TAX 2 Feb 21 Incomplete Compilation

7/29/2019 TAX 2 Feb 21 Incomplete Compilation

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Alejandro Ty vs. Trampe and Mun. Assessor of Pasig - Marquez, M.

Sec. Drilon vs. Mayor Lim - De Leon

COCA-COLA BOTTLERS PHILIPPINES, INC., CITY OF MANILA, (2006, Chico- Nazario)

Facts:

• Petitioner Coca-Cola Bottlers Philippines, Inc. isa corporation engaged in the business of manufacturing and selling beverages andmaintains a sales office located in the City of Manila.

• On 25 February 2000: the City Mayor of Manilaapproved Tax Ordinance No. 7988, otherwiseknown as "Revised Revenue Code of the City of

Manila" repealing Tax Ordinance No. 7794- Tax Ordinance No. 7988 amended certain

sections of Tax Ordinance No. 7794 by

increasing the tax rates applicable to certain

establishments operating within the territorial

jurisdiction of the City of Manila, including

herein petitioner.

• Petitioner filed a Petition before the Departmentof Justice (DOJ), against the City of Manila andits Sangguniang Panlungsod, invoking Section187 of the Local Government Code of 1991 SaidPetition questions the constitutionality orlegality of Section 21 of Tax Ordinance No.7988.

• On 17 August 2000: then DOJ Tuquero issued aResolution declaring Tax Ordinance No. 7988null and void for non-compliance withpublication requirements.

• The City of Manila failed to file a Motion for

Reconsideration nor lodge an appeal of saidResolution, thus, said Resolution has lapsed intofinality.

• On 16 November 2000: Atty. Leonardo A.Aurelio wrote the Bureau of Local GovernmentFinance (BLGF) requesting in behalf of his client,Singer Sewing Machine Company, an opinion onwhether the Office of the City Treasurer of Manila has the right to enforce Tax Ordinance

No. 7988 despite the Resolution of the DOJSecretary.

• The BLGF Executive Director issued anIndorsement ordering the City Treasurer of Manila to "cease and desist" from enforcing TaxOrdinance No. 7988.

• Despite this order, respondents continued toassess petitioner business tax for the year 2001based on the tax rates prescribed under TaxOrdinance No. 7988. Thus, petitioner filed aComplaint with the RTC praying that

respondents be enjoined from implementing theaforementioned tax ordinance.RTC: in favor of petitioner.

• During the pendency of the said case, the CityMayor of Manila approved on 22 February 2001 Tax Ordinance No. 8011 entitled, "An OrdinanceAmending Certain Sections of Ordinance No.7988."

• Said tax ordinance was again challenged by



petitioner before the DOJ through a Petitionquestioning the legality of the aforementionedtax ordinance on the grounds that:1. said tax ordinance amends a tax ordinance

previously declared null and void and without

legal effect by the DOJ; and

2. said tax ordinance was likewise not published

upon its approval in accordance with Section

188 of the Local Government Code of 1991.

• On 5 July 2001:DOJ Secretary Hernando Perezissued a Resolution declaring Tax Ordinance No.8011 null and void and legally not existing: Thepassage of the assailed ordinance did not havethe effect of curing the defects of theOrdinance.

RTC: Tax Ordinance No. 8011 valid.

Issue: Whether or not Tax Ordinance No. 8011

amending Tax Ordinance 7988 is null and void and of

no legal effect?

SC: Yes, It is void.

Ratio: Tax Ordinance No. 8011 was likewise declared

null and void by the DOJ Secretary in a Resolution,

dated 5 July 2001, elucidating that instead of

amending Ordinance No. 7988, 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

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.13

City of Manila vs. Coca-Cola (GR 181845) - Castillo

ICTSI vs. City of Manila - Ruivivar

PHIL. MATCH VS CITY OF CEBU1978, Aquino

Facts:



Ordinance 279 (approved by the mayor on Mar. 10,1960, also approved by the prov. board) imposes asales tax of 1% on the gross sales, receipts or value of commodities sold, bartered, exchanged ormanufactured in Cebu in excess of P2T/quarter.

Sec. 9: For purposes of the tax, all deliveries of

goods or commodities

stored or sold in Cebushall be considered as sales in the city and shall

be taxable. (Sales of matches consummatedoutside Cebu are taxable as long as thematches sold are taken from the company'sstock stored in Cebu)

Phil. Match (principal office in Manila) ships matchesfrom Manila to its Cebu branch office for storage, saleand distribution within the territories and districtsunder the said branch for the whole VisMin region. Itassailed the legality of the tax collected on the ff. out-of- town deliveries:

(1) Sa les of matches booked and paid for in

Cebu but shipped directly to customers

outside Cebu.(2) Transfers of matches to salesmen assigned to

different agencies outside Cebu.

• The salesmen sell the matches within theirrespective territories; issue cash sales

invoices and remit the proceeds of the salesto the Cebu branch office. The value of theunsold matches constitutes their stockliability.

(3) Shipments of matches to provincial customerspursuant to salesmen's instructions.

• Orders (by letter/telegram) sent to theCebu branch office by the salesmen assignedoutside Cebu. The proceeds of the sale, for

which the salesmen are accountable areremitted to the branch office.

Phil. Match paid under protest to Cebu P12.8T as the1% sales tax on those three classes of out-of-town

deliveries of matches for the 2nd qtr. of 1961 - 2nd qtr.of 1963.

• It sought the refund of the sales tax paid for out-

of-town deliveries of matches, invoking Shell vs.Municipality of Sipocot, CamSur (sales of oil andpetroleum products effected outside theterritorial limits of Sipocot are not subject to thetax imposed by an ordinance of that

municipality) City Treasurer denied. UnderSec. 9 of the Ord., all out-of-town deliveries of

matches stored in Cebu are subject to the salestax imposed by the Ord.

• Aug. 1963: Phil. Match filed this complaint,praying (1) that the ordinance be declared void

insofar as it taxed the deliveries of matchesoutside Cebu, (2) refund of the P12T as excesssales tax paid.

o TC: Sustained the tax on (1) [Such saleswere consummated in Cebu bec. delivery tothe carrier in Cebu is deemed to be adelivery to the customers outside Cebu];

invalidated the tax on (2) and (3)[Characterized the tax on as a “storage tax"

and not a sales tax; assumed that the saleswere consummated outside Cebu, hencebeyond its taxing power].

Issue/Held: W/N Cebu can tax transactions under (1). YES. Cebu can validly tax the sales of matches tocustomers outside Cebu as long as the orders were



booked and paid for in Phil. Match's branch office inCebu.

RatioGenerally, delivery to the carrier is delivery to the

buyer. A different interpretation would encourage taxevasion through the simple expedient of arranging forthe delivery of the matches at the outskirts of Cebu,though the purchase was effected and paid for in theCebu branch office. The municipal board of Cebu is empowered to providefor the levy and collection of taxes for purposes inaccordance with law. The taxing power validlydelegated to cities and municipalities is defined in theLocal Autonomy Act (RA 2264):

• The prohibition against the imposition of percentage taxes under such law refers tomunicipalities and municipal districts but not tochartered cities.

• The taxing power of cities, municipalities andmunicipal districts may be used (1) upon anyperson engaged in any occupation or business,or exercising any privilege therein; (2) forservices rendered by those political subdivisionsor rendered in connection with any business,profession or occupation being conducted

therein, and (3) to levy, for public purposes, justand uniform taxes, licenses or fees.

HERE: Sales of matches to customers outside Cebu,which sales were booked and paid for in the branchoffice, are subject to Cebu's taxing power. [vs. theShell case where the price was paid outside of the

municipality of Sipocot, the entity imposing the tax]• Mun. of Jose Panganiban, Camarines Norte vs.

Shell (place of delivery determines the taxable

situs of the property to be taxed) cannotproperly be invoked in this case. In the saidcase, RA 1435 specifies that the tax may belevied upon oils distributed within the limits of the city or municipality, meaning the placewhere the oils were delivered.

• HERE, the fact that the matches were delivered

to customers, whose places of business wereoutside Cebu, would not place those salesbeyond Cebu's taxing power. Those salesformed part of the merchandising businessbeing assigned on by the company in Cebu.

o Furthermore, because the seller’s place of business is in Cebu, it cannot be sensiblyargued that such sales should be consideredas transactions subject to the taxing powerof the political subdivisions where thecustomers resided and accepted delivery of

the matches sold.

PLDT vs. City of Davao - Ko

Palma Development vs. Mun. Of Malangas - Bayad

PLDT vs. Prov. of Laguna - Dee

Smart vs. City of Makati - Dumayas

Smart vs. City of Davao - Ferrer



Yamane vs. BA Lepanto - Banaag

Ericsson vs. City of Pasig - Quitain

FELS Energy v. Batangas (2007)

Callejo, Sr. J.

2 consolidated petitions for review on certiorari (FELS

v. Province; NPC v. Local Board of Assessment

Appeals)

In 1993, Polar Energy entered into an Energy

Conversion Agreement with Napocor, for the lease of

power barges moored in Calaca, Batangas. The

agreement was for 5 years and under it, Napocor

obligated itself to pay for all real estate taxes on the

barges. Polar later assigned its rights under the

agreement to FELS.

On Aug. 7, 1995, FELS received an assessment of

real property taxes on the barges from Prov. Assessor

Andaya of Batangas amounting to P56M/year. FELS

referred the matter to the Napocor, reminding it of its

duty under the Energy Conversion Agreement. It also

gave Napocor authority to represent it in conferenceswith the Prov. Assessor.

Prov. Assessor (Reconsideration, filed Sept. 7,

1995): DENIED

Local Board of Assessment Appeals (Petition to set

aside assessment; for the declaration of barges as

non-taxable items): DENIED, on the ff. grounds—

1. 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

permanence.

2. FELS, a private corporation, isn’t covered by the

exemption granted to NPC notwithstanding the

agreement between them.

3. The action has already prescribed.

FELS appealed to the Central Board of Assessment

Appeals. Pending the appeal, the Provincial Treasurer

issued a Notice of Levy and Warrant by Distraint over

the power barges. The CBAA then issued an order

lifting the levy and distraint. At this stage, NPC was

allowed to intervene in the case. Both FELS and NPC

also filed motions to admit bonds to guarantee the

payment of the taxes, which was approved by the

CBAA.

CBAA: power barges were found to be exempt from

real property tax!

1. The power barges belong to NPC.



2. Since they are actually, directly and exclusively

used by it, the power barges are covered by the

exemptions under Section 234(c) of R.A. No.

7160.

3. Prescription did not preclude the NPC from

pursuing its claim for tax exemption in

accordance with Section 206 of R.A. No. 7160.

CBAA: later completely reversed its earlier

decision.

FELS (Sept. 20, 2004) and NPC (Oct. 19, 2004) both

filed MRs with the CA. This was ultimately denied on

the ground of prescription (Aug. 25, 2004). These

actions were then filed before the SC.

Issues/Held/Ratio:

WON their right to appeal has prescribed. YES.

FELS: when NPC moved to have the

assessment reconsidered on September 7,

1995, the running of the period to file an appeal

with the LBAA was tolled.

NPC: the 60-day period for appealing to the

LBAA should be reckoned from its receipt of the

denial of its motion for reconsideration.

Section 226 of the LGC provides that any

owner/person having legal interest in the property who

is unsatisfied with an assessment made by the

assessor (provincial, city or municipal) has 60 days

from the receipt of the written notice of assessment to

appeal to the BOAA. This was also explicitly stated in

the notice of assessment sent by the Provincial

Assessor.

Instead of appealing to the Board of Assessment

Appeals (as stated in the notice), NPC opted to file a

motion for reconsideration of the Provincial Assessor’s

decision, a remedy not sanctioned by law. The

taxpayer’s failure to question the assessment in the

LBAA renders the assessment of the local assessor

final, executory and demandable. The rationale given

for this is to discourage corruption in appraisal and

assessment, as it gives the assessor the opportunity to

set the real property values unreasonably high thenreduce it later at the request of the property owner.

Whether power barges are considered movables

or immovables for the purpose of real property

taxation. IMMOVABLES.

Article 415 (9) of the New Civil Code provides that

“[d]ocks and structures which, though floating, are

intended by their nature and object to remain at a

fixed place on a river, lake, or coast” are consideredimmovable property. Thus, power barges are

categorized as immovable property by destination.

WON the barges are exempt from paying real

property tax because they are used actually,

directly, and exclusively by a GOCC (234.c of the

LGC). NO.



According to the terms of the agreement itself, Polar

itself was to operate the power barges. The mere

undertaking of petitioner NPC under the Agreement

does not justify the exemption, as it cannot bind

someone not a party to the agreement. Tax

exemptions are construed strictly against the claimant

and liberally in favor of the government (in this case,

the provincial corporation), and in this case it was not

proven.

Lung Center of the Phils. vs. QC - Ruga

MCIAA v Marcos

Petitioner Mactan Cebu International Airport Authority(MCIAA) was created by virtue of Republic Act No.6958, mandated to "principally undertake theeconomical, efficient and effective control,

management and supervision of the MactanInternational Airport in the Province of Cebu and theLahug Airport in Cebu City, . . . and such other Airportsas may be established in the Province of Cebu . .. .(Sec. 3, RA 6958).

Since the time of its creation, petitioner MCIAA enjoyedthe privilege of exemption from payment of realtytaxes in accordance with Section 14 of its Charter. OnOctober 11, 1994, however, Mr. Eustaquio B. Cesa,Officer-in-Charge, Office of the Treasurer of the City of

Cebu, demanded payment for realty taxes on severalparcels of land belonging to the petitioner. Petitionerobjected to such demand for payment as baseless andunjustified, claiming in its favor the aforecited Section14 of RA 6958 which exempt it from payment of realtytaxes. It was also asserted that it is an instrumentalityof the government performing governmental functions,citing section 133 of the Local Government Code of 1991 which puts limitations on the taxing powers of local government units.

Respondent City refused to cancel and set asidepetitioner's realty tax account, insisting that the MCIAAis a government-controlled corporation whose tax

exemption privilege has been withdrawn by virtue of Sections 193 and 234 of the Local Governmental Codethat took effect on January 1, 1992.

Whether or not the MCIAA is excempted from realtytaxes?

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,acknowledging in its very nature no limits, so thatsecurity against its abuse is to be found only in the

responsibility of the legislature which imposes the taxon the constituency who are to pay it. Nevertheless,effective limitations thereon may be imposed by thepeople through their Constitutions.

A claim of exemption from tax payment must beclearly shown and based on language in the law tooplain to be mistaken. Elsewise stated, taxation is therule, exemption therefrom is the exception. However,if the grantee of the exemption is a political



subdivision or instrumentality, the rigid rule of construction does not apply because the practicaleffect of the exemption is merely to reduce theamount of money that has to be handled by thegovernment in the course of its operations.

There can be no question that under Section 14 of R.A.No. 6958 the petitioner is exempt from the payment of realty taxes imposed by the National Government orany of its political subdivisions, agencies, andinstrumentalities. Nevertheless, since taxation is therule and exemption therefrom the exception, theexemption may thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule iswhere the exemption was granted to private partiesbased on material consideration of a mutual nature,which then becomes contractual and is thus coveredby the non-impairment clause of the Constitution.

The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the exercise by localgovernment units of their power to tax, the scopethereof or its limitations, and the exemption fromtaxation.

With the repealing clause of RA 7160 the taxexemption provided. All general and special exemptionin the charter of the MCIAA has been expresslyrepealed. Laws, acts, City Charters, decrees, executiveorders, proclamations and administrative regulations,or part of parts thereof which are inconsistent with anyof the provisions of the Code are hereby repealed ormodified accordingly. Therefore the SC affirmed thedecision and order of the RTC and herein petitionerhas to pay the assessed realty tax of its propertieseffective January 1, 1992 up to the present.

MIAA v. Court of Appeals (2006)Carpio, J

Facts:

• The Manila International Airport Authority (MIAA)

operates the Ninoy Aquino International Airport(NAIA) Complex in Parañaque City underExecutive Order No. 903 (MIAA Charter).

o As such operator, it administers the land,improvements and equipment within theNAIA Complex.

• In March 1997, the Office of the GovernmentCorporate Counsel (OGCC) issued Opinion No.061 to the effect that the Local Government

Code of 1991 (LGC) withdrew the exemptionfrom real estate tax granted to MIAA underSection 21of its Charter.

o MIAA paid some of the real estate taxalready due.

• June 2001, it received Final Notices of RealEstate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001.

o The City Treasurer subsequently issuednotices of levy and warrants of levy onthe airport lands and buildings.



• At the instance of MIAA, the OGCC issuedOpinion No. 147 clarifying Opinion No. 061,pointing out that Sec. 206 of the LGC requirespersons exempt from real estate tax to showproof of exemption.

o According to the OGCC, Sec. 21 of theMIAA Charter is the proof that MIAA isexempt from real estate tax.

• MIAA, thus, filed a petition with the Court of Appeals seeking to restrain the City of Parañaque from imposing real estate tax on,levying against, and auctioning for public salethe airport lands and buildings, but this wasdismissed for having been filed out of time.

• Hence, MIAA filed this petition for review,pointing out that it is exempt from real estatetax under Sec. 21 of its charter and Sec. 234 of the LGC.

o It invokes the principle that thegovernment cannot tax itself as a justification for exemption, since theairport lands and buildings, being devotedto public use and public service, areowned by the Republic of the Philippines.

• The City of Parañaque invokes Sec. 193 of theLGC, which expressly withdrew the taxexemption privileges of government-owned andcontrolled corporations (GOCC) upon theeffectivity of the LGC.

o It asserts that an international airport isnot among the exceptions mentioned inthe said law.

o Meanwhile, the City of Parañaque postedand published notices announcing thepublic auction sale of the airport landsand buildings. In the afternoon before thescheduled public auction, MIAA applied

with the Court for the issuance of a TROto restrain the auction sale. The Courtissued a TRO on the day of the auctionsale, however, the same was receivedonly by the City of Parañaque three hoursafter the sale.

Issue:

W/N the airport lands and buildings of MIAA areexempt from real estate tax? YES.

Held:

• Sec. 243(a) of the LGC exempts from real estatetax any real property owned by the Republic of the Philippines. This exemption should be readin relation with Sec.133(o) of the LGC, whichprovides that the exercise of the taxing powersof local governments shall not extend to the

levy of taxes, fees or charges of any kind on theNational Government, its agencies andinstrumentalities.

• The basic principle that local governmentscannot tax the national government, whichhistorically merely delegated to localgovernments the power to tax. The rule is that atax is never presumed and there must be clearlanguage in the law imposing the tax. This rule



applies with greater force when localgovernments seek to tax national governmentinstrumentalities.

• 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 thebeneficial owner of the properties. MIAA itself isowned solely by the Republic. At any time, thePresident can transfer back to the Republic titleto the airport lands and buildings without theRepublic paying MIAA any consideration. As long

as the airport lands and buildings are reservedfor public use, their ownership remains with theState. Unless the President issues aproclamation withdrawing these properties frompublic use, they remain properties of public

dominion. As such, they are inalienable, hence,they are not subject to levy on execution orforeclosure sale, and they are exempt from realestate tax. However, portions of the airportlands and buildings that MIAA leases to privateentities are not exempt from real estate tax. Insuch a case, MIAA has granted the beneficialuse of such portions for a consideration to ataxable person

MIAA vs. CITY OF PASAY (GR 163072) April 2, 2009

CARPIO, J.:

FACTS:

Manila International Airport Authority (MIAA)operates and administers the NAIA Complex under

EO 903 (Revised Charter of the MIAA). UnderSections 3 and 22 of EO 903, approximately 600hectares of land, including the runways, the airporttower, and other airport buildings, weretransferred to MIAA. The NAIA Complex is locatedalong the border between Pasay City andParañaque 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. TOTAL

DEFICIENCY: P1,016,213,836.33 [principal:P642,747,726.20, penalty: P373,466,110.13]o City of Pasay issued notices of levy and

warrants of levy for the NAIA Pasay

properties. MIAA received the notices andwarrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasaythreatened to sell at public auction the NAIAPasay properties if the delinquent realproperty taxes remain unpaid.

On 29 October 2001, MIAA filed with the CA apetition for prohibition and injunction with prayerfor preliminary injunction or TRO. The petitionsought to enjoin the City of Pasay from imposing



real property taxes on, levying against, andauctioning for public sale the NAIA Pasayproperties.o CA dismissed the petition and upheld the

power of the City of Pasay to impose and

collect realty taxes on the NAIA Pasayproperties holding that Sections 1931 and2342 of the LGC withdrew the exemption frompayment of real property taxes granted tonatural or juridical persons, including GOCCs,except local water districts, cooperatives dulyregistered under Republic Act No. 6938, non-stock and non-profit hospitals and educationalinstitutions. Since MIAA is a government-owned corporation, it follows that its tax

1 SECTION 193. Withdrawal of Tax Exemption Privileges. – Unlessotherwise provided in this Code, tax exemptions or incentivesgranted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations,except local water districts, cooperatives duly registered underR.A. No. 6938, non-stock and non-profit hospitals and educationalinstitutions, are hereby withdrawn upon the effectivity of this Code.

2 SECTION 234. Exemptions from Real Property Tax. – The followingare 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 hasbeen granted, for consideration or otherwise to a taxable person;

xxxxxxx

Except as provided herein, any exemption from payment of realproperty tax previously granted to, or presently enjoyed by, allpersons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon theeffectivity of this Code.

exemption under Section 21 of EO 903 hasbeen withdrawn.

MIAA filed a motion for reconsideration, which theCourt of Appeals denied. Hence, this petition.

ISSUE: WON the NAIA Pasay properties of MIAA

are exempt from Real Property Tax?

HELD: YES

Ratio:

In MIAA v. CA (2006 MIAA case; only difference is itinvolved the NAIA Paranaque properties), SCalready resolved the issue of whether the airportlands and buildings of MIAA are exempt from taxunder existing laws.

o SC held: MIAA is not a GOCC under Section2(13) of the Introductory Provisions of theAdministrative Code because it is notorganized as a stock or non-stockcorporation. Neither is MIAA a GOCC underSection 16, Article XII of the 1987Constitution because MIAA is not required tomeet the test of economic viability. MIAA is a

government instrumentality

3

vested with3 MIAA is a government "instrumentality" that does not qualify as a"government-owned or controlled corporation." As explained in the2006 MIAA case: A GOCC must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stockcorporation. MIAA is not a stock corporation because it has nocapital stock divided into shares. MIAA has no stockholders orvoting shares. (SEC 3 CORP CODE) MIAA is also not a non-stockcorporation because it has no members. (SEC 87 CORP CODE)Section 88 of the Corporation Code provides that non-stockcorporations are "organized for charitable, religious, educational,



corporate powers and performing essentialpublic services pursuant to Section 2(10) of the Introductory Provisions of theAdministrative Code. As a governmentinstrumentality, MIAA is not subject to any

kind of tax by local governments underSection 133(o) of the Local GovernmentCode. The exception to the exemption inSection 234(a) does not apply to MIAAbecause MIAA is not a taxable entity underthe LGC. Such exception applies only if thebeneficial use of real property owned by theRepublic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA areproperties devoted to public use and thus areproperties of public dominion. Properties of publicdominion are owned by the State or theRepublic. (NCC ART 420) The Airport Lands andBuildings of MIAA are intended for public use, andat 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 theRepublic and thus exempt from real estate taxunder Section 234(a) of the Local GovernmentCode.

IN SUM:

professional, cultural, recreational, fraternal, literary, scientific,social, civil service, or similar purposes, like trade, industry,agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate aninternational and domestic airport for public use.

MIAA is not a GOCC but a governmentinstrumentality which is exempt from any kind of tax from the local governments. Indeed, theexercise of the taxing power of LGU is subject tothe limitations enumerated in Section 133 of the

LGC. Under Section 133(o) of the LGC, localgovernment units have no power to taxinstrumentalities of the national government likethe MIAA. Hence, MIAA is not liable to pay realproperty tax for the NAIA Pasay properties.

Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended forpublic use, and as such are exempt from realproperty tax under Section 234(a) of the LocalGovernment Code. However, under the sameprovision, if MIAA leases its real property to ataxable person, the specific property leasedbecomes subject to real property tax. In this case,only those portions of the NAIA Pasayproperties which are leased to taxablepersons like private parties are subject toreal property tax by the City of Pasay.

Dispositive: Granted. Exempt.



City Government Of Quezon City vs. Bayan Telecommunications, Inc.Garcia, J. | 2006

Facts:

Respondent Bayan Telecommunications, Inc.3

(Bayantel) is a legislative franchise holder under RA3259 to establish and operate radio stations fordomestic telecommunications, radiophone,broadcasting and telecasting. Within Quezon City,Bayantel owned several real properties on which itmaintained various telecommunications facilities.

Under RA 3259 Section 14:

(a) The grantee shall be liable to pay the same taxeson its real estate, buildings and personal property,exclusive of the franchise, as other persons orcorporations are now or hereafter may be required bylaw to pay.

(b) The grantee shall further pay to the Treasurer of the Philippines each year, within ten days after theaudit and approval of the accounts as prescribed inthis Act, one and one-half per centum of all gross

receipts from the business transacted under thisfranchise by the said grantee

Meanwhile in the LGC:

SEC. 232. – Power to Levy Real Property Tax. – Aprovince or city or a municipality within theMetropolitan Manila Area may levy an annual advalorem tax on real property such as land, building,

machinery and other improvements not hereinafter

specifically exempted.

Complementing the aforequoted provision is thesecond paragraph of Section 234 of the same Codewhich withdrew any exemption from realty taxheretofore granted to or enjoyed by all persons,natural or juridical, to wit:

SEC. 234 - Exemptions from Real Property Tax. Thefollowing are exempted from payment of the realproperty tax:

xxx xxx xxx

Except as provided herein, any exemption frompayment of real property tax previously granted to, orenjoyed by, all persons, whether natural or juridical,including government-owned-or-controlledcorporations is hereby withdrawn upon effectivity of this Code.

Few months after LGC took effect, Congress enactedRep. Act No. 7633, amending Bayantel’s originalfranchise:

SEC. 11. The grantee, its successors or assigns shall beliable to pay the same taxes on their real estate,buildings and personal property, exclusive of thisfranchise, as other persons or corporations are now orhereafter may be required by law to pay. In additionthereto, the grantee, its successors or assigns shall

http://www.lawphil.net/judjuris/juri2006/mar2006/gr_162015_2006.html#fnt3




pay a franchise tax equivalent to three percent (3%) of all gross receipts of the telephone or othertelecommunications businesses transacted under thisfranchise by the grantee, its successors or assigns andthe said percentage shall be in lieu of all taxes on this

franchise or earnings thereof. Provided, That thegrantee, its successors or assigns shall continue to beliable for income taxes payable under Title II of theNational Internal Revenue Code …. xxx.

Meanwhile, the government of Quezon City, pursuantto the taxing power vested on local government unitsand in relation to Section 232 of the LGC, enacted CityOrdinance No. SP-91, S-93, otherwise known as theQuezon City Revenue Code(QCRC)http://www.lawphil.net/judjuris/juri2006/mar200

6/gr_162015_2006.html - fnt5 imposed underSection 5 thereof, a real property tax on all realproperties in Quezon City, and the withdrawal of exemption from real property tax under Section 234 of the LGC. Furthermore, much like the LGC, the QCRC,under its Section 230, withdrew tax exemptionprivileges in general

Pursuant to the QCRC, new tax declarations forBayantel’s real properties in Quezon City were issued

by the City Assessorand were received by Bayantel.Meanwhile, on March 16, 1995, RA 7925 otherwiseknown as the "Public Telecommunications Policy Act of the Philippines," took effect and Section 23 of the Actprovides:

SEC. 23. Equality of Treatment in the Telecommunications Industry. – Any advantage, favor,privilege, exemption, or immunity granted underexisting franchises, or may hereafter be granted, shall

ipso facto become part of previously grantedtelecommunications franchises and shall be accordedimmediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoingshall neither apply to nor affect provisions of

telecommunications franchises concerning territorycovered by the franchise, the life span of the franchise,or the type of service authorized by the franchise.

On January 7, 1999, Bayantel wrote the office of theCity Assessor seeking the exclusion of its realproperties in the city from the roll of taxable realproperties. DENIED appeal with the Local Board of Assessment Appeals (LBAA). Bayantel did not pay thereal property taxes assessed against it by the QuezonCity government.

Quezon City Treasurer sent out notices of delinquencyfor the total amount of P43,878,208.18, followed bythe issuance of several warrants of levy againstBayantel’s properties.

Bayantel withdrew its appeal with the LBAA andinstead filed with the RTC of Quezon City a petition forprohibition with an urgent application for a temporaryrestraining order (TRO) and/or writ of preliminary

injunction. In the eve of the public auction scheduledthe following day, the lower court issued a TRO,followed, after due hearing, by a writ of preliminaryinjunction via its order of August 20, 2002.

RTC decision: Pursuant to the enabling franchise underSection 11 of Republic Act No. 7633, the real estateproperties and buildings of Bayantel which have beenadmitted to be used in the operation of petitioner’sfranchise described in the following tax declarations







are hereby DECLARED EXEMPT from real estatetaxation

Issue: W/N Bayantel’s real properties in Quezon Cityare exempt from real property taxes under its

legislative franchise

Held: Yes

The lower court resolved the issue in the affirmative,basically owing to the phrase "exclusive of thisfranchise" found in Section 11 of Bayantel’s amendedfranchise, Rep. Act No. 7633. To petitioners, however,the language of Section 11 of Rep. Act No. 7633 isneither clear nor unequivocal. The elaborate and

extensive discussion devoted by the trial court on themeaning and import of said phrase, they add, suggestsas much. It is petitioners’ thesis that Bayantel was inno time given any express exemption from thepayment of real property tax under its amendatoryfranchise.

There seems to be no issue as to Bayantel’s exemptionfrom real estate taxes by virtue of the term "exclusiveof the franchise" qualifying the phrase "same taxes onits real estate, buildings and personal property," found

in Section 14, supra, of its franchise, Rep. Act No.3259, as originally granted.

The legislative intent expressed in the phrase"exclusive of this franchise" distinguishes between two(2) sets of properties, be they real or personal, ownedby the franchisee, namely, (a) those actually, directlyand exclusively used in its radio ortelecommunications business, and (b) those propertieswhich are not so used. It is worthy to note that the

properties subject of the present controversy are onlythose which are admittedly falling under the firstcategory.

Section 14 of Rep. Act No. 3259 effectively works to

grant or delegate to local governments of Congress’inherent power to tax the franchisee’s propertiesbelonging to the second group of properties indicatedabove, that is, all properties which, "exclusive of thisfranchise," are not actually and directly used in thepursuit of its franchise. Necessarily, other properties of Bayantel directly used in the pursuit of its business arebeyond the pale of the delegated taxing power of localgovernments. Ultimately, the inevitable result was thatall realties which are actually, directly and exclusivelyused in the operation of its franchise are "exempted"from any property tax.

Bayantel’s franchise being national in character, the"exemption" thus granted under Section 14 of Rep. ActNo. 3259 applies to all its real or personal propertiesfound anywhere within the Philippine archipelago.

In concrete terms, the realty tax exemption heretoforeenjoyed by Bayantel under its original franchise, butsubsequently withdrawn by force of Section 234 of the

LGC, has been restored by Section 14 of Rep. Act No.7633.

The QCRC just like the LGC, expressly withdrew, underSection 230 thereof all tax exemption privileges ingeneral. This thus raises the question of whether ornot the City’s Revenue Code pursuant to which the citytreasurer of Quezon City levied real property taxesagainst Bayantel’s real properties located within the



City effectively withdrew the tax exemption enjoyed byBayantel under its franchise, as amended.

Bayantel answers that it is only "liable to pay the sametaxes, as any other persons or corporations on all its

real or personal properties, exclusive of its franchise.”Bayantel’s posture is well-taken. While the system of local government taxation has changed with the onsetof the 1987 Constitution, the power of localgovernment units to tax is still limited. The power totax has been delegated by Congress and directlygranted by the Constitution. Under the latter, theexercise of the power may be subject to suchguidelines and limitations as the Congress mayprovide which, however, must be consistent with thebasic policy of local autonomy. Even if the policy isslanted in favor of local taxation, the power to tax isstill primarily vested in the Congress.

In net effect, the controversy presently beforethe Court involves, at bottom, a clash betweenthe inherent taxing power of the legislature,which necessarily includes the power to exempt,and the local government’s delegated power totax under the aegis of the 1987 Constitution.

The Quezon City Revenue Code which imposed realestate taxes on all real properties within the city’sterritory and removed exemptions theretofore"previously granted to, or presently enjoyed by allpersons, whether natural or juridical ….," there canreally be no dispute that the power of the Quezon City

Government to tax is limited by Section 232 of the LGCwhich expressly provides that "a province or city ormunicipality within the Metropolitan Manila Area maylevy an annual ad valorem tax on real property such asland, building, machinery, and other improvement not

hereinafter specifically exempted." Indeed, the grantof taxing powers to LGUs under the Constitutionand the LGC does not affect the power of Congress to grant exemptions to certainpersons, pursuant to a declared national policy. The legal effect of the constitutional grant tolocal governments simply means that ininterpreting statutory provisions on municipaltaxing powers, doubts must be resolved in favorof municipal corporations.

Rep. Act No. 7633 was enacted subsequent to the LGC.Perfectly aware that the LGC has alreadywithdrawn Bayantel’s former exemption fromrealty taxes, Congress opted to pass RA7633using, under Section 11 thereof, exactly thesame defining phrase "exclusive of thisfranchise" which was the basis for Bayantel’sexemption from realty taxes prior to the LGC. The Court views this subsequent piece of legislation asan express and real intention on the part of Congress to once again remove from the LGC’sdelegated taxing power, all of the franchisee’s(Bayantel’s) properties that are actually, directlyand exclusively used in the pursuit of itsfranchise.

WHEREFORE, the petition is DENIED.

NATIONAL POWER CORPORATIONvs.CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA)



(January 30, 2009, BRION)

FACTS:

1993, First Private Power Corporation (FPPC) entered

into a Build-Operate-Transfer agreement withNAPOCOR for the construction of the 215 Megawatt

Bauang Diesel Power Plant in Payocpoc, Bauang, La

Union

• Pursuant to the BOT Agreement, Bauang PrivatePower Corporation (BPPC) which will own,manage and operate the power plant/station,and assume and perform FPPC’s obligationsunder the BOT agreement

• For a fee, BPPC will convert NAPOCOR’s supplied

diesel fuel into electricity and deliver theproduct to NAPOCOR

• BOT agreement provision related to the issue inthe case: 2.03 NAPOCOR shall make availablethe Site to CONTRACTOR for the purpose of building and operating the Power Station at nocost to CONTRACTOR for the periodcommencing on the Effective Date and endingon the Transfer Date and NAPOCOR shall beresponsible for the payment of all real estatetaxes and assessments, rates, and other

charges in respect of the Site and the buildingsand improvements thereon.

The Officer-in-Charge of the Municipal Assessor’s

Office of Bauang, La Union issued a Declarations of

Real Property declaring BPPC’s machineries and

equipment as tax-exempt.

• Municipality of Bauang questioned the taxexemption declarationg before the Regional

Director of the Bureau of Local GovernmentFinance (BLGF)

• Deputy Executive Director and Officer-in-Chargeof the BLGF, Department of Finance RULING:BPPC’s machineries and equipments are subjectto real property tax directed the Assessors’Office to take appropriate action

The Provincial/Municipal Assessors issued Revised Tax

Declarations and cancelled the earlier issued

Declarations of Real Property

• The Municipal Assessor issued a Notice of Assessment and Tax Bill to BPPCassessing/taxing the machineries andequipments amounting to P288,582,848.00 for1995-1998 period received by BPPC’s Vice-President and Plant Manager

1998, NAPOCOR filed a petition with the LBAA asking

that retroactive to 1995, the machineries covered by

the tax declarations be exempt from real property tax

under Section 234(c) LGC and, that these properties

be dropped from the assessment roll pursuant to

Section 206 of the LGC.

• LBAA: denied petition exemption provided bySection 234(c) applies only when a GOCC likeNAPOCOR owns and/or actually usesmachineries and equipment for the generationand transmission of electric power, not so in thiscase appeal to CBAA

• BPPC moved to intervene



• CBAA: dismissed appeal BPPC, and notNAPOCOR, is the actual, direct and exclusiveuser of the equipment and machineries; thus,the exemption under Section 234(c) does not

apply appeal to CTA

• CTA: dismissed NAPOCOR is not theregistered owner of the machineries andequipment but BPPC

NAPOCOR contention: entitled to tax exemption as the

actual, direct, and exclusive user of the machineries

and equipment because:

a. BOT agreement is a financing agreementwhere NAPOCOR is the beneficial owner andthe actual, direct, and exclusive user of the

power plant and BPPC is the lender/creditorthat retains the plant’s legal ownership untilit is fully paid

b. NAPOCOR’s tax exemption should apply to aBOT project since BOT projects are reallygovernment projects and that Congressspecifically considered NAPOCOR’s situationin granting tax exemption to machineriesand equipment used in power generation anddistribution

c. [RELEVANT PART] In interpreting Section

234(c) LGC, related statutes must beconsidered and the task of the courts is toharmonize all these laws, if possible;specifically, Section 234(c) of the LGC wasenacted to clarify or restore NAPOCOR’s realproperty tax exemption so that NAPOCORcan perform its public function of supplyingelectricity to the entire country at affordablerates, while the BOT law was enacted, among

others, to authorize NAPOCOR to enter intoBOT contracts with the private sector so thatNAPOCOR can carry out its mandate; the taxexemption under Section 234(c) of the LGCmust be given effect as the only legal and

cogent way of harmonizing it withNAPOCOR’s Charter and the BOT law

ISSUE: Is the BOT Project included in NAPOCOR’s tax

exemption?

RULING: NO

• Section 234(c) LGC is clear and unambiguouso Exempt from real property taxation are:

(a) all machineries and equipment; (b)

actually, directly, and exclusively usedby; (c) [local water districts and] GOCCsengaged in the [supply and distribution of water and/or] generation andtransmission of electric power

o In FELS Energy, Inc. v. Province of Batangas: Province of Batangas assessedreal property taxes against FELS Energy,Inc. – the owner of a barge used ingenerating electricity under anagreement with NAPOCOR, which

provided that NAPOCOR shall pay all of FELS’ real estate taxes and assessments SC RULING: didn’t recognize the taxexemption claimed, since NAPOCOR wasnot the actual, direct and exclusive userof the barge as required by Sec. 234 (c)and since tax exemptions must be strictlyconstrued THUS mere undertaking of NAPOCOR under the Agreement (shall be



responsible for the payment of all realestate taxes and assessments) does not justify the exemption and the privilegegranted to petitioner NAPOCOR cannot beextended to FELS

• HERE, records show that NAPOCOR admitsBPPC’s ownership of the machineries andequipment in the power plant and this issupported by provisions of the BOT agreement

o Thus real issue here is not ownership butuse of the machineries andequipment since the claim under Sec.234(c) LGC is premised on actual,

direct and exclusive use

• NAPOCOR characterizes the BOT Agreement asa mere financing agreement where BPPC is thefinancier, while NAPOCOR is the actual user of

the properties SC disagrees

o Build-operate-and-transfer : There is aproject proponent who constructs theproject at its own cost and subsequentlyoperates and manages it. This proponent

secures the return on its investmentsfrom those using the project’s facilitiesthrough appropriate tolls, fees, rentals,and charges not exceeding thoseproposed in its bid or as negotiated. Atthe end of the fixed term agreed upon,the project proponent transfers theownership of the facility to thegovernment agency.

o HERE, BPPC has complete ownership bothlegal and beneficial of the project,including the machineries and equipmentused, subject only to the transfer of theseproperties without cost to NAPOCOR after

the lapse of the period agreed upon

UNDENIABLE that there is somekind of "financing" arrangement iscontemplated – in the sense thatthe private sector proponent shallinitially shoulder the heavy cost of constructing the project’s buildingsand structures and of purchasingthe needed machineries andequipment

But the arrangement is not just asimple provision of funds, since theprivate sector proponent not onlyconstructs and buys the necessaryassets to put up the project, butoperates and manages it as wellduring an agreed period that wouldallow it to recover its basic costs

and earn profits Thus, the

private sector proponent goes intobusiness for itself, assuming risksand incurring costs for its account.If it receives support from thegovernment at all during theagreed period, these are pre-agreed items of assistance gearedto ensure that the BOTagreement’s objectives – both forthe project proponent and for the



government – are achieved

Thus, a BOT arrangement is suigeneris

• It is different from the usualfinancing arrangementswhere funds are advanced toa borrower who uses thefunds to establish a projectthat it owns, subject only toa collateral securityarrangement to guardagainst the nonpayment of the loan

• It is different from anarrangement where agovernment agency borrowsfunds to put a project from aprivate sector-lender who isthereafter commissioned torun the project for thegovernment agency here,the government agency isthe owner of the project

from the beginning, and thelender-operator is merely itsagent in running the project

o THUS, consistent with the BOT conceptand as implemented, BPPC – the owner-manager-operator of the project – is theactual user of its machineries andequipment BPPC’s ownership and use

of the machineries and equipment areactual, direct, and immediate, whileNAPOCOR’s is contingent and, at thisstage of the BOT Agreement, notsufficient to support its claim for tax

exemption

CONCLUSION: CTA committed noreversible error in denyingNAPOCOR’s claim for taxexemption

• SC: for these same reasons also rejectNAPOCOR’s argument that the machineries andequipment must be subjected to a lower

assessment level

o Since the basis for the application of theclaimed differential treatment orassessment level is the same as theclaimed tax exemption, the lowertribunals correctly found that there is nobasis to apply the lower assessment levelof 10%

• The real concern for NAPOCOR in this case is its

assumption under the BOT agreement of BPPC’sreal property tax liability (which in itself is arecognition that BPPC’s real properties are notreally tax exempt) thus NAPOCOR argues that if no tax exemption will be recognized, theresponsibility it assumed carries practicalimplications that are very difficult to ignore (thealleged detriment to the public interest that willresult if the levy, sale, and transfer of the



machineries and equipment were to be

completed machineries and equipment havebeen sold in public auction and the buyer,respondent Province, will consolidate itsownership over these properties on February 1,

2009)

o SC: while recognizing these concerns, thesame are not relevant to the dispositionof the issues in this case

Local government real propertytaxation also has constitutionalunderpinnings, based on Section 5of Article X of the Constitution that

we cannot simply ignore

In FELScase: The right of local governmentunits to collect taxes due mustalways be upheld to avoid severe

tax erosion. This consideration isconsistent with the State policy toguarantee the autonomy of localgovernments and the objective of the Local Government Code that

they enjoy genuine and meaningfullocal autonomy to empower themto achieve their fullestdevelopment as self-reliantcommunities and make themeffective partners in the attainmentof national goals

CONCLUSION: DENY NAPOCOR’s petition for lack of

merit. We AFFIRM the appealed decision of the Court

of Tax Appeals.

Brion, J.

The NPC is a GOCC mandated by law to undertake the production of electricity and the transmission of electric power on a nationwide basis. TheNPC entered into an Energy Conversion Agreement (ECA) with Mirant

Pagbilao Corporation under a build-operate-transfer (BOT) arrangement.Mirant will build a coal-fired thermal power plant on lots owned by the NPCin Pagbilao, Quezon and operate the power plant for 25 years. The NPC willsupply the fuel, take the power generated, and use it to supply electricpower. At the end of 25 years, Mirant will transfer the power plant to theNPC without compensation.

Among the obligations undertaken by the NPC under the ECA was thepayment of all taxes that the government may impose on Mirant. Under Article 11.1, the NPC shall be responsible for the payment of (b) all realestate taxes and assessments, rates and other charges in respect of theSite, the buildings and improvements thereon and the Power Station.

The Municipality of Pagbilao assessed Mirant’s real property taxes on thepower plant and its machineries as P 1,538,076,000.00 for the period of 1997 to 2000. The NPC filed a petition before the Local Board of Assessment

Appeals (LBAA) and objected to the assessment against Mirant on the claimthat it (the NPC) is entitled to the tax exemptions provided in Section 234,paragraphs (c) and (e) of the Local Government Code. The LBAA dismissedthe NPC’s petition.

The Central Board of Assessment Appeals (CBAA) and the Court of Tax Appeals affirmed the denial of the NPC’s claim for exemption.

WON NPC can claim tax exemption for taxes due from Mirant? No



- A taxpayer's failure to question the assessment before the LBAA rendersthe assessment of the local assessor final, executory, and demandable, thusprecluding the taxpayer from questioning the correctness of the assessment.- Section 226 of LGC lists down two entities vested with personality tocontest an assessment: the owner and the person with legal interest in theproperty.

- The liability for taxes generally rests on the owner of the real property atthe time the tax accrues. However, personal liability for realty taxes mayalso expressly rest on the entity with the beneficial use of the real property.- In either case, unpaid realty tax attaches to the property but is directlychargeable against the taxable person who has actual and beneficial use andpossession of the property regardless of whether that person is the owner.- The NPC is neither the owner nor the possessor/user of the machineries.Under Article 12.2 of the ECA, Mirant shall, directly or indirectly, own thePower Station and all the fixtures, fittings, machinery and equipment on theSite.- Legal interest should be an interest that is actual and material, direct andimmediate, not simply contingent or expectant. The NPC’s ownership of theplant will happen only after the lapse of the 25 year period; until such time

arrives, the NPC's claim of ownership is merely contingent.- On liability for taxes, the NPC indeed assumed responsibility for the taxesdue on the power plant and its machineries. The tax liability we refer to,however, is the liability arising from law that the local government unit canrightfully and successfully enforce, not the contractual liability that isenforceable between the parties to a contract. By law, the tax liability restson Mirant based on its ownership, use, and possession of the plant and itsmachineries- The NPC's contractual liability alone cannot be the basis for theenforcement of tax liabilities against it by the local government unit. TheNPC is neither the owner, nor the possessor or user of the property taxed.No interest on its part justifies any tax liability on its part other than itsvoluntary contractual undertaking. Only Mirant as the contractual obligor,not the local government unit, can enforce the tax liability that the NPCcontractually assumed. The NPC does not have the “legal interest” to give itpersonality to protest the tax imposed by law on Mirant.

- The stipulation is between the NPC and Mirant and does not bind thirdpersons who are not privy to the contract. There is no privity between thelocal government units and the NPC, even though both are publiccorporations. An LGU is independent and autonomous in its taxing powers.- Section 130 (d) of LGC: d) The revenue collected pursuant to theprovisions of this Code shall inure solely to the benefit of, and be subject to

disposition by, the local government unit- Only the parties to the ECA can exact and demand the enforcement of therights and obligations it established. Only Mirant can demand compliancefrom the NPC for payment of real property tax the NPC assumed to pay. Thelocal government units can not be compelled to recognize the protest of atax assessment from the NPC, against whom it cannot enforce the taxliability.

- To claim exemption in Sec 234(c) of LGC, a claimant must prove twoelements:

a. the machineries and equipment are actually, directly, and exclusively

used by ... government-owned or controlled corporations; andb. the ... government-owned and controlled corporations claiming

exemption must be engaged in the ... generation and transmission of electric power.- The GOCC claiming exemption must be the entity actually, directly, andexclusively using the real properties, and the use must be devoted to thegeneration and transmission of electric power. Neither the NPC nor Mirantsatisfies both requirements. Mirant, a private corporation, uses and operatesthem. NPC does not actually, directly, and exclusively use them.- It is wrong to allow the NPC to assume in its BOT contracts the liability of the other contracting party for taxes and at the same time allow NPC to turnaround and say that no taxes should be collected because the NPC is tax-exempt as a GOCC. It is grossly unfair to the people of the Province of Quezon and the Municipality of Pagbilao who stand to benefit from the taxprovisions of the LGC.

Dispositive: Affirmed the decision of the Court of Tax Appeals en banc.

TAX 2 Feb 21 Incomplete Compilation

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