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CALTEX PHILIPPINES VS CBAA

FACTS: Various machines and equipments are loaned by Caltex to gas station operators under
an appropriate lease agreement or receipt. These are underground tanks, gasoline pumps, water
pumps, car washer and air compressors, among others. 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. The lessor of the land, where the gas station is located, does not
become the owner of the machines and equipment installed therein. Caltex retains the
ownership thereof during the term of the lease. The city assessor of Pasay City characterized the
said items of gas station equipment and machinery as taxable realty. However, the city board of
tax appeals ruled that they are personalty.
The City Board of Tax Appeals decided that the definitions of realty and personalty under the Civil
Code do not apply in this case. Instead, the definition under the Real Property Tax Code should
be followed. Thus, the property in controversy are real in nature and subject to realty tax.
ISSUE: Whether the pieces of gas station equipment and machinery already enumerated are
subject to realty tax.
HELD: The Court held 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.
Under the Real Property Tax Code,
improvements are defined as 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.
On the other hand, machinery is embraces machines, mechanical contrivances, instruments,
appliances and apparatus attached to the real estate. Improvements on land are commonly
taxed as realty even though for some purposes they might be considered personalty.
LUNG CENTER OF THE PHILIPPINES VS QUEZON CITY
FACTS: Petitioner is a non-stock, non-profit entity established by virtue of PD No. 1823, seeks
exemption from real property taxes when the City Assessor issued Tax Declarations for the land
and the hospital building. Petitioner predicted on its claim that it is a charitable institution. The
request was denied, and a petition hereafter filed before the Local Board of Assessment Appeals
of Quezon City (QC-LBAA) for reversal of the resolution of the City Assessor. Petitioner alleged
that as a charitable institution, is exempted from real property taxes under Sec 28(3) Art VI of
the Constitution. QC-LBAA dismissed the petition and the decision was likewise affirmed on
appeal by the Central Board of Assessment Appeals of Quezon City. The Court of Appeals
affirmed the judgment of the CBAA.
ISSUE: 1. Whether or not petitioner is a charitable institution within the context of PD 1823 and
the 1973 and 1987 Constitution and Section 234(b) of RA 7160. 2. Whether or not petitioner is
exempted from real property taxes.
RULING: 1. Yes. The Court hold that the petitioner is a charitable institution within the context of
the 1973 and 1987 Constitution. Under PD 1823, the petitioner is a non-profit and non-stock
corporation which, subject to the provisions of the decree, is to be administered by the Office of
the President with the Ministry of Health and the Ministry of Human Settlements. The purpose for
which it was created was to render medical services to the public in general including those who
are poor and also the rich, and become a subject of charity. Under PD 1823, petitioner is entitled
to receive donations, even if the gift or donation is in the form of subsidies granted by the
government.
2. Partly No. Under PD 1823, the lung center does not enjoy any property tax exemption
privileges for its real properties as well as the building constructed thereon.
The property tax exemption under Sec. 28(3), Art. VI of the Constitution of the property taxes
only. This provision was implanted by Sec.243 (b) of RA 7160.which provides that in order to be
entitled to the exemption, the lung center must be able to prove that: it is a charitable institution
and; its real properties are actually, directly and exclusively used for charitable purpose.
Accordingly, the portions occupied by the hospital used for its patients are exempt from real
property taxes while those leased to private entities are not exempt from such taxes.
MIAA v. Court of Appeals

Facts: The Manila International Airport Authority (MIAA) operates the Ninoy Aquino International
Airport (NAIA) Complex in Paraaque City under Executive Order No. 903 (MIAA Charter), as
amended. As such operator, it administers the land, improvements and equipment within the
NAIA Complex. In March 1997, the Office of the Government Corporate Counsel (OGCC) issued
Opinion No. 061 to the effect that the Local Government Code of 1991 (LGC) withdrew the
exemption from real estate tax granted to MIAA under Section 21 of its Charter.
Thus, MIAA paid some of the real estate tax already due. In June 2001, it received Final Notices of
Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. The
City Treasurer subsequently issued notices of levy and warrants of levy on the airport lands and
buildings.
At the instance of MIAA, the OGCC issued Opinion No. 147 clarifying Opinion No. 061, pointing
out that Sec. 206 of the LGC requires persons exempt from real estate tax to show proof of
exemption. According to the OGCC, Sec. 21 of the MIAA Charter is the proof that MIAA is exempt
from real estate tax. MIAA, thus, filed a petition with the Court of Appeals seeking to restrain the
City of Paraaque from imposing real estate tax on, levying against, and auctioning for public
sale the airport lands and buildings, but this was dismissed for having been filed out of time.
Hence, MIAA filed this petition for review, pointing out that it is exempt from real estate tax
under Sec. 21 of its charter and Sec. 234 of the LGC. It invokes the principle that the government
cannot tax itself as a justification for exemption, since the airport lands and buildings, being
devoted to public use and public service, are owned by the Republic of the Philippines. On the
other hand, the City of Paraaque invokes Sec. 193 of the LGC, which expressly withdrew the tax
exemption privileges of government-owned and controlled corporations (GOCC) upon the
effectivity of the LGC.
It asserts that an international airport is not among the exceptions mentioned in the said law.
Meanwhile, the City of Paraaque posted and published notices announcing the public auction
sale of the airport lands and buildings. In the afternoon before the scheduled public auction,
MIAA applied with the Court for the issuance of a TRO to restrain the auction sale. The Court
issued a TRO on the day of the auction sale, however, the same was received only by the City of
Paraaque three hours after the sale.
Issue: Whether or not the airport lands and buildings of MIAA are exempt from real estate tax?
Held: The airport lands and buildings of MIAA are exempt from real estate tax imposed by local
governments. Sec. 243(a) of the LGC exempts from real estate tax any real property owned by
the Republic of the Philippines. This exemption should be read in relation with Sec. 133(o) of the
LGC, which provides that the exercise of the taxing powers of local governments shall not extend
to the levy of taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities.
These provisions recognize the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax.
The rule is that a tax is never presumed and there must be clear language in the law imposing
the tax. This rule applies with greater force when local governments seek to tax national
government instrumentalities. Moreover, a tax exemption is construed liberally in favor of
national government instrumentalities.
MIAA is not a GOCC, but an instrumentality of the government.
The Republic remains the beneficial owner of the properties. MIAA itself is owned solely by the
Republic. At any time, the President can transfer back to the Republic title to the airport lands
and buildings without the Republic paying MIAA any consideration. As long as the airport lands
and buildings are reserved for public use, their ownership remains with the State. Unless the
President issues a proclamation withdrawing these properties from public use, they remain
properties of public dominion. As such, they are inalienable, hence, they are not subject to levy
on execution or foreclosure sale, and they are exempt from real estate tax.
However, portions of the airport lands and buildings that MIAA leases to private entities are not
exempt from real estate tax. In such a case, MIAA has granted the beneficial use of such portions
for a consideration to a taxable person.
CITY ASSESSOR OF CEBU VS. ASSOCIATION OF BENEVOLA DE CEBU

FACTS: Benevola de Cebu is a non-stock non-profit organization which in 1990, a medical arts
building was constructed and in 1998 was issued with a certification classifying the building as
commercial. City assessor of Cebu assessed the building with a market value of Php 28,060,520
and on assessed value of Php 9,821,180 at the assessment level of 35% and not 10% which is
currently imposed on private respondent herein. Petitioner claimed that the building is used as
commercial clinic/spaces for renting out to physicians and thus classified as commercial.
Benevola de Cebu contended that the building is used actually, directly and exclusively part of
hospital and should have an assessment level of 10%
ISSUE: Whether or not the new building is liable to pay the 35% assessment level?
RULING: We hold that the new building is an integral part of the hospital and should not be
assessed as commercial. Being a tertiary hospital, it is mandated to fully departmentalized and
be equipped with the service capabilities needed to support certified medical specialist and other
licensed physicians. The fact that they are holding office is a separate building does not take
away the essence and nature of their services vis-a-vis the overall operation of the hospital and
to its patients.
Under the Local Government Code, Sec. 26: 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 shall be classified as special.

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