PEPSI-COLA V CITY OF BUTUAN

FACTS: That Ordinance No. 110 as amended, imposes a tax on any person, association, etc., of P0.10 per case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest the amount of P4,926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961.

ISSUE: Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature of an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and confiscatory; (4) it is highly unjust and discriminatory; and (5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is an unconstitutional delegation of legislative powers.

HELD:

RATIO: (2) it amounts to double taxation (5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is an unconstitutional delegation of legislative powers.

Then, again, the general principle against delegation of legislative powers, in consequence of the theory of separation of powers2 is subject to one well-established exception, namely: legislative powers may be delegated to local governments — to which said theory does not apply3 — in respect of matters of local concern.

(3) it is excessive, oppressive and confiscatory

The tax of "P0.10 per case of 24 bottles," of soft drinks or carbonated drinks — in the production and sale of which plaintiff is engaged — or less than P0.0042 per bottle, is manifestly too small to be excessive, oppressive, or confiscatory.

(1) it partakes of the nature of an import tax; (4) it is highly unjust and discriminatory;

The first and the fourth objections merit, however, serious consideration. In this connection, it is noteworthy that the tax prescribed in section 3 of Ordinance No. 110, as originally approved, was imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. Thus, it would seem that the intent was then to levy a tax upon the sale of said merchandise. As amended by Ordinance No. 122, the tax is, however, imposed only upon "any agent and/or consignee of any person, association, partnership, company or corporation engaged in selling ... soft drinks or carbonated drinks." And, pursuant to section 3-A, which was inserted by said Ordinance No. 122:

... — Definition of the Term Consignee or Agent. — For purposes of this Ordinance, a consignee of agent shall mean any person, association, partnership, company or corporation who acts in the place of another by authority from him or one entrusted with the business of another or to whom is consigned or shipped no less than 1,000 cases of hard liquors or soft drinks every month for resale, either retail or wholesale.

As a consequence, merchants engaged in the sale of soft drink or carbonated drinks, are not subject to the tax, unless they are agents and/or consignees of another dealer, who, in the very nature of things, must be one engaged in business outside the City.

Besides, the tax would not be applicable to such agent and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to him every month. When we consider, also, that the tax "shall be based and computed from the cargo manifest or bill of lading ... showing the number of cases" — not sold — but "received" by the taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax partakes of the nature of an import duty, which is beyond defendant's authority to impose by express provision of law.

PHILIPPINE PETROLEUM CORPORATION V PILILLA

FACTS: Philippine Petroleum Corporation (PPC for short) is a business enterprise engaged in the manufacture of lubricated oil

Under Section 142 of the National Internal Revenue Code of 1939, manufactured oils and other fuels are subject to specific tax.

On June 28, 1973, Presidential Decree No. 231, otherwise known as the Local Tax Code was issued by former President Ferdinand E. Marcos governing the exercise by provinces, cities, municipalities and barrios of their taxing and other revenue-raising powers. Sections 19 and 19 (a) thereof, provide among others, that the municipality may impose taxes on business, except on those for which fixed taxes are provided on manufacturers, importers or producers of any article of commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits and/or wines in accordance with the schedule listed therein.

The Secretary of Finance issued Provincial Circular No. 26-73 dated December 27, 1973, directed to all provincial, city and municipal treasurers to refrain from collecting any local tax imposed in old or new tax ordinances in the business of manufacturing, wholesaling, retailing, or dealing in petroleum products subject to the specific tax under the National Internal Revenue Code (Rollo, p. 76).

Likewise, Provincial Circular No. 26 A-73 dated January 9, 1973 was issued by the Secretary of Finance instructing all City Treasurers to refrain from collecting any local tax imposed in tax ordinances enacted before or after the effectivity of the Local Tax Code on July 1, 1973, on the businesses of manufacturing, wholesaling, retailing, or dealing in, petroleum products subject to the specific tax under the National Internal Revenue Code (Rollo, p. 79).

Respondent Municipality of Pililla, Rizal, through Municipal Council Resolution No. 25, S-1974 enacted Municipal Tax Ordinance No. 1, S-1974 otherwise known as "The Pililla Tax Code of 1974" on June 14, 1974, which took effect on July 1, 1974 (Rollo, pp. 181-182). Sections 9 and 10 of the said ordinance imposed a tax on business, except for those for which fixed taxes are provided in the Local Tax Code on manufacturers, importers, or producers of any article of commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits and/or wines in accordance with the schedule found in the Local Tax Code, as well as mayor's permit, sanitary inspection fee and storage permit fee for flammable, combustible or explosive substances (Rollo, pp. 183-187), while Section 139 of the disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges (Ibid., p. 193).

On June 3, 1977, P.D. 1158 otherwise known as the National Internal Revenue Code of 1977 was enacted, Section 153 of which specifically imposes specific tax on refined and manufactured mineral oils and motor fuels.

ISSUE: whether or not petitioner PPC whose oil products are subject to specific tax under the NIRC, is still liable to pay (a) tax on business and (b) storage fees, considering Provincial Circular No. 6-77; and mayor's permit and sanitary inspection fee unto the respondent Municipality of Pililla, Rizal, based on Municipal Ordinance No. 1.

HELD:

RATIO: There is no question that Pililla's Municipal Tax Ordinance No. 1 imposing the assailed taxes, fees and charges is valid especially Section 9 (A) which according to the trial court "was lifted in toto and/or is a literal reproduction of Section 19 (a) of the Local Tax Code as amended by P.D. No. 426." It conforms with the mandate of said law.

But P.D. No. 426 amending the Local Tax Code is deemed to have repealed Provincial Circular Nos. 26-73 and 26 A-73 issued by the Secretary of Finance when Sections 19 and 19 (a), were carried over into P.D. No. 426 and no exemptions were given to manufacturers, wholesalers, retailers, or dealers in petroleum products.

Necessarily, there could not be any other logical conclusion than that the framers of P.D. No. 426 really and actually intended to terminate the effectivity and/or enforceability of Provincial Circulars Nos. 26-73 and 26 A-73 inasmuch as clearly these circulars are in contravention with Sec. 19 (a) of P.D. 426-the amendatory law to P.D. No. 231. That intention to terminate is very apparent and in fact it is expressed in clear and unequivocal terms in the effectivity and repealing clause of P.D. 426 . . .

Furthermore, while Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended by P.D. 426, wherein the municipality is granted the right to levy taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself

The exercise by local governments of the power to tax is ordained by the present Constitution.1âwphi1 To allow the continuous effectivity of the prohibition set forth in PC No. 26-73 (1) would be tantamount to restricting their power to tax by mere administrative issuances. Under Section 5, Article X of the 1987 Constitution, only guidelines and limitations that may be established by Congress can define and limit such power of local governments. Thus:

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

The storage permit fee being imposed by Pililla's tax ordinance is a fee for the installation and keeping in storage of any flammable, combustible or explosive substances. Inasmuch as said storage makes use of tanks owned not by the municipality of Pililla, but by petitioner PPC, same is obviously not a charge for any service rendered by the municipality as what is envisioned in Section 37 of the same Code.

BASCO V PAGCOR

FACTS: The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 "to establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines."

Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Government to regulate and centralize all games of chance authorized by existing franchise or permitted by law, under the following declared policy —

(a) To centralize and integrate the right and authority to operate and conduct games of chance into one corporate entity to be controlled, administered and supervised by the Government.

ISSUE: Whether or no PAGCOR should be taxed

HELD: no

RATIO: Their contention stated hereinabove is without merit for the following reasons:

(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent power to tax" (Bernas, the Revised [1973] Philippine Constitution, Vol. 1, 1983 ed. p. 445).

(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that "municipal corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January 18, 1957) which has the power to "create and abolish municipal corporations" due to its "general legislative powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has the power of control over Local governments (Hebron v. Reyes, G.R. No. 9124, July 2, 1950). And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power.

(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as 1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government

Therefore, only the National Government has the power to issue "licenses or permits" for the operation of gambling. Necessarily, the power to demand or collect license fees which is a consequence of the issuance of "licenses or permits" is no longer vested in the City of Manila.

(d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government.

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government.

The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government.

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation"

The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law.

In the absence of express grant of power to enact, ordinance provisions on this subject which are inconsistent with the state laws are void.

NAPOCOR V CITY OF CABANATUAN

FACTS: Petitioner, whose capital stock was subscribed and paid wholly by the Philippine Government,10 refused to pay the tax assessment. It argued that the respondent has no authority to impose tax on government entities. Petitioner also contended that as a non-profit organization, it is exempted from the payment of all forms of taxes, charges, duties or fees11 in accordance with sec. 13 of Rep. Act No. 6395, as amended,

ISSUE: Whether or not the City of Cabanatuan cannot impose tax on NAPOCOR

HELD:

RATIO: nothing prevents Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax.46 In enacting the LGC, Congress exercised its prerogative to tax instrumentalities and agencies of government as it sees fit.

"Thus, reading together sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in section 133, the taxing power of local governments cannot extend to the levy of inter alia, 'taxes, fees and charges of any kind on the national government, its agencies and instrumentalities, and local government units'; however, pursuant to section 232, provinces, cities and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, 'real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted for consideration or otherwise, to a taxable person as provided in the item (a) of the first paragraph of section 12.'"

In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the respondent city government to impose on the petitioner the franchise tax in question.

In its general signification, a franchise is a privilege conferred by government authority, which does not belong to citizens of the country generally as a matter of common right.48 In its specific sense, a franchise may refer to a general or primary franchise, or to a special or secondary franchise. The former relates to the right to exist as a corporation, by virtue of duly approved articles of incorporation, or a charter pursuant to a special law creating the corporation

On the other hand, the latter refers to the right or privileges conferred upon an existing corporation such as the right to use the streets of a municipality to lay pipes of tracks, erect poles or string wires.

a franchise tax is "a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state."53 It is not levied on the corporation simply for existing as a corporation, upon its property54 or its income,55 but on its exercise of the rights or privileges granted to it by the government. Hence, a corporation need not pay franchise tax from the time it ceased to do business and exercise its franchise.56 It is within this context that the phrase "tax on businesses enjoying a franchise" in section 137 of the LGC should be interpreted and understood. Verily, to determine whether the petitioner is covered by the franchise tax in question, the following requisites should concur: (1) that petitioner has a "franchise" in the sense of a secondary or special franchise; and (2) that it is exercising its rights or privileges under this franchise within the territory of the respondent city government.

These contentions must necessarily fail.

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. The taxable entity is the corporation which exercises the franchise, and not the individual stockholders.

To be sure, the ownership by the National Government of its entire capital stock does not necessarily imply that petitioner is not engaged in business.

proprietary functions are those that are undertaken only by way of advancing the general interest of society, and are merely optional on the government

Certainly, these activities do not partake of the sovereign functions of the government. They are purely private and commercial undertakings, albeit imbued with public interest.

CITY OF IRIGA V CASURECO III

FACTS: CASURECO III is an electric cooperative duly organized and existing by virtue of Presidential Decree (PD) 269,4 as amended, and registered with the National Electrification Administration (NEA). It is engaged in the business of electric power distribution to various end-users and consumers within the City of Iriga and the municipalities of Nabua, Bato, Baao, Buhi, Bula and Balatan of the Province of Camarines Sur, otherwise known as the "Rinconada area."5

Sometime in 2003, petitioner City of Iriga required CASURECO III to submit a report of its gross receipts for the period 1997-2002 to serve as the basis for the computation of franchise taxes, fees and other charges.6 The latter complied7 and was subsequently assessed taxes.

On January 7, 2004, petitioner made a final demand on CASURECO III to pay the franchise taxes due for the period 1998-2003 and real property taxes due for the period 1995-2003.8 CASURECO III, however, refused to pay said taxes on the ground that it is an electric cooperative provisionally registered with the Cooperative Development Authority (CDA),9 and therefore exempt from the payment of local taxes.10

ISSUE: Whether or not CASURECO is correct

HELD: No

RATIO: CASURECO III is not exempt from payment of franchise tax

PD 269, which took effect on August 6, 1973, granted electric cooperatives registered with the NEA, like CASURECO III, several tax privileges, one of which is exemption from the payment of "all national government, local government and municipal taxes and fees, including franchise, filing, recordation, license or permit fees or taxes."22

On March 10, 1990, Congress enacted into law RA 6938,23 otherwise known as the "Cooperative Code of the Philippines," and RA 693924 creating the CDA. The latter law vested the power to register cooperatives solely on the CDA, while the former provides that electric cooperatives registered with the NEA under PD 269 which opt not to register with the CDA shall not be entitled to the benefits and privileges under the said law.

On January 1, 1992, the LGC took effect, and Section 193 thereof withdrew tax exemptions or incentives previously enjoyed by "all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions."25

Therefore, CASURECO III can no longer invoke PD 269 to evade payment of local taxes. Moreover, its provisional registration with the CDA which granted it exemption for the payment of local taxes was extended only until May 4, 1992. Thereafter, it can no longer claim any exemption from the payment of local taxes, including the subject franchise tax.1âwphi1

In National Power Corporation v. City of Cabanatuan,29 the Court declared that "a franchise tax is „a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state."30 It is not levied on the corporation simply for existing as a corporation, upon its property or its income, but on its exercise of the rights or privileges granted to it by the government.31 "It is within this context that the phrase „tax on businesses enjoying a franchise‟ in Section 137 of the LGC should be interpreted and understood

MCIAA V MARCOS

FACTS: Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. 6958, mandated to principally undertake the economical, efficient and effective control, management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City

Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter:

Sec. 14. Tax Exemptions. -- The Authority shall be exempt from realty taxes imposed by the National Government or any of its political subdivisions, agencies and instrumentalities x x x.

On October 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 several parcels of land belonging to the petitioner.

ISSUE: whether or not MCIAA is exempted from local tax

HELD: No.

RATIO: 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 or any of its political subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is the rule and exemption therefrom the exception, the exemption may thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule is where the exemption was granted to private parties based on material consideration of a mutual nature, which then becomes contractual and is thus covered by the non-impairment clause of the Constitution.[23]

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 taxation.

Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units as follows:

SEC. 133. Common Limitations on the Taxing Power of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

(o) TAXES, FEES OR CHARGES OF ANY KIND ON THE NATIONAL GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES, AND LOCAL GOVERNMENT UNITS. (emphasis supplied)

Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. It provides:

SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

On the other hand, the LGC authorizes local government units to grant tax exemption privileges. Thus, Section 192 thereof provides:

SEC. 192. Authority to Grant Tax Exemption Privileges.-- Local government units may, through ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and conditions as they may deem necessary.

The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local government units and the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. The use of exceptions or provisos in these sections, as shown by the following clauses:

(1) unless otherwise provided herein in the opening paragraph of Section 133;

(2) Unless otherwise provided in this Code in Section 193;

(3) not hereafter specifically exempted in Section 232; and

(4) Except as provided herein in the last paragraph of Section 234

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

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn.

The terms Republic of the Philippines and National Government are not interchangeable. The former is broader and synonymous with Government of the Republic of the Philippines which the Administrative Code of 1987 defines as the corporate governmental entity through which the functions of government are exercised throughout the Philippines, including, save as the contrary appears from the context, the various arms through which political authority is made affective in the Philippines, whether pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local government.[27] These autonomous regions, provincial, city, municipal or barangay subdivisions are the political subdivisions.[28]

On the other hand, National Government refers to the entire machinery of the central government, as distinguished from the different forms of local governments.[29] The National Government then is composed of the three great departments: the executive, the legislative and the judicial.[30]

An agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein;[31] while an instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned and controlled corporations.[32]

If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption from payment of real property taxes under the last sentence of the said section to the agencies and instrumentalities of the National Government mentioned in Section 133(o), then it should have restated the wording of the latter.

CALLANTA V OMBUDSMAN

FACTS: It is alleged that a general revision of assessment was conducted by the Office of the City Assessor in 1988 and sometime thereafter. Notices of assessment together with the new tax declarations were subsequently sent to the property owners. Thereafter, respondents, without the authority of the Local Board of Assessment Appeals, reassessed the values of certain properties, in contravention of Sec. 30 of P.D. 464. The said assessment resulted in the reduction of assessed values of the properties x x x.

ISSUE: Whether or not the City Assessor may reconsider real property assessment

HELD: NO

RATIO: Sec. 22, PD 464[14](now Sec. 220 of RA 7160), which reads:

Sec. 22. Valuation of Real Property. Upon the discovery of real property or during the general revision of property assessments as provided in Section twenty-one of this Code or at any time when requested by the person in whose name the property is declared, the provincial or city assessor or his authorized deputy shall make an appraisal and assessment in accordance with Section five hereof of the real property listed and described in the declaration irrespective of any previous assessment or taxpayers valuation thereon: Provided, however, That the assessment of real property shall not be increased oftener once every five years in the absence of new improvements increasing the value of said property or of any change in its use, except as otherwise provided in this Code.

The instances referred to [under Sec. 22] are as follows:

1.) upon the discovery of real property;

2.) during the general revision of property assessments as provided in Section 21 of the Code; and

3.) at anytime [sic] when requested by the person in whose name the property is declared.

It is not disputed that the assessment/valuation involved herein were conducted by virtue of the 1988 general revision of property assessments under No. 2 instance above.

After an assessment has been conducted, the assessor shall within thirty days issue a written notice of such new or revised assessment to the persUnder the aforecited procedure, the issuance of a notice of assessment by the local assessor shall be his last action on a particular assessment. On the side of the property owner, it is this last action which gives him [the] right to appeal to the Local Board of Assessment Appeals. The above procedure also, does not grant the property owner the remedy of filing a motion for reconsideration before the local assessor.

The act of herein petitioners in providing the corresponding notices of assessment the chance for the property owners concerned to file a motion for reconsideration and for acting on the motions filed is not in accordance with law and in excess of their authority and therefore constitutes ultra vires acts.[16]

In the case at bar, the second instance gave rise to the revised assessed values for which the property owners subsequently sought reconsideration. Sec. 30 of the same Code is equally clear that the aggrieved owners should have brought their appeals before the LBAA. Unfortunately, despite the advice to this effect contained in their respective notices of assessment, the owners chose to bring their requests for a review/readjustment before the city assessor, a remedy not sanctioned by the law. To allow this procedure would indeed invite corruption in the system of appraisal and assessment. on in whose name the property is declared.

While Sec. 23 requires the local assessor to certify to the finance secretary that the general revision has been finished, such certification is, however, not the operative act for the effectivity of the new assessments. This interpretation is bolstered by the fact that under the Local Government Code of 1991,[20] Title Two, Book II of which has replaced the Real Property Tax Code, there is no longer any provision requiring such certification.

In the same vein, we have said that the assessment is deemed made when the notice to this effect is released, mailed or sent to the taxpayer for the purpose of giving effect to said assessment.[22]

PHILRECA V SEC. OF DILG

FACTS: Under P.D. No. 269, as amended, or the National Electrification Administration Decree, it is the declared policy of the State to provide the total electrification of the Philippines on an area coverage basis the same being vital to the people and the sound development of the nation.[1] Pursuant to this policy, P.D. No. 269 aims to promote, encourage and assist all public service entities engaged in supplying electric service, particularly electric cooperatives by giving every tenable support and assistance to the electric cooperatives coming within the purview of the law.[2] Accordingly, Section 39 of P.D. No. 269 provides for the following tax incentives to electric cooperatives:

SECTION 39. Assistance to Cooperatives; Exemption from Taxes, Imposts, Duties, Fees; Assistance from the National Power Corporation. Pursuant to the national policy declared in Section 2, the Congress hereby finds and declares that the following assistance to cooperative is necessary and appropriate:

(a) Provided that it operates in conformity with the purposes and provisions of this Decree, cooperatives (1) shall be permanently exempt from paying income taxes, and (2) for a period ending on December 31 of the thirtieth full calendar year after the date of a cooperative's organization or conversion hereunder, or until it shall become completely free of indebtedness incurred by borrowing, whichever event first occurs, shall be exempt from the payment (a) of all National Government, local government and municipal taxes and fees, including franchise, filing, recordation, license or permit fees or taxes and any fees, charges, or costs involved in any court or administrative proceeding in which it may be a party, and (b) of all duties or imposts on foreign goods acquired for its operations, the period of such exemption for a new cooperative formed by consolidation, as provided for in Section 29, to begin from as of the date of the beginning of such period for the constituent consolidating cooperative which was most recently organized or converted under this Decree: Provided, That the Board of Administrators shall, after consultation with the Bureau of Internal Revenue, promulgate rules and regulations for the proper implementation of the tax exemptions provided for in this Decree.

.[3]

From 1971 to 1978, in order to finance the electrification projects envisioned by P.D. No. 269, as amended, the Philippine Government, acting through the National Economic Council (now National Economic Development Authority) and the NEA, entered into six (6) loan agreements with the government of the United States of America through the United States Agency for International Development (USAID) with electric cooperatives, including petitioners ANECO, ILECO I and ISELCO I, as beneficiaries. The six (6) loan agreements involved a total amount of approximately US$86,000,000.00. These loan agreements are existing until today.

ISSUE: Whether or not there is a violation of the Equal Protection Clause

HELD: No

RATIO: A cooperative under R.A. No. 6938 is defined as:

[A] duly registered association of persons with a common bond of interest, who have voluntarily joined together to achieve a lawful common or social economic end, making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles.[10]

Nowhere in P.D. No. 269, as amended, does it require cooperatives to make equitable contributions to capital. Petitioners themselves admit that to qualify as a member of an electric cooperative under P.D. No. 269, only the payment of a P5.00 membership fee is required which is even refundable the moment the member is no longer interested in getting electric service from the cooperative or will transfer to another place outside the area covered by the cooperative.[13]

Another principle adhered to by the Cooperative Code is the principle of subsidiarity. Pursuant to this principle, the government may only engage in development activities where cooperatives do not posses the capability nor the resources to do so and only upon the request of such cooperatives.[15]

Thus, Article 2 of the Cooperative Code provides:

Art. 2. Declaration of Policy. It is the declared policy of the State to foster the creation and growth of cooperatives as a practical vehicle for prompting self-reliance and harnessing people power towards the attainment of economic development

and social justice. The State shall encourage the private sector to undertake the actual formation and organization to cooperatives and shall create an atmosphere that is conducive to the growth and development of these cooperatives.

Towards this end, the Government and all its branches, subdivisions, instrumentalities and agencies shall ensure the provision of technical guidance, financial assistance and other services to enable said cooperatives to develop into viable and responsive economic enterprises and thereby bring about a strong cooperative movement that is free from any conditions that might infringe upon the autonomy or organizational integrity of cooperatives.

Further, the State recognizes the principle of subsidiarity under which the cooperative sector will initiate and regulate within its own ranks the promotion and organization, training and research, audit and support services relating to cooperatives with government assistance where necessary.[16]

Accordingly, under the charter of the CDA, or the primary government agency tasked to promote and regulate the institutional development of cooperatives, it is the declared policy of the State that:

[g]overnment assistance to cooperatives shall be free from any restriction and conditionality that may in any manner infringe upon the objectives and character of cooperatives as provided in this Act.The State shall, except as provided in this Act, maintain the policy of noninterference in the management and operation of cooperatives.[17]

In contrast, P.D. No. 269, as amended by P.D. No. 1645, is replete with provisions which grant the NEA, upon the happening of certain events, the power to control and take over the management and operations of cooperatives registered under it.

The extent of government control over electric cooperatives covered by P.D. No. 269, as amended, is largely a function of the role of the NEA as a primary source of funds of these electric cooperatives. It is crystal clear that NEA incurred loans from various sources to finance the development and operations of the electric cooperatives.

In contrast, cooperatives under R.A. No. 6938 are envisioned to be self-sufficient and independent organizations with minimal government intervention or regulation.

Article 128 of the Cooperative Code provides that all cooperatives registered under previous laws shall be deemed registered with the CDA upon submission of certain requirements within one year. However, cooperatives created under P.D. No. 269, as amended, are given three years within which to qualify and register with the CDA, after which, provisions of P.D. No. 1645 which expand the powers of the NEA over electric cooperatives, would no longer apply.[22]

Second, the classification of tax-exempt entities in the Local Government Code is germane to the purpose of the law.

Thus, while each government unit is granted the power to create its own sources of revenue, Congress, in light of its broad power to tax, has the discretion to determine the extent of the taxing powers of local government units consistent with the policy of local autonomy.

PHIL. PORTS AUTHORITY V CITY OF ILOILO

FACTS: City of Iloilo sent a Notice of Sale of Delinquent Real Properties to petitioner Philippine Ports Authority (PPA) for non-payment of real property taxes covering its facilities and edifices at the Iloilo port

The respondent city was the only winning bidder at the public auction conducted by the City Treasurer and the Assessor.

The petitioner contends that the subject properties are owned by the Republic of the Philippines. It avers that while under Section 30 of P.D. No. 857, the said properties were transferred to the petitioner, the Republic of the Philippines retained ownership over the same. It claims that while it administers and operates the port of Iloilo, it does so for the benefit of the general public and not for taxable persons. As such, the said properties are exempt from realty taxes under Section 40 of P.D. No. 464. The petitioner further asserts that P.D. No. 1931 and E.O. No. 93 have no application to properties owned by the Republic of the Philippines.

ISSUE: Whether or not the properties are taxable

HELD: No

RATIO: Under the last paragraph of Section 234 of Republic Act No. 7160, otherwise known as the Local Government Code (LGC), the petitioners exemptions from the real property tax were withdrawn upon the effectivity of the law.

The justification for this restricted exemption in Section 234(a) seems obvious: to limit further tax exemption privileges, especially in light of the general provision on withdrawal of tax exemption privileges in Section 193 and the special provision on withdrawal of exemption from payment of real property taxes in the last paragraph of Section 234.

The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.

. It must be stressed that the said port facilities and appurtenances are the petitioners corporate patrimonial properties, not for public use, and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business. The petitioner is clothed, under P.D. No. 857, with corporate status and corporate powers in the furtherance of its proprietary interests

Clearly then, the petitioner is a profit-earning corporation; hence, its patrimonial properties are subject to tax.[13]

We reject the petitioners claim that it is exempt from the payment of real property taxes, considering that it does not use the port facilities and buildings. This Court overruled a similar submission as follows:

Under the Real Property Tax Code, real property is classified for assessment purposes on the basis of actual use, which is defined as the purpose for which the property is principally or predominantly utilized by the person in possession of the property.

CITY ASSESSOR OF CEBU V ASSN. OF BENEVOLA DE CEBU

FACTS: Respondent Association of Benevola de Cebu, Inc. is a non-stock, non-profit organization organized under the laws of the Republic of the Philippines and is the owner of Chong Hua Hospital (CHH) in Cebu City. In the late 1990s, respondent constructed the CHH Medical Arts Center (CHHMAC). Thereafter, an April 17, 1998 Certificate of Occupancy[7] was issued to the center with a classification of Commercial [Clinic].

Petitioner City Assessor of Cebu City assessed the CHHMAC building under Tax Declaration (TD) No. 97 GR-04-024-02529 as commercial with a market value of PhP 28,060,520 and an assessed value of PhP 9,821,180 at the assessment level of 35% for commercial buildings, and not at the 10% special assessment currently imposed for CHH and its other separate buildingsthe CHHs Dietary and Records Departments.

ISSUE: Whether or not CCHMAC is an integral part of CHH

HELD: yes

RATIO: It is undisputed that the doctors and medical specialists holding clinics in CHHMAC are those duly accredited by CHH, that is, they are consultants of the hospital and the ones who can treat CHHs patients confined in it. This fact alone takes away CHHMAC from being categorized as commercial since a tertiary hospital like CHH is required by law to have a pool of physicians who comprises the required medical departments in various medical fields.

Based on these provisions, these physicians holding offices or clinics in CHHMAC, duly appointed or accredited by CHH, precisely fulfill and carry out their roles in the hospitals services for its patients through the CHHMAC. The fact that they are holding office in a separate building, like at CHHMAC, does not take away the essence and nature of their services vis--vis the over-all operation of the hospital and the benefits to the hospitals patients. Given what the law requires, it is clear that CHHMAC is an integral part of CHH.

Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefore (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as, in the case of hospitals, a school for training nurses, a nurses home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses, interns and residents (84 C.J.S., 621), such as athletic fields, including a farm used for the inmates of the institution (Cooley on Taxation, Vol. 2, p. 1430).[25]

Verily, being an integral part of CHH, CHHMAC should be under the same special assessment level of as that of the former.

Finally, respondents charge of rentals for the offices and clinics its accredited physicians occupy cannot be equated to a commercial venture, which is mainly for profit.

Respondents explanation on this point is well taken. First, CHHMAC is only for its consultants or accredited doctors and medical specialists. Second, the charging of rentals is a practical necessity: (1) to recoup the investment cost of the building, (2) to cover the rentals for the lot CHHMAC is built on, and (3) to maintain the CHHMAC building and its facilities. Third, as correctly pointed out by respondent, it pays the proper taxes for its rental income. And, fourth, if there is indeed any net income from the lease income of CHHMAC, such does not inure to any private or individual person as it will be used for respondents other charitable projects.

CITY OF PASIGE V RP

FACTS: Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of land, Portions of the properties are leased to different business establishments.

In 1986, the registered owner of MPLDC, Jose Y. Campos (Campos), voluntarily surrendered MPLDC to the Republic of the Philippines.

On 30 September 2002, the Pasig City Assessors Office sent MPLDC two notices of tax delinquency for its failure to pay real property tax on the properties for the period 1979 to 2001totaling P256,858,555.

ISSUE: Whether or not the protions of the properties leased to different business estabilishments are tax exempted

HELD: No

RATIO: Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the Philippines are exempt from real property tax except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. Thus, the portions of the properties not leased to taxable entities are exempt from real estate tax while the portions of the properties leased to taxable entities are subject to real estate tax.

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

In sum, only those portions of the properties leased to taxable entities are subject to real estate tax for the period of such leases.

RURAL BANK OF MAKATI V MUN. OF MAKATI

FACTS: On November 19, 1990, the municipality lodged a complaint with the Prosecutors Office, charging petitioners Esteban S. Silva, president and general manager of the bank and Magdalena V. Landicho for violation of Section 21(a), Chapter II, Article 3 in relation to Sections 105 and 169 of the Metropolitan Tax Code.

ISSUE: Whether or not the closure of petitioner bank is valid;

HELD: NO

RATIO: On the issue of the closure of the bank, we find that the bank was not engaged in any illegal or immoral activities to warrant its outright closure. The appropriate remedies to enforce payment of delinquent taxes or fees are provided for in Section 62 of the Local Tax Code, to wit:

SEC. 62. Civil Remedies. The civil remedies available to enforce payment of delinquent taxes shall be by distraint of personal property, and by legal action. Either of these remedies or both simultaneously may be pursued at the discretion of the proper authority.

The payment of other revenues accruing to local governments shall be enforced by legal action.[28]

Said Section 62 did not provide for closure. Moreover, the order of closure violated petitioners right to due process, considering that the records show that the bank exercised good faith and presented what it thought was a valid and legal justification for not paying the required taxes and fees. The violation of a municipal ordinance does not empower a municipal mayor to avail of extrajudicial remedies.[29] It should have observed due process before ordering the banks closure.

SPS WONG V CITY OF ILOILO

FACTS: the respective estates of the Hodges spouses sold the property to Vicente Chan. For some reason, however, Chan was not able to register the property in his name.

Subsequently, Chan passed away and his estate sold the same property to petitioners Francisco and Joaquin Wong on September 29, 1967. Because the estate of Chan was unable to produce the estate tax clearance and the owners duplicate of title, petitioners were only allowed to annotate a notice of adverse claim on TCT No. T-7373

On January 3, 1991, respondent Iloilo City Treasurer Romeo Manikan issued a general notice of delinquency in the payment of real estate taxes.

Because no one contested the said notice or settled the tax delinquency of the subject property, the City Treasurer sent the notice of sale to the last known judicial administrator of the estates of the Hodges.

On September 26, 1991, the property was sold at public auction wherein respondent Melanie Uy was the highest bidder.

They asserted that the tax sale was void since the City Treasurer failed to inform them of the tax sale as required by Section 73 of PD[8] 464[9] which provided:

Section 73. Advertisement of sale of real property at public auction.

ISSUE: Whether or not the auction was valid

HELD: Yes

RATIO: Section 83 of PD 464 states that the RTC shall not entertain any complaint assailing the validity of a tax sale of real property unless the complainant deposits with the court the amount for which the said property was sold plus interest equivalent to 20% per annum from the date of sale until the institution of the complaint. This provision was adopted in Section 267 of the Local Government Code, albeit the increase in the prescribed rate of interest to 2% per month.[18]

ANGELES CITY VS AEC

FACTS: On June 18, 1964, AEC was granted a legislative franchise under Republic Act No. (RA) 4079[2] to construct, maintain and operate an electric light, heat, and power system for the purpose of generating and distributing electric light, heat and power for sale in Angeles City, Pampanga. Pursuant to Section 3-A thereof,[3] AECs payment of franchise tax for gross earnings from electric current sold was in lieu of all taxes, fees and assessments.

On September 11, 1974, Presidential Decree No. (PD) 551 reduced the franchise tax of electric franchise holders. Section 1 of PD 551

On January 1, 1992, RA 7160 or the Local Government Code (LGC) of 1991 was passed into law, conferring upon provinces and cities the power, among others, to impose tax on businesses enjoying franchise.[4] In accordance with the LGC, the Sangguniang Panlungsod of Angeles City enacted on December 23, 1993 Tax Ordinance No. 33, S-93, otherwise known as the Revised Revenue Code of Angeles City (RRCAC).

ISSUE: Being a special civil action for certiorari, the issue in the instant case is limited to the determination of whether the RTC gravely abused its discretion in issuing the writ of preliminary injunction enjoining Angeles City and its City Treasurer from levying, selling, and disposing the properties of AEC. All other matters pertaining to the validity of the tax assessment and AECs tax exemption must therefore be left for the determination of the RTC where the main case is pending decision.

HELD: We find the petition bereft of merit.

The LGC does not specifically prohibit an injunction enjoining the collection of taxes

RATIO: A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of the government should be collected promptly,[26] without unnecessary hindrance[27] or delay.[28]In line with this principle, the National Internal Revenue Code of 1997 (NIRC) expressly provides that no court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the code.[29] An exception to this rule obtains only when in the opinion of the Court of Tax Appeals (CTA) the collection thereof may jeopardize the interest of the government and/or the taxpayer.[30]

The situation, however, is different in the case of the collection of local taxes as there is no express provision in the LGC prohibiting courts from issuing an injunction to restrain local governments from collecting taxes. Thus, in the case of Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II, cited by the petitioner, we ruled that:

Unlike the National Internal Revenue Code, the Local Tax Code[31] does not contain any specific provision prohibiting courts from enjoining the collection of local taxes. Such statutory lapse or intent, however it may be viewed, may have allowed preliminary injunction where local taxes are involved but cannot negate the procedural rules and requirements under Rule 58.[32]

As a rule, the issuance of a preliminary injunction rests entirely within the discretion of the court taking cognizance of the case and will not be interfered with, except where there is grave abuse of discretion committed by the court.[36]