position that the local
business tax should be based on gross receipts and not
gross revenue.
ISSUE: Whether the local business tax on contractors should
be based on gross receipts, and not gross revenue.
HELD: YES.
In Ericsson Telecommunications' case, its audited financial
statements reflect income or revenue which accrued to it
during the taxable period although not yet actually or
constructively received or paid. This is because Ericsson
Telecommunications uses the accrual method of accounting,
where income is reportable when all the events have
occurred that fix the taxpayer's right to receive the income,
and the amount can be determined with reasonable
accuracy; the right to receive income, and not the actual
receipt, determines when to include the amount in gross
income. The imposition of local business tax based on
Ericsson Telecommunications' gross revenue will inevitably
result in the constitutionally proscribed double taxation
taxing of the same person twice by the same jurisdiction for
the same thing inasmuch as Ericcson Telecommunications'
revenue or income for a taxable year will definitely include
its gross receipts already reported during the previous year
and for which local business tax has already been paid. Thus,
the Court of Appeals committed a palpable error when it
assessed petitioner's local business tax based on its gross
revenue as reported in its audited financial statements, as
Section 143 of the Local Government Code and Section 22(e)
of the Pasig Revenue Code clearly provide that the tax
should be computed based on gross receipts.
25
In Commissioner of Internal Revenue v. Bank of Commerce,

[17] the Court interpreted gross receipts as including those
which were actually or constructively received, viz.:
o
Actual receipt of interest income is not limited to
physical receipt. Actual receipt may either be
physical receipt or constructive receipt. When the
depository bank withholds the final tax to pay the
tax liability of the lending bank, there is prior to the
withholding a constructive receipt by the lending
bank of the amount withheld. From the amount
constructively received by the lending bank, the
depository bank deducts the final withholding tax
and remits it to the government for the account of
the lending bank. Thus, the interest income actually
received by the lending bank, both physically and
constructively, is the net interest plus the amount
withheld as final tax.
o
The concept of a withholding tax on
income obviously and necessarily implies
that the amount of the tax withheld comes
from the income earned by the taxpayer.
Since the amount of the tax withheld
constitutes income earned by the
taxpayer, then that amount manifestly
forms part of the taxpayers gross receipts.
Because the amount withheld belongs to
the taxpayer, he can transfer its ownership
to the government in payment of his tax
liability. The amount withheld indubitably
comes from income of the taxpayer, and
thus forms part of his gross receipts.
(Emphasis supplied)
Revenue Regulations No. 16-2005 dated September 1,
2005[20] defined and gave examples of constructive
receipt, to wit:
o
SEC. 4. 108-4. Definition of Gross Receipts. -- x x x
Constructive receipt occurs when the money

consideration or its equivalent is placed at the
control of the person who rendered the service
without restrictions by the payor. The following
are examples of constructive receipts:
(1) deposit in banks which are made

available to the seller of services without
restrictions;
(2) issuance by the debtor of a notice to

offset any debt or obligation and
acceptance thereof by the seller as
payment for services rendered; and
(3) transfer of the amounts retained by

the payor to the account of the contractor.
There is, therefore, constructive receipt, when the
consideration for the articles sold, exchanged or leased, or
the services rendered has already been placed under the
control of the person who sold the goods or rendered the
services without any restriction by the payor.
In contrast, gross revenue covers money or its equivalent
actually or constructively received, including the value of
services rendered or articles sold, exchanged or leased, the
payment of which is yet to be received.
This is in
consonance with the International Financial Reporting
Standards,[21] which defines revenue as the gross inflow of
economic benefits (cash, receivables, and other assets)
arising from the ordinary operating activities of an enterprise
(such as sales of goods, sales of services, interest, royalties,
and dividends),[22] which is measured at the fair value of
the consideration received or receivable.
YAMANE VS. BA LEPANTO
GR No 154992, October 25, 2005
SECOND DIVISION
FACTS:
BA-Lepanto Condominium Corporation is a duly

organized condominium corporation constituted in
accordance with the Condominium Act, which owns and
holds title to the common and limited common areas of
the BA-Lepanto Condominium, situated in Paseo de
Roxas, Makati City. Its membership comprises the
various unit owners of the Condominium. The
DIGEST
Nov
2014 under Article V of its
Corporation
is 7,
authorized,
City of Manila assessed Coca-Cola
Amended By-Laws, to collect regular assessments from
its
members
for
operating
expenses,
capital
expenditures on the common areas, and other special
assessments as provided for in the Master Deed with
Declaration of Restrictions of the Condominium. On 15
December 1998, the Corporation received a Notice of
Assessment dated 14 December 1998 signed by the City
Treasurer. The Notice of Assessment stated that the
Corporation is "liable to pay the correct city business
taxes, fees and charges," computed as totaling
P1,601,013.77 for the years 1995 to 1997. The Notice of
Assessment was silent as to the statutory basis of the
business taxes assessed. Through counsel, the
Corporation responded with a written tax protest dated
12 February 1999, addressed to the City Treasurer.
ISSUE: Whether the City of Makati may collect business taxes
on condominium corporations.
HELD: NO.
Whatever capacity the Corporation may have

pursuant to its power to exercise acts of ownership
over personal and real property is limited by its
stated corporate purposes, which are by themselves
further limited by the Condominium Act. A
condominium corporation, while enjoying such
powers of ownership, is prohibited by law from
transacting its properties for the purpose of gainful
profit. Accordingly, and with a significant degree of
comfort, we hold that condominium corporations
are generally exempt from local business taxation
under the Local Government Code, irrespective of
any local ordinance that seeks to declare otherwise.
The assessment appears to be based solely on the
Corporations collection of assessments from unit
owners, such assessments being utilized to defray
the necessary expenses for the Condominium
Project and the common areas. There is no
contemplation of business, no orientation towards
profit in this case. Hence, the assailed tax
assessment has no basis under the Local
Government Code or the Makati Revenue Code, and
the insistence of the city in its collection of the void
tax constitutes an attempt at deprivation of
property without due process of law.
CITY OF MANILA VS. COCA COLA BOTTLERS
GR No. 181845, August 4, 2009
THIRD DIVISION
FACTS:
Prior to 25 February 2000, the Coca-Cola Bottlers

Philippines Inc. had been paying the City of Manila local
business tax only under Section 14 of Tax Ordinance No.
7794, being expressly exempted from the business tax
under Section 21 of the same tax ordinance. The City of
Manila subsequently approved on 25 February 2000, Tax
Ordinance No. 7988, amending certain sections of Tax
Ordinance No. 7794, particularly: (1) Section 14, by
increasing the tax rates applicable to certain
establishments
operating
within
the
territorial
jurisdiction of the City of Manila; and (2) Section 21, by
deleting the proviso found therein, which stated "that all
registered businesses in the City of Manila that are
already paying the aforementioned tax shall be
exempted from payment thereof." The City of Manila
approved only after a year, on 22 February 2001,
another tax ordinance, Tax Ordinance No. 8011,
amending Tax Ordinance No. 7988. Tax Ordinances No.
7988 and No. 8011 were later declared by the Court null
and void in Coca-Cola Bottlers Philippines, Inc. v. City of
Manila for the following reasons: (1) Tax Ordinance No.
7988 was enacted in contravention of the provisions of
the Local Government Code (LGC) of 1991 and its
implementing rules and regulations; and (2) Tax
Ordinance No. 8011 could not cure the defects of Tax
Ordinance No. 7988, which did not legally exist.
However, before the Court could declare Tax Ordinance
No. 7988 and Tax Ordinance No. 8011 null and void, the
26
on the basis of
Section 21 of Tax Ordinance No. 7794, as amended by
the aforementioned tax ordinances, for deficiency local
business taxes, penalties, and interest, in the total
amount of P18,583,932.04, for the third and fourth
quarters of the year 2000. Coca-Cola filed a protest with
the city treasurer on the ground that the said
assessment amounted to double taxation, as respondent
was taxed twice, i.e., under Sections 14 and 21 of Tax
Ordinance No. 7794, as amended by Tax Ordinances No.
7988 and No. 8011.
ISSUE: Whether the City of Manila can impose both business

taxes under Section 143(a) and 143(h) of the NIRC, relevant
to Sections 14 and 21 of the City's ordinance, against a
manufacturer.
HELD: NO.
The Court revisits Section 143 of the LGC, the very

source of the power of municipalities and cities to
impose a local business tax, and to which any local
business tax imposed by the City of Manila must
conform. It is apparent from a perusal thereof that
when a municipality or city has already imposed a
business tax on manufacturers, etc. of liquors,
distilled spirits, wines, and any other article of
commerce, pursuant to Section 143(a) of the LGC,
said municipality or city may no longer subject the
same manufacturers, etc. to a business tax under
Section 143(h) of the same Code. Section 143(h)
may be imposed only on businesses that are subject
to excise tax, VAT, or percentage tax under the
NIRC, and that are "not otherwise specified in
preceding paragraphs." In the same way,
businesses such as Coca-Cola Bottlers, already
subject to a local business tax under Section 14 of
Tax Ordinance No. 7794 [which is based on Section
143(a) of the LGC], can no longer be made liable for
local business tax under Section 21 of the same Tax
Ordinance [which is based on Section 143(h) of the
LGC].
ALABANG SUPERMARKET CORP. vs. CITY GOVERNMENT
OF MUNTINLUPA
CTA 1st DIVISION December 12, 2007
J: ACOSTA
Facts:
Alabang Supermarket Corp. (ASC) operates the
Alabang Branch of the Makati Supermarket a distributor
and dealer of liquor, beer, wine, distilled spirits, cigarettes
and tobacco products.
Pursuant to Ordinance No. 95-35 (Revenue Code of
Mutinlupa), ASC pays the graduated business tax on its gross
sales of liquor, etc. This Ordinance implements Sec. 143 (b)
of the LGC.
On Dec. 1, 1998, Muntinlupa City enacted Ordiance
98-015, amending 95-35 by imposing 3% business tax on the
sale and distribution of alcoholic beverages and tobacco
products.
I this regard, for periods covering Jan. 2, 1999 to
Sept. 15, 2002, ASC allegedly paid P3.7M representing the
3% business tax on its gross receipts.
ASC questioned the said Ordinance before the
Bureau of Local Govt. Finance which ruled in its favor,
holding that: the local legislative body may amend the same,
however, the rates of increase should have been based on
the schedules of graduated business taxes under Sec. 143(b)
of the LGC and no on the basis of 2% local percentage tax on
gross sales/receiptsthus, in amending, the increase should
have been 10% on the schedules of graduated business
taxes, not 3% on the gross sales or receipts.
ASC sought refund/tax credit of the amount f P1.6M,
representing the 3% of business taxes paid on its gross sales
of liquor, beer, etc. for the period covering Jan. 1999 to Dec.
2000. ASC filed with the RTC a complaint with TRO, seeking
refund of the amount and seeking the declaration of Sec. 2 of
Ordinance No. 98-015.
RTC disallowed the claim for refund holding that the
Ordinance was enacted with basis, that is, the purpose is
DIGEST
Nov 7,and
2014
public
in character
not oppressive, excessive nor
prohibitive.
From his decision, ASC filed a PFR before CTA.
Issue:
Whether Sec. 2 of the Ordinance is valid
Whether the ASC is entitled to be refunded the
amount it paid.
Decision:
As regards the 1st issue, ASC argues that Sec. 2 of
the Ordinance is contrary to the Constitution and LGC for
LGUs do not have the inherent power to tax except such
power as may be delegated to them by law. ASC posits that
the Ordinance is confiscatory and excessive. Moreover, Secs.
130, 133, 143 (b) and 191 of the LGC expressly imposed
limitations that govern the exercise of the LGUs taxing
powers. Considering that Ordinance No. 98-015 imposes a
3% business tax on the gross sales, it is necessarily an
exaction based on sales, thus, null and void.
Further, petitioner argues that Section 191 of the
LGC specifically provides that local government units have
the authority to adjust the tax rates as prescribed in the LGC
of 1991 not oftener than once every five (5) years but in no
case shall the adjustments exceed ten percent (10%) of the
rates fixed under the said Code. Thus, by amending Section
5 (b) of the RCM, respondents should have increased the
graduated rates by ten percent (10%) and not imposed a
fixed rate of 3%.
Muntinlupa City avers that it is erroneous for the
petitioner to claim that as it is covered under Sec. 143(b) of
the LGC, it may no longer be taxed under Sec. 2 of the
Ordinance. ASC is clearly both a distributor/dealer and
retailer, such that neither Sec. 143(b) nor any other
subparagraphs of Sec. 143 find application. Not being
covered under Subparagraphs A to G, then Art. 237 of the
IRR of the LGC, which allows cities to levy and collect a
percentage tax not ecedding 3% based on gross sales or
receipts on any business not specified in Sec. 143 A to G of
the LGC, in releation to Sec. 151 of the LGC come into play.
Even assuming that Art. 237 of IRR in relation to Sec. 151 do
not apply, the imposition finds basis in Sec. 143(h) of the
LGC. The 3% business tax imposed is still within the 50%
maximum increase from the 2% percentage tax allowed by
law. City government, therefore, did not exceed its limits in
imposing the 3% business tax on the gross sales of liquor,
beer, etc.
On the main issue, with the enactment of Ordinance
No. 98-015, City Govt. now collect from ASC the 3% fixed
business tax rate based on its gross sales or receipts of
liquor and other distilled products and tobacco products as a
wholesaler and retailer, on the premise that no other
provision of law imposes a business tax on wholesalers and
retailers of liquor, beer, wine, distilled products, and other
tobacco products.
It is emphasized that the very phrase under Sec.
143(b) of the LGC ay article of commerce of whatever kind
is broad enough as o include liquor, beer , wine, and tobacco
products.
ASC have already been taxed as distributor and
dealer of liquor, beer, wine, and tobacco products by the City
based on the graduated rates provided for under Sec. 5(b) of
the Revenue Code of Muntinlupa. Hence, it was erroneous for
the City to argue that no other provision of law imposes a
business tax on wholesalers ad retailers of liquor, beer, etc.
When Ordninance No. 98-015 was enacted
amending the rates of business taxes to a fixed rate of 3%
which is more than 10% of the allowable increase, such
imposition was excessive and contrary to law. Pursuant to
Sec. 191 9(9) of the LGC, it is provided that the LGUs may
adjust the rates of taxes prescribed in the same Code, not
oftener than once every 5 years but in no case shall it
exceed 10% of the rates already prescribed. In this regard,
the adjustments on the rate of tax imposed upon ASC should
have been based on the existing graduated business tax
rates under Revenue Code of Mutinlupa.
City cannot based the adjustments on the business
tax rates on the 2% tax rate provided under Sec. 143(h) of
the LGC because the Revenue Code of Muntinlupa adopted a
graduated rate of Tax, pursuant to Sec. 143(b) taking for
consideration the last paragraph of Sec. 143 of the LGC.
27
Nonetheless, although the CTA agrees with ASC that

the ordinance is excessive and contrary to law, the refund for
the full amount may not be allowed. It may be that the
imposition of the 3% fixed business tax is excessive,
however, ASC is not exempt from the payment of business
tax as may be imposed by the LGU in accordance with law.
CTA held that the increase in the business tax rates
imposed by Sec. 2 of the Ordinance is excessive and
contrary to law pursuant to Sec. 191 of the LGC, but as
regards ASCs petitioners liability for the business tax, the
same is in the affirmative. Absent any evidence or document
to show or compute for the exact amount of business taxes
ASC is liable to, the claim for refund may not be allowed.
CTA remanded the case to the lower court for the
proper recomputation of ASCs business tax liability covering
the period from January 1999 to December 2000 only, taking
into consideration Sec. 191 of the LGC.
ALABANG SUPERMARKET CORP. vs. CITY GOVERNMENT
OF MUNTINLUPA
CTA CASE No. 386 EN BANC February 12, 2009
J: UY
Facts:
- ASC appeals from the 2007 Decision of CTA DIVISION,
ordering the remand of this case to the RTC for proper
determination of business taxes holding that ASC is still
liable for business tax despite the fact that the Ordinance
under which the tax was based is excessive and contrary to
law. ASC also assails the RESOLUTION of the CTA DIVISION
denying its 2 motions on April 2008.
- Petitioner alleges that, at the very least, the anticipated
finality of this Court's judicial pronouncement that
respondents' tax ordinance is excessive and contrary to law
should be considered as a supervening cause entitling a
taxpayer to a tax refund from which the date to file a claim
for refund should be reckoned from. Thus, it opined that it
could not be adjudged to have failed to file an administrative
claim for refund since the two (2)-year period from the
finality of this Court's declaration that the respondents' tax
ordinance is illegal thus entitling petitioner to a refund has
yet to lapse.
- Further, petitioner insists that its argument finds
jurisprudential support in the recent case of ALLIED BANKING
CORPORATION vs. THE QUEZON CITY GOVERNMENT, et al.
14(14) (Allied Bank case) whereby petitioner alleges that the
Honorable Supreme Court after ruling that the local
ordinance is null and void for being ultra vires and contrary
to law thus acquiring no legal effect and conferring no rights
from its inception held, in its September 15, 2006 Decision,
that the refund may be pursued within two (2) years from the
finality of the Court's decision nullifying the ordinance, that is
within two (2) years from the finality of the said Decision.
- Petitioner reiterates that the reason why it opted not to file
an administrative case for refund with the local treasurer for
business taxes paid after December 15, 2000 is due to the
fact that it has already a pending case in court assailing
Section 2 of Ordinance No. 98-105. Thus, it deemed it wise to
simply file a supplemental complaint to the earlier complaint
filed so that the same could be resolved at once.
- Moreover, petitioner reasoned that to file an administrative
claim for refund would be a useless exercise since the local
treasurer would deny it anyway, considering the fact that the
City Government of Muntinlupa is continuously collecting
business taxes under the assailed Ordinance No. 98-105.
- In addition, petitioner argues that respondents never raised
or pleaded as a defense and/or issue the alleged failure of
the petitioner to file an administrative claim for refund for
the business taxes it paid during the period from December
16, 2000 to December 15, 2002, therefore, the same defense
and/or issue is already deemed waived; that the same issue
should not have been considered by the Court in Division at
a very late stage of the case without violating its
fundamental right to due process and fair play as it is
doctrinally well-settled that courts do not have the authority
to rule on appeal matters not raised by the parties in their
pleadings and during trial.
Issue: Whether ASC is entitled to the refund of the business
tax paid.
DIGEST Nov 7, 2014
periods provided by law would be rendered
Decision:
- SC held that the arguments raised in this case were mere
restatements of previous arguments raised in the DIVISION
that had already been thoroughly discussed and passed
upon in the decision.
- We find that the Court in Division appropriately denied
petitioner's claim for refund pertaining to the period
from December 16, 2000 to December 2002, due to
petitioner's failure to file an administrative claim for
refund before the City Government of Muntinlupa as
required under Section 196 of the LGC prior to judicial
recourse. Said provision reads thus:
"Section 196. Claim for Refund of Tax Credit. No case or
proceeding shall be maintained in any court for the recovery
of any tax, fee, or charge erroneously or illegally collected
until a written claim for refund or credit has been filed with
the local treasurer. No case or proceeding shall be
entertained in any court after the expiration of two (2) years
from the date of the payment of such tax, fee, or charge, or
from the date the taxpayer is entitled to a refund or credit."
Clearly from the above quoted provision, no case or
proceeding may be entertained by any courts absent
showing that petitioner has a written claim for refund of
erroneous or excessive payment of any tax, fee or charge
filed with the local treasurer prior to its filing before any
court.
Moreover, it should be noted that two reckoning periods are
provided by law for the filing of a case or proceeding, which
is from the date of payment of the tax, and from the date the
taxpayer becomes entitled to the refund. However,
petitioner's interpretation of the phrase "from the date the
taxpayer becomes entitled to the refund" is not in
consonance with the intent of the law since Section 196
should not be read in isolation, but in relation with other
provisions of the LGC. As exhaustively discussed by the
Court in Division in its Resolution dated April 4, 2008, it held
that:
"Section 187 of the Local Government Code dictates the
procedure for questioning the constitutionality or legality of
tax ordinances. It provides in part that: 'any question on the
constitutionality or legality of tax ordinances or revenue
the receipt of the appeal'. It further provides 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.
A reading of Section 187 of the Local Government Code
would show that the law intends that questions on the
legality or constitutionality of an ordinance or tax measure
be threshed out the soonest possible time. It should be
raised within thirty (30) days from approval and such appeal
should be resolved within sixty (60) days from receipt
thereof. Section 187 states that any appeal on the legality or
constitutionality of the ordinance does not suspend its
effectivity.
Thus, before any final declaration of its nullity, taxes accrue
and should be paid accordingly. In the same vein, the
reckoning periods for the filing of a claim for refund in
Section 196 of the Local Government Code should be
interpreted so as to accomplish the evident purpose, viz., the
settlement of the rights of the taxpayer vis--vis the
government, at the earliest opportunity. The phrase "from
the date the taxpayer becomes entitled to a refund or credit"
in Section 196 should not be interpreted to mean the finality
of the decision of a court declaring the tax measure void,
even without a timely claim for refund. Otherwise, claims for
refund will be filed even after several years from payment of
the tax due, merely because the tax ordinance was declared
void. And the filing of administrative and judicial claims for
refund shall be endless. This interpretation would give the
taxpayer, who was not able to question the legality or
constitutionality of the tax measure within the period
provided in Section 187, the right to instead file a claim for
refund with the court under Section 196, absent the filing of
a timely administrative claim. In effect, the prescriptive
28
naught and
meaningless.
- Petitioner's failure to file the appropriate administrative
claim for refund for the period December 16, 2000 to
September 2002, cannot be countenanced. More so, since it
has been able to file a timely administrative claim for the 3%
business tax it paid covering January 2, 1999 to December
15, 2000. It is clearly aware of the requirements for the filing
of an administrative claim set forth by law. Its manifest error
cannot be cured at this point.
- On the issue of the validity of the Ordinance, As thoroughly
discussed by the Court in Division, We emphasize that
respondent cannot base the adjustments on the business tax
rates on the 2% tax rate provided for under Section 143 (h)
of the LGC.
It should be noted that petitioner has already been taxed as
a distributor and dealer of liquor, beer, wine, distilled spirits,
cigarettes and tobacco products by the respondents, based
on the graduated rates provided for under Section 5 (b) of
the
- Revenue Code of Muntinlupa City based on Section 143 (b)
of the LGC that taxes "any article of commerce of whatever
kind and nature", which is broad enough as to include
products of petitioner. When the law evidently does not
distinguish the articles of commerce subject to the business
tax, thus, respondents should not have done so.
In addition, a general provision that provides for the scope
and extent of the city's taxing power like the above quoted
Section 151 of the LGC cannot be made to apply. On the
contrary,
the
proper
provision
in
cases
of
amendment/increase of tax rates is:
SEC. 191. Authority of Local Government Units to Adjust
Rates of Tax Ordinances. Local government units shall
have the authority to adjust the tax rates as prescribed
herein not oftener than once every five (5) years, but in no
case shall such adjustment exceed ten percent (10%) of the
rates this Code.
Based
on
the
foregoing,
the
imposition
of
an
amended/increased rate of business taxes to a fixed rate of
3%, which is more than 10% of the allowable increase as
indicated in Section 191 of the LGC, provided under Section
2 of Ordinance No. 98-015, is excessive and contrary to law.
WHEREFORE, in view of the foregoing, the instant Petition for
Review is hereby DENIED for lack of merit. The assailed
Decision and Resolution of the Court
in Division dated December 12, 2007 and April 4, 2008,
respectively, are hereby AFFIRMED.
CAGAYAN ELECTRIC POWER AND LIGHT Co. (CEPALCO)
vs. CITY OF CAGAYAN DE ORO
G.R. No. 191761 November 14, 2012
J: Carpio
Facts:
Sagguniang Panglungsod of CDO passed Ordinance
9503-2005 imposing a ax on the lease or rental of electric
and telecommunication posts, poles or towers by pole
owners to other pole users a 10% of annual retal income
derived from such lease or rental.
CEPALCO questioned the validity of the Ordinance
before RTC CDO on the ground that the tax is a tax on
income which CDO City may not impose, the same being
expressly prohibited by Sec. 133(a) of LGC.
CEPALCO further argues that assuming the CDO
may impose such tax, it is nevertheless exempted from such
by virtue of its franchise providing for such exemption.
RTC ruled in favor of CDO City, holding that the
ordinance is an imposition prohibited by the LGC because
what is directly taxed is not the income but the privilege of
CEPALCO to engage in business. It also made mention of the
catch all provision: Moreover, Section 143(h), in relation to
Section 151, of the Local Government Code authorizes a city
to impose taxes, fees and charges on any business which is
not specified as prohibited under Section 143(a) to (g) and
which the city council may deem proper to tax.
CA affirmed the decision of RTC and held that
CEPALCO failed to file a timely appeal to the Secretary of
Justice. Hence, this appeal.
DIGEST
Nov
7, 2014
Issue:
Whether
CEPALCO
is liable to pay business tax under
the Ordiance
Decision:
On failure to appeal on time: Clearly, the law
requires that the dissatisfied taxpayer who questions the
validity or legality of a tax ordinance must file his appeal to
the Secretary of Justice, within 30 days from effectivity
thereof. In case the Secretary decides the appeal, a period
also of 30 days is allowed for an aggrieved party to go to
court. But if the Secretary does not act thereon, after the
lapse of 60 days, a party could already proceed to seek relief
in court. These three separate periods are clearly given for
compliance as a prerequisite before seeking redress in a
competent court. Such statutory periods are set to prevent
delays as well as enhance the orderly and speedy discharge
of judicial functions. For this reason the courts construe
these provisions of statutes as mandatory. Consequently, any
delay in implementing tax measures would be to the
detriment of the public. It is for this reason that protests over
tax ordinances are required to be done within certain time
frames. In the instant case, it is our view that the failure of
petitioners to appeal to the Secretary of Justice within 30
days as required by Sec. 187 of R.A. 7160 is fatal to their
cause. As in Reyes, CEPALCOs failure to appeal to the
Secretary of Justice within the statutory period of 30 days
from the effectivity of the ordinance should have been fatal
to its cause. However, we relax the application of the rules in
view of the more substantive matters.
On the merits of the case: Although CEPALCO does
not question the authority of the Sangguniang Panlungsod of
Cagayan de Oro to impose a tax or to enact a revenue
measure, CEPALCO insists that Ordinance No. 9503-2005 is
an imposition of an income tax which is prohibited by Section
133(a) of the Local Government Code. Unfortunately for
CEPALCO, we agree with the ruling of the trial and appellate
courts that Ordinance No. 9503-2005 is a tax on business.
CEPALCOs act of leasing for a consideration the use of its
posts, poles or towers to other pole users falls under the
Local Government Codes definition of business. Business is
defined by Section 131(d) of the Local Government Code as
"trade or commercial activity regularly engaged in as a
means of livelihood or with a view to profit." In relation to
Section 131(d), Section 143(h) of the Local Government
Code provides that the city may impose taxes, fees, and
charges on any business which is not specified in Section
143(a) to (g) and which the sanggunian concerned may
deem proper to tax. In contrast to the express statutory
provisions on the City of Cagayan de Oros power to tax,
CEPALCOs claim of tax exemption of the income from its
poles relies on a strained interpretation. Section 1 of R.A. No.
9284 added Section 9 to R.A. No. 3247, CEPALCOs franchise:
SEC. 9. Tax Provisions. The grantee, its successors
or assigns, shall be subject to the payment of all taxes,
duties, fees or charges and other impositions applicable to
private electric utilities under the National Internal Revenue
Code (NIRC) of 1997, as amended, the Local Government
Code and other applicable laws: Provided, That nothing
herein shall be construed as repealing any specific tax
exemptions, incentives, or privileges granted under any
relevant law: Provided, further, That all rights, privileges,
benefits and exemptions accorded to existing and future
private electric utilities by their respective franchises shall
likewise be extended to the grantee.
The grantee shall file the return with the city or
province where its facility is located and pay the taxes due
thereon to the Commissioner of Internal Revenue or his duly
authorized representative in accordance with the NIRC and
the return shall be subject to audit by the Bureau of Internal
Revenue.
The Local Government Code withdrew tax
exemption privileges previously given to natural or juridical
persons, and granted local government units the power to
impose franchise tax, thus:
SEC. 137. Franchise Tax. Notwithstanding any
exemption granted by any law or other special law, the
province may impose a tax on businesses enjoying a
franchise, at a rate not exceeding fifty percent (50%) of one
percent (1%) of the gross annual receipts for the preceding
calendar year based on the incoming receipt, or realized,
within its territorial jurisdiction.
29
xxxx
SEC. 193. Withdrawal of Tax Exemption Privileges.
Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or
controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.
SEC. 534. Repealing Clause. x x x.
(f) All general and special laws, acts, city charters,
decrees, executive orders, proclamations and administrative
regulations, or part or parts thereof which are inconsistent
with any of the provisions of this Code are hereby repealed
or modified accordingly. CEPALCOs claim of exemption under
the "in lieu of all taxes" clause must fail in light of Section
193 of the Local Government Code as well as Section 9 of its
own franchise.
DISCUSSION ON THE MERITS:
CEPALCO argues that the Ordinance is invalid
because of 2 limitations: (1) The taxes imposable under Sec.
137 or 143(h) are restricted as to the amount which may be
imposed; and (2) If it is a city which imposes the same, it can
impose only up to one half of what the province or
municipality may impose.
Ordinance 9503-2005 imposes a tax on the lease or
rental of electric or telecommunication posts, poles, or
towers by pole owners to other pole users at the rate of 10%
of the annual rental income derived therefrom.
Sec. 137 considering that the tax allowed
provinces SHALL NOT EXCEED 50% OF 1% OF THE GROSS
ANNUAL RECEIPTS FOR THE PRECEDING CALENDAR YEAR
based on the incoming receipt,xxx xxx.. the tax imposed by
Ordinance a the rate of 10% is too much. There is a whale of
a difference between the allowable 50% of 1% and the 10%
tax imposed by CDO city.
To illustrate: assuming that the gross annual receipt
is Php100, the maximum tax that a province may impose
under Section 137 (50% of 1%) shall be Php0.5 or only fifty
centavos. Therefore, the maximum tax that the City may
impose shall only be one-half of this, which is Php0.25 or
only twenty-five centavos. But the questioned Ordinance
imposes a tax amounting to 10% of the gross annual receipt
of Php100, which is Php10, or Ten Pesos. This a whooping
[sic] 40 times more than that allowed for the province! The
violation made by respondent city of its delegated taxing
authority is all too patent.
With respect to Section 143(h), the rate of tax which
the municipality may impose "shall not exceed two percent
(2%) of gross sales or receipts of the preceding calendar
year." On the other hand, the tax imposed by Ordinance No.
9503-2005 is "at the rate of ten (10) percent of the annual
rental income derived therefrom." Again, it is obvious that
the respondent Citys questioned tax ordinance is way too
much.
CDO City argues that Section 186 of the LGC allow
[sic] local government units to exercise their taxing power to
levy taxes, fees or charges on any base or subject not
otherwise specifically enumerated in the preceding sections,
more particularly Section 143 thereof, or under the
provisions of the National Internal Revenue Code, as long as
they are not unjust, excessive, oppressive, confiscatory or
contrary to declared national policy. Moreover, a public
hearing is required before the Ordinance levying such taxes,
fees or charges can be enacted; CEPALCO is mistaken when
it states that a city can impose a tax up to only one-half of
what the province or city may impose. A more circumspect
reading of the Local Government Code could have prevented
this error. Section 151 of the Local Government Code states
that, subject to certain exceptions, a city may exceed by "not
more than 50%" the tax rates allowed to provinces and
municipalities.29 A province may impose a franchise tax at a
rate "not exceeding 50% of 1% of the gross annual
receipts."30 Following Section 151, a city may impose a
franchise tax of up to 0.0075 (or 0.75%) of a business gross
annual receipts for the preceding calendar year based on the
incoming receipt, or realized, within its territorial jurisdiction.
A municipality may impose a business tax at a rate not
exceeding "two percent of gross sales or receipts."31
Following Section 151, a city may impose a business tax of
Nov
upDIGEST
to 0.03 (or
3%) of7,a 2014
business gross sales or receipts of
the preceding calendar year.
CEPALCO also erred when it equates Section 137s
"gross annual receipts" with Ordinance No. 9503-2005s
"annual rental income." Section 2 of Ordinance No. 95032005 imposes "a tax on the lease or rental of electric and/or
telecommunication posts, poles or towers by pole owners to
other pole users at the rate of ten (10) percent of the annual
rental income derived therefrom," and not on CEPALCOs
gross annual receipts. Thus, although the tax rate of 10% is
definitely higher than that imposable by cities as franchise or
business tax, the tax base of annual rental income of
"electric and/or telecommunication posts, poles or towers by
pole owners to other pole users" is definitely smaller than
that used by cities in the computation of franchise or
business tax. In effect, Ordinance No. 9503-2005 wants a
slice of a smaller pie.
However, we disagree with the City of Cagayan de
Oros submission that Ordinance No. 9503-2005 is not
subject to the limits imposed by Sections 143 and 151 of the
Local Government Code. On the contrary, Ordinance No.
9503-2005 is subject to the limitation set by Section 143(h).
Section 143 recognizes separate lines of business and
imposes different tax rates for different lines of business. Let
us suppose that one is a brewer of liquor and, at the same
time, a distributor of articles of commerce. The brewery
business is subject to the rates established in Section 143(a)
while the distribution business is subject to the rates
established in Section 143(b). The City of Cagayan de Oros
imposition of a tax on the lease of poles falls under Section
143(h), as the lease of poles is CEPALCOs separate line of
business which is not covered by paragraphs (a) to (g) of
Section 143. The treatment of the lease of poles as a
separate line of business is evident in Section 4(a) of
Ordinance No. 9503-2005. The City of Cagayan de Oro
required CEPALCO to apply for a separate business permit.
More importantly, because "any person, who in the
course of trade or business x x x leases goods or properties x
x x shall be subject to the value-added tax,"3 the imposable
tax rate should not exceed two percent of gross receipts of
the lease of poles of the preceding calendar year. Section
143(h) states that "on any business subject to x x x valueadded x x x tax under the National Internal Revenue Code,
as amended, the rate of tax shall not exceed two percent
(2%) of gross sales or receipts of the preceding calendar
year" from the lease of goods or properties. Hence, the 10%
tax rate imposed by Ordinance No. 9503-2005 clearly
violates Section 143(h) of the Local Government Code.
Finally, in view of the lack of a separability clause,
we declare void the entirety of Ordinance No. 9503-2005.
Any payment made by reason of the tax imposed by
Ordinance No. 9503-2005 should, therefore, be refunded to
CEPALCO. Our ruling, however, is made without prejudice to
the enactment by the City of Cagayan de Oro of a tax
ordinance that complies with the limits set by the Local
Government Code.
WHEREFORE, we GRANT the petition.
LOCAL AND REAL PROPERTY TAX
It is further provided that on any business already subject to

EXCISE TAX, VAT, or PERCENTAGE TAX under the NIRC, the
rate of tax to be imposed under Section 143(h), if any,
should not exceed 2% of gross sales or receipts of the
PRECEDING CALENDAR YEAR.
CITY OF MANILA vs. COCA COLA BOTTLERS
G.R. No. 181845, August 4, 2009
Facts:
- Pursuant to Sec. 143(a) of the LGC, Section 14 of Tax
Ordinance No. 7794 imposed local business tax on
manufacturers, etc. of liquors, distilled spirits, wines, and
any other article of commerce.
- Pursuant to Section 143(h) of the LGC, Section 21 of the
said Ordinance imposed local business tax upon persons
selling goods and services in the course of trade of business,
and those importing goods for business or otherwise, who,
are subject to excise tax, VAT or percentage tax under the
NIRC.
- Said Ordinance was questioned by Coca Cola Bottlers as
the same, according to them amounts to double taxation.
- City of Manila argues that there can be no double taxation
when Coca Cola is being taxed under both Sections 14 and
21 of the Tax Ordinance No. 7794, for under the 1 st, it is
being taxed as a manufacturer, and under the 2nd, it is being
taxed as a person selling goods in the course of trade or
business subject to excise, VAT, or percentage tax.
Issue: Whether the imposition of the taxes is valid.
Decision: NO.
- Double taxation means taxing the same person twice by
the same jurisdiction for the same thing. This is also known
as duplicate double taxation wherein two taxes must be
imposed on the same subject matter, for the same purpose,
by the same taxing authority, within the same jurisdiction,
during the same taxing period, and the taxes must be of the
same kind or character.
- It is apparent from Section 143(h) that when a municipality
or a city has already imposed a business tax on
manufacturers, etc. of liquors, distilled spirits, wines, and any
other article of commerce, pursuant to Sec. 143(a) of the
LGC, said municipality or city may no longer subject the
same manufacturers, etc. to a business tax under Sec.
143(h) of the same code.
- Section 143(h) may be imposed only on businesses that are
subject to excise tax, VAT, or percentage tax under the NIRC,
and that are not otherwise specified in the preceding
paragraphs.
- In the same way, businesses such as respondents, already
subject to a local business tax under Sec. 14 of TO 7794
(which is based on Sec. 143[a]of the LGC), can no longer be
made liable for local business tax under Sec. 21 of the same
Tax Ordinance (which is based on Sec. 143[h] of the LGC).
BUSINESS TAX vs. INCOME TAX
CATCH ALL PROVISION Section 143(h) LGC of 1991

Sec. 143. Tax on Business. The municipality may impose
Xxx
xxx
xxx
(h) On any business, not otherwise specified in the preceding
paragraphs, which the sanggunian concerned may deem
proper to tax: Provided, That on any business subject to the
excise, value-added or percentage tax under the NIRC, as
amended, the rate of tax shall not exceed 2% of gross sales
or receipts of the preceding calendar year.
Based on the provision:
GR: Municipality may impose taxes on any business
specified under Sec. 143, paragraphs A to I, which
sanggunian concerned may deem proper to tax.
EXCEPTION: If the business is already subjected to
imposed under Paragraphs A to I, it can no longer
30
subjected to tax under Paragraph H as it would amount to

double taxation.
not
the
tax
be
Business Taxes
- imposed in the exercise of the Police Power for
regulatory purposes.
- paid for the privilege of carrying on a business in the
year the tax was paid.
- paid at the beginning of the year as a fee to allow the
business to operate for the rest of the year.
- prerequisite to the conduct of business.
Income Tax
- tax on all yearly profits arising from property,
professions, trades or offices, or as a tax on a
persons income, emoluments, profits and the like.
- tax on income, whether net or gross realized in
one taxable year.
- It is due on or before the 15 th day of the 4th month
following the close of the TPs taxable year and is
generally regarded as an excise tax, levied upon
the right of a person or entity to receive income or
profits.
DIGEST Nov 7, 2014
person, natural or juridical, shall require the
RATES OF TAX WITHIN METRO MANILA (Sec. 144)
Sec. 144. Rates of Tax within the Metropolitan Manila Area.
The municipalities within the Metropolitan Manila Area may
levy taxes at rates which shall not exceed by 50% the
maximum rates prescribed in the preceding section.
RETIREMENT OF BUSINESS (Sec. 145)
Sec. 145. Retirement of Business. A business subject to tax
pursuant to the preceding sections shall, upon termination
thereof, submit a sworn statement of its gross sales or
receipts for the current year. If the tax paid during the year
be less than the tax due on said gross sales or receipts of the
current year, the difference shall be paid before the business
is considered officially retired.
IRR of LGC
PART SIX
Special Provisions
ARTICLE 241. Retirement of Business.
(a) Any person natural or juridical, subject to the tax on
businesses under Article 232 of this Rule shall, upon
termination of the business, submit a sworn statement of the
gross sales or receipts for the calendar year.
For purposes hereof, termination shall mean that business
operations are stopped completely. Any change in ownership,
management and/or name of the business shall not
constitute termination as contemplated in this Article. Unless
stated otherwise, assumption of the business by any new
owner or manager or re-registration of the same business
under a new name will only be considered by the LGU
concerned for record purposes in the course of the renewal
of the permit or license to operate the business.
The local treasurer concerned shall see to it that the
payment of taxes of a business is not avoided by simulating
the termination or retirement thereof. For this purpose, the
following procedural guidelines shall be strictly observed:
(1) The local treasurer shall assign every application for the
termination or retirement of business to an inspector in his
office who shall go to the address of the business on record
to verify if it is really no longer operating. If the inspector
finds that the business is simply placed under a new name,
manager and/or new owner, the local treasurer shall
recommend to the mayor the disapproval of the application
for the termination or retirement of said business.
Accordingly, the business continues to become liable for the
payment of all the taxes, fees and charges imposed thereon
under existing local tax ordinances; and
(2) In the case of a new owner to whom the business was
transferred by sale or other form of conveyance, said new
owner shall be liable to pay the tax or fee for the transfer of
the business to him if there is an existing ordinance
prescribing such transfer tax.
(b) If it is found that the retirement or termination of the
business is legitimate, and the tax due therefrom be less
than the tax due for the current year based on the gross
sales or receipts, the difference in the amount of the tax
shall be paid before the business is considered officially
retired or terminated.
(c) The permit issued to a business retiring or terminating its
operations shall be surrendered to the local treasurer who
shall forthwith cancel the same and record such cancellation
in his books.
ARTICLE 242. Related or Combined Businesses.
(a) The conduct or operation of two or more related
businesses provided in Article 232 of this Rule by any one
31
issuance of a
separate permit or license to each business.

(b) If a person conducts or operates two (2) or more related
businesses which are subject to the same rate of imposition,
the tax shall be computed on the basis of the combined total
gross sales or receipts of the said two (2) or more related
businesses.
(c) If, however, the businesses operated by one person are
governed by separate tax schedules or the rates of the taxes
are different, the taxable gross sales or receipts of each
business shall be reported independently and the tax
thereon shall be computed on the basis of the appropriate
schedule.
MOBIL PHILS. vs. CITY TREASURER OF MAKATI
G.R. No. 154092, July 14, 2005
Facts:
- Mobil Phils. is a domestic corporation engaged in the
manufacturing, importing, exporting and wholesaling f
petroleum products.
- For the year 1998, it paid a total of P2.2M to the City
Treasurer of Makati as business taxes for the 1998.
- The amount of tax as computed based on Mobils gross
sales for 1998 is only P1.3M.
- Before September 1998, Mobils principal office was at
Makati City.
- On August 20, 1998, Mobil filed an application with the City
Treasurer of Makati for the retirement of its business within
Makati City as it moved to Pasig.
- Upon evaluation of Mobils application, Makati issued to
Mobil a billing slip assessing business taxes against it.
Issue: Whether Mobil is still liable for business taxes to
Makati.
Decision: NO.
- Under the Makati Revenue Code, it appears that the
business tax, like income tax, is computed based on the
previous years figures. This is the reason for the confusion.
- A newly-started business is already liable for business taxes
(license fees) at the start of the quarter when it commences
operations. In computing the amount of tax due for the 1st
quarter of operations, the business capital investment is
used as the basis.
- For the subsequent quarters of the 1st year, the tax is
based on the gross sales/receipts for the previous quarter.
- In the following years, the business is then taxes based
on the gross sales or receipts of the previous years.
- The business taxes paid in 1998 is for the privilege of
engaging in business for the same year, and not for having
engaged in business for 1997.
- The amount paid in this case is more than the amount
computed based on Mobils actual gross sales for 1998, Mobil
upon its retirement is not liable for additional taxes to the
Makati City.
- Thus, we find that the Makati City erroneously treated the
assessment and collection of business tax as if it were
income tax, by rendering an additional assessment of P1.3M
for the revenue generated for the year 1998.
PAYMENT OF BUSINESS TAXES (Section 146)
Section 146. Payment of Business Taxes. (a) The taxes imposed under Section 143 shall be payable for
every separate or distinct establishment or place where
business subject to the tax is conducted and one line of
business does not become exempt by being conducted with
some other business for which such tax has been paid. The
tax on a business must be paid by the person conducting the
same.
(b) In cases where a person conducts or operates two (2) or
more of the businesses mentioned in Section 143 of this
Code which are subject to the same rate of tax, the tax shall
be computed on the combined total gross sales or receipts of
the said two (2) or more related businesses.
Nova 7,
2014
(c)DIGEST
In cases where
person
conducts or operates two (2) or
more businesses mentioned in Section 143 of this Code
which are subject to different rates of tax, the gross sales or
receipts of each business shall be separately reported for the
purpose of computing the tax due from each business.
SITUS OF TAX (Section 150) Where to pay business
tax?
Section 150. Situs of the Tax. (a) For purposes of collection of the taxes under Section 143
of this Code, manufacturers, assemblers, repackers, brewers,
distillers, rectifiers and compounders of liquor, distilled
spirits and wines, millers, producers, exporters, wholesalers,
distributors, dealers, contractors, banks and other financial
institutions, and other businesses, maintaining or operating
branch or sales outlet elsewhere shall record the sale in the
branch or sales outlet making the sale or transaction, and
the tax thereon shall accrue and shall be paid to the
municipality where such branch or sales outlet is located. In
cases where there is no such branch or sales outlet in the
city or municipality where the sale or transaction is made,
the sale shall be duly recorded in the principal office and the
taxes due shall accrue and shall be paid to such city or
municipality.
(b) The following sales allocation shall apply to
manufacturers, assemblers, contractors, producers, and
exporters with factories, project offices, plants, and
plantations in the pursuit of their business:
(1) Thirty percent (30%) of all sales recorded in the principal
office shall be taxable by the city or municipality where the
principal office is located; and
(2) Seventy percent (70%) of all sales recorded in the
principal office shall be taxable by the city or municipality
where the factory, project office, plant, or plantation is
located.
(c) In case of a plantation located at a place other than the
place where the factory is located, said seventy percent
(70%) mentioned in subparagraph (b) of subsection (2)
above shall be divided as follows:
(1) Sixty percent (60%) to the city or municipality where the
factory is located; and
(2) Forty percent (40%) to the city or municipality where the
plantation is located.
(d) In cases where a manufacturer, assembler, producer,
exporter or contractor has two (2) or more factories, project
offices, plants, or plantations located in different localities,
the seventy percent (70%) sales allocation mentioned in
subparagraph (b) of subsection (2) above shall be prorated
among the localities where the factories, project offices,
plants, and plantations are located in proportion to their
respective volumes of production during the period for which
the tax is due.
(e) The foregoing sales allocation shall be applied
irrespective of whether or not sales are made in the locality
where the factory, project office, plant, or plantation is
located.
IRR of LGC on SITUS OF TAX (Compare with Iloilo
Bottlers)
ARTICLE 243. Situs of the Tax.
(a) Definition of Terms
(1) Principal Office the head or main office of the business
appearing in the pertinent documents submitted to the
Securities and Exchange Commission, or the Department of
Trade and Industry, or other appropriate agencies, as the
case may be.
The city or municipality specifically mentioned in the articles
of incorporation or official registration papers as being the
official address of said principal office shall be considered as
the situs thereof.
In case there is a transfer or relocation of the principal office
to another city or municipality, it shall be the duty of the
owner, operator or manager of the business to give due
notice of such transfer or relocation to the local chief
executives of the cities or municipalities concerned within
fifteen (15) days after such transfer or relocation is effected.
(2) Branch or Sales Office a fixed place in a locality which
conducts operations of the business as an extension of the
32
principal office. Offices used only as display areas of the

products where no stocks or items are stored for sale,
although orders for the products may be received thereat,
are not branch or sales offices as herein contemplated. A
warehouse which accepts orders and/or issues sales invoices
independent of a branch with sales office shall be considered
as a sales office.
(3) Warehouse a building utilized for the storage of
products for sale and from which goods or merchandise is
withdrawn for delivery to customers or dealers, or by
persons acting in behalf of the business. A warehouse that
does not accept orders and/or issue sales invoices as
aforementioned shall not be considered a branch or sales
office.
(4) Plantation a tract of agricultural land planted to trees
or seedlings whether fruit bearing or not, uniformly spaced
or seeded by broadcast methods or normally arranged to
allow highest production. For purposes of this Article, inland
fishing ground shall be considered as plantation.
(5) Experimental Farms agricultural lands utilized by a
business or corporation to conduct studies, tests, researches
or experiments involving agricultural, agribusiness, marine,
or aquatic, livestock, poultry, dairy and other similar
products for the purpose of improving the quality and
quantity of goods or products. On-site sales of commercial
quantity made in experimental farms shall be similarly
imposed the corresponding tax under Article 232 and
allocated in paragraph (b) of this Article.
(b) Sales Allocation
(1) All sales made in a locality where there is a branch or
sales office or warehouse shall be recorded in said branch or
sales office or warehouse and the tax shall be payable to the
city or municipality where the same is located.
(2) In cases where there is no such branch, sales office, or
warehouse in the locality where the sale is made, the sale
shall be recorded in the principal office along with the sales
made by said principal office and the tax shall accrue to the
city or municipality where said principal office is located.
(3) In cases where there is a factory, project office, plant or
plantation in pursuit of business, thirty percent (30%) of all
sales recorded in the principal office shall be taxable by the
city or municipality where the principal office is located and
seventy percent (70%) of all sales recorded in the principal
office shall be taxable by the city or municipality where the
factory, project office, plant or plantation is located. LGUs
where only experimental farms are located shall not be
entitled to the sales allocation provided in this subparagraph.
(4) In case of a plantation located in a locality other than that
where the factory is located, the seventy percent (70%) sales
allocation shall be divided as follows:
(i) Sixty percent (60%) to the city or municipality where the
factory is located; and
(ii) Forty percent (40%) to the city or municipality where the
plantation is located.
(5) In cases where there are two (2) or more factories,
project offices, plants or plantations located in different
localities, the seventy percent (70%) sales allocation shall be
prorated among the localities where such factories, project
offices, plants, and plantations are located in proportion to
their respective volumes of production during the period for
which the tax is due. In the case of project offices of service
and other independent contractors, the term production shall
refer to the cost of projects actually undertaken during the
tax period.
(6) The sales allocation in paragraph (b) hereof shall be
applied irrespective of whether or not sales are made in the
locality where the factory, project office, plant or plantation
is located. In case of sales made by the factory, project
office, plant or plantation, the sale shall be covered by
subparagraphs (1) or (2) above.
(7) In case of manufacturers or producers which engage the
services of an independent contractor to produce or
manufacture some of their products, these rules on situs of
taxation shall apply except that the factory or plant and
warehouse of the contractor utilized for the production and
storage of the manufacturers' products shall be considered
as the factory or plant and warehouse of the manufacturer.
Nov7,
2014
(c)DIGEST
Port of Loading
The
city or municipality where the port
of loading is located shall not levy and collect the tax
imposable in Article 232 of this Rule unless the exporter
maintains in said city or municipality its principal office, a
branch, sales office or warehouse, factory, plant, or
plantation in which case, the rule on the matter shall apply
accordingly.
(d) Sales made by route trucks, vans, or vehicles
(1) For route sales made in a locality where a manufacturer,
producer, wholesaler, retailer or dealer has a branch or sales
office or warehouse, the sales are recorded in the branch,
sales office or warehouse and the tax due thereon is paid to
the LGU where such branch, sales office or warehouse is
located.
(2) For route sales made in a locality where a manufacturer,
producer, wholesaler, retailer or dealer has no branch, sales
office or warehouse, the sales are recorded in the branch,
sales office or warehouse from where the route trucks
withdraw their products for sale, and the tax due on such
sales is paid to the LGU where such branch, sales office or
warehouse is located.
(3) Based on subparagraphs (1) and (2) above, LGUs where
route trucks deliver merchandise cannot impose any tax on
said trucks except the annual fixed tax authorized to be
imposed by the province in Article 230 of this Rule on every
delivery truck or van or any motor vehicle used by
manufacturers, producers, wholesalers, dealers, or retailers
in the delivery or distribution of distilled spirits, fermented
liquors, soft drinks, cigars and cigarettes, and other products
as may be determined by the sangguniang panlalawigan,
and by the city, pursuant to Article 223 of this Rule.
(4) In addition to this annual fixed tax, cities may also collect
from same manufacturers, producers, wholesalers, retailers,
and dealers using route trucks a mayor's permit fee which
shall be imposed in a local tax ordinance pursuant to Article
233 in relation to Article 222 of this Rule.
It is not the place where the contract was perfected, but
the place of delivery which determines the taxable situs of
the property sought to be taxed. (JOSE PANGANIBAN vs.
SHELL COMPANY)
Thus, it is all inconsequential where the subject
transactions were perfected and consummated or paid. It
was held in Shell vs. Sipocot
From the explanatory note and the general discussions
in Congress over the House Bill No. 5288, it can be readily
gathered that one of the main purposes for the enactment of
the law was to provide for the construction and the
improvement of principal road systems in municipalities. The
logical conclusion would accordingly follow that the taxable
situs of the property to be taxed should be where the same
is used. This place is ordinarily the place of delivery. As
correctly pointed out by the appellants (SHELL COMPANY),
the term SOLD under the statute and the ordinance in
question does not mean a mere perfected contract but a
consummated sale, where delivery becomes of the essence
in determining the situs of the sale.
In the cases of Soriano y Cia vs. CIR, etc., it has been
ruled that for a sale to be taxed in the Philippines, it must be
consummated there; thus, indicating that the place of
consummation (associated with the delivery of the things
subject matter of the contract) is the accepted criterion in
determining the situs of the contract for purposes of
taxation, and not merely the place of the perfection of the
contract.
The taxing power of cities, municipalities, and municipal
districts may be used:
1. Upon any person engaged in an y occupation or business,
or exercising any privilege therein;
2. For services rendered by those political subdivisions or
rendered in connection with any business, profession or
occupation being conducted therein; and
3. To levy, for public purposes, just and uniform taxes,
licenses or fees.
This is referred to as the jurisdictional test to determine
the situs of taxation for municipalities. (Phil. Match vs.
City of Cebu)
PHIL. MATCH vs. CITY OF CEBU

G.R. No. L-30745, January 18, 1978
33
Facts:
- This case is about the legality of the tax collected by Cebu
City on sales of matches stored by the Phil. Match Co. In
Cebu City BUT delivered to customers outside of the City.
Issue: Whether the imposition of municipal tax was valid.
Decision: YES.
- The sales in the instant case were in the city and the
matches sold were stored in the city. The facts that the
matches were delivered to customers, whose places of
business were outside of the city, would not place those
sales beyond the taxing power of the city.
- We hold that the appeal is devoid of merit bemuse the city
can validly tax the sales of matches to customers outside of
the city as long as the orders were booked and paid for in the
company's branch office in the city. Those matches can be
regarded as sold in the city, as contemplated in the
ordinance, because the matches were delivered to the
carrier in Cebu City. Generally, delivery to the carrier is
delivery to the buyer (Art. 1523, Civil Code; Behn, Meyer &
Co. vs. Yangco, 38 Phil. 602).
- A different interpretation would defeat the tax ordinance in
question or encourage tax evasion through the simple
expedient of arranging for the delivery of the matches at the
out. skirts of the city through the purchase were effected and
paid for in the company's branch office in the city.
- Those sales formed part of the merchandising business
being assigned on by the company in the city. In essence,
they are the same as sales of matches fully consummated in
the city.
- Furthermore, because the sellers place of business is in
Cebu City, it cannot be sensibly argued that such sales
should be considered as transactions subject to the taxing
power of the political subdivisions where the customers
resided and accepted delivery of the matches sold.
VS. PANGANIBAN DOCTRINE
Note that the prohibition against the imposition of
percentage taxes (formerly provided for in section 1 of
Commonwealth Act No. 472) refers to municipalities and
municipal districts but not to chartered cities. (See Local Tax
Code, P.D. No. 231. Marinduque Iron Mines Agents, Inc. vs.
Municipal Council of Hinabangan Samar, 120 Phil. 413;
Ormoc Sugar Co., Inc. vs. Treasurer of Ormoc City, L-23794,
February 17, 1968, 22 SCRA 603). Note further that the
taxing power of cities, municipalities and municipal districts
may be used (1) "upon any person engaged in any
occupation or business, or exercising any privilege" therein;
(2) for services rendered by those political subdivisions or
rendered in connection with any business, profession or
occupation being conducted therein, and (3) to levy, for
public purposes, just and uniform taxes, licenses or fees (C.
N. Hodges vs. Municipal Board of the City of Iloilo, 117 Phil.
164, 167. See sec. 31[251, Revised Charter of Cebu City).
Applying that jurisdictional test to the instant case, it is at
once obvious that sales of matches to customers outside oil
Cebu City, which sales were booked and paid for in the
company's branch office in the city, are subject to the city's
taxing power. The instant case is easily distinguishable from
the Shell Company case where the price of the oil sold was
paid outside of the municipality of Sipocot, the entity
imposing the tax.
On the other hand, the ruling in Municipality of Jose
Panganiban, Province of Camarines Norte vs. Shell Company
of the Philippines, Ltd., L-18349, July 30, 1966, 17 SCRA 778
that the place of delivery determines the taxable situs of the
property to be taxed cannot properly be invoked in this case.
Republic Act No. 1435, the law which enabled the
Municipality of Jose Panganiban to levy the sales tax involved
in that case, specifies that the tax may be levied upon oils
"distributed within the limits of the city or municipality",
meaning the place where the oils were delivered. That
feature of the Jose Panganiban case distinguished it from this
case.
ILOILO BOTTLERS vs. CITY OF ILOILO
DIGEST Nov 7, 2014
the taxing authority only when the acts,
G.R. No. 52019, August 18, 1998
Facts:
- Iloilo bottlers had its bottling plant in Pavia, Iloilo, outside of
Iloilo city. It distributed its soft drinks by means of a fleet of
delivery trucks which went directly to customers in different
places in the Iloilo province.
- Sales transactions with customers were entered into and
sales were perfected and consummated by route salesmen.
Truck sales were made independently of transactions in the
main office. The delivery trucks were not used solely for the
purpose of delivering soft drinks previously sold at Pavia.
They served as selling units.
- Ordinance No.5 was enacted byt the Iloilo City, imposing
tax on persons, firms, and corporations engaged in business
of: 1. Distribution of soft drinks
2. Manufacture of soft drinks
3. Bottling of soft drinks within the territorial jurisdiction
of the Iloilo City
- Iloilo bottlers disclaims liability on the ground that since it is
not engaged in the independent business of distributing soft
drinks, but that its activity of selling is merely an incident to,
or is a necessary consequence of its main or principal
business of bottling, then it is not liable under the city tax
ordinance.
34
privileges or
businesses are done or performed within the jurisdiction of
said authority [Commissioner of Internal Revenue v. British
Overseas Airways Corp. and Court of Appeals, G.R. Nos.
65773-74, April 30, 1987, 149 SCRA 395, 410.] Specifically,
the situs of the act of distributing, bottling or manufacturing
softdrinks must be within city limits, before an entity
engaged in any of the activities may be taxed in Iloilo City.
- As stated above, sales were made by Iloilo Bottlers, Inc. in
Iloilo City. Thus, we have no option but to declare the
company liable under the tax ordinance.
Section 147. Fees and Charges. - The municipality may
impose and collect such reasonable fees and charges on
business and occupation and, except as reserved to the
province in Section 139 of this Code, on the practice of any
profession or calling, commensurate with the cost of
regulation, inspection and licensing before any person may
engage in such business or occupation, or practice such
profession or calling.
(l) "Fee" means a charge fixed by law or ordinance for the
regulation or inspection of a business or activity; (Sec. 131,
LGC)
(g) "Charges" refers to pecuniary liability, as rents or fees
against persons or property; (Sec. 131, LGC)
Issue: Whether the petitioners are liable for municipal tax.
OTHER MATTERS
Decision: YES.
- This Court has always recognized that the right to
manufacture implies the right to sell/distribute the
manufactured products. Hence, for tax purposes, a
manufacturer does not necessarily become engaged in the
separate business of selling simply because it sells the
products it manufactures. In certain cases, however, a
manufacturer may also be considered as engaged in the
separate business of selling its products.
- To determine whether an entity engaged in the principal
business of manufacturing, is likewise engaged in the
separate business of selling, its marketing system or sales
operations must be looked into.
- Under the first system, the manufacturer enters into sales
transactions and invoices the sales at its main office where
purchase orders are received and approved before delivery
orders are sent to the company's warehouses, where in turn
actual deliveries are made. No warehouse sales are made;
nor are separate stores maintained where products may be
sold independently from the main office. The warehouses
only serve as storage sites and delivery points of the
products earlier sold at the main office. Under the second
system, sales transactions are entered into and perfected at
stores or warehouses maintained by the company. Any one
who desires to purchase the product may go to the store or
warehouse and there purchase the merchandise. The stores
and warehouses serve as selling centers.
- Entities operating under the first system are NOT
considered engaged in the separate business of selling or
dealing in their products, independent of their manufacturing
business. Entities operating under the second system are
considered engaged in the separate business of selling.
- In the case at bar, the company distributed its softdrinks by
means of a fleet of delivery trucks which went directly to
customers in the different places in lloilo province. Sales
transactions with customers were entered into and sales
were perfected and consummated by route salesmen. Truck
sales were made independently of transactions in the main
office. The delivery trucks were not used solely for the
purpose of delivering softdrinks previously sold at Pavia.
They served as selling units. They were what were called,
until recently, "rolling stores". The delivery trucks were
therefore much the same as the stores and warehouses
under the second marketing system. Iloilo Bottlers, Inc. thus
falls under the second category above. That is, the
corporation was engaged in the separate business of selling
or distributing soft-drinks, independently of its business of
bottling them.
- The tax imposed under Ordinance No. 5 is an excise tax. It
is a tax on the privilege of distributing, manufacturing or
bottling softdrinks. Being an excise tax, it can be levied by
Section 148. Fees for Sealing and Licensing of Weights and

Measures. (a) The municipality may levy fees for the sealing and
licensing of weights and measures at such reasonable rates
as shall be prescribed by the sangguniang bayan.
(b) The sangguniang bayan shall prescribe the necessary
regulations for the use of such weights and measures,
subject to such guidelines as shall be prescribed by the
Department of Science and Technology. The sanggunian
concerned shall, by appropriate ordinance, penalize
fraudulent practices and unlawful possession or use of
instruments of weights and measures and prescribe the
criminal penalty therefor in accordance with the provisions of
this Code. Provided, however, That the sanggunian
concerned may authorize the municipal treasurer to settle an
offense not involving the commission of fraud before a case
therefor is filed in court, upon payment of a compromise
penalty of not less than Two hundred pesos (P200.00).
Section 149. Fishery Rentals, Fees and Charges. (a) Municipalities shall have the exclusive authority to grant
fishery privileges in the municipal waters and impose rentals,
fees or charges therefor in accordance with the provisions of
this Section.
(b) The sangguniang bayan may:
(1) Grant fishery privileges to erect fish corrals, oysters,
mussels or other aquatic beds or bangus fry areas, within a
definite zone of the municipal waters, as determined by it:
Provided, however, That duly registered organizations and
cooperatives of marginal fishermen shall have the
preferential right to such fishery privileges: Provided, further,
That the sangguniang bayan may require a public bidding in
conformity with and pursuant to an ordinance for the grant of
such privileges: Provided, finally, That in the absence of such
organizations and cooperatives or their failure to exercise
their preferential right, other parties may participate in the
public bidding in conformity with the above cited procedure.
(2) Grant the privilege to gather, take or catch bangus fry,
prawn fry or kawag-kawag or fry of other species and fish
from the municipal waters by nets, traps or other fishing
gears to marginal fishermen free of any rental, fee, charge or
any other imposition whatsoever.
(3) Issue licenses for the operation of fishing vessels of three
(3) tons or less for which purpose the sangguniang bayan
shall promulgate rules and regulations regarding the
DIGESTof such
Nov licenses
7, 2014
issuances
to qualified applicants under
existing laws.
Provided, however, That the sanggunian concerned shall, by
appropriate ordinance, penalize the use of explosives,
noxious or poisonous substances, electricity, muro-ami, and
other deleterious methods of fishing and prescribe a criminal
penalty therefor in accordance with the provisions of this
Code: Provided, finally, That the sanggunian concerned shall
have the authority to prosecute any violation of the
provisions of applicable fishery laws.
35
COMMON REVENUE RAISING POWERS

ARTICLE V
Common Revenue-Raising Powers
SERVICE FEES AND CHARGES (Sec. 153)
Section 153. Service Fees and Charges. - Local government
units may impose and collect such reasonable fees and
charges for services rendered.
PUBLIC UTILITY CHARGES
CITIES (Sec. 151)

ARTICLE III
Cities
Section 151. Scope of Taxing Powers. - Except as otherwise
provided in this Code, the city, may levy the taxes, fees, and
charges which the province or municipality may impose:
Provided, however, That the taxes, fees and charges levied
and collected by highly urbanized and independent
component cities shall accrue to them and distributed in
accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality by
not more than fifty percent (50%) except the rates of
professional and amusement taxes.
BARANGGAY (Sec. 152)
ARTICLE IV
Barangays
TAX ON RETAILERS (Sec. 152a)
Section 152. Scope of Taxing Powers. - The barangays may
levy taxes, fees, and charges, as provided in this Article,
which shall exclusively accrue to them:
(a) Taxes - On stores or retailers with fixed business
establishments with gross sales of receipts of the preceding
calendar year of Fifty thousand pesos (P50,000.00) or less, in
the case of cities and Thirty thousand pesos (P30,000.00) or
less, in the case of municipalities, at a rate not exceeding
one percent (1%) on such gross sales or receipts.
SERVICE FEES OR CHARGES (Sec. 152b)
(b) Service Fees or Charges. - Barangays may collect
reasonable fees or charges for services rendered in
connection with the regulations or the use of barangayowned properties or service facilities such as palay, copra, or
tobacco dryers.
BARANGGAY CLEARANCE (Sec. 152c)
(c) Barangay Clearance. - No city or municipality may issue
any license or permit for any business or activity unless a
clearance is first obtained from the barangay where such
business or activity is located or conducted. For such
clearance, the sangguniang barangay may impose a
reasonable fee. The application for clearance shall be acted
upon within seven (7) working days from the filing thereof. In
the event that the clearance is not issued within the said
period, the city or municipality may issue the said license or
permit.
OTHER FEES (Sec. 152d)
(d) Other fees and Charges. - The barangay may levy
reasonable fees and charges:
(1) On commercial breeding of fighting cocks, cockfights and
cockpits;
(2) On places of recreation which charge admission fees; and
(3) On billboards, signboards, neon signs, and outdoor
advertisements.
Section 154. Public Utility Charges. - Local government units

may fix the rates for the operation of public utilities owned,
operated and maintained by them within their jurisdiction.
TOLL FEES OR CHARGES
Section 155. Toll Fees or Charges. - The sanggunian
concerned may prescribe the terms and conditions and fix
the rates for the imposition of toll fees or charges for the use
of any public road, pier, or wharf, waterway, bridge, ferry or
telecommunication system funded and constructed by the
local government unit concerned: Provided, That no such toll
fees or charges shall be collected from officers and enlisted
men of the Armed Forces of the Philippines and members of
the Philippine National Police on mission, post office
personnel delivering mail, physically-handicapped, and
disabled citizens who are sixty-five (65) years or older.
When public safety and welfare so requires, the sanggunian
concerned may discontinue the collection of the tolls, and
thereafter the said facility shall be free and open for public
use.
OTHER MATTERS
ARE PUBLIC HEARINGS NECESSARY? (Sec. 187 of the
LGC vs. Sec. 324 of the IRR of LGC)
Section 187. Procedure for Approval and Effectivity of Tax,
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 188. Publication of Tax Ordinances and Revenue
Measures. - Within ten (10) days after their approval,
certified true copies of all provincial, city, and municipal tax
ordinances or revenue measures shall be published in full for
three (3) consecutive days in a newspaper of local
circulation: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local
circulation, the same may be posted in at least two (2)
ARTICLE 275. Procedure for Approval and Effectivity of Tax
Ordinances and Revenue Measures. The procedure for
approval of local tax ordinances and revenue measures shall
be in accordance with the provisions of this Rule 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)
DIGEST
Nov
7, 2014
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 furthermore that such
of the ordinance and the accrual and payment of the tax,
fee, or charge levied therein and 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.
All tax ordinances or revenue measures shall be numbered
consecutively throughout the calendar year and continuously
from year to year, using the last two (2) digits of the
calendar year in which it is enacted, followed by its
denominated number.
For example, an ordinance is passed in January, 1992, and it
is the first ordinance for that year. The ordinance shall be
denominated and numbered as Tax Ordinance No. 92-001.
The next shall be Tax Ordinance No. 92-002, Tax Ordinance
No. 92-003, and so forth.
BELEN C. FIGUERRES vs. CA, CITY ASSESSORS OF
MANDALUYONG CITY, et. Al
G.R. No. 11972 March 25, 1999
J: MENDOZA
Facts:
- Belen C. Figuerres owns a parcel of land in Mandaluyong
City.
- In 1993, she received a notice of assessment from the City
Assessor of Mandaluyong City based on Ordinance Nos. 119,
125, and 135 which contain a schedule of fair market values
of different classes of real property in the municipality
(subsequently became City).
- Figuerres brought a prohibition suit in the CA against the
treasurer, assessor and the then Sangguniang Bayan of
Mandaluyong to stop them from enforcing the ordinances in
question on the ground that the ordinances were invalid for
having been adopted without public hearings and prior
publication or posting and without complying with the
implementing rules yet to be issued by the Dept. Of Finance.
- CA dismissed the petition on the grounds that the approval
and determination of Dept. Of Finance is not needed under
the LGC since it is now the City council of Mandaluyong that
is empowered to determine and approved the aforecited
Ordinances and that the publication of the Ordinances is not
necessary for their effectivity.
- Figuerres brought the matter to the SC.
36
as required by 2232-2233 of the Administrative Code. In

rejecting this contention, the Court held:
From the judgment of the Court of First Instance the
defendant appealed to this court upon the theory that the
ordinance in question was adopted without authority on the
part of the municipality and was therefore unconstitutional.
The appellant argues that there was no proof adduced during
the trial of the cause showing that said ordinance had been
approved by the provincial board. Considering the provisions
of law that it is the duty of the provincial board to approve or
disapprove ordinances adopted by the municipal councils of
the different municipalities, we will assume, in the absence
of proof to the contrary, that the law has been complied with.
We have a right to assume that officials have done that
which the law requires them to do, in the absence of positive
proof to the contrary.
Furthermore, the lack of a public hearing is a negative
allegation essential to petitioner's cause of action in the
present case. Hence, as petitioner is the party asserting it,
she has the burden of proof. Since petitioner failed to rebut
the presumption of validity in favor of the subject ordinances
and to discharge the burden of proving that no public
hearings were conducted prior to the enactment thereof, we
are constrained to uphold their constitutionality or legality.
Also without merit is the contention of petitioner that
Ordinance No, 119 and Ordinance No. 135 are void for not
having been enacted in accordance with Local Assessment
Regulation No. 1-92, dated October 6, 1992, of the
Department of Finance, which provides guidelines for the
preparation of proposed schedules of fair market values of
the different classes of real property in a local government
unit, such as time tables for obtaining information from
owners of affected lands and buildings regarding the value
thereof. As in the case of the procedural requirements for the
enactment of tax ordinances and revenue measures,
however, petitioner has not shown that the ordinances in this
case were enacted in accordance with the applicable
regulations of the Department of Finance. The Municipality of
Mandaluyong claims that, although the regulations are
merely directory, it has complied with them. Hence, in the
absence of proof that the ordinances were not enacted in
accordance with such regulations, said ordinances presumed
to have been enacted in accordance with such regulations.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED.
Issue: Whether the Ordinances in question are valid

Decision: YES.
*** You can infer from the decision that public
hearings are necessary but the failure of Figuerres to
prove that no public hearing was conducted was fatal
to her cause because of the presumption of validity of
Ordinances passed by the council.
Petitioner is right in contending that public hearings are
required to be conducted prior to the enactment of an
ordinance imposing real property taxes. R.A. No. 7160, 186
provides that an ordinance levying taxes, fees, or charges
"shall not be enacted without any prior public hearing
conducted for the purpose."
However, it is noteworthy that apart from her bare
assertions, petitioner Figuerres has not presented any
evidence to show that no public hearings were conducted
prior to the enactment of the ordinances in question. On the
other hand, the Municipality of Mandaluyong claims that
public hearings were indeed conducted before the subject
ordinances were adopted, although it likewise failed to
submit any evidence to establish this allegation. However, in
accordance with the presumption of validity in favor of an
ordinance, their constitutionality or legality should be upheld
in the absence of evidence showing that the procedure
prescribed by law was not observed in their enactment. In an
analogous case, United States v. Cristobal, it was alleged
that the ordinance making it a crime for anyone to obstruct
waterways had not been submitted by the provincial board
ii. Authority to Adjust Tax Rates (Sec. 191)

Section 191. Authority of Local Government Units to Adjust
Rates of Tax Ordinances. - Local government units shall have
the authority to adjust the tax rates as prescribed herein not
oftener than once every five (5) years, but in no case shall
such adjustment exceed ten percent (10%) of the rates fixed
under this Code.
Alabang Supermarket Corporation vs. City of
Muntinlupa,
CTA EB Case No. 386 February 12, 2009 (read also case
decided by the CTA Division)
FACTS:
Alabang Supermarket Corporation, is a domestic

corporation duly organized and existing under Philippine
Laws. It operates the Alabang branch of the Makati
Supermarket, a distributor and dealer of, among others,
liquor, beer, wine, distilled spirits, cigarettes and
tobacco products. Pursuant to Section 5 (b), Article I,
Chapter I of Title II of Ordinance No. 93-35, otherwise
known as the Revenue Code of the City of Muntinlupa,
Alabang Supermarket pays the graduated business tax
on its gross sales of liquor, beer, wine, distilled spirits,
cigarettes and tobacco products. Such provision of the
Revenue Code implements Section 143 (b) of the Local
Government Code (LGC) of 1991.
DIGEST
Nov 7,
years from payment of the tax due, erely
On December
1, 2014
1998, the City Government of
Muntinlupa, through the approval of its City Mayor,
enacted City Ordinance No. 98-015, which imposes a
three percent (3%) business tax on the sale and
distribution of alcoholic beverages and tobacco
products. In this regard, for the periods covering January
2, 1999 to September 15, 2002, Alabang Supermarket
allegedly paid the total amount of P3,696,557.06 in
compliance with the aforementioned ordinance.
Aggrieved by the alleged erroneous collections made by
the City, Alabang Supermarket, through its external
auditor, wrote a letter to the Bureau of Local
Government Finance (BLGF) of the Department of
Finance seeking clarification on whether or not the City
of Muntinlupa can legally impose the 3% business tax on
gross receipts of wholesalers and retailers from their
sale of liquor, beer, wine, distilled spirits, cigarette and
tobacco products under City Ordinance No. 98-015 to
which the BLGF issued its ruling in favor of Alabang
Supermarket. Alabang Supermarket sought a refund
from the City.
ISSUE: Whether the Court in Division correctly denied

petitioner's claim for refund of business taxes paid after
December 15, 2000 simply on the basis of lack of an
administrative claim for refund with the local treasurer
notwithstanding the fact that the subject tax ordinance was
declared excessive and contrary to law.
HELD: YES.
The Court in Division appropriately denied petitioner's claim
for refund pertaining to the period from December 16, 2000
to December 2002, due to petitioner's failure to file an
administrative claim for refund before the City Government
of Muntinlupa as required under Section 196 of the LGC prior
to judicial recourse. Clearly from the provision, no case or
court. Moreover, it should be noted that two reckoning
periods are provided by law for the filing of a case or
proceeding, that is from the date of payment of the tax, and
from the date the taxpayer becomes entitled to the refund.
However, petitioner's interpretation of the phrase "from the
date the taxpayer becomes entitled to the refund" is not in
that: "Section 187 of the Local Government Code dictates
the procedure for questioning the constitutionality or legality
of tax ordinances. It provides in part that: 'any question on
the receipt of the appeal'. It further provides that 'such
of the ordinance and the accrual and payment of the tax, fee
or charge levied therein. A reading of Section 187 of the
Local Government Code would show that the law intends that
questions on the legality or constitutionality of an ordinance
or tax measure be threshed out the soonest possible time. It
should be raised within thirty (30) days from approval and
such appeal should be resolved within sixty (60) days from
receipt thereof. Section 187 states that any appeal on the
legality or constitutionality of the ordinance does not
suspend its effectivity. Thus, before any final declaration of
its nullity, taxes accrue and should be paid accordingly. In
the same vein, the reckoning periods for the filing of a claim
for refund in Section 196 of the Local Government Code
should be interpreted so as to accomplish the evident
purpose, viz., the settlement of the rights of the taxpayer
vis--vis the government, at the earliest opportunity. The
phrase "from the date the taxpayer becomes entitled to a
refund or credit" in Section 196 should not be interpreted to
mean the finality of the decision of a court declaring the tax
measure void, even without a timely claim for refund.
Otherwise, claims for refund will be filed even after several
37
because the tax

ordinance was declared void. And the filing of administrative
and judicial claims for refund shall be endless. This
interpretation would give the taxpayer, who was not able to
question the legality or constitutionality of the tax measure
within the period provided in Section 187, the right to
instead file a claim for refund with the court under Section
196, absent the filing of a timely administrative claim. In
effect, the prescriptive periods provided by law would be
rendered naught and meaningless. This could not have been
the intention of lawmakers. A taxpayer who believes that he
has paid a tax imposed under a void ordinance should timely
exhaust administrative remedies before resorting to the filing
of a judicial claim or timely question its constitutionality and
legality. Petitioner's failure to file the appropriate
administrative claim for refund for the period December 16,
2000 to September 2002, cannot be countenanced. More so,
since it has been able to file a timely administrative claim for
the 3% business tax it paid covering January 2, 1999 to
December 15, 2000. It is clearly aware of the requirements
for the filing of an administrative claim set forth by law. Its
manifest error cannot be cured at this point."
iii. Authority to Grant Tax Exemptions (Sec. 192)
Section 192. Authority to Grant Tax Exemption Privileges. Local government units may, through ordinances duly
approved, grant tax exemptions, incentives or reliefs under
such terms and conditions as they may deem necessary.
iv. Withdrawal of Tax Exemption Privileges (Sec. 193)
Section 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or
controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.
PLDT vs. City of Davao
GR No. 143867, August 22, 2001
SECOND DIVISION
FACTS:
On January 1999, Philippine Long Distance Telephone

Co., Inc. (PLDT) applied for a Mayor's Permit to operate
its Davao Metro Exchange. The City of Davao withheld
action on the application pending payment by PLDT of
the local franchise tax in the amount of P3,681,985.72
for the first to the fourth quarter of 1999. In a letter
dated May 31, 1999, PLDT protested the assessment of
the local franchise tax and requested a refund of the
franchise tax paid by it for the year 1997 and the first to
the third quarters of 1998. PLDT contended that it was
exempt from the payment of franchise tax based on an
opinion of the Bureau of Local Government Finance
(BLGF), dated June 2, 1998.
ISSUE: Whether, after the withdrawal of its exemption by
virtue of 137 of the LGC, PLDT has again become entitled to
exemption from local franchise tax under RA 7925.
HELD: NO.
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 national policy. 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 municipal
corporations. To begin with, tax exemptions are highly
disfavored. 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 interpreted in
strictissimi juris against the taxpayer and liberally in favor of
the taxing authority. R.A. No. 7925 is a legislative enactment
designed to set the national policy on telecommunications
DIGEST
Nov
7, 2014
and
provide
the
structures
to implement it to keep up with
the technological advances in the industry and the needs of
the public. The thrust of the law is to promote gradually the
deregulation of the entry, pricing, and operations of all public
telecommunications entities and thus promote a level
playing field in the telecommunications industry. There is
nothing in the language of 23 nor in the proceedings of both
the House of Representatives and the Senate in enacting R.A.
No. 7925 which shows that it contemplates the grant of tax
exemptions to all telecommunications entities, including
those whose exemptions had been withdrawn by the LGC. In
sum, it does not appear that, in approving 23 of R.A. No.
7925, Congress intended it to operate as 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 corporations in interpreting statutory provisions on
municipal taxing powers, we hold that 23 of R.A. No. 7925
cannot be considered as having amended PLDT's franchise
so as to entitle it to exemption from the imposition of local
franchise taxes.
NPC VS. CITY OF CABANATUAN
GR No. 149110, April 9, 2003
THIRD DIVISION
FACTS:
National Power Corporation (NPC) is a governmentowned and controlled corporation created under
Commonwealth Act No. 120, as amended. It is tasked to
undertake
the
"development
of
hydroelectric
generations of power and the production of electricity
from nuclear, geothermal and other sources, as well as,
the transmission of electric power on a nationwide
basis." Concomitant to its mandated duty, NPC has,
among others, the power to construct, operate and
maintain power plants, auxiliary plants, power stations
and substations for the purpose of developing hydraulic
power and supplying such power to the inhabitants. For
many years, NPC sells electric power to the residents of
Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992. Pursuant to section 37 of
Ordinance No. 165-92, the City of Cabanatuan assessed
NPC a franchise tax amounting to P808,606.41,
representing 75% of 1% of the latter's gross receipts for
the preceding year.
ISSUE: Whether the fact the the NPC is wholly owned by the
National Government exempts it from the imposition of a
franchise tax.
HELD: NO.
A franchise tax is imposed based not on the ownership but
on the exercise by the corporation of a privilege to do
business. The taxable entity is the corporation which
exercises the franchise, and not the individual stockholders.
By virtue of its charter, NPC was created as a separate and
distinct entity from the National Government. It can sue and
be sued under its own name, and can exercise all the powers
of a corporation under the Corporation Code. To be sure, the
ownership by the National Government of its entire capital
stock does not necessarily imply that the NPC is not engaged
in business. Section 2 of Pres. Decree No. 2029 classifies
government-owned or controlled corporations (GOCCs) into
those performing governmental functions and those
performing proprietary functions. Included in the class of
GOCCs performing proprietary functions are "business-like"
entities such as the National Steel Corporation (NSC), the
National Development Corporation (NDC), the Social Security
System (SSS), the Government Service Insurance System
(GSIS), and the National Water Sewerage Authority
(NAWASA), among others.
v. Community Tax
1. Who may impose (Sec. 156)
38
Section 156. Community Tax. - Cities or municipalities may

levy a community tax in accordance with the provisions of
this Article.
2. Individuals Liable to pay (Sec. 157)
Section 157. Individuals Liable to Community Tax. - Every
inhabitant of the Philippines eighteen (18) years of age or
over who has been regularly employed on a wage or salary
basis for at least thirty (30) consecutive working days during
any calendar year, or who is engaged in business or
occupation, or who owns real property with an aggregate
assessed value of One thousand pesos (P1,000.00) or more,
or who is required by law to file an income tax return shall
pay an annual additional tax of Five pesos (P5.00) and an
annual additional tax of One peso (P1.00) for every One
thousand pesos (P1,000.00) of income regardless of whether
from business, exercise of profession or from property which
in no case shall exceed Five thousand pesos (P5,000.00).
In the case of husband and wife, the additional tax herein
imposed shall be based upon the total property owned by
them and the total gross receipts or earnings derived by
them.
3. Juridical Persons Liable to Community Tax (Sec. 158)
Section 158. Juridical Persons Liable to Community Tax. Every corporation no matter how created or organized,
whether domestic or resident foreign, engaged in or doing
business in the Philippines shall pay an annual community
tax of Five hundred pesos (P500.00) and an annual additional
tax, which, in no case, shall exceed Ten thousand pesos
(P10,000.00) in accordance with the following schedule:
(1) For every Five thousand pesos (P5,000.00) worth of real
property in the Philippines owned by it during the preceding
year based on the valuation used for the payment of real
property tax under existing laws, found in the assessment
rolls of the city or municipality where the real property is
situated - Two pesos (P2.00); and
(2) For every Five thousand pesos (P5,000.00) of gross
receipts or earnings derived by it from its business in the
Philippines during the preceding year - Two pesos (P2.00).
The dividends received by a corporation from another
corporation however shall, for the purpose of the additional
tax, be considered as part of the gross receipts or earnings of
said corporation.
4. Exemptions (Sec. 159)
Section 159. Exemptions. - The following are exempt from
the community tax:
(1) Diplomatic and consular representatives; and
(2) Transient visitors when their stay in the Philippines does
not exceed three (3) months.
5. Place of Payment (Sec. 160)
Section 160. Place of Payment. - The community tax shall
be paid in the place of residence of the individual, or in the
place where the principal office of the juridical entity is
located.
6. Time of Payment (Sec. 161)
Section 161. Time for Payment; Penalties for Delinquency. (a) The community tax shall accrue on the first (1st) day of
January of each year which shall be paid not later than the
last day of February of each year. If a person reaches the age
of eighteen (18) years or otherwise loses the benefit of
exemption on or before the last day of June, he shall be liable
for the community tax on the day he reaches such age or
upon the day the exemption ends. However, if a person
reaches the age of eighteen (18) years or loses the benefit of
DIGESTon or
Nov
7, the
2014
exemption
before
last day of March, he shall have
twenty (20) days to pay the community tax without
becoming delinquent.
Persons who come to reside in the Philippines or reach the
age of eighteen (18) years on or after the first (1st) day of
July of any year, or who cease to belong to an exempt class
or after the same date, shall not be subject to the
community tax for that year.
(b) Corporations established and organized on or before the
last day of June shall be liable for the community tax for that
year. But corporations established and organized on or
before the last day of March shall have twenty (20) days
within which to pay the community tax without becoming
delinquent. Corporations established and organized on or
after the first day of July shall not be subject to the
community tax for that year.
If the tax is not paid within the time prescribed above, there
shall be added to the unpaid amount an interest of twentyfour percent (24%) per annum from the due date until it is
paid.
7. Community Tax Certificate (Sec. 162)
Section 162. Community Tax Certificate. - A community tax
certificate shall be issued to every person or corporation
upon payment of the community tax. A community tax
certificate may also be issued to any person or corporation
not subject to the community tax upon payment of One peso
(P1.00).
8. Presentation of CTC on certain occasions (Sec. 163)
Section 163. Presentation of Community Tax Certificate On
Certain Occasions. (a) When an individual subject to the community tax
acknowledges any document before a notary public, takes
the oath of office upon election or appointment to any
position in the government service; receives any license,
certificate. or permit from any public authority; pays any tax
or free; receives any money from any public fund; transacts
other official business; or receives any salary or wage from
any person or corporation with whom such transaction is
made or business done or from whom any salary or wage is
received to require such individual to exhibit the community
tax certificate.
The presentation of community tax certificate shall not be
required in connection with the registration of a voter.
(b) When, through its authorized officers, any corporation
subject to the community tax receives any license,
certificate, or permit from any public authority, pays any tax
or fee, receives money from public funds, or transacts other
official business, it shall be the duty of the public official with
whom such transaction is made or business done, to require
such corporation to exhibit the community tax certificate.
(c) The community tax certificate required in the two
preceding paragraphs shall be the one issued for the current
year, except for the period from January until the fifteenth
(15th) of April each year, in which case, the certificate issued
for the preceding year shall suffice.
IV. COLLECTION OF TAXES AND REMEDIES
a. Collection of Taxes
i. Tax Period and Manner of Payment (Sec. 165)
Section 165. Tax Period and Manner of Payment. - Unless
otherwise provided in this Code, the tax period of all local
taxes, fees and charges shall be the calendar year. Such
taxes, fees and charges may be paid in quarterly
installments.
ii. Accrual of Tax (Sec. 166)
39
Section 166. Accrual of Tax. - Unless otherwise provided in

this Code, all local taxes, fees, and charges shall accrue on
the first (1st) day of January of each year. However, new
taxes, fees or charges, or changes in the rates thereof, shall
accrue on the first (1st) day of the quarter next following the
effectivity of the ordinance imposing such new levies or
rates.
iii. Time of Payment (Sec. 167)
Section 167. Time of Payment. - Unless otherwise provided
in this Code, all local taxes, fees, and charges shall be paid
within the first twenty (20) days of January or of each
subsequent quarter, as the case may be. The sanggunian
concerned may, for a justifiable reason or cause, extend the
time for payment of such taxes, fees, or charges without
surcharges or penalties, but only for a period not exceeding
six (6) months.
iv. Surcharges and Penalties (Sec. 168)
Section 168. Surcharges and Penalties on Unpaid Taxes,
Fees, or Charges. - The sanggunian may impose a surcharge
not exceeding twenty-five (25%) of the amount of taxes, fees
or charges not paid on time and an interest at the rate not
exceeding two percent (2%) per month of the unpaid taxes,
fees or charges including surcharges, until such amount is
fully paid but in no case shall the total thirty-six (36%)
months.
v. Interests on Other Unpaid Revenues (Sec. 169)
Section 169. Interests on Other Unpaid Revenues. - Where
the amount of any other revenue due a local government
unit, except voluntary contributions or donations, is not paid
on the date fixed in the ordinance, or in the contract,
expressed or implied, or upon the occurrence of the event
which has given rise to its collection, there shall be collected
as part of that amount an interest thereon at the rate not
exceeding two percent (2%) per month from the date it is
due until it is paid, but in no case shall the total interest on
the unpaid amount or a portion thereof exceed thirty-six (36)
months.
vi. Collection of Local Revenues by Treasurer (Sec. 170)
Section 170. Collection of Local Revenue by Treasurer. - All
local taxes, fees, and charges shall be collected by the
provincial, city, municipal, or barangay treasurer, or their
duly authorized deputies.
The provincial, city or municipal treasurer may designate the
barangay treasurer as his deputy to collect local taxes, fees,
or charges. In case a bond is required for the purpose, the
provincial, city or municipal government shall pay the
premiums thereon in addition to the premiums of bond that
may be required under this Code.
vii. Examination of Books of Accounts and Pertinent Records
(Sec. 171)
Section 171. Examination of Books of Accounts and
Pertinent Records of Businessmen by Local Treasurer. - The
provincial, city, municipal or barangay treasurer may, by
himself or through any of his deputies duly authorized in
writing, examine the books, accounts, and other pertinent
records of any person, partnership, corporation, or
association subject to local taxes, fees and charges in order
to ascertain. assess, and collect the correct amount of the
tax, fee, or charge. Such examination shall be made during
regular business hours, only once for every tax period, and
shall be certified to by the examining official. Such certificate
shall be made of record in the books of accounts of the
taxpayer examined.
In case the examination herein authorized is made by a duly
authorized deputy of the local treasurer, the written
DIGEST
Nov
7, concerned
2014 shall specifically state the
authority
of the
deputy
name, address, and business of the taxpayer whose books,
accounts, and pertinent records are to be examined, the date
and place of such examination and the procedure to be
followed in conducting the same.
For this purpose, the records of the revenue district office of
the Bureau of Internal Revenue shall be made available to
the local treasurer, his deputy or duly authorized
representative.
b. Remedies of the Government
i. Local Governments Lien (Sec. 173)
Section 173. Local Government's Lien. - Local taxes, fees,
charges and other revenues constitute a lien, superior to all
liens, charges or encumbrances in favor of any person,
enforceable by appropriate administrative or judicial action,
not only upon any property or rights therein which may be
subject to the lien but also upon property used in business,
occupation, practice of profession or calling, or exercise of
privilege with respect to which the lien is imposed. The lien
may only be extinguished upon full payment of the
delinquent local taxes fees and charges including related
surcharges and interest.
ii. Civil Remedies (Sec. 174)
Section 174. Civil Remedies. - The civil remedies for the
collection of local taxes, fees, or charges, and related
surcharges and interest resulting from delinquency shall be:
(a) By administrative action thru distraint of goods, chattels,
or effects, and other personal property of whatever
character, including stocks and other securities, debts,
credits, bank accounts, and interest in and rights to personal
property, and by levy upon real property and interest in or
rights to real property;
(b) By judicial action.
Either of these remedies or all may be pursued concurrently
or simultaneously at the discretion of the local government
unit concerned.
iii. Distraint (Sec. 175)
Section 175. Distraint of Personal Property. - The remedy by
distraint shall proceed as follows:
(a) Seizure - Upon failure of the person owing any local tax,
fee, or charge to pay the same at the time required, the local
treasurer or his deputy may, upon written notice, seize or
confiscate any personal property belonging to that person or
any personal property subject to the lien in sufficient
quantity to satisfy the tax, fee, or charge in question,
together with any increment thereto incident to delinquency
and the expenses of seizure. In such case, the local treasurer
or his deputy shall issue a duly authenticated certificate
based upon the records of his office showing the fact of
delinquency and the amounts of the tax, fee, or charge and
penalty due. Such certificate shall serve as sufficient warrant
for the distraint of personal property aforementioned, subject
to the taxpayer's right to claim exemption under the
provisions of existing laws. Distrained personal property shall
be sold at public auction in the manner hereon provided for.
(b) Accounting of distrained goods. - The officer executing
the distraint shall make or cause to be made an account of
the goods, chattels or effects distrained, a copy of which
signed by himself shall be left either with the owner or
person from whose possession the goods, chattels or effects
are taken, or at the dwelling or place or business of that
person and with someone of suitable age and discretion, to
which list shall be added a statement of the sum demanded
and a note of the time and place of sale.
40
(c) Publication - The officer shall forthwith cause a

notification to be exhibited in not less than three (3) public
and conspicuous places in the territory of the local
government unit where the distraint is made, specifying the
time and place of sale, and the articles distrained. The time
of sale shall not be less than twenty (20) days after the
notice to the owner or possessor of the property as above
specified and the publication or posting of the notice. One
place for the posting of the notice shall be at the office of the
chief executive of the local government unit in which the
property is distrained.
(d) Release of distrained property upon payment prior to sale
- If at any time prior to the consummation of the sale, all the
proper charges are paid to the officer conducting the sale,
the goods or effects distrained shall be restored to the
owner.
(e) Procedure of sale - At the time and place fixed in the
notice, the officer conducting the sale shall sell the goods or
effects so distrained at public auction to the highest bidder
for cash. Within five (5) days after the sale, the local
treasurer shall make a report of the proceedings in writing to
the local chief executive concerned.
Should the property distrained be not disposed of within one
hundred and twenty (120) days from the date of distraint,
the same shall be considered as sold to the local government
unit concerned for the amount of the assessment made
thereon by the Committee on Appraisal and to the extent of
the same amount, the tax delinquencies shall be cancelled.
Said Committee on Appraisal shall be composed of the city
or municipal treasurer as chairman, with a representative of
the Commission on Audit and the city or municipal assessor
as members.
(f) Disposition of proceeds - The proceeds of the sale shall be
applied to satisfy the tax, including the surcharges, interest,
and other penalties incident to delinquency, and the
expenses of the distraint and sale. The balance over and
above what is required to pay the entire claim shall be
returned to the owner of the property sold. The expenses
chargeable upon the seizure and sale shall embrace only the
actual expenses of seizure and preservation of the property
pending the sale, and no charge shall be imposed for the
services of the local officer or his deputy. Where the
proceeds of the sale are insufficient to satisfy the claim,
other property may, in like manner, be distrained until the
full amount due, including all expenses, is collected.
iv. Levy of Real Property (Sec. 176)
Section 176. Levy on Real Property. - After the expiration of
the time required to pay the delinquent tax, fee, or charge,
real property may be levied on before, simultaneously, or
after the distraint of personal property belonging to the
delinquent taxpayer. To this end, the provincial, city or
municipal treasurer, as the case may be, shall prepare a duly
authenticated certificate showing the name of the taxpayer
and the amount of the tax, fee, or charge, and penalty due
from him. Said certificate shall operate with the force of a
legal execution throughout the Philippines. Levy shall be
effected by writing upon said certificate the description of
the property upon which levy is made. At the same time,
written notice of the levy shall be mailed to or served upon
the assessor and the Register of Deeds of the province or
city where the property is located who shall annotate the
levy on the tax declaration and certificate of title of the
property, respectively, and the delinquent taxpayer or, if he
be absent from the Philippines, to his agent or the manager
of the business in respect to which the liability arose, or if
there be none, to the occupant of the property in question.
In case the levy on real property is not issued before or
simultaneously with the warrant of distraint on personal
property, and the personal property of the taxpayer is not
sufficient to satisfy his delinquency, the provincial, city or
DIGESTtreasurer,
Nov 7,
2014
municipal
as the
case may be, shall within thirty
(30) days after execution of the distraint, proceed with the
levy on the taxpayer's real property.
from the lien of such taxes, fees, or charges, related

surcharges, interests, and penalties.
41
A report on any levy shall, within ten (10) days after receipt
of the warrant, be submitted by the levying officer to the
sanggunian concerned.
The owner shall not, however, be deprived of the possession

of said property and shall be entitled to the rentals and other
income thereof until the expiration of the time allowed for its
redemption.
v. Advertisement and Sale (Sec. 178)
vii. Purchase of Property by LGU for want of bidder (Sec. 181)
Section 178. Advertisement and Sale. - Within thirty (30)

days after the levy, the local treasurer shall proceed to
publicly advertise for sale or auction the property or a usable
portion thereof as may be necessary to satisfy the claim and
cost of sale; and such advertisement shall cover a period of
at least thirty (30) days. It shall be effected by posting a
notice at the main entrance of the municipal building or city
hall, and in a public and conspicuous place in the barangay
where the real property is located, and by publication once a
week for three (3) weeks in a newspaper of general
circulation in the province, city or municipality where the
property is located. The advertisement shall contain the
amount of taxes, fees or charges, and penalties due thereon,
and the time and place of sale, the name of the taxpayer
against whom the taxes, fees, or charges are levied, and a
short description of the property to be sold. At any time
before the date fixed for the sale, the taxpayer may stay
they proceedings by paying the taxes, fees, charges,
penalties and interests. If he fails to do so, the sale shall
proceed and shall be held either at the main entrance of the
provincial, city or municipal building, or on the property to be
sold, or at any other place as determined by the local
treasurer conducting the sale and specified in the notice of
sale.
Section 181. Purchase of Property By the Local

Government Units for Want of Bidder. - In case there is no
bidder for the real property advertised for sale as provided
herein, or if the highest bid is for an amount insufficient to
pay the taxes, fees, or charges, related surcharges, interests,
penalties and costs, the local treasurer conducting the sale
shall purchase the property in behalf of the local government
unit concerned to satisfy the claim and within two (2) days
thereafter shall make a report of his proceedings which shall
be reflected upon the records of his office. It shall be the
duty of the Registrar of Deeds concerned upon registration
with his office of any such declaration of forfeiture to transfer
the title of the forfeited property to the local government unit
concerned without the necessity of an order from a
competent court.
Within thirty (30) days after the sale, the local treasurer or
his deputy shall make a report of the sale to the sanggunian
concerned, and which shall form part of his records. After
consultation with the sanggunian, the local treasurer shall
make and deliver to the purchaser a certificate of sale,
showing the proceeding of the sale, describing the property
sold, stating the name of the purchaser and setting out the
exact amount of all taxes, fees, charges, and related
surcharges, interests, or penalties: Provided, however, That
any excess in the proceeds of the sale over the claim and
cost of sales shall be turned over to the owner of the
property.
viii. Resale of Real Estate Tax for TFC
The local treasurer may, by ordinance duly approved,

advance an amount sufficient to defray the costs of
collection by means of the remedies provided for in this Title,
including the preservation or transportation in case of
personal property, and the advertisement and subsequent
sale, in cases of personal and real property including
improvements thereon.
x. Further Distraint and Levy (Sec. 184)
vi. Redemption of Property Sold (Sec. 179)
Section 185. Personal Property Exempt from Distraint or

Levy. - The following property shall be exempt from distraint
and the levy, attachment or execution thereof for
delinquency in the payment of any local tax, fee or charge,
including the related surcharge and interest:
Section 179. Redemption of Property Sold. - Within one (1)

year from the date of sale, the delinquent taxpayer or his
representative shall have the right to redeem the property
upon payment to the local treasurer of the total amount of
taxes, fees, or charges, and related surcharges, interests or
penalties from the date of delinquency to the date of sale,
plus interest of not more than two percent (2%) per month
on the purchase price from the date of purchase to the date
of redemption. Such payment shall invalidate the certificate
of sale issued to the purchaser and the owner shall be
entitled to a certificate of redemption from the provincial,
city or municipal treasurer or his deputy.
The provincial, city or municipal treasurer or his deputy,
upon surrender by the purchaser of the certificate of sale
previously issued to him, shall forthwith return to the latter
the entire purchase price paid by him plus the interest of not
more than two percent (2%) per month herein provided for,
the portion of the cost of sale and other legitimate expenses
incurred by him, and said property thereafter shall be free
Within one (1) year from the date of such forfeiture, the
taxpayer or any of his representative, may redeem the
property by paying to the local treasurer the full amount of
the taxes, fees, charges, and related surcharges, interests, or
penalties, and the costs of sale. If the property is not
redeemed as provided herein, the ownership thereof shall be
fully vested on the local government unit concerned.
ix. Judicial Action (Sec. 183)

Section 183. Collection of Delinquent Taxes, Fees, Charges
or other Revenues through Judicial Action. - The local
government unit concerned may enforce the collection of
delinquent taxes, fees, charges or other revenues by civil
action in any court of competent jurisdiction. The civil action
shall be filed by the local treasurer within the period
prescribed in Section 194 of this Code.
Section 184. Further Distraint or Levy. - The remedies by

distraint and levy may be repeated if necessary until the full
amount due, including all expenses, is collected.
xi. Personal Property Exempt from Distraint or Levy (Sec.
185)
(a) Tools and implements necessarily used by the delinquent

taxpayer in his trade or employment;
(b) One (1) horse, cow, carabao, or other beast of burden,
such as the delinquent taxpayer may select, and necessarily
used by him in his ordinary occupation;
(c) His necessary clothing, and that of all his family;
(d) Household furniture and utensils necessary for
housekeeping and used for that purpose by the delinquent
taxpayer, such as he may select, of a value not exceeding
Ten thousand pesos (P10,000.00);
(e) Provisions, including crops, actually provided for
individual or family use sufficient for four (4) months;
(f) The professional libraries of doctors, engineers, lawyers
and judges;
(g) One fishing boat and net, not exceeding the total value of
Ten thousand pesos (P10,000.00), by the lawful use of which
a fisherman earns his livelihood; and
DIGEST
Novor7,article
2014forming part of a house or
(h)
Any material
improvement of any real property.
c. Taxpayers Remedies
d. Question Constitutionality of Ordinance
Section 187. Procedure for Approval and Effectivity of Tax,
hearings shall be conducted for the purpose prior to the
enactment thereof: Provided, further, That any question on
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.
[ G.R. No. 112497, August 04, 1994 ]
HON. FRANKLIN M. DRILON, IN HIS CAPACITY AS
SECRETARY OF JUSTICE, PETITIONER, VS. MAYOR
ALFREDO S. LIM, VICE-MAYOR JOSE L. ATIENZA, CITY
TREASURER
ANTHONY
ACEVEDO,
SANGGUNIANG
PANGLUNSOD
AND
THE
CITY
OF
MANILA,
RESPONDENTS.
FACTS:
The Secretary of Justice had, on appeal to him of four oil

companies and a taxpayer, declared Ordinance No 7794,
otherwise known as Manila Revenue Code, null and void
for non-compliance with the prescribed procedure in the
enactment of tax ordinances and for containing certain
provisions contrary to laws and public policy.
In petition for certiorari filed by the City of Manila, RTC

revoked the Secretarys resolution and sustained the
ordinance. It declared that Section 187 of the Local
Government Code as unconstitutional because of its
vesture in the Secretary of Justice of the power of control
over local governments in violation of the policy of local
autonomy mandated in the Constitution and of the
specific provision therein conferring on the President of
the Philippines only the power of supervision over local
governments. Hence, this appeal.
SC reversed the decision of the RTC insofar as it

declared Section 187 of the LGC unconstitutional.
ISSUE: W/N Section 187 of the LGC is constitutional in so far
as it empowered the Secretary of Justice to review tax
ordinances and to annul them.
HELD: YES
Section 187 authorizes the Secretary of Justice to review only
the constitutionality or legality of the tax ordinance and, if
warranted, to revoke it on either or both of these grounds.
When he alters or modifies or sets aside a tax ordinance, he
is not also permitted to substitute his own judgment for the
judgment of the local government that enacted the measure.
Secretary Drilon did set aside the Manila Revenue Code, but
he did not replace it with his own version of what the Code
should be. He did not pronounce the ordinance unwise or
unreasonable as a basis for its annulment. He did not say
that in his judgment it was a bad law. What he found only
was that it was illegal. All he did in reviewing the said
measure was determine if the petitioners were performing
their functions in accordance with law, that is, with the
prescribed procedure for the enactment of tax ordinances
and the grant of powers to the city government under the
Local Government Code. As we see it, that was an act not of
control but of mere supervision.
42
An officer in control lays down the rules in the doing of an

act. If they are not followed, he may, in his discretion, order
the act undone or re-done by his subordinate or he may even
decide to do it himself. Supervision does not cover such
authority. The supervisor or superintendent merely sees to it
that the rules are followed, but he himself does not lay down
such rules, nor does he have the discretion to modify or
replace them. If the rules are not observed, he may order the
work done or re-done but only to conform to the prescribed
rules. He may not prescribe his own manner for the doing of
the act. He has no judgment on this matter except to see to
it that the rules are followed. In the opinion of the Court,
Secretary Drilon did precisely this, and no more nor less than
this, and so performed an act not of control but of mere
supervision.
The case of Taule v. Santos [9] cited in the decision has no
application here because the jurisdiction claimed by the
Secretary of Local Governments over election contests in the
Katipunan ng Mga Barangay was held to belong to the
Commission on Elections by constitutional provision. The
conflict was over jurisdiction, not supervision or control.
Significantly, a rule similar to Section 187 appeared in the
Local Autonomy Act, which provided in its Section 2 as
follows:
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.
That section allowed the Secretary of Finance to suspend the
effectivity of a tax ordinance if, in his opinion, the tax or fee
levied
was unjust,
excessive,
oppressive
or
confiscatory. Determination of these flaws would involve the
exercise of judgment or discretion and not merely an
examination of whether or not the requirements or
limitations of the law had been observed; hence, it would
smack of control rather than mere supervision. That power
was never questioned before this Court but, at any rate, the
Secretary of Justice is not given the same latitude under
Section 187. All he is permitted to do is ascertain the
constitutionality or legality of the tax measure, without the
right to declare that, in his opinion, it is unjust, excessive,
oppressive or confiscatory. He has no discretion on this
matter. In fact, Secretary Drilon set aside the Manila Revenue
Code only on two grounds, to wit, the inclusion therein of
certain ultra vires provisions and non-compliance with the
prescribed procedure in its enactment. These grounds
affected the legality, not the wisdom or reasonableness, of
the tax measure.
[ G.R. No. 191761, November 14, 2012 ]

CAGAYAN ELECTRIC POWER AND LIGHT CO., INC.,
PETITIONER, VS. CITY OF CAGAYAN DE ORO,
RESPONDENT.
FACTS:
January 10, 2005 - The Sangguniang Panlungsod of

Cagayan de Oro (CDO) passed Ordinance No. 9503-2005
DIGEST
7, the
2014
imposing aNov
tax on
lease or rental of electric and/or
declaratory relief before the Regional
telecommunication posts, poles or towers by pole

owners to other pole users at 10% of the annual rental
income derived from such lease or rental.
The City Council thru a letter dated March 15, 2005,
informed appellant Cagayan Electric Power and Light
Company Inc. (CEPALCO) of the passage of the subject
ordinance.
September 30, 2005 - Appellant filed a petition for
declaratory relief assailing the validity of the Ordinance
before the RTC on the ground that the tax imposed is in
reality a tax on income which appellee may not impose.
In its answer, appellee raised the defense of prescription
of respondent-appellees action pursuant to Section 187
of the LGC.
RTC rendered its decision in favour of CEPALCO on the
ground that CEPALCO is barred by prescription as it
failed to raise on appeal to the Secretary of Justice
within the 30-day period provided in Section 187 of the
LGC.
Upon appeal, CA affirmed the decision of the RTC. Hence
this petition for review with the SC.
Clearly, the law requires that the dissatisfied

taxpayer who questions the validity or legality of
a tax ordinance must file his appeal to the
Secretary of Justice, within 30 days from
effectivity thereof. In case the Secretary decides
the appeal, a period also of 30 days is allowed
for an aggrieved party to go to court. But if the
Secretary does not act thereon, after the lapse
of 60 days, a party could already proceed to
seek relief in court. These three separate periods
are clearly given for compliance as a
prerequisite before seeking redress in a
competent court. Such statutory periods are set
to prevent delays as well as enhance the orderly
and speedy discharge of judicial functions. For
this reason the courts construe these provisions
of statutes as mandatory.
ISSUE: W/N CEPALCOs action was filed beyond the 30-day

period as required in Section 187 of the LGC.
A municipal tax ordinance empowers a local

government unit to impose taxes. The power to
tax is the most effective instrument to raise
needed revenues to finance and support the
myriad activities of local government units for
the delivery of basic services essential to the
promotion
of
the
general
welfare
and
enhancement of peace, progress, and prosperity
of the people. Consequently, any delay in
implementing tax measures would be to the
detriment of the public. It is for this reason that
protests over tax ordinances are required to be
done within certain time frames. In the instant
case, it is our view that the failure of petitioners
to appeal to the Secretary of Justice within 30
days as required by Sec. 187 of R.A. 7160 is fatal
to their cause.
HELD: YES
Ordinance No. 9503-2005 is a local revenue measure. As
such, the Local Government Code applies.
SEC. 187. Procedure for Approval and
Effectivity of Tax Ordinances and Revenue
Measures; Mandatory Public Hearings.
The procedure for approval of local tax
ordinances and revenue measures shall be
in accordance with the provisions of this
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.
SEC. 188. Publication of Tax Ordinances and
Revenue Measures. - Within ten (10) days
after their approval, certified true copies of
all provincial, city, and municipal tax
ordinances or revenue measures shall be
published in full for three (3) consecutive
days
in
a
newspaper
of
local
circulation: Provided,
however, That
in
provinces, cities and municipalities where
there are no newspapers of local circulation,
the same may be posted in at least two (2)
The Sangguniang Panlungsod of Cagayan de Oro approved
Ordinance No. 9503-2005 on 10 January 2005. Section 5 of
said ordinance provided that the Ordinance shall take effect
after 15 days following its publication in a local newspaper of
general circulation for at least three (3) consecutive issues.
Gold Star Daily published Ordinance No. 9503-2005 on 1 to 3
February 2005. Ordinance No. 9503-2005 thus took effect on
19 February 2005. CEPALCO filed its petition for
43
Trial Court on
30 September 2005, clearly beyond the 30-day period
provided in Section 187. CEPALCO did not file
anything before the Secretary of Justice. CEPALCO
ignored our ruling in Reyes v. Court of Appeals [18] on the
mandatory nature of the statutory periods:
As in Reyes, CEPALCOs failure to appeal to the

Secretary of Justice within the statutory period of 30
days from the effectivity of the ordinance should have
been fatal to its cause. However, we relax the
application of the rules in view of the more
substantive matters.
i.
Publication
Section 188. Publication of Tax Ordinances and Revenue

Measures. - Within ten (10) days after their approval,
certified true copies of all provincial, city, and municipal tax
ordinances or revenue measures shall be published in full for
three (3) consecutive days in a newspaper of local
circulation: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local
circulation, the same may be posted in at least two (2)
[ G.R. NO. 156252, June 27, 2006 ]
COCA-COLA BOTTLERS PHILIPPINES, INC., PETITIONER,
VS. CITY OF MANILA, LIBERTY M. TOLEDO CITY
TREASURER AND JOSEPH SANTIAGO CHIEF,
LICENSING DIVISION, RESPONDENTS.
FACTS:
February 25, 2000 The City Mayor of Manila approved

Tax Ordinance No. 7988 otherwise known as the Revised
Revenue Code of the City of Manila which increases the
tax rates applicable to certain establishments operating
within the territorial jurisdiction of the City of Manila,
including herein petitioner.
Petitioner then filed a petition with the DOJ against the

City of Manila and its Sangguniang Panlungsod invoking
Section 187 of LGC.
44
DIGEST
Nov
2014
became due. No action for the collection of such
August 17,
2000 7,
the
DOJ Secretary issued a Resolution
declaring the ordinance null and void and without legal
effect. In its decision it was held that respondents
failure to file their comments and present documentary
evidence to show that the mandatory requirement of law
on publication, among other things, has been met, may
be deemed to have waived its right to controvert or
dispute the documentary evidence submitted by
petitioner which indubitably show that subject tax
ordinance was published only once, i.e., on the May 22,
2000 issue of the Philippine Post. Clearly, therefore,
herein respondents failed to satisfy the requirement that
said ordinance shall be published for three (3)
consecutive days as required by law.
Despite the resolution of the DOJ, respondents continued
to assess petitioner business tax for the year 2001
based on the tax rates prescribe under Tax Ordinance
No. 7988. Thus, petitioner filed a complaint with the RTC
praying
that
respondents
be
enjoined
from
implementing the aforementioned tax ordinance.
RTC rendered a decision in favour of petitioner since the
defendants did not follow the procedure in the
enactment of Tax Ordinance No. 7988.
During the pendency of the said case, the City Mayor of
Manila approved on February 22, 2001 Tax Ordinance
no. 8011 entitled An Ordinance Amending Certain
Sections of Ordinance No. 7988. Said ordinance was
once again challenged by petitioner before the DOJ
questioning the legality of the aforementioned tax
ordinance. The ordinance was likewise declared null and
void since it was an amendatory ordinance that was
previously declared null and void. The MR was
subsequently denied in a Resolution dated March 12,
2002.
The City of Manila appealed said resolution but the same
was dismissed by the RTC for lack of merit. Thereafter,
they filed an MR and the same was granted by the RTC.
Hence, this instant petition.
ISSUE: W/N the Tax Ordinance No. 7988 is valid.

HELD: NO
Despite the nullity of Tax Ordinance No. 7988, the court a
quo, in the assailed Order, dated 8 May 2002, went on to
dismiss petitioner's case on the force of the enactment of Tax
Ordinance No. 8011, amending Tax Ordinance No. 7988.
Significantly, said amending ordinance was likewise declared
null and void by the DOJ Secretary in a Resolution, dated 5
July 2001, elucidating that "[I]nstead of amending Ordinance
No. 7988, [herein] respondent should have enacted another
tax measure which strictly complies with the requirements of
law, both procedural and substantive. The passage of the
assailed ordinance did not have the effect of curing
the defects of Ordinance No. 7988 which, any way,
does not legally exist." Said Resolution of the DOJ
Secretary had, as well, attained finality by virtue of the
dismissal with finality by this Court of respondents' Petition
for Review on Certiorari in G.R. No. 157490 assailing the
dismissal by the RTC of Manila, Branch 17, of its appeal due
to lack of jurisdiction in its Order, dated 11 August 2003.
Based on the foregoing, this Court must reverse the Order of
the RTC of Manila, Branch 21, dismissing petitioner's case as
there is no basis in law for such dismissal. The amending law,
having been declared as null and void, in legal
contemplation, therefore, does not exist. Furthermore, even
if Tax Ordinance No. 8011 was not declared null and void, the
trial court should not have dismissed the case on the reason
that said tax ordinance had already amended Tax Ordinance
No. 7988. As held by this Court in the case of People v. Lim,
[12]
if an order or law sought to be amended is invalid, then it
does not legally exist, there should be no occasion or need to
amend it.
ii.
Periods of Assessment and Collection
Section 194. Periods of Assessment and Collection. (a) Local taxes, fees, or charges shall be assessed
within five (5) years from the date they
taxes, fees, or charges, whether administrative or

judicial, shall be instituted after the expiration of
such period: Provided, That. taxes, fees or charges
which have accrued before the effectivity of this
Code may be assessed within a period of three (3)
years from the date they became due.
(b) In case of fraud or intent to evade the payment
of taxes, fees, or charges, the same may be
assessed within ten (10) years from discovery of the
fraud or intent to evade payment.
(c) Local taxes, fees, or charges may be collected
within five (5) years from the date of
assessment by administrative or judicial
action. No such action shall be instituted after the
expiration of said period: Provided, however, That,
taxes, fees or charges assessed before the
effectivity of this Code may be collected within a
period of three (3) years from the date of
assessment.
(d) The running of the periods of prescription
provided in the preceding paragraphs shall be
suspended for the time during which:
(1) The treasurer is legally prevented from
making the assessment of collection;
(2)
The
taxpayer
requests
for
a
reinvestigation and executes a waiver
in writing before expiration of the period
within which to assess or collect; and
(3) The taxpayer is out of the country or
otherwise cannot be located.
iii.
Protest of an Assessment
Section 195. Protest of Assessment. - When the local

treasurer or his duly authorized representative finds that
correct taxes, fees, or charges have not been paid, he shall
issue a notice of assessment stating the nature of the tax,
fee, or charge, the amount of deficiency, the surcharges,
interests and penalties. Within sixty (60) days from the
receipt of the notice of assessment, the taxpayer may file a
written protest with the local treasurer contesting the
assessment; otherwise, the assessment shall become final
and executory. The local treasurer shall decide the protest
within sixty (60) days from the time of its filing. If the local
treasurer finds the protest to be wholly or partly meritorious,
he shall issue a notice cancelling wholly or partially the
assessment. However, if the local treasurer finds the
assessment to be wholly or partly correct, he shall deny the
protest wholly or partly with notice to the taxpayer. The
taxpayer shall have thirty (30) days from the receipt of the
denial of the protest or from the lapse of the sixty (60) day
period prescribed herein within which to appeal with the
court of competent jurisdiction otherwise the assessment
becomes conclusive and unappealable.
[ G.R. No. 174617, December 27, 2007 ]
ROMULO D. SAN JUAN, PETITIONER, VS. RICARDO L.
CASTRO, IN HIS CAPACITY AS CITY TREASURER OF
MARIKINA CITY, RESPONDENT.
FACTS:
Romulo San Juan, registered owner of real

properties in Rancho Estate I, Concepcion II,
Marikina City, with consent of his wife, conveyed by
Deed of Assignment, the properties to the Saints
and Angels Realty Corporation (SARC), then under
the process of incorporation in exchange of 258,434
shares of stocks with total par value of P2,584,340.
Petitioner then went to the Office of the Marikina

City Treasurer to pay the transfer tax based on the
consideration stated in Deed of Assignment.
Respondent City Treasurer, informed him, however,
that the tax due is based on the FMV of the
property.
Petitioner protested the basis of the tax due. In

reply thereto, respondent said that in cases of
transfer of real property not involving monetary
DIGEST
Nov 7, it2014
consideration,
is certain that the FMV or zonal
Mandamus lies only to compel an officer
value of the property is the basis of the tax rate.

Petitioner thus filed before the RTC a petition for
mandamus and damages against respondent in his
capacity as Marikina City Treasurer praying that
respondent be compelled to perform a ministerial
duty, that is, to accept the payment of transfer tax
based on the actual consideration of the
transfer/assignment.
RTC dismissed the petition. Hence, this petition for
Review on Certiorari faulting the RTC for dismissing
the petition for mandamus with damages.
ISSUE: W/N the petition for mandamus filed by petitioner is

proper.
HELD: NO
For mandamus to lie, petitioner must comply with Section 3
of Rule 65 of the Rules of Court which provides:
SEC. 3. Petition for Mandamus. -- When any tribunal,
corporation, board, officer or person unlawfully neglects the
performance of an act which the law specifically enjoins as a
duty resulting from an office, trust, or station, or unlawfully
excludes another from the use and enjoyment of a right or
office to which such other is entitled, and there is no other
plain, speedy and adequate remedy in the ordinary course of
law, the person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and
praying that judgment be rendered commanding the
respondent, immediately or at some other time to be
specified by the court, to do the act required to be done to
protect the rights of the petitioner and to pay the damages
sustained by the petitioner by reason of the wrongful acts of
the respondent. x x x x (Underscoring supplied)
In the case at bar, the condition that "there is no other plain,
speedy and adequate remedy in the ordinary course of law"
is absent.
Under Section 195 of the Local Government Code which is
quoted immediately below, a taxpayer who disagrees with a
tax assessment made by a local treasurer may file a written
protest thereof:
SECTION 195. Protest of Assessment. When the local
treasurer or his duly authorized representative finds that the
correct taxes, fees, or charges have not been paid, he shall
issue a notice of assessment stating the nature of the tax,
fee, or charge, the amount of deficiency, the surcharges,
interests and penalties. Within sixty (60) days from the
receipt of the notice of assessment, the taxpayer may file a
written protest with the local treasurer contesting the
assessment; otherwise, the assessment shall become final
and executory. The local treasurer shall decide the protest
within sixty (60) days from the time of its filing. If the local
treasurer finds the protest to be wholly or partly meritorious,
he shall issue a notice cancelling wholly or partially the
assessment. However, if the local treasurer finds the
assessment to be wholly or partly correct, he shall deny the
protest wholly or partly with notice to the taxpayer. The
taxpayer shall have thirty (30) days from the receipt
of the denial of the protest or from the lapse of the
sixty-day (60) period prescribed herein within which
to appeal with the court of competent jurisdiction,
otherwise the assessment becomes conclusive and
unappealable.
That petitioner protested in writing against the assessment
of tax due and the basis thereof is on record as in fact it was
on that account that respondent sent him the above-quoted
July 15, 2005 letter which operated as a denial of petitioner's
written protest.
Petitioner should thus have, following the earlier abovequoted Section 195 of the Local Government Code, either
appealed the assessment before the court of competent
jurisdiction or paid the tax and then sought a refund.
Petitioner did not observe any of these remedies available to
him, however. He instead opted to file a petition for
mandamus to compel respondent to accept payment of
transfer tax as computed by him.
45
to perform a
ministerial duty (one which is so clear and specific as to
leave no room for the exercise of discretion in its
performance) but not a discretionary function (one which by
its nature requires the exercise of judgment). Respondent's
argument that "[m]andamus cannot lie to compel the City
Treasurer to accept as full compliance a tax payment which
in his reasoning and assessment is deficient and incorrect" is
thus persuasive.
CTA EB CASE NO. 413 June 3, 2009
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,
INC., petitioner, vs. CITY OF BALANGA and AMADO P.
JIMENEZ, in his capacity as OIC-City Treasurer of the
City of Balanga, respondents.
FACTS:
PLDT received a letter from respondent Jimenez,

requesting petitioner to pay respondent City business
franchise taxes, invoking Art. 243 of the IRR of the LGC
and the Revenue Code of the City of Balanga.
After exchanges of correspondence, PLDT wrote

respondents a letter requesting the latter to cancel and
withdraw the assessed tax liabilities imposed upon PLDT.
Respondent denied PLDTs protest and reiterated that it

is subject to both business and franchise taxes. PLDT
then appealed the said denial to the RTC of Makati City.
RTC dismissed PLDTs petition. PLDT appealed the Order

by way of Petition for Review before the First Division of
the CTA.
CTA Division dismissed PLDTs petition for lack of merit.

Hence this petition for review with the En Banc.
PLDT contends that the appeal from the local treasurers

denial of an assessment protest instituted before the
RTC is a personal action, as such may be commenced
and tried where the plaintiff or any of the principal
plaintiffs resides RTC Makati.
Respondents counter that a review of the decision of

the OIC-City Treasurer is not an original action filed, the
respondent is acting as an administrative body when it
assessed petitioner of its financial tax liability of
business tax, thus petitioner should have filed its appeal
with the RTC of Balanga City.
SC dismissed the petition for lack of merit.

ISSUE: Which court has competent jurisdiction over an
appeal from the denial of a tax protest by the Local City
Treasurer under Section 195 of the LGC.
HELD: RTC of Balanga City
Section 18 of BP 129, as amended by RA 7691, provides:
SEC. 18. Authority to define territory appurtenant
to each branch. The Supreme Court shall define
the territory over which a branch of the Regional
Trial Court shall exercise its authority. The territory
thus defined shall be deemed to the territorial area
of the branch concerned for purposes of
determining the venue of all suits, proceedings or
actions, whether
civil or criminal, as well as
determining
the
Metropolitan
Trial
Courts,
Municipal Trial Courts, and Municipal Circuit Trial
Courts over the said branch may exercise appellate
jurisdiction. The power herein granted shall be
exercised with a view to making the courts readily
accessible to the people of the different parts of
the region and making the attendance of litigants
and witnesses as inexpensive as possible.
Corollary thereto, Supreme Court Supervisory Circular No.
14, states:
C. PROCEDURE IN THE REGIONAL TRIAL COURTS
13. Venue of actions. The venue of all actions
whether civil or criminal, and in special
proceedings, filed in the regional trial courts shall
mean such area defined by the Supreme Court as
the territory over which a particular branch shall
46
DIGEST
Nov 7, in2014
exercise authority
accordance with Section 18 of
December 1, 1998 - the City Government of Muntinlupa

BP 129.
All provisions of the Rules of Court referring to

provides shall be deemed to mean such area.
The territory defined in law shall be deemed to be the
territorial area of the branch concerned for the purpose of
determining (1) the venue of all suits, proceedings or
actions, whether civil or criminal, as well as (2) determining
the Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts over which the said branch
may exercise appellate jurisdiction. The intendment of the
law in this regard is to make, at all times, the courts
accessible to the people of the different parts of the region
and making attendance of litigants and witnesses as
inexpensive as possible and to make more speedy and
dispatch of judicial business.
In short, the Regional Trial Courts shall exercise their
respective jurisdiction within their territorial limits and
territorial limits pertain to the venue over which a judicial
power is exercised.
Pursuant to the foregoing, where the acts of the public
official are the object of the litigation, meaning, petitioner
seeks to control them, then the suit must be filed in the RTC
whose territorial jurisdiction encompasses the place where
the respondent public official is found or holding office. For
this rule is, outside its territorial limits, the court has no
power to enforce its order.
In the instant case, PLDT was not only seeking for a review of
the denial by the City Treasurer of Balanga City of the tax
protest of PLDT, but petitioner was also asking the court to
order respondents to perform specific acts, such as, to order
respondents to cancel the assessment, to amend the official
receipts issued to petitioner and to enjoin respondents form
imposing franchise and business taxes against PLDT; in
other words, petitioner PLDT seeks to control the acts
of City Treasurer of Balanga City. Hence, the suit
ought to be filed in the RTC of Balanga City which has
territorial jurisdiction over the City Treasurer of
Balanga City. For it is the RTC of Balanga City that has
power to enforce its orders over the City Treasurer of
Balanga City.
Thus, the RTC of Balanga City, and not the RTC of Makati,
therefore, is the court of competent jurisdiction over the
appeal from the denial by the local City Treasurer of Balanga
City of the tax protest of PLDT.
iv.
v.
Appeal to the CTA

Claim for Refund
Section 196. Claim for Refund of Tax Credit. - No case or

from the date the taxpayer is entitled to a refund or credit.
CTA EB CASE NO. 386 February 12, 2009
ALABANG SUPERMARKET CORPORATION, petitioner,
Vs. CITY OF GOVERNMENT OF MUNTINLUPA,
REPRESENTED BY MAYOR JAIME R. FRESNEDI, THE
CITY TREASURER OF MUNTINLUPA, AND THE
SANGGUNIANG PANLUNGSOD OF MUNTINLUPA CITY,
respondent.
FACTS:
Pursuant to Ordinance No. 93-35, otherwise known as

the Revenue Code of the City of Muntinlupa, petitioner
pays the graduated business tax on its gross sales of
liquor, beer, wine, distilled spirits, cigarettes and
tobacco products.
enacted Ordinance No. 98-015 which imposes a 3%

business tax on the sale and distribution of alcoholic
beverage and tobacco products.
In this regard, petitioner allegedly paid P3.7M for the
periods covering Jan 2, 1999 to September 15, 2002 in
compliance with the aforementioned ordinance.
Aggrieved by the alleged erroneous collections made by
respondents, petitioner wrote a letter to the Bureau of
Local Government Finance (BLGF) of the Dept. Of
Finance seeking clarification on w/n the City of
Muntinlupa can legally impose the 3% business tax
under Ordinance No. 98-015 to which BLGF issued its
ruling in favour of petitioner.
Petitioner then wrote a letter dated March 20, 2001
addressed to the City Treasurer seeking the refund/tax
credit of the amount of P1.6M representing 3% business
taxes paid on its gross sales of alcoholic beverages and
tobacco products for the period covering Jan 1999 to
December 2000.
Subsequently, petitioner filed its complaint with the RTC
seeking refund or issuance of a tax credit certificate of
the same amount and covering the same period.
RTC denied petitioners application for the TRO and
dismissed the petitioners complaint. Hence, this petition
for review with the CTA Division.
CTA Division denied petitioners claim for refund of
business taxes paid after December 15, 2000 simply on
the basis of lack of an administrative claim for refund
with the local treasurer notwithstanding the fact that the
subject tax ordinance was declared excessive and
contrary to law.
SC denied the petition.
ISSUE: W/N petitioner is entitled to claim for a refund.

HELD: NO
Section 196. Claim for Refund of Tax Credit. - No case or
from the date the taxpayer is entitled to a refund or credit.
Clearly from the above quoted provision, no case or
court.
Moreover, it should be noted that two reckoning periods are
provided by law for the filing of a case or proceeding, that is
from the date of payment of the tax, and from the date the
taxpayer becomes entitled to the refund. However,
petitioner's interpretation of the phrase "from the date the
taxpayer becomes entitled to the refund" is not in
that:
"Section 187 of the Local Government Code dictates
the procedure for questioning the constitutionality
or legality of tax ordinances. It provides in part 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
the receipt of the appeal'. It further provides 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.
DIGEST
Nov
7, 2014
A reading
of Section
187 of the Local Government
above-specified newly adjusted tax
Code would show that the law intends that
questions on the legality or constitutionality of an
ordinance or tax measure be threshed out the
soonest possible time. It should be raised within
thirty (30) days from approval and such appeal
should be resolved within sixty (60) days from
receipt thereof. Section 187 states that any appeal
on the legality or constitutionality of the ordinance
does not suspend its effectivity. Thus, before any
final declaration of its nullity, taxes accrue and
should be paid accordingly.
In the same vein, the reckoning periods for the filing
of a claim for refund in Section 196 of the Local
Government Code should be interpreted so as to
accomplish the evident purpose, viz., the
settlement of the rights of the taxpayer vis--vis the
government, at the earliest opportunity. The phrase
"from the date the taxpayer becomes entitled to a
refund or credit" in Section 196 should not be
interpreted to mean the finality of the decision of a
court declaring the tax measure void, even without
a timely claim for refund. Otherwise, claims for
refund will be filed even after several years from
payment of the tax due, merely because the tax
ordinance was declared void. And the filing of
administrative and judicial claims for refund shall be
endless. This interpretation would give the
taxpayer, who was not able to question the legality
or constitutionality of the tax measure within the
period provided in Section 187, the right to instead
file a claim for refund with the court under Section
196, absent the filing of a timely administrative
claim. In effect, the prescriptive periods provided by
law would be rendered naught and meaningless.
This could not have been the intention of
lawmakers. A taxpayer who believes that he has
paid a tax imposed under a void ordinance should
timely exhaust administrative remedies before
resorting to the filing of a judicial claim or timely
question
its
constitutionality
and
legality.
Petitioner's
failure
to
file
the
appropriate
administrative claim for refund for the period
December 16, 2000 to September 2002, cannot be
countenanced. More so, since it has been able to file
a timely administrative claim for the 3% business
tax it paid covering January 2, 1999 to December
15, 2000. It is clearly aware of the requirements for
the filing of an administrative claim set forth by law.
Its manifest error cannot be cured at this point."
CTA AC No. 62 January 11, 2011

MINDANAO SHOPPING DESTINATION CORPORATION,
ET AL., petitioners, vs. DAVAO CI TY AND RODRIGO S.
RIOLA, in his capacity as the City Treasurer of Davao
City, respondents.
FACTS:
Petitioners (also collectively referred to as the SM Group

of Companies) are retailers who conduct business
operations at SM City Davao.
The following ordinances were enacted by the

Respondent Davao City:
Tax Ordinance
Rate
Old Tax Ordinance
New Tax Ordinance
Amendatory Ordinances
As legitimate retailers affected by the new tax rates

mandated under the New Tax Ordinances brought about
the reclassification, petitioners assailed the validity of
the New Tax Ordinance by filing an appeal before the
DOJ on January 24, 2006. Petitioners insisted that the
47
rates under the

questioned ordinance are excessive, oppressive, illegal,
confiscatory, in restraint of trade, contrary to the
Constitution.
The appeal was dismissed by the DOJ. Also, the Office of

the President dismissed the same upon appeal.
This prompted petitioners to elevate the case to the

Court of Appeals pursuant to Rule 43 of the RoC, also
known as the CA case. The CA case was filed on
December 5, 2007 and its resolution is still pending.
In the meantime, petitioners filed with the respondent

Treasurer individual claims for refund of the amounts
they paid to respondents under the increased tax rate 1
% set for in the New Tax Ordinance for 2006 and the
1st, 2nd and 3rd quarters of 2007, and the increased rate
of 1 % set forth in the Amendatory Ordinances for the
4th quarter of 2007.
Respondent Treasurer denied petitioners claim for

refund for being premature.
January 18, 2008 - petitioners filed a Complaint/Appeal

with the Davao City RTC with prayer that judgment be
rendered ordering respondents to refund or issue tax
credit certificates in favor of the petitioners for the
increased local business taxes petitioners had paid to
respondents.
RTC declared the present action for refund as premature

in view of the appealed case pending with the Court of
Appeals. Hence, this instant petition for review.
SC dismissed the petition for review.

ISSUE:
(1) W/N RTC erred in ruling that the RTC was premature and
that the petitioners should have awaited the outcome of the
CA case before filing the RTC case.
(2)W/N petitioners are entitled to a refund or tax credit and if
so, in what amounts?
HELD:
(1) NO
Petitioners argue that a taxpayer should not wait the finality
of the decision of a court declaring a tax measure void
before filing a claim for refund.
Respondents submit that the petitioners should have first
waited the outcome of the CA case before filing the RTC
case. Petitioners argument that the RTC case was filed so as
to beat the two (2) year prescriptive period under the LGC
for filing claims for refund or credit does not lie.
Section 196. Claim for Refund of Tax Credit. - No
case or proceeding shall be maintained in any court
for the recovery of any tax, fee, or charge
erroneously or illegally collected until a written
claim for refund or credit has been filed with the
local treasurer. No case or proceeding shall be
entertained in any court after the expiration of two
(2) years from the date of the payment of such tax,
fee, or charge, or from the date the taxpayer is
entitled to a refund or credit.
From the above-cited provision, it may be fairly inferred that

taxpayers judicially claiming for refund of any local tax, fee,
or charge must satisfy two essential requisites:
1. A written claim for refund or credit must be filed
with the local treasurer; and
2. The case or proceeding must be filed within two (2)
years [i] from the date of payment of tax, fee, or
Threshold Amount
charge, or [ii] from the date the taxpayer is
entitled to a refund or credit.
The above provision plainly declares, therefore, that
prescription is not reckoned only from the date of payment,
but also from the date the taxpayer is entitled to a
refund or credit.
This Court is well-aware of the ruling enunciated by the CT A
En Banc in the case of Alabang where it declared that it
could not have been the intention of the taxpayers to grant
judicial relief on business tax refunds beyond two (2) years
from the time of payment, and that the phrase "from the
DIGEST
Novis 7,
2014
date
the taxpayer
entitled
to a refund or credit" provided
under Section 196 should not be interpreted to mean the
finality of the decision declaring the tax measure void.
However, in view of the clear provision of the LGC and after a
conscientious study of the circumstances in this case, this
forum deems it prudent to veer off the stern interpretation of
the phrase "from the date the taxpayer is entitled to a
refund or credit" under Section 196.
A cardinal rule in statutory construction is that when the law
is clear and free from any doubt or ambiguity, there is no
room for construction or interpretation. There is only room
for application.
Inasmuch as the law states in unequivocal terms that a case
or proceeding shall be entertained in any court if filed within
two (2) years from the date of the payment of such tax, fee,
or charge, or from the date the taxpayer is entitled to a
refund or credit. We venture to say now that petitioners'
judicial claim for refund or credit may still be pursued within
two (2) years from the time the assailed ordinance is nullified
or from the time the decision nullifying the ordinance
becomes fin al and executory, because it is only at such time
when the petitioners become entitled to a refund or credit or
their claim for refund is ripened for administrative and
judicial determination.
(2) NO
Petitioner contend that they are entitled to a refund or the

issuance of a tax credit because the increase in the local
business tax rate imposed against retailers set forth in the
New Tax Ordinance is contrary to Sections 191 and 130 of
the LGC. The said increase labelled as a reclassification or
an error correction by the respondents is misleading
because they conveniently conceal that Section 143 of the
LGC does not require respondent City to classify retailers
separately from wholesalers, distributors, and dealers;
neither does Section 143 require respondent City to tax
retailers at the rate of 1 %. Also, petitioners interposed
that the New Tax Ordinance is ineffective and without any
force and effect whatsoever because it was not published
within 10 days from approval thereof in accordance with the
mandatory provisions of Section 188 of the LGC. The New
Tax Ordinance was approved on December 2, 2007, it was
published only on December 23, 24 and 25, 2007 or more
than 21 days after the date of its approval.
On the other hand, respondents aver that all the issues

raised in relation to this issue should not be ruled upon for
the issues raised herein to support petitioners contention
are the same issues raised in the CA case, except as to the
issue on ineffectivity of the New Tax Ordinance in view of the
alleged failure of respondents to publish the said ordinance
within 10 days from approval thereof, which petitioners failed
to raise in the much earlier CA case.
Furthermore, emphasis must be given to a well-entrenched
rule which states that in this jurisdiction, an ordinance is
presumed to be valid unless declared otherwise by a Court in
an appropriate proceeding where the validity of the
ordinance is directly put in issue.
vi.
Is injunction available?
G.R. No. 166134
June 29, 2010
ANGELES CITY, Petitioner,

vs. ANGELES CITY ELECTRIC CORPORATION and
REGIONAL TRIAL COURT BRANCH 57, ANGELES CITY,
Respondents.
FACTS:
48
Respondent Angeles City Electric Corporation (AEC) was

granted legislative franchise to construct, maintain and
operate an electric light, heat and power system for the
purpose of generating and distributing electric light,
heat and power for sale in Angeles City, Pampanga.
January 22, 2004 the City Treasurer issued a Notice of
Assessment to AEC for payment of business tax, license
fee and other charges for the period 1993 to 2004
totalling P94.8M.
AEC protested the assessment but the same was denied
by the City Treasurer for lack of merit. Aggrieved, AEC
appealed the denial of the protest to the RTC via a
Petition for Declaratory Relief.
April 5, 2004- the City Treasurer levied on the real
properties of AEC. A Notice of Auction Sale was
published and posted.
AEC filed with the RTC a petition for declaratory relief
was pending, an Urgent Motion for Issuance of TRO
and/or Writ of Preliminary Injunction to enjoin Angeles
City and its City Treasurer from levying, seizing,
confiscating, garnishing, selling and disposing at public
auction the properties of AEC.
RTC granted the Urgent Motion.
Petitioner then filed a Motion for Dissolution of
Preliminary Injunction and MR of the order but the same
was denied by the RTC. Hence, this petition in the SC.
Petitioner contends that the collection of taxes cannot
be enjoined by the RTC.
SC dismissed the petition.
ISSUE: W/N RTC gravely abused its discretion in issuing the

writ of preliminary injunction?
HELD: NO
The LGC does not specifically prohibit an injunction enjoining
the collection of taxes
A principle deeply embedded in our jurisprudence is that
taxes being the lifeblood of the government should be
collected promptly, without unnecessary hindrance or delay.
In line with this principle, the National Internal Revenue Code
of 1997 (NIRC) expressly provides that no court shall have
the authority to grant an injunction to restrain the collection
of any national internal revenue tax, fee or charge imposed
by the code. An exception to this rule obtains only when in
the opinion of the Court of Tax Appeals (CTA) the collection
thereof may jeopardize the interest of the government
and/or the taxpayer.
The situation, however, is different in the case of the
collection of local taxes as there is no express provision in
the LGC prohibiting courts from issuing an injunction to
restrain local governments from collecting taxes. Thus, in the
case of Valley Trading Co., Inc. v. Court of First Instance of
Isabela, Branch II, cited by the petitioner, we ruled that:
Unlike the National Internal Revenue Code, the Local
Tax Code does not contain any specific provision
prohibiting courts from enjoining the collection of
local taxes. Such statutory lapse or intent, however it may
be viewed, may have allowed preliminary injunction where
local taxes are involved but cannot negate the procedural
rules and requirements under Rule 58.
In light of the foregoing, petitioners reliance on the abovecited case to support its view that the collection of taxes
cannot be enjoined is misplaced. The lower courts denial of
the motion for the issuance of a writ of preliminary injunction
to enjoin the collection of the local tax was upheld in that
case, not because courts are prohibited from granting such
injunction, but because the circumstances required for the
issuance of writ of injunction were not present.
DIGEST Nov 7, 2014
REAL PROPERTY TAX
I.
PRELIMINARY MATTERS
a. Definition of Real Property Tax
[ G.R. No. L-26521, December 28, 1968 ]

EUSEBIO VILLANUEVA, ET AL., PLAINTIFFS-APPELIEES,
VS. CITY OF ILOILO, DEFENDANT-APPELLANT.
FACTS:
The Municipal Board of Iloilo City enacted Ordinance No.

86 imposing license tax fees on
the following: 1)
tenement house, P25 annually; 2) tenement houses,
partially or wholly engaged in or dedicated to business
in the streets of JM Basa, Iznar and Aldeguer, P24 per
apartment , and for other streets P12 per apartment.
Appellees Eusebio Villanueva and Remedio Villanueva

are owners of 5 tenement houses, aggregately
containing 43 apartments, while other appellees and the
same Remedios VIllanuava are owners of 10 apartments.
By virtue of said ordinance, the appellant City then

collected from spouses Villanueva and other appellees.
Eusebio Villanueva has likewise been paying real estate
taxes on his property.
Appellees filed a complaint praying the ordinance be

declared invalid for being beyond the powers of the
Municipal Council to enact.
The lower court declared the ordinance illegal because it

imposes double taxation. Hence, this appeal.
Appellees strongly maintain that it is a property tax and

not a tax on persons engaged in any occupation or
business or exercising privileges, or a license tax or a
privilege tax, or an excise tax.
ISSUE: W/N the tax imposed is a property tax?
HELD: NO
The tax in question is not a real estate tax. Obviously, the
appellees confuse the tax with the real estate tax within the
meaning of the Assessment Law, which, although not
applicable to the City of Iloilo, has counterpart provisions in
the Iloilo City Charter. A real estate tax is a direct tax on
the ownership of lands and buildings or other
improvements thereon, not specially exempted, and is
payable regardless of whether the property is used or
not, although the value may vary in accordance with
such factor. The tax is usually single or indivisible, although
the land and building or improvements erected thereon are
assessed separately, except when the land and building or
improvements belong to separate owners. It is a fixed
proportion of the assessed value of the property taxed, and
requires, therefore, the intervention of assessors, It is
collected or payable at appointed times, and it constitutes a
superior lien on and is enforceable against the property
subject to such taxation, and not by imprisonment of the
owner.
The tax imposed by the ordinance in question does not
possess the aforestated attributes. It is not a tax on the land
on which the tenement houses are erected, although both
land and tenement houses may belong to the same owner.
The tax is not a fixed proportion of the assessed value of the
tenement houses, and does not require the intervention of
assessors or appraisers. It is not payable at a designated
time or date, and is not enforceable against the tenement
houses either by sale or distraint. Clearly, therefore, the tax
in question is not a real estate tax.
b.
Who should pay the real property tax?
G.R. No. L-29772 September 18, 1980

CITY OF BAGUIO, plaintiff-appellee,
vs. FERNANDO S. BUSUEGO, defendant-appellant.
49
FACTS:
Defendant Busuego and GSIS executed, by and between

themselves, a Contract to Sell over a parcel of land
and its building and improvements within a housing
project belonging to GSIS. The purchase price has not
yet been fully paid and the GSIS up to the present time,
title of the property in question although defendant is
using the same.
The property has been consistently assessed by the City

of Baguio in the name of GSIS.
Demands were made on the defendant by the City

Treasurers Office for the unpaid taxes but defendant
refused and failed to pay the same.
Petitioner then instituted a tax collection suit against

defendant.
Both the City Court and the CFI adjudged the defendant
liable to pay realty taxes thereon from the time
possession of such property was transferred to him,
although pending full payment of the purchase price the
seller GSIS as a government exempt from the payment
of taxes retains ownership and title over the property.
Hence, this petition.
ISSUE: Who is liable to pay the tax Busuego or GSIS?
HELD: Defendant Busuego
What is determinative was its rulings on the merits (not on

the nomenclature or classification of the contract), wherein it
correctly held that purchaser-appellant agreed to the
contractual stipulation "to pay and shoulder all taxes and
assessments on the lot and building or improvements
thereon and insurance during the term of the contract. In
view of his acceptance of this condition, he is now estopped
to deny his liability to pay the taxes. And, on the other hand,
when the GSIS sold the property and imposed said condition,
the agency although exempt from the payment of
taxes clearly indicated that the property became
taxable upon its delivery to the purchaser" and that
"the sole determinative factor for exemption from
realty taxes is the "use" to which the property is
devoted. And where "use" is the test, the ownership is
immaterial. (Martin on the Rev. Adm. Code, 1961, Vol. II, p.
487, citing Apostolic Prefect of Mt. Province vs. Treasurer of
Baguio City, 71 Phil. 547). In the instant case, although the
property was still in the name of the GSIS pending the
payment of the full price its use and possession was already
transferred to the defendant." Such contractual stipulation
that the purchaser on installments pay the real estate taxes
pending completion of payments, although the seller who
retained title is exempt from such taxes, is valid and binding,
absent any law to the contrary and none has been cited by
appellant.
Thus, the delivery of possession by the seller GSIS to the

purchaser was clearly with the intention of passing to the
latter the possession, use of and control over said property,
and all the other attributes of ownership, short of the naked
ownership such that it included in said transfer the incidental
obligation to pay the taxes thereon, for nothing more was left
to the GSIS except its right to receive full payment of the
purchase price. The fact that in the contract to sell the GSIS,
although aware of its own exemption from taxation
stipulated and exacted from the purchaser the payment of
taxes amounts to an interpretation on its part that such an
immunity was not to be transmitted to a private person who
becomes the beneficial owner and user of the
property. Verily, this interpretative regulation by the
DIGEST Nov
7, officially
2014 charged with the duty of
administrative
agency
administering and enforcing Commonwealth Act 186 which
contains the tax-exempting provision at issue carries great
weight in determining the operation of said provision.
The position taken by the GSIS is but in conformity with

Section 40(a) of Presidential Decree No. 464 entitled The
Real Property Tax Code promulgated on May 20, 1974 which
reads as follows:
Sec. 40., Exemptions from Real Property

Tax. The exemptions shall be as follows:
(a) Real property owned by the Republic of

the Philippines or any of its political
subdivisions and any government-owned
corporation so exempt by its charter;
Provided, however, That this exemption
shall not apply to real property of the
above-named entitles the beneficial use of
which has been granted, for consideration
or otherwise, to a taxable person.
50
between Mirant and the NPC. Mirant will build and

finance a coal-fired thermal power plant on the lots
owned by the NPC in Pagbilao, Quezon for the purpose
of converting fuel into electricity, and thereafter,
operate and maintain the power plant for a period of 25
years.
The NPC, in turn, will supply the necessary fuel to be
converted by Mirant into electric power, take the power
generated, and use it to supply the electric power needs
of the country.
At the end of the 25-year term, Mirant will transfer the
power plant to the NPC without compensation.
Among the obligations undertaken by the NPA under the
ECA was the payment of all taxes that the government
may impose on Mirant.
The Municipality of Pagbilao assessed Mirants RPT on
the power plant and its machineries in the total amount
of P1 billion.
NPC filed a petition before the Local Board of
Assessment of Appeals (LBAA) objecting the assessment
against Mirant on the claim that it is entitled to the tax
exemptions provided in Sec. 234 of the LGC. LBAA and
the CBAA dismissed the petition.
Upon its appeal, the CTA dismissed the NPCs petition. It
held that the NPC was not the proper party to protest
the RPT assessment as it did not have requisite legal
interest.
SC denied NPCs petition for review.
ISSUE: Who is liable to pay NPC or Mirant?

HELD: MIRANT
Thus under this provision, while the GSIS may be exempt
from real estate tax the exemption does not cover property
belonging to it "where the beneficial use thereof has been
granted for consideration or otherwise to a taxable person."
There can be no doubt that under the provisions of the
contract in question, the purchaser to whose possession the
property had been transferred was granted beneficial use
thereof. It follows on the strength of the provision sec. 40(a)
of PD 464 that the said property is not exempt from the real
property tax. While this decree just cited was still inexistent
at the time the taxes at issue were assessed on the herein
appellant, indeed its above quoted provision sheds light
upon the legislative intent behind the provision of
Commonwealth Act 186, pertaining to exemption of the GSIS
from taxes.
The end result is but in consonance with the established rule

in taxation that exemptions are held strictly against the
taxpayer and liberally in favor of the taxing authority.
G.R. No. 171586
July 15, 2009
NATIONAL POWER CORPORATION, Petitioner,

vs. PROVINCE OF QUEZON and MUNICIPALITY OF
PAGBILAO, Respondents.
FACTS:
The NPC is a government-owned and controlled

corporation mandated by law to undertake, among
others, the production of electricity from nuclear,
geothermal, and other sources, and the transmission of
electric power on a nationwide basis.
NPC entered into an Energy Conversion Agreement

(ECA) with Mirant on November 9, 1991. The ECA
provided for a build-operate-transfer (BOT) arrangement
A person legally burdened with the obligation to pay for the

tax imposed on a property has legal interest in the property
and the personality to protest a tax assessment on the
property. This is the logical and legal conclusion when
Section 226, on the rules governing an assessment protest,
is placed side by side with Section 250 on the payment of
real property tax; both provisions refer to the same parties
who may protest and pay the tax:
SECTION 226. Local Board of Assessment Appeals.
- Any owner or person having legal interest in
the property who is not satisfied with the action of
the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60)
days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment
Appeals of the province or city xxx.
SECTION 250. Payment of Real Property Taxes in
Instalments. - The owner of the real property or
the person having legal interest therein may
pay the basic real property tax xxx due thereon
without interest in four (4) equal instalments xxx.
The liability for taxes generally rests on the owner of the real
property at the time the tax accrues. This is a necessary
consequence
that
proceeds
from
the
fact
of
ownership. However, personal liability for realty taxes may
also expressly rest on the entity with the beneficial use of
the real property, such as the tax on property owned by the
government but leased to private persons or entities, or
when the tax assessment is made on the basis of the actual
use of the property. In either case, the unpaid realty tax
attaches to the property but is directly chargeable
against the taxable person who has actual and
beneficial use and possession of the property
regardless of whether or not that person is the owner.
In the present case, the NPC, contrary to its claims, is neither
the owner nor the possessor/user of the subject machineries.
The ECAs terms regarding the power plants machineries
clearly vest their ownership with Mirant.
On liability for taxes, the NPC indeed assumed responsibility
for the taxes due on the power plant and its
machineries, specifically, "all real estate taxes and
assessments, rates and other charges in respect of the site,
DIGEST
Novimprovements
7, 2014 thereon and the [power
the
buildings and
plant]." At first blush, this contractual provision would appear
to make the NPC liable and give it standing to protest the
assessment. The tax liability we refer to above, however, is
the liability arising from law that the local government unit
can rightfully and successfully enforce, not the contractual
liability that is enforceable between the parties to a contract
as discussed below. By law, the tax liability rests on Mirant
based on its ownership, use, and possession of the plant and
its machineries.
In Testate of Concordia Lim v. City of Manila, we had occasion
to rule that:
In [Baguio v. Busuego], the assumption by the
vendee of the liability for real estate taxes
prospectively due was in harmony with the tax
policy that the user of the property bears the
tax. In [the present case], the interpretation that
the [vendee] assumed a liability for overdue real
estate taxes for the periods prior to the contract of
sale is incongruent with the said policy because
there was no immediate transfer of possession of
the properties previous to full payment of the
repurchase price. Xxxx
To impose the real property tax on the estate which was
neither the owner nor the beneficial user of the property
during the designated periods would not only be contrary to
law but also unjust.
For a fuller appreciation of this ruling, the Baguio case
referred to a contract of sale wherein the vendee not only
assumed liability for the taxes on the property, but also
acquired its use and possession, even though title remained
with the vendor pending full payment of the purchase price.
Under this situation, we found the vendee who had assumed
liability for the realty taxes and who had been given use and
possession to be liable. Compared with Baguio, the Lim case
supposedly involved the same contractual assumption of tax
liabilities, but possession and enjoyment of the property
remained with other persons. Effectively, Lim held that the
contractual assumption of the obligation to pay real property
tax, by itself, is not sufficient to make one legally
compellable by the government to pay for the taxes due; the
person liable must also have use and possession of the
property.
Using the Baguio and Lim situations as guides, and after
considering the comparable legal situations of the parties
assuming liability in these cases, we conclude that the NPCs
contractual liability alone cannot be the basis for the
enforcement of tax liabilities against it by the local
government unit. In Baguio and Lim, the vendors still
retained ownership, and the effectiveness of the tax
liabilities assumed by the vendees turned on the possession
and use of the property subject to tax. In other words, the
contractual assumption of liability was supplemented by an
interest that the party assuming liability had on the property
taxed; on this basis, the vendee in Baguio was found liable,
while the vendee in Lim was not. In the present case, the
NPC is neither the owner, nor the possessor or user of the
property taxed. No interest on its part thus justifies any tax
liability on its part other than its voluntary contractual
undertaking. Under this legal situation, only Mirant as the
contractual obligor, not the local government unit, can
enforce the tax liability that the NPC contractually assumed;
the NPC does not have the "legal interest" that the law and
jurisprudence require to give it personality to protest the tax
imposed by law on Mirant.
51
FACTS:
NPC filed a motion for reconsideration of the SCs

decision of July 15, 2009 (please refer to the above
case), in which SC denied Napocors claimed RPT
exemptions.
ISSUE: W/N Napocor may appeal the real property tax
assessment.
HELD: NO
Legal interest is defined as interest in property or a claim
cognizable at law, equivalent to that of a legal owner who
has legal title to the property. Given this definition, Napocor
is clearly not vested with the requisite interest to protest the
tax assessment, as it is not an entity having the legal title
over the machineries. It has absolutely no solid claim of
ownership or even of use and possession of the machineries,
as our July 15, 2009 Decision explained.
Given the special nature of a BOT agreement, we find Article
1503 inapplicable to define the contract between Napocor
and Mirant, as it refers only to ordinary contracts of sale. We
thus declared in Tatad v. Garcia that under BOT agreements,
the private corporations/investors are the owners of the
facility or machinery concerned. Apparently, even Napocor
and Mirant recognize this principle; Article 2.12 of their BOT
Agreement provides that "until the Transfer Date, [Mirant]
shall, directly or indirectly, own the Power Station and all the
fixtures, fitting, machinery and equipment on the Site x x x.
[Mirant] shall operate, manage, and maintain the Power
Station for the purpose of converting fuel of Napocor into
electricity."
Moreover, if Napocor truly believed that it was the owner of
the subject machineries, it should have complied with
Sections 202 and 206 of the LGC which obligates owners of
real property to:
a. file a sworn statement declaring the true value of
the real property, whether taxable or exempt; and
b. file sufficient documentary evidence supporting
its claim for tax exemption.
While a real property owners failure to comply with Sections
202 and 206 does not necessarily negate its tax obligation
nor invalidate its legitimate claim for tax exemption,
Napocors omission to do so in this case can be construed as
contradictory to its claim of ownership of the subject
machineries. That it assumed liability for the taxes that may
be imposed on the subject machineries similarly does not
clothe it with legal title over the same. We do not believe
that the phrase "person having legal interest in the property"
in Section 226 of the LGC can include an entity that assumes
another persons tax liability by contract.
G.R. No. 186242
December 23, 2009
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner,

vs. CITY TREASURER and CITY ASSESSOR of the CITY
OF MANILA, Respondents.
G.R. No. 171586
January 25, 2010
NATIONAL POWER CORPORATION, Petitioner,

vs. PROVINCE OF QUEZON and MUNICIPALITY OF
PAGBILAO, Respondent.
FACTS:
GSIS owns 2 parcels of land, one located at Katigbak 25 th

St., Bonifacio Drive, Manila and the other at Concepcion
cor. Arroceros Sts., also in Manila.
DIGEST
Nov 7,of2014
Section 198. Fundamental Principles. The City Treasurer
Manila informed GSIS President and
GM of the unpaid RPT due on the aforementioned
property. Respondent then issued a Notices of Realty Tax
Delinquency for the subject properties.
GSIS wrote back emphasizing its exemption from all
kinds of taxes, including realty taxes under RA 8291.
GSIS filed a petition for certiorari and prohibition with
prayer for a restraining and injunctive relief before the
Manial RTC. GSIS later amended its petition the fact that
the Katigbak property has been leased to and occupied
by the Manila Hotel Corporation (MHC) which has
contractually bound itself to pay any realty taxes that
may be imposed on the subject property.
RTC dismissed the GSIS petition. Hence, this instant
petition for review.
SC granted the petition.
ISSUE: Who is liable to pay tax MHC or GSIS?

HELD: MHC
52
The appraisal,
assessment, levy and collection of real property tax shall be
guided by the following fundamental principles:
(a) Real property shall be appraised at its current
and fair market value;
(b) Real property shall be classified for assessment
purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a
uniform classification within each local government
unit;
(d) The appraisal, assessment, levy and collection of
real property tax shall not be let to any private
person; and
(e) The appraisal and assessment of real property
shall be equitable.
d.
Important Definitions
i.
Real Property for RPT Purposes
Art. 415. The following are immovable property:

As we declared in Testate Estate of Concordia T. Lim, "the
unpaid tax attaches to the property and is chargeable
against the taxable person who had actual or beneficial use
and possession of it regardless of whether or not he is the
owner." Of the same tenor is the Courts holding in the
subsequent Manila Electric Company v. Barlis and later
in Republic v. City of Kidapawan. Actual use refers to the
purpose for which the property is principally or
predominantly utilized by the person in possession thereof.
Being in possession and having actual use of the Katigbak

property since November 1991, MHC is liable for the realty
taxes assessed over the Katigbak property from 1992 to
2002.
The foregoing is not all. As it were, MHC has obligated itself
under the GSIS-MHC Contract of Lease to shoulder such
assessment. Stipulation l8 of the contract pertinently reads:
18. By law, the Lessor, [GSIS], is exempt from taxes,

assessments and levies. Should there be any
change in the law or the interpretation thereof or
any other circumstances which would subject the
Leased Property to any kind of tax, assessment or
levy which would constitute a charge against the
Lessor or create a lien against the Leased Property,
the Lessee agrees and obligates itself to
shoulder and pay such tax, assessment or levy
as it becomes due. (Emphasis ours.)
As a matter of law and contract, therefore, MHC stands liable

to pay the realty taxes due on the Katigbak property.
Considering, however, that MHC has not been impleaded in
the instant case, the remedy of the City of Manila is to serve
the realty tax assessment covering the subject Katigbak
property to MHC and to pursue other available remedies in
case of nonpayment, for said property cannot be levied upon
as shall be explained below.
c.
Fundamental Principles
(1) Land, buildings, roads and constructions of all

kinds adhered to the soil;
(2) Trees, plants, and growing fruits, while they are
attached to the land or form an integral part of an
immovable;
(3) Everything attached to an immovable in a fixed
manner, in such a way that it cannot be separated
therefrom without breaking the material or
deterioration of the object;
(4) Statues, reliefs, paintings or other objects for
use or ornamentation, placed in buildings or on
lands by the owner of the immovable in such a
manner that it reveals the intention to attach them
permanently to the tenements;
(5)
Machinery,
receptacles,
instruments
or
implements intended by the owner of the tenement
for an industry or works which may be carried on in
a building or on a piece of land, and which tend
directly to meet the needs of the said industry or
works;
(6) Animal houses, pigeon-houses, beehives, fish
ponds or breeding places of similar nature, in case
their owner has placed them or preserves them with
the intention to have them permanently attached to
the land, and forming a permanent part of it; the
animals in these places are included;
(7) Fertilizer actually used on a piece of land;
(8) Mines, quarries, and slag dumps, while the
matter thereof forms part of the bed, and waters
either running or stagnant;
(9) Docks and structures which, though floating, are
intended by their nature and object to remain at a
fixed place on a river, lake, or coast;
(10) Contracts for public works, and servitudes and
other real rights over immovable property. (334a)
ii.
Machineries
G.R. No. L-17870

September 29, 1962
MINDANAO BUS COMPANY, petitioner,
vs. THE CITY ASSESSOR & TREASURER and the BOARD
OF TAX APPEALS of Cagayan de Oro City, respondents.
FACTS:
Mindanao Bus Company is a public utility solely engaged

in transporting passengers and cargoes by motor trucks,
over its authorized lines in the island of Mindanao,
DIGEST
Nov
2014 by the Public Service
collecting
rates7,approved
xxx
xxx
xxx
Commission.
Petitioner is the owner of the land where it maintains
and operates a garage for its TPU motor trucks; a repair
shop; blacksmith and carpentry shops, and with these
machineries which are placed therein, its TPU trucks are
made; body constructed; and same are repaired in a
condition to be serviceable in the TPU land
transportation business it operates. These machineries
have never been or were never used as industrial
equipments to produce finished products for sale, nor to
repair machineries, parts and the like offered to the
general public indiscriminately for business or
commercial purposes for which petitioner has never
engaged in, to date.1awphl.nt
The City Assessor of Cagayan de Oro assessed petitioner
realty tax on its maintenance and repair equipment.
These machines includes: Hobart electric welder
machine, storm boring machine, lathe machine with
motor, black and decker grinder, PEMCO hydraulic press,
battery charger and D-engine Waukesha-M-Fuel.
Petitioner appealed the assessment to the Board of Tax
Appeals on the ground that the same are not realty.
The Board sustained the city assessor, so petitioner filed
with the Court of Tax Appeals a petition for review of the
assessment. CTA sustained the respondent city
assessors ruling. Hence, this appeal.
Respondents contend that said equipments, tho
movable, are immobilized by destination.
SC the subject petition is hereby set aside and the
equipment in question is declared not subject to
assessment as real estate for the purposes of real estate
tax.
ISSUE: W/N the subject equipments are immovable taxable

real properties.
HELD: NO
So that movable equipments to be immobilized in
contemplation of the law must first be "essential and
principal elements" of an industry or works without which
such industry or works would be "unable to function or carry
on the industrial purpose for which it was established." We
may here distinguish, therefore, those movable which
become
immobilized
by
destination
because
they
are essential and principal elements in the industry for those
which may not be so considered immobilized because they
are merely incidental, not essential and principal. Thus, cash
registers, typewriters, etc., usually found and used in hotels,
restaurants, theaters, etc. are merely incidentals and are not
and should not be considered immobilized by destination, for
these businesses can continue or carry on their functions
without these equity comments. Airline companies use
forklifts, jeep-wagons, pressure pumps, IBM machines, etc.
which are incidentals, not essentials, and thus retain their
movable nature. On the other hand, machineries of
breweries used in the manufacture of liquor and soft drinks,
though movable in nature, are immobilized because they are
essential to said industries; but the delivery trucks and
adding machines which they usually own and use and are
found within their industrial compounds are merely incidental
and retain their movable nature.
Similarly, the tools and equipments in question in this instant
case are, by their nature, not essential and principle
municipal elements of petitioner's business of transporting
passengers and cargoes by motor trucks. They are merely
incidentals acquired as movables and used only for
expediency to facilitate and/or improve its service. Even
without such tools and equipments, its business may be
carried on, as petitioner has carried on, without such
equipments, before the war. The transportation business
could be carried on without the repair or service shop if its
rolling equipment is repaired or serviced in another shop
belonging to another.
The law that governs the determination of the question at
issue is as follows:
Art. 415. The following are immovable property:
53
(5)
Machinery,
receptacles,
instruments
or
implements intended by the owner of the tenement
for an industry or works which may be carried on in
a building or on a piece of land, and which tend
directly to meet the needs of the said industry or
works; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted
provision also requires that the industry or works be carried
on in a building or on a piece of land. Thus in the case
of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid
containers, and instruments or implements" are found in a
building constructed on the land. A sawmill would also be
installed in a building on land more or less permanently, and
the sawing is conducted in the land or building.
But in the case at bar the equipments in question are
destined only to repair or service the transportation
business, which is not carried on in a building or
permanently on a piece of land, as demanded by the law.
Said equipments may not, therefore, be deemed real
property.
Resuming what we have set forth above, we hold that
the equipments in question are not absolutely
essential to the petitioner's transportation business,
and petitioner's business is not carried on in a
building, tenement or on a specified land, so said
equipment may not be considered real estate within
the meaning of Article 415 (c) of the Civil Code.
G.R. No. L-50466 May 31, 1982

CALTEX (PHILIPPINES) INC., petitioner,
vs. CENTRAL BOARD OF ASSESSMENT APPEALS and
CITY ASSESSOR OF PASAY, respondents.
FACTS:
Caltex (Philippines) Inc. installed machinery and

equipment in its gas stations located on leased
land.
The machines and equipment consists of

underground tanks, elevated tank, elevated water
tanks, water tanks, gasoline pumps, computing
pumps, water pumps, car washer, car hoists, truck
hoists, air compressors and tireflators.
The said machines and equipment are loaned by

Caltex to gas station operators under an appropriate
lease agreement or receipt, It is stipulated in the
lease contract that the operators, upon demand,
shall return to Caltex the machines and equipment
in good condition as when received, ordinary wear
and tear expected.
The City Assessor of Pasay City characterized the

said items of gas station equipment and machinery
as taxable realty. The City Board of Tax Appeals
ruled that they are pesonalty. The assessor
appealed to the Central Board of Assessment
Appeals.
The Board held in its decision that the said

machines and equipment are real property within
the meaning of sections 3(k) and (m) and 38 of the
Real Property Tax Code, PD 464, and that the
definitions of real property and personal property in
articles 415 and 416 of the Civil Code are not
applicable to this case.
Hence, this certiorari petition.
SC affirmed the questioned decision and resolution

of the Central Board of Assessment Appeals. The
petition for certiorari was dismissed for lack of
merit.
ISSUE: W/N the pieces of gas station equipment and
machinery are subject to realty tax.
Nov 7, 2014
treated the machinery as personal property.
DIGEST
HELD:
YES
54
This Court
sustained the sheriff's action.

Section 2 of the Assessment Law provides that the realty tax
is due "on real property, including land, buildings, machinery,
and other improvements" not specifically exempted in
section 3 thereof. This provision is reproduced with some
modification in the Real Property Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There
shall be levied, assessed and collected in all
provinces, cities and municipalities an annual ad
valorem tax on real property, such as land,
buildings, machinery and other improvements
affixed or attached to real property not hereinafter
specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements is 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
adapt it for new or further purposes.
m)
Machinery
shall
embrace
machines,
mechanical contrivances, instruments, appliances
and apparatus attached to the real estate. It
includes the physical facilities available for
production, as well as the installations and
appurtenant service facilities, together with all other
equipment designed for or essential to its
manufacturing, industrial or agricultural purposes
(See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as

appurtenances to the gas station building or shed
owned by Caltex (as to which it is subject to realty
tax) and which fixtures are necessary to the operation
of the gas station, for without them the gas station
would be useless, and which have been attached or
affixed permanently to the gas station site or
embedded therein, are taxable improvements and
machinery within the meaning of the Assessment Law
and the Real Property Tax Code.
Caltex invokes the rule that machinery which is movable in

its nature only becomes immobilized when placed in a plant
by the owner of the property or plant but not when so placed
by a tenant, a usufructuary, or any person having only a
temporary right, unless such person acted as the agent of
the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).
Here, the question is whether the gas station equipment and

machinery permanently affixed by Caltex to its gas station
and pavement (which are indubitably taxable realty) should
be subject to the realty tax. This question is different from
the issue raised in the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even

though for some purposes they might be considered
personalty. "It is a familiar phenomenon to see things classed
as real property for purposes of taxation which on general
principle might be considered personal property" (Standard
Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).
This case is also easily distinguishable from Board of

Assessment Appeals vs. Manila Electric Co., 119 Phil. 328,
where Meralco's steel towers were considered poles within
the meaning of paragraph 9 of its franchise which exempts
its poles from taxation. The steel towers were considered
personalty because they were attached to square metal
frames by means of bolts and could be moved from place to
place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the

same as tools and equipment in the repair shop of a bus
company which were held to be personal property not
subject to realty tax (Mindanao Bus Co. vs. City Assessor,
116 Phil. 501).
MANILA ELECTRIC COMPANY (Meralco), petitioner, vs.

CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD
OF ASSESSMENT APPEALS OF BATANGAS and
PROVINCIAL ASSESSOR OF BATANGAS, respondents.
G.R. No. L-47943 | May 31, 1982 (2D)
Facts:
That ruling is an interpretation of paragraph 5 of article 415

of the Civil Code regarding machinery that becomes real
property by destination. In the Davao Saw Mills case the
question was whether the machinery mounted on
foundations of cement and installed by the lessee on leased
land should be regarded as real property for purposes of
execution of a judgment against the lessee. The sheriff
Two oil storage tanks, used for storing fuel oil for
Meralco's power plants, were installed by Manila
Electric Company on a lot in San Pascual, Batangas
which it leased in 1968 from Caltex (Phil.), Inc.
In 1970, the municipal treasurer of Bauan, Batangas, on
the basis of an assessment made by the provincial
assessor, required Meralco to pay realty taxes on the
two tanks.
CBAA: The tanks together with the foundation, walls,
dikes, steps, pipelines and other appurtenances
constitute taxable improvements.
MR denied. Hence Meralco files this petition, contending
that the Board acted without jurisdiction and committed
a grave error of law in holding that its storage tanks are
taxable real property.
o
The said oil storage tanks do not fall within
any of the kinds of real property
enumerated in Article 415 of the Civil Code
and, therefore, they cannot be categorized
as realty by nature, by incorporation, by
destination nor by analogy.
o
Stress is laid on the fact that the tanks are
not attached to the land and that they
DIGEST Nov
7, placed
2014 on leased land, not on the
were
in the City of Manila and its suburbs,
land owned by Meralco.
Issue: W/N the oil storage tanks do not fall within any of the
kinds of real property subject to tax
Held: No
The issue raised by Meralco has to be resolved in the light of
the provisions of the Assessment Law, Commonwealth Act
No. 470, and the Real Property Tax Code, Presidential Decree
No. 464 which took effect on June 1, 1974.
Section 2 of the Assessment Law provides that the realty tax
is due "on real property, including land, buildings, machinery,
and other improvements" not specifically exempted in
section 3 thereof. This provision is reproduced with some
modification in the Real Property Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. They
shall be levied, assessed and collected in all
provinces, cities and municipalities an annual ad
valorem tax on real property, such as land,
buildings, machinery and other improvements
affixed or attached to real property not hereinafter
specifically exempted.
The Code contains the following definition in its section 3:
55
as authorized by
Act No. 484.

Meralco's electric power is generated by its hydroelectric plant and is transmitted to the City of Manila by
means of electric transmission wires, which are fastened
to insulators attached on steel towers constructed by
respondent at intervals, from its hydro-electric plant in
the province of Laguna to the City of Manila.
Petitioner City Assessor of Quezon City then declared the
aforesaid steel towers for real property tax.
After denying respondent's petition to cancel these tax
declarations, an appeal was taken by respondent to the
Board of Assessment Appeals of Quezon City.
Respondent paid the amount under protest, and filed a
petition for review in the CTA, which ordered the
cancellation of the said tax declarations and the
petitioner City Treasurer of Quezon City to refund to the
respondent.
In upholding the cause of respondents, the CTA held
that: (1) the steel towers come within the term "poles"
which are declared exempt from taxes under part II
paragraph 9 of respondent's franchise; (2) the steel
towers are personal properties and are not subject to
real property tax; and (3) the City Treasurer of Quezon
City is held responsible for the refund of the amount
paid.
k) Improvements is 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
adapt it for new or further purposes.
Issue: W/N the steel towers of Meralco are subject to real

property tax
While the two storage tanks are not embedded in the land,
they may, nevertheless, be considered as improvements
on the land, enhancing its utility and rendering it
useful to the oil industry. It is undeniable that the two
tanks have been installed with some degree of permanence
as receptacles for the considerable quantities of oil needed
by Meralco for its operations.
PAR 9. The grantee shall be liable to pay the same

taxes upon its real estate, buildings, plant (not
including
poles,
wires,
transformers,
and
insulators), machinery and personal property as
other persons are or may be hereafter required by
law to pay ... Said percentage shall be due and
payable at the time stated in paragraph nineteen of
Part One hereof, ... and shall be in lieu of all taxes
and assessments of whatsoever nature and by
whatsoever authority upon the privileges, earnings,
income, franchise, and poles, wires, transformers,
and insulators of the grantee from which taxes and
assessments the grantee is hereby expressly
exempted.
Oil storage tanks were held to be taxable realty in Standard

Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real property" may
include things which should generally be regarded as
personal property (84 C.J.S. 171, Note 8). It is a familiar
phenomenon to see things classed as real property for
purposes of taxation which on general principle might be
considered personal property (Standard Oil Co. of New York
vs. Jaramillo, 44 Phil. 630, 633).
Case of Board of Assessment Appeals vs. Manila Electric
Company, 119 Phil. 328, wherein Meralco's steel towers were
held not to be subject to realty tax, is not in point.
o
In that case the steel towers were regarded
as poles and under its franchise Meralco's
poles are exempt from taxation.
o
Moreover, the steel towers were not
attached to any land or building. They were
removable from their metal frames.
Nor is there any parallelism between this case and Mindanao
Bus Co. vs. City Assessor, 116 Phil. 501
o
In that case, the tools and equipment in
the repair, carpentry and blacksmith shops
of a transportation company were held not
subject to realty tax because they were
personal property.
WHEREFORE, the petition is dismissed.
BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR
and CITY TREASURER OF QUEZON CITY, petitioners, vs.
MANILA ELECTRIC COMPANY (Meralco), respondent
G.R. No. L-15334 | January 31, 1964 (EB)
Facts:
The Municipal Board of Manila granted a franchise to
Meralco to construct, maintain and operate an electric
street railway and electric light, heat and power system
Held: No
Par. 9, Part
Franchise:
Two,
Act
No.
484
Respondent's
Several courts of last resort in the United States

have called these steel supports "steel towers", and
they denominated these supports or towers, as
electric poles. In their decisions the words "towers"
and "poles" were used interchangeably, and it is
well understood in that jurisdiction that a
transmission tower or pole means the same thing.
o
Stemmons and Dallas Light Co. (Tex) 212
S.W. 222, 224; 32-A Words and Phrases, p.
365: Poles construed to mean either wood
or metal poles and in view of the land
being subject to overflow, and the
necessary carrying of numerous wires and
the distance between poles, the statute
was interpreted to include towers or poles
o
Salt River Valley Users' Ass'n v. Compton, 8
P. 2nd, 249-250: The term "poles" was also
used to denominate the steel supports or
towers used by an association used to
convey its electric power furnished to
subscribers and members, constructed for
the purpose of fastening high voltage and
dangerous electric wires alongside public
highways.
o
Connecticut Light and Power Co. v. Oxford,
101 Conn. 383, 126 Atl. p. 1: The term
"poles" was used to denote the steel
towers of an electric company engaged in
the generation of hydro-electric power
generated from its plant to the Tower of
Oxford and City of Waterbury.
DIGEST
Nov 7,therefore,
2014 that the word "poles", as
It isevident,
industry or works in the land
used in Act No. 484 and incorporated in the

petitioner's franchise, should not be given a
restrictive and narrow interpretation, as to defeat
the very object for which the franchise was granted.
o
The poles as contemplated thereon, should
be understood and taken as a part of the
electric power system of the respondent
Meralco, for the conveyance of electric
current from the source thereof to its
consumers.
o
If the respondent would be required to
employ "wooden poles", or "rounded poles"
as it used to do fifty years back, then one
should admit that the Philippines is one
century behind the age of space. It should
also be conceded by now that steel towers,
like the ones in question, for obvious
reasons, can better effectuate the purpose
for which the respondent's franchise was
granted.
Granting for the purpose of argument that the steel
supports or towers in question are not embraced
within the term poles, the logical question posited is
whether they constitute real properties, so that they
can be subject to a real property tax.
o
Tax law does not provide for a definition of
real property; but Article 415 of the Civil
Code does, by stating the following are
immovable property:
(1) Land, buildings, roads, and constructions of
all kinds adhered to the soil; x x x
xxx
xxx
(3) Everything attached to an immovable in a
fixed manner, in such a way that it cannot be
separated therefrom without breaking the
material or deterioration of the object; x x x
xxx
xxx
(5) Machinery, receptacles, instruments or
implements intended by the owner of the
tenement for an industry or works which may
be carried in a building or on a piece of land,
and which tends directly to meet the needs of
the said industry or works; x x x
x x x
xxx
o
The steel towers or supports in question,

do not come within the objects mentioned
in paragraph 1, because they do not
constitute buildings or constructions
adhered to the soil. They are not
construction analogous to buildings nor
adhering to the soil. As per description,
given by the lower court, they are
removable and merely attached to a
square metal frame by means of bolts,
which when unscrewed could easily be
dismantled and moved from place to place.
They cannot be included under paragraph
3, as they are not attached to an
immovable in a fixed manner, and
they
can
be separated without
breaking the material or causing
deterioration upon the object to which
they are attached. Each of these steel
towers or supports consists of steel bars or
metal strips, joined together by means of
bolts, which can be disassembled by
unscrewing the bolts and reassembled by
screwing the same.
These steel towers or supports do not also
fall under paragraph 5, for they are not
machineries, receptacles, instruments
or implements, and even if they were,
they are not intended for industry or works
on the land. Petitioner is not engaged in an
56
in which the
steel supports or towers are constructed.
iii. Actual Use

ALFREDO PATALINGHUG, petitioner, vs. HON. COURT OF
APPEALS, RICARDO CRIBILLO, MARTIN ARAPOL,
CORAZON ALCASID, PRIMITIVA SEDO, respondents.
G.R. No. 104786 | January 27, 1994 (3D)
Facts:
Sangguniang Panlungsod of Davao City enacted

Ordinance No. 363, wherein Section 8 of which
provides for a condition that funeral parlors shall be
established not less than 50 meters from any
residential
structures,
churches
and
other
institutional buildings.
Petitioner was issued a building permit for the
construction of a funeral parlor in the name and
style of Metropolitan Funeral Parlor.
Acting on the complaint of several residents of
Barangay Agdao, Davao City that the construction
of petitioner's funeral parlor violated Ordinance No.
363, the Sangguniang Panlungsod conducted an
investigation and found that "the nearest residential
structure, owned by Wilfred G. Tepoot is only 8
inches to the south.
Notwithstanding the findings of the Sangguniang
Panlungsod, petitioner continued to construct his
funeral parlor. Consequently, private respondents
filed a case for the declaration of nullity of a
building permit.
The lower Court denied the petition. This was
however reversed by the CA.
CAs Ruling:
o
The construction of the funeral parlor was
within the 50-meter radius measured from
the Tepoot's building
o
Although Tepoot's building was commercial
and was used by Mr. Tepoot's lessee for
laundry business, it was a residential lot as
reflected in the tax declaration, thus
paving the way for the application of
Ordinance No. 363.
Hence this appeal.
Issue 1: W/N the CA erred in considering the tax declaration

of Mr. Tepoots building as basis for determining the nature of
the said property
Issue 2: For purposes of real property tax, what is the basis
of the assessment of Mr. Tepoots building?
Held: Yes; Actual Use
A tax declaration is not conclusive of the
nature of the property for zoning purposes. A
property may have been declared by its owner as
residential for real estate taxation purposes but it
may well be within a commercial zone. A
discrepancy may thus exist in the determination of
the nature of property for real estate taxation
purposes vis-a-vis the determination of a property
for zoning purposes.
Needless to say, even if we are to examine the
evidentiary value of a tax declaration under the
Real Property Tax Code, a tax declaration only
enables the assessor to identify the same for
assessment levels. In fact, a tax declaration does
not bind a provincial/city assessor, for under Sec.
22 of the Real Estate Tax Code, appraisal and
assessment are based on the actual use
irrespective of "any previous assessment or
taxpayer's valuation thereon," which is based
on a taxpayer's declaration. In fact, a piece of
land declared by a taxpayer as residential may be
assessed by the provincial or city assessor as
commercial because its actual use is commercial.
The trial court's determination that Mr. Tepoot's
building is commercial and, therefore, Sec. 8 is
inapplicable, is strengthened by the fact that the
57
DIGEST
Nov 7, 2014
Sangguniang
Panlungsod
has
declared
the
(4) or to the gross illegality of the assessment when
questioned area as commercial or C-2.

Consequently, even if Tepoot's building was
declared for taxation purposes as residential, once a
local government has reclassified an area as
commercial, that determination for zoning purposes
must prevail. While the commercial character of the
questioned vicinity has been declared thru the
ordinance, private respondents have failed to
present convincing arguments to substantiate their
claim that Cabaguio Avenue, where the funeral
parlor was constructed, was still a residential zone.
Unquestionably, the operation of a funeral parlor
constitutes a "commercial purpose," as gleaned
from Ordinance No. 363.
iv. Appraisal
v. Assessment
vi. Assessed Value
e. Appraisal of Real Property
Section 201. Appraisal of Real Property. - All real
property, whether taxable or exempt, shall be appraised at
the current and fair market value prevailing in the locality
where the property is situated. The Department of Finance
shall promulgate the necessary rules and regulations for the
classification, appraisal, and assessment of real property
pursuant to the provisions of this Code.
RAUL H. SESBREO, petitioner, vs. CENTRAL BOARD OF
ASSESSMENT APPEALS and THE CITY ASSESSOR OF
CEBU CITY, respondents
G.R. No. 106588 | March 24, 1997 (3D)
Facts:
On April 3, 1980, petitioner purchased from Estrella
Benedicto Tan 2 parcels of land in Cebu City.
Thereafter, petitioner declared the real property
constructed on the said lots for purposes of tax
assessment as a residential house of strong materials
with a floor area of 60 square meters.
The field inspectors of the Cebu City Assessor then
discovered that the real property declared and assessed
was actually a residential building consisting of 4 storeys
with a 5th storey used as a roof deck.
Based on these findings, petitioners was assessed real
property tax.
Petitioner protested the new assessment for being
"excessive and unconscionable," contending that it was
increased by more than 1,000% as compared to its
previous market value of P60,000.00 or assessed value
of P36,900.00
Petitioner insists that CBAA should have computed the
assessed value of the property based on its market
value as defined in paragraph n, Section 3 of PD 464, to
wit:
n) Market Value is defined as "the highest price estimated
in terms of money which the property will buy if
exposed for sale in the open market allowing a
reasonable time to find a purchaser who buys with
knowledge of all uses to which it is adapted and for
which it is capable of being used." It is also referred to
as "the price at which a willing seller would sell and a
willing buyer would buy, neither being under abnormal
pressure.
Arguing that he should not be liable for back taxes,
petitioner states that Respondent CBAA should have
applied Section 24, instead of Section 25, of PD 464.
These statutory provisions read:
"Section 24.
Date of effectivity of Assessment or
Reassessment. All assessments or reassessments
made after the first day of January of any year shall take
effect on the first day of January of the succeeding year:
Provided, however, That the reassessment of real
property due to its (1) partial or total destruction, or to
(2) a major change in its actual use, or to any (3) great
and sudden inflation or deflation of real property values,
made or to any other abnormal cause,

within ninety days from the date any
causes occurred, the same to take
beginning of the quarter next
reassessment.
shall be made
such cause or
effect at the
following the
Section 25. Assessment of Property Subject to Back Taxes.

Real property declared for the first time shall have
back taxes assessed against it for the period during
which it would have been liable if assessed from the first
in proper course but in no case for more than ten years
prior to the year of initial assessment; Provided,
however, that the back taxes shall be computed on the
basis of the applicable schedule of values in force during
the corresponding period.
Opposing the application of Section 25 of PD 464,

petitioner posits that Respondent CBAA "misread or
misinterpreted" the same, specifically the phrases
therein referring to "property declared for the first time"
and "prior to the year of initial assessment." Without
expressly stating so, petitioner purports to argue that
Section 25 is inapplicable because the property in
question has been declared for assessment as early as
1980 (and even before that, by the prior owner), and not
"for the first time" in 1989.
Issue 1: W/N CBAA should have computed the assessed

value of the property based on its market value as defined in
PD 464
Held 1: No
The cited provision merely defines "market value." It
does not in any way direct that the market value as
defined therein should be used as basis in
determining the value of a property for purposes of
real property taxation.
On the other hand, Section 5 of PD 464 provides
unequivocally that "all real property, whether
taxable or exempt, shall be appraised at the current
and fair market value prevailing in the locality
where the property is situated."
Contrary to petitioner's contention, acquisition
cost cannot be and is not the sole basis of the
current and fair market value of a property.
The current value of like properties and their
actual or potential uses, among others, are
also considered.
Assessors, in fixing the value of property, have to
consider all the circumstances and elements of
value, and must exercise a prudent discretion in
reaching conclusions. Courts, therefore, will not
presume to interfere with the intelligent exercise of
the judgment of men specially trained in appraising
property. (Viuda e Hijos de Pedro P. Roxas vs.
Rafferty [1918], 37 Phil., 957; New Orleans Cotton
Exchange vs. Board of Assessors, supra.)
Issue 2: W/N petitioner is liable for back taxes
Held 2: Yes
Section 24 merely lays down the general rule
that assessments under PD 464 are to be
given prospective application. It cannot be
construed in such a manner as to eliminate
the imposition of back taxes. If Section 24,
instead of Section 25, were made to apply as
suggested by petitioner, he would in effect be
excused from the payment of back taxes on the
undeclared excess area of his property.
The Court, clearly, cannot allow a taxpayer to evade
his obligation to the government by letting him pay
taxes on a property based on its gross
undervaluation at P60,000.00, when the same had
then a current market value of P449,860.00.
Accepting the petitioner's position will
necessarily prejudice the public interest, for
the government is thereby deprived of back
taxes which ought to have been paid in the
DIGEST
Nov 7,This
2014
first place.
will certainly subvert the raison
local government units for enactment by
d'etre of the law which is to raise taxes, the

lifeblood of the government.
Furthermore, if Section 24 is the only applicable
provision in cases where a taxpayer has eluded the
payment of the correct amount of taxes for more
than 9 years, as in this case, Section 25 of PD 464
which requires the payment of back taxes will be
rendered
superfluous
and
nugatory.
Such
interpretation could not have been intended by the
law. It is a familiar rule in statutory construction that
"the legal provision being therefore susceptible of
two interpretations, we adopt the one in
consonance with the presumed intention of the
legislature to give its enactments the most
reasonable and beneficial construction, the one that
will render them operative and effective and
harmonious with other provisions of law.
f. Declaration of Real Property
JAIME C. LOPEZ, petitioner, vs. CITY OF MANILA and

HON. BENJAMIN A.G. VEGA, Presiding Judge, RTC, Manila,
Branch 39, respondent
G.R. No. 127139 | February 19, 1999 (2D)
Facts:
i. By Owner or Administrator (Sec. 202)

Section 202. Declaration of real Property by the
Owner or Administrator. - It shall be the duty of all
persons, natural or juridical, owning or administering real
property, including the improvements therein, within a city or
municipality, or their duly authorized representative, to
prepare, or cause to be prepared, and file with the provincial,
city or municipal assessor, a sworn statement declaring the
true value of their property,
whether previously declared or undeclared, taxable or
exempt, which shall be the current and fair market value of
the property, as determined by the declarant. Such
declaration shall contain a description of the property
sufficient in detail to enable the assessor or his deputy to
identify the same for assessment purposes. The sworn
declaration of real property herein referred to shall be filed
with the assessor concerned once every three (3) years
during the period from January first (1st) to June thirtieth
(30th) commencing with the calendar year 1992.
ii. In case improvements are made (Sec. 203)
Section 203. Duty of Person Acquiring Real Property
or Making Improvement Thereon. - It shall also be the
duty of any person, or his authorized representative,
acquiring at any time real property in any municipality or city
or making any improvement on real property, to prepare, or
cause to be prepared, and file with the provincial, city or
municipal assessor, a sworn statement declaring the true
value of subject property, within sixty (60) days after the
acquisition of such property or upon completion or
occupancy of the improvement, whichever comes earlier.
iii. By Assessor (Sec. 204)
Section 204. Declaration of Real Property by the
Assessor. - When any person, natural or juridical, by whom
real property is required to be declared under Section 202
hereof, refuses or fails for any reason to make such
declaration within the time prescribed, the provincial, city or
municipal assessor shall himself declare the property in the
name of the defaulting owner, if known, or against an
unknown owner, as the case may be, and shall assess the
property for taxation in accordance with the provision of this
Title. No oath shall be required of a declaration thus made by
the provincial, city or municipal assessor.
g. Assessment of Real Property
i. Preparation of Schedule of Fair Market Values (Sec. 212)
Section 212. Preparation of Schedule of Fair Market
Values. - Before any general revision of property
assessment is made pursuant to the provisions of this Title,
there shall be prepared a schedule of fair market values by
the provincial, city and municipal assessor of the
municipalities within the Metropolitan Manila Area for the
different classes of real property situated in their respective
58
ordinance of the
sanggunian concerned. The schedule of fair market values
shall be published in a newspaper of general circulation in
the province, city or municipality concerned or in the
absence thereof, shall be posted in the provincial capitol, city
or municipal hall and in two other conspicuous public places
therein.
Until the year 1995, the basis for collection of real

estate taxes in the City of Manila was the old, year1979, real estate market values.
Mrs. Lourdes Laderas, the newly appointed City
Assessor of Manila, then began the process of
general revision based on the updated fair market
values of the real properties.
In the year 1995, the increase in valuation of real
properties compared to the year-1979 market
values ranges from 600% to 3,330%, but the City
Assessor's office initially fixed the general average
of increase to 1,700%. Mrs. Laderas felt that the
increase may have adverse reactions from the
public, hence, she ended up reducing the increase
in the valuation of real properties to 1,020%.
On December 12, 1995, the City Council enacted
Manila Ordinance No. 7894, entitled: "An Ordinance
Prescribed as the Revised Schedule of Fair Market
Values of Real Properties the City of Manila."
Thereafter, notices of the revised assessments were
distributed to the real property owners of Manila
pursuant to Sec. 223 of R.A. 7160.
As a consequence of the increases based on the
ordinance, petitioner filed a special proceeding for
the declaration of nullity of the said ordinance.
Respondents motion to dismiss was granted by the
RTC.
Hence this petition.
Issue: W/N the trail court erred to correctly apply Sec. 212 of
the LGC
Held: No
The petitioner claims that the effectivity date of
Manila Ordinance No. 7894 and the schedule of the
fair market values is January 1, 1996. He contends
that Sec. 212 of the R.A. 7160 prohibits the general
revision of real property assessment before the
approval of the schedule of the fair market values.
Thus, the alleged revision of real property
assessment in 1995 is illegal.
Based on the evidence presented by the parties, the
steps to be followed for the mandatory conduct of
General Revision of Real Property assessments,
pursuant to the provision of Sec. 219, of R.A. No.
7160 are as follows:
1. The preparation of Schedule of Fair
Market Values
2. The enactment of Ordinances:
a. levying
an
annual
"ad
valorem" tax on real property
and
an
additional
tax
accruing to the SEF.
b. fixing the assessment levels
to be applied to the market
values of real properties;
c. providing
necessary
appropriation
to
defray
expenses incident to general
revision of real property
assessments; and
d. adopting the Schedule of Fair
Market Values prepared by
the assessors
DIGEST
Nov 7, 2014
The preparation
of fair market values as a
distribution of water and/or generation and
preliminary step in the conduct of general

revision was set forth in Section 212 of R.A.
7160, to wit:
1. The city or municipal assessor shall
prepare a schedule of fair market
values for the different classes of real
property situated in their respective
Local Government Units for the
enactment of an ordinance by the
2. The schedule of fair market values
shall be published in a newspaper of
general circulation in the province, city
or municipality concerned or the
posting in the provincial capitol or
other places as required by law
It was clear from the records that Mrs. Lourdes
Laderas, the incumbent City Assessor, prepared the
fair market values of real properties and in
preparation thereof, she considered the fair market
values prepared in the calendar year 1992. Upon
that basis, the City Assessor's Office updated the
schedule for the year 1995.
Thereafter, the proposed ordinance with the
schedule of the fair market values of real properties
was published in the Manila Standard on October
28, 1995 and Balita on November 1, 1995.
o
Under the circumstances of this case, was
compliance with the requirement provided
under Sec. 212 of R.A. 7160.
With the introduction of assessment levels, tax rates
could be maintained, although tax payments can be
made either higher or lower depending on their
percentage (assessment level) applied to the fair
market value of property to derive its assessed
value which is subject to tax. Moreover, classes and
values of real properties can be given proper
consideration, like assigning lower assessment
levels to residential properties and higher levels to
properties used in business.
The procedural steps in computing the real property
tax are as follows:
1. Ascertain the assessment level of the
property
2. Multiply the market value by the
applicable assessment level of the
property
3. Find the tax rate which corresponds to
the class (use) of the property and
multiply the assessed value by the
applicable tax rates.
For easy reference, the computation of real property
tax is cited below:
Market Value
Pxxx
X
Assessment Level x%
Assessed Value Pxxx
X
Rate of Tax
x%
Real Property Tax Pxxx
ii. Classes of Real Property for Assessment (Sec. 215)

Section 215. Classes of Real Property for Assessment
Purposes. - For purposes of assessment, real property shall
be classified as residential, agricultural, commercial,
industrial, mineral, timberland or special.
The city or municipality within the Metropolitan Manila Area,
through their respective sanggunian, shall have the power to
classify lands as residential, agricultural, commercial,
industrial, mineral, timberland, or special in accordance with
their zoning ordinances.
iii. Special Classes of Real Property (Sec. 216)
Section 216. Special Classes of Real Property. - All
lands, buildings, and other improvements thereon actually,
directly and exclusively used for hospitals, cultural, or
scientific purposes, and those owned and used by local water
districts, and government-owned or controlled corporations
rendering essential public services in the supply and
59
transmission of
electric power shall be classified as special.
CITY ASSESSOR OF CEBU CITY, petitioner, vs.

ASSOCIATION OF BENEVOLA DE CEBU, INC., respondent
G.R. No. 152904 | June 8, 2007 (2D)
Facts:
Respondent Association of Benevola de Cebu, Inc.,
owner of Chong Hua Hospital (CHH), constructed the
CHH Medical Arts Center (CHHMAC).
Petitioner City Assessor of Cebu City assessed the
CHHMAC building as "commercial" with an assessment
level of 35% for commercial buildings, and not at the
10% special assessment currently imposed for CHH and
its other separate buildingsthe CHHs Dietary and
Records Departments.
Thus, respondent filed a letter-petition with the Cebu
City LBAA for reconsideration, asserting that CHHMAC is
part of CHH and ought to be imposed the same special
assessment level of 10% with that of CHH.
As directed by LBAA, petitioner, in its position paper,
argued that CHHMAC is a newly constructed five-storey
building situated about 100 meters away from CHH and,
based on actual inspection, was ascertained that it is not
a part of the CHH building but a separate building which
is actually used as commercial clinic/room spaces for
renting out to physicians and, thus, classified as
"commercial."
LBAA: Building is entitled to 10% assessment level.
By notice of appeal, CBAAs decision: Affirmed LBAA
By petition for review, CAs decision: Affirmed CBAA
o
The appellate court applied Secs. 215 and
216 of the Local Government Code
(Republic Act No. 7160) which classify
lands,
buildings,
and
improvements
actually, directly, and exclusively used for
hospitals as special cases of real property
and not as commercial.
o
Thus, CHHMAC being an integral part of
CHH is not commercial but special and
should be imposed the 10% special
assessment, the same as CHH, instead of
the 35% for commercial establishments.
Issue: W/N the subject building is commercial in nature and
thus subject to 35% assessment rate
Held: No
Respondents charge of rentals for the offices and
clinics its accredited physicians occupy cannot be
equated to a commercial venture, which is mainly
for profit.
Respondents explanation on this point is well taken.
o
First, CHHMAC is only for its consultants or
accredited doctors and medical specialists.
o
Second, the charging of rentals is a
practical necessity: (1) to recoup the
investment cost of the building, (2) to
cover the rentals for the lot CHHMAC is
built on, and (3) to maintain the CHHMAC
building and its facilities.
o
Third, as correctly pointed out by
respondent, it pays the proper taxes for its
rental income.
o
Fourth, if there is indeed any net income
from the lease income of CHHMAC, such
does not inure to any private or individual
person as it will be used for respondents
other charitable projects.
Given the foregoing arguments, there is no reason
why the CHHMAC building should be classified as
"commercial" and be imposed the commercial level
of 35% as it is not operated primarily for profit
but as an integral part of CHH. The CHHMAC,
with operations being devoted for the benefit of the
CHHs patients, should be accorded the 10% special
assessment.
DIGEST
Nov
7, the
2014
In this
regard,
Court pointed with approbation
plaintiff-appellant even if the latter
the appellate courts application of Sec. 216 in
relation with Sec. 215 of the Local Government
Code on the proper classification of the subject
CHHMAC
building
as
"special"
and
not
"commercial." Secs. 215 and 216 pertinently
provide:
SEC. 215. Classes of Real Property for Assessment

Purposes.For purposes of assessment, real
property shall be classified as residential,
agricultural,
commercial,
industrial,
mineral,
timberland or special.
xxxx
SEC. 216. Special Classes of Real Property.All

lands, buildings, and other improvements thereon
actually, directly and exclusively used for hospitals,
cultural or scientific purposes, and those owned and
used by local water districts, and governmentowned or controlled corporations rendering
essential public services in the supply and
distribution of water and/or generation and
transmission of electric power shall be classified as
special. (Emphasis supplied.)
Thus, applying the above provisos in line with City
Tax Ordinance LXX of Cebu City, the 10% special
assessment should be imposed for the CHHMAC
building which should be classified as "special."
iv. Actual Use as Basis for Assessment (Sec. 217)

Section 217. Actual Use of Real Property as Basis for
Assessment. - Real property shall be classified, valued and
assessed on the basis of its actual use regardless of where
located, whoever owns it, and whoever uses it.
TESTATE ESTATE OF CONCORDIA T. LIM, plaintiffappellant, vs. CITY OF MANILA, JESUS I. CALLEJA, in his
capacity as City Treasurer of Manila, NICOLAS CATIIL, in his
capacity as City Assessor of Manila, and/or GOVERNMENT
SERVICE INSURANCE SYSTEM, defendants-appellees.
G.R. No. 90639 | February 21, 1990 (3D)
Facts:
The late Concordia Lim obtained a real estate loan from
the defendant-appellee Government Service Insurance
System (GSIS), secured by a mortgage constituted on 2
parcels of land with a three-story building.
When Lim failed to pay the loan, the mortgage was
extrajudicially foreclosed and the subject properties sold
at public auction. The GSIS, being the highest bidder,
bought the properties.
However, pursuant to Resolution No. 188 of the Board of
Trustees of the GSIS, the estate of Lim was allowed to
repurchase the foreclosed properties.
The defendant City Treasurer of Manila required the
plaintiff-appellant to pay the real estate taxes due on
the properties for the years 1977, 1978 and the first
quarter of 1979, before the titles could be transferred to
the plaintiff-appellant. The latter paid the amount under
protest.
Plaintiff then filed an action before the trial court for a
sum of money for the refund or reimbursement of the
real estate taxes paid under protest.
After trial, the lower court dismissed the complaint for
lack of jurisdiction.
Issue: W/N the tax assessed and collected from the plaintiffappellant is valid
Held: No
The records show that the subject properties were
leased to other persons during the time when GSIS
held their titles, as was the case during the
ownership of the late Concordia Lim.
However, the real estate taxes later assessed on the
said properties for the years 1977, 1978 and the
first quarter of 1979 were charged against the
60
was not the
beneficial user of the parcels of land.

In real estate taxation, the unpaid tax attaches
to the property and is chargeable against the
taxable person who had actual or beneficial
use and possession of it regardless of
whether or not he is the owner.
Raising doubts on the validity of the imposition and
collection of the real property tax for the designated
periods before the title to the properties may be
transferred, the plaintiff-appellant paid under
protest.
The facts of the case constrain us to rule that the
plaintiff-appellant is not liable to pay the real
property tax due for the years 1977, 1978 and first
quarter of 1979. The clause in the Deed of Sale
cannot be interpreted to include taxes for the
periods prior to April 11, 1979, the date of
repurchase.
To impose the real property tax on the estate
which was neither the owner nor the
beneficial user of the property during the
designated periods would not only be
contrary to law but also unjust.
o
If plaintiff-appellant intended to assume
the liability for realty taxes for the prior
periods,
the
contract
should
have
specifically stated "real estate taxes" due
for the years 1977,1978 and first quarter of
1979.
o
The payments made by the plaintiffappellant cannot be construed to be an
admission of a tax liability since they were
paid under protest and were done only in
compliance with one of the requirements
for the consummation of the sale as
directed by the City Treasurer of Manila.
Hence, the tax assessed and collected from the
plaintiff-appellants is not valid and a refund by the
City government is in order.
The Court rules, however, that the plaintiff-appellant
is not entitled to a reimbursement from the
respondent GSIS because: (1) the GSIS is exempt
from payment of the real property tax under Sec. 33
of the Revised Charter of the GSIS; and (2) the tax
should be based on "actual use" of the property.
Section 40 of the Real Property Tax Code supports
the view that not even the GSIS is liable to pay real
property tax on public land leased to other persons.
Patalinghug vs. CA, GR No. 104786, January 27, 1994

(See above)
LIGHT RAIL TRANSIT AUTHORITY (LRTA), petitioner, vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD
OF ASSESSMENT APPEALS OF MANILA and the CITY
ASSESSOR OF MANILA, respondents G.R. No. 127316 |
October 12, 2000 (3D)
Facts:
By reason of Executive Order 603, LRTA acquired

real
properties
and
constructed
structural
improvements, such as buildings, carriageways,
passenger terminal stations, and installed various
kinds of machinery and equipment and facilities for
the purpose of its operations
Respondent-Appellee City Assessor of Manila then
assessed the real properties of petitioner to
commence with the year 1985.
Petitioner paid its real property taxes on all its real
property holdings, except the carriageways and
passenger terminal stations including the land
where it is constructed on the ground that the same
are not real properties under the Real Property Tax
Code, and if the same are real property, these are
for public use/purpose, therefore, exempt from
realty taxation, which claim was denied by the
Respondent-Appellee City Assessor of Manila.
Aggrieved by the action of the Respondent-Appellee
City Assessor, petitioner filed an appeal with the
DIGEST
Nov
7,petitioners
2014 appeal and declared that
LBAA:
Denied
Petitioner, as trustee for College Assurance
carriageways and passenger terminal stations are

improvements, therefore, are real property under
the Code. CBAA affirmed.
CA: Affirmed CBAA
o
True, the government owned the real
property upon which the carriageways and
terminal stations were built. However, they
were still taxable, because beneficial use
had been transferred to petitioner, a
taxable entity.
o
CA Debunked the argument of petitioner
that carriageways and terminals were
intended for public use. The former agreed,
instead, with the CBAA. The CBAA had
concluded that since petitioner was not
engaged in purely governmental or public
service, the latter's endeavors were
proprietary. Indeed, petitioner was deemed
as a profit-oriented endeavor, serving as it
did, only the paying public.
Issue: W/N the carriageways and passenger terminal stations

are subject to real property tax
Held: Yes
Under the Real Property Tax Code, real property is
classified for assessment purposes on the basis of
actual use, which is defined as "the purpose for
which
the
property
is
principally
or
predominantly utilized by the person in
possession of the property."
Petitioner argues that it merely operates and
maintains the LRT system, and that the actual users
of the carriageways and terminal stations are the
commuting public. It adds that the public-use
character of the LRT is not negated by the fact that
revenue is obtained from the latter's operations.
We do not agree. Unlike public roads which are open
for use by everyone, the LRT is accessible only to
those who pay the required fare. It is thus apparent
that petitioner does not exist solely for public
service, and that the LRT carriageways and terminal
stations are not exclusively for public use. Although
petitioner is a public utility, it is nonetheless profitearning. It actually uses those carriageways and
terminal stations in its public utility business and
earns money therefrom.
WHEREFORE, the Petition is hereby DENIED.
Allied Banking Corporation as Trustee for the Trust Fund
of College Assurance Plan Philippines, Inc. (CAP), Petitioner
vs. The Quezon City Government, the Quezon City
Treasurer, the Quezon City Assessor and the City
Mayor of Quezon City, Respondents
G.R. No. 154126 | October 11, 2005 (EB)
Facts:
On December 19, 1995, the Quezon City government
enacted City Ordinance No. 357, Series of 1995, Section
3 of which reads:
Section 3. The City Assessor shall undertake a general
revision of real property assessments using as basis the
newly approved schedule specified in Sections 1 and 2
hereof. He shall apply the new assessment level of 15%
for residential and 40% for commercial and industrial
classification, respectively as prescribed in Section 8 (a)
of the 1993 Quezon City Revenue Code to determine the
assessed value of the land. Provided; however, that
parcels of land sold, ceded, transferred and conveyed
for remuneratory consideration after the effectivity of
this revision shall be subject to real estate tax based on
the actual amount reflected in the deed of conveyance
or the current approved zonal valuation of the Bureau of
Internal Revenue prevailing at the time of sale, cession,
transfer and conveyance, whichever is higher, as
evidenced by the certificate of payment of the capital
gains tax issued therefor. (Emphasis and underscoring
supplied)
61
Plan of the
Philippines, Inc., purchased from Liwanag C. Natividad et
al. a 1,000 square meter parcel of land located along
Aurora Boulevard, Quezon City.
After its acquisition of the property, petitioner was, in
accordance with Section 3 of the ordinance, required to
pay a higher real estate tax compared to that paid prior
to the sale by Natividad.
Petitioner paid the quarterly real estate tax for the
property from the 1st quarter of 1999 up to the 3rd
quarter of 2000. Its tax payments for the 2nd, 3rd, and
4th quarter of 1999, and 1st and 2nd quarter of 2000
were, however, made under protest.
In its written protest with the City Treasurer, petitioner
assailed Section 3 of the ordinance as null and void, it
contending that it is violative of the equal protection and
uniformity of taxation clauses of the Constitution.
Petitioner additionally contended that the proviso of
Section 3 of the ordinance which allows re-assessment
every time the property is transferred, ceded or
conveyed violates Sections 219 and 220 of the Local
Government Code which provide that the assessment of
real property shall not be increased oftener than once
every 3 except in case of new improvements
substantially increasing the value of said property or of
any change in its actual use.
Issue: W/N Sec. 3 of Ordinance No. 357 is valid

Held: No
On Actual Use:
This Court holds that the proviso in question is invalid as it
adopts a method of assessment or appraisal of real property
contrary to the Local Government Code, its Implementing
Rules and Regulations and the Local Assessment Regulations
No. 1-9246 issued by the Department of Finance.
Under these immediately stated authorities, real properties
shall be appraised at the current and fair market
value prevailing in the locality where the property is
situated and classified for assessment purposes on
the basis of its actual use.
Using the consideration appearing in the deed of
conveyance to assess or appraise real properties is
not only illegal since "the appraisal, assessment, levy
and collection of real property tax shall not be let to
any private person," but it will completely destroy the
fundamental principle in real property taxation that
real property shall be classified, valued and assessed on the
basis of its actual use regardless of where located, whoever
owns it, and whoever uses it.
Necessarily, allowing the parties to a private sale to dictate
the fair market value of the property will dispense with the
distinctions of actual use stated in the Code and in the
regulations.
The invalidity of the assessment or appraisal system adopted
by the proviso is not cured even if the proviso mandates the
comparison of the stated consideration as against the
prevailing BIR zonal value, whichever is higher, because an
integral part of that system still permits valuing real property
in disregard of its "actual use."
On Valuation of Real Property:
As this Court stressed in Reyes v. Almanzor,
assessors, in fixing the value of real property,
have to consider all the circumstances and
elements of value, and must exercise prudent
discretion in reaching conclusions.
In this regard, Local Assessment Regulations No. 192 establishes the guidelines to assist assessors in
classifying, appraising and assessing real property.
The approaches in estimating the fair market value:
o
Sales analysis or market data approach ->
the price paid in actual market transactions
is considered by taking into account valid
sales data accumulated from among the
DIGEST Nov
7, 2014
various
sources stated in Sections 202,
Section 218. Assessment Levels.
203, 208, 209, 210, 211 and 213 of the

Code.
o
Income capitalization approach -> the
value of an income-producing property is
no more than the return derived from it. An
analysis of the income produced is
necessary in order to estimate the sum
which might be invested in the purchase of
the property.
o
Replacement
or
reproduction
cost
approach -> a factual approach used
exclusively
in
appraising
man-made
improvements such as buildings and other
structures, based on such data as
materials and labor costs to reproduce a
new replica of the improvement.
The assessor uses any or all of these approaches in
analyzing the data gathered to arrive at the
estimated fair market value to be included in the
ordinance containing the schedule of fair market
values.
Given these different approaches to guide the
assessor, it can readily be seen that the Code did
not intend to have a rigid rule for the valuation of
property, which is affected by a multitude of
circumstances which no rule could foresee or
provide for. Thus, what a thing has cost is no
singular and infallible criterion of its market value.
Accordingly, this Court holds that the proviso
directing that the real property tax be based on the
actual amount reflected in the deed of conveyance
or the prevailing BIR zonal value is invalid not only
because it mandates an exclusive rule in
determining the fair market value but more so
because it departs from the established procedures
stated in the Local Assessment Regulations No. 1-92
and unduly interferes with the duties statutorily
placed upon the local assessor by completely
dispensing with his analysis and discretion which
the Code and the regulations require to be
exercised. An ordinance that contravenes any
statute is ultra vires and void
WHEREFORE, the petition is hereby GRANTED.
v. Assessment Levels (Sec. 218)
62
- The assessment
levels to be applied to the fair market value of real property
to determine its assessed value shall be fixed by ordinances
of the sangguniang panlalawigan, sangguniang panlungsod
or sangguniang bayan of a municipality within the
Metropolitan Manila Area, at the rates not exceeding the
following:
(a) On Lands:
CLASS
ASSESSMENTLEVELS
Residential
20%
Agricultural
40%
Commercial
50%
Industrial
50%
Mineral
50%
Timberland
20%
(b) On Buildings and Other Structures:

(1) Residential
Fair market Value
Over
Not Over
Assessment
Levels
P175,000.00
P175,000.00
300,000.00
300,000.00
500,000.00
500,000.00
750,000.00
750,000.00 1,000,000.00
1,000,000.00 2,000,000.00
2,000,000.00 5,000,000.00
5,000,000.00 10,000,000.00
10,000,000.00
0%
10%
20%
25%
30%
35%
40%
50%
60%
(2) Agricultural
Fair Market Value
Over
P300,000.00
P300,000.00
500,000.00
750,000.00
1,000,000.00
2,000,000.00
Not Over
500,000.00
750,000.00
1,000,000.00
2,000,000.00
Assessment
Levels
25%
30%
35%
40%
45%
50%
DIGEST
Nov 7, 2014
(3) Commercial / Industrial
63
viii. Date of Effectivity of Assessment or Reassessment (Sec.

221)
Fair Market Value
Over
P300,000.00
P300,000.00
500,000.00
750,000.00
1,000,000.00
2,000,000.00
5,000,000.00
10,000,000.00
Section 221. Date of Effectivity of Assessment or

Reassessment. - All assessments or reassessments made
after the first (1st) day of January of any year shall take
effect on the first (1st) day of January of the succeeding
year: Provided, however, That the reassessment of real
property due to its partial or total destruction, or to a major
change in its actual use, or to any great and sudden inflation
or deflation of real property values, or to the gross illegality
of the assessment when made or to any other abnormal
cause, shall be made within ninety (90) days from the date
any such cause or causes occurred, and shall take effect at
the beginning of the quarter next following the
reassessment.
Assessment
Levels
Not Over
30%
35%
40%
50%
60%
70%
75%
80%
500,000.00
750,000.00
1,000,000.00
2,000,000.00
5,000,000.00
10,000,000.00
(4) Timberland
Fair Market Value
Over
Not Over
P300,000.00
500,000.00
750,000.00
1,000,000.00
2,000,000.00
P300,000.00
500,000.00
750,000.00
5,000,000.00
2,000,000.00
ix. Assessment of Property Subject to Back Taxes (Sec. 222)
Assessment
Levels
Section 222. Assessment of Property Subject to Back

Taxes. - Real property declared for the first time shall be
assessed for taxes for the period during which it would have
been liable but in no case of more than ten (10) years prior
to the date of initial assessment: Provided, however, That
such taxes shall be computed on the basis of the applicable
schedule of values in force during the corresponding period.
45%
50%
55%
60%
65%
70%
(c) On Machineries
Class
Assessment
Levels
Agricultural
Residential
Commercial
Industrial
40%
50%
80%
80%
Sesbreno v. CBAA, 270 SCRA 263 (See above)
(d) On Special Classes: The assessment levels for all lands

buildings, machineries and other improvements;
Actual Use
Cultural
Scientific
Hospital
Local water districts
Assessment Level
15%
15%
15%
10%
Government-owned or
controlled corporations
engaged in the supply and
distribution of water and/or
generation and transmission
of electric power
10%
vi. General Revision

Classification (Sec. 219)
of
Assessments
Notification of New or Revised Assessment (Sec. 223):

When real property is assessed for the first time or when an
existing assessment is increased or decreased, the
provincial, city or municipal assessor shall within thirty (30)
days give written notice of such new or revised assessment
to the person in whose name the property is declared. The
notice may be delivered personally or by registered mail or
through the assistance of the punong barangay to the last
known address of the person to be served.
Appraisal and Assessment of Machinery (Sec. 224)
(a) The fair market value of a brand-new machinery
shall be the acquisition cost. In all other cases, the
fair market value shall be determined by dividing
the remaining economic life of the machinery by its
estimated economic life and multiplied by the
replacement or reproduction cost.
and
Property
Section 219. General Revision of Assessment and

Property Classification. - The provincial, city or municipal
assessor shall undertake a general revision of real property
assessments within two (2) years after the effectivity of this
Code and every three (3) years thereafter.
vii. Valuation of Real Property (Sec. 220)
Section 220. Valuation of Real Property. - In cases
where (a) real property is declared and listed for taxation
purposes for the first time; (b) there is an ongoing general
revision of property classification and assessment; or (c) a
request is made by the person in whose name the property is
declared, the provincial, city or municipal assessor or his
duly authorized deputy shall, in accordance with the
provisions of this Chapter, make a classification, appraisal
and assessment or taxpayer's valuation thereon: Provided,
however, That the assessment of real property shall not be
increased oftener than once every three (3) years except in
case of new improvements substantially increasing the value
of said property or of any change in its actual use.
Allied Bank vs. Quezon City Government GR No.
154126, October 11, 2005 (See above)
(b) If the machinery is imported, the acquisition cost

includes freight, insurance, bank and other charges,
brokerage, arrastre and handling, duties and taxes,
plus charges at the present site. The cost in foreign
currency of imported machinery shall be converted
to peso cost on the basis of foreign currency
exchange rates as fixed by the Central Bank
Depreciation Allowance for Machinery (Sec. 225): For
purposes of assessment, a depreciation allowance shall be
made for machinery at a rate not exceeding five percent
(5%) of its original cost or its replacement or reproduction
cost, as the case may be, for each year of use: Provided,
however, That the remaining value for all kinds of machinery
shall be fixed at not less than twenty percent (20%) of such
original, replacement, or reproduction cost for so long as the
machinery is useful and in operation.
Condonation of RPT
Condonation and Reduction of RPT (Sec. 276): In case
of a general failure of crops or substantial decrease in the
price of agricultural or agribased products, or calamity in any
DIGEST
Nov
7, 2014
province,
cityor
municipality,
the sanggunian concerned, by
ordinance passed prior to the first (1st) day of January of any
year and upon recommendation of the Local Disaster
Coordinating Council, may condone or reduce, wholly or
partially, the taxes and interest thereon for the succeeding
year or years in the city or municipality affected by the
calamity.
Petitioner, as trustee for CAP purchased from Liwanag C.

Natividad et al. a parcel of land located along Aurora
Boulevard, Quezon City in the amount of P38M
Prior to the sale, Natividad et al. had been paying the

total amount of P85,050.006 as annual RPT based on the
propertys fair
market
value
of P4,500,000.00 and assessed value of P1,800,000.00
After its acquisition of the property, petitioner was, in

accordance with Section 3 of the ordinance, required to
pay P102,600.00 as quarterly real estate tax pegged the
market value of the property at P38,000,000.00 the
consideration appearing in the Deed of Absolute Sale,
and its assessed value at P15,200,000.00
Petitioner paid the quarterly real estate tax for the

property from the 1st quarter of 1999 up to the 3rd
quarter of 2000. Its tax payments for the 2nd, 3rd, and
4th quarter of 1999, and 1st and 2nd quarter of 2000
were, however, made under protest.
In its written protest, petitioner assailed Section 3 of the

ordinance as null and void, it contending that it is
violative of the equal protection and uniformity of
taxation clauses of the Constitution
(a) In the case of a province, at the rate not

exceeding one percent (1%) of the assessed value
of real property; and
Assessor denied the demand for refund on the ground

that the ordinance is presumed valid and legal unless
otherwise declared by a court of competent jurisdiction.
(b) In the case of a city or a municipality within the

Metropolitan Manila Area, at the rate not exceeding
two percent (2%) of the assessed value of real
property.
Petitioner thereupon filed a petition for prohibition and

declaratory relief before RTC: In support of its thesis,
petitioner contended that the re-assessment under the
third sentence of Section 3 of the ordinance for purposes
of RPT of a propertys FMV where it is sold, ceded,
transferred or conveyed for remuneratory consideration
is null and void as it is an invalid classification of real
properties which are transferred, ceded or conveyed and
those which are not, the latter remaining to be valued
and assessed in accordance with the general revisions of
assessments of real properties under the first sentence
of Section 3.
Petitioner additionally contended that the proviso of

Section 3 of the ordinance which allows re-assessment
every time the property is transferred, ceded or
conveyed violates Sections 219 and 220 of LGC which
provide that the assessment of real property shall not be
increased oftener than once every 3 years except in
case of new improvements substantially increasing the
value of said property or of any change in its actual use.
Before respondents could file any responsive pleading,

respondent Quezon City Government enacted Ordinance
No. SP-1032, S-2001 which repealed the assailed proviso
in Section 3 of the 1995 Ordinance. WHEREAS, it is clear
from the foregoing premises that the second (2nd)
sentence of the Ordinance, fixing the realty tax based on
the actual amount reflected in the deed of conveyance
Condonation or Reduction of RPT by President (Sec.

277): The President of the Philippines may, when public
interest so requires, condone or reduce the real property tax
and interest for any year in any province or city or a
municipality within the Metropolitan Manila Area.
IMPOSITION OF REAL PROPERTY TAX
Power to Levy Real Property Tax (Sec. 232): A province

or city or a municipality within the Metropolitan Manila Area
my levy an annual ad valorem tax on real property such as
land, building, machinery, and other improvement not
hereinafter specifically exempted.
Rates of Levy (Sec. 233): A province or city or a
municipality within the Metropolitan Manila Area shall fix a
uniform rate of basic real property tax applicable to their
respective localities as follows:
G.R. No. 154126 October 11, 2005 (E)

Allied Banking Corporation as Trustee for the Trust
Fund of College Assurance Plan Philippines, Inc. (CAP)
vs.
The Quezon City Government, the Quezon City
Mayor of Quezon City
o
64
valuation of the Bureau of Internal Revenue

prevailing at the time of sale, cession, transfer
and
conveyance,
whichever
is
higher, as
evidenced by the certificate of payment of the
capital gains tax issued therefor
QC enacted City Ordinance No. 357, Series of 1995 (the

ordinance), Section 3 of which reads: The City Assessor
shall undertake a general revision of real property
assessments using as basis the newly approved
schedule specified in Sections 1 and 2 hereof. He shall
apply the new assessment level of 15% for residential
and 40% for commercial and industrial classification,
respectively as prescribed in Section 8 (a) of the 1993
Quezon City Revenue Code to determine the assessed
value of the land. Provided; however, that parcels of
land sold, ceded, transferred and conveyed for
remuneratory consideration after the effectivity
of this revision shall be subject to real estate tax
based on the actual amount reflected in the deed
of conveyance or the current approved zonal
DIGEST
Novapproved
7, 2014
or the current
zonal valuation x x x is violative
65
of, and repugnant to, the uniformity rule of taxation;

o
Petitioner subsequently moved to declare respondents in

default for failure to file a responsive pleading within the
period, as extended. Before the motion could be
heard, however, respondents moved to dismiss the
petition, averring that the passage of the repealing
ordinance had rendered the petition moot and
academic.
Petitioner opposed the motion, it alleging that while its

action for the declaration of nullity of the proviso was
rendered moot and academic by its repeal, its claim for
refund and attorneys fees had not been mooted, and
the trial court still had to determine if Section 3 of the
ordinance "is null and void ab initio and perforce, may
not be enforced during the intervening period from the
time of its enactment until the time of its repeal."
As to the claim for refund, respondents averred that it

was premature for the trial court to take cognizance
thereof as petitioner had an administrative remedy.
RTC granted respondents motion to dismiss: since an

administrative remedy is available for refund of taxes
illegally and erroneously collected and petitioner has not
yet availed of it, the Court shall not take cognizance of
this issue considering the rule on "Exhaustion of
Administrative Remedy."
I: Whether or not Section 3, Quezon City Ordinance No. 357,

Series of 1995, which was abrogated for being
UNCONSTITUTIONAL can be the basis of collecting real estate
taxes prior to its repeal.
H: NO.
The proviso in question is invalid as it adopts a method of
assessment or appraisal of real property contrary to the
Local Government Code, its Implementing Rules and
Regulations and the Local Assessment Regulations No. 192 issued by the Department of Finance.
Under these immediately stated authorities, real properties

shall be appraised at the current and fair market value
prevailing in the locality where the property is situated and
classified for assessment purposes on the basis of its actual
use.
"Fair market value" is the price at which a property may be

sold by a seller who is not compelled to sell and bought by a
buyer who is not compelled to buy, taking into consideration
all uses to which the property is adapted and might in reason
be applied. The criterion established by the statute
contemplates a hypothetical sale. Hence, the buyers need
not be actual and existing purchasers.
Reyes v. Almanzor: assessors, in fixing the value of real
property, have to consider all the circumstances and
elements of value, and must exercise prudent discretion in
reaching conclusions.
In this regard, Local Assessment Regulations No. 192 establishes the guidelines to assist assessors in
classifying, appraising and assessing real property three
approaches in estimating the fair market value, namely: (1)
the sales analysis or market data approach; (2) the income
capitalization approach; and (3) the replacement or
reproduction cost approach.
Under the sales analysis approach, the price paid in actual

market transactions is considered by taking into account
valid sales data accumulated from among the various
sources stated in Sections 202, 203, 208, 209, 210, 211 and
213 of the Code.
In the income capitalization approach, the value of an

income-producing property is no more than the return
derived from it. An analysis of the income produced is
necessary in order to estimate the sum which might be
invested in the purchase of the property.
The reproduction cost approach, on the other hand, is a
factual approach used exclusively in appraising man-made
improvements such as buildings and other structures, based
on such data as materials and labor costs to reproduce a
new replica of the improvement.
The assessor uses any or all of these approaches in

analyzing the data gathered to arrive at the estimated fair
market value to be included in the ordinance containing the
schedule of fair market values.
Given these different approaches to guide the assessor, it

can readily be seen that the Code did not intend to have a
rigid rule for the valuation of property, which is affected by a
multitude of circumstances which no rule could foresee or
provide for. Thus, what a thing has cost is no singular and
infallible criterion of its market value.
Accordingly, this Court holds that the proviso directing that

the real property tax be based on the actual amount
reflected in the deed of conveyance or the prevailing BIR
zonal value is invalid not only because it mandates an
exclusive rule in determining the fair market value but more
so because it departs from the established procedures stated
in the Local Assessment Regulations No. 1-92 and unduly
interferes with the duties statutorily placed upon the local
assessor by completely dispensing with his analysis and
discretion which the Code and the regulations require to be
exercised. An ordinance that contravenes any statute is ultra
vires and void.
Exemptions from RPT (Sec. 234):
66
DIGEST
Nov
7, 2014
(a) Real
property
owned by the Republic of the
shall be disposed of in the manner provided by law.
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person;
Proprietary educational institutions, including those

cooperatively owned, may likewise be entitled to
such exemptions, subject to the limitations provided
by law, including restrictions on dividends and
provisions for reinvestment; Subject to conditions
prescribed by law, all grants, endowments,
donations, or contributions used actually, directly,
and exclusively for educational purposes shall be
exempt from tax.
(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
G.R. No. 144104 June 29, 2004 (E)

LUNG CENTER vs. QUEZON CITY and CONSTANTINO P.
ROSAS
Petitioner, a non-stock and non-profit entity, is the

registered owner of a parcel of land located at Quezon
Ave. cor. Elliptical Road Erected in the middle of said
lot is the Lung Center of the Philippines: A big space at
the ground floor is being leased to private parties, for
canteen and small store spaces, and to medical or
professional practitioners who use the same as their
private clinics for their patients whom they charge for
their professional services
P accepts paying and non-paying patients; aside from its

income from paying patients, the petitioner receives
annual subsidies from the govt
Both the land and the hospital building of P were

assessed for RPT of P4.5M by the City Assessor
P filed a Claim for Exemption from RPT predicated on its

claim that it is a charitable institution request was
denied, and a petition was, thereafter, filed before the
Local Board of Assessment Appeals of QC
P alleged that under Sec 28 (3) of the 1987 Constitution,

the property is exempt from RPT: that it is a charitable
institution within the context of Section 28(3), Article VI
of the 1987 Constitution. It asserts that its character as
a charitable institution is not altered by the fact that it
admits paying patients and renders medical services to
them, leases portions of the land to private parties, and
rents out portions of the hospital to private medical
practitioners from which it derives income to be used for
operational expenses; that the "exclusivity" required in
the Constitution does not necessarily mean "solely"
QC-LBAA rendered judgment dismissing the petition

Central Board of Assessment Appeals then ruled that P
was not a charitable institution and that its real
properties were not actually, directly and exclusively
used for charitable purposes;
CA affirmed CBAA
(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 all government-owned
or controlled corporations are hereby withdrawn
upon the effectivity of this Code.
Proof of Exemption from RPT (Sec. 206): Every person
by or for whom real property is declared, who shall claim tax
exemption for such property under this Title shall file with
the provincial, city or municipal assessor within thirty (30)
days from the date of the declaration of real property
sufficient documentary evidence in support of such claim
including corporate charters, title of ownership, articles of
incorporation, by-laws, contracts, affidavits, certifications
and mortgage deeds, and similar documents.
If the required evidence is not submitted within the period
herein prescribed, the property shall be listed as taxable in
the assessment roll. However, if the property shall be proven
to be tax exempt, the same shall be dropped from the
assessment roll.
CONSTITUTIONAL PROVISIONS ON RPT EXEMPTION
1.
2.
Section 28, Article VI: Charitable institutions,

churches and personages or convents appurtenant
thereto, mosques, non-profit cemeteries, and all
lands, buildings, and improvements, actually,
directly, and exclusively used for religious,
charitable, or educational purposes shall be exempt
from taxation.
Section 4 (3), Article XIV: All revenues and
assets
of
non-stock,
non-profit
educational
institutions used actually, directly, and exclusively
for educational purposes shall be exempt from taxes
and duties. Upon the dissolution or cessation of the
corporate existence of such institutions, their assets
I: WON Ps property is exempt from RPT.

H: Partly.
Nov
7, 2014
P DIGEST
is a charitable
institution
within the context of the 1973
and 1987 Constitutions: To determine whether an enterprise
is a charitable institution/entity or not, the elements which
should be considered include the statute creating the
enterprise, its corporate purposes, its constitution and bylaws, the methods of administration, the nature of the actual
work performed, the character of the services rendered, the
indefiniteness of the beneficiaries, and the use and
occupation of the properties The test whether an
enterprise is charitable or not is whether it exists to carry out
a purpose reorganized in law as charitable or whether it is
maintained for gain, profit, or private advantage
As a general principle, a charitable institution does not lose
its character as such and its exemption from taxes simply
because it derives income from paying patients, whether
out-patient, or confined in the hospital, or receives subsidies
from the government, so long as the money received is
devoted or used altogether to the charitable object which it
is intended to achieve; and no money inures to the private
benefit of the persons managing or operating the institution
(Congregational Sunday School, etc. v. Board of Review)
The petitioner does not lose its character as a charitable

institution simply because the gift or donation is in the form
of subsidies granted by the government.
BUT even if P is a charitable institution, those portions of its

real property that are leased to private entities are not
exempt from RPT as these are not actually, directly and
exclusively used for charitable purposes
Sec 2 of PD 1823: Being a non-profit, non-stock corporation

organized primarily to help combat the high incidence of
lung and pulmonary diseases in the Philippines, all
donations, contributions, endowments and equipment and
supplies to be imported by authorized entities or persons
and by the Board of Trustees of the Lung Center of the
Philippines, Inc., for the actual use and benefit of the Lung
Center, shall be exempt from income and gift taxes, the
same further deductible in full for the purpose of determining
the maximum deductible amount under Section 30,
paragraph (h), of the National Internal Revenue Code, as
amended. The Lung Center of the Philippines shall be exempt
from the payment of taxes, charges and fees imposed by the
Government or any political subdivision or instrumentality
thereof with respect to equipment purchases made by, or for
the Lung Center.29
THUS under the decree, the petitioner does not enjoy any
property tax exemption privileges for its real properties as
well as the building constructed thereon If the intentions
were otherwise, the same should have been among the
enumeration of tax exempt privileges under Section 2
Sec 28(3), Article VI of the 1987 Constitution: Charitable

institutions, churches and parsonages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all
lands, buildings, and improvements, actually, directly and
67
exclusively used for religious, charitable or educational

purposes shall be exempt from taxation
The tax exemption under this constitutional provision covers

property taxes only
Consequently, the constitutional provision is implemented by

Sec 234(b) of RA 7160 (LGC of 1991):The following are
exempted from payment of the real property tax: (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.
Note that under the 1935 Constitution, "... all lands,

buildings, and improvements used exclusively for
charitable purposes shall be exempt from taxation."
However, under the 1973 and the present Constitutions, for
"lands, buildings, and improvements" of the charitable
institution to be considered exempt, the same should not
only be "exclusively" used for charitable purposes; it is
required that such property be used "actually" and "directly"
for such purposes.
THUS under the 1973 and 1987 Constitutions and RA 7160 in

order to be entitled to the exemption, the petitioner is
burdened to prove, by clear and unequivocal proof, that (a) it
is a charitable institution; and (b) its real properties are
ACTUALLY, DIRECTLY and EXCLUSIVELY used for
charitable purposes. "Exclusive" is defined as possessed and
enjoyed to the exclusion of others; debarred from
participation or enjoyment; and "exclusively" is defined, "in a
manner to exclude; as enjoying a privilege exclusively." If
real property is used for one or more commercial purposes, it
is not exclusively used for the exempted purposes but is
subject to taxation. The words "dominant use" or "principal
use" cannot be substituted for the words "used exclusively"
without doing violence to the Constitutions and the law.
What is meant by actual, direct and exclusive use of the
property for charitable purposes is the direct and immediate
and actual application of the property itself to the purposes
for which the charitable institution is organized. It is not the
use of the income from the real property that is
determinative of whether the property is used for tax-exempt
purposes.
While portions of the hospital are used for the treatment of

patients and the dispensation of medical services to them,
whether paying or non-paying, other portions thereof are
being leased to private individuals for their clinics and a
canteen. Further, a portion of the land is being leased to a
private individual for her business enterprise under the
business name "Elliptical Orchids and Garden Center
68
DIGEST
Nov 7, 2014
actually, directly and exclusively used by petitioner NPC,
G.R. No. 168557 February 16, 2007 (3D)
FELS ENERGY, INC. vs. THE PROVINCE OF BATANGAS
and
THE OFFICE OF THE PROVINCIAL ASSESSOR OF
BATANGAS
a government- owned and controlled corporation

engaged in the supply, generation, and transmission of
electric power
I: WON power barges, which are floating and movable, are

personal properties and therefore, not subject to RPT
H: YES.
Napocor entered into a lease contract with Polar Energy,

Inc. over diesel engine power barges at Batangas for 5
years Art 10 reads that NAPOCOR shall be responsible
for the payment of (a) all taxes, import duties, fees,
charges and other levies imposed by the Natl Govt or
any agency or instrumentality thereof to which POLAR
may be or become subject to or in relation to the
performance of their obligations under this agreement
(other than (i) taxes imposed or calculated on the basis
of the net income of POLAR and Personal Income Taxes
of its employees and (ii) construction permit fees,
environmental permit fees and other similar fees and
charges) and (b) all real estate taxes and assessments,
rates and other charges in respect of the Power Barges
Subsequently, Polar assigned its rights to FELS
FELS then received an assessment of RPT on the power

barges from Provincial Assessor
Napocor sought recon of the Provincial Assessors

decision to assess RPT but motion was denied: PA
averred that the barges were real property for purposes
of taxation under Sec 199(c) of RA 7160
Before the case was decided by the LBAA, NPC filed a

Manifestation that the DOF had rendered an opinion
where it is clearly stated that power barges are not real
property subject to real property assessment
LBAA: FELS is ordered to pay the real estate tax: the

power plant facilities, while they may be classified as
movable or personal property, are nevertheless
considered real property for taxation purposes because
they are installed at a specific location with a character
of permanency; that the owner of the bargesFELS, a
private corporationis the one being taxed, not NPC. A
mere agreement making NPC responsible for the
payment of all real estate taxes and assessments will
not justify the exemption of FELS; such a privilege can
only be granted to NPC and cannot be extended to FELS
CBAA rendered a Decision finding the power barges

exempt from RPT: that the power barges belong to NPC;
since they are actually, directly and exclusively used by
it, the power barges are covered by the exemptions
under Sec 234(c) of RA. 7160 later reversed its
earlier decision
CA denied the petition on the ground of prescription

upon the failure of FELS to appeal the disputed
assessment to the LBAA within the period prescribed by
law
P: the power barges are exempt from real estate tax

under Section 234 (c) of RA 7160 because they are
Sec 226 of RA 7160: Any owner or person having legal

interest in the property who is not satisfied with the action of
the provincial, city or municipal assessor in the assessment
of his property may, within 60 days from the date of receipt
of the written notice of assessment, appeal to the Board of
Assessment Appeals of the province or city by filing a
petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such
affidavits or documents submitted in support of the appeal.
Instead of appealing to the Board of Assessment, NPC opted

to file MFR of PAs decision, a remedy not sanctioned by law
THUS LBAA acted correctly when it dismissed the petitioners
appeal for having been filed out of time; the CBAA and the
appellate court were likewise correct in affirming the
dismissal
Having found that the elements of res judicata and forum

shopping are present in the consolidated cases, a discussion
of the other issues is no longer necessary. Nevertheless, for
the peace and contentment of petitioners, we shall shed light
on the merits of the case.
As found by the appellate court, the CBAA and LBAA power

barges are real property and are thus subject to RPT In
Consolidated Edison Company of New York, Inc., et al. v. The
City of New York, et al., the barges on which were mounted
gas turbine power plants designated to generate electrical
power, the fuel oil barges which supplied fuel oil to the power
plant barges, and the accessory equipment mounted on the
barges were subject to real property taxation.
SC affirms the findings of the LBAA and CBAA that the owner
of the taxable properties is petitioner FELS, which in fine, is
the entity being taxed by the local government As
stipulated in the Agreement: POLAR shall own the Power
Barges and all the fixtures, fittings, machinery and
equipment on the Site used in connection with the Power
Barges which have been supplied by it at its own cost.
POLAR shall operate, manage and maintain the Power
Barges for the purpose of converting Fuel of NAPOCOR into
electricity
Indeed, the law states that the machinery must be actually,

directly and exclusively used by the government owned or
controlled corporation;
DIGEST
Nov 7,of2014
The
mere undertaking
petitioner NPC under Section 10.1
of the Agreement, that it shall be responsible for the
payment of all real estate taxes and assessments, does not
justify the exemption. The privilege granted to petitioner NPC
cannot be extended to FELS. The covenant is between FELS
and NPC and does not bind a third person not privy thereto,
in this case, the Province of Batangas.
G.R. No. 169836 July 31, 2007 (3D)

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY vs
CA, OFFICE OF THE PRESIDENT, DOF and the CITY OF
ILOILO
PD 977 was issued creating the Authority and placing it

under the direct control and supervision of DENR
Secretary
Upon the effectivity of the Administrative Code, the

Authority became an attached agency of the
Department of Agriculture
Meanwhile, the then Ministry of Public Works and

Highways reclaimed from the sea a 21-hectare parcel of
land in Barangay Tanza, Iloilo City, and constructed
thereon the IFPC, consisting of breakwater, a landing
quay, a refrigeration building, a market hall, a municipal
shed, an administration building, a water and fuel oil
supply system and other port related facilities and
machineries
Upon its completion, the Ministry of Public Works and

Highways turned over IFPC to the Authority, which
places fishing port complexes and related facilities under
the governance and operation of the Authority
The Authority thereafter leased portions of IFPC to

private firms and individuals engaged in fishing related
businesses
City of Iloilo assessed the entire IFPC for RPT

remained unpaid thus City of Iloilo scheduled the sale at
public auction of the IFPC
Iloilo City
exemption
DOF ruled that the Authority is liable to pay RPT because

it enjoys the beneficial use of the IFPC however, that in
satisfying the amount of the unpaid RPT, the property
that is owned by the Authority shall be auctioned, and
not the IFPC, which is a property of the Republic
CA affirmed the decision of the Office of the President
Assessors
Office
denied
the
claim
for
I: WON the Authority is liable to pay RPT

H:Partly.
The Authority is not a GOCC but an instrumentality of the
national government which is generally exempt from
69
payment of RPT. However, said exemption does not apply to

the portions of the IFPC which the Authority leased to private
entities. Nonetheless, the IFPC, being a property of public
dominion cannot be sold at public auction to satisfy the tax
delinquency.
MIAA v. CA: For an entity to be considered as a GOCC, it must

either be organized as a stock or non-stock corporation. Two
requisites must concur before one may be classified as a
stock corporation, namely: (1) that it has CS divided into
shares, and (2) that it is authorized to distribute dividends
and allotments of surplus and profits to its stockholders. If
only one requisite is present, it cannot be properly classified
as a stock corporation. As for non-stock corporations, they
must have members and must not distribute any part of their
income to said members.11
On the basis of the parameters set in the MIAA case, the

Authority should be classified as an instrumentality of the
national government. As such, it is generally exempt from
payment of RPT, except those portions which have been
leased to private entities.
In the MIAA case, petitioner was cited as among the

instrumentalities of the national government.
The MIAA case held that unlike GOCCs, instrumentalities

of the national government are exempt from local taxes
pursuant to Sec 133(o) of LGC. This exemption, however,
admits of an exception with respect to RPT. Applying Sec
234(a) of LGC, Court ruled that when an instrumentality of
the natl govt grants to a taxable person the beneficial use of
a real property owned by the Republic, said instrumentality
becomes liable to RPT.
In light of the foregoing, the Authority should be classified as

an instrumentality of the national government which is liable
to pay taxes only with respect to the portions of the
property, the beneficial use of which were vested in private
entities. Thus, the real property tax assessments issued by
the City of Iloilo should be upheld only with respect to the
portions leased to private persons. In case the Authority fails
to pay the real property taxes due thereon, said portions
cannot be sold at public auction to satisfy the tax
delinquency.
G.R. No. 120082 September 11, 1996 (3D)

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY
vs. HON. FERDINAND J. MARCOS, THE CITY OF CEBU
and EUSTAQUIO B. CESA
DIGEST
was
Novcreated
7, 2014
Petitioner
by virtue of RA 6958; Since the
conferred by Sec 5, Art X of the Constitution
time of its creation, MCIAA enjoyed the privilege of
exemption from payment of realty taxes in accordance
with Section 14 (The authority shall be exempt from
realty taxes imposed by the Natl Govt or any of its
political subdivisions, agencies and instrumentalities
Treasurer of the City of Cebu, demanded payment for

realty taxes on several parcels of land belonging to the
petitioner in the total amount of P2,229,078.79
P objected to such demand for payment as baseless and

unjustified, claiming in its favor the aforecited Sec 14 of
RA 6958 which exempt it from payment of realty taxes.
It was also asserted that it is an instrumentality of the
government performing governmental functions, citing
sec 133 of LGC: Unless otherwise provided herein, the
municipalities, and barangay shall not extend to the levy
of the following: Taxes, fees or charges of any kind on
the Natl Govt, its agencies and instrumentalities, and
LGUs.
Respondent City refused to cancel and set aside

petitioner's realty tax account, insisting that the MCIAA
is a GOCC whose tax exemption privilege has been
withdrawn by virtue of Sec 193 and 234 of LGC:
As the City of Cebu was about to issue a warrant of levy

against the properties of P, the latter was compelled to
pay its tax account "under protest" and thereafter filed a
Petition for Declaratory Relief MCIAA basically
contended that the taxing powers of LGUs do not extend
to the levy of taxes or fees of any kind on an
instrumentality of the natl govt; that while it is indeed a
GOCC, it nonetheless stands on the same footing as an
agency or instrumentality of the national government by
the very nature of its powers and fxns
RTC dismissed the petition: New LGC provides the

express cancellation and withdrawal of exemption of
taxes by GOCC
I: WON P is exempt from RPT.

H: NO.
P contends that being an instrumentality of the Natl Govt,
City of Cebu has no power nor authority to impose RPT upon
it in accordance with Sec 133 of the LGC, as explained in
Basco vs. PAGCOR: Local governments have no power to tax
instrumentalities of the National Government. This
doctrine emanates from the "supremacy" of the Natl Govt
over local govt
GR: the power to tax is an incident of sovereignty and is

unlimited in its range, acknowledging in its very nature no
limits, so that security against its abuse is to be found only in
the responsibility of the legislature which imposes the tax on
the constituency who are to pay it
The power to tax is primarily vested in the Congress;
however, in our jurisdiction, it may be exercised by local
legislative bodies, no longer merely by virtue of a valid
delegation as before, but pursuant to direct authority
70
the exercise
of the power may be subject to such guidelines and
limitations as the Congress may provide which, however,
must be consistent with the basic policy of local autonomy.
There can be no question that under Sec 14 of RA 6958 the

petitioner is exempt from the payment of realty taxes
imposed by the Natl Govt or any of its political subdivisions,
agencies, and instrumentalities. Nevertheless, since taxation
is the rule and exemption therefrom the exception, the
exemption may thus be withdrawn at the pleasure of the
taxing authority. The only exception to this rule is where the
exemption was granted to private parties based on material
consideration of a mutual nature, which then becomes
contractual and is thus covered by the non-impairment
clause of the Constitution.
Sec 133 of LGC prescribes the common limitations on the

taxing powers of local government units: The "taxes, fees or
charges" referred to are "of any kind", hence they include all
of these, unless otherwise provided by the LGC. The term
"taxes" is well understood so as to need no further
elaboration, especially in the light of the above enumeration.
The term "fees" means charges fixed by law or Ordinance for
the regulation or inspection of business activity, while
"charges" are pecuniary liabilities such as rents or fees
against person or property.
Among the "taxes" enumerated in the LGC is RPT, which is

governed by Sec 232: A province or city or a municipality
within the Metropolitan Manila Area may levy on an annual
ad valorem tax on real property such as land, building,
machinery and other improvements not hereafter specifically
exempted.
Section 234 of LGC provides for the exemptions from

payment of real property taxes and withdraws previous
exemptions therefrom granted to natural and juridical
persons, inc GOCCs, except as provided therein. It provides:
(a) Real property owned by Rep of Phl or any of its political
subdivisions except when the beneficial use thereof had
been granted, for reconsideration or otherwise, to a taxable
person; (b) Charitable institutions, churches, parsonages or
convents appurtenants thereto, mosques nonprofits or
religious
cemeteries
and
all
lands,
building
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 GOCCs 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 RA 6938;
and; (e) Machinery and equipment used for pollution control
and environmental protection.
Except as provided herein, any exemptions from payment of
RPT previously granted to or presently enjoyed by, all
persons whether natural or juridical, including all GOCCs are
hereby withdrawn upon the effectivity of LGC
DIGEST Nov 7, 2014
These exemptions are based on the ownership, character,
and use of the property. Thus;
Ownership Exemptions. Exemptions from RPT on the
basis of ownership are real properties owned by: (i) the
Republic, (ii) a province, (iii) a city, (iv) a municipality,
(v) a barangay, and (vi) registered cooperatives.
Character Exemptions. Exempted from RPT on the basis
of their character are: (i) charitable institutions, (ii)
houses and temples of prayer like churches, parsonages
or convents appurtenant thereto, mosques, and (iii) non
profit or religious cemeteries.
Usage exemptions. Exempted from RPT on the basis of
the actual, direct and exclusive use to which they are
devoted are: (i) all lands buildings and improvements
which are actually, directed and exclusively used for
religious, charitable or educational purpose; (ii) all
machineries and equipment actually, directly and
exclusively used or by local water districts or by GOCCs
engaged in the supply and distribution of water and/or
generation and transmission of electric power; and (iii)
all machinery and equipment used for pollution control
and environmental protection
71
Since the last paragraph of Section 234 unequivocally

withdrew, upon the effectivity of the LGC, exemptions from
RPT granted to natural or juridical persons, including GOCCs,
except as provided in the said section, and the petitioner is,
undoubtedly, a GOCC, it necessarily follows that its
exemption from such tax granted it in Sec 14 of its charter
has been withdrawn. Any claim to the contrary can only be
justified if the petitioner can seek refuge under any of the
exceptions provided in Section 234, but not under Section
133, as it now asserts, since, as shown above, the said
section is qualified by Section 232 and 234.
Moreover, P cannot claim that it was never a "taxable

person" under its Charter. It was only exempted from the
payment of RPT even if P was originally not a taxable
person for purposes of RPT, in light of the forgoing
disquisitions, it had already become even if it be conceded to
be an "agency" or "instrumentality" of the Government, a
taxable person for such purpose in view of the withdrawal in
the last paragraph of Section 234 of exemptions from the
payment of real property taxes, which, as earlier adverted to,
applies to the petitioner.
G.R. No. 155650 July 20, 2006 (E)

Thus, reading together Sec 133, 232 and 234 of the LGC, as
a general rule, as laid down in Section 133 the taxing powers
of local government units cannot extend to the levy of inter
alia, "taxes, fees, and charges of any kind of the Natl Govt,
its agencies and instrumentalties, and LGUs"; however,
pursuant to Sec 232, provinces, cities, municipalities in the
Metropolitan Manila Area may impose RPT except on, inter
alia, "real property owned by the Republic of the Philippines
or any of its political subdivisions except when the beneficial
used thereof has been granted, for consideration or
otherwise, to a taxable person", as provided in item (a) of
the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently

enjoyed by natural or juridical persons, including
government-owned and controlled corporations, Section 193
of the LGC prescribes the general rule, viz., they are
withdrawn upon the effectivity of the LGC, except upon the
effectivity of the LGC, except those granted to local water
districts, cooperatives duly registered under R.A. No. 6938,
non stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the LGC. The
latter proviso could refer to Section 234, which enumerates
the properties exempt from real property tax. But the last
paragraph of Section 234 further qualifies the retention of
the exemption in so far as the real property taxes are
concerned by limiting the retention only to those
enumerated there-in; all others not included in the
enumeration lost the privilege upon the effectivity of the
LGC. Moreover, even as the real property is owned by the
Republic of the Philippines, or any of its political subdivisions
covered by item (a) of the first paragraph of Section 234, the
exemption is withdrawn if the beneficial use of such property
has been granted to taxable person for consideration or
otherwise.
MANILA INTERNATIONAL AIRPORT AUTHORITY vs. CA,

CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE,
SANGGUNIANG PANGLUNGSOD NG PARAAQUE, CITY
ASSESSOR OF PARAAQUE, and CITY TREASURER OF
PARAAQUE
MIAA operates NAIA Complex: As operator of the

international airport, MIAA administers the land,
improvements and equipment within the NAIA Complex
MIAA Charter transferred to MIAA approximately 600
hectares of land then under the Bureau of Air
Transportation and provides that no portion of the land
transferred to MIAA shall be disposed of
OGCC issued an Opinion that LGC withdrew the

exemption from RPT granted to MIAA under Section 21
of the MIAA Charter
MIAA received Final Notices of Real Estate Tax

Delinquency from the City of Paraaque for the taxable
years 1992 to 2001.
the City issued notices of levy and warrants of levy on

the Airport Lands and Buildings: threatened to sell at
public auction the Airport Lands and Buildings should
MIAA fail to pay RPT MIAA thus sought a clarification
of OGCC Opinion No. 061
OGCC then issued Opinion No. 147 clarifying OGCC

Opinion No. 061: Sec 206 of LGC requires persons
exempt from RPT to show proof of exemption Sec 21
of the MIAA Charter is the proof that MIAA is exempt
from RPT
DIGEST
Nov
7,an2014
MIAA filed
with CA
original petition for prohibition and
MIAA is a government instrumentality
injunction CA dismissed the petition because MIAA
filed it beyond the 60-day reglementary period
Meanwhile, the City posted notices of auction sale of the

Airport Lands and Buildings
A day before the public auction, MIAA filed an Urgent ExParte and Reiteratory Motion for the Issuance of TRO
SC issued a TRO however respondents received the TRO
only three hours after the conclusion of the public
auction
MIAA: Sec 21 of MIAA Charter specifically exempts MIAA

from the payment of RPT and that it is also exempt
under Sec 234 of LGC because the Airport Lands and
Buildings are owned by the Republic
Respondents invoke Sec 193 of LGC, which expressly

withdrew the tax exemption privileges of GOCCs upon
the effectivity of LGC; An international airport is not
among the exceptions mentioned in Sec 193 of LGC
THUS respondents assert that MIAA cannot claim that
the Airport Lands and Buildings are exempt from RPT;
also cite the ruling of in Mactan International Airport
v. Marcos where we held LGC has withdrawn the
exemption from RPT granted to international airports;
further argue that since MIAA has already paid some of
RPT assessments, it is now estopped from claiming
exemption
I: WON the Airport Lands and Buildings of MIAA are exempt

from RPT.
H: YES. First, MIAA is not a GOCC but an instrumentality of
Natl Govt and thus exempt from local taxation. Second, the
real properties of MIAA are owned by Republic and thus
exempt from RPT
Respondents claim that the deletion of the phrase "any

GOCC so exempt by its charter" in Sec 234(e) of LGC
withdrew the RPT exemption of GOCC. The deleted phrase
appeared in Sec 40(a) of RPT Code enumerating the entities
exempt from RPT
There is no dispute that a GOCC is not exempt from RPT.

However, MIAA is not GOCC: Sec 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines GOCC
as 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 51% of its capital
stock: THUS GOCC must be "organized as a stock or nonstock corporation." MIAA is not organized as a stock or
non-stock corporation. MIAA is not a stock corporation
because it has no capital stock divided into shares. MIAA
is also not a non-stock because it has no members.
72
vested with
corporate powers to perform efficiently its governmental
functions. MIAA is like any other government instrumentality,
the only difference is that MIAA is vested with corporate
powers. Section 2(10) of the Introductory Provisions of the
Administrative
Code
defines
a
government
"instrumentality" as any agency of the Natl Govt, not
integrated within the department framework, vested with
special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special
funds, and enjoying operational autonomy, usually through a
charter
When the law vests in a government instrumentality

corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a
government
instrumentality
exercising
not
only
governmental but also corporate powers. Thus, MIAA
exercises the governmental powers of eminent domain,
police authority13 and the levying of fees and charges. At the
same time, MIAA exercises "all the powers of a corporation
under the Corporation Law, insofar as these powers are not
inconsistent with the provisions of this Executive Order."
A government instrumentality like MIAA falls under Sec

133(o) of LGC, which states: Unless otherwise provided
herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall
not extend to the levy of the following: (o) Taxes, fees
or charges of any kind on the Natl Govt, its agencies
and instrumentalities and LGUs
Sec 133(o) recognizes the basic principle that local

governments cannot tax the natl govt, which historically
merely delegated to LGUs the power to tax. While the 1987
Constitution now includes taxation as one of the powers of
LGUs, LGUs may only exercise such power "subject to such
guidelines and limitations as the Congress may provide"
o
When local governments invoke the power to tax on

national government instrumentalities, such power
is construed strictly against local governments.
There is also no reason for LGUs to tax natl govt

instrumentalities for rendering essential public services to
inhabitants of LGUs. The only exception is when the
legislature clearly intended to tax government
instrumentalities for the delivery of essential public
services
for
sound
and
compelling
policy
considerations. There must be express language in the law
empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is
resolved against local governments.
Thus, Sec 133 of LGC states that "unless otherwise

provided" in the Code, local governments cannot tax natl
govt instrumentalities Basco v. PAGCOR: The states have
no power by taxation or otherwise, to retard, impede, burden
Nov
7, 2014
orDIGEST
in any manner
control
the operation of constitutional laws
enacted by Congress to carry into execution the powers
vested in the federal government.
The Airport Lands and Buildings of MIAA are property of

public dominion and therefore owned by the State or
the Republic of the Philippines. The MIAA Airport
Lands and Buildings constitute a "port" constructed by the
State. Under Article 420 of the Civil Code, the MIAA Airport
Lands and Buildings are properties of public dominion and
thus owned by the State or the Republic
The Airport Lands and Buildings are devoted to public use
because they are used by the public for international and
domestic travel and transportation. The fact that the
MIAA collects terminal fees and other charges from the
public does not remove the character of the Airport Lands
and Buildings as properties for public use. The operation by
the government of a tollway does not change the character
of the road as one for public use
Sec 234(a) of LGC exempts from RPT any "real property

owned by the Republic: Real property owned by the
Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof
has been granted, for consideration or otherwise, to a
taxable person;
This exemption should be read in relation with Section 133(o)

of the same Code, which prohibits local governments from
imposing "[t]axes, fees or charges of any kind on the
National Government, its agencies and instrumentalities x
x x."
The Republic may grant the beneficial use of its real property
to an agency or instrumentality of the national government.
This happens when title of the real property is transferred to
an agency or instrumentality even as the Republic remains
the owner of the real property. Such arrangement does not
result in the loss of the tax exemption. Section 234(a) of LGC
states that real property owned by the Republic loses its tax
exemption only if the "beneficial use thereof has been
granted, for consideration or otherwise, to a taxable
person."
MIAA, as a government instrumentality, is not a taxable

person under Sec 133(o) of LGC Thus, even if we assume
that the Republic has granted to MIAA the beneficial use of
the Airport Lands and Buildings, such fact does not make
these real properties subject to RPT
73
The minority asserts that the MIAA is not exempt from RPT
because Sec 193 of LGC withdrew the tax exemption of "all
persons, whether natural or juridical" upon the
effectivity of the Code: Unless otherwise provided in this
Code, tax exemptions or incentives granted to, or presently
enjoyed by all persons, whether natural or juridical,
including GOCCs, except local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions are hereby withdrawn
upon effectivity of this Code. The minority states that MIAA is
indisputably a juridical person It is evident from the
quoted provisions of LGC that the withdrawn
exemptions from realty tax cover not just GOCCs, but
all persons. The term "All persons" encompasses the
two classes of persons recognized under our laws,
natural and juridical persons. Obviously, MIAA is not a
natural person. Thus, the determinative test is not
just whether MIAA is a GOCC, but whether MIAA is a
juridical person at all.
The argument of the minority is fatally flawed. Sec 193
expressly withdrew the tax exemption of all juridical persons
"[u]nless otherwise provided in this Code." Now, Sec
133(o) expressly provides
otherwise, specifically
prohibiting local governments from imposing any kind of
tax on national government instrumentalities. By express
mandate, LGUs cannot impose any kind of tax on national
government
instrumentalities
like
the
MIAA.
Local
governments are devoid of power to tax the national
government, its agencies and instrumentalities. The taxing
powers of local governments do not extend to the national
government, its agencies and instrumentalities, "[u]nless
otherwise provided in this Code" as stated in the saving
clause of Section 133. The saving clause refers to Section
234(a) on the exception to the exemption from real estate
tax of real property owned by the Republic.
The minority's theory violates Sec 133(o) which expressly

prohibits LGUs from imposing any kind of tax on national
government instrumentalities. Section 133(o) does not
distinguish between national government instrumentalities
with or without juridical personalities. Where the law does
not distinguish, courts should not distinguish. Thus, Section
133(o) applies to all national government instrumentalities,
with or without juridical personalities. The determinative test
whether MIAA is exempt from local taxation is not whether
MIAA is a juridical person, but whether it is a national
government instrumentality under Section 133(o) of the
Local Government Code. Section 133(o) is the specific
provision of law prohibiting local governments from imposing
any kind of tax on the national government, its agencies and
instrumentalities.
G.R. No. 163072 April 2, 2009 (E)

However, portions of the Airport Lands and Buildings that
MIAA leases to private entities are not exempt from real
estate tax. For example, the land area occupied by hangars
that MIAA leases to private corporations is subject to real
estate tax. In such a case, MIAA has granted the beneficial
use of such land area for a consideration to a taxable
person and therefore such land area is subject to real estate
tax
MANILA INTERNATIONAL AIRPORT AUTHORITY vs. CITY

OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY,
CITY MAYOR OF PASAY, CITY TREASURER OF PASAY,
and CITY ASSESSOR OF PASAY,
74
DIGEST
Novand
7,administers
2014
MIAA operates
NAIA Complex
A close scrutiny of the definition of "government-owned
MIAA received Final Notices of RPT Delinquency from the

City of Pasay for the taxable years 1992 to 2001
the City issued notices of levy and warrants of levy for

the NAIA Pasay properties
MIAA filed CA a petition for prohibition and injunction

CA dismissed the petition
CA held that Sec 193 and 234 withdrew the exemption

from payment of RPT granted to natural or juridical
persons, including GOCCs, except local water districts,
cooperatives duly registered under RA 6938, non-stock
and non-profit hospitals and educational institutions.
Since MIAA is GOCC, it follows that its tax exemption
under Section 21 of EO 903 has been withdrawn
I: WON NAIA Pasay properties of MIAA are exempt from RPT

H:
In MIAA v. CA (2006 MIAA case), SC already resolved the
issue of whether the airport lands and buildings of MIAA are
exempt from tax under existing laws. The 2006 MIAA case
originated from a petition for prohibition and injunction which
MIAA filed with CA, seeking to restrain the City of Paraaque
from imposing RPT on, levying against, and auctioning for
public sale the airport lands and buildings located in
Paraaque City. The only difference between the 2006 MIAA
case and this case is that the 2006 MIAA case involved
airport lands and buildings located in Paraaque City while
this case involved those located in Pasay City.
In the 2006 MIAA case, this Court held: To summarize, MIAA

is not a GOCC under Sec 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 GOCC
under Section 16, Article XII of the 1987 Constitution
because MIAA is not required to meet the test of economic
viability. 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). The exception to the exemption in Sec
234(a) does not apply to MIAA because MIAA is not a taxable
entity under LGC. Such exception applies only if the
beneficial use of real property owned by the Republic is
given to a taxable entity. Finally, the Airport Lands and
Buildings of MIAA are properties devoted to public use and
thus are properties of public dominion. Properties of public
dominion are owned by the State or the Republic
or
controlled corporation" in Section 2(13) will show that MIAA
would not fall under such definition. MIAA is a government
"instrumentality" that does not qualify as a
"government-owned or controlled corporation." As
explained in the 2006 MIAA case: A GOCC must be
"organized as a stock or non-stock corporation." MIAA is not
organized as a stock or non-stock corporation. MIAA is not a
stock corporation because it has no capital stock divided into
shares. MIAA has no stockholders or voting shares. Section 3
of the Corporation Code defines a stock corporation as one
whose "capital stock is divided into shares and authorized to
distribute to the holders of such shares dividends x x x."
MIAA has capital but it is not divided into shares of stock.
MIAA has no stockholders or voting shares. Hence, MIAA is
not a stock corporation.
MIAA is also not a non-stock corporation because it has no

members. Sec 87 of the Corporation Code defines a nonstock corporation as "one where no part of its income is
distributable as dividends to its members, trustees or
officers." A non-stock corporation must have members. Even
if we assume that the Government is considered as the sole
member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any
part of their income to their members. Section 11 of the
MIAA Charter mandates MIAA to remit 20% of its annual
gross operating income to the National Treasury. This
prevents MIAA from qualifying as a non-stock corporation.
Thus, MIAA is not a GOCC but a government instrumentality

which is exempt from any kind of tax from the local
governments. Indeed, the exercise of the taxing power of
local government units is subject to the limitations
enumerated in Sec 133: LGUs have no power to tax
instrumentalities of the national government like the MIAA.
Hence, MIAA is not liable to pay real property tax for the
NAIA Pasay properties.
G.R. No. 170532 April 30, 2009 (3D)

THE PROVINCIAL ASSESSOR OF MARINDUQUE vs. CA
AND MARCOPPER MINING CORPORATION
Petitioner issued against respondent an Assessment

Notice for RPT due on the latter's real properties,
including its Siltation Dam and Decant System (subject
property)
Respondent paid the tax demanded, but appealed the

assessment before the Local Board of Assessment
Appeals (LBAA) on the ground that the subject property
is exempt from RPT under Sec 234(e): The following are
exempted from payment of RPT: (e) Machinery and
equipment used for pollution control and
environmental protection.
Attached to its appeal is an Affidavit issued by its Chief

Mining Engineer stating that the subject property was
The fact that two terms have separate definitions means

that while a government "instrumentality" may include a
"government-owned or controlled corporation," there may be
a government "instrumentality" that will not qualify as a
"government-owned or controlled corporation."
75
DIGEST
Nov
7, 2014
constructed
to comply
with the condition imposed by
Title II of R.A. No. 7160 governs the administration, appraisal,
DENR that respondent prevent run-offs and silt materials
from contaminating the Mogpog and Boac Rivers; and
describing the subject property as a specialized
combination of essential impervious earth materials with
a special provision for a spillway and a diversion canal.
o
Respondent also submitted a Certification issued by

DENR Regional Technical Director that the subject
property is a Siltation Dam structure intended primarily
for pollution control of silted materials
LBAA: subject property is taxable as an improvement on

the principal real property, citing the ruling of the Court
in Benguet Corporation v. CBAA that a tailings dam is a
permanent improvement not exempt from RPT
CBAA respondents appeal with the LBAA is timely, but

the same lacked legal basis because the subject
property was neither a machinery nor an equipment but
a permanent improvement, and therefore not tax
exempt under the definition of machinery under Sec.
199 that to be considered a "machinery," the subject
property must either be a physical facility for production;
or a service facility; or one that is actually, directly and
exclusively used to meet the needs of the particular
industry, business, or activity; and which by its very
nature and purpose is designed for, or necessary to a
manufacturing, mining, logging, commercial, industrial
or agricultural purpose. The subject property does not
produce anything nor operate as auxiliary to a
production process; thus, it is neither a physical facility
for production nor a service facility. It is not even
necessary to the mining activity of respondent, because
its purpose is merely to contain silt and sediments.
CA reversed LBAA and CBAA: siltation dam and decant

system = exempt from RPT; that the concept of
machinery under Sec 199 is broad enough to include a
"machinery, instrument, apparatus or device consisting
of parts which, functioning together, allows a person to
perform a task more efficiently," that the subj property
was exempt from RPT under Sec 91 of RA 7942
(Philippine Mining Act of 1995): Pollution control
devices acquired, constructed or installed by
contractors
shall
not
be
considered
as
improvements on the land or building where they
are placed, and shall not be subject to real
property and other taxes or assessments: Provided,
however, That payment of mine wastes and tailings fees
is not exempted
I: WON subject property herein is exempt from RPT.

H: NO.
It should be borne in mind that the protest and appeals filed
by respondents before LBAA, CBAA, and CA refer to the
Assessment Notice dated March 28, 1994 and effective Jan
1, 1995 disputed assessment notice having taken effect
on Jan 1, 1995, its validity is determined by the provisions of
Title II (Real Property Taxation) of RA 7160; RA 7942 has no
bearing on the matter, for this law came into effect only on
April 14, 1995. Hence, reference to R.A. No. 7942 by the CA
and the respondent are all out of place.
assessment, levy and collection of real property tax. Section

234 thereof grants exemption from real property taxation
based on ownership, character or usage. As the Court
explained in Mactan Cebu International Airport Authority v.
Marcos, to wit: Sec 234 provides for the exemptions from
payment of RPT and withdraws previous exemptions
therefrom granted to natural and juridical persons, including
GOCC, except as provided therein
As held in Mactan, the exemption granted under Sec. 234(e)

of R.A. No. 7160 to "[m]achinery and equipment used for
pollution control and environmental protection" is based on
usage. The term usage means direct, immediate and actual
application of the property itself to the exempting purpose. 46
Section 199 of R.A. No. 7160 defines actual use as "the
purpose for which the property is principally or
predominantly utilized by the person in possession thereof."
It contemplates concrete, as distinguished from mere
potential, use. Thus, a claim for exemption under Sec. 234(e)
of R.A. No. 7160 should be supported by evidence that the
property sought to be exempt is actually, directly and
exclusively used for pollution control and environmental
protection.47
The records yield no allegation or evidence by respondent

that the subject property was actually, directly and
exclusively used for pollution control and environmental
protection during the period covered by the
assessment notice under protest. Rather, the finding of
the CBAA that said property "apparently out of commission
and not apt to its function as would control pollution and
protect the environment" stands undisputed; such finding is
even admitted by respondent
Moreover, Sec. 206 prescribes the evidentiary requirements

for exemption from RPT, viz.: Every person by or for whom
real property is declared, who shall claim tax exemption for
such property under this Title shall file with the provincial,
city or municipal assessor within 30 days from the date of
the declaration of real property sufficient documentary
evidence in support of such claim including corporate
charters, title of ownership, articles of incorporation, bylaws,
contracts, affidavits, certifications and mortgage deeds, and
similar documents. If the required evidence is not
submitted within the period herein prescribed, the property
shall be listed as taxable in the assessment roll. However, if
the property shall be proven to be tax exempt, the same
shall be dropped from the assessment roll.
o
The burden is upon the taxpayer to prove, by clear

and convincing evidence, that his claim for
exemption has legal and factual basis.
As aptly pointed out by petitioner, there is no

allegation nor evidence in respondent's pleadings
that it had complied with the procedural
requirement under Sec. 206. There is nothing in the
records that would indicate that, within 30 days
from its filing of Tax Declaration No. 05-35697 on
November 17, 1993, respondent filed with the
provincial assessor an application for exemption or
76
DIGEST
Nov 7, 2014
any documentary
evidence of the exempt status of
o
Among the obligations undertaken by the NPC under the
the subject property
The DENR Certification classifies the subject property as a
"structure intended primarily for pollution control of silted
materials in order to protect the environmental degredation
of Maguila-guila, Mangamu-Mogpog River system from
getting turbid." That the subject property is a structure is
further underscored by the project design which describes
the subject property as a "zoned earth siltation dam" 56
composed of a clay core consisting of clayey materials or
impervious fill, a random fill made up of heavily to intensely
fractured metarock, and filters comprised of course tailings,
river sand deposits and course filter gravels Therefore, by
design, composition and function, the subject property is a
structure adhered to the soil, and has neither a mechanical
contrivance, instrument, tool, implement, appliances,
apparatus, nor paraphernalia that produces a mechanical
effect or performs a mechanical work of any kind. It meets
none of the following features of a machinery as described in
Section 199(o) of R.A. No. 7160:
That a structure such as the subject property does not

qualify as a machinery or equipment used for pollution
control as contemplated under R.A. No. 7160 is evident
from the adoption of an expanded definition of pollution
control device in R.A. No. 7942. Under Section 3 thereof, a
pollution control device now also refers to "infrastructure"
or "improvement," and not just to machinery or
equipment. This new concept, however, cannot benefit
respondent, for the assessment notice under review
pertains to real property tax assessed prior to the
amendment of Sec. 234 (e) of R.A. No. 7160 by Sec. 91 in
relation to Sec. 3 (am) of R.A. No. 7942. It is settled that
tax laws are prospective in application, unless expressly
provided to apply retroactively.62 R.A. No. 7942 does not
provide for the retroactive application of its provisions.
ECA was the payment of all taxes that the government

may impose on Mirant
o
Then, the Municipality of Pagbilao assessed Mirants RPT

on the power plant and its machineries in the total
amount of P1,538,076,000 for the period of 1997 to
2000
NPC filed a petition before LBAA: objected to the

assessment against Mirant on the claim that it (the NPC)
is entitled to the tax exemptions provided in Sec 234,
paragraphs (c) and (e) of the LGC. These provisions
state: The following are exempted from payment for
RPT: (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; (e) Machinery and
equipment used for pollution control and environmental
protection
Except as provided herein, any exemption from payment

of RPT previously granted to, or presently enjoyed by, all
persons, whether natural or juridical, including GOCCs
are hereby withdrawn upon the effectivity of the Code.
Assuming that it cannot claim the exemptions stated in

these provisions, the NPC alternatively asserted that it is
entitled to: a. the lower assessment level of 10% under
Section 218(d) of the LGC for GOCCs engaged in the
generation and transmission of electric power, instead of
the 80% assessment level for commercial properties as
imposed in the assessment letter; and b. an allowance
for depreciation of the subject machineries under
Section 225 of the LGC.
LBAA dismissed the NPCs petition
CBAA affirmed the denial of the NPCs claim for

exemption.
CTA en banc resolved to dismiss the NPCs petition
G.R. No. 171586 July 15, 2009 (2D)

NATIONAL POWER CORPORATION vs. PROVINCE OF
QUEZON and MUNICIPALITY OF PAGBILAO
I: WON properties herein are exempt from RPT

H: NO.
NPC is a GOCC mandated by law to undertake, among

others, the production of electricity from nuclear,
geothermal, and other sources, and the transmission of
electric power on a nationwide basis NPC entered into
an Energy Conversion Agreement (ECA) with Mirant:
provided for a build-operate-transfer arrangement:
Mirant will build and finance a coal-fired thermal power
plant on the lots owned by the NPC in Pagbilao, Quezon
for the purpose of converting fuel into electricity, and
thereafter, operate and maintain the power plant for a
period of 25 years. The NPC, in turn, will supply the
necessary fuel to be converted by Mirant into electric
power, take the power generated, and use it to supply
the electric power needs of the country. At the end of
the 25-year term, Mirant will transfer the power plant to
the NPC without compensation. According to the NPC,
the power plant is currently operational and is one of the
largest sources of electric power in the country.
Section 226 of the LGC lists down the two entities vested
with the personality to contest an assessment: the owner
and the person with legal interest in the property
A person legally burdened with the obligation to pay for the

tax imposed on a property has legal interest in the property
and the personality to protest a tax assessment on the
property. This is the logical and legal conclusion when
Section 226, on the rules governing an assessment protest,
is placed side by side with Section 250 on the payment of
real property tax; both provisions refer to the same parties
who may protest and pay the tax:
DIGEST
Nov
2014
SECTION
226.
Local 7,
Board
of Assessment Appeals. - Any
owner or person having legal interest in the property
who is not satisfied with the action of the provincial, city or
municipal assessor in the assessment of his property may,
within sixty (60) days from the date of receipt of the written
notice of assessment, appeal to the Board of Assessment
Appeals of the province or city xxx.
SECTION 250. Payment of Real Property Taxes in

Instalments. - The owner of the real property or the
person having legal interest therein may pay the basic
real property tax xxx due thereon without interest in four (4)
equal instalments xxx.
The liability for taxes generally rests on the owner of the real
property at the time the tax accrues. This is a necessary
consequence that proceeds from the fact of ownership.
However, personal liability for realty taxes may also
expressly rest on the entity with the beneficial use of the real
property, such as the tax on property owned by the
government but leased to private persons or entities, or
when the tax assessment is made on the basis of the actual
use of the property. In either case, the unpaid realty tax
attaches to the property but is directly chargeable
against the taxable person who has actual and
beneficial use and possession of the property
regardless of whether or not that person is the owner.
In the present case, the NPC, contrary to its claims, is neither

the owner nor the possessor/user of the subject machineries.
Cario v. Ofilado: legal interest should be an interest that is

actual and material, direct and immediate, not simply
contingent or expectant. The concept of the directness and
immediacy involved is no different from that required in
motions for intervention under Rule 19 of the Rules of Court
that allow one who is not a party to the case to participate
because of his or her direct and immediate interest,
characterized by either gain or loss from the judgment that
the court may render NPCs ownership of the plant will
happen only after the lapse of the 25-year period; until such
time arrives, the NPC's claim of ownership is merely
contingent, i.e., dependent on whether the plant and its
machineries exist at that time. Prior to this event, the NPCs
real interest is only in the continued operation of the plant
for the generation of electricity. This interest has not been
shown to be adversely affected by the realty taxes imposed
and is an interest that NPC can protect, not by claiming an
exemption that is not due to Mirant, but by paying the taxes
it (NPC) has assumed for Mirant under the ECA.
On liability for taxes, the NPC indeed assumed responsibility

for the taxes due on the power plant and its machineries,
specifically, "all real estate taxes and assessments, rates and
other charges in respect of the site, the buildings and
improvements thereon and the [power plant]." At first blush,
this contractual provision would appear to make the NPC
77
liable and give it standing to protest the assessment. The tax

liability we refer to above, however, is the liability arising
from law that LGU can rightfully and successfully enforce, not
the contractual liability that is enforceable between the
parties to a contract as discussed below. By law, the tax
liability rests on Mirant based on its ownership, use, and
possession of the plant and its machineries.
By our above conclusion, we do not thereby pass upon the

validity of the contractual stipulation between the NPC and
Mirant on the assumption of liability that the NPC undertook.
All we declare is that the stipulation is entirely between the
NPC and Mirant, and does not bind third persons who are not
privy to the contract between these parties. We say this
pursuant to the principle of relativity of contracts under
Article 1311 of the Civil Code which postulates that contracts
take effect only between the parties, their assigns and heirs.
Quite obviously, there is no privity between the respondent
local government units and the NPC, even though both are
public corporations. The tax due will not come from one
pocket and go to another pocket of the same governmental
entity. An LGU is independent and autonomous in its taxing
powers and this is clearly reflected in Section 130 of the LGC:
The following fundamental principles shall govern the
exercise of the taxing and other revenue-raising powers of
local government units: (d) The revenue collected pursuant
to the provisions of this Code shall inure solely to the benefit
of, and be subject to disposition by, the local government
unit levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein;
To reiterate, only the parties to the ECA agreement can exact
and demand the enforcement of the rights and obligations it
established only Mirant can demand compliance from the
NPC for the payment of RPT the NPC assumed to pay. The
local government units (the Municipality of Pagbilao and the
Province of Quezon), as third parties to the ECA, cannot
demand payment from the NPC on the basis of Article 11.1 of
the ECA alone. Corollarily, the local government units can
neither be compelled to recognize the protest of a tax
assessment from the NPC, an entity against whom it cannot
enforce the tax liability.
The test of exemption is the nature of the use,
not ownership, of the subject machineries: To
successfully claim exemption under Section 234(c) of the
LGC, the claimant must prove two elements: a. the
machineries and equipment are actually, directly, and
exclusively used by local water districts and GOCCs; and
b. the local water districts and government-owned and
controlled corporations claiming exemption must be engaged
in the supply and distribution of water and/or the generation
and transmission of electric power.
As applied to the present case, GOCC claiming exemption

must be the entity actually, directly, and exclusively using
the real properties, and the use must be devoted to the
generation and transmission of electric power. Neither the
NPC nor Mirant satisfies both requirements. Although the
plants machineries are devoted to the generation of electric
power, by the NPCs own admission and as previously
pointed out, Mirant a private corporation uses and
operates them. That Mirant operates the machineries solely
in compliance with the will of the NPC only underscores the
fact that NPC does not actually, directly, and exclusively use
DIGEST
Nov 7, 2014
them.
The
machineries
must be actually, directly, and
exclusively used by GOCC for the exemption under Sec
234(c) to apply
Nor will NPC find solace in its claim that it utilizes all the
power plants generated electricity in supplying the power
needs of its customers. Based on the clear wording of the
law, it is the machineries that are exempted from the
payment of real property tax, not the water or electricity that
these machineries generate and distribute.27
78
To prove that it had legal interest in the taxed

machineries, Napocor relied on:. 1. the stipulation in the
BOT Agreement that authorized the transfer of
ownership to Napocor after 25 years; 2. its authority to
control and supervise the construction and operation of
the power plant; and 3. its obligation to pay for all taxes
that may be incurred, as provided in the BOT
Agreement.
I: WON Napocor has sufficient legal interest to protest the tax

assessment.
H:
Even the NPCs claim of beneficial ownership is unavailing.

The test of exemption is the use, not the ownership of the
machineries devoted to generation and transmission of
electric power.28 The nature of the NPCs ownership of these
machineries only finds materiality in resolving the NPCs
claim of legal interest in protesting the tax assessment on
Mirant. As we discussed above, this claim is inexistent for tax
protest purposes.
Lastly, from the points of view of essential fairness and the
integrity of our tax system, we find it essentially wrong to
allow the NPC to assume in its BOT contracts the liability of
the other contracting party for taxes that the government
can impose on that other party, and at the same time allow
NPC to turn around and say that no taxes should be collected
because the NPC is tax-exempt as a government-owned and
controlled corporation. We cannot be a party to this kind of
arrangement; for us to allow it without congressional
authority is to intrude into the realm of policy and to debase
the tax system that the Legislature established. We will then
also be grossly unfair to the people of the Province of Quezon
and the Municipality of Pagbilao who, by law, stand to benefit
from the tax provisions of the LGC
G.R. No. 171586 January 25, 2010 (2D)

NATIONAL POWER CORPORATION vs. PROVINCE OF
QUEZON and MUNICIPALITY OF PAGBILAO
Province of Quezon assessed Mirant for unpaid RPT in

the amount of P1.5B for the machineries located in its
power plant in Pagbilao, Quezon.
Napocor protested the assessment before LBAA,

claiming entitlement to the tax exemptions provided
under Sec 234
In the Courts Decision of July 15, 2009, SC ruled that

Napocor is not entitled to any of these claimed tax
exemptions and privileges on the basis primarily of the
defective protest filed by the same: Napocor did not file
a valid protest against the assessment because it did
not possess the requisite legal standing. When a
taxpayer fails to question the assessment before the
LBAA, the assessment becomes FED, precluding the
taxpayer from questioning the correctness of the
assessment or from invoking any defense that would
reopen the question of its liability on the merits
Section 226 of the LGC limits the right to appeal the local
assessors action to the owner or the person having legal
interest in the property Napocor posits that it is the
beneficial owner of the subject machineries, with Mirant
retaining merely a naked title to secure certain obligations.
Thus, it argues that the BOT Agreement is a mere financing
agreement and is similar to the arrangement authorized
under Art 1503 of CC, (When there is a contract of sale of
specific goods, the seller may, by the terms of the contract,
reserve the right of possession or ownership in the goods
until certain conditions have been fulfilled)
Legal interest is defined as interest in property or a claim

cognizable at law, equivalent to that of a legal owner who
has legal title to the property Given this definition,
Napocor is clearly not vested with the requisite interest to
protest the tax assessment, as it is not an entity having the
legal title over the machineries. It has absolutely no solid
claim of ownership or even of use and possession of the
machineries
A BOT agreement is not a mere financing arrangement

Napocor v. CBAA
(BOT agreement is a contractual
arrangement whereby the project proponent undertakes the
construction, including financing, of a given infrastructure
facility, and the operation and maintenance thereof. The
project proponent operates the facility over a fixed term
during which it is allowed to charge facility users appropriate
tolls, fees, rentals, and charges not exceeding those
proposed in its bid or as negotiated and incorporated in the
contract to enable the project proponent to recover its
investment, and operating and maintenance expenses in the
project. The project proponent transfers the facility to the
government agency or local government unit concerned at
the end of the fixed term which shall not exceed 50 years
A reading of the provisions of the parties BOT Agreement

shows that it fully conforms to this concept. By its express
terms, BPPC has complete ownership both legal and
beneficial of the project, including the machineries
and equipment used, subject only to the transfer of
these properties without cost to NAPOCOR after the
lapse of the period agreed upon. As agreed upon, BPPC
provided the funds for the construction of the power plant,
including the machineries and equipment needed for power
generation; thereafter, it actually operated and still operates
the power plant, uses its machineries and equipment, and
receives payment for these activities and the electricity
DIGESTunder
Nov
7, 2014
generated
a defined
compensation scheme. Notably,
BPPC as owner-user is responsible for any defect in the
machineries and equipment.
f. who may pay the real property tax;
g. who is entitled to be notified of the warrant of

levy and against whom it may be enforced;
h. who may stay the public auction upon payment
of the delinquent tax, penalties and surcharge; and
BPPC the owner-manager-operator of the project is

the actual user of its machineries and equipment.
BPPCs ownership and use of the machineries and
equipment are actual, direct, and immediate, while
NAPOCORs is contingent and, at this stage of the BOT
Agreement, not sufficient to support its claim for tax
exemption. Thus, the CTA committed no reversible error in
denying NAPOCORs claim for tax exemption.
THUS Article 1503 inapplicable to define the contract

between Napocor and Mirant, as it refers only to ordinary
contracts of sale
Moreover, if Napocor truly believed that it was the owner of

the subject machineries, it should have complied with
Sections 202 and 206 of the LGC which obligates owners of
real property to: file a sworn statement declaring the true
value of the real property, whether taxable or exempt; and
file sufficient documentary evidence supporting its claim for
tax exemption
While a real property owners failure to comply with Sections
202 and 206 does not necessarily negate its tax obligation
nor invalidate its legitimate claim for tax exemption,
Napocors omission to do so in this case can be construed as
contradictory to its claim of ownership of the subject
machineries. That it assumed liability for the taxes that may
be imposed on the subject machineries similarly does not
clothe it with legal title over the same. We do not believe
that the phrase "person having legal interest in the property"
in Section 226 of the LGC can include an entity that assumes
another persons tax liability by contract.
A review of the provisions of the LGC on real property

taxation shows that the phrase has been repeatedly adopted
and used to define an entity:
79
i. who may redeem the property after it was sold at

the public auction for delinquent taxes.
Some authorities consider a person whose pecuniary

interests is or may be adversely affected by the tax
assessment as one who has legal interest in the property
(hence, possessed of the requisite standing to protest it),
citing Cooleys Law on Taxation. The reference to this foreign
material, however, is misplaced. The tax laws of the United
States deem it sufficient that a persons pecuniary interests
are affected by the tax assessment to consider him as a
person aggrieved and who may thus avail of the judicial or
administrative remedies against it. As opposed to our LGC,
mere pecuniary interest is not sufficient; our law has
required legal interest in the property taxed before any
administrative or judicial remedy can be availed. The right to
appeal a tax assessment is a purely statutory right; whether
a person challenging an assessment bears such a relation to
the real property being assessed as to entitle him the right to
appeal is determined by the applicable statute in this case,
our own LGC, not US federal or state tax laws.
o
SEC. 206. Proof of Exemption of Real Property from Taxation.
- Every person by or for whom real property is declared, who
shall claim tax exemption for such property under this Title
shall file with the provincial, city or municipal assessor within
thirty (30) days from the date of the declaration of real
property sufficient documentary evidence in support of such
claim including corporate charters, title of ownership, articles
of incorporation, bylaws, contracts, affidavits, certifications
and mortgage deeds, and similar documents. If the required
evidence is not submitted within the period herein
prescribed, the property shall be listed as taxable in the
assessment roll. However, if the property shall be proven to
be tax exempt, the same shall be dropped from the
assessment roll. [Emphasis provided]
a. in whose name the real property shall be listed,

valued, and assessed;
b. who may be summoned by the local assessor to
gather information on which to base the market
value of the real property;
c. who may protest the tax assessment before the
LBAA18 and may appeal the latters decision to the
CBAA;
d. who may be liable for the idle land tax,20 as well
as who may be exempt from the same;
e. who shall be notified of any proposed ordinance
imposing a special levy, as well as who may object
the proposed ordinance;
By providing that real property not declared and proved as

tax-exempt shall be included in the assessment roll, the
above-quoted provision implies that the local assessor has
the authority to assess the property for realty taxes, and any
subsequent claim for exemption shall be allowed only when
sufficient proof has been adduced supporting the claim.
Since Napocor was simply questioning the correctness of the
assessment, it should have first complied with Section 252,
particularly the requirement of payment under protest.
Napocors failure to prove that this requirement has been
complied with thus renders its administrative protest under
Section 226 of the LGC without any effect. No protest shall
be entertained unless the taxpayer first pays the tax.
DIGEST Nov 7, 2014
The benefits granted under this Act shall
G.R. No. 186242 December 23, 2009 (3D)
GSIS vs. CITY TREASURER and CITY ASSESSOR of the
CITY OF MANILA,
o
GSIS owns or used to own 2 parcels of land, Katigbak

property, and the Concepcion-Arroceros property
Title to the Concepcion-Arroceros property was

transferred SC in 2005 pursuant to Proclamation No. 835
Both the GSIS and MeTC of Manila occupy the

Concepcion-Arroceros property, while the Katigbak
property was under lease
City Treasurer of Manila addressed a letter to GSIS

President and GM Garcia informing him of the unpaid
RPT due on the aforementioned properties for years
1992 to 2002; letter warned of the inclusion of the
subject properties in the scheduled October 30, 2002
public auction of all delinquent properties in Manila
should the unpaid taxes remain unsettled before that
date
GSIS wrote back emphasizing the GSIS exemption from

all kinds of taxes, including realty taxes, under RA 8291
GSIS filed a petition for certiorari and prohibition before

the Manila RTC; GSIS would later amend its petition to
include the fact that: (a) the Katigbak property in the
name of GSIS, has, since November 1991, been leased
to and occupied by the Manila Hotel Corporation (MHC),
which has contractually bound itself to pay any realty
taxes that may be imposed on the subject property; and
(b) the Concepcion-Arroceros property is partly occupied
by GSIS and partly occupied by the MeTC of Manila
RTC dismissed GSIS petition,
80
not be subject,
among others, to attachment, garnishment, levy or other
processes. This, however, shall not apply to obligations of
the member to the System, or to the employer, or when the
benefits granted herein are assigned by the member with the
authority of the System.
Then came the enactment of the LGC providing the exercise

of LGUs of their power to tax, the scope and limitations
thereof,14 and the exemptions from taxations Sec. 193 of
the LGC: Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by
all persons, whether natural or juridical, including GOCCs,
under RA 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the
effectivity of LGC
From the foregoing provisos, there can be no serious doubt
about the Congress intention to withdraw, subject to certain
defined exceptions, tax exemptions granted prior to the
passage of RA 7160 THUS the full tax exemption
heretofore granted to GSIS under PD 1146 IS deemed
withdrawn
Mactan Cebu International Airport Authority v. Marcos: the

express withdrawal by LGC of previously granted exemptions
from realty taxes applied to instrumentalities and GOCCs
City of Davao v. RTC, Branch XII, Davao City citing Mactan

Cebu International Airport Authority, declared the GSIS liable
for RPT, its previous exemption under PD 1146 being
considered withdrawn with the enactment of the LGC in
1991.
I: WON GSIS is exempt from RPT.

H: Partly.
GSISs posture that both its old charter, PD 1146, and
present charter, RA 8291 exempt the agency and its
properties from all forms of taxes and assessments, inclusive
of realty tax
In 1977, PD 1146 was issued Sec. 33: It is hereby declared

to be the policy of the State that the actuarial solvency of
the funds of the System shall be preserved and maintained
at all times and that the contribution rates necessary to
sustain the benefits under this Act shall be kept as low as
possible in order not to burden the members of the System
and/or their employees. Taxes imposed on the System tend
to impair the actuarial solvency of its funds and increase the
contribution rate necessary to sustain the benefits under this
Act. Accordingly, notwithstanding any laws to the contrary,
the System, its assets, revenues including all accruals
thereto, and benefits paid, shall be exempt from all
taxes, assessments, fees, charges or duties of all
kinds. These exemptions shall continue unless expressly and
specifically revoked and any assessment against the System
as of the approval of this Act are hereby considered paid.
Almost 20 years to the day after the issuance of PD 1146, it

was further amended and expanded by RA 8291 which took
effect on June 24, 1997 Under it, the full tax exemption
privilege of GSIS was restored, the operative provision being
Sec. 39 It is hereby declared to be the policy of the State
that the actuarial solvency of the funds of the GSIS shall be
preserved and maintained at all times and that contribution
rates necessary to sustain the benefits under this Act shall
be kept as low as possible in order not to burden the
members of the GSIS and their employers. Taxes imposed on
the GSIS tend to impair the actuarial solvency of its funds
and increase the contribution rate necessary to sustain the
benefits of this Act. Accordingly, notwithstanding, any laws to
the contrary, the GSIS, its assets, revenues including all
accruals thereto, and benefits paid, shall be exempt
from all taxes, assessments, fees, charges or duties of
all kinds. These exemptions shall continue unless
expressly
and
specifically
revoked
and
any
assessment against the GSIS as of the approval of
this Act are hereby considered paid. Moreover, these
exemptions shall not be affected by subsequent laws
to the contrary unless this section is expressly,
specifically and categorically revoked or repealed by
law and a provision is enacted to substitute or replace
the exemption referred to herein as an essential
DIGEST
Nov or
7, protect
2014 the solvency of the fund,
factor
to maintain
notwithstanding and independently of the guaranty of the
national government to secure such solvency or liability.
The foregoing exempting proviso, couched as it were in an

encompassing manner, brooks no other construction but that
GSIS is exempt from all forms of taxes. While not
determinative of this case, it is to be noted that prominently
added in GSIS present charter is a paragraph precluding any
implied repeal of the tax-exempt clause so as to protect the
solvency of GSIS funds. Moreover, an express repeal by a
subsequent law would not suffice to affect the full exemption
benefits
granted
the
GSIS,
unless
the
following
conditionalities are met: (1) The repealing clause must
expressly, specifically, and categorically revoke or repeal
Sec. 39; and (2) a provision is enacted to substitute or
replace the exemption referred to herein as an essential
factor to maintain or protect the solvency of the fund. These
restrictions for a future express repeal, notwithstanding, do
not make the proviso an irrepealable law, for such
restrictions do not impinge or limit the carte blanche
legislative authority of the legislature to so amend it.
Given the foregoing perspectives, the following may be

assumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS enjoyed
tax exemption from real estate taxes, among other tax
burdens, until January 1, 1992 when the LGC took effect and
withdrew exemptions from payment of real estate taxes
privileges granted under PD 1146; (2) RA 8291 restored in
1997 the tax exempt status of GSIS by reenacting under its
Sec. 39 what was once Sec. 33 of P.D. 1146; and (3) If any
real estate tax is due to the City of Manila, it is, following
City of Davao, only for the interim period, or from 1992 to
1996, to be precise.
While recognizing the exempt status of GSIS owing to the

reenactment of the full tax exemption clause under Sec. 39
of RA 8291 in 1997, the ponencia in City of Davao appeared
to have failed to take stock of and fully appreciate the allembracing condoning proviso in the very same Sec. 39
which, for all intents and purposes, considered as paid "any
assessment against the GSIS as of the approval of this Act."
MIAA v. CA: MIAA does not qualify as a GOCC, not having

been organized either as a stock corporation, its capital not
being divided into shares, or as a non-stock corporation
because it has no members. MIAA is rather an
instrumentality of the Natl Govt and, hence, outside the
purview of local taxation by force of Sec. 133 of the LGC
providing in context that "unless otherwise provided," LGUs
cannot tax national government instrumentalities.
o
While perhaps not of governing sway in all fours inasmuch as
what were involved in MIAA, e.g., airfields and runways, are
properties of the public dominion and, hence, outside the
commerce of man, the rationale underpinning the disposition
in that case is squarely applicable to GSIS, both MIAA and
81
GSIS being similarly situated. First, while created under CA

186 as a non-stock corporation, a status that has remained
unchanged even when it operated under PD 1146 and RA
8291, GSIS is not, in the context of the afore quoted Sec. 193
of the LGC, a GOCC following the teaching of MIAA, for, GSIS
capital is not divided into unit shares. Also, GSIS has no
members to speak of. Second, the subject properties under
GSISs name are likewise owned by the Republic. The GSIS is
but a mere trustee of the subject properties which have
either been ceded to it by the Government or acquired for
the enhancement of the system. Third, GSIS manages the
funds for the life insurance, retirement, survivorship, and
disability benefits of all government employees and their
beneficiaries. This undertaking, to be sure, constitutes an
essential and vital function which the government, through
one of its agencies or instrumentalities, ought to perform if
social security services to civil service employees are to be
delivered with reasonable dispatch.
The foregoing notwithstanding, the leased Katigbak property

shall be taxable pursuant to the "beneficial use" principle
under Sec. 234(a) of the LGC.
It is true that said Sec. 234(a), quoted below, exempts from

real estate taxes real property owned by the Republic, unless
the beneficial use of the property is, for consideration,
transferred to a taxable person.
Thus read together, the provisions allow the Republic to

grant the beneficial use of its property to an agency or
instrumentality of the national government. Such grant does
not necessarily result in the loss of the tax exemption. The
tax exemption the property of the Republic or its
instrumentality carries ceases only if, as stated in Sec.
234(a) of the LGC of 1991, "beneficial use thereof has been
granted, for a consideration or otherwise, to a taxable
person." GSIS, as a government instrumentality, is not a
taxable juridical person under Sec. 133(o) of the LGC. GSIS,
however, lost in a sense that status with respect to the
Katigbak property when it contracted its beneficial use to
MHC, doubtless a taxable person. Testate Estate of
Concordia T. Lim: the unpaid tax attaches to the property
and is chargeable against the taxable person who had actual
or beneficial use and possession of it regardless of WON he is
the owner
Being in possession and having actual use of the Katigbak
property since November 1991, MHC is liable for the realty
taxes assessed over the Katigbak property from 1992 to
2002.
Considering, however, that MHC has not been impleaded in

the instant case, the remedy of the City of Manila is to serve
the realty tax assessment covering the subject Katigbak
property to MHC and to pursue other available remedies in
case of nonpayment, for said property cannot be levied upon
as shall be explained below.
82
DIGEST Nov 7, 2014
of law; instead, they were voluntarily surrendered to the
G.R. No. 185023 August 24, 2011 (2D)
CITY OF PASIG and THE CITY ASSESSOR vs. REPUBLIC
OF THE PHILIPPINES
o
Mid-Pasig Land Development Corporation owned two

parcels of land in Pasig City: Portions of the properties
are leased to different business establishments
In 1986, the registered owner of MPLDC, Jose Campos,

voluntarily surrendered MPLDC to Republic
Pasig City Assessors Office sent MPLDC two notices of

tax delinquency for its failure to pay RPT on the
properties for the period 1979 to 2001 Independent
Realty Corporation (IRC) informed the Pasig City
Treasurer that the tax for the period 1979 to 1986 had
been paid, and that the properties were exempt from tax
beginning 1987
Pasig City Treasurer informed MPLDC and IRC that the
properties were not exempt from tax
MPLDC received two warrants of levy on the properties
Republic, through the Presidential Commission on Good

Government (PCGG), filed with the RTC a petition for
prohibition to enjoin petitioner Pasig City from auctioning
the properties and from collecting RPT
Pasig City Treasurer offered the properties at public

auction Since there was no other bidder, Pasig City
bought the properties
PCGG filed an amended petition for certiorari, prohibition

and mandamus against Pasig City prayed that: (1) the
assessments be declared void; (2) the warrants of levy
on the properties be declared void; (3) the public auction
be declared void; (4) the issuance of certificates of sale
be declared void; (5) Pasig City be prohibited from
assessing MPLDC RPT and penalty; (6)
RTC granted the petition: upon the voluntary surrender

by Campos, the controlling owner of Mid-Pasig and IRC,
of the "payanig" properties to PCGG, a clear admission
that these properties were part of the ill-gotten wealth of
former President Marcos was already evident. As such,
there was already constructive reconveyance to the
State, which immediately placed these reconveyed
properties under the control and stewardship of the
PCGG THUS are exempt from payment of RPT
CA set aside RTC: the subject parcels of land are

registered in the name of Mid-Pasig, a private entity.
Although the government, through the PCGG have
sequestered Mid-Pasig and all its assets including the
subject parcels of land, the sequestration per se, did not
operate to convert Mid-Pasig and its properties to public
property. In view thereof and the fact that Mid-Pasig and
its properties have not been validly declared by the
Sandiganbayan as "ill-gotten" wealth, the same are not
yet public properties
PCGG filed a MFR CA reversed itself: the subject

properties were not sequestered by the govt so as to
amount to a deprivation of property without due process
State by Campos, a self-admitted crony of the then

President Marcos. The relinquishment of the subject
properties to the State as ill-gotten wealth of Marcos, as
recognized by the Supreme Court, makes a judicial
declaration that the same were ill-gotten unnecessary.
By virtue of said relinquishment, the State correctly
exercised dominion over the subject properties.
Indubitably, the subject properties, being ill-gotten
wealth, belong to the State.
I: WON Pasig City has right to assess and collect RPT from
the lessees of the properties
H: Patly
Republic owns the properties Campos voluntarily
surrendered MPLDC, which owned the properties, to the
Republic of the Philippines.
Section 234(a) of RA 7160 states that properties owned by

the Republic are exempt from RPT "except when the
beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person
Philippine Fisheries Development Authority v. Central Board
of Assessment Appeals: The Court rules that the
Authority is not a GOCC but an instrumentality of the
national government which is generally exempt from
payment of real property tax. However, said
exemption does not apply to the portions of the IFPC
which the Authority leased to private entities. With
respect to these properties, the Authority is liable to
pay property tax. Nonetheless, the IFPC, being a property
of public dominion cannot be sold at public auction to satisfy
the tax delinquency.
GSIS v. City Treasurer of the City of Manila: The tax

exemption the property of the Republic or its
instrumentalities carries ceases only if, as stated in
Sec. 234(a) of the LGC of 1991, "beneficial use thereof
has been granted, for a consideration or otherwise, to
a taxable person." GSIS lost in a sense that status
with respect to the Katigbak property when it
contracted its beneficial use to MHC, doubtless a
taxable person. Thus, the real estate tax assessment
of Php 54,826,599.37 covering 1992 to 2002 over the
subject Katigbak property is valid insofar as said tax
delinquency is concerned as assessed over said
property
MIAA v. CA: Section 234(a) of the Local Government

Code states that real property owned by the Republic
loses its tax exemption only if the "beneficial use
thereof has been granted, for consideration or
otherwise, to a taxable person." MIAA, as a government
instrumentality, is not a taxable person under Section 133(o)
of the local Government Code. Thus, even if we assume that
the Republic has granted to MIAA the beneficial use of the
Airport Lands and Buildings, such fact does not make these
real properties subject to real estate tax. However, portions
Nov
7,and
2014
ofDIGEST
the Airport
Lands
Buildings that MIAA leases to
private entities are not exempt from real estate tax.
G.R. No. 191109 July 18, 2012 (3D)
83
REPUBLIC vs. CITY OF PARANAQUE
Lung Center of the Philippines v. QC: The portions of the

land leased to private entities as well as those parts
of the hospital leased to private individuals are not
exempt from such taxes. On the other hand, the portions
of the land occupied by the hospital and portions of the
hospital used for its patients, whether paying or non-paying,
are exempt from RPT
Article 420 of the Civil Code classifies as properties of public

dominion those that are "intended for public use, such as
roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads" and those that "are
intended for some public service or for the development of
the national wealth." Properties of public dominion are not
only exempt from real estate tax, they are exempt from sale
at public auction.
PFDA v. CA: RPT assessments should be upheld only with

respect to the portions leased to private persons. In case
the Authority fails to pay RPT due thereon, said
portions cannot be sold at public auction to satisfy
Chavez v. Public Estates Authority it was held that
reclaimed lands are lands of the public dominion and
cannot, without Congressional fiat, be subject of a
sale, public or private. In the same vein, the port built
by the State in the Iloilo fishing complex is a property
of the public dominion and cannot therefore be sold
at public auction.
In the present case, the parcels of land are not properties of

public dominion because they are not "intended for public
use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads." Neither
are they "intended for some public service or for the
development of the national wealth." MPLDC leases portions
of the properties to different business establishments. Thus,
the portions of the properties leased to taxable entities are
not only subject RPT they can also be sold at public auction
to satisfy the tax delinquency.
In sum, only those portions of the properties leased to

taxable entities are subject to real estate tax for the period
of such leases. Pasig City must, therefore, issue to
respondent new real property tax assessments covering the
portions of the properties leased to taxable entities. If the
Republic of the Philippines fails to pay the real property tax
on the portions of the properties leased to taxable entities,
then such portions may be sold at public auction to satisfy
Public Estates Authority (PEA) is a government

corporation created by virtue of PD. 1084 to provide a
coordinated, economical and efficient reclamation of
lands, and the administration and operation of lands
belonging to, managed and/or operated by, the
government with the object of maximizing their
utilization and hastening their development consistent
with public interest.
EO 525: PEA was designated as the agency primarily

responsible for integrating, directing and coordinating all
reclamation projects for and on behalf of the National
Government.
EO 380: transformed PEA into PRA, which shall perform

all the powers and functions of the PEA relating to
reclamation activities.
By virtue of its mandate, PRA reclaimed several portions

of the foreshore and offshore areas of Manila Bay,
including those located in Paraaque City
Then, Paraaque City Treasurer issued Warrants of Levy

on PRAs reclaimed properties based on the assessment
for delinquent RPT
PRA filed a petition for prohibition with before the RTC

the RTC issued an order denying PRAs petition
PRA filed a Motion for Leave to File and Admit Attached

Supplemental Petition which sought to declare as null
and void the assessment for real property taxes, the
levy based on the said assessment, the public auction
sale conducted on April 7, 2003, and the Certificates of
Sale issued pursuant to the auction sale.
RTC rendered its decision dismissing PRAs petition: In

ruling that PRA was not exempt from payment of RPT,
the RTC reasoned out that it was a GOCC under Section
3 of P.D. No. 1084. It was organized as a stock
corporation because it had an authorized capital stock
divided into no par value shares. In fact, PRA admitted
its corporate personality and that said properties were
registered in its name as shown by the certificates of
title. Therefore, as a GOCC, local tax exemption is
withdrawn by virtue of Section 193 of LGC
I: WON PRA is exempt from RPT.

H: YES
PRA asserts that it is not a GOCC under Section 2(13) of the
Introductory Provisions of the Administrative Code. Neither is
it a GOCC under Section 16, Article XII of the 1987
Constitution because it is not required to meet the test of
economic viability. Instead, PRA is a government
instrumentality vested with corporate powers and performing
an essential public service. Although it has a capital stock
divided into shares, it is not authorized to distribute
DIGESTand
Nov
7, 2014
dividends
allotment
of surplus and profits to its
stockholders. Therefore, it may not be classified as a stock
corporation because it lacks the second requisite of a stock
corporation which is the distribution of dividends and
allotment of surplus and profits to the stockholders.
It insists that it may not be classified as a non-stock
corporation because it has no members and it is not
organized for charitable, religious, educational, professional,
cultural, recreational, fraternal, literary, scientific, social, civil
service, or similar purposes, like trade, industry, agriculture
and like chambers as provided in Section 88 of the
Corporation Code.
It explains that reclaimed lands are part of the public

domain, owned by the State, thus, exempt from the payment
of real estate taxes. Reclaimed lands retain their inherent
potential as areas for public use or public service. While the
subject reclaimed lands are still in its hands, these lands
remain public lands and form part of the public domain.
Hence, the assessment of real property taxes made on said
lands, as well as the levy thereon, and the public sale thereof
on April 7, 2003, including the issuance of the certificates of
sale in favor of the respondent Paraaque City, are invalid
and of no force and effect.
On the other hand, the City of Paraaque argues that PRA

since its creation consistently represented itself to be a
GOCC. PRAs very own charter declared it to be a GOCC and
that it has entered into several thousands of contracts where
it represented itself to be a GOCC.
Section 2(13) of the Introductory Provisions of the

Administrative Code of 1987 defines a GOCC as 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 51% of its capital stock
On the other hand, Section 2(10) of the Introductory

Provisions of the Administrative Code defines a government
"instrumentality" as any agency of the National Government,
not integrated within the department framework, vested with
special functions or jurisdiction by law, endowed with some if
not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter
From the above definitions, it is clear that a GOCC must be

"organized as a stock or non-stock corporation" while an
instrumentality is vested by law with corporate powers.
Likewise, when the law makes a government instrumentality
operationally autonomous, the instrumentality remains part
of the National Government machinery although not
integrated with the department framework.
84
In the case at bench, PRA is not a GOCC because it is neither

a stock nor a non-stock corporation. It cannot be considered
as a stock corporation because although it has a capital
stock divided into no par value shares as provided in Section
7 of P.D. No. 1084, it is not authorized to distribute dividends,
surplus allotments or profits to stockholders. There is no
provision whatsoever in P.D. No. 1084 or in any of the
subsequent executive issuances pertaining to PRA that
authorizes PRA to distribute dividends, surplus allotments or
profits to its stockholders.
PRA cannot be considered a non-stock corporation either
because it does not have members. A non-stock corporation
must have members. Moreover, it was not organized for any
of the purposes mentioned in Section 88 of the Corporation
Code. Specifically, it was created to manage all government
reclamation projects.
Furthermore, there is another reason why the PRA cannot be

classified as a GOCC. Section 16, Article XII of the 1987
Constitution provides: The Congress shall not, except by
general law, provide for the formation, organization, or
regulation of private corporations. GOCCs may be created or
established by special charters in the interest of the common
good and subject to the test of economic viability The
fundamental provision above authorizes Congress to create
GOCCs through special charters on two conditions: 1) the
GOCC must be established for the common good; and 2) the
GOCC must meet the test of economic viability. In this case,
PRA may have passed the first condition of common good
but failed the second one - economic viability. Undoubtedly,
the purpose behind the creation of PRA was not for economic
or commercial activities. Neither was it created to compete
in the market place considering that there were no other
competing reclamation companies being operated by the
private sector. As mentioned earlier, PRA was created
essentially to perform a public service considering that it was
primarily responsible for a coordinated, economical and
efficient reclamation, administration and operation of lands
belonging to the government with the object of maximizing
their utilization and hastening their development consistent
with the public interest.
The twin requirement of common good and economic

viability was lengthily discussed in the case of Manila
International Airport Authority v. Court of Appeals, the
pertinent portion of which reads: In contrast, government
instrumentalities vested with corporate powers and
performing governmental or public functions need not meet
the test of economic viability. These instrumentalities
perform essential public services for the common good,
services that every modern State must provide its citizens.
These instrumentalities need not be economically viable
since the government may even subsidize their entire
operations.
Commissioner Blas F. Ople, proponent of the test of economic
viability, explained to the Constitutional Commission the
purpose of this test, as follows: the reason for this concern is
really that when the government creates a corporation, there
is a sense in which this corporation becomes exempt from
the test of economic performance. We know what happened
7, 2014
inDIGEST
the past. IfaNov
government
corporation loses, then it makes
its claim upon the taxpayers' money through new equity
infusions from the government and what is always invoked is
the common good. Therefore, when we insert the phrase
"ECONOMIC VIABILITY" together with the "common good,"
this becomes a restraint on future enthusiasts for state
capitalism to excuse themselves from the responsibility of
meeting the market test so that they become viable.
Father Joaquin G. Bernas: The second sentence was added by

the 1986 Constitutional Commission. The significant addition,
however, is the phrase "in the interest of the common good
and subject to the test of economic viability." The addition
includes the ideas that they must show capacity to function
efficiently in business and that they should not go into
activities which the private sector can do better. Moreover,
economic viability is more than financial viability but also
includes capability to make profit and generate benefits not
quantifiable in financial terms.
Clearly, the test of economic viability does not apply to

government entities vested with corporate powers and
performing essential public services. The State is obligated
to render essential public services regardless of the
economic viability of providing such service. The noneconomic viability of rendering such essential public service
does not excuse the State from withholding such essential
services from the public.
Furthermore, PEA's charter expressly states that PEA "shall

hold lands of the public domain" as well as "any and all kinds
of lands." PEA can hold both lands of the public domain and
private lands. Thus, the mere fact that alienable lands of the
public domain like the Freedom Islands are transferred to PEA
and issued land patents or certificates of title in PEA's name
does not automatically make such lands private.
G.R. No. 189999 June 27, 2012 (1D)

ANGELES UNIVERSITY FOUNDATION
ANGELES, JULIET G. QUINSAAT
The subject reclaimed lands are still part of the public

domain, owned by the State and, therefore, exempt from
payment of real estate taxes. Here, the subject lands are
reclaimed lands, specifically portions of the foreshore and
offshore areas of Manila Bay. As such, these lands remain
public lands and form part of the public domain. In the case
of Chavez v. Public Estates Authority and AMARI Coastal
Development Corporation, the Court held that foreshore and
submerged areas irrefutably belonged to the public domain
and were inalienable unless reclaimed, classified as alienable
lands open to disposition and further declared no longer
needed for public service. The fact that alienable lands of the
public domain were transferred to the PEA (now PRA) and
issued land patents or certificates of title in PEAs name did
not automatically make such lands private. This Court also
held therein that reclaimed lands retained their inherent
potential as areas for public use or public service.
vs.
CITY
OF
Petitioner is an educational institution established on

May 25, 1962 and was converted into a non-stock, nonprofit education foundation under RA 6055 on December
4, 1975.
Sometime in August 2005, petitioner filed with the Office

of the City Building Official an application for a building
permit for the construction a building of AUF Medical
Center in its main campus Said office issued a
Building Permit Fee Assessment in the amount of
P126,839.20 and P238,741.64 as Locational Clearance
Fee.
petitioner claimed that it is exempt from the payment of

the building permit and locational clearance fees
Respondent City Treasurer referred the matter to the
Bureau of Local Government Finance (BLGF) of the
Department of Finance, which in turn endorsed the
query to the DOJ
Then Justice Secretary cited Opinion No. 157, s. 1981

and Opinion No. 147, s. 1982 declaring petitioner to be
exempt from the payment of building permit fees.
Petitioner wrote the respondents reiterating its request

to reverse the disputed assessments and invoking the
DOJ legal opinions which have been affirmed by
Secretary Gonzalez. Despite petitioners plea, however,
respondents refused to issue the building permits
Consequently, petitioner paid under protest including

RPT on the subject land
On June 9, 2006, petitioner formally requested the

respondents to refund the fees it paid under protest
City Treasurer denied the claim for refund
On August 31, 2006, petitioner filed a Complaint before

RTC seeking the refund of P826,662.99 plus interest at
the rate of 12% per annum, and also praying for the
award of attorneys fees in the amount of P300
In its Answer, respondents asserted that the claim of

petitioner cannot be granted because its structures are
not among those mentioned in Sec. 209 of the National
THUS PRA is not a GOCC either under Section 2(3) of the

Introductory Provisions of the Administrative Code or under
Section 16, Article XII of the 1987 Constitution.
Clearly, respondent has no valid or legal basis in taxing the

subject reclaimed lands managed by PRA. On the other hand,
Section 234(a) of the LGC, in relation to its Section 133(o),
exempts PRA from paying realty taxes and protects it from
the taxing powers of local government units.
85
DIGEST
Nov
2014 from the building permit fee.
Building Code
as7,
exempted
educational foundations if the privilege were
Respondents argued that R.A. No. 6055 should be
considered repealed on the basis of Sec. 2104 of the
National Building Code. Since the disputed assessments
are regulatory in nature, they are not taxes from which
petitioner is exempt. As to the real property taxes
imposed on petitioners property located in Marisol
Village, respondents pointed out that said premises will
be used as a school dormitory which cannot be
considered as a use exclusively for educational
activities.
Petitioner countered that the subject building permit are

being collected on the basis of Art. 244 of the
Implementing Rules and Regulations of the Local
Government Code, which impositions are really taxes
considering that they are provided under the chapter on
"Local Government Taxation" in reference to the
"revenue raising power" of local government units
(LGUs). Moreover, petitioner contended that, as held in
Philippine Airlines, Inc. v. Edu, fees may be regarded as
taxes depending on the purpose of its exaction. In any
case, petitioner pointed out that the Local Government
Code of 1991 provides in Sec. 193 that non-stock and
non-profit educational institutions like petitioner retained
the tax exemptions or incentives which have been
granted to them. Under Sec. 8 of R.A. No. 6055 and
applicable jurisprudence and DOJ rulings, petitioner is
clearly exempt from the payment of building permit
fees.
RTC rendered judgment in favor of the petitioner:

Plaintiff is exempt from the payment of building permit
and other fees
Respondents appealed to the CA which reversed the trial

court, holding that while petitioner is a tax-free entity, it
is not exempt from the payment of regulatory fees:
under R.A. No. 6055, petitioner was granted exemption
only from income tax derived from its educational
activities and real property used exclusively for
educational purposes. Regardless of the repealing clause
in the National Building Code, petitioner is still not
exempt because a building permit cannot be considered
as the other "charges" mentioned in Sec. 8 of R.A. No.
6055 which refers to impositions in the nature of tax,
import duties, assessments and other collections for
revenue purposes, following the ejusdem generisrule.
And while petitioner may be exempt from the payment
of real property tax, petitioner in this case merely
alleged that "the subject property is to be used actually,
directly and exclusively for educational purposes,"
declaring merely that such premises is intended to
house the sports and other facilities of the university but
by reason of the occupancy of informal settlers on the
area, it cannot yet utilize the same for its intended use.
I: WON AUF is exempt from RPT.

H: NO
Petitioner stresses that the tax exemption granted to
educational stock corporations which have converted into
non-profit foundations was broadened to include any other
charges imposed by the Government as one of the incentives
for such conversion. These incentives necessarily included
exemption from payment of building permit and related fees
as otherwise there would have been no incentives for
86
only limited to
exemption from taxation, which is already provided under
the Constitution.
In their Comment, respondents maintain that petitioner is

not exempt from the payment of building permit and related
fees since the only exemptions provided in the National
Building Code are public buildings and traditional indigenous
family dwellings. Because the law did not include petitioners
buildings from those structures exempt from the payment of
building permit fee, it is therefore subject to the regulatory
fees imposed under the National Building Code.
R.A. No. 6055 granted tax exemptions to educational

institutions like petitioner which converted to non-stock, nonprofit educational foundations. Section 8: The Foundation
shall be exempt from the payment of all taxes, import duties,
assessments, and other charges imposed by the Government
onall income derived from or property, real or personal, used
exclusively for the educational activities of the Foundation.
On February 19, 1977, PD 1096 was issued adopting the

National Building Code of the Philippines Exempted from
the payment of building permit fees are: (1) public buildings
and (2) traditional indigenous family dwellings. Not being
expressly included in the enumeration of structures to which
the building permit fees do not apply, petitioners claim for
exemption rests solely on its interpretation of the term "other
charges imposed by the National Government" in the tax
exemption clause of R.A. No. 6055.
A "charge" is broadly defined as the "price of, or rate for,
something," while the word "fee" pertains to a "charge fixed
by law for services of public officers or for use of a privilege
under control of government." As used in LGC, charges refers
to pecuniary liability, as rents or fees against persons or
property, while fee means a charge fixed by law or ordinance
for the regulation or inspection of a business or activity
THUS Since building permit fees are not charges on property,

they are not impositions from which petitioner is exempt.
As to petitioners argument that the building permit fees

collected by respondents are in reality taxes because the
primary purpose is to raise revenues for the local
government unit, the same does not hold water. A charge
of a fixed sum which bears no relation at all to the cost of
inspection and regulation may be held to be a tax rather
than an exercise of the police power.
Petitioners reliance on Sec. 193 of the LGC is likewise

misplaced: Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by
all persons, whether natural or juridical, including GOCCs,
DIGEST
Nov
2014 and non-profit hospitals and
under
R.A. No.
6938,7,
non-stock
educational institutions, are hereby withdrawn upon the
effectivity of this Code.
Considering that exemption from payment of regulatory fees
was not among those "incentives" granted to petitioner
under R.A. No. 6055, there is no such incentive that is
retained under the LGC Consequently, no reversible error
was committed by the CA in ruling that petitioner is liable to
pay the subject building permit and related fees.
Coverage of Idle Lands (Sec. 237): For purposes of real

property taxation, idle lands shall include the following:
(a) Agricultural lands, more than one (1) hectare in
area, suitable for cultivation, dairying, inland
fishery, and other agricultural uses, one-half (1/2) of
which remain uncultivated or unimproved by the
owner of the property or person having legal
interest therein. Agricultural lands planted to
permanent or perennial crops with at least fifty (50)
trees to a hectare shall not be considered idle lands.
Lands actually used for grazing purposes shall
likewise not be considered idle lands.
(b) Lands, other than agricultural, located in a city
or municipality, more than one thousand (1,000)
square meters in area one-half (1/2) of which
remain unutilized or unimproved by the owner of
the property or person having legal interest therein.
Section 28(3), Article VI of the 1987 Constitution provides:

Charitable institutions, churches and parsonages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all
lands, buildings, and improvements, actually, directly and
purposes shall be exempt from taxation.
Section 234(b) of LGC implements the foregoing

constitutional provision by declaring that The following are
exempted from payment RPT: Charitable institutions,
churches, parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all lands,
buildings, and improvements actually, directly, and
purposes;
Lung Center of the Philippines v. Quezon City: only portions

of the hospital actually, directly and exclusively used for
charitable purposes are exempt from real property taxes,
while those portions leased to private entities and individuals
are not exempt from such taxes.
Petitioner failed to discharge its burden to prove that its real

property is actually, directly and exclusively used for
educational purposes. While there is no allegation or proof
that petitioner leases the land to its present occupants, still
there is no compliance with the constitutional and statutory
requirement that said real property is actually, directly and
exclusively used for educational purposes. The respondents
correctly assessed the land for real property taxes for the
taxable period during which the land is not being devoted
solely to petitioners educational activities. Accordingly, the
CA did not err in ruling that petitioner is likewise not entitled
to a refund of the real property tax it paid under protest.
Regardless of land area, this Section shall likewise apply to

residential lots in subdivisions duly approved by proper
authorities, the ownership of which has been transferred to
individual owners, who shall be liable for the additional tax:
Provided, however, That individual lots of such subdivisions,
the ownership of which has not been transferred to the buyer
shall be considered as part of the subdivision, and shall be
subject to the additional tax payable by subdivision owner or
operator.
Idle Lands Exempt from Tax (Sec. 238): A province or
city or a municipality within the Metropolitan Manila Area
may exempt idle lands from the additional levy by reason of
force majeure, civil disturbance, natural calamity or any
cause or circumstance which physically or legally prevents
the owner of the property or person having legal interest
therein from improving, utilizing or cultivating the same.
Special Levies (Sec. 240): A province, city or municipality
may impose a special levy on the lands comprised within its
territorial jurisdiction specially benefited by public works
projects or improvements funded by the local government
unit concerned: Provided, however, That the special levy
shall not exceed sixty percent (60%) of the actual cost of
such projects and improvements, including the costs of
acquiring land and such other real property in connection
therewith: Provided, further, That the special levy shall not
apply to lands exempt from basic real property tax and the
remainder of the land portions of which have been donated
to the local government unit concerned for the construction
of such projects or improvements.
o
Additional Levy for SEF (Sec. 235): A province or city, or

a municipality within the Metropolitan Manila Area, may levy
and collect an annual tax of one percent (1%) on the
assessed value of real property which shall be in addition to
the basic real property tax. The proceeds thereof shall
exclusively accrue to the Special Education Fund (SEF).
RPT on Idle Lands (Sec. 236): A province or city, or a

municipality within the Metropolitan Manila Area, may levy
an annual tax on idle lands at the rate not exceeding five
87
percent (5%) of the assessed value of the property which

shall be in addition to the basic real property tax.
Ordinance Imposing Special Levy (Sec. 241): A

tax ordinance imposing a special levy shall describe
with reasonable accuracy the nature, extent, and
location of the public works projects or
improvements to be undertaken, state the
estimated cost thereof, specify the metes and
bounds by monuments and lines and the number of
annual installments for the payment of the special
levy which in no case shall be less than five (5) nor
more than ten (10) years. The sanggunian
concerned shall not be obliged, in the
apportionment and computation of the special levy,
to establish a uniform percentage of all lands
subject to the payment of the tax for the entire
district, but it may fix different rates for different
parts or sections thereof, depending on whether
DIGEST
Novis 7,
2014
suchland
more
or less benefited by proposed
(a) Agricultural lands, more than one
work.
o
I.
II.
Publication and Public Hearing (Sec. 242):

Before the enactment of an ordinance imposing a
special levy, the sanggunian concerned shall
conduct a public hearing thereon; notify in writing
the owners of the real property to be affected or the
persons having legal interest therein as to the date
and place thereof and afford the latter the
opportunity to express their positions or objections
relative to the proposed ordinance.
Fixing Amount of Special Levy (Sec. 243): The
special levy authorized herein shall be apportioned,
computed, and assessed according to the assessed
valuation of the lands affected as shown by the
books of the assessor concerned, or its current
assessed value as fixed by said assessor if the
property does not appear of record in his books.
Upon the effectivity of the ordinance imposing
special levy, the assessor concerned shall forthwith
proceed to determine the annual amount of special
levy assessed against each parcel of land comprised
within the area especially benefited and shall send
to each landowner a written notice thereof by mail,
personal service or publication in appropriate cases.
Taxpayers Remedies (Sec. 244): Any owner of
real property affected by a special levy or any
person having a legal interest therein may, upon
receipt of the written notice of assessment of the
special levy, avail of the remedies provided for in
Chapter 3, Title Two, Book II of this Code.
Accrual of Special Levy (Sec. 245): The special
levy shall accrue on the first day of the quarter next
following the effectivity of the ordinance imposing
such levy.
PRELIMINARY MATTERS
A. POWER TO LEVY REAL PROPERTY TAX (Sec.
232)
B. RATES OF LEVY (Sec. 233)
C. EXEMPTIONS FROM RPT (Sec. 234)
D. ADDITIONAL LEVY FOR SEF (Sec. 235)
Section 235. Additional Levy on Real Property for
the Special Education Fund. - A province or city, or a
municipality within the Metropolitan Manila Area,
may levy and collect an annual tax of one percent
(1%) on the assessed value of real property which
shall be in addition to the basic real property tax.
The proceeds thereof shall exclusively accrue to the
Special Education Fund (SEF).
E.
RPT ON IDLE LANDS (Sec. 236)
Section 236. Additional Ad Valorem Tax on Idle Lands. - A

province or city, or a municipality within the Metropolitan
Manila Area, may levy an annual tax on idle lands at the rate
not exceeding five percent (5%) of the assessed value of the
property which shall be in addition to the basic real property
tax.
1.
COVERAGE OF IDLE LANDS (Sec. 237)
Section 237. Idle Lands, Coverage. - For purposes of real

property taxation, idle lands shall include the following:
88
(1) hectare in
area, suitable for cultivation, dairying, inland
fishery, and other agricultural uses, one-half (1/2) of
which remain uncultivated or unimproved by the
owner of the property or person having legal
interest therein. Agricultural lands planted to
permanent or perennial crops with at least fifty (50)
trees to a hectare shall not be considered idle lands.
Lands actually used for grazing purposes shall
likewise not be considered idle lands.
(b) Lands, other than agricultural, located in a city or

municipality, more than one thousand (1,000)
square meters in area one-half (1/2) of which
remain unutilized or unimproved by the owner of
the property or person having legal interest therein.
Regardless of land area, this Section shall likewise apply to
residential lots in subdivisions duly approved by proper
authorities, the ownership of which has been transferred to
individual owners, who shall be liable for the additional tax:
Provided, however, That individual lots of such subdivisions,
the ownership of which has not been transferred to the buyer
shall be considered as part of the subdivision, and shall be
subject to the additional tax payable by subdivision owner or
operator.
2.
IDLE LANDS EXEMPT FROM TAX (Sec. 238)
Section 238. Idle Lands Exempt from Tax. - A province or city

or a municipality within the Metropolitan Manila Area may
exempt idle lands from the additional levy by reason of force
majeure, civil disturbance, natural calamity or any cause or
circumstance which physically or legally prevents the owner
of the property or person having legal interest therein from
improving, utilizing or cultivating the same.
F.
SPECIAL LEVIES (Sec. 240)
Section 240. Special Levy by Local Government Units. - A

province, city or municipality may impose a special levy on
the lands comprised within its territorial jurisdiction specially
benefited by public works projects or improvements funded
by the local government unit concerned: Provided, however,
That the special levy shall not exceed sixty percent (60%) of
the actual cost of such projects and improvements, including
the costs of acquiring land and such other real property in
connection therewith: Provided, further, That the special levy
shall not apply to lands exempt from basic real property tax
and the remainder of the land portions of which have been
donated to the local government unit concerned for the
construction of such projects or improvements.
1.
ORDINANCE IMPOSING SPECIAL LEVY (Sec.

241)
Section 241. Ordinance Imposing a Special Levy. - A tax

ordinance imposing a special levy shall describe with
reasonable accuracy the nature, extent, and location of the
public works projects or improvements to be undertaken,
state the estimated cost thereof, specify the metes and
bounds by monuments and lines and the number of annual
installments for the payment of the special levy which in no
case shall be less than five (5) nor more than ten (10) years.
The sanggunian concerned shall not be obliged, in the
apportionment and computation of the special levy, to
establish a uniform percentage of all lands subject to the
payment of the tax for the entire district, but it may fix
different rates for different parts or sections thereof,
depending on whether such land is more or less benefited by
proposed work.
2.
PUBLICATION AND PUBLIC HEARING (Sec.

242)
Section 242. Publication of Proposed Ordinance Imposing a

Special Levy. - Before the enactment of an ordinance
imposing a special levy, the sanggunian concerned shall
conduct a public hearing thereon; notify in writing the
owners of the real property to be affected or the persons
having legal interest therein as to the date and place thereof
DIGEST
Nov
7, 2014
and
afford
the
latter
the opportunity to express their
positions or objections relative to the proposed ordinance.
3.
FIXING AMOUNT OF SPECIAL LEVY (Sec.

243)
Section 243. Fixing the Amount of Special Levy. - The special

levy authorized herein shall be apportioned, computed, and
assessed according to the assessed valuation of the lands
affected as shown by the books of the assessor concerned,
or its current assessed value as fixed by said assessor if the
property does not appear of record in his books. Upon the
effectivity of the ordinance imposing special levy, the
assessor concerned shall forthwith proceed to determine the
annual amount of special levy assessed against each parcel
of land comprised within the area especially benefited and
shall send to each landowner a written notice thereof by
mail, personal service or publication in appropriate cases.
4.
TAXPAYERS REMEDIES (Sec. 244)
Section 244. Taxpayer's Remedies Against Special Levy. Any owner of real property affected by a special levy or any
person having a legal interest therein may, upon receipt of
the written notice of assessment of the special levy, avail of
the remedies provided for in Chapter 3, Title Two, Book II of
this Code.
5.
ACCRUAL OF SPECIAL LEVY (Sec. 245)
Section 245. Accrual of Special Levy. - The special levy shall

accrue on the first day of the quarter next following the
effectivity of the ordinance imposing such levy.
III.

A.
DATE OF ACCRUAL (Sec. 246)
Section 246. Date of Accrual of Tax. - The real property tax

for any year shall accrue on the first day of January and from
that date it shall constitute a lien on the property which shall
be superior to any other lien, mortgage, or encumbrance of
any kind whatsoever, and shall be extinguished only upon
the payment of the delinquent tax.
B.
NOTICE OF TIME OF COLLECTION (Sec. 249)
Section 249. Notice of Time for Collection of Tax. - The city or

municipal treasurer shall, on or before the thirty-first (31st)
day of January each year, in the case of the basic real
property tax and the additional tax for the Special Education
Fund (SEF) or any other date to be prescribed by the
sanggunian concerned in the case of any other tax levied
under this title, post the notice of the dates when the tax
may be paid without interest at a conspicuous and publicly
accessible place at the city or municipal hall. Said notice
shall likewise be published in a newspaper of general
circulation in the locality once a week for two (2) consecutive
weeks.
C.
PAYMENT OF RPT IN INSTALLMENTS (Sec. 250)
Section 250. Payment of Real Property Taxes in Installments.

- The owner of the real property or the person having legal
interest therein may pay the basic real property tax and the
additional tax for Special Education Fund (SEF) due thereon
without interest in four (4) equal installments; the first
installment to be due and payable on or before March Thirtyfirst (31st); the second installment, on or before June Thirty
(30); the third installment, on or before September Thirty
(30); and the last installment on or before December Thirtyfirst (31st), except the special levy the payment of which
shall be governed by ordinance of the sanggunian
concerned.
The date for the payment of any other tax imposed under
this Title without interest shall be prescribed by the
89
Payments of real property taxes shall first be applied to prior

years delinquencies, interests, and penalties, if any, and only
after said delinquencies are settled may tax payments be
credited for the current period.
D.
TAX DISCOUNT FOR

PAYMENT (Sec. 251)
ADVANCED
PROMPT
Section 251. Tax Discount for Advanced Prompt Payment. - If

the basic real property tax and the additional tax accruing to
the Special Education Fund (SEF) are paid in advance in
accordance with the prescribed schedule of payment as
provided under Section 250, the sanggunian concerned may
grant a discount not exceeding twenty percent (20%) of the
annual tax due.
IV.
REMEDIES
A.
LOCAL GOVERNMENT UNITS REMEDIES

1.
DATE OF ACCRUAL OF TAX (Sec. 246)
Section 246. Date of Accrual of Tax. - The real property tax

for any year shall accrue on the first day of January and from
that date it shall constitute a lien on the property which shall
be superior to any other lien, mortgage, or encumbrance of
any kind whatsoever, and shall be extinguished only upon
the payment of the delinquent tax.
2.
LGUS LIEN (Sec. 257)
Section 257. Local Governments Lien. - The basic real

property tax and any other tax levied under this Title
constitutes a lien on the property subject to tax, superior to
all liens, charges or encumbrances in favor of any person,
irrespective of the owner or possessor thereof, enforceable
by administrative or judicial action, and may only be
extinguished upon payment of the tax and the related
interests and expenses.
3.
INTEREST ON UNPAID RPT (Sec. 255)
Section 255. Interests on Unpaid Real Property Tax. - In case

of failure to pay the basic real property tax or any other tax
levied under this Title upon the expiration of the periods as
provided in Section 250, or when due, as the case may be,
shall subject the taxpayer to the payment of interest at the
rate of two percent (2%) per month on the unpaid amount or
a fraction thereof, until the delinquent tax shall have been
fully paid: Provided, however, That in no case shall the total
interest on the unpaid tax or portion thereof exceed thirty-six
(36) months.
4.
PERIOD TO COLLECT (Sec. 270)
Section 270. Periods Within Which To Collect Real Property

Taxes. - The basic real property tax and any other tax levied
under this Title shall be collected within five (5) years from
the date they become due. No action for the collection of the
tax, whether administrative or judicial, shall be instituted
after the expiration of such period. In case of fraud or intent
to evade payment of the tax, such action may be instituted
for the collection of the same within ten (10) years from the
discovery of such fraud or intent to evade payment.
a.
SUSPENSION OF PERIOD TO COLLECT
Section 270. Periods Within Which To Collect Real Property

Taxes. xxx xxx
The period of prescription within which to collect shall be
suspended for the time during which:
(1) The local treasurer is legally prevented from
collecting the tax;
(2) The owner of the property or the person having
legal interest therein requests for reinvestigation
and executes a waiver in writing before the
expiration of the period within which to collect; and
(3) The owner of the property or the
person having legal interest therein is
DIGEST Nov 7,
out2014
of the country or otherwise cannot
JOSE F. PUZON, petitioner-appellant,
be located.
5.
LEVY ON REAL PROPERTY
Section 258. Levy on Real Property. - After the expiration of

the time required to pay the basic real property tax or any
other tax levied under this Title, real property subject to such
tax may be levied upon through the issuance of a warrant on
or before, or simultaneously with, the institution of the civil
action for the collection of the delinquent tax. The provincial
or city treasurer, or a treasurer of a municipality within the
Metropolitan Manila Area, as the case may be, when issuing
a warrant of levy shall prepare a duly authenticated
certificate showing the name of the delinquent owner of the
property or person having legal interest therein, the
description of the property, the amount of the tax due and
the interest thereon. The warrant shall operate with the force
of a legal execution throughout the province, city or a
municipality, within the Metropolitan Manila Area. The
warrant shall be mailed to or served upon the delinquent
owner of the real property or person having legal interest
therein, or in case he is out of the country or cannot be
located, the administrator or occupant of the property. At the
same time, written notice of the levy with the attached
warrant shall be mailed to or served upon the assessor and
the Registrar of Deeds of the province, city or municipality
within the Metropolitan Manila Area where the property is
located, who shall annotate the levy on the tax declaration
and certificate of title of the property, respectively.
The levying officer shall submit a report on the levy to the
sanggunian concerned within ten (10) days after receipt of
the warrant by the owner of the property or person having
legal interest therein.
a.
ADVERTISEMENT AND SALE
Section 260. Advertisement and Sale. - Within thirty (30)

days after service of the warrant of levy, the local treasurer
shall proceed to publicly advertise for sale or auction the
property or a usable portion thereof as may be necessary to
satisfy the tax delinquency and expenses of sale. The
advertisement shall be effected by posting a notice at the
main entrance of the provincial, city or municipal building,
and in a publicly accessible and conspicuous place in the
barangay where the real property is located, and by
publication once a week for two (2) weeks in a newspaper of
general circulation in the province, city or municipality where
the property is located. The advertisement shall specify the
amount of the delinquent tax, the interest due thereon and
expenses of sale, the date and place of sale, the name of the
owner of the real property or person having legal interest
therein, and a description of the property to be sold. At any
time before the date fixed for the sale, the owner of the real
property or person having legal interest therein may stay the
proceedings by paying the delinquent tax, the interest due
thereon and the expenses of sale. The sale shall be held
either at the main entrance of the provincial, city or
municipal building, or on the property to be sold, or at any
other place as specified in the notice of the sale.
Within thirty (30) days after the sale, the local treasurer or
his deputy shall make a report of the sale to the sanggunian
concerned, and which shall form part of his records. The local
treasurer shall likewise prepare and deliver to the purchaser
a certificate of sale which shall contain the name of the
purchaser, a description of the property sold, the amount of
the delinquent tax, the interest due thereon, the expenses of
sale and a brief description of the proceedings: Provided,
however, That proceeds of the sale in excess of the
delinquent tax, the interest due thereon, and the expenses of
sale shall be remitted to the owner of the real property or
person having legal interest therein.
The local treasurer may, by ordinance duly approved,
advance an amount sufficient to defray the costs of
collection thru the remedies provided for in this Title,
including the expenses of advertisement and sale.
90
vs. ALEJANDRA
ABELLERA, substituted by TOMASA D. DOMONDON,
oppositor-appellee. [G.R. No. 75082 January 31, 1989]
FACTS:
Alejandra Abellera (now deceased and substituted by

Tomasa Domondon) was the registered owner of the
land in question located in Baguio City which was
subsequently reverted to the public domain by virtue of
PD No. 1271
Certain real properties in Baguio City, which included the

properties of Abellera, were auctioned off for alleged
RPT delinquencies for the years 1971 to 1977
Jose Puzon was declared winner in the bidding over the

lot in question, being the lone bidder
Puzon was given the certificate of sale over the parcel of

land and then proceeded to register the title of the land
in his name by filing the instant suit to consolidate his
ownership over the property
While trying to avail of the provisions of PD 1271,

Domondon found out that the lands of Abellera had been
auctioned off
When Puzon failed to appear at the meeting arranged by

Domondon, the latter consigned with the court the
amount for the land in question and filed her opposition
to Puzons petition for consolidation
The lower court ruled in favor of Domondon declaring

the auction sale and the assessment made null and void
The lower courts ruling was affirmed by the IAC

ISSUE:
The petitioner submits that: 'upon compliance with certain
requirements the titles so issued are validated and deemed
to have been conveyed in fee simple.... The validation of the
title retroacts to the very day the title was originally issued'
(pp. 45, Rollo). We agree with the petitioner. The intent of the
law (PD 1271) necessarily makes such titles valid from, the
time they were issued.
Considering, however, that during the years 1971-1977 the
land in question was still part of the public domain, the
oppositor-appellee could not, in those years, obviously be
held liable for real property taxes over the land in question.
Since the validity of her title would take effect retroactively
only after having complied with the conditions set in PD
1271, only then could she be held liable for taxes for the
period starting 1971 to 1977. It would be absurd then to hold
the oppositor-appellee liable for taxes over a piece of land
which she did not own (it being public land) or use.
Consequently, the tax sale was prematurely conducted. The
oppositor-appellee should have first been given the
opportunity to settle the taxes assessed for the years 19711977 after having complied with PD 1271.
As to the validity of the auction sale, We reiterate that it was
prematurely held, hence, null and void for the above
reasons. But even on the evidence presented by the parties,
assuming that the sale was properly and seasonably held, it
has been clearly shown by the trial court and the IAC that the
oppositor-appellee was not properly notified. The holding of
the tax sale despite the absence of the requisite notice was
tantamount to a violation of her substantial right to due
process. As held by the IAC,
o
. . . Under these provisions (referring to Secs. 59, 65,
73 and 76 of PD 464, the Real Property Tax Code)
notice to the delinquent owner is required as a
prerequisite to a valid tax sale.
o
Failure to notify the registered owner shall vitiate the
sale.' (Cabrera v. Prov. Treasurer, 75 Phil. 780)
o
Tax sales are administrative proceedings. Ando
Administrative proceedings established for the sale of
private lands for non-payment of taxes being in
personam (Pantaleon v. Santos, L-10289, July 31,
1957), it is essential that there be actual notice to the
delinquent, otherwise the sale is null and void
although preceded by proper advertisement or
publication." (Vivencio v. Quintos, CA-G.R. No. 44697,
Jan. 23, 1975, 72 O.G. No. 11, March 15, 1975.)
(Decision of the IAC, 13 March 1986, pp. 27-28, Rollo)
DIGEST Nov 7, 2014
The auction sale was tainted with
Spouses RAMON and ROSITA TAN, petitioners vs.

GORGONIA BANTEGUI, Represented by GUADALUPE B.
BAUTISTA; and Spouses FLORANTE and FLORENCIA B.
CAEDO, Respondents. [G.R. No. 154027| October 24, 2005 |
3D]
FACTS:
The subject lot situated Quezon City was registered in

the name of Gorgonia Bantegui (Bantegui)
Bantegui acquired the property sometime in 1954 and

rented it to the Caedos, who resided therein until 1994.
Bantegui left for the USA and returned to the PH in 1988

and executed her special power of attorney, making
Guadalupe Bautista her representative, after which, she
went back to the US
Her taxes on the subject property were paid until 1977,

however, RPTs from the year 1978 to 1983 were not paid
For failure of Bantegui to pay said taxes, the city

treasurer of QC sold said property at public auction to
the Capistranos
in which a Certificate of Sale of
Delinquent Property was subsequently issued in their
favor
Since the property was not redeemed within the 1 year

redemption period, title to said property was
consolidated to the Capistranos and a TCT was issued in
their names
The Capistranos, however, did not take possession of

the land or inform the Caedos about the sale or collected
any rent from them and did not pay real property taxes
thereon
The property was later sold by the Capistranos to

Pereyras where a new TCT was issued in their names,
who also did not take possession of the property in
question but mortgaged the same to the Rural Bank of
Imus, Cavite, which mortgage was annotated on the title
of the property
These transfers were unknown to Bantegui and the

Caedos, despite the fact that Evelyn Pereyra is the
daughter of the Caedos
The Caedos still considered themselves as tenants of

Bantegui, such that they paid rent to her until December
1993
Bantegui, on her part, applied for administrative

reconstitution of her title as it was lost and a
reconstituted title was subsequently issued in her name.
Bantegui likewise paid the realty taxes on the subject

property for the years 1987 to 1989 but the city
treasurer of Quezon City refused to accept her payment
for the year 1990
Said property was again sold by the Pereyras to spouses

Ramon and Rosita Tan, with the latter paying the Rural
Bank of Imus, Cavite for the release of the mortgage per
agreement by the parties and also the overdue taxes
and other expenses incurred by the Pereyras pertaining
to said mortgage
The Tans, like their predecessors, did not take immediate

possession of the property [or inform] the Caedos of
their title to the land
Towards the latter part of 1990, however, the Tans, thru

their lawyer, informed the Caedos of their ownership
over the property and demanded that the Caedos vacate
the property
The Tans subsequently filed an action for ejectment

against the Caedos who were subsequently ejected from
the property
February 11, 1992 Bantegui, thru her sister

Guadalupe Bautista, and joined by the spouses Caedo,
filed a Complaint for Annulment of Sale, Quieting of
Title, Injunction and Damages with the RTC which
complaint was later amended by impleading the spouses
Capistrano and the city treasurer of QC as codefendants, and deleting quieting of title from the
prayer and inserting reconveyance
RTC rendered its Decision in favor of Bantegui and the

Caedos
The Tans appealed to the CA
CA affirmed RTCs decision
91
irregularities: no
notices of delinquency and of sale were sent to the
owner.
The owner continued to pay realty taxes on the
property, even after the date of the sale. She would not
have done so had she been aware that it had already
been auctioned off.
ISSUE: Whether the auction sale was valid.

HELD: NO
The tax sale did not conform to the requirements prescribed
under Presidential Decree (PD) No. 464, otherwise known as
the Real Property Tax Code.
o
First, no notice of delinquency or of sale was given to
either Gorgonia Bantegui, the delinquent owner; or to
her representative.
o
On the one hand, Section 65 of PD 464 provides:
SECTION 65. Notice of delinquency in the payment of

the real property tax.
Upon the real property tax or any installment thereof
becoming delinquent, the x x x city treasurer shall
immediately cause notice of the fact to be posted at
the main entrance of the x x x city hall and in a public
and conspicuous place in each barrio of the x x x city
as the case may be. The notice of delinquency shall
also be published once a week for three consecutive
weeks, in a newspaper of general circulation in the x x
x city, if any there be, and announced by a crier at the
market place for at least three market days.
Such notice shall specify the date upon which tax
became delinquent, and shall state that personal
property may be seized to effect payment. It shall also
state that, at any time, before the seizure of personal
property, payment may be made with penalty in
accordance with the next following section, and
further, that unless the tax and penalties be paid
before the expiration of the year for which the tax is
due, or the tax shall have been judicially set aside, the
entire delinquent real property will be sold at public
auction, and that thereafter the full title to the
property will be and remain with the purchaser,
subject only to the right of delinquent taxpayer or any
other person in his behalf to redeem the sold property
within one year from the date of sale.
On the other hand, Section 73 of PD 464 states:
SECTION 73. Advertisement of sale of real property at
public auction.
After the expiration of the year for which the tax is
due, the x x x city treasurer shall advertise the sale at
public auction of the entire delinquent real property,
except real property mentioned in subsection (a) of
Section forty hereof, to satisfy all the taxes and
penalties due and the costs of sale. Such
advertisement shall be made by posting a notice for
three consecutive weeks at the main entrance of the x
x x city or x x x hall in the case of cities, and in a
public and conspicuous place in barrio or district
wherein the property is situated, in English, Spanish
and the local dialect commonly used, and by
announcement at least three market days at the
market by crier, and, in the discretion of the x x x city
treasurer, by publication once a week for three
consecutive weeks in a newspaper of general
circulation published in the x x x city.
The notice, publication, and announcement by crier
shall state the amount of the taxes, penalties and
costs of sale; the date, hour, and place of sale, the
name of the taxpayer against whom the tax was
assessed; and the kind or nature of property and, if
land, its approximate areas, lot number, and location
stating the street and block number, district or barrio,
municipality and the province or city where the
property to be sold is situated. Copy of the notice shall
forthwith be sent either by registered mail or by
messenger, or through the barrio captain, to the
delinquent taxpayer, at his address as shown in the
DIGEST
Nov
7, 2014
tax rolls
or property
tax record cards of the x x x city
property by paying to the local treasurer the
where the property is located, or at his residence, if
known to said treasurer or barrio captain: Provided,
however, That a return of the proof of service under
oath shall be filed by the person making the service
with the x x x city treasurer concerned.
The auction sale of real property for the collection of
delinquent taxes is in personam, not in rem. Although
sufficient in proceedings in rem like land registration, mere
notice by publication will not satisfy the requirements of
proceedings in personam. [P]ublication of the notice of
delinquency [will] not suffice, considering that the procedure
in tax sales is in personam. It is still incumbent upon the
city treasurer to send the notice directly to the taxpayer -the registered owner of the property -- in order to protect the
latters
interests.
Although
preceded
by
proper
advertisement and publication, an auction sale is void absent
an actual notice to a delinquent taxpayer.
The sale of land for tax delinquency is in derogation of
property rights and due process; the prescribed steps must
be followed strictly. In the present case, notices either of
delinquency or of sale were not given to the delinquent
taxpayer. Those notices are mandatory, and failure to issue
them invalidates a sale.
Because it was clearly in contravention of the requirements
under the law and jurisprudence, the subsequent sale of the
real property did not make its purchaser the new owner.
vi. Redemption of Property Sold (Sec. 261)
Section 261. Redemption of Property Sold. - Within one
(1) year from the date of sale, the owner of the delinquent
real property or person having legal interest therein, or his
representative, shall have the right to redeem the property
upon payment to the local treasurer of the amount of the
delinquent tax, including the interest due thereon, and the
expenses of sale from the date of delinquency to the date of
sale, plus interest of not more than two percent (2%) per
month on the purchase price from the date of sale to the
date of redemption. Such payment shall invalidate the
certificate of sale issued to the purchaser and the owner of
the delinquent real property or person having legal interest
therein shall be entitled to a certificate of redemption which
shall be issued by the local treasurer or his deputy.
From the date of sale until the expiration of the period of
redemption, the delinquent real property shall remain in
possession of the owner or person having legal interest
therein who shall be entitled to the income and other fruits
thereof.
The local treasurer or his deputy, upon receipt from the
purchaser of the certificate of sale, shall forthwith return to
the latter the entire amount paid by him plus interest of not
more than two percent (2%) per month. Thereafter, the
property shall be free from lien of such delinquent tax,
interest due thereon and expenses of sale.
vii. Purchase of Property by the Local Government Units for
Want of Bidder (Sec.
263)
Section 263. Purchase of Property By the Local
Government Units for Want of Bidder. - In case there is
no bidder for the real property advertised for sale as
provided herein, the real property tax and the related
interest and costs of sale the local treasurer conducting the
sale shall purchase the property in behalf of the local
government unit concerned to satisfy the claim and within
two (2) days thereafter shall make a report of his
proceedings which shall be reflected upon the records of his
office. It shall be the duty of the Registrar of Deeds
concerned upon registration with his office of any such
declaration of forfeiture to transfer the title of the forfeited
property to the local government unit concerned without the
necessity of an order from a competent court.
Within one (1) year from the date of such forfeiture, the
taxpayer or any of his representative, may redeem the
92
full amount of
the real property tax and the related interest and the costs of
sale. If the property is not redeemed as provided herein, the
ownership thereof shall be vested on the local government
unit concerned.
viii. Court Action for Collection (Sec. 266)
Section 266. Collection of Real Property Tax Through
the Courts. - The local government unit concerned may
enforce the collection of the basic real property tax or any
other tax levied under this Title by civil action in any court of
competent jurisdiction. The civil action shall be filed by the
local treasurer within the period prescribed in Section 270 of
this Code.
b. Taxpayers Remedies
i. Action Assailing Validity of Tax Sale (Sec. 267)
Section 267. Action Assailing Validity of Tax Sale. - No
court shall entertain any action assailing the validity or any
sale at public auction of real property or rights therein under
this Title until the taxpayer shall have deposited with the
court the amount for which the real property was sold,
together with interest of two percent (2%) per month from
the date of sale to the time of the institution of the action.
The amount so deposited shall be paid to the purchaser at
the auction sale if the deed is declared invalid but it shall be
returned to the depositor if the action fails.
Neither shall any court declare a sale at public auction
invalid by reason or irregularities or informalities in the
proceedings unless the substantive rights of the delinquent
owner of the real property or the person having legal interest
therein have been impaired.
ii. Action Involving Ownership (Sec. 268)
Section 268. Payment of Delinquent Taxes on Property
Subject of Controversy. - In any action involving the
ownership or possession of, or succession to, real property,
the court may, motu propio or upon representation of the
provincial, city, or municipal treasurer or his deputy, award
such ownership, possession, or succession to any party to
the action upon payment to the court of the taxes with
interest due on the property and all other costs that may
have accrued, subject to the final outcome of the action.
iii. Payment under Protest (Sec. 252)
Section 252. Payment Under Protest. (a) No protest shall be entertained unless the taxpayer first
pays the tax. There shall be annotated on the tax
receipts the words "paid under protest". The protest in
writing must be filed within thirty (30) days from payment of
the tax to the provincial, city treasurer or municipal
treasurer, in the case of a municipality within Metropolitan
Manila Area, who shall decide the protest within sixty (60)
days from receipt.
(b) The tax or a portion thereof paid under protest, shall be
held in trust by the treasurer concerned.
(c) In the event that the protest is finally decided in favor of
the taxpayer, the amount or portion of the tax protested
shall be refunded to the protestant, or applied as tax credit
against his existing or future tax liability.
(d) In the event that the protest is denied or upon the lapse
of the sixty day period prescribed in subparagraph (a), the
taxpayer may avail of the remedies as provided for in
Chapter 3, Title II, Book II of this Code.
RAMIE TEXTILES, INC., petitioner, vs. HON. ISMAEL
MATHAY, SR., in his capacity as Auditor General respondent.
G.R. No. L-32364 April 30, 1979
DIGEST Nov 7, 2014
application of the principle of solutio indebiti
FIRST DIVISION
FACTS:
Petitioner, a domestic corporation which started

operating in 1959, voluntarily paid the amount of
P78,041.17 as real estate taxes on its plant machinery
and equipment used by its general mill for the first 5
years of its operation
Petitioner found later that said machineries are exempt

from realty tax under CA 470
May 19, 1967 Petitioner then submitted with the

Provincial Treasurer, through the Provincial Assesor of
Bulacan, a claim for refund
Provincial Treasurer denied the claim for refund on the

ground that the same should have been filed within 2
years from date of payment
Auditor General ruled that the claim for refund of real

estate taxes paid by petitioner having been voluntarily
made without protest may not be allowed pursuant to
Section 54 of Commonwealth Act No. 470 which
provides:
o
Section 54. Restriction upon power of court to
impeach tax - No court shall entertain any suit
assailing the validity of a tax assessed under this
Act until the taxpayer shall have paid, under pro.
test, the taxes assessed against him ....
ISSUE: Whether a protest is a condition precedent or a sine
qua non requirement for the recovery of real estate taxes
paid under the erroneous belief that the claimant was liable
therefor.
HELD: NO.
We agree with petitioner. Protest is not a requirement in
order that a taxpayer who paid under a mistaken belief that
it is required by law, may claim for a refund. Section 54 of
Commonwealth Act No. 470 does not apply to petitioner
which could conceivably not have been expected to protest a
payment it honestly believed to be due. The same refers only
to the case where the taxpayer, despite his knowledge of the
erroneous or illegal assessment, still pays and fails to make
the proper protest, for in such case, he should manifest an
unwillingness to pay, and failing so, the taxpayer is deemed
to have waived his right to claim a refund.
In the case at bar, petitioner, therefore, cannot be said to
have waived his right. He had no knowledge of the fact
that it was exempted from payment of the realty tax
under Commonwealth Act No. 470. Payment was made
through error or mistake, in the honest belief that petitioner
was liable, and therefore could not have been made under
protest, but with complete voluntariness. 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.
The case of National Waterworks and Sewerage Authority vs.
Quezon City, et al., G.R. No. L-25310, April 26, 1968, 23 SCRA
286-291, to the effect that prior protest of realty tax
payments is necessary for recovery, cited by respondent, is
not in point. The facts of said case are different because
there was already prior knowledge on the part of NWSA of its
exemption from payment of its taxes which dated back to
1957 when it paid under protest, and then again in 1961. But
despite the fact that it knew already that it was exempt, it
still paid without protest the taxes for 1958, 1959, 1960 and
1962. Hence, this Court ruled:
o
Stated otherwise, this appeal concerns only the
taxes paid for 1958 to 1962 (total amount;
P449,088.46). Starting from 1957 up to 1962, NWSA
already knew it was exempt, as shown by its
payment in 1957 under protest, reiterated in 1961.
NWSA therefore, should have paid the rest of the
taxes from 1957 to 1962 under protest ...
It is not disputed that petitioner is exempt from the payment
of realty taxes during the first five (5) years of its operation
The fact that petitioner paid thru error or Mistake, and the
government accepted the payment, save rise to the
93
under Article
2154 of the New Civil Code, which provides that "if
something is received when there is no right to demand it,
and it was unduly delivered through mistake, the obligation
to return it arises." There is, therefore, created a tie or
juridical relation in the nature of solutio indebiti expressly
classified as quasi- contract under Section 2, Chapter I
Respondent's contention that petitioner's right to recover
real estate taxes has prescribed in accordance with Section
359 of the Revised Manual of Instructions to Treasurers which
reads:
o
Section 359. Refund of taxes paid under
ordinance subsequently declared illegal
and taxes illegally assessed and collected.
To encourage prompt and voluntary
payment of taxes and to maintain the
principle that the government should not,
at the expense of the taxpayer, retain what
is not legally due it, for refund of taxes
erroneously paid or illegally collected or
assessed may be presented within two (2)
years from date of payment. Claim for
refund presented thereafter will no longer
be entertained. All claims for recovery of
taxes illegally and erroneously as shall be
filed with the treasurer who collected the
tax. The treasurer may... decide the protest
or he may forward the same to the
corresponding authority for decision. His
comment and recommendation shall be
stated by him together with the protest.
This procedure shall be strictly followed in
order to determine as to whether or not a
formal or written claim was filed within the
two (2) years from date of payment.
is without merit. The said provision applies to taxes
paid under ordinance subsequently declared illegal
or taxes illegally assessed and collected under such
ordinance, but not to payments of real estate taxes
mistakenly made, as in the present case.
Furthermore, the Revised Manual of Instructions to
Treasurers is a mere compilation of existing
accounting instructions affecting the finance and
administration of local government. Section 359,
particularly, has no force and effect of a law, and
the same can not prevail over the provisions of the
New Civil Code.
Equally not applicable is Section 17 of Commonwealth Act
No. 470 cited by respondent in relation to the right of a
property owner to contest the validity of assessment. Said
provision provides:
o
Section 17. Appeal by owner to the Board of Tax
Appeals (Now Board of Assessment Appeals, R. A.
No. 1125). Any owner who is not satisfied with the
action of a provincial assessor in the assessment of
his property may, within sixty (60) days from the
date of receipt by him of the written notice of
assessment as provided in Section 16 hereof,
appeal to the Board of Tax Appeals, which is created
in each province, by filing with it or with the
municipal Treasurer of the municipality where the
property assessed is situated who is duty bound to
transmit it to the Board of Tax Appeals, a petitioner
to that effect stating the grounds of his appeal
As already stated the claim for refund must be made within
six (6) years from date of payment. Since petitioner
demanded the refund of real estate taxes mistakenly paid
only on May 23, 1967, it can recover only those paid during
the period from October 31, 1961 to September 9, 1965 or a
total amount of P61,007.33. Petitioner has, by reason of the
six (6) years prescriptive period, lost its right to recover the
amount of P17,033.84 paid during the period from July 24,
1959 to March 27,1961.
ALEJANDRO B. TY AND MVR PICTURE TUBE, INC.,

petitioners, vs.
THE HON. AURELIO C. TRAMPE, in his capacity as Judge of
the Regional Trial Court of Pasig, Metro Manila, THE HON.
94
DIGEST Nov 7, 2014
o
2. It is improper for this Court to prohibit or annul a
SECRETARY OF FINANCE, THE MUNICIPAL ASSESSOR OF
PASIG AND THE MUNICIPAL TREASURER OF PASIG,
respondents.
G.R. No. 117577 December 1, 1995
EN BANC
FACTS:
Petitioner Ty, a resident of Pasig, was assessed by the

Municipality of Pasig for realty taxes
Petitioners questioned the validity of said assessment by

filing an action before the RTC
Respondents argue that this case is premature because

petitioners
neither
appealed
the
questioned
assessments on their properties to the Board of
Assessment Appeal, pursuant to Sec. 226, nor paid the
taxes under protest, per Sec. 252.
ISSUE: Whether petitioners are required to exhaust
administrative remedies prior to seeking judicial relief.
HELD: NO.
Although as a rule, administrative remedies must first be
exhausted before resort to judicial action can prosper, there
is a well-settled exception in cases where the controversy
does not involve questions of fact but only of law. In the
present case, the parties, even during the proceedings in the
lower court on 11 April 1994, already agreed "that the issues
in the petition are legal" , and thus, no evidence was
presented in said court.
In laying down the powers of the Local Board of Assessment
Appeals, R.A. 7160 provides in Sec. 229 (b) that "(t)he
proceedings of the Board shall be conducted solely for the
purpose of ascertaining the facts . . . ." It follows that appeals
to this Board may be fruitful only where questions of fact are
involved. Again, the protest contemplated under Sec. 252 of
R.A. 7160 is needed where there is a question as to the
reasonableness of the amount assessed. Hence, if a taxpayer
disputes the reasonableness of an increase in a real estate
tax assessment, he is required to "first pay the tax" under
protest. Otherwise, the city or municipal treasurer will not act
on his protest. In the case at bench however, the petitioners
are questioning the very authority and power of the
assessor, acting solely and independently, to impose the
assessment and of the treasurer to collect the tax. These are
not questions merely of amounts of the increase in the tax
but attacks on the very validity of any increase.
DR. PABLO R. OLIVARES, DR. ROSARIO DE LEON

OLIVARES, EDWIN D. OLIVAREZ and OLIVAREZ REALTY
CORPORATION, petitioners, vs. MAYOR JOEY MARQUEZ,
CITY TREASURER SILVESTRE A. DE LEON, ASSISTANT CITY
TREASURER LIBERATO M. CARABEO, CITY ASSESSOR
SOLEDED S. MEDINA CUE and ASSISTANT CITY ASSESSOR
JOSE MARLEO P. DEL ROSARIO, respondents.
G.R. No. 155591
September 22, 2004
SECOND DIVISION
FACTS:
Petitioners filed before the RTC a petition for certiorari,

prohibition and mandamus questioning the assessment
and levy made by the Office of the City Treasurer of
Paraaque City on their properties
They protested the notice that was sent to them in a

letter dated July 7, 1998, and sought reinvestigation on
the grounds that: (1) some of the taxes being collected
have already prescribed and may no longer be collected
as provided in Section 194 of the Local Government
Code of 1991; (2) some properties have been doubly
taxed/assessed; (3) some properties being taxed are no
longer existent; (4) some properties are exempt from
taxation as they are being used exclusively for
educational purposes; and (5) some errors are made in
the assessment and collection of taxes due on
petitioners properties
RTC dismissed the petitions on the grounds that:

o
1. Questions involving tax assessment is within the
jurisdiction of the Bureau of Internal Revenue (BIR).
tax assessment issued by the City Assessors Office

since it is legally inherent in the functions of their
office. Any complaint or protest thereto should be
coursed through the BIR.
3. It appears on record that the City Treasurers
Office had already responded to the letter-protest of
plaintiff. Hence, the prayer in the complaint asking
that the City Treasurer be ordered to act on it is now
moot.
4. It is also of judicial notice that at present there is
no longer any publication regarding plaintiffs tax
delinquency. Hence, the prayer that this kind of
publication be ordered stopped is now, likewise,
moot.
ISSUE: Whether petitioners correctly brought the case before

the RTC and not the BIR.
HELD: NO.
The well-established rule is that the allegations in the
complaint and the character of the relief sought determine
the nature of an action. A perusal of the petition before the
RTC plainly shows that what is actually being assailed is the
correctness of the assessments made by the local assessor
of Paraaque on petitioners properties. The allegations in
the said petition purportedly questioning the assessors
authority to assess and collect the taxes were obviously
made in order to justify the filing of the petition with the RTC.
In fact, there is nothing in the said petition that supports
their claim regarding the assessors alleged lack of authority.
What petitioners raise are the following: (1) some of the
taxes being collected have already prescribed and may no
longer be collected as provided in Section 194 of the Local
Government Code of 1991; (2) some properties have been
doubly taxed/assessed; (3) some properties being taxed are
no longer existent; (4) some properties are exempt from
taxation as they are being used exclusively for educational
purposes; and (5) some errors are made in the assessment
and collection of taxes due on petitioners properties, and
that respondents committed grave abuse of discretion in
making the "improper, excessive and unlawful the collection
of taxes against the petitioner[s]."Moreover, these
arguments essentially involve questions of fact. Hence, the
petition should have been brought, at the very first instance,
to the Local Board of Assessment Appeals (LBAA).
Under the doctrine of primacy of administrative remedies, an
error in the assessment must be administratively pursued to
the exclusion of ordinary courts whose decisions would be
void for lack of jurisdiction. But an appeal shall not suspend
the collection of the tax assessed without prejudice to a later
adjustment pending the outcome of the appeal.
Even assuming that the assessors authority is indeed an
issue, it must be pointed out that in order for the court a quo
to resolve the petition, the issues of the correctness of the
tax assessment and collection must also necessarily be dealt
with.
In Ty vs. Trampe, cited by petitioners, the Court held that
jurisdiction over the case was properly vested with the trial
court because what was being questioned is the very
authority and power of the assessor, acting solely and
independently, to impose the assessment and of the
treasurer to collect the tax, and not merely of amounts of the
increase in the tax. The petitioners therein were questioning
the increased real estate taxes imposed by and being
collected in Pasig City effective from the year 1994,
premised on the legal question of whether or not P.D. No.
921 was repealed by R.A. No. 7160. P.D. No. 921, particularly
Section 9 thereof, requires that the schedule of values of real
properties in the Metropolitan Manila area shall be prepared
jointly by the city assessors in the districts created therein;
while Sec. 212 of R.A. No. 7160 states that the schedule shall
be prepared by the provincial, city or municipal assessors of
the municipalities within the Metropolitan Manila Area for the
different classes of real property situated in their respective
local government units for enactment by ordinance of the
case,
Novthe
7, authority
2014 of the assessor is not being
InDIGEST
the present
questioned. Despite petitioners protestations, the petition
filed before the court a quo primarily involves the
correctness of the assessments, which are questions of fact,
that are not allowed in a petition for certiorari, prohibition
and mandamus. The court a quo is therefore precluded from
entertaining the petition, and it appropriately dismissed the
petition.
NATIONAL POWER CORPORATION, Petitioner, vs.
PROVINCE OF QUEZON and MUNICIPALITY OF PAGBILAO,
Respondents
G.R. No. 171586 July 15, 2009
SECOND DIVISION
FACTS:
Province of Quezon assessed Mirant for unpaid

property taxes for the machineries located in its
power plant in Pagbilao, Quezon
Petitioner, which had entered into a BOT agreement
(called the Energy Conversion Agreement [ECA])
with Mirant, was furnished a copy of said tax
assessment
Petitioner then protested said tax assessment
before the LBAA, invoking Section 234 of the LGC
which purportedly exempts it from tax
o
Section 234.
Exemptions from Real
Property Tax. The following are exempted
from payment for the real property tax:
o
(c) All machineries and equipment that are
actually, directly, and exclusively used by
local water districts and governmentowned or controlled corporations engaged
in the supply and distribution of water
and/or generation and transmission of
electric power;
o
(e) Machinery and equipment used for
pollution
control
and
environmental
protection.
Petitioner contends that it is the beneficial owner of
the subject machineries and the plant since it shall
acquire the same in 25 years, hence, Mirant merely
retained a naked title over the same
LBAA dismissed Petitioners petition
CBAA affirmed LBAA
Petitioner elevated the case to CTA
o
NPC claimed it was procedurally erroneous
for the CBAA to exercise jurisdiction over
its appeal because the LBAA issued a sin
perjuicio decision, that is, the LBAA
pronounced a judgment without any
finding of fact. It argued that the CBAA
should have remanded the case to the
LBAA.
On substantive issues, the NPC
asserted the same grounds it relied upon
to support its claimed tax exemptions.
ISSUE #1: Whether Petitioner has the right to protest the

subject assessment.
HELD #1: NO.
Section 226 of the LGC lists down the two entities

vested with the personality to contest an
assessment: the owner and the person with legal
interest in the property.
A person legally burdened with the obligation to pay

for the tax imposed on a property has legal interest
in the property and the personality to protest a tax
assessment on the property. This is the logical and
legal conclusion when Section 226, on the rules
governing an assessment protest, is placed side by
side with Section 250 on the payment of real
property tax; both provisions refer to the same
parties who may protest and pay the tax:
o
SECTION 226. Local Board of Assessment
Appeals. - Any owner or person having
legal interest in the property who is not
satisfied with the action of the provincial,
95
city or municipal assessor in the

assessment of his property may, within
sixty (60) days from the date of receipt of
the written notice of assessment, appeal to
the Board of Assessment Appeals of the
province or city xxx.
o
SECTION 250. Payment of Real Property
Taxes in Instalments. - The owner of the
real property or the person having legal
interest therein may pay the basic real
property tax xxx due thereon without
interest in four (4) equal instalments xxx.
The liability for taxes generally rests on the owner
of the real property at the time the tax accrues.
This is a necessary consequence that proceeds from
the fact of ownership. However, personal liability for
realty taxes may also expressly rest on the entity
with the beneficial use of the real property, such as
the tax on property owned by the government but
leased to private persons or entities, or when the
tax assessment is made on the basis of the actual
use of the property. In either case, the unpaid realty
tax attaches to the property but is directly
chargeable against the taxable person who has
actual and beneficial use and possession of the
property regardless of whether or not that person is
the owner.
In the present case, the NPC, contrary to its claims,
is neither the owner nor the possessor/user of the
subject machineries.
The ECAs terms regarding the power plants
machineries clearly vest their ownership with
Mirant. Article 2.12 of the ECA states:
o
2.12 OWNERSHIP OF POWER STATION.
From the Effective Date until the Transfer
Date [that is, the day following the last day
of the 25-year period], [Mirant] shall,
directly or indirectly, own the Power
Station and all the fixtures, fittings,
machinery and equipment on the Site
or used in connection with the Power
Station which have been supplied by
it or at its cost. [Mirant] shall operate,
manage, and maintain the Power Station
for the purpose of converting fuel of [NPC]
into electricity. [Emphasis supplied.]
The NPC contends that it should nevertheless be
regarded as the beneficial owner of the plant, since
it will acquire ownership thereof at the end of 25
years. The NPC also asserts, by quoting portions of
the ECA, that it has the right to control and
supervise the construction and operation of the
plant, and that Mirant has retained only naked title
to it. These contentions, unfortunately, are not
sufficient to vest the NPC the personality to protest
the assessment.
In Cario v. Ofilado, we declared that legal interest
should be an interest that is actual and material,
direct and immediate, not simply contingent or
expectant. The concept of the directness and
immediacy involved is no different from that
required in motions for intervention under Rule 19
of the Rules of Court that allow one who is not a
party to the case to participate because of his or
her direct and immediate interest, characterized by
either gain or loss from the judgment that the court
may render. In the present case, the NPCs
ownership of the plant will happen only after the
lapse of the 25-year period; until such time arrives,
the NPC's claim of ownership is merely contingent,
i.e., dependent on whether the plant and its
machineries exist at that time. Prior to this event,
the NPCs real interest is only in the continued
operation of the plant for the generation of
electricity. This interest has not been shown to be
adversely affected by the realty taxes imposed and
is an interest that NPC can protect, not by claiming
an exemption that is not due to Mirant, but by
paying the taxes it (NPC) has assumed for Mirant
under the ECA.
DIGEST Nov 7, 2014
The LBAA dismissed Napocors petition for
ISSUE # 2: Whether Petitioner was entitled to exemption.
HELD # 2: NO.
At any rate, the NPCs claim of tax exemptions is

completely without merit. To successfully claim
exemption under Section 234(c) of the LGC, the
claimant must prove two elements:
o
a.
the machineries and equipment are
actually, directly, and exclusively used by
local water districts and governmentowned or controlled corporations; and
o
b.
the local water districts and
government-owned and controlled
corporations claiming exemption must be
engaged in the supply and distribution of
water and/or the generation and
transmission of electric power.
s applied to the present case, the governmentowned or controlled corporation claiming exemption
must be the entity actually, directly, and exclusively
using the real properties, and the use must be
devoted to the generation and transmission of
electric power. Neither the NPC nor Mirant satisfies
both requirements. Although the plants
machineries are devoted to the generation of
electric power, by the NPCs own admission and as
previously pointed out, Mirant a private
corporation uses and operates them. That Mirant
operates the machineries solely in compliance with
the will of the NPC only underscores the fact that
NPC does not actually, directly, and exclusively use
them. The machineries must be actually, directly,
and exclusively used by the government-owned or
controlled corporation for the exemption under
Section 234(c) to apply.
Nor will NPC find solace in its claim that it utilizes all
the power plants generated electricity in supplying
the power needs of its customers. Based on the
clear wording of the law, it is the machineries that
are exempted from the payment of real property
tax, not the water or electricity that these
machineries generate and distribute.
Even the NPCs claim of beneficial ownership is

unavailing. The test of exemption is the use, not the
ownership of the machineries devoted to generation
and transmission of electric power. The nature of
the NPCs ownership of these machineries only finds
materiality in resolving the NPCs claim of legal
interest in protesting the tax assessment on Mirant.
As we discussed above, this claim is inexistent for
tax protest purposes.
NATIONAL POWER CORPORATION, Petitioner, vs.
PROVINCE OF QUEZON and MUNICIPALITY OF PAGBILAO,
Respondent.
G.R. No. 171586
January 25, 2010
SPECIAL SECOND DIVISION
FACTS:
Petitioner filed an MR assailing the July 15, 2009

decision (above)
o
"the protest contemplated in Section 252 (a) is
applicable only when the taxpayer is questioning
the reasonableness or excessiveness of an
assessment. It presupposes that the taxpayer is
subject to the tax but is disputing the correctness of
the amount assessed. It does not apply where, as in
this case, the legality of the assessment is put in
issue on account of the taxpayers claim that it is
exempt from tax."
ISSUE: Whether Petitioner has sufficient legal interest to
protest the tax assessment.
HELD: NO.
Apart from Napocors failure to prove that it has sufficient
legal interest, a further review of the records revealed
another basis for disregarding Napocors protest against the
assessment.
96
exemption for its

failure to comply with Section 252 of the LGC30 requiring
payment of the assailed tax before any protest can be made.
Although the CBAA ultimately dismissed Napocors appeal
for failure to meet the requirements for tax exemption, it
agreed with Napocors position that "the protest
contemplated in Section 252 (a) is applicable only when the
taxpayer is questioning the reasonableness or excessiveness
of an assessment. It presupposes that the taxpayer is subject
to the tax but is disputing the correctness of the amount
assessed. It does not apply where, as in this case, the
legality of the assessment is put in issue on account of the
taxpayers claim that it is exempt from tax." The CTA en banc
agreed with the CBAAs discussion, relying mainly on the
cases of Ty v. Trampe and Olivarez v. Marquez.
We disagree. The cases of Ty and Olivarez must be placed in
their proper perspective.
The petitioner in Ty v. Trampe questioned before the trial
court the increased real estate taxes imposed by and being
collected in Pasig City effective from the year 1994,
premised on the legal question of whether or not Presidential
Decree No. 921 (PD 921) was repealed by the LGC. PD 921
required that the schedule of values of real properties in the
Metropolitan Manila area shall be prepared jointly by the city
assessors in the districts created therein; while Section 212
of the LGC stated that the schedule shall be prepared by the
provincial, city or municipal assessors of the municipalities
within the Metropolitan Manila Area for the different classes
of real property situated in their respective local government
units for enactment by ordinance of the Sanggunian
concerned. The private respondents assailed Tys act of filing
a prohibition petition before the trial court contending that Ty
should have availed first the administrative remedies
provided in the LGC, particularly Sections 252 (on payment
under protest before the local treasurer) and 226 (on appeals
to the LBAA).
The Court, through former Chief Justice Artemio Panganiban,
declared that Ty correctly filed a petition for prohibition
before the trial court against the assailed act of the city
assessor and treasurer. The administrative protest
proceedings provided in Section 252 and 226 will not apply.
The protest contemplated under Section 252 is required
where there is a question as to the reasonableness or
correctness of the amount assessed. Hence, if a taxpayer
disputes the reasonableness of an increase in a real property
tax assessment, he is required to "first pay the tax" under
protest. Otherwise, the city or municipal treasurer will not act
on his protest. Ty however was questioning the very
authority and power of the assessor, acting solely and
independently, to impose the assessment and of the
treasurer to collect the tax. These were not questions merely
of amounts of the increase in the tax but attacks on the very
validity of any increase. Moreover, Ty was raising a legal
question that is properly cognizable by the trial court; no
issues of fact were involved. In enumerating the power of the
LBAA, Section 229 declares that "the proceedings of the
Board shall be conducted solely for the purpose of
ascertaining the facts x x x." Appeals to the LBAA (under
Section 226) are therefore fruitful only where questions of
fact are involved.
Olivarez v. Marquez, on the other hand, involved a petition
for certiorari, mandamus, and prohibition questioning the
assessment and levy made by the City of Paraaque.
Olivarez was seeking the annulment of his realty tax
delinquency assessment. Marquez assailed Olivarez failure
to first exhaust administrative remedies, particularly the
requirement of payment under protest. Olivarez replied that
his petition was filed to question the assessors authority to
assess and collect realty taxes and therefore, as held in Ty v.
Trampe, the exhaustion of administrative remedies was not
required. The Court however did not agree with Olivarezs
argument. It found that there was nothing in his petition that
supported his claim regarding the assessors alleged lack of
authority. What Olivarez raised were the following grounds:
"(1) some of the taxes being collected have already
prescribed and may no longer be collected as provided in
Section 194 of the Local Government Code of 1991; (2) some
DIGESThave
Nov
7, 2014
properties
been
doubly taxed/assessed; (3) some
properties being taxed are no longer existent; (4) some
properties are exempt from taxation as they are being used
exclusively for educational purposes; and (5) some errors are
made in the assessment and collection of taxes due on
petitioners properties, and that respondents committed
grave abuse of discretion in making the improper, excessive
and unlawful the collection of taxes against the petitioner."
The Olivarez petition filed before the trial court primarily
involved the correctness of the assessments, which is a
question of fact that is not allowed in a petition for certiorari,
prohibition, and mandamus. Hence, we declared that the
petition should have been brought, at the very first instance,
to the LBAA, not the trial court.
Like Olivarez, Napocor, by claiming exemption from realty
taxation, is simply raising a question of the correctness of
the assessment. A claim for tax exemption, whether full or
partial, does not question the authority of local assessor to
assess real property tax. This may be inferred from Section
206 which states that:
o
SEC. 206. Proof of Exemption of Real Property from
Taxation. - Every person by or for whom real
property is declared, who shall claim tax exemption
for such property under this Title shall file with the
provincial, city or municipal assessor within thirty
(30) days from the date of the declaration of real
property sufficient documentary evidence in support
of such claim including corporate charters, title of
ownership, articles of incorporation, bylaws,
contracts, affidavits, certifications and mortgage
deeds, and similar documents. If the required
evidence is not submitted within the period herein
prescribed, the property shall be listed as taxable in
the assessment roll. However, if the property shall
be proven to be tax exempt, the same shall be
dropped from the assessment roll. [Emphasis
provided]
By providing that real property not declared and proved as
tax-exempt shall be included in the assessment roll, the
above-quoted provision implies that the local assessor has
the authority to assess the property for realty taxes, and any
subsequent claim for exemption shall be allowed only when
sufficient proof has been adduced supporting the claim.
Since Napocor was simply questioning the correctness of the
assessment, it should have first complied with Section 252,
particularly the requirement of payment under protest.
Napocors failure to prove that this requirement has been
complied with thus renders its administrative protest under
Section 226 of the LGC without any effect. No protest shall
be entertained unless the taxpayer first pays the tax.
It was an ill-advised move for Napocor to directly file an
appeal with the LBAA under Section 226 without first paying
the tax as required under Section 252. Sections 252 and 226
provide successive administrative remedies to a taxpayer
who questions the correctness of an assessment. Section
226, in declaring that "any owner or person having legal
interest in the property who is not satisfied with the action of
the provincial, city, or municipal assessor in the assessment
of his property may x x x appeal to the Board of Assessment
Appeals x x x," should be read in conjunction with Section
252 (d), which states that "in the event that the protest is
denied x x x, the taxpayer may avail of the remedies as
provided for in Chapter 3, Title II, Book II of the LGC [Chapter
3 refers to Assessment Appeals, which includes Sections 226
to 231]. The "action" referred to in Section 226 (in relation to
a protest of real property tax assessment) thus refers to the
local assessors act of denying the protest filed pursuant to
Section 252. Without the action of the local assessor, the
appellate authority of the LBAA cannot be invoked.
Napocors action before the LBAA was thus prematurely filed.
CAMP JOHN HAY DEVELOPMENT CORPORATION,
Petitioner, vs. CENTRAL BOARD OF ASSESSMENT
APPEALS, REPRESENTED BY ITS CHAIRMAN HON. CESAR S.
GUTIERREZ, ADELINA A. TABANGIN, IN HER CAPACITY AS
CHAIRMAN OF THE BOARD OF TAX (ASSESSMENT) APPEALS
OF BAGUIO CITY, AND HON. ESTRELLA B. TANO, IN HER
CAPACITY AS THE CITY ASSESSOR OF THE CITY OF BAGUIO,
Respondents. G.R. No. 169234
October 2, 2013
SECOND DIVISION
97
FACTS:
March 21, 2012 Respondent City of Baguio sent a

letter to Petitioner informing the latter about the
issuance against it of thirty-six (36) Owners Copy of
Assessment of Real Property (ARP) covering various
buildings of petitioner and two (2) parcels of land owned
by the Bases Conversion Development Authority (BCDA)
in the John Hay Special Economic Zone (JHSEZ), Baguio
City, which were leased out to petitioner.
April 3, 2002 Petitioner questioned the same for

failure to identify the specific properties and its
corresponding assessed values.
April 11, 2002 City Assessor replied that the subject

ARPs (with an additional ARP on another building
bringing the total number of ARPs to thirty-seven [37])
against the buildings of petitioner located within the
JHSEZ were issued on the basis of the approved building
permits obtained from the City Engineers Office of
Baguio City and pursuant to Sections 201 to 206 of RA
No. 7160 or the LGC of 1991.
Petitioner filed an appeal before the Board of Tax

Assessment Appeals (BTAA)
o
Petitioner claimed that there was no legal basis for
the issuance of the assessments because it was
allegedly exempted from paying taxes, national and
local, including real property taxes, pursuant to RA
No. 7227, otherwise known as the Bases Conversion
and Development Act of 1992.
BTAA enjoined petitioner pay under protest of the

subject real property taxes before the hearing of its
appeal
Petitioner elevated the case to Central Board of

Assessment Appeals (CBAA)
CBAA denied petition, set aside BTAAs ruling and

remanded the case to LBAA
o
The governing provision in this case is Section 231,
not Section 226, of RA No. 7160 which provides that
"appeal on assessments of real property made
under the provisions of this Code shall, in no case,
suspend the collection of the corresponding realty
taxes on the property involved as assessed by the
provincial or city assessor, without prejudice to
subsequent adjustment depending upon the final
outcome of the appeal." In addition, as to the issue
raised pertaining to the propriety of the subject
assessments issued against petitioner, allegedly
claimed to be a tax-exempt entity, the CBAA
expressed that it has yet to acquire jurisdiction over
it since the same has not been resolved by the
LBAA.
Petitioner appealed to the CTA
CTA En Banc dismissed petition, affirmed CBAA

insofar as the remand of the case to the LBAA is
concerned
o
ruled that it could not resolve the issue on whether
petitioner is liable to pay real property tax or
whether it is indeed a tax-exempt entity considering
that the LBAA has not decided the case on the
merits. To do otherwise would not only be
procedurally wrong but legally wrong. It therefore
concluded that before a protest may be entertained,
the tax should have been paid first without
prejudice to subsequent adjustment depending
upon the final outcome of the appeal and that the
tax or portion thereof paid under protest, shall be
held in trust by the treasurer concerned.
ISSUE: Whether payment under protest is necessary before
petitioner may institute its appeal.
HELD: YES.
SEC. 252. Payment Under Protest.
o
(a) No protest shall be entertained unless the
taxpayer first pays the tax. There shall be
annotated on the tax receipts the words "paid under
protest." The protest in writing must be filed within
thirty (30) days from payment of the tax to the
98
DIGEST
Novcity
7, treasurer
2014 or municipal treasurer, in
provincial,
committed grave abuse of discretion in making
o
o
the case of a municipality within Metropolitan

Manila Area, who shall decide the protest within
sixty (60) days from receipt.
(b) The tax or a portion thereof paid under protest,
shall be held in trust by the treasurer concerned.
(c) In the event that the protest is finally decided in
favor of the taxpayer, the amount or portion of the
tax protested shall be refunded to the protestant, or
applied as tax credit against his existing or future
tax liability.
(d) In the event that the protest is denied or upon
the lapse of the sixty-day period prescribed in
subparagraph (a), the tax payer may avail of the
remedies as provided for in Chapter 3, Title Two,
Book II of this Code. (Emphasis and underlining
supplied)
o
Relevant thereto, the remedies referred to under Chapter 3,
Title Two, Book II of RA No. 7160 or the LGC of 1991 are
those provided for under Sections 226 to 231. Significant
provisions pertaining to the procedural and substantive
aspects of appeal before the LBAA and CBAA, including its
effect on the payment of real property taxes
To begin with, Section 252 emphatically directs that the
taxpayer/real property owner questioning the assessment
should first pay the tax due before his protest can be
entertained. As a matter of fact, the words "paid under
protest" shall be annotated on the tax receipts.
Consequently, only after such payment has been made by
the taxpayer may he file a protest in writing (within thirty
(30) days from said payment of tax) to the provincial, city, or
municipal treasurer, who shall decide the protest within sixty
(60)days from its receipt. In no case is the local treasurer
obliged to entertain the protest unless the tax due has been
paid.
Secondly, within the period prescribed by law, any owner or
person having legal interest in the property not satisfied with
the action of the provincial, city, or municipal assessor in the
assessment of his property may file an appeal with the LBAA
of the province or city concerned, as provided in Section 226
of RA No. 7160 or the LGC of 1991. Thereafter, within thirty
(30) days from receipt, he may elevate, by filing a notice of
appeal, the adverse decision of the LBAA with the CBAA,
which exercises exclusive jurisdiction to hear and decide all
appeals from the decisions, orders, and resolutions of the
Local Boards involving contested assessments of real
properties, claims for tax refund and/or tax credits, or
overpayments of taxes.
Significantly, in Dr. Olivares v. Mayor Marquez,17 this Court
had the occasion to extensively discuss the subject
provisions of RA No. 7160 or the LGC of 1991, in relation to
the impropriety of the direct recourse before the courts on
issue of the correctness of assessment of real estate taxes.
The pertinent articulations follow:
o
x x x A perusal of the petition before the RTC plainly
shows that what is actually being assailed is the
correctness of the assessments made by the local
assessor of Paraaque on petitioners properties.
The allegations in the said petition purportedly
questioning the assessors authority to assess and
collect the taxes were obviously made in order to
justify the filing of the petition with the RTC. In fact,
there is nothing in the said petition that supports
their claim regarding the assessors alleged lack of
authority. What petitioners raise are the following:
(1) some of the taxes being collected have

already prescribed and may no longer be
collected as provided in Section 194 of the
Local Government Code of 1991; (2) some
properties have been doubly taxed/assessed;
(3) some properties being taxed are no longer
existent;
(4)some properties are exempt from taxation as

they are being used exclusively for educational
purposes; and (5) some errors are made in the
assessment and collection of taxes due on
petitioners properties, and that respondents
the "improper, excessive and unlawful the

collection of taxes against the petitioners."
Moreover, these arguments essentially involve questions of
fact. Hence, the petition should have been brought, at the
very first instance, to the LBAA.
adjustment pending the outcome of the appeal.
Even assuming that the assessors authority is indeed an
issue, it must be pointed out that in order for the court a quo
to resolve the petition, the issues of the correctness of the
tax assessment and collection must also necessarily be dealt
with.
In the present case, the authority of the assessor is not being
questioned. Despite petitioners protestations, the petition
filed before the court a quo primarily involves the
correctness of the assessments, which are questions of fact
that are not allowed in a petition for certiorari, prohibition
and mandamus. The court a quo is therefore precluded from
entertaining the petition, and it appropriately dismissed the
petition.
By analogy, the rationale of the mandatory compliance with
the requirement of "payment under protest" similarly
provided under Section 64 of the Real Property Tax Code
(RPTC) was earlier emphasized in Meralco v. Barlis, wherein
the Court held:
o
We find the petitioners arguments to be without
merit. The trial court has no jurisdiction to entertain
a Petition for Prohibition absent petitioners
payment under protest, of the tax assessed as
required by Sec.64 of the RPTC. Payment of the tax
assessed under protest, is a condition sine qua non
before the trial court could assume jurisdiction over
the petition and failure to do so, the RTC has no
jurisdiction to entertain it.
o
The restriction upon the power of courts to impeach
tax assessment without a prior payment, under
protest, of the taxes assessed is consistent with the
doctrine that taxes are the lifeblood of the nation
and as such their collection cannot be curtailed by
injunction or any like action; otherwise, the state or,
in this case, the local government unit, shall be
crippled in dispensing the needed services to the
people, and its machinery gravely disabled.
First, Section 206 of RA No. 7160 or the LGC of 1991, as
quoted earlier, categorically provides that every person by or
for whom real property is declared, who shall claim
exemption from payment of real property taxes imposed
against said property, shall file with the provincial, city or
municipal assessor sufficient documentary evidence in
support of such claim. Clearly, the burden of proving
exemption from local taxation is upon whom the subject real
property is declared; thus, said person shall be considered by
law as the taxpayer thereof. Failure to do so, said property
shall be listed as taxable in the assessment roll.
Second, considering that petitioner is deemed a taxpayer
within the meaning of law, the issue on whether or not it is
entitled to exemption from paying taxes, national and local,
including real property taxes, is a matter which would be
better resolved, at the very instance, before the LBAA, for
the following grounds: (a) petitioners reliance on its
entitlement for exemption under the provisions of RA No.
7227 and Presidential Proclamation No. 420, was allegedly
confirmed by Section 18,27 Article XVI of the Lease
Agreement dated 19 October 1996 it entered with the BCDA.
However, it appears from the records that said Lease
Agreement has yet to be presented nor formally offered
before any administrative or judicial body for scrutiny; (b)
the subject provision of the Lease Agreement declared a
condition that in order to be allegedly exempted from the
payment of taxes, petitioner should have first paid and
DIGEST
7, 2014
remitted
5% ofNov
the gross
income earned by it within ninety
(90) days from the close of the calendar year through the
JPDC. Unfortunately, petitioner has neither established nor
presented any evidence to show that it has indeed paid and
remitted 5% of said gross income tax; (c) the right to appeal
is a privilege of statutory origin, meaning a right granted
only by the law, and not a constitutional right, natural or
inherent. Therefore, it follows that petitioner may avail of
such opportunity only upon strict compliance with the
procedures and rules prescribed by the law itself, i.e. RA No.
7160 or the LGC of 1991; and (d) at any rate, petitioners
position of exemption is weakened by its own admission and
recognition of this Courts previous ruling that the tax
incentives granted in RA No. 7227 are exclusive only to the
Subic Special Economic and Free Port Zone; and thus, the
extension of the same to the JHSEZ (as provided in the
second sentence of Section 3 of Presidential Proclamation
No. 420) finds no support therein and therefore declared null
and void and of no legal force and effect. Hence, petitioner
needs more than mere arguments and/or allegations
contained in its pleadings to establish and prove its
exemption, making prior proceedings before the LBAA a
necessity.
CONCURRING OPINION of Justice Carpio on CAMP JOHN
HAY CASE (Page 6 in the SYLLABUS):
Republic Act No. 7227, the Bases Conversion and
Development Act of 1992, was enacted on 13 1\larch 1992.
R.A. No. 7227 authorized the President to create through
executive proclamation Special Economic Zones in various
areas in the country, including Camp John Hay in Baguio City.
President Fidel V. Ramos issued Proclamation No. 420,
establishing the JHSEZ, on 5 July 1994. Section 3 of
Proclamation No. 420 created a regime of tax exemption
within the JHSEZ.
CJHDC entered into a Lease Agreement with Bases
Conversion Development Authority (BCDA) on 19 October
1996 for the development of JHSEZ. On 21 March 2002, the
City Assessor of Baguio City issued notices of assessment to
CJHDC on the properties that it leased from BCDA. In Case
No. 2002-003, CJHDC questioned the assessments before the
Board of Tax Assessment Appeals of Baguio City (BTAABaguio), and stated that it was exempted from paying taxes
pursuant to Section 12(c) of R.A. No. 72271 and Section 3 of
Proclamation No. 420.
Pending resolution of Petitioners Appeal before the CBAA, on
24 October 2003, this Court promulgated its decision in John
Hay Peoples Alternative Coalition v. Lim (John Hay). We ruled
against JHSEZs tax exemptions, and declared that "under
Section 12of R.A. No. 7227 it is only the Subic SEZ which was
granted by Congress with tax exemption, investment
incentives and the like. There is no express extension of the
aforesaid benefits to other SEZs still to be created at the
time via presidential proclamation."4 The grant by
Proclamation No. 420of tax exemption and other privileges to
JHSEZ is void for being violative of the Constitution: a law
granting any tax exemption must have the concurrence of a
majority of all the members of Congress, and cannot be
granted by the Chief Executive alone.
o
Petitioner then filed a Motion for Leave to Intervene

in said case "alleging that it, together with its
consortium partners Fil-Estate Management, Inc.
and Penta Capital Investment Corporation, entered
into a Lease Agreement dated October 19, 1996
with respondent BCDA for the development of the
John Hay SEZ; and that it stands to be most
affected by this Courts Decision invalidating the
grant of tax exemption and other financial
incentives in the John Hay SEZ since its financial
obligations and development and investment
commitments under the Lease Agreement were
entered into upon the premise that these incentives
are valid and subsisting."
This was granted
While pending, petitioner elevated

the unfavorable decision of CTA
Division to CTA EB denied
99
CTA EB was correct.

o
There is no showing that CJHDC ever complied with
the requirements of Section 20611 of the Local
Government Code in claiming tax exemption;
hence, the City Assessor of Baguio acted well within
her power to assess the subject properties. There
was no need for CJHDC to wait for an assessment
before submission of its proofs of tax exemption.12
Had CJHDC submitted proofs of its tax exemption to
the City Assessor, there would have been no need
for CJHDC to pay under protest. CJHDC could
question in court any adverse decision of the City
Assessor, the Local Board of Assessment Appeals,
and the Central Board of Assessment Appeals
denying its tax exemption, without paying any tax
assessment under protest, due to its claim of tax
exemption under Proclamation No. 420.
o
However,
once
the
tax
exemption
in
Proclamation No. 420 was declared with
finality as unconstitutional by this Court on
17 November 2005, CJHDC no longer had any
legal basis for claiming tax exemption. CJHDC
could then only question the correctness of
the amount of the tax assessment, not the
lack of legal authority by the City Assessor to
impose or assess any realty tax on CJHDC.
Payment under protest under Sections
231and 252 of the Local Government Code
thus applied to CJHDC as of 17 November
2005. Thereafter, any question by CJHDC on
realty assessment can only refer to the
correctness of the amount of the assessment,
and not to the City Assessors legal authority
to impose or issue the assessment.
o
Once the non-tax-exempt status of the taxpayer is
settled with finality, or if the same is not in issue,
any dispute on the realty assessment only raises
questions on the correctness of the amount of the
assessment, thus necessitating prior payment of the
assessment under protest. To repeat, any protest
that CJHDC files or pursues after 17 November 2005
necessarily refers only to the correctness of the
amount of the assessment, in which case CJHDC
must pay the assessed tax under protest. The
present petition should be denied because JHSEZ
can no longer claim tax exemption, with the finality
of this Courts ruling in John Hay. CJHDCs doctrine
of operative fact argument is a defense it may raise
before the Local Board of Assessment Appeals, to
where this case is being remanded.
o
The facts in the present case are different from

National Power Corporation v. Province of Quezon
and Municipality of Pagbilao13 (Napocor). The
province of Quezon assessed Mirant Pagbilao
Corporation (Mirant) realty taxes for its machineries
in Pagbilao, Quezon. A copy of the tax assessment
was also sent to Napocor, with whom Mirant had a
Build-Operate-Transfer Agreement. Napocor, and not
Mirant, protested the assessment and claimed tax
exemption under Section 234(c) and (e) of the Local
Government Code.14 Napocor is different from the
present case because Napocor is not a case of tax
exemption by law but a case of assumption of tax
by another entity -where Napocor, a tax-exempt
entity, assumed by contract to pay all taxes that
may be incurred (including realty taxes) by Mirant, a
taxable entity. In Napocor, the Court held that
payment of the tax under protest was required to
contest the assessment.
iv. Refunds
Section 253. Repayment of Excessive Collections. When an assessment of basic real property tax, or any other
tax levied under this Title, is found to be illegal or erroneous
and the tax is accordingly reduced or adjusted, the taxpayer
may file a written claim for refund or credit for taxes and
interests with the provincial or city treasurer within two (2)
years from the date the taxpayer is entitled to such
reduction or adjustment.
DIGEST Nov 7, 2014
The second paragraph of the above quoted
The provincial or city treasurer shall decide the claim for tax
refund or credit within sixty (60) days from receipt thereof. In
case the claim for tax refund or credit is denied, the taxpayer
may avail of the remedies as provided in Chapter 3, Title II,
Book II of this Code.
Allied Banking Corporation as Trustee for the Trust Fund

of College Assurance Plan Philippines, Inc. (CAP), Petitioner
vs. The Quezon City Government, the Quezon City
Mayor of Quezon City, Respondents
G.R. No. 154126 | September 15, 2006 (EB - Motion for
Clarification of Decision)
Facts:
Petitioner filed the instant motion for clarification of

the Decision of this Court promulgated on October
11, 2005 which declared as invalid the third
sentence of Section 3, Quezon City Ordinance No.
357 Series of 1995 for adopting a method of
assessment or appraisal of real property contrary to
the LGC and its Implementing Rules and Regulations
and the Local Assessment Regulations No. 1-92
issued by the Department of Finance.
Petitioner contends in its motion for clarification
that the return of the real property tax erroneously
collected and paid is a necessary consequence of
this Court's finding that the proviso is invalid,
hence, there is no need to claim for a refund with
the Local Board of Assessment Appeals as provided
by the second paragraph of the dispositive portion
of the decision to wit:
WHEREFORE, the petition is hereby GRANTED. The
assailed portion of the provisions of Section 3 of
Quezon City Ordinance No. 357 is hereby declared
invalid.
Petitioner's claim for refund, however, must be
lodged with the Local Board of Assessment Appeals,
if it is not barred by the statute of limitations.
(Underscoring supplied)
Issue: W/N Petitioner can refund the real estate tax it paid
without going through the usual procedure provided for by
the Local Government Code, as a consequence of declaring
the assailed proviso invalid
Held: No
In its Decision subject of the present motion, this Court ruled
that the assailed proviso is null and void ab initio for being
ultra vires and for contravening the provisions of the Local
Government Code and its Implementing Rules and
Regulations and Local Assessment Regulations No. 1-92 and,
as such, it acquired no legal effect and conferred no rights
from its inception.
Clearly, petitioner and all those similarly situated are entitled
to a tax refund/credit corresponding to the difference
between the assessed value based on the proviso and the
assessed value based on the then prevailing schedule of fair
market values prepared by the City Assessor.
It bears stressing, however, that entitlement to a tax
refund does not necessarily call for the automatic
payment of the sum claimed. The amount of the claim
being a factual matter, it must still be proven in the normal
course and in accordance with the administrative procedure
for obtaining a refund of real property taxes, as provided
under the Local Government Code.
Under Section 253 of the Local Government Code, the claim
for refund or credit for taxes must be filed before the city
treasurer who shall decide the claim based on the tax
declarations, affidavits, documents and other documentary
evidence to be presented by petitioner.
100
dispositive
portion of the Decision of this Court dated October 11, 2005
is amended to read:
Petitioner's claim for refund may be pursued in
accordance with Section 253 of the Local
Government Code within Two (2) Years from the
finality of this Decision.
v. Assessment Appeals
1.
Appeal with the LBAA
Section 226. Local Board of Assessment Appeals. - Any

owner or person having legal interest in the property who is
not satisfied with the action of the provincial, city or
municipal assessor in the assessment of his property may,
within sixty (60) days from the date of receipt of the written
notice of assessment, appeal to the Board of Assessment
Appeals of the provincial or city by filing a petition under
oath in the form prescribed for the purpose, together with
copies of the tax declarations and such affidavits or
documents submitted in support of the appeal.
THE CITY GOVERNMENT OF QUEZON CITY, AND THE

CITY TREASURER OF QUEZON CITY, DR. VICTOR B.
ENRIGA, Petitioners, vs. BAYAN TELECOMMUNICATIONS,
INC., Respondent.
G.R. No. 162015 | March 6, 2006 (2D)
Facts:
In 1993, the government of Quezon City, pursuant to the

taxing power vested on local government units by
Section 5, Article X of the 1987 Constitution, infra, in
relation to Section 232 of the LGC, supra, enacted City
Ordinance No. SP-91, S-93, otherwise known as the
Quezon City Revenue Code (QCRC), imposing, under
Section 5 thereof, a real property tax on all real
properties in Quezon City, and, reiterating in its Section
6, the withdrawal of exemption from real property tax
under Section 234 of the LGC, supra.
Furthermore, much like the LGC, the QCRC, under its

Section 230, withdrew tax exemption privileges in
general
Conformably with the Citys Revenue Code, new tax

declarations for Bayantels real properties in Quezon
City were issued by the City Assessor.
Bayantel wrote the office of the City Assessor seeking

the exclusion of its real properties in the city from the
roll of taxable real properties. With its request having
been denied, Bayantel interposed an appeal with the
Local Board of Assessment Appeals (LBAA). And,
evidently on its firm belief of its exempt status, Bayantel
did not pay the real property taxes assessed against it
by the Quezon City government.
Threatened with the imminent loss of its properties,

Bayantel immediately withdrew its appeal with the LBAA
and instead filed with the RTC of Quezon City a petition
for prohibition with an urgent application for a
temporary restraining order (TRO) and/or writ of
preliminary injunction.
Issue: W/N Bayantel is required to exhaust administrative
remedies before seeking judicial relief with the trial court
Held: No
Petitioners argue that Bayantel had failed to avail itself of the
administrative remedies provided for under the LGC, adding
that the trial court erred in giving due course to Bayantels
petition for prohibition. To petitioners, the appeal mechanics
under the LGC constitute Bayantels plain and speedy
remedy in this case. The Court does not agree.
Petitions for prohibition are governed by the following
provision of Rule 65 of the Rules of Court:
SEC. 2. Petition for prohibition. When the
proceedings of any tribunal, are without or in
excess of its or his jurisdiction, or with grave abuse
of discretion amounting to lack or excess of
101
DIGEST
Nov 7,
jurisdiction,
and2014
there is no appeal or any other
Issue: W/N Petition for Prohibition had no cause of action by
plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file
a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be
rendered commanding the respondent to desist
from further proceedings in the action or matter
specified therein, or otherwise, granting such
incidental reliefs as law and justice may require.
With the reality that Bayantels real properties were already
levied upon on account of its nonpayment of real estate
taxes thereon, the Court agrees with Bayantel that an appeal
to the LBAA is not a speedy and adequate remedy within the
context of the aforequoted Section 2 of Rule 65. This is not to
mention of the auction sale of said properties already
scheduled on July 30, 2002.
Moreover, one of the recognized exceptions to the
exhaustion-of-administrative remedies rule is when, as here,
only legal issues are to be resolved. In fact, the Court,
cognizant of the nature of the questions presently involved,
gave due course to the instant petition.
Lest it be overlooked, an appeal to the LBAA, to be properly
considered, required prior payment under protest of the
amount of P43,878,208.18, a figure which, in the light of the
then prevailing Asian financial crisis, may have been difficult
to raise up. Given this reality, an appeal to the LBAA may not
be considered as a plain, speedy and adequate remedy. It is
thus understandable why Bayantel opted to withdraw its
earlier appeal with the LBAA and, instead, filed its petition
for prohibition with urgent application for injunctive relief.
The remedy availed of by Bayantel under Section 2, Rule 65
of the Rules of Court must be upheld.
MANILA ELECTRIC COMPANY, petitioner, vs. NELIA A.
BARLIS, in her capacity as Officer-in-Charge/Acting Municipal
Treasurer of Muntinlupa, substituting EDUARDO A. ALON,
former Municipal Treasurer of Muntinlupa, Metro Manila,
respondent
G.R. No. 114231 | May 18, 2001 (2D)
Facts:
In 1985, the Offices of the Municipal Assessor and

Municipal Treasurer of Muntinlupa, while reviewing
records pertaining to assessments and collection of real
property taxes, discovered, among others, that
MERALCO, for the period beginning 1 January 1976 to 29
December 1978, misdeclared and/or failed to declare for
taxation purposes a number of real properties,
consisting of several equipment and machineries, found
in the said power plants.
A review of the Deed of Sale which MERALCO executed

in favor of NAPOCOR when it sold the power plants to
the latter convinced the municipal government of
Muntinlupa of the misdeclaration/non-declaration of the
true value of the said machineries and equipment.
The Municipal Assessor of Muntinlupa then declared and

assessed the subject real properties for taxation
purposes and on 19 November 1985 furnished MERALCO
their corresponding tax declarations.
Thereafter, on 3 September 1986, the then Municipal

Treasurer of Muntinlupa, Norberto A. San Mateo issued
several collection notices5 to MERALCO, ordering it to
pay the deficiency in the real property taxes covering
the machineries and equipment found in the said power
plants. Still MERALCO did not pay the tax assessed.
Accordingly, after issuing the requisite certification of

non-payment of real property taxes and complying with
the additional requirement of public posting of the
notice of delinquency, Municipal Treasurer Alon issued
warrants of garnishment.
Immediately, MERALCO filed before the RTC a Petition for

Prohibition with Prayer for Writ of Preliminary Mandatory
Injunction and/or Temporary Restraining order (TRO)
praying, among others, that a TRO be issued to enjoin
the Municipal Treasurer of Muntinlupa from enforcing the
warrants of garnishment.
reason of MERALCO's failure to exhaust available

administrative remedies, i.e., to question the notice of
assessment issued to it by the Municipality of Muntinlupa
before the Local Board of Assessment Appeals prior to the
filing of the said petition before the trial court
Held:
Petitioner contends that it need not exhaust any
administrative remedies, i.e., to appeal the tax assessment
before the Local Board of Assessment Appeals since:
o
the petition merely seeks to assail the validity of the
issuance of the warrants of garnishment over its
deposits, and not the tax assessment;
o
it is not a taxpayer for purposes of appealing a real
property tax assessment over the power plant
machineries and equipment since it is no longer the
owner thereof;
o
even if it were to follow the prescribed remedies on
protesting a tax assessment it had nothing to
appeal since the respondent municipal treasurer
issued notices of collection and not notices of
assessment
It cannot be gainsaid that petitioner should have addressed
its arguments to respondent at the first opportunity - upon
receipt of the 3 September 1986 notices of assessment
signed by Municipal treasurer Norberto A. San Mateo
.
Thereafter, it should have availed of the proper
administrative remedies in protesting an erroneous tax
assessment, i.e., to question the correctness of the
assessment before the Local Board of Assessment Appeals
(LBAA), and later, invoke the appellate jurisdiction of the
Central Board of Assessment Appeals (CBAA).
adjustment pending the outcome of the appeal. The failure
to appeal within the statutory period shall render the
assessment final and unappealable.
Petitioner having failed to exhaust the administrative
remedies available to it, the assessment attained finality and
collection would be in order.
SYSTEMS PLUS COMPUTER COLLEGE vs. LOCAL
GOVERNMENT OF CALOOCAN CITY, et. al. August 7,
2003
G.R. No. 146382
J: CORONA
Facts:
Systems Plus Computer College (Petitioner) is a nonstock, non-profit educational institution organized and
established in 1997 with business address in Caloocan
City.
As such, it enjoys property tax exemption from the local
government on its buildings but not on the parcels of
land which petitioner is renting for P5,000 monthly from
its sister companies, Consolidated Assembly, Inc.
(Consolidated Assembly) and Pair Management and
Development Corporation (Pair Management).
On January 8, 1998, petitioner requested respondent city
government of Caloocan to extend tax exemption to the
parcels of land claiming that the same were being used
actually, directly and exclusively for educational
purposes pursuant to Article VI, Section 28(3) of the
1987 Constitution and other applicable provisions of the
Local Government Code.
On February 5, 1998, respondent city government
denied the request on the ground that the subject
parcels of land were owned by Consolidated Assembly
and Pair Management which derived income therefrom
in the form of rentals and other local taxes assumed by
DIGEST
NovHence,
7, 2014
the petitioner.
from the land owners standpoint,
J: CALLEJO SR.
the same were not actually, directly and exclusively

used for educational purposes.
On February 15, 1999, the petitioner, on the one hand,
and the Consolidated Assembly and Pair Management,
on the other, entered into separate agreements which in
effect novated their existing contracts of lease on the
subject parcels of land and converted them to donations
of the beneficial use thereof.
On February 19, 1999, the petitioner wrote respondent
City Assessor informing the latter of the new
agreements
and
seeking
a
reconsideration
of
respondents earlier denial of the application for tax
exemption but this was, again, denied.
Petitioner filed a petition for Mandamus before the RTC
but was denied for being premature since it failed to
exhaust administrative remedies.
Petitioner filed a petition for certiorari before the SC
imputing grave abuse of discretion on the part of the
RTC.
ISSUE: Whether the appeal was properly taken.

Decision: NO.
Where administrative remedies are available, a petition for
mandamus does not lie.
Under Section 226 of RA 7160, the remedy of appeal to the
Local Board of Assessment Appeals is available from an
adverse ruling or action of the provincial, city or municipal
assessor in the assessment of property, thus:
Section 226. Local Board of Assessment Appeals. -Any owner
or person having legal interest in the property who is not
satisfied with the action of the provincial, city or municipal
assessor in the assessment of his property may, within sixty
(60) days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment Appeals of
the province or city by filing a petition under oath in the form
prescribed for the purpose, together with copies of the tax
declarations and such affidavits or documents submitted in
support of the appeal.
However, petitioner argues that it is not contesting any
assessment made by respondent City Assessor. Petitioners
argument obviously proceeds from its misunderstanding of
the term "assessment." Under Section 199(f), Title II, Book II,
of the Local Government Code of 1991, "assessment" is
defined as the act or process of determining the value of a
property, or proportion thereof subject to tax, including the
discovery, listing, classification and appraisal of properties.
Viewed from this broader perspective, the determination
made by the respondent City Assessor with regard to the
taxability of the subject real properties squarely falls within
its power to assess properties for taxation purposes subject
to appeal before the Local Board of Assessment Appeals.
It must be stressed that the authority to receive evidence, as
basis for classification of properties for taxation, is legally
vested on the respondent City Assessor whose action is
appealable to the Local Board of Assessment Appeals and
the Central Board of Assessment Appeals, if necessary.
The petitioner cannot bypass the authority of the concerned
administrative agencies and directly seek redress from the
courts even on the pretext of raising a supposedly pure
question of law without violating the doctrine of exhaustion
of administrative remedies. Hence, when the law provides for
remedies against the action of an administrative board,
body, or officer, as in the case at bar, relief to the courts can
be made only after exhausting all remedies provided therein.
Otherwise stated, before seeking the intervention of the
courts, it is a precondition that petitioner should first avail of
all the means afforded by the administrative processes. SC
dismissed the petition.
FELS ENERGY INC. vs. THE OFFICE OF THE PROVINCIAL
ASSESOR OF BATANGAS
G.R. No. 168557 February 16, 2007
102
Facts:
*** 2 Consolidated petitions of FELS and NPC.
- On August 7, 1995, FELS received an assessment of

real property taxes on the power barges from Provincial
Assessor Lauro C. Andaya of Batangas City.
- FELS referred the matter to NPC, reminding it of its
obligation under the Agreement to pay all real estate
taxes. It then gave NPC the full power and authority to
represent it in any conference regarding the real
property assessment of the Provincial Assessor.
- In a letter dated September 7, 1995, NPC sought
reconsideration of the Provincial Assessors decision to
assess real property taxes on the power barges.
However, the motion was denied on September 22,
1995, and the Provincial Assessor advised NPC to pay
the assessment.
- ***Instead of appealing to the Board of Assessment
Appeals, NPC opted to file a Motion for Reconsideration
of the Provincial Assessors Decision.
Issue: Whether the remedy chosen by NPC is correct.

Decision: NO.
The remedy of appeal to the LBAA is available from an
adverse ruling or action of the provincial, city or municipal
assessor in the assessment of the property. It follows then
that the determination made by the respondent Provincial
Assessor with regard to the taxability of the subject real
properties falls within its power to assess properties for
taxation purposes subject to appeal before the LBAA.
We fully agree with the rationalization of the CA in both CAG.R. SP No. 67490 and CA-G.R. SP No. 67491. The two
divisions of the appellate court cited the case of Callanta v.
Office of the Ombudsman, where we ruled that under Section
226 of R.A. No 7160, the last action of the local assessor on a
particular assessment shall be the notice of assessment; it is
this last action which gives the owner of the property the
right to appeal to the LBAA. The procedure likewise does not
permit the property owner the remedy of filing a motion for
reconsideration before the local assessor.
- SC denied the petitions.
ACTION BY THE LBAA (Sec. 229)
Section 229. Action by the Local Board of Assessment
Appeals. (a) The Board shall decide the appeal within one hundred
twenty (120) days from the date of receipt of such appeal.
The Board, after hearing, shall render its decision based on
substantial evidence or such relevant evidence on record as
a reasonable mind might accept as adequate to support the
conclusion.
(b) In the exercise of its appellate jurisdiction, the Board shall
have the power to summon witnesses, administer oaths,
conduct ocular inspection, take depositions, and issue
subpoena and subpoena duces tecum. The proceedings of
the Board shall be conducted solely for the purpose of
ascertaining the facts without necessarily adhering to
technical rules applicable in judicial proceedings.
(c) The secretary of the Board shall furnish the owner of the
property or the person having legal interest therein and the
provincial or city assessor with a copy of the decision of the
Board. In case the provincial or city assessor concurs in the
revision or the assessment, it shall be his duty to notify the
owner of the property or the person having legal interest
therein of such fact using the form prescribed for the
purpose. The owner of the property or the person having
legal interest therein or the assessor who is not satisfied with
the decision of the Board, may, within thirty (30) days after
receipt of the decision of said Board, appeal to the Central
Board of Assessment Appeals, as herein provided. The
decision of the Central Board shall be final and executory.
DIGEST
Nov
7, 2014
APPEAL
TO
THE
CBAA
(Sec. 230)
Section 230. Central Board of Assessment Appeals. - The
Central Board of Assessment Appeals shall be composed of a
chairman, and two (2) members to be appointed by the
President, who shall serve for a term of seven (7) years,
without reappointment. Of those first appointed, the
chairman shall hold office for seven (7) years, one member
for five (5) years, and the other member for three (3) years.
Appointment to any vacancy shall be only for the unexpired
portion of the term of the predecessor. In no case shall any
member be appointed or designated in a temporary or acting
capacity. The chairman and the members of the Board shall
be Filipino citizens, at least forty (40) years old at the time of
their appointment, and members of the Bar or Certified
Public Accountants for at least ten (10) years immediately
preceding their appointment. The chairman of the Board of
Assessment Appeals shall have the salary grade equivalent
to the rank of Director III under the Salary Standardization
Law exclusive of allowances and other emoluments. The
members of the Board shall have the salary grade equivalent
to the rank of Director II under the Salary Standardization
Law exclusive of allowances and other emoluments. The
Board shall have appellate jurisdiction over all assessment
cases decided by the Local Board of Assessment Appeals.
There shall be Hearing Officers to be appointed by the
Central Board of Assessment Appeals pursuant to civil
service laws, rules and regulations, one each for Luzon,
Visayas and Mindanao, who shall hold office in Manila, Cebu
City and Cagayan de Oro City, respectively, and who shall
103
serve for a term of six (6) years, without reappointment until

their successors have been appointed and qualified. The
Hearing Officers shall have the same qualifications as that of
the Judges of the Municipal Trial Courts.
The Central Board Assessment Appeals, in the performance
of its powers and duties, may establish and organize staffs,
offices, units, prescribe the titles, functions and duties of
their members and adopt its own rules and regulations.
Unless otherwise provided by law, the annual appropriations
for the Central Board of Assessment Appeals shall be
included in the budget of the Department of Finance in the
corresponding General Appropriations Act.
APPEAL TO THE CTA EB (Previously discussed on the
CTA Chapter)
EFFECT OF APPEAL ON PAYMENT OF RPT
Section 231. Effect of Appeal on the Payment of Real
Property Tax. - Appeal on assessments of real property made
under the provisions of this Code shall, in no case, suspend
the collection of the corresponding realty taxes on the
property involved as assessed by the provincial or city
assessor, without prejudice to subsequent adjustment
depending upon the final outcome of the appeal.

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REGEN VOLOSO| TAXATION II LOCAL & REAL PROPERTY TAX PROVIONS & CASE

POWER TO TAX OF LOCAL GOVERNMENT UNITS

Sec. 5, Art. X, 1987 Constitution

Sec. 129, LGC

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES,

Pepsi-Cola Bottling Company filed a complaint with a

Ordinance No. 23 collects from soft drinks producers

Ordinance No. 27 collects on soft drinks produced or

The tax imposed in both Ordinance Nos. 23 and 27 is

CFI upheld the constitutionality of Sec. 2 of RA 2264

Pepsi-Cola Bottling Company appealed to the CA which

beyond the sphere of the legislative power to enact and vest

Mactan Cebu International Airport Authority (MCIAA) was

Since the time of its creation, MCIAA enjoyed the

The Office of the Treasurer of Cebu City demanded

MCIAA objected to such demand for payment claiming

MCIAA also asserted thatit is an instrumentality of the

Respondent Cebu City refused to cancel MCIAAs realty

As Cebu City was about to issue a warrant of levy

RTC dismissed the MCIAAs petition

MCIAA appealed to the SC

Certain municipalities of the province of Laguna issued

On September 12, 1991, Republic Act No. 7160,

Pursuant to the provisions of the Code, the province of

On the basis of this ordinance, respondent Provincial

MERALCO paid the tax under protest

A formal claim for refund was thereafter sent by

The claim for refund of MERALCO was denied.

MERALCO filed with the RTC, a complaint for refund.

RTC dismissed MERALCOs petition

In the instant petition, MERALCO assailed the trial

(starting with the 1973 Constitution), however, would broadly

National Power Corporation (NPC) is a GOCC created

Pursuant to Ordinance No. 165-42, the City of

NPC refused to pay the tax assessment arguing that

The City of Cabanatuan filed a collection suit with the

RTC dismissed the case and ruled that the tax

CA reversed the RTCs order on the ground that Sec.

NPC filed the instant petition for review

Considered as the most revolutionary piece of legislation on

Bayantel is a legislative franchise holder under RA 3259

RA 7160 or LGC of 1991 took effect on Jan. 1, 1992

After the LGC took effect, Bayantels original franchise

The government of Quezon City pursuant to Sec. 5, Art.

Quezon City issued new tax declarations for Bayantels

Bayantel sought the exclusion of its real properties in QC

Bayantel interposed an appeal with the LBAA and did

As warrants of levy were issued against its properties,

RTC issued a TRO and declared that Bayantels real

Petitioners elevated the case directly to the SC on pure

LOCAL TAXING AUTHORITY (Sec. 132)

Sec. 132. Local Taxing Authority. - The power to impose a

CONSTRUCTION OF TAX ORDINANCES

Sec. 5. Rules of Interpretation. - In the interpretation of the

Petron maintains a depot or bulk plant at the Navotas

The municipality of Navotas assessed Petron of

Petron filed with Navotas a letter-protestarguing that it

Respondent Municipal Treasurer denied the letter-protest

Petron filed with the RTC a complaint for cancellation of

While the case was pending decision, respondents

RTC dismissed Petrons complaint and ordered the

Petron filed the present petition raising pure questions of

PROCEDURE FOR APPROVAL AND

Sec. 187. Procedure for Approval and Effectivity of Tax,