Sta. Lucia-Realty v. Pasig
Lucia and Cainta filed separate MR which CA denied
Facts:
1. Sta. Lucia Realty & Dev. is the registered owner of several parcels of
land located in Pasig
2. A parcel of land in Pasig was consolidated with another TCT (land
was situated in Cainta)
3. The two combined lots were subsequently partitioned into three.
(all TCTs are now bearing the Cainta address)
4. Pasig filed a petition to correct the location stated in the TCT. The
LRC ordered the amendment of the location (it was changed from
Cainta to Pasig)
5. Cainta filed a petition for settlement of land boundary dispute with
RTC Pasig. This case is still pending up to date
6. Pasig filed a complaint against Sta. Lucia for the collection of real
estate tax including penalties and interest
7. Sta. Lucia alleged that it had ben religiously paying its real estate
taxes to Cainta, by virtue of the demands and assessments made by
Cainta on the claim that the subject properties were within its
territorial jurisdiction. Since 1913, it had been paying taxes to Cainta
8. Cainta intervened. It averred that the properties were within
Cainta’s territory
9. Sta. Lucia and Cainta moved for suspension and claimed that the
pending settlement of boundary dispute between Pasig and Cainta
presented a prejudicial question
10. RTC: in favor of Pasig. TCTs were conclusive evidence as to its
location. It ordered Sta. Lucia to pay Pasig. Also, for Cainta to refund
to Sta. Lucia the tax payments improperly collected. RTC later
included realty taxes due with regard on the improvements on the
subject lots
11. Sta. Lucia and Cainta appealed with the CA
12. Pasig filed Motion for Execution Pending Appeal. RTC granted such
motion.
13. Sta. Lucia filed Pet Cert under Rule 65 with CA to assail the
execution order
14. CA set aside the order of execution. Null and void. Also, the
boundary dispute presented a prejudicial question
15. CA decision was affirmed by the SC
16. CA affirmed the ruling of the RTC regarding the conclusiveness of
the TCT and that Pasig has a right to collect the taxes. There’s no
prejudicial question since both are civil cases
17. Sta.
18. Cainta’s Pet Cert with SC was denied
19. Sta. Lucia’s Pet Cert with SC is the one subject of this decision
Issue:
Whether or not there was prejudicial question
Whether or not Sta. Lucia should continue paying its real property taxes to
Cainta
Ratio:
 Odsigue v. CA
o Certificate of title is conclusive evidence of both ownership
and location
 Pasig had the right to collect the realty taxes on the subject
properties as the titles of the subject properties show on their faces
that they are situated in Pasig
 Under PD 464, authority to collect real property taxes is vested
locally where the property is situated
 Such was also reiterated in RA 7160 (LGC)
 Mariano Jr. v. Comelec
o LGUs can legitimately exercise powers of government only
within the limits of its territorial jurisdiction. Beyond these
limits, its acts are ultra vires
 CTCs as conclusive evidence of Location
o While title is conclusive as to its ownership and location,
this does not preclude the filing of an action for the very
purpose of attacking the statements therein
o The settlement of the boundary case filed with the RTC
would be able to best determine once and for all the
precise metes and bounds of both Pasigs and Caintas
respective territorial jurisdictions
o Resolution of this case would ascertain the extent of each
LGUs authority, a prerequisite in the proper exercise of
their powers, one of which is the power of taxation
 While the general rule is that prejudicial action may not lie if both
are civil actions, this court has held in Vidad v. RTC that in the
interest of good order, we can very well suspend action on one case
pending the final outcome of another case closely interrelated or
linked to the first
 Term prejudicial question has been applied, but to its ordinary
meaning rather than strict legal meaning. It may be allowed
 because the RoC states that a trial court may control its own
proceedings according to its sound discretion
 The RTC should have held in abeyance the proceedings in view of
the settlement of the boundary case, because the decision in the
latter will undeniably affect both Pasigs and Caintas rights
 In the meantime, Sta. Lucia is directed to deposit the succeeding
real property taxes with the LBP
CA decision is set aside, parties are directed to await the decision regarding
the settlement of the boundary dispute.
2 MACTAN-CEBU INTERNATIONAL AIRPORT (MCIAA) v. CITY OF LAPU-
LAPU and PACALDO
1. MCIAA was created under RA 6958 to undertake the control,
management, and supervision of the Mactan Airport, Lahug Airport and
other airports in Cebu.
2. MCIAA enjoys exemption from realty taxes under its charter (Sec. 14).
3. 1996: The Supreme Court in MCIAA v. Marcos declared that upon the
effectivity of LGC, MCIAA was no longer exempt from real estate taxes.
a. Sec. 234 withdrew the exemptions upon effectivity of LGC.
b. Since MCIAA is a GOCC, Sec. 14 has been withdrawn by the LGC.
4. The City of Lapu-Lapu assessed the MCIAA the amount of P162M as Real
Estate Tax. Amended to P151M after MCIAA questioned some
discrepancies.
5. MCIAA contended that the amount of taxes covers lots utilized solely
and exclusively for public/governmental purpose (airfield, runway,
taxiway and the lots which they are situated).
6. MCIAA paid the City P4M monthly, increased to P6M. As of 2003,
MCIAA already paid P275M.
7. DOJ issued an Opinion saying that the properties should not be subject
to tax because they are owned by the Republic and are merely held in
trust by MCIAA.
8. Undersecretary of Finance had no objection on the opinion above and
instructed the City Assessor to transfer the subject properties to the
“Exempt Roll” for taxation purposes.
9. Pacaldo, City Treasurer, sent another Statement of Real Prop Tax
Balances up to 2002 amounting to P246M. Still included the lots used
exclusively for airport purposes.
10. Later, Pacaldo sent Notices of Levy on 18 sets of properties of MCIAA.
11. MCIAA: Prohibition with RTC and declare the properties exempt.
12. Denied, auction, City purchased the properties.
13. MCIAA contended that the City did not pass any ordinance authorizing
collection of real property tax, tax for a special education fund and
penalty interest.
14. RTC: Injunction issued against the City but was lifted when the City
presented a certified copy of Ordinance 44 (Omnibus Tax Ordinance of
Lalu-Lapu).
a. Sec. 25 authorized the collection of a rate of 1 ½% from owners of
real estate within Lapu-Lapu City.
 b. Still valid even if effected before LGC because it still followed the
rates prescribed by LGC (except for the interest).
15. 2007, CA: MCIAA is a GOCC and its properties are subject to realty tax.
16. MCIAA, Partial Recon for the Decision covering only the portion of the
decision declaring it a GOCC and not exempt from realty tax and SEF.
a. Citing MIAA (Manila International Airport Authority) v. CA (2006
case), MIAA is a government instrumentality and it follows that
MCIAA too is exempt from the taxing powers of Lapu-Lapu.
b. Alleged that the 1996 MCIAA case had been overturned by the 2006
MIAA case.
17. CA denied the motion. Refused to apply the 2006 MIAA case. 1996
MCIAA case is more elegant and rational and provides intellectual clarity
than the 2006 MIAA case. Ordinance 44 is valid.
a. LGC provides that GOCCs, instrumentalities and agencies are no
longer exempt from local taxes.
b. Exemptions: If Code so provides or a subsequent legislation.
c. Thus, the LGC, enacted pursuant to Section 3, Article X of the
Constitution, provides for the exercise by local government units of
their power to tax, the scope thereof or its limitations, and the
exemptions from local taxation.
d. LGC is explicit in withdrawing tax exemptions previously enjoyed by
persons, including MCIAA.
e. Only the Republic and its subdivisions are exempted from payment
of taxes. NOT GOCCS or instrumentalities.
18. CA, however, declared that even if Lapu-Lapu City has the power to
impose real property taxes over MCIAA, under RA 6958, the properties
of MCIAA may not be conveyed to any entity/person except the national
government.
19. As regards the Special Education Fund, the Court of Appeals held that
respondent City can still collect the additional 1% tax on real property
even without an ordinance to this effect, as this is authorized by
Republic Act No. 5447, as amended by Presidential Decree No. 464 (the
Real Property Tax Code), which does not require an enabling tax
ordinance.
20. MR. Denied.
ISSUE: Whether MCIAA is exempt from payment of real estate tax. YES.
 MCIAA is an instrumentality of the government; thus, its properties
actually, solely and exclusively used for public purposes, consisting of
the airport terminal building, airfield, runway, taxiway and the lots on
which they are situated, are not subject to real property tax and
respondent City is not justified in collecting taxes from petitioner over
said properties.
 The 1996 MCIAA case should be read in light of the subsequent and
unequivocal ruling in the 2006 MIAA case.
 While it is true, as the City alleged, that the 1996 MCIAA case was cited
in a long line of cases, still, in 2006, the Court En Banc decided a case
that in effect reversed the 1996 Mactan ruling.
 Compared to the 2006 MIAA case:
o MIAA is not a GOCC but a government instrumentality. MIAA is not
a stock corporation. Also non-stock because it has no members.
o Sec. 133 of LGC limits the power of LGUs to tax. The National
Government, agencies, and instrumentalities and LGUs are
exempted.
o 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.
 MCIAA, with its many similarities to the MIAA, should be classified as
a government instrumentality, as its properties are being used for
public purposes, and should be exempt from real estate taxes. This is
not to derogate in any way the delegated authority of local
government units to collect realty taxes, but to uphold the
fundamental doctrines of uniformity in taxation and equal protection
of the laws, by applying all the jurisprudence that have exempted
from said taxes similar authorities, agencies, and instrumentalities,
whether covered by the 2006 MIAA ruling or not.
 MCIAA is vested with corporate powers but it is not a stock or non-stock
corporation, which is a necessary condition before an agency or
instrumentality is deemed a government-owned or -controlled
corporation. Like MIAA, MCIAA has capital under its charter but it is not
divided into shares of stock. It also has no stockholders or voting shares.
 Like in MIAA, the airport lands and buildings of MCIAA are properties of
public dominion because they are intended for public use. As properties
of public dominion, they indisputably belong to the State or the
Republic of the Philippines, and are outside the commerce of man. This,
unless petitioner leases its real property to a taxable person, the specific
property leased becomes subject to real property tax; in which case,
only those portions of MCIAA’s properties which are leased to taxable
 persons like private parties are subject to real property tax by the City of
Lapu-Lapu.
NOTE: Difference of instrumentality and GOCCS
These two terms have separate definitions means that while a
government “instrumentality” may include a GOCC, there may be a
government “instrumentality” that will not qualify as a GOCC.
3 CIR vs Nippon Express
1. Nippon is engaged in freight forwarding (sea and air) and it’s a VAT
registered entity
a. From 2002-2003 it said in its VAT returns that the it earned P28M
input VAT from zero-rated sales (P3M of which was applied as tax
credit)
b. Thus, the excess input VAT is P24M
2. Nippon filed an admin claim for refund P24M with the BIR
a. Then the next day, filed a judicial claim for refund with the CTA
b. CIR said it should be denied because its undocumented
c. CTA: partially granted the refund – because it failed to show the
recipients of its services, which were PEZA enterprises who are non-
residents not doing business in the Philippines (decision said
Nippon is only entitled to P2M)
3. Before Nippon received the decision, it filed a motion to withdraw the
case, because it had already received a tax credit certificate from the
BIR for P21M – motion to withdraw was granted because there had
already been a settlement
a. CIR appealed to CTA en banc
b. CTA en banc: affirmed
ISSUE: WON motion to withdraw should be granted. NO
1. The Revised Rules of the CTA says that the ROC applies suppletorily
a. Under the ROC Rule 50, Sec. 3 – an appeal may be withdrawn as a
matter of right any time before the filing of the appellee’s brief
i. After filing of the appellee’s brief, it is discretionary
2. Here, the CTA allowed the motion to withdraw because the BIR had
already issued a tax credit certificate because the BIR and Nippon had
already arrived at a reasonable settlement to avoid further proceedings
3. HOWEVER, SC believes that there are circumstances which shows that
the CTA should have denied the motion to withdraw
a. There was already a CTA decision rendered after a long proceeding
and exhaustive study of documents and evidence
i. Jurisdiction once acquired is not merely lost upon insistence by
the parties but continues until the case is terminated
b. CTA had already decided Nippon is entitled to P2M for failing to
prove its side
i. Nippon had received P19M larger than what it is entitled to
 ii. The interest of the government and the public was erroneously
prejudiced at a substantial amount
4. CIR is not estopped from questioning the validity of the tax credit
certificate it issued
a. In taxation, the government cannot be estopped by the mistakes
and omissions of its agents because upon it, depends the ability of
the government to serve the people for whose benefit taxes are
collected
5. Also, the action for the 1st quarter of 2002 has prescribed for being filed
beyond the 2-year period
04 CIR v. AQUAFRESH SEAFOODS, INC. (2010)
1. Aquafresh sold to Philips Seafoods 2 parcels of land & improvements, in
Roxas City, for P3.1M.
2. Aquafresh then filed a Capital Gains Tax Return/Application for
Certification Authorizing Registration (CAR) and paid P186k CGT and
P46,500 DST due from the sale.
3. CAR was issued, but BIR received a report that the lots sold were
undervalued, prompting the Special Investigation Division (SID) of the
BIR to conduct an investigation and occular inspection.
4. SID concluded that the properties were commercial with a zonal value
of P2k per sqm.
5. Relying on SID findings, Regional Director Sacamos of the Revenue
Region Iloilo City sent 2 Assessment Notices apprising Aquafresh of
P1.3M CGT defeciency and P356k DST defeciency.
6. Aquafresh protested the assessments. Director Sacamos denied the
protest for lack of legal basis. Aquafresh appealed, but it was denied
with finality.
7. Aquafresh filed a PetRev before the CTA seeking reversal. It argues
a. that the properties were located in Barrio Banica, Roxas, where
the pre-defined zonal value was P650 per sqm based on the
Revised Zonal Values of Real Properties in Roxas City (RZV)
b. That the subject properties were classified as residential and
NOT commercial
c. That since there was already a pre-defined zonal value for
properties located therein, BIR officials had no business re-
classifying them to commercial.
8. CTA ruled in favor of Aquafresh, its assessments for deficiency CGT and
DST are CANCELLED & SET ASIDE. The existing RZVs should prevail for
purposes of determining Aquafresh’s tax liabilities.
a. While the Director is given the authority to determine the FMV
of the properties for the purpose of computing taxes, the 1st
sentence of Section 6(E) sets the limitation or condition in the
exercise of such power by requiring the Director to CONSULT
w/ competent appraisers both from private and public sectors.
b. Since there was no re-evaluation and no revision of the ZV of
the properties at the time of the sale, the Director cannot
unilaterally determine the ZVs of the subject properties by
invoking his powers of obtaining information and making
assessments under NIRC Sections 5 & 6.
 c. The existing RZVs of Real Properties in the City of Roxas shall
prevail for the purpose of determining the proper tax liabilities
of Aquafresh.
9. CIR filed a MRs. CTA denied. CIR then appealed.
10. CTA En Banc dismissed CIR’s appeal for lack of merit. It ruled that the
1995 RZVs of Real Properties should prevail. It relied on NIRC Section 6
(E) which requires consultation from appraisers, from both the public
and private sectors, in fixing the zonal valuation of properties. CIR failed
to prove any amendment effected on the RZVs at the time of the sale of
the properties.
11. Hence, this PetRev on Certiorari.
ISSUES:
1. W/N THE REQUIREMENT OF CONSULTATION WITH COMPETENT
APPRAISERS BOTH FROM THE PRIVATE AND PUBLIC SECTORS IN
DETERMINING THE FMV OF THE SUBJECT LOTS IS APPLICABLE IN THIS
CASE. YES
2. W/N THE CTA EN BANC COMMITTED GRAVE ERROR IN APPLYING THE
FMV BASED ON THE ZONAL VALUATION OF A RESIDENTIAL LAND AS TAX
BASE IN THE COMPUTATION OF CGT AND DST DEFICIENCIES OF
AQUAFRESH. NO
HELD: AFFIRMED. The petition is not meritorious.
RULING:
Under the NIRC, a CGT of 6% is imposed on the gains presumed to have
been realized in the sale, exchange or disposition of lands/buildings which
are not actively used in the business of a corporation and which are treated
as capital assets based on the gross selling price or FMV as determined in
accordance with Section 6(E), whichever is higher. DST is based on the
consideration contracted to be paid or on its FMV determined in accordance
with Section 6(E), whichever is higher.
Thus, in determining the value of CGT and DST, the power of the CIR to
assess is subject to Section 6(E), which provides: “(E) ….The Commissioner is
hereby authorized to divide the Philippines into different zones or area and
shall, upon consultation with competent appraisers both from the private
and public sectors, determine the FMV of real properties located in each
zone or area.”
While the CIR has the authority to prescribe real property values and
divide the Philippines into zones, the law is clear that the same has to be
done upon consultation with competent appraisers both from the public
and private sectors.
 Since at the time of the sale, the properties were classified as
residential, based on the 1995 RZV of Real Properties, the CIR cannot
unilaterally change the zonal valuation of such properties to commercial
without first conducting a re-evaluation of the zonal values as mandated
under Section 6(E).
CIR argues that the requirement of consultation is mandatory only when a
formulation or change is made in the schedule of zonal values. It also
contends that what it did in this case was NOT to prescribe the zonal value,
but merely classify the same as commercial and apply the corresponding
zonal value for such classification based on the existing schedule of zonal
values in Roxas City.
 Wrong! CIR's act of re-classifying the subject properties from residential
to commercial cannot be done without first complying with the
procedures prescribed by law. ALL the properties in Barrio Banica were
classified as residential. Thus, CIR’s act of classifying the subject
properties involves a re-classification and revision of the prescribed
zonal values.
 Moreover, CIR failed to prove that it had complied with Revenue Memo
58-69, which provides for the procedures on the establishment of the
zonal values of real properties, and that a revision of RZVs was made
PRIOR TO the sale of the properties. Thus, this must be followed for
purposes of computing the CGT and DST.
CIR contends that its act of classifying the subject properties based on actual
use was in accordance with
the Zonal Valuation Guidelines. However, this proviso operates only when
no zonal valuation has been prescribed. The properties located
in Barrio Banica, Roxas City were already subject to a zonal valuation.
The BIR held that Certain Guidelines in the Implementation of Zonal
Valuation of Real Properties, applying the predominant use of property as
the basis for the computation of the CGT DST, shall apply only when the
real property is located in an area or zone where the properties are not
yet classified and their respective zonal valuation are not yet determined.
Zonal valuation was established with the objective of having an efficient tax
administration by minimizing the use of discretion in the determination of
the tax based on the part of the administrator on one hand and the
taxpayer on the other hand.
 Zonal value is determined for the purpose of establishing a more
realistic basis for real property valuation. Since internal revenue
taxes, such as CGT and DST, are assessed on the basis of valuation,
the zonal valuation existing at the time of the sale should be taken
into account
If CIR feels that the properties in Barrio Banica should also be classified as
commercial, then CIR should work for its revision in accordance with the
Revenue Memo.
Even assuming arguendo that the subject properties were used for
commercial purposes, the same remains to be residential for zonal value
purposes. It appears that actual use is NOT considered for zonal valuation,
but the predominant use of other classification of properties located in the
zone.
CIR v DLSU
1. BIR issued a Letter of Authority for all internal revenue taxes for the period
Fiscal Year Ending 2003 and Unverified Prior Years
2. DLSU was assessed income tax on income derived from rental of restaurants
and bookstores, VAT on business income and DST on loan transactions and
lease contracts
3. DLSU, a non-stock, non-profit educational institution, protested based on
Article XIV, Section 4 (3) of the Constitution:
a. 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. xxx
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.
i. CTA Division partially granted.
4. BIR Commissioner appealed to the CTA En Banc that DLSU is not tax-exempt
considering the use of its revenues and assets for non-educational purposes;
DLSU also filed a petition for review with the CTA En Banc
5. CTA En Banc dismissed the Commissioner's petition for review
a. DLSU proved that a portion of the assessed rental income was used
actually, directly and exclusively for educational purposes (building of
the university's Physical Education – Sports Complex) and exempt
from tax; DLSU's unsubstantiated claim for exemption must be
subjected to income tax and VAT
6. CTA En Banc partially granted DLSU's petition for review
a. LOA should cover only one taxable period and that the practice of
issuing a LOA covering audit of unverified prior years is prohibited,
such that the assessments for deficiency income tax, VAT and DST for
taxable years 2001 and 2002 are void, but the assessment for taxable
year 2003 is valid
7. Both DLSU and the Commissioner filed for Certiorari
8. Commissioner:
a. Section 30 (H) of the Tax Code states that the income of whatever kind
and character of a non-stock and non-profit educational institution
from any of its properties, real or personal, or from any of its activities
conducted for profit regardless of the disposition made of such
income, shall be subject to tax imposed by this Code
i. A tax-exempt organization like DLSU is exempt only from
property tax but not from income tax on the rentals earned
from property.
9. DLSU:
a. Section 30 (H) of the 1997 Tax Code cannot amend the 1987
Constitution; doctrine of constitutional supremacy
WON DLSU’s income and revenues proved to have been used actually, directly and
exclusively for educational purposes are exempt from duties and taxes- YES

 Non-stock, non-profit v Proprietary

o The tax exemption granted to non-stock, non-profit educational
institutions is conditioned only on the actual, direct and exclusive use
of their revenues and assets for educational purposes while tax
exemptions granted to proprietary educational institutions may be
subject to limitations imposed by Congress.
 The 1997 Tax Code did not qualify the tax exemption granted to non-stock,
non-profit educational institutions by the Constitution as determined by the
Court in the YMCA case
o Educational institution (when used in laws granting tax exemptions)-
hierarchically structured and chronologically graded learnings
organized and provided by the formal school system
o Requisites for availing the exemption under Article XIV, Section 4 (3):
 The taxpayer falls under the classification non-stock,
non-profit educational institution
 The income it seeks to be exempted from taxation is used
actually, directly and exclusively for educational purposes
 Article XIV, Section 4 (3) categorically states that all revenues and assets ...
used actually, directly, and exclusively for educational purposes shall be
exempt from taxes and duties
o The phrase all revenues is unqualified by any reference to the source
of revenues, such that so long as the revenues and income are used
actually, directly and exclusively for educational purposes, then said
revenues and income shall be exempt from taxes and duties.
 Revenues v Assets
o When a non-stock, non-profit educational institution proves that it
uses its revenues actually, directly, and exclusively for educational
purposes, it shall be exempted from income tax, VAT, and LBT.
o When it also shows that it uses its assets in the form of real property
for educational purposes, it shall be exempted from RPT.
 Proving the actual use of the taxable item will result in an
exemption, but the specific tax from which the entity shall be
exempted from shall depend on whether the item is an item
of revenue or asset.
 The last paragraph of Section 30 of the Tax Code is without force and effect
with respect to non-stock, non-profit educational institutions for being
contrary to the Constitution insofar as it subjects to tax the income and
revenues of non-stock, non-profit educational institutions used actually,
directly and exclusively for educational purposes