PHILIPPINE LONG DISTANCETELEPHONE COMPANY,INC., petitioner, vs.
CITY OF DAVAOand ADELAIDA B. BARCELONA, in hercapaci! a" he Ci!
Trea"#rer $%Da&a$, respondents.'G.R. N$. ()*+,-.A#.#" //,
/00(1SECOND DIVISION D E C I S I O NMENDO2A, J.3This is a petition
for reviewon certiorari under Rule 45 of the 199Rules
ofCivil!ro"edureof theresolution#$1% dated &une '(# ')))# of
the Re*ionalTrial Court# +ran"h 1(# Davao Cit,#a-r.in* the ta/
assess.ent of petitionerand the denial of its "lai. for ta/ refund
0,the Cit, Treasurer of Davao1The fa"ts are as follows2On
&anuar, 1999# petitioner !hilippine3on*Distan"eTelephoneCo1#
In"1 4!3DT5applied for a 6a,or7s !er.it to operate
itsDavao6etroE/"han*e1Respondent Cit,of Davao withheld a"tion on
theappli"ation pendin* pa,.ent 0, petitionerof thelo"al
fran"hiseta/inthea.ountof!(#891#9951' for the :rst to the
fourth;uarter of 19991$'% In a letter dated 6a, (1#1999#$(%
petitioner protested theassess.ent of the lo"al fran"hise ta/
andre;uestedarefundof thefran"hiseta/paid 0, it for the ,ear 199
and the :rst tothe third ;uarters of 19991!etitioner"ontendedthat
it was e/e.pt fro.thepa,.ent of fran"hise ta/ 0ased on anopinion of
the +ureau of 3o"al u*ust (# 19911Se"tion 1' of said fran"hise#
liBewise# "ontains the ?in lieu of all ta/esA proviso1In this
"onne"tion# Se"tion '( of R> 9'5# ;uoted hereunder# whi"h was
approved on 6ar"h 1# 1995# provides for the e;ualit, of treat.ent
in the tele"o..uni"ations industr,2?SEC1 '(1E;ualit, of Treat.ent
in the Tele"o..uni"ations Industr,1 C >n, advanta*e# favor#
privile*e# e/e.ption# or i..unit, *ranted under e/istin*
fran"hises# or .a, hereafter 0e *ranted# shall ipso fa"to 0e"o.e
part of previousl, *ranted tele"o..uni"ations fran"hises and shall
0e a""orded i..ediatel, and un"onditionall, to the *rantees of su"h
fran"hises2 Provided, however# That the fore*oin* shall neither
appl, to nor aDe"t provisions of tele"o..uni"ations fran"hises
"on"ernin* territor, "overed 0, the fran"hise# the life span of the
fran"hise# or the t,pe of servi"e authoriEed 0, the fran"hise1A
4Fnders"orin* supplied15On the 0asis of the afore;uoted Se"tion
'(of R> 9'5# !3DT as a tele"o..uni"ationsfran"hise holder
0e"o.es auto.ati"all, "overed 0, the ta/ e/e.ption provisions
ofR> 9'5# whi"h tooB eDe"t on 6ar"h 18# 19951>""ordin*l,#
!3DT shall 0e e/e.pt fro. the pa,.ent of fran"hise and 0usiness
ta/es i.posa0le 0, 3 9'5 on 6ar"h 18# 19951Gowever# !3DT shall 0e
lia0le topa, the fran"hise and 0usiness ta/es on its*ross re"eipts
realiEed fro. &anuar, 1# 199' up to 6ar"h 15# 1995# durin*
whi"h period !3DT was not enHo,in* the ?.ost favored "lauseA
proviso of R> )'5 4si"51$4%In a letter dated Septe.0er '#
1999#respondent >delaida +1 +ar"elona# Cit,Treasurer of Davao#
denied the protest and"lai.forta/refundof petitioner#$5% "itin*the
le*alopinion of the Cit, 3e*alO-"erof Davao and >rt1 1)# I1 of
Ordinan"e No1'()# Series of 1991# as a.ended 0,Ordinan"e No1 519#
Series of 199'# whi"hprovides2Notwithstandin* an, e/e.ption *ranted
0, an, law or other spe"ial law# there is here0, i.posed a ta/ on
0usinesses enHo,in* a fran"hise# at a rate of Sevent,J:ve per"ent
45@5 of one per"ent 41@5 of the *ross annual re"eipts for the
pre"edin* "alendar ,ear 0ased on the in"o.e or re"eipts realiEed
within the territorial Hurisdi"tion of Davao Cit,1$8%!etitioner
re"eived respondent Cit,Treasurer7sorder of denial onO"to0er
1#19991 On Nove.0er (# 1999# it :led apetition in the Re*ional
Trial Court ofDavaoseeBin*a reversal of respondentCit, Treasurer7s
denial of petitioner7sprotest and the refund of the fran"hise
ta/paid 0, it for the ,ear 1999 in the a.ountof !'#59)#9'91'(1The
petition was :ledpursuant toII195and198of the3o"al1 No1
18)51No"lai. for refund of fran"hise ta/es paid in199 was .ade as
the sa.e had alread,pres"ri0edunderI198of the31No1 9'5#
inrelationtothefran"hisesofs was said 0, the Supre.e Court of
Tennessee in 6e.phis vs1 F1 R !1 +anB 491 Tenn1# 548# 55)5# ?The
ri*ht of ta/ation is inherent in the State1 It is a prero*ative
essential to the perpetuit, of the *overn.entK and he who "lai.s an
e/e.ption fro. the "o..on 0urden .ust Hustif, his "lai. 0, the
"learest *rant of or*ani" or statute law1AOther utteran"es e;uall,
or .ore e.phati" "o.e readil, to hand fro. the hi*hest authorit,1In
Ohio 3ife Ins1 and Trust Co1 vs1 De0olt 418 Goward# 4185# it was
said 0, Chief &usti"e Tane,# that the ri*ht of ta/ation will
not 0e held to have 0een surrendered# ?unless the intention to
surrender is .anifested 0, words too plain to 0e .istaBen1AIn the
"ase of the Delaware Railroad Ta/ 419 Lalla"e# ')8# ''85# the
Supre.e Court of the Fnited States said that the surrender# when
"lai.ed# .ust 0e shown 0, "lear# una.0i*uous lan*ua*e# whi"h will
ad.it of no reasona0le "onstru"tion "onsistent with the reservation
of the power1If a dou0t arises as to the intent of the le*islature#
that dou0t .ust 0e solved in favor of the State1In Erie Railwa,
Co.pan, vs1 Co..onwealth of !enns,lvania 4'1 Lalla"e# 49'# 4995#
6r1 &usti"e Gunt# speaBin* of e/e.ptions# o0served that a State
"annot strip itself of the .ost essential power of ta/ation 0,
dou0tful words1?It "annot# 0, a.0i*uous lan*ua*e# 0e deprived of
this hi*hest attri0ute of soverei*nt,1AIn Tennessee vs1 Lhitworth
411 F1 S1# 1'9# 1(85# it was said2 ?In all "ases of this Bind the
;uestion is as to the intent of the le*islature# the presu.ption
alwa,s 0ein* a*ainst an, surrender of the ta/in* power1A In
=arrin*ton vs1 Tennessee and Count, of Shel0, 495 F1 S1# 89# 8985#
6r1 &usti"e Swa,ne said2 ?1 1 1 Lhen e/e.ption is "lai.ed# it
.ust 0e shown indu0ita0l, to e/ist1>t the outset# ever,
presu.ption is a*ainst it1> wellJfounded dou0t is fatal to the
"lai.1It is onl, when the ter.s of the "on"ession are too e/pli"it
to ad.it fairl, of an, other "onstru"tion that the proposition "an
0e supported1AThe ta/ e/e.ption .ust 0e e/pressedin the statute in
"lear lan*ua*e that leavesno dou0t of the intention of the
le*islatureto *rant su"h e/e.ption1 >nd# even if it is*ranted#
the e/e.ption .ust 0einterpretedin strictissimi !uris a*ainst
theta/pa,er and li0erall, in favor of the ta/in*authorit,1$1'%In
the present "ase# petitioner Husti:esits "lai.of ta/ e/e.ption 0,
strainedinferen"es1=irst# it "ites R1>1 No1 9'5#otherwise Bnown
as the !u0li"Tele"o..uni"ations !oli", >"t of the!hilippines#
I'( of whi"h reads2SEC1 '(.E"ualit# of Treatment in the
Telecommunications Industr#. S >n, advanta*e# favor# privile*e#
e/e.ption# or i..unit, *ranted under e/istin* fran"hises# or .a,
hereafter 0e *ranted# shall ipso facto 0e"o.e part of previousl,
*ranted tele"o..uni"ations fran"hises and shall 0e a""orded
i..ediatel, and un"onditionall, to the *rantees of su"h fran"hises2
Provided, however, That the fore*oin* shall neither appl, to nor
aDe"t provisions of tele"o..uni"ations fran"hises "on"ernin*
territor, "overed 0, the fran"hise# the life span of the fran"hise#
or the t,pe of servi"e authoriEed0, the fran"hise1!etitioner then
"lai.s that S.art and"t No1 9'5 "ontains the*eneral provisions#
statin* that the >"tshall 0e Bnown as the
!u0li"Tele"o..uni"ations !oli", >"t of the!hilippines# and a
de:nition of ter.s1$15% >rt1 II provides for its poli"ies
ando0He"tives# whi"h is to foster thei.prove.ent and e/pansion
oftele"o..uni"ations servi"es in the"ountr, throu*h2 415 the
"onstru"tionoftele"o..uni"ations infrastru"ture
andinter"onne"tionfa"ilities# havin*in.indthe e-"ient use of the
radio fre;uen",spe"tru.ande/tensionof 0asi"servi"esto areas not ,et
servedK 4'5 fair# Hust# andreasona0le rates and tariD "har*esK
4(5sta0le# transparent# and fair ad.inistrativepro"essesK 445
relian"e on privateenterprise for dire"t provision
oftele"o..uni"ations servi"esK 455 dispersalof ownership of
tele"o..uni"ationsentities in "o.plian"e with the"onstitutional
.andate to de.o"ratiEe theownership of pu0li" utilitiesK
485en"oura*e.ent of the esta0lish.ent ofinter"onne"tion with other
"ountries toprovide a""ess to international"o..uni"ations hi*hwa,s
anddevelop.ent of a "o.petitive e/portJoriented do.esti"
tele"o..uni"ations.anufa"turin* industr,K and 45develop.ent of
hu.an resour"es sBillsand "apa0ilities to sustain the *rowth
anddevelop.ent of tele"o..uni"ations1$18%>rt1 III provides for
itsad.inistration1The operational
andad.inistrativefun"tionsaredele*atedtothe National
Tele"o..uni"ationsCo..ission 4NTC5# while poli",J.aBin*#resear"h#
and ne*otiations in internationaltele"o..uni"ations.attersareleft
withthe Depart.ent of Transportation andCo..uni"ations1$1%>rt1
IV "lassi:es the "ate*ories oftele"o..uni"ations entities as2
3o"alE/"han*e Operator# InterJE/"han*eCarrier# International
Carrier# ValueJ>ddedServi"e !rovider# 6o0ile Radio Servi"es#and
Radio !a*in* Servi"es1$19% >rt1 Vprovides for the use of other
servi"es andfa"ilities# su"h as "usto.er pre.isese;uip.ent# whi"h
.a, 0e used within thepre.ises of tele"o..uni"ationssu0s"ri0ers
su0He"t onl, to there;uire.ent that it is t,peJapproved 0, theNTC#
andradiofre;uen",spe"tru.# theassi*n.ent of whi"hshall 0esu0He"t
toperiodi" review1$19%>rt1 VI# entitled=ran"hise#
RatesandRevenueDeter.ination# provides for there;uire.ent to o0tain
a fran"hise fro.Con*ress and a Certi:"ate of
!u0li"Convenien"eandNe"essit,fro.theNTC0efore a tele"o..uni"ations
entit, "an0e*inits operations1It alsoprovides fortheNTC7sresidual
powertore*ulatetheratesor tariDswhenruinous"o.petitionresults or
when a .onopol, or a "artel or"o.0ination in restraint of
free"o.petition e/ists and the rates or
tariDsaredistortedoruna0letofun"tionfreel,and the pu0li" is
adversel, aDe"ted1Thereis also a provision relatin* to
revenuesharin* arran*e.ents 0etween interJ"onne"tin*
"arriers1$')%>rt1 VII provides for the ri*hts
oftele"o..uni"ations users1$'1%>rt1 VIII#
entitledTele"o..uni"ationsDevelop.ent# where I'( is found#
providesfor pu0li" ownership oftele"o..uni"ations entities#
privatiEationof e/istin*fa"ilities# andthee;ualit,oftreat.ent
provision1$''%>rt1 IN "ontains the =inal !rovisions1$'(%R1>1
No1 9'5 is thus a le*islativeena"t.ent desi*ned to set the
nationalpoli", on tele"o..uni"ations and providethe stru"tures to
i.ple.ent it to Beep upwith the te"hnolo*i"al advan"es in
theindustr, and the needs of the pu0li"1Thethrustof
thelawistopro.ote*raduall,the dere*ulation of the entr,# pri"in*#
andoperations of all pu0li"tele"o..uni"ations entities and
thuspro.ote a level pla,in* :eld in thetele"o..uni"ations
industr,1$'4%There isnothin* in the lan*ua*e of I'( nor in
thepro"eedin*s of 0oth the Gouse ofRepresentatives and the Senate
inena"tin* R1>1 No1 9'5 whi"h shows that it"onte.plates the
*rant of ta/ e/e.ptionsto all tele"o..uni"ations entities#in"ludin*
those whose e/e.ptions had0een withdrawn 0, the 31No1 9'5 "ould
"onte.plate e/e.ptionfro. "ertain re*ulator, or
reportin*re;uire.ents# 0earin* in .ind the poli", ofthelaw1It
isnoteworth,that# inholdin*S.art and ppeals#$'8%
ahi*hl,spe"ialiEed"ourtwhi"h perfor.s Hudi"ial fun"tions as it
was"reatedfor thereviewof ta/"ases1$'% In"ontrast# the +3 18)
43nother e/e.ption *ranted 0, the law in line with its poli", of
dere*ulation is the e/e.ption fro. the re;uire.ent of se"urin*
per.its fro. the NTC ever, ti.e a tele"o..uni"ations "o.pan,
i.ports e;uip.ent1Ta/ e/e.ptions should 0e *ranted onl, 0, "lear
and une;uivo"al provision of law on the 0asis of lan*ua*e too plain
to 0e .istaBen1
The CITY OF ILOILO,Mr.ROMEO V.MANI7AN, in hi" capaci! a" he
Trea"#rer $% I8$i8$ Ci!# !etitioners# VS1 SMARTCOMM9NICATIONS, INC.
5SMART6# Respondent1G.R. N$. (,-/,0=e0ruar, '# '))9SECOND DIVISION
D E C I S I O NBRION, J12 +efore this Court is the appeal0,
certiorari :led 0, the Cit,of Iloilo 4petitioner5 under Rule 45 of
theRules of Court seeBin* to set aside thede"isionof theRe*ional
Trial Court 4,TC5of Iloilo Cit,# +ran"h '9# whi"h de"lared
thatrespondent S6>RT Co..uni"ations# In"14+-A,T5 is e/e.pt
fro.thepa,.ent oflo"al fran"hise and 0usiness ta/es1 BAC7GRO9ND
FACTS The fa"ts of the "ase are not indispute1S6>RT re"eived a
letter ofassess.ent dated =e0ruar, 1'# '))' fro.petitioner
re;uirin* it to pa, de:"ien",lo"al
fran"hiseand0usinessta/es4inthea.ount of !84#5451'9# plus interests
andsur"har*es5 whi"h it in"urred for the ,ears199 to '))11S6>RT
protested theassess.ent 0, sendin* a letterdated =e0ruar, 15# '))'
to the Cit,Treasurer1It "lai.ed e/e.ption fro.pa,.ent of lo"al
fran"hiseand0usinessta/es 0ased on Se"tion 9 of its
le*islativefran"hise under Repu0li" >"t 4,.A.5
No1'944+-A,T.sfranchise51 FnderS6>RT7sfran"hise# it was re;uired
to pa, a fran"hiseta/ e;uivalent to (@ of all*ross re"eipts#whi"h
a.ount shall 0e in lieu of allta/es1S6>RT "ontends that the ?in
lieu ofall ta/esA "lause "overs lo"al fran"hise and0usiness ta/es1
S6>RT si.ilarl, invoBed R1>1 No19'5 or the !u0li"
Tele"o..uni"ations!oli", >"t 4Pu(lic Telecoms Act5 whoseSe"tion
'( de"lares that an, e/istin*privile*e# in"entive# advanta*e#
ore/e.ption *ranted under e/istin*fran"hisesshall ipsofacto
0e"o.epart ofpreviousl,
*rantedJtele"o..uni"ationsfran"hise1S6>RT"ontendsthat 0,virtueof
Se"tion'(# ta/e/e.ptions*ranted0,the le*islature to other holders
oftele"o..uni"ations fran"hise .a, 0ee/tended to and availed of 0,
S6>RT1 Throu*h a letter dated >pril 4# '))'#petitioner denied
S6>RT7s protest# "itin*the failure of S6>RT to "o.pl, with
Se"tion'5' of R1>1 No1 18) or the 3o"alRT o0He"tedto
thepetitioner7sdenial of itsprotest 0,institutin*a"asea*ainst
petitioner 0eforetheRTCof IloiloCit,1$1%The trial "ourt ruled in
favour ofS6>RT and de"lared
thetele"o..uni"ations:r.e/e.ptfro.thepa,.ent of lo"al
fran"hiseand0usinessta/esK$'%it a*reedwithS6>RT7s
"lai.ofe/e.ption under Se"tion 9 of its fran"hiseand Se"tion '( of
the !u0li" Tele"o.s >"t1$(% =ro.this Hud*.ent# petitioner
:lesthis petition for review on certiorari raisin*the sole issue of
whether S6>RT is e/e.ptfro.thepa,.ent of lo"al
fran"hiseand0usiness ta/es1
THE CO9RT:S R9LING S6>RTreliesontwoprovisionsoflaw to support
its "lai. for ta/ e/e.ption2Se"tion 9 of S6>RT7s fran"hise and
Se"tion'( of the !u0li" Tele"o.s >"t1>fter areview of
pertinent laws and Hurispruden"eU parti"ularl,of
+-A,TCommunications,Inc. v. Cit# of )avao#$4% a "ase whi"h#e/"ept
for the respondent# involves thesa.eset of fa"ts andissues U
we:ndS6>RT7s "lai. for e/e.ption to 0eunfounded1 Conse;uentl,#
we :nd thepetition .eritorious1 The 0asi" prin"iple in
the"onstru"tion of laws *rantin* ta/e/e.ptions has 0een ver,
sta0le1>s earl,as 1918# in the "ase of/overnment of
thePhilippine Islands v. -onte de Piedad#$5% this Court has
de"lared that he who"lai.s an e/e.ption fro. his share of
the"o..on0urdenof ta/ation.ust Hustif,his "lai.0,showin* that the
3e*islatureintended to e/e.pt hi. 0, words too plainto 0e 0e,ond
dou0t or .istaBe1Thisdo"trinewas repeatedinthe19'8"aseof Asiatic
Petroleum v. lanes#$8% as well asinthe"aseof $or!av. Commissioner
ofInternal ,evenue%CI,&$%
de"idedin19811Citin*>.eri"anHurispruden"e# theCourtstated in E.
,odrigue0, Inc. v. CI,2$9% The ri*ht of ta/ation isinherent in the
State1 It is aprero*ativeessential totheperpetuit, of
the*overn.entK and he who"lai.s an e/e.ption fro.the "o..on 0urden#
.ustHustif, his "lai. 0, the"learest*rant of or*ani"orstatute law
/// Lhene/e.ption is "lai.ed# it.ust 0eshownindu0ita0l,to e/ist1
>t the outset# ever,presu.ptionisa*ainstit1 >wellJfounded
dou0t is fatalto the "lai.K it is onl, whenthe ter.s of the
"on"essionare too e/pli"it to ad.itfairl, of an, other"onstru"tion
that theproposition "an 0esupported1 In the re"ent "ase of
)igitalTelecommunications, Inc. v. Cit#/overnment of $atangas, et
al.#$9% weadheredtothesa.eprin"iplewhenwesaid2 > ta/ e/e.ption
"annotarise fro. va*ueinferen"e111Ta/ e/e.ptions.ust 0e "lear
andune;uivo"al1> ta/pa,er"lai.in* a ta/ e/e.ption.ust point to a
spe"i:"provision of law"onferrin*on the ta/pa,er# in "lear andplain
ter.s# e/e.ption fro.a "o..on 0urden1>n,dou0t whether a
ta/e/e.ption e/ists is resolveda*ainst the ta/pa,er1 The 0urden
therefore is on S6>RT to provethat# 0ased on its fran"hise and
the !u0li"Tele"o.s>"t# it isentitledtoe/e.ptionfro. the lo"al
fran"hise and 0usiness ta/es0ein* "olle"ted 0, the petitioner1
Claim for Exemption underSMARTs franchise Se"tion 9 of S6>RT7s
fran"hisestates2 Se"tion 91 Taxprovisions1 SThe*rantee#its
su""essors or assi*nsshall 0e lia0le to pa, thesa.e ta/es on their
realestate 0uildin*s andpersonal propert,#e/"lusiveofV this
fran"hise# as otherpersons or "orporationswhi"harenowor
hereafter.a,0ere;uired0,lawtopa,1 In addition thereto# he.ranee, i"
"#cce""$r"$r a""i.n" "ha88 pa! a%ranchi"e a; e#"ine""ran"aced #nder
i"%ranchi"e. B# Aheherhe %ranchi"e a;e;e?pi$n A$#8dinc8#dee;e?pi$n
%r$?e;aci$n" >! >$h he8$ca8 and he nai$na8.$&ern?en i"
n$#nelso# the se"ondpara*raph of Se"tion 9speaBs of ta/ returns
:ledand ta/es paid to the?Co..issioner of InternalRevenue or his
dul,authoriEed representativeina""ordan"e with theNational Internal
RevenueCode1A6oreover# thesa.epara*raph de"lares that theta/
returns ?shall 0e su0He"tto audit 0, the +ureau ofInternal
Revenue1A Nothin*is .entioned in Se"tion 9a0out lo"alta/es1
The"learintent is for the ?in lieu of
allta/esA"lausetoappl,onl,tota/esundertheNationalInternal
RevenueCodeandnot to lo"al ta/es1 Nonetheless# evenif
Se"tion9ofS6>RT7s fran"hise "an 0e "onstrued as"overin* lo"al
ta/es as well# relian"ethereon would now 0e unavailin*1The ?inlieu
of all ta/esA "lause 0asi"all, e/e.ptsS6>RT fro. pa,in* all
other Binds of ta/esfor as lon* as it pa,s the (@ fran"hise ta/Kit
is the fran"hise ta/ that shall 0e in lieu ofall ta/es#
andnotan,otherfor.of ta/1$18% =ran"hise ta/es on
tele"o..uni"ations"o.panies# however# have 0een
a0olished0,R1>1No1 18ortheE/pandedValueJ>dded Ta/ 3aw4E12AT
aw5# whi"h wasena"ted0,Con*resson &anuar,1# 19981$1%To repla"e
the fran"hise ta/# the EJV>T3aw i.posed a 1)@$19% valueJadded
ta/ ontele"o..uni"ations "o.panies underSe"tion 1)9 of the National
InternalRevenue Code1$19%The ?in lieu of all ta/esA"lause in the
le*islative fran"hise of S6>RThas thus 0e"o.e functus o3cio#
.adeinoperative for la"B of a fran"hise ta/1$')% S6>RT7s
"lai.for e/e.ptionfro.lo"al
0usinessandfran"hiseta/es0asedonSe"tion9of
itsfran"hiseisthereforeunfounded1 Claim for ExemptionUnder u!lic
Telecoms Act S6>RT additionall, invoBesthe?e;ualit, "lauseAunder
Se"tion'(of the !u0li" Tele"o.s >"t2 SECTION/*. E"ualit# of
Treatmentin theTelecommunications$ndustr#. F An!ad&ana.e,
%a&$r,pri&i8e.e, e;e?pi$n, $ri??#ni! .raned#ndere;i"in.
%ranchi"e", $r?a! herea%er >e.raned, "ha88 ipsofacto >ec$?e
par $%pre&i$#"8! .ranede8ec$??#nicai$n"%ranchi"e and "ha88
>eacc$rded i??ediae8!and #nc$ndii$na88! $he .ranee" $%
"#ch%ranchi"e"2 !rovided#however# That the fore*oin*shall neither
appl, to noraDe"t provisions oftele"o..uni"ationsfran"hises
"on"ernin*territor, "overed 0, thefran"hise# the life span ofthe
fran"hise# or the t,pe ofservi"e authoriEed 0,
thefran"hise1$E.phasissupplied1% >s in the "ase of +-A,T v. Cit#
of )avao#$'1% S6>RT posits that sin"e the fran"hise
oftele"o..uni"ations "o.panies *rantedafter the ena"t.ent of its
fran"hise"ontained provisions e/e.ptin* these"o.panies fro.0oth
national and lo"alta/es# theseprivile*es shoulde/tendtoand 0ene:t
S6>RT# appl,in* the ?e;ualit,"lauseA a0ove1The petitioner# on
theother hand# 0elieves that the "lai.ede/e.ption under Se"tion '(
of the !u0li"Tele"o.s >"t is si.ilarl, unfounded1 Le a*ree with
the petitioner1 Lhether Se"tion '( of the "ited lawe/tends ta/
e/e.ptions *ranted 0,Con*ress to new fran"hise holders
toe/istin*ones has 0eenansweredinthene*ative in the "ase of P)T v.
Cit# of)avao1$''%The ter. ?e/e.ptionA in Se"tion'(of the!u0li"
Tele"o.s >"t does not.eanta/e/e.ptionK rather# it
referstoe/e.ption fro. "ertain re*ulator, orreportin* re;uire.ents
i.posed 0,*overn.ent a*en"ies su"h as the
NationalTele"o..uni"ations Co..ission1Thethrust of the !u0li"
Tele"o.s >"t is topro.ote the *radual dere*ulation of
entr,#pri"in*# and operations of all pu0li"tele"o..uni"ations
entities# andthus tolevel the pla,in* :eld in thetele"o..uni"ations
industr,1Thelan*ua*e of Se"tion '( and thepro"eedin*s of 0othGouses
of Con*ressare0ereft of an,thin*that wouldsi*nif,the *rant of ta/
e/e.ptions to alltele"o..uni"ations entities1$'(% Intent to*rant
ta/e/e.ption"annot therefore0edis"erned fro. the lawK the
ter.?e/e.ptionA istoo *eneral to in"lude ta/e/e.ption and runs
"ounter to there;uire.ent that the *rant of
ta/e/e.ptionshould0estatedin"lear andune;uivo"al lan*ua*e too plain
to 0e0e,ond dou0t or .istaBe1 Surchar%e and $nterests Sin"e
S6>RT "annot validl, "lai.an, ta/ e/e.ption 0ased either on
Se"tion9 of its fran"hise or Se"tion '( of the!u0li" Tele"o.s
>"t# it follows thatpetitioner "an i.pose and "olle"t the
lo"alfran"hise and 0usiness ta/es a.ountin*to !84#5451'9 it
assessed a*ainstS6>RT1>sidefro.these# S6>RTshouldalso 0e
.ade to pa, sur"har*e andinterests on the ta/es due1
Thesettledruleisthat *oodfaithand honest 0elief that one is not
su0He"t tota/ on the 0asis of previous interpretationof *overn.ent
a*en"ies tasBed toi.ple.ent the ta/ laws are su-"ientHusti:"ation
to delete the i.position ofsur"har*es and interest1$'4%In
refutin*lia0ilit, for the lo"al fran"hise and 0usinessta/es#
wedonot0elieveS6>RTreliedin*ood faith in the :ndin*s and
"on"lusion ofthe +ureau of 3o"al RT lia0le to pa, thelo"al
fran"hise and 0usiness ta/esa.ountin* to !84#5451'9#
assesseda*ainst it 0, petitioner# plus thesur"har*es and interest
due thereon1 SO ORDERED. >RTFRO D1+RION>sso"iate&usti"e
$1'% Se"tion 1(1Franchise Tax1U N$Aih"andin. an! e;e?pi$n.raned
>! an! 8aA $r $her "pecia88aA#
theprovin"e.a,i.poseata/on0usinesses enHo,in* a fran"hise# at
therate not e/"eedin* :ft, per"ent 45)@5 ofone per"ent 41@5 of the
*ross annualre"eiptsforthepre"edin*"alendar,ear0ased on the
in"o.in* re"eipt# or realiEedwithin its territorial Hurisdi"tion1 /
/ /1$E.phasis supplied1%$19% The ta/ rate is now 1'@ per RJV>T
3aw1$'9% SEC1 41 Powerof theCommissionertoInterpret Tax aws and to
)ecide Cases. UThepowertointerprettheprovisionsofthis Code $NIRC%
and other ta/ laws shall0e under the e/"lusive and
ori*inalHurisdi"tions of the Co..issioner# su0He"tto review0, the
Se"retar, of =inan"e1///1MACTAN CEB9 INTERNATIONALAIRPORT
A9THORITY, petitioner, vs.HON. FERDINAND G. MARCOS, in hi"capaci!
a" he Pre"idin. G#d.e $% heRe.i$na8 Tria8 C$#r, Branch /0,
Ce>#Ci!, THE CITY OF CEB9, repre"ened>! i" Ma!$r, HON. TOMAS
R.OSMEHA, and E9STAI9IO B.CESA, respondents.'G.R. N$.
(/00+/.Sepe?>er ((,(EE,1TGIRD DIVISION D E C I S I O NDAVIDE,
GR., J.3=or review under Rule 45 of the Rulesof Court on a pure
;uestion of law are thede"ision of '' 6ar"h 1995$1% of theRe*ional
Trial Court 4RTC5 of Ce0u Cit,#+ran"h ')# dis.issin* the petition
forde"larator,relief inCivil CaseNo1 CE+J189))# entitled ?-actan
Ce(uInternational Airport Authorit#vs. Cit#ofCe(u#A and its order
of 4 6a,1995$'%den,in* the .otion to re"onsiderthe de"ision1Le
resolved to *ive due "ourse to thispetition for it raises issues
dwellin* on thes"ope of the ta/in* power of lo"al*overn.ent units
and the li.its of ta/e/e.ption privile*es of *overn.entJowned and
"ontrolled "orporations1The un"ontradi"ted fa"tualante"edents are
su..ariEed in the instantpetition as follows2!etitioner 6a"tan Ce0u
International >irport >uthorit, 46CI>>5 was "reated 0,
virtue of Repu0li" >"t No1 8959# .andated to ?prin"ipall,
undertaBe the e"ono.i"al# e-"ient and eDe"tive "ontrol# .ana*e.ent
and supervision of the 6a"tan International >irport in the
!rovin"e of Ce0u and the 3ahu* >irport in Ce0u Cit,# / / / and
su"h other airports as .a, 0e esta0lished in the !rovin"e of Ce0u/
/ /A 4Se"1 (# R> 895951It is also .andated to2a5 en"oura*e#
pro.ote and develop international and do.esti" air tra-" in
theCentral Visa,as and 6indanao re*ions as a.eans of .aBin* the
re*ions "enters of international trade and touris.# and
a""eleratin* the develop.ent of the .eans of transportation and
"o..uni"ation in the "ountr,K and#05 up*rade the servi"es and
fa"ilitiesof the airports and to for.ulate internationall,
a""epta0le standards of airport a""o..odation and servi"e1Sin"e the
ti.e of its "reation# petitioner 6CI>> enHo,ed the privile*e
of e/e.ption fro. pa,.ent of realt, ta/es in a""ordan"e with
Se"tion 14 of its Charter2Se"1 141 Tax Exemptions1 JJ The
>uthorit, shall 0e e/e.pt fro. realt, ta/es i.posed 0, the
National # 44# 1)949(15# IJ6# 919# 919# 91(J=# 941# 94'# 94#!sd1#
48 and 991J>5# lo"ated at +arrio >pas and +arrio Oasa.0a*an#
3ahu*# Ce0u Cit,# in the total a.ount of !'#''9#)9191!etitioner
o0He"ted to su"h de.and for pa,.ent as 0aseless and unHusti:ed#
"lai.in* in its favor the afore"ited Se"tion 14 of R> 8959 whi"h
e/e.pts it fro. pa,.ent of realt, ta/es1It was also asserted that
it is an instru.entalit, of the*overn.ent perfor.in* *overn.ental
fun"tions# "itin* Se"tion 1(( of the 3o"al No1 89(9# nonJsto"B and
nonJpro:t hospitals and edu"ational institutions# are here0,
withdrawn upon the eDe"tivit, of this Code1 4unders"orin*
supplied5/ / /Se"tion '(41 Exemptions from ,eal Propert# Taxes1 S /
/ /4a5/ / // / /4e5/ / /E/"ept as provided herein# an, e/e.ption
fro. pa,.ent of real propert, ta/ previousl, *ranted to# or
presentl, enHo,ed0, all persons# whether natural or
Huridi"al#in"ludin* *overn.entJowned or "ontrolled "orporations are
here0, withdrawn upon the eDe"tivit, of this Code1>s the Cit, of
Ce0u was a0out to issue a warrant of lev, a*ainst the properties of
petitioner# the latter was "o.pelled to pa, its ta/ a""ount ?under
protestA and thereafter :led a !etition for De"larator, Relief with
the Re*ional Trial Court of Ce0u#+ran"h ')# on De"e.0er '9#
199416CI>>0asi"all, "ontended that the ta/in* powersof lo"al
*overn.ent units do not e/tend to the lev, of ta/es or fees of an,
Bind on an instru.entalit, of the national *overn.ent1 !etitioner
insisted that while it is indeed a *overn.entJowned "orporation# it
nonetheless stands on the sa.e footin* as an a*en", or
instru.entalit, of the national *overn.ent0, the ver, nature of its
powers and fun"tions1Respondent Cit,# however# asserted that
6CI>> is not an instru.entalit, of the *overn.ent 0ut .erel,
a *overn.entJowned "orporation perfor.in* proprietar,
fun"tions1>s su"h# all e/e.ptions previousl, *ranted to it were
dee.ed withdrawn 0, operation of law# as providedunder Se"tions 19(
and '(4 of the 3o"al "lose readin* of the New 3o"al 18) provides
the e/press "an"ellation and withdrawal of e/e.ption of ta/es 0,
*overn.entJowned and "ontrolled "orporation per Se"tions after the
eDe"tivit, of said Code on &anuar, 1# 199'#to wit2 $pro"eeds to
;uote Se"tions 19( and '(4%!etitioners "lai.ed that its real
properties assessed 0, respondent Cit, 8959 to pa, the sa.e 4"itin*
Se"tion 14 of R> 895951Gowever# R> 18) e/pressl, provides
that ?>ll *eneral and spe"ial laws# a"ts# "it, "harters# de"rees
$si"%# e/e"utive orders# pro"la.ations and ad.inistrative
re*ulations# or part of parts thereof whi"h are in"onsistent with
an, of the provisions of this Code are here0, repealed or .odi:ed
a""ordin*l,1A 4QfQ# Se"tion 5(4# R> 18)51Lith that repealin*
"lause in R> 18)# it is safe to infer and state that the ta/
e/e.ption provided for in R> 8959 "reatin* petitioner had 0een
e/pressl, repealed 0, the provisions of the New 3o"al s a *eneral
rule# the power to ta/ isan in"ident of soverei*nt, and is
unli.itedin its ran*e# a"Bnowled*in* in its ver,naturenoli.its#
sothat se"urit,a*ainstits a0use is to 0e found onl, in
theresponsi0ilit, of the le*islature whi"hi.poses the ta/ on
the"onstituen", whoare to pa, it1 Nevertheless# eDe"tiveli.itations
thereon .a, 0e i.posed 0, thepeoplethrou*htheir Constitutions1$1(%
OurConstitution# for instan"e# provides thattheruleof ta/ationshall
0eunifor.ande;uita0le and Con*ress shall evolve apro*ressive s,ste.
of ta/ation1$14%Sopotent indeedis the power that it wason"e opined
that ?the power to ta/involves the power to destro,1A$15%
Veril,#ta/ation is a destru"tive power
whi"hinterfereswiththepersonal andpropert,ri*hts of the people and
taBes fro. the. aportion of their propert, for the support ofthe
*overn.ent1>""ordin*l,# ta/ statutes.ust 0e "onstrued stri"tl,
a*ainst the*overn.ent andli0erall,infavor of theta/pa,er1$18% +ut
sin"eta/es arewhat wepa, for "iviliEed so"iet,#$1% or are
thelife0lood of the nation# the lawfrownsa*ainst e/e.ptions fro.
ta/ation andstatutes *rantin* ta/ e/e.ptions are thus"onstrued
strictissimi !uris a*ainst theta/pa,er and li0erall, in favor of
the ta/in*authorit,1$19% > "lai. of e/e.ption fro. ta/pa,.ents
.ust 0e "learl, shown and0ased on lan*ua*e in the law too plain
to0e .istaBen1$19% Elsewise stated# ta/ation isthe rule# e/e.ption
therefro. is thee/"eption1$')% Gowever# if the *rantee ofthe
e/e.ption is a politi"al su0division orinstru.entalit,# the ri*id
rule of"onstru"tiondoesnot appl,0e"ausethepra"ti"al eDe"t of the
e/e.ption is .erel,to redu"e the a.ount of .one, that has to0e
handled 0, the *overn.ent in the"ourse of its operations1$'1%The
power to ta/ is pri.aril, vested inthe Con*ressK however# in our
Hurisdi"tion#it .a, 0e e/er"ised 0, lo"al le*islative0odies#
nolon*er .erel,0,virtueof avalid dele*ation as 0efore# 0ut pursuant
todire"t authorit, "onferred 0, Se"tion 5#>rti"leNof
theConstitution1$''% Fnder thelatter# thee/er"iseof
thepower.a,0esu0He"ttosu"h*uidelines andli.itationsas the Con*ress
.a, provide whi"h#however# .ust 0e "onsistent with the0asi" poli",
of lo"al autono.,1There"an0eno;uestionthatunderSe"tion 14 of
R1>1 No1 8959 the petitioneris e/e.pt fro. the pa,.ent of realt,
ta/esi.posed0,theNational rea .a, lev, an annual ad valorem ta/ on
real propert, su"h as land# 0uildin*# .a"hiner,#and other
i.prove.ents not hereafter spe"i:"all, e/e.pted1Se"tion'(4of the3ll
.a"hineries ande;uip.ent that are a"tuall,#dire"tl, and e/"lusivel,
used 0,lo"al water distri"ts and*overn.entJowned or"ontrolled
"orporationsen*a*ed in the suppl, anddistri0ution of water
andQor*eneration and trans.ission ofele"tri" powerK4d5>ll
realpropert, owned0, dul, re*istered
"ooperativesasprovidedforunderR1>1No189(9K and4e56a"hiner,
ande;uip.ent used for pollution"ontrol and
environ.entalprote"tion1E/"ept as provided herein# an, e/e.ption
fro. pa,.ent of real propert, ta/ previousl, *ranted to# or
presentl, enHo,ed0,# all persons# whether natural or Huridi"al#
in"ludin* all *overn.entJowned or "ontrolled "orporations are
here0, withdrawn upon the eDe"tivit, of this Code1Thesee/e.ptions
are0asedontheownership# "hara"ter# and use of
thepropert,1Thus24a55wnershipExemptions1E/e.ptions fro.real
propert, ta/es on the 0asisof ownership are real propertiesowned
0,2 4i5 the Repu0li"# 4ii5 aprovin"e# 4iii5 a "it,# 4iv5
a.uni"ipalit,# 4v5 a 0aran*a,#and 4vi5
re*istered"ooperatives1405CharacterExemptions1E/e.pted fro.real
propert, ta/es on the 0asisof their "hara"ter are2 4i5"harita0le
institutions# 4ii5housesandte.plesof pra,erliBe "hur"hes#
parsona*es or"onvents appurtenant thereto#.os;ues# and 4iii5
nonJpro:t orreli*ious "e.eteries14"54sageexemptions1E/e.pted
fro.real propert, ta/es on the 0asisof the a"tual# dire"t
ande/"lusive use to whi"h the, aredevoted are2 4i5 all
lands#0uildin*s and i.prove.entswhi"h are a"tuall, dire"tl,
ande/"lusivel, used for reli*ious#"harita0le or
edu"ationalpurposesK 4ii5 all .a"hineriesand e;uip.ent
a"tuall,#dire"tl, and e/"lusivel, used 0,lo"al water distri"ts or
0,*overn.entJowned or"ontrolled "orporationsen*a*ed in the suppl,
anddistri0ution of water andQor*eneration and trans.ission
ofele"tri" powerK and 4iii5 all.a"hiner, and e;uip.ent usedfor
pollution "ontrol andenviron.ental prote"tion1To help provide a
health, environ.ent in the .idst of the .oderniEation of the
"ountr,# all .a"hiner, and e;uip.ent for pollution "ontrol and
environ.ental prote"tion .a, not 0e ta/ed 0, lo"al *overn.ents1'1
5ther Exemptions Withdrawn1>ll other e/e.ptions previousl,
*ranted to natural or Huridi"al persons in"ludin* *overn.entJowned
or "ontrolled "orporations are withdrawn upon the eDe"tivit, of the
Code1$'8%Se"tion 19( of the 3s to ta/ e/e.ptions or
in"entives*ranted to or presentl, enHo,ed 0, naturalor Huridi"al
persons# in"ludin* *overn.entJowned and "ontrolled "orporations#
Se"tion19( of the 3""ordin*l,# the position taBen 0, thepetitioner
is untena0le1Relian"e on $ascovs. Philippine Amusement and
/amingCorporation$(9% is unavailin* sin"e it wasde"ided 0efore the
eDe"tivit, of the3M+EENERCISED+M TGE3OC>3 3ETIVE +ODIES1S
Thepower to ta/ is pri.aril, vested in theCon*ressK however# in our
Hurisdi"tion#it .a, 0e e/er"ised 0, lo"al le*islative0odies# no
lon*er .erel, 0, virtue of avalid dele*ation as 0efore# 0utpursuant
to dire"t authorit, "onferred0, Se"tion 5# >rti"le N of
theConstitution1Fnder the latter# thee/er"ise of the power .a, 0e
su0He"ttosu"h*uidelinesandli.itationsasthe Con*ress .a, provide
whi"h#however# .ust 0e "onsistent with the0asi" poli", of lo"al
autono.,1 The3rti"le N of the Constitution# providesfor
thee/er"ise0,lo"al *overn.entunits of their power to ta/# the
s"opethereof or its li.itations# and thee/e.ptions fro.
ta/ation1Se"tion1(( of the 3ll other e/e.ptionspreviousl, *ranted
to natural orHuridi"al persons in"ludin**overn.entJowned or
"ontrolled"orporations are withdrawn uponeDe"tivit, of the Code151
ID1K RE!F+3IC O= TGE !GI3I!!INES
>SDISTINTION>3d.inistrativeCode of 19915These
?autono.ousre*ions# provin"ial# "it,# .uni"ipal or0aran*a,
su0divisionsA are thepoliti"al su0divisions14Se"tion 1#>rti"leN#
199Constitution15 Ontheother hand# ?National n ?a*en",A ofthe
uthorit, was "reated 0, virtue of R1>1 8959# .andated to
prin"ipall, undertaBe the e"ono.i"al# e-"ient# and eDe"tive
"ontrol# .ana*e.ent# and supervision of the 6a"tan International
>irport and 3ahu* >irport# and su"h other airports as .a, 0e
esta0lished in Ce0u1Sin"e the ti.e of its "reation# petitioner
6CI>> enHo,ed the privile*e of e/e.ption fro. pa,.ent of
realt, ta/es in a""ordan"e with Se"tion 14 of its "harter1 Gowever#
on O"to0er 11# 1994# 6r1 Eusta;uio +1 Cesa# O-"er in Char*e# O-"eof
the Treasurer of the Cit, of Ce0u# de.anded pa,.ent fro. realt,
ta/es in the total a.ount of !'''9)9191 !etitioner o0He"ted to su"h
de.and for pa,.ent as 0aseless and unHusti:ed "lai.in* in its favor
the afore "ited Se"tion14 of R1>1 89591 It was also asserted
that itis an instru.entalit, of the *overn.ent perfor.in*
*overn.ental fun"tions# "itin* Se"tion 1(( of the 3o"al