SISON v.

ANCHETA, 139 SCRA 654 (1984)

Petitioners: ANTERO M. SISON, JR.
Respondents: RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO VILLA,
Deputy Commissioner, Bureau of Internal Revenue; TOMAS TOLEDO Deputy Commissioner, Bureau of
Internal Revenue; MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, Commissioner on
Audit, and CESAR E. A. VIRATA, Minister of Finance
FACTS:
BP 135
Amended Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on
citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes,
and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from
deposit substitutes and from trust fund and similar arrangements, (e) dividends and share of individual
partner in the net profits of taxable partnership, (f) adjusted gross income.
PETITIONER CHALLENGES CONSTITUTIONALITY OF BP 135
There is a transgression of both the equal protection and due process clauses of the Constitution as
well as of the rule requiring uniformity in taxation
Petitioner as taxpayer alleged that "he would be unduly discriminated against by the imposition of
higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are
imposed upon fixed income or salaried individual taxpayers."
He characterizes the above section as arbitrary amounting to class legislation, oppressive and
capricious in character
OSG REPLY
Prayed for dismissal of the petition due to lack of merit.
ISSUE: W/N THE IMPOSITION OF A HIGHER TAX RATE ON A TAXABLE NET INCOME DERIVED FROM
BUSINESS OR PROFESSION THAN ON COMPENSATION IS CONSTITUTIONALLY INFIRM (W/N there is a
transgression of both the equal protection and due process clauses of the Constitution as well as of the rule
requiring uniformity in taxation)
HELD: No, the imposition of a higher tax rate on a taxable net income from businesses or professions
than on compensation is not constitutionally infirm.
The need for more revenues is rationalized by the government's role to fill the gap not done by public
enterprise in order to meet the needs of the times. It is better equipped to administer for the public
welfare.
The power to tax, an inherent prerogative, has to be availed of to assure the performance of vital state
functions; it is the source of the bulk of public funds.
The power to tax is an attribute of sovereignty and the strongest power of the government.
There are restrictions, however, diversely affecting as it does property rights
o Both the due process and equal protection clauses may properly be invoked, as petitioner does,
to invalidate in appropriate cases a revenue measure
o If it were otherwise, taxation would be a destructive power
The petitioner failed to prove that the statute ran counter to the Constitution
He used arbitrariness as basis without a factual foundation
This is merely to adhere to the authoritative doctrine that where the due process and equal protection
clauses are invoked, considering that they are not fixed rules but rather broad standards, there is a
need for proof of such persuasive character as would lead to such a conclusion

It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it
finds no support in the Constitution. An obvious example is where it can be shown to amount to the
confiscation of property. That would be a clear abuse of power.

It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is
not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to
attack on due process grounds.

For equal protection, the applicable standard to determine whether this was denied in the exercise of
police power or eminent domain was the presence of the purpose of hostility or unreasonable
discrimination.
It suffices then that the laws operate equally and uniformly on all persons under similar circumstances
or that all persons must be treated in the same manner, the conditions not being different, both in the
privileges conferred and the liabilities imposed.
Favoritism and undue preference cannot be allowed.
For the principle is that equal protection and security shall be given to every person under
circumstances, which if not identical are analogous.
If law be looks upon in terms of burden or charges, those that fall within a class should be treated in the
same fashion, whatever restrictions cast on some in the group equally binding on the rest.
The equal protection clause is, of course, inspired by the noble concept of approximating the ideal of
the laws's benefits being available to all and the affairs of men being governed by that serene and
impartial uniformity, which is of the very essence of the idea of law.
The equality at which the 'equal protection' clause aims is not a disembodied equality.
The Fourteenth Amendment enjoins 'the equal protection of the laws,' and laws are
not abstract propositions.
They do not relate to abstract units A, B and C, but are expressions of policy arising out of specific
difficulties, addressed to the attainment of specific ends by the use of specific remedies.
The Constitution does not require things which are different in fact or opinion to be treated in
law as though they were the same.
Lutz v Araneta it is inherent in the power to tax that a state be free to select the subjects of taxation,
and it has been repeatedly held that 'inequalities which result from a singling out of one particular class
for taxation, or exemption infringe no constitutional limitation.
Equality and uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation
There is quite a similarity then to the standard of equal protection for all that is required is that the tax
"applies equally to all persons, firms and corporations placed in similar situation"
There was a difference between a tax rate and a tax base. There is no legal objection to a broader tax
base or taxable income by eliminating all deductible items and at the same time reducing the applicable
tax rate.
The discernible basis of classification is the susceptibility of the income to the application of generalized
rules removing all deductible items for all taxpayers within the class and fixing a set of reduced
tax rates to be applied to all of them. As there is practically no overhead expense, these taxpayers are
not entitled to make deductions for income tax purposes because they are in the same situation more
or less.
Taxpayers who are recipients of compensation income are set apart as a class.
On the other hand, in the case of professionals in the practice of their calling and businessmen, there is
no uniformity in the costs or expenses necessary to produce their income. It would not be just then to
disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the
same tax rates on the basis of gross income.

There was a lack of a factual foundation, the forcer of doctrines on due process and equal protection,
and he reasonableness of the distinction between compensation and taxable net income of
professionals and businessmen not being a dubious classification.
RULING: Petition is DISMISSED.
REYES VS. ALMANZOR GR 43839-46 (1991)
Petitioners: JOSE B. L. REYES and EDMUNDO A. REYES
Respondents: PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROO, in their capacities as
appointed and Acting Members of the CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H.
NOBLEJAS, ROMULO M. DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed and Acting
Members of the BOARD OF ASSESSMENT APPEALS of Manila; and NICOLAS CATIIL in his capacity as City
Assessor of Manila
FACTS:
RA 6359
Prohibited increase in monthly rentals for one year of dwelling units
Disallowed ejectment of lessees upon the expiration of the usual period of lease
CITY ASSESSOR OF MANILA INCREASED PETITIONERS TAX RATES
Petitioner are owners of parcels of land leased to tenants.
City assessor of Manila assessed the value of petitioners property based on the schedule of market
values duly reviewed by the Secretary of Finance.
The revision entailed an increase to the tax rates
PETITIONERS CONTENTION
The reassessment imposed upon them greatly exceeded the annual income derived from their
properties
ISSUE: W/N THE INCOME APPROACH IS THE METHOD TO BE USED IN THE TAX ASSESSMENT AND
NOT THE COMPARABLE SALES APPROACH
HELD: By no stretch of the imagination can the market value of properties covered by PD 20 be
equated with the market value of properties not so covered.
In the case at bar, not even factors determinant of the assessed value of subject properties under the
comparable sales approach were presented by respondent namely:
1. That the sale must represent a bonafide arms length transaction between a willing seller and a
willing buyer
2. The property must be comparable property.
As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that
these properties are comparable.
Taxes are lifeblood of government, however, such collection should be made in accordance with the
law and therefore necessary to reconcile conflicting interests of the authorities so that the real
purpose of taxation, promotion of the welfare of common good can be achieved.
RULING:
(a) the petition is GRANTED;
(b) the assailed decisions of public respondents are REVERSED and SET ASIDE;
(c) the respondent Board of Assessment Appeals of Manila and the City Assessor of Manila are ordered to
make a new assessment by the income approach method to guarantee a fairer and more realistic basis of
computation

Comm. of Internal Revenue v. Solidbank, 416 SCRA 436 (2003)

Petitioner: COMMISSIONER OF INTERNAL REVENUE
Respondent: SOLIDBANK CORPORATION
FACTS:
Note:
The earnings of banks from passive income are subject to a twenty percent final withholding tax (20% FWT).
The gross receipts of banks, including the passive income, are also subject to a five percent gross receipts tax (5%
GRT).

SOLIDBANKS TAX RETURNS

Solidbank filed its Quarterly Percentage Tax Returns reflecting gross receipts amounting to
P1,474,693.44.
It alleged that the total included P350,807,875.15 representing gross receipts from passive income
which was already subjected to 20%final withholding tax (FWT).
CTA RULING
The Court of Tax Appeals (CTA) held in Asian Ban Corp. v Commissioner, that the 20% FWT should not
form part of its taxable gross receipts for purposes of computing the tax.
SOLIDBANK FILES FOR TAX REFUND OR CREDIT
Solidbank, relying on the strength of this decision, filed with the BIR a letter-request for the refund or tax
credit. It also filed a petition for review with the CTA where it ordered the refund.
CA RULING
The CA ruling, however, stated that the 20% FWT did not form part of the taxable gross receipts
o Because the FWT was not actually received by the bank but was directly remitted to the
government
CIR COMMISSIONER CONTENTION
The Commissioner claims that although the FWT was not actually received by Solidbank, the fact that
the amount redounded to the banks benefit makes it part of the taxable gross receipts in computing the
Gross Receipts Tax
Solidbank avers that the CA ruling is correct
ISSUE/S:
1) W/N the 20% final withholding tax on a banks interest income forms part of the taxable gross
receipts in computing the 5% gross receipts tax
2) W/N there is double taxation
HELD:
1) Yes.

As a bank, petitioner is both covered by the GRT, which is a percentage tax, and FWT, which is an income
tax.

A percentage tax is a national 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. It is not subject to withholding.
o An income tax, on the other hand, is a national tax imposed on the net or the gross income realized in a
taxable year. It is subject to withholding.
o In a withholding tax system, the payee is the taxpayer, the person on whom the tax is imposed; the payor,
a separate entity, acts as no more than an agent of the government for the collection of the tax in order to
ensure its payment.
Constructive receipt versus Actual Receipt
o Petitioner: Applying Section 7 of Revenue Regulations (RR) No. 1784, petitioner contends that there is
constructive receipt of the interest on deposits and yield on deposit substitutes.
o Respondent: Section 4(e) of RR 12-80 is plain and clear: since there is no actual receipt, the FWT is not
to be included in the tax base for computing the GRT. There is supposedly no pecuniary benefit or
advantage accruing to the bank from the FWT, because the income is subjected to a tax burden
immediately upon receipt through the withholding process. In other words, only items of income actually
received should be included in its gross receipts. It claims that since the amount had already been
withheld at source, it did not have actual receipt thereof.
o SC: In our withholding tax system, possession is acquired by the payor as the withholding agent
of the government, because the taxpayer ratifies the very act of possession for the government.
There is thus constructive receipt.
Article 531 of the Civil Code clearly provides that the acquisition of the right of possession is
through the proper acts and legal formalities established therefor. The withholding process is one
such act. There may not be actual receipt of the income withheld; however, as provided for in
Article 532, possession by any person without any power whatsoever shall be considered as
acquired when ratified by the person in whose name the act of possession is executed.
RR 12-80 Superseded by RR 17-84
o In general, rules and regulations issued by administrative or executive officers pursuant to the procedure
or authority conferred by law upon the administrative agency have the force and effect, or partake of the
nature, of a statute.
o The regulation must (1) be germane to the object and purpose of the law; (2) not contradict, but conform
to, the standards the law prescribes; and (3) be issued for the sole purpose of carrying into effect the
general provisions of our tax laws.
o As stated in Section 11 of RR 17-84, all regulations, rules, orders or portions thereof that are inconsistent
with the provisions of the said RR are thereby repealed.
o There are two well-settled categories of implied repeals: (1) in case the provisions are in irreconcilable
conflict, the later regulation, to the extent of the conflict, constitutes an implied repeal of an earlier one;
and (2) if the later regulation covers the whole subject of an earlier one and is clearly intended as a
substitute, it will similarly operate as a repeal of the earlier one.
o RR 12-80 imposes the GRT only on all items of income actually received, as opposed to their mere
accrual, while RR 17-84 includes all interest income in computing the GRT. RR 12-80 is superseded by
the later rule, because Section 4(e) thereof is not restated in RR 17-84. Clearly therefore, as petitioner
correctly states, this particular provision was impliedly repealed when the later regulations took effect.
Reconciling the Two Regulations
o Respondent: The accrual referred to therein is equated with the determination of the amount to be used
as tax base in computing the GRT.
o SC: Such accrual merely refers to an accounting method that recognizes income as earned
although not received, and expenses as incurred although not yet paid.
Accrual should not be confused with the concept of constructive possession or receipt as earlier
discussed. Petitioner correctly points out that income that is merely accruedearned, but not yet
receiveddoes not form part of the taxable gross receipts; income that has been received, albeit
constructively, does.
o The inclusion of accrual stresses the fact that Section 4(e) does not distinguish between actual and
constructive receipt. It merely focuses on the method of accounting known as the accrual system. Under
this system, income is accrued or earned in the year in which the taxpayers right thereto becomes fixed
and definite, even though it may not be actually received until a later year; while a deduction for a liability
is to be accrued or incurred and taken when the liability becomes fixed and certain, even though it may
not be actually paid until later.
o

In reconciling these two regulations, the earlier one includes in the tax base for GRT all income, whether
actually or constructively received, while the later one includes specifically interest income.
Manila Jockey Club Inapplicable
o In Commissioner of Internal Revenue v. Manila Jockey Club, we held that the term gross receipts shall
not include money which, although delivered, has been especially earmarked by law or regulation for
some person other than the taxpayer.
o Gross receipts refer to the total, as opposed to the net, income. These are therefore the total receipts
before any deduction for the expenses of management.
o Given that a tax is imposed upon total receipts and not upon net earnings, the income withheld, or income
constructively received, is included in the tax base for computing the GRT.
Manila Jockey Club does not apply to this case. Earmarking is not the same as withholding.
Amounts earmarked do not form part of gross receipts, because, although delivered or received,
these are by law or regulation reserved for some person other than the taxpayer. On the contrary,
amounts withheld form part of gross receipts, because these are in constructive possession and
not subject to any reservation, the withholding agent being merely a conduit in the collection
process.
The government subsequently becomes the owner of the money when the financial institutions
pay the FWT to extinguish their obligation to the government. It is ownership that determines
whether interest income forms part of taxable gross receipts. Being originally owned by these
financial institutions as part of their interest income, the FWT should form part of their taxable
gross receipts. Besides, these amounts withheld are in payment of an income tax liability, which
is different from a percentage tax liability.
The legislature clearly intended two different taxes. The FWT is a tax on passive income, while
the GRT is on business. The withholding of one is not equivalent to the payment of the other.
Non-Exemption of FWT from GRT: Neither Unjust nor Absurd
o Taxing the people and their property is essential to the very existence of government. Certainly, one of the
highest attributes of sovereignty is the power of taxation, which may legitimately be exercised on the
objects to which it is applicable to the utmost extent as the government may choose.
o A taxing act will be construed, and the intent and meaning of the legislature ascertained, from its
language. Its clarity and implied intent must exist to uphold the taxes as against a taxpayer in whose favor
doubts will be resolved.
o A literal application of any part of a statute is to be rejected if it will operate unjustly, lead to absurd results,
or contradict the evident meaning of the statute taken as a whole. Unlike the CA, we find that the literal
application of the aforesaid sections of the Tax Code and its implementing regulations does not operate
unjustly or contradict the evident meaning of the statute taken as a whole.
o Respondent: claims that it is entitled to a refund on the basis of excess GRT payments.
o SC: Tax refunds are in the nature of tax exemptions. Such exemptions are strictly construed
against the taxpayer. Hence, those who claim to be exempt from the payment of a particular tax
must do so under clear and unmistakable terms found in the statute.
The right of taxation will not be surrendered, except in words too plain to be mistaken. The reason
is that the State cannot strip itself of this highest attribute of sovereigntyits most essential
power of taxationby vague or ambiguous language. Since tax refunds are in the nature of tax
exemptions, these are deemed to be in derogation of sovereign authority and to be construed
strictissimi juris against the person or entity claiming the exemption.
In the instant case, respondent has not been able to satisfactorily show that its FWT on interest
income is exempt from the GRT. Like China Banking Corporation, its argument creates a tax
exemption where none exists.
o

2) No. Subjecting interest income to a 20% FWT and including it in the computation of the 5% GRT is
not double taxation.
No Double Taxation
o Double taxation or direct duplicate taxation means taxing the same property twice when it
should be taxed only once; that is, x x x taxing the same person twice by the same jurisdiction
for the same thing. It is obnoxious when the taxpayer is taxed twice, when it should be but
once. The 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
they must be of the same kind or character.
o The taxes herein are imposed on two different subject matters. A tax based on receipts is a tax
on business rather than on the property; hence, it is an excise rather than a property tax. GRT is
not an income tax, unlike the FWT. One can be taxed for the privilege of engaging in business
and further taxed differently for the income derived therefrom.
o Although both are national in scope, imposed by the same taxing authority, operate within the
same jurisdiction, for the same purpose of raising revenues, the taxing periods are different. The
FWT is deducted and withheld as soon as the income is earned, and is paid after every
calendar quarter in which it is earned. On the other hand, the GRT is neither deducted nor
withheld, but is paid only after every taxable quarter in which it is earned
These two taxes are of different kinds or characters
o The FWT is an income tax subject to withholding
o The GRT is a percentage tax not subject to withholding
o Subjecting interest income to a 20% FWT and including it in the computation of the 5%
GRT is clearly not double taxation.

RULING: Petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals are hereby
REVERSED and SET ASIDE.

LUNG CENTER v. QUEZON CITY, 433 SCRA 119 (2004)

Petitioner: LUNG CENTER OF THE PHILIPPINES
Respondent: QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessor of Quezon City
FACTS:
LUNG CENTER OF THE PHILIPPINES
Lung Center of the Philippines is a non-stock and non-profit entity established by virtue of PD No. 1823
It is the registered owner of the land on which the Lung Center of the Philippines Hospital is erected
Almost one-half of the entire area on the left side of the building along Quezon Avenue is vacant and
idle, while a big portion on the right side of the hospital is being leased for commercial purposes to a
private enterprise known as the Elliptical Orchids and Garden Center
It accepts paying and nonpaying patients and also renders medical services to outpatients, both paying
and nonpaying
Aside from its income from paying patients, the petitioner receives annual subsidies from the
government
CITY ASSESSOR OF QC ASSESSES LUNG CENTER AND THE CLAIM FOR EXEMPTION
The City Assessor of Quezon City assessed both its land and hospital building for real property taxes in
the amount of P4,554,860
Lung Center of the Philippines filed a claim for exemption
o It is a charitable institution with a minimum of 60% of its hospital beds exclusively used for
charity patients and that the major thrust of its hospital operation is to serve charity patients
The claim for exemption was denied holding the petitioner liable for real property taxes, prompting a
petition for the reversal of the resolution of the City Assessor with the Local Board of Assessment
Appeals of Quezon City [LBA], which denied the same
On appeal, the Central Board of Assessment Appeals of Quezon City [CBAA] affirmed the local boards
decision
o it was not entitled to real property tax exemption under the constitution and the law
Finding that Lung Center of the Philippines is not a charitable institution and that its
properties were not actually, directly and exclusively used for charitable purposes
On appeal the CA likewise affirmed the decision of the CBAA
PETITIONER CONTENTION
The petitioner avers that it is a charitable institution within the context of Section 28(3), Article VI of the
1987 Constitution,1 notwithstanding 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
The fact that it receives subsidies from the government attests to its character as a charitable institution
It contends that the exclusivity required in the Constitution does not necessarily mean solely.
Even if a portion of its real estate is leased out to private individuals from whom it derives income, it
does not lose its character as a charitable institution, and its exemption from the payment of real estate
taxes on its real property
Petitioner also avers that it may not be declared as real property tax exempt under its Charter, PD
1823, said exemption may nevertheless be extended upon proper application.
RESPONDENTS REPLY
1 SECTION 28. (3) Charitable institutions, churches and parsonages 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.

The petitioners real property is not exempt from the payment of real estate taxes under P.D. No. 1823
and even under the 1987 Constitution
o because it failed to prove that it is a charitable institution and that the said property is actually,
directly and exclusively used for charitable purposes.
The respondents noted that in a newspaper report, it appears that graft charges were filed with the
Sandiganbayan against the director of the petitioner among others for entering into a lease contract and
that instead of complying with the directive of the COA for the cancellation of the contract for being
grossly prejudicial to the government, the petitioner renewed the same.
They aver that the petitioner failed to adduce substantial evidence that 100% of its outpatients and 170
beds in the hospital are reserved for indigent patients; and that even if a patient is living below the
poverty line, he is charged with high hospital bills and not allowed to leave unless he pays the same.

ISSUE/S:
1) w/n the petitioner is a charitable institution within the context of Presidential Decree No. 1823 and the 1973
and 1987 Constitutions and Section 234(b) of Republic Act No. 7160
2) w/n the real properties of the petitioner are exempt from real property taxes
HELD:
1) The petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions
A charity may be fully defined as a gift, to be applied consistently with existing laws, for the benefit of an
indefinite number of persons, either by bringing their minds and hearts under the influence of education
or religion, by assisting them to establish themselves in life or otherwise lessening the burden of
government It embraces the improvement and promotion of the happiness of man
o The test of a charity and a charitable organization are in law the same.
o 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.
Under P.D. No. 1823, the petitioner is a nonprofit and nonstock corporation which, subject to the
provisions of the decree, is to be administered by the Office of the President of the Philippines with the
Ministry of Health and the Ministry of Human Settlements.
o It was organized for the welfare and benefit of the Filipino people principally to help combat the
high incidence of lung and pulmonary diseases in the Philippines.
o Hence, the medical services of the petitioner are to be rendered to the public in general
in any and all walks of life including those who are poor and the needy without
discrimination.
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 outpatient, 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. The money received by the
petitioner becomes a part of the trust fund and must be devoted to public trust purposes and cannot be
diverted to private profit or benefit.
2) Those portions of its real property that are leased to private entities are not exempt from real
property taxes as these are not actually, directly and exclusively used for charitable purposes
The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi
juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is
the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for
exemption from tax payments must be clearly shown and based on language in the law too plain to be
mistaken.
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the
petitioner shall enjoy the tax exemptions and privileges specifically from income and gift taxes covering
all donations, contributions, endowments and equipment and supplies for the actual use and benefit of

the Lung Center. It is plain as day that 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.
It is a settled rule of statutory construction that the express mention of one person, thing, or
consequence implies the exclusion of all others.
The tax exemption under Section 28(3), Article VI of the 1987 Philippine Constitution covers property
taxes only and provides thus: (3) Charitable institutions, churches and parsonages or convents
appurtenant thereto, mosques, nonprofit cemeteries, and all lands, buildings, and improvements,
actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt
from taxation. Section 234(b) of Republic Act No. 7160 imported this constitutional provision.
Unlike the 1935 Constitution, the 1973 and the present Constitution grants real property tax exemptions
to the same not only exclusively used for charitable purposes; it is required that such property be used
actually and directly for such purposes.
Under the 1973 and 1987 Constitutions and Rep. Act No. 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.
Solely is synonymous with exclusively.
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.

The Court holds that 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.
i.e., other portions being leased to private individuals for their clinics and a canteen; and a portion of the
land being leased to a private individual for her business enterprise under the business name Elliptical
Orchids and Garden Center.
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 nonpaying, are exempt from real property taxes.
RULING: the petition is PARTIALLY GRANTED. The respondent Quezon City Assessor is hereby DIRECTED
to determine, after due hearing, the precise portions of the land and the area thereof which are leased to
private persons, and to compute the real property taxes due thereon as provided for by law.

NATIONAL POWER CORP v. CITY OF CABANATUAN, 401 SCRA 259, (2003)

Petitioner: NATIONAL POWER CORPORATION
Respondent: CITY OF CABANATUAN
NAPOCOR
o NAPOCOR, the petitioner, is a government-owNed and controlled corporation created under
Commonwealth Act 120
o 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.
o For many years now, NAPOCOR sells electric power to the resident Cabanatuan City, posting a gross
income of P107,814,187.96 in 1992
CABANATUAN ASSESSES NAPOCORS FRANCHISE TAX
o Pursuant to Sec. 37 of Ordinance No. 165-92, the respondent assessed the petitioner a franchise tax
amounting to P808,606.41, representing 75% of 1% of the formers gross receipts for the preceding
year.
NAPOCOR REFUSES TO PAY
o Petitioner, whose capital stock was subscribed and wholly paid by the Philippine Government, refused
to pay the tax assessment
o It argued that the respondent has no authority to impose tax on government entities.
o Petitioner also contend that as a non-profit organization, it is exempted from the payment of all forms of
taxes, charges, duties or fees in accordance with Sec. 13 of RA 6395, as amended.
CABANATUAN FILES FOR COLLECTION
o The respondent filed a collection suit in the RTC of Cabanatuan City
o Demanding that petitioner pay the assessed tax, plus surcharge equivalent to 25% of the
amount of tax and 2% monthly interest
o Respondent alleged that petitioners exemption from local taxes has been repealed by Sec. 193 of RA
7160 (Local Government Code).
RTC AND CA RULING
o The trial court issued an order dismissing the case
o On appeal, the Court of Appeals reversed the decision of the RTC and ordered the petitioner to pay the
city government the tax assessment.
ISSUES:
(1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because its stocks are wholly
owned by the National Government and its charter characterized is as a non-profit organization?
(2) Is the NAPOCORs exemption from all forms of taxes repealed by the provisions of the Local Government
Code (LGC)?
HELD:
(1) NO.
o To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation
of a privilege to do business.
o The taxable entity is the corporation which exercises the franchise, and not the individual stockholders.

o
o

By virtue of its charter, petitioner 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 petitioner is no engaged in business.
(2) YES.
o One of the most significant provisions of the LGC is the removal of the blanket exclusion of
instrumentalities and agencies of the National Government from the coverage of local taxation.
o Although as a general rule, LGUs cannot impose taxes, fees, or charges of any kind on the National
Government, its agencies and instrumentalities
o this rule now admits an exception, i.e. when specific provisions of the LGC authorize the LGUs
to impose taxes, fees, or charges on the aforementioned entities.
o The legislative purpose to withdraw tax privileges enjoyed under existing laws or charter is clearly
manifested by the language used on Sec. 137 and 193 categorically withdrawing such exemption
subject only to the exceptions enumerated.
o Since it would be tedious and impractical to attempt to enumerate all the existing statutes providing for
special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of
such exemptions or privileges.
o No more unequivocal language could have been used.
RULING: instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals dated
March 12, 2001 and July 10, 2001, respectively, are hereby AFFIRMED.