CITY OF PASIG, REPRESENTEDG.R. No. 185023BY THE CITY TREASURER
andTHE CITY ASSESSOR,Petitioner,Present:,-versus-REPUBLIC OF THE
PHILIPPINES,REPRESENTED BY THEPRESIDENTIAL COMMISSION ONGOOD
GOVERNMENT,Promulgated:Respondent.August 24, 2011x- - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - xD E C I S I O NEven as the Republic of the
Philippines is now the owner of the properties in view of the
voluntary surrender of MPLDC by its former registered owner,
Campos, to the State, such transfer does not prevent a third party
with a better right from claiming such properties in the proper
forum. In the meantime, the Republic of the Philippines is the
presumptive owner of the properties for taxation purposes.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. The law imposes
the liability to pay real estate tax on the Republic of the
Philippines for the portions of the properties leased to taxable
entities. It is, of course, assumed that the Republic of the
Philippines passes on the real estate tax as part of the rent to
the lessees.InPhilippine Fisheries Development Authority v. Central
Board of Assessment Appeals,12the Court held:In the 2007 case
ofPhilippine Fisheries Development Authority v. Court of
Appeals,the Court resolved the issue of whether the PFDA is a
government-owned or controlled corporation or an instrumentality of
the national government.In that case, the City of Iloilo assessed
real property taxes on the Iloilo Fishing Port Complex (IFPC),
which was managed and operated by PFDA. The Court held that PFDA is
an instrumentality of the government and is thus exempt from the
payment of real property tax, thus:The Court rules that the
Authority is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of real property
tax. However, said exemption does not apply to the portions of the
IFPC which the Authority leased to private entities. With respect
to these properties, the Authority is liable to pay property tax.
Nonetheless, the IFPC, being a property of public dominion cannot
be sold at public auction to satisfy the tax delinquency.xxxxThis
ruling was affirmed by the Court in a subsequent PFDA case
involving theNavotasFishing Port Complex, which is also managed and
operated by the PFDA. In consonance with the previous ruling,the
Court held in the subsequent PFDA case that the PFDA is a
government instrumentality not subject to real property tax except
those portions of theNavotasFishing Port Complex that were leased
to taxable or private persons and entities for their beneficial
use.Similarly, we hold that as a government instrumentality, the
PFDA is exempt from real property tax imposed on theLucenaFishing
Port Complex, except those portions which are leased to private
persons or entities.13(Emphasis supplied)InGovernment Service
Insurance System v. City Treasurer of the City of Manila,14the
Court held:xxxThe tax exemption the property of the Republic or its
instrumentalities carries ceases only if, as stated in Sec. 234(a)
of the LGC of 1991, beneficial use thereof has been granted, for a
consideration or otherwise, to a taxable person.GSIS, as a
government instrumentality, is not a taxable juridical person under
Sec. 133(o) of the LGC.GSIS, however,lost in a sense that status
with respect to theKatigbakproperty when it contracted its
beneficial use to MHC, doubtless a taxable person. Thus, the real
estate tax assessment ofPhp54,826,599.37 covering 1992 to 2002 over
the subjectKatigbakproperty is valid insofar as said tax
delinquency is concerned as assessed over said property.15(Emphasis
supplied)InManila International Airport Authority v. Court of
Appeals,16the Court held:xxxSection 234(a) of the Local Government
Code states that real property owned by the Republic loses its tax
exemption only if the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person.MIAA, as a
government instrumentality, is not a taxable person under Section
133(o) of the local Government Code. Thus, even if we assume that
the Republic has granted to MIAA the beneficial use of the Airport
Lands and Buildings, such fact does not make these real properties
subject to real estate tax.However,portions of the Airport Lands
and Buildings that MIAA leases to private entities are not exempt
from real estate tax. For example, the land area occupied by
hangars that MIAA leases to private corporations is subject to real
estate tax. In such a case, MIAA has granted the beneficial use of
such land area for a consideration to a taxable person and
therefore such land area is subject to real estate tax.17(Emphasis
supplied)InLungCenterof the Philippines v. Quezon City,18the Court
held:xxxWhile portions of the hospital are used for the treatment
of patients and the dispensation of medical services to them,
whether paying or non-paying, other portions thereof are being
leased to private individuals for their clinics and a canteen.
Further, a portion of the land is being leased to a private
individual for her business enterprise under the business name
Elliptical Orchids and GardenCenter. Indeed, the petitioners
evidence shows that it collectedP1,136,483.45as rentals in 1991
andP1,679,999.28 for 1992 from the said lessees.Accordingly, we
hold thatthe portions of the land leased to private entities as
well as those parts of the hospital leased to private individuals
are not exempt from such taxes. On the other hand, the portions of
the land occupied by the hospital and portions of the hospital used
for its patients, whether paying or non-paying, are exempt from
real property taxes.19(Emphasis supplied)Article 420 of the Civil
Code classifies as properties of public dominion those that are
intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks,
shores,roadsteads and those that are intended for some public
service or for the development of the national wealth. Properties
of public dominion are not only exempt from real estatetax,they are
exempt from sale at public auction. InHeirs of MarioMalabananv.
Republic,20the Court held that, It is clear that property of public
dominion, which generally includes property belonging to the State,
cannot be xxxsubject of the commerce of man.21InPhilippine
Fisheries Development Authority v. Court of Appeals,22the Court
held:xxx[T]he real property tax assessments issued by the City of
Iloilo should be upheld only with respect to the portions leased to
private persons.In case the Authority fails to pay the real
property taxes due thereon, said portions cannot be sold at public
auction to satisfy the tax delinquency. InChavez v. Public Estates
Authorityit was held thatreclaimed lands are lands of the public
dominion and cannot, without Congressional fiat, be subject of a
sale, public or privatexxx.In the same vein, the port built by the
State in the Iloilo fishing complex is a property of the public
dominion and cannot therefore be sold at public auction. Article
420 of the Civil Code, provides:Article 420.The following things
are property of public dominion:1.Those intended for public use,
such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores,roadsteads, and others of
similar character;2.Those which belong to the State, without being
for public use, and are intended for some public service or for the
development of the national wealth.The Iloilo fishing port which
was constructed by the State for public use and/or public service
falls within the term port in theaforecitedprovision. Being a
property of public dominion the same cannot be subject to execution
or foreclosure sale. In like manner, the reclaimed land on which
the IFPC is built cannot be the object of a private or public sale
without Congressional authorization.23(Emphasis supplied)InManila
International Airport Authority,24the Court held:xxx[T]he Airport
Lands and Buildings of MIAA are properties devoted to public use
and thus are properties of public dominion. Properties of public
dominion are owned by the State or the Republic. Article 420 of the
Civil Code provides:Art. 420. The following things are property of
public dominion:(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges constructed by the
State, banks, shores,roadsteads, and others of similar
character;(2) Those which belong to the State, without being for
public use, and are intended for some public service or for the
development of the national wealth.The term ports xxxconstructed by
the Sate includes airports and seaports. The Airport Lands and
Buildings of MIAA are intended for public use, and at 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, thetheAirport
lands and Buildings are owned by the Republic and thus exempt from
real estate tax under Section 234(a) of the Local Government
Code.xxxxUnder Article 420 of the Civil Code, the Airport Lands and
Buildings of MIAA, being devoted to public use, are properties of
public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions ports xxxconstructed
by the State, which includes public airports and seaports, as
properties of public dominion and owned by the Republic. As
properties of public dominion owned by the Republic, there is no
doubt whatsoever that the Airport Lands and Buildings are expressly
exempt from real estate tax under Section 234(a) of the local
Government Code.This Court has also repeatedly ruled that
properties of public dominion are not subject to execution or
foreclosure sale.25(Emphasis supplied)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. Pasig City must,
therefore, issue to respondent new real property tax assessments
covering the portions of the properties leased to taxable entities.
If the Republic of the Philippines fails to pay the real property
tax on the portions of the properties leased to taxable entities,
then such portions may be sold at public auction to satisfy the tax
delinquency.
G.R. No. 195909 September 26, 2012COMMISSIONER OF INTERNAL
REVENUE,PETITIONER,vs.ST. LUKE'S MEDICAL CENTER, INC.,RESPONDENT.x
- - - - - - - - - - - - - - - - - - - - - - - xG.R. No. 195960ST.
LUKE'S MEDICAL CENTER, INC.,PETITIONER,vs.COMMISSIONER OF INTERNAL
REVENUE,RESPONDENT.D E C I S I O NThe Court partly grants the
petition of the BIR but on a different ground. We hold that Section
27(B) of the NIRC does not remove the income tax exemption of
proprietary non-profit hospitals under Section 30(E) and (G).
Section 27(B) on one hand, and Section 30(E) and (G) on the other
hand, can be construed together without the removal of such tax
exemption. The effect of the introduction of Section 27(B) is to
subject the taxable income of two specific institutions, namely,
proprietary non-profit educational institutions36and proprietary
non-profit hospitals, among the institutions covered by Section 30,
to the 10% preferential rate under Section 27(B) instead of the
ordinary 30% corporate rate under the last paragraph of Section 30
in relation to Section 27(A)(1).Section 27(B) of the NIRC imposes a
10% preferential tax rate on the income of (1) proprietary
non-profit educational institutions and (2) proprietary non-profit
hospitals. The only qualifications for hospitals are that they must
be proprietary and non-profit. "Proprietary" means private,
following the definition of a "proprietary educational institution"
as "any private school maintained and administered by private
individuals or groups" with a government permit. "Non-profit" means
no net income or asset accrues to or benefits any member or
specific person, with all the net income or asset devoted to the
institution's purposes and all its activities conducted not for
profit."Non-profit" does not necessarily mean "charitable." In
Collector of Internal Revenue v. Club Filipino Inc. de Cebu,37this
Court considered as non-profit a sports club organized for
recreation and entertainment of its stockholders and members. The
club was primarily funded by membership fees and dues. If it had
profits, they were used for overhead expenses and improving its
golf course.38The club was non-profit because of its purpose and
there was no evidence that it was engaged in a profit-making
enterprise.39The sports club in Club Filipino Inc. de Cebu may be
non-profit, but it was not charitable. The Court defined "charity"
in Lung Center of the Philippines v. Quezon City40as "a gift, to be
applied consistently with existing laws, for the benefit of an
indefinite number of persons, either by bringing their minds and
hearts under the influence of education or religion, by assisting
them to establish themselves in life or [by] otherwise lessening
the burden of government."41A non-profit club for the benefit of
its members fails this test. An organization may be considered as
non-profit if it does not distribute any part of its income to
stockholders or members. However, despite its being a tax exempt
institution, any income such institution earns from activities
conducted for profit is taxable, as expressly provided in the last
paragraph of Section 30.To be a charitable institution, however, an
organization must meet the substantive test of charity in Lung
Center. The issue in Lung Center concerns exemption from real
property tax and not income tax. However, it provides for the test
of charity in our jurisdiction. Charity is essentially a gift to an
indefinite number of persons which lessens the burden of
government. In other words, charitable institutions provide for
free goods and services to the public which would otherwise fall on
the shoulders of government. Thus, as a matter of efficiency, the
government forgoes taxes which should have been spent to address
public needs, because certain private entities already assume a
part of the burden. This is the rationale for the tax exemption of
charitable institutions. The loss of taxes by the government is
compensated by its relief from doing public works which would have
been funded by appropriations from the Treasury.42Charitable
institutions, however, are not ipso facto entitled to a tax
exemption. The requirements for a tax exemption are specified by
the law granting it. The power of Congress to tax implies the power
to exempt from tax. Congress can create tax exemptions, subject to
the constitutional provision that "[n]o law granting any tax
exemption shall be passed without the concurrence of a majority of
all the Members of Congress."43The requirements for a tax exemption
are strictly construed against the taxpayer44because an exemption
restricts the collection of taxes necessary for the existence of
the government.The Court in Lung Center declared that the Lung
Center of the Philippines is a charitable institution for the
purpose of exemption from real property taxes. This ruling uses the
same premise as Hospital de San Juan45and Jesus Sacred Heart
College46which says that receiving income from paying patients does
not destroy the charitable nature of a hospital.As a general
principle, a charitable institution does not lose its character as
such and its exemption from taxes simply because it derives income
from paying patients, whether out-patient, or confined in the
hospital, or receives subsidies from the government, so long as the
money received is devoted or used altogether to the charitable
object which it is intended to achieve; and no money inures to the
private benefit of the persons managing or operating the
institution.47For real property taxes, the incidental generation of
income is permissible because the test of exemption is the use of
the property. The Constitution provides that "[c]haritable
institutions, churches and personages or convents appurtenant
thereto, mosques, non-profit cemeteries, and all lands, buildings,
and improvements, actually, directly, and exclusively used for
religious, charitable, or educational purposes shall be exempt from
taxation."48The test of exemption is not strictly a requirement on
the intrinsic nature or character of the institution. The test
requires that the institution use the property in a certain way,
i.e. for a charitable purpose. Thus, the Court held that the Lung
Center of the Philippines did not lose its charitable character
when it used a portion of its lot for commercial purposes. The
effect of failing to meet the use requirement is simply to remove
from the tax exemption that portion of the property not devoted to
charity.The Constitution exempts charitable institutions only from
real property taxes. In the NIRC, Congress decided to extend the
exemption to income taxes. However, the way Congress crafted
Section 30(E) of the NIRC is materially different from Section
28(3), Article VI of the Constitution. Section 30(E) of the NIRC
defines the corporation or association that is exempt from income
tax. On the other hand, Section 28(3), Article VI of the
Constitution does not define a charitable institution, but requires
that the institution "actually, directly and exclusively" use the
property for a charitable purpose.Section 30(E) of the NIRC
provides that a charitable institution must be:(1) A non-stock
corporation or association;(2) Organized exclusively for charitable
purposes;(3) Operated exclusively for charitable purposes; and(4)
No part of its net income or asset shall belong to or inure to the
benefit of any member, organizer, officer or any specific
person.Thus, both the organization and operations of the charitable
institution must be devoted "exclusively" for charitable purposes.
The organization of the institution refers to its corporate form,
as shown by its articles of incorporation, by-laws and other
constitutive documents. Section 30(E) of the NIRC specifically
requires that the corporation or association be non-stock, which is
defined by the Corporation Code as "one where no part of its income
is distributable as dividends to its members, trustees, or
officers"49and that any profit "obtain[ed] as an incident to its
operations shall, whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which the corporation
was organized."50However, under Lung Center, any profit by a
charitable institution must not only be plowed back "whenever
necessary or proper," but must be "devoted or used altogether to
the charitable object which it is intended to achieve."51The
operations of the charitable institution generally refer to its
regular activities. Section 30(E) of the NIRC requires that these
operations be exclusive to charity. There is also a specific
requirement that "no part of [the] net income or asset shall belong
to or inure to the benefit of any member, organizer, officer or any
specific person." The use of lands, buildings and improvements of
the institution is but a part of its operations.There is no dispute
that St. Luke's is organized as a non-stock and non-profit
charitable institution. However, this does not automatically exempt
St. Luke's from paying taxes. This only refers to the organization
of St. Luke's. Even if St. Luke's meets the test of charity, a
charitable institution is not ipso facto tax exempt. To be exempt
from real property taxes, Section 28(3), Article VI of the
Constitution requires that a charitable institution use the
property "actually, directly and exclusively" for charitable
purposes. To be exempt from income taxes, Section 30(E) of the NIRC
requires that a charitable institution must be "organized and
operated exclusively" for charitable purposes. Likewise, to be
exempt from income taxes, Section 30(G) of the NIRC requires that
the institution be "operated exclusively" for social
welfare.However, the last paragraph of Section 30 of the NIRC
qualifies the words "organized and operated exclusively" by
providing that:Notwithstanding the provisions in the preceding
paragraphs, the income of whatever kind and character of the
foregoing organizations from any of their properties, real or
personal, or from any of their activities conducted for profit
regardless of the disposition made of such income, shall be subject
to tax imposed under this Code. (Emphasis supplied)In short, the
last paragraph of Section 30 provides that if a tax exempt
charitable institution conducts "any" activity for profit, such
activity is not tax exempt even as its not-for-profit activities
remain tax exempt. This paragraph qualifies the requirements in
Section 30(E) that the "[n]on-stock corporation or association
[must be] organized and operated exclusively for x x x charitable x
x x purposes x x x." It likewise qualifies the requirement in
Section 30(G) that the civic organization must be "operated
exclusively" for the promotion of social welfare.Thus, even if the
charitable institution must be "organized and operated exclusively"
for charitable purposes, it is nevertheless allowed to engage in
"activities conducted for profit" without losing its tax exempt
status for its not-for-profit activities. The only consequence is
that the "income of whatever kind and character" of a charitable
institution "from any of its activities conducted for profit,
regardless of the disposition made of such income, shall be subject
to tax." Prior to the introduction of Section 27(B), the tax rate
on such income from for-profit activities was the ordinary
corporate rate under Section 27(A). With the introduction of
Section 27(B), the tax rate is now 10%.In 1998, St. Luke's had
total revenues ofP1,730,367,965 from services to paying patients.
It cannot be disputed that a hospital which receives
approximatelyP1.73 billion from paying patients is not an
institution "operated exclusively" for charitable purposes.
Clearly, revenues from paying patients are income received from
"activities conducted for profit."52Indeed, St. Luke's admits that
it derived profits from its paying patients. St. Luke's
declaredP1,730,367,965 as "Revenues from Services to Patients" in
contrast to its "Free Services" expenditure ofP218,187,498. In its
Comment in G.R. No. 195909, St. Luke's showed the following
"calculation" to support its claim that 65.20% of its "income after
expenses was allocated to free or charitable services" in
1998.53REVENUES FROM SERVICES TO PATIENTSP1,730,367,965.00
OPERATING EXPENSES
Professional care of patientsP1,016,608,394.00
Administrative287,319,334.00
Household and Property91,797,622.00
P1,395,725,350.00
INCOME FROM OPERATIONSP334,642,615.00100%
Free Services-218,187,498.00-65.20%
INCOME FROM OPERATIONS, Net of FREE
SERVICESP116,455,117.0034.80%
OTHER INCOME17,482,304.00
EXCESS OF REVENUES OVER EXPENSESP133,937,421.00
In Lung Center, this Court declared:"[e]xclusive" is defined as
possessed and enjoyed to the exclusion of others; debarred from
participation or enjoyment; and "exclusively" is defined, "in a
manner to exclude; as enjoying a privilege exclusively." x x x The
words "dominant use" or "principal use" cannot be substituted for
the words "used exclusively" without doing violence to the
Constitution and the law. Solely is synonymous with
exclusively.54The Court cannot expand the meaning of the words
"operated exclusively" without violating the NIRC. Services to
paying patients are activities conducted for profit. They cannot be
considered any other way. There is a "purpose to make profit over
and above the cost" of services.55TheP1.73 billion total revenues
from paying patients is not even incidental to St. Luke's charity
expenditure ofP218,187,498 for non-paying patients.St. Luke's
claims that its charity expenditure ofP218,187,498 is 65.20% of its
operating income in 1998. However, if a part of the remaining
34.80% of the operating income is reinvested in property, equipment
or facilities used for services to paying and non-paying patients,
then it cannot be said that the income is "devoted or used
altogether to the charitable object which it is intended to
achieve."56The income is plowed back to the corporation not
entirely for charitable purposes, but for profit as well. In any
case, the last paragraph of Section 30 of the NIRC expressly
qualifies that income from activities for profit is taxable
"regardless of the disposition made of such income."Jesus Sacred
Heart College declared that there is no official legislative record
explaining the phrase "any activity conducted for profit." However,
it quoted a deposition of Senator Mariano Jesus Cuenco, who was a
member of the Committee of Conference for the Senate, which
introduced the phrase "or from any activity conducted for
profit."P. Cuando ha hablado de la Universidad de Santo Toms que
tiene un hospital, no cree Vd. que es una actividad esencial dicho
hospital para el funcionamiento del colegio de medicina de dicha
universidad?x x x xR. Si el hospital se limita a recibir enformos
pobres, mi contestacin seria afirmativa; pero considerando que el
hospital tiene cuartos de pago, y a los mismos generalmente van
enfermos de buena posicin social econmica, lo que se paga por estos
enfermos debe estar sujeto a 'income tax', y es una de las razones
que hemos tenido para insertar las palabras o frase 'or from any
activity conducted for profit.'57The question was whether having a
hospital is essential to an educational institution like the
College of Medicine of the University of Santo Tomas. Senator
Cuenco answered that if the hospital has paid rooms generally
occupied by people of good economic standing, then it should be
subject to income tax. He said that this was one of the reasons
Congress inserted the phrase "or any activity conducted for
profit."The question in Jesus Sacred Heart College involves an
educational institution.58However, it is applicable to charitable
institutions because Senator Cuenco's response shows an intent to
focus on the activities of charitable institutions. Activities for
profit should not escape the reach of taxation. Being a non-stock
and non-profit corporation does not, by this reason alone,
completely exempt an institution from tax. An institution cannot
use its corporate form to prevent its profitable activities from
being taxed.The Court finds that St. Luke's is a corporation that
is not "operated exclusively" for charitable or social welfare
purposes insofar as its revenues from paying patients are
concerned. This ruling is based not only on a strict interpretation
of a provision granting tax exemption, but also on the clear and
plain text of Section 30(E) and (G). Section 30(E) and (G) of the
NIRC requires that an institution be "operated exclusively" for
charitable or social welfare purposes to be completely exempt from
income tax. An institution under Section 30(E) or (G) does not lose
its tax exemption if it earns income from its for-profit
activities. Such income from for-profit activities, under the last
paragraph of Section 30, is merely subject to income tax,
previously at the ordinary corporate rate but now at the
preferential 10% rate pursuant to Section 27(B).A tax exemption is
effectively a social subsidy granted by the State because an exempt
institution is spared from sharing in the expenses of government
and yet benefits from them. Tax exemptions for charitable
institutions should therefore be limited to institutions beneficial
to the public and those which improve social welfare. A
profit-making entity should not be allowed to exploit this subsidy
to the detriment of the government and other taxpayers.1wphi1St.
Luke's fails to meet the requirements under Section 30(E) and (G)
of the NIRC to be completely tax exempt from all its income.
However, it remains a proprietary non-profit hospital under Section
27(B) of the NIRC as long as it does not distribute any of its
profits to its members and such profits are reinvested pursuant to
its corporate purposes. St. Luke's, as a proprietary non-profit
hospital, is entitled to the preferential tax rate of 10% on its
net income from its for-profit activities.St. Luke's is therefore
liable for deficiency income tax in 1998 under Section 27(B) of the
NIRC. However, St. Luke's has good reasons to rely on the letter
dated 6 June 1990 by the BIR, which opined that St. Luke's is "a
corporation for purely charitable and social welfare purposes"59
and thus exempt from income tax.60In Michael J. Lhuillier, Inc. v.
Commissioner of Internal Revenue,61the Court said that "good faith
and honest belief that one is not subject to tax on the basis of
previous interpretation of government agencies tasked to implement
the tax law, are sufficient justification to delete the imposition
of surcharges and interest."62
FIRST DIVISIONMOBIL PHILIPPINES, INC., Petitioner, - versus -
G.R. No. 154092 Present: Davide, Jr.,C.J., (Chairman), Quisumbing,
Ynares-Santiago, Carpio, and Azcuna,JJ.
THE CITY TREASURER OF MAKATI and the CHIEF OF THE LICENSE
DIVISION OF THE CITY OF MAKATI, Respondents.Promulgated: July 14,
2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - -xDECISIONSimply stated, the
issue is: Are the business taxes paid by petitioner in 1998,
business taxes for 1997 or 1998?According to petitioner, the 1997
gross sales/revenue is merely the basis for the amount of business
taxes due for the privilege of carrying on a business in the year
when the tax was paid.For their part, respondents argue that since
local taxes, which include business taxes, are paid either within
the first twenty days of January of each year or of each subsequent
quarter, as the case may be, what the taxpayer actually pays during
the recorded calendar year is actually its business tax for the
preceding year.Prefatorily, it is necessary to distinguish between
a business taxvis--visan income tax.Business taxes imposed in the
exercise of police power for regulatory purposes are paid for the
privilege of carrying on a business in the year the tax was paid.
It is paid at the beginning of the year as a fee to allow the
business to operate for the rest of the year. It is deemed a
prerequisite to the conduct of business.Income tax, on the other
hand, is a tax on all yearly profits arising from property,
professions, trades or offices, or as a tax on a persons income,
emoluments, profits and the like. It is tax on income, whether net
or gross realized in one taxable year.[15] It is due on or before
the 15thday of the 4thmonth following the close of the taxpayers
taxable year and is generally regarded as an excise tax, levied
upon the right of a person or entity to receive income or
profits.The trial court erred when it said that the payments made
by petitioner in 1998 are payments for business tax incurred in
1997 which only accrued in January 1998. Likewise, it erred when it
ruled that petitioner was still liable for business taxes based on
its gross income/revenue for January to August 1998.Section 3A.04
of the Makati City Revenue Code states:Sec.3A.04.Computation of tax
for newly-started business. In the case of newly-started business
under Sec. 3A.02, (a), (b), (c), (d), (e), (f), (g), (h), (i), (j),
(k), (l), and (m) above, the tax shall be fixed by the quarter. The
initial tax of the quarter in which the business starts to operate
shall be two and one half percent (2 %) of one percent (1%) of the
capital investment.In the succeeding quarter or quarters, in cases
where the business opens before the last quarter of the year, the
tax shall be based on the gross sales or receipt for the preceding
quarter at one-half ( ) of the rates fixed therefor by the
pertinent schedule in Section 3A.02, (a), (b), (c), (d), (e), (f),
(g), (h), (i), (j), (k), (l), and (m).In the succeeding calendar
year, regardless of when the business started to operate, the tax
shall be based on the gross sales or receipts for the preceding
calendar year, or any fraction thereof as provided in the same
pertinent schedules.[16]Under the Makati Revenue Code, it appears
that the business tax, like income tax, is computed based on the
previous years figures. This is the reason for the confusion. A
newly-started business is already liable for business taxes (i.e.
license fees) at the start of the quarter when it commences
operations. In computing the amount of tax due for the first
quarter of operations, the business capital investment is used as
the basis. For the subsequent quarters of the first year, the tax
is based on the gross sales/receipts for the previous quarter. In
the following year(s), the business is then taxed based on the
gross sales or receipts of the previous year. The business taxes
paid in the year 1998 is for the privilege of engaging in business
for the same year, and not for having engaged in business for
1997.Upon its transfer, petitioner was apparently subjected to Sec.
3A.11 par. (g) which states:. . .(g)Retirement of business.. . .For
purposes thereof, termination shall mean that business operation
are stopped completely.. . .(2) If it is found that the retirement
or termination of the business is legitimate, [a]nd the tax due
therefrom be less than the tax due for the current year based on
the gross sales or receipts, the difference in the amount of the
tax shall be paid before the business is considered officially
retired or terminated.[17]Based on this foregoing provision, on the
year an establishment retires or terminates its business within the
municipality, it would be required to pay the difference in the
amount if the tax collected, based on the previous years gross
sales or receipts, is less than the actual tax due based on the
current years gross sales or receipts.For the year 1998, petitioner
paid a total ofP2,262,122.48 to the City Treasurer of Makati[18]as
business taxes for the year 1998. The amount of tax as computed
based on petitioners gross sales for 1998 is onlyP1,331,638.84.
Since the amount paid is more than the amount computed based on
petitioners actual gross sales for 1998, petitioner upon its
retirement is not liable for additional taxes to the City of
Makati. Thus, we find that the respondent erroneously treated the
assessment and collection of business tax as if it were income tax,
by rendering an additional assessment ofP1,331,638.84 for the
revenue generated for the year 1998..G.R. No. 183137 April 10,
2013PELIZLOY REALTY CORPORATION, represented herein by its
President, GREGORY K. LOY,Petitioner,vs.THE PROVINCE OF
BENGUET,Respondent.D E C I S I O NThe power to tax "is an attribute
of sovereignty,"7and as such, inheres in the State. Such, however,
is not true for provinces, cities, municipalities and barangays as
they are not the sovereign;8rather, they are mere "territorial and
political subdivisions of the Republic of the Philippines".9The
rule governing the taxing power of provinces, cities, muncipalities
and barangays is summarized in Icard v. City Council of Baguio:10It
is settled that a municipal corporation unlike a sovereign state is
clothed with no inherent power of taxation. The charter or statute
must plainly show an intent to confer that power or the
municipality, cannot assume it. And the power when granted is to be
construed in strictissimi juris. Any doubt or ambiguity arising out
of the term used in granting that power must be resolved against
the municipality. Inferences, implications, deductions all these
have no place in the interpretation of the taxing power of a
municipal corporation.11[Underscoring supplied]Therefore, the power
of a province to tax is limited to the extent that such power is
delegated to it either by the Constitution or by statute. Section
5, Article X of the 1987 Constitution is clear on this
point:Section 5. 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.
Such taxes, fees, and charges shall accrue exclusively to the local
governments. [Underscoring supplied]Per Section 5, Article X of the
1987 Constitution, "the power to tax is no longer vested
exclusively on Congress; local legislative bodies are now given
direct authority to levy taxes, fees and other
charges."12Nevertheless, such authority is "subject to such
guidelines and limitations as the Congress may provide".13In
conformity with Section 3, Article X of the 1987
Constitution,14Congress enacted Republic Act No. 7160, otherwise
known as the Local Government Code of 1991. Book II of the LGC
governs local taxation and fiscal matters.Relevant provisions of
Book II of the LGC establish the parameters of the taxing powers of
LGUS found below.First, Section 130 provides for the following
fundamental principles governing the taxing powers of LGUs:1.
Taxation shall be uniform in each LGU.2. Taxes, fees, charges and
other impositions shall:a. be equitable and based as far as
practicable on the taxpayer's ability to pay;b. be levied and
collected only for public purposes;c. not be unjust, excessive,
oppressive, or confiscatory;d. not be contrary to law, public
policy, national economic policy, or in the restraint of trade.3.
The collection of local taxes, fees, charges and other impositions
shall in no case be let to any private person.4. The revenue
collected pursuant to the provisions of the LGC shall inure solely
to the benefit of, and be subject to the disposition by, the LGU
levying the tax, fee, charge or other imposition unless otherwise
specifically provided by the LGC.5. Each LGU shall, as far as
practicable, evolve a progressive system of taxation.Second,
Section 133 provides for the common limitations on the taxing
powers of LGUs. Specifically, Section 133 (i) prohibits the levy by
LGUs of percentage or value-added tax (VAT) on sales, barters or
exchanges or similar transactions on goods or services except as
otherwise provided by the LGC.As it is Pelizloys contention that
Section 59, Article X of the Tax Ordinance levies a prohibited
percentage tax, it is crucial to understand first the concept of a
percentage tax.In Commissioner of Internal Revenue v. Citytrust
Investment Phils. Inc.,15the Supreme Court defined percentage tax
as a "tax measured by a certain percentage of the gross selling
price or gross value in money of goods sold, bartered or imported;
or of the gross receipts or earnings derived by any person engaged
in the sale of services." Also, Republic Act No. 8424, otherwise
known as the National Internal Revenue Code (NIRC), in Section 125,
Title V,16lists amusement taxes as among the (other) percentage
taxes which are levied regardless of whether or not a taxpayer is
already liable to pay value-added tax (VAT).Amusement taxes are
fixed at a certain percentage of the gross receipts incurred by
certain specified establishments.Thus, applying the definition in
CIR v. Citytrust and drawing from the treatment of amusement taxes
by the NIRC, amusement taxes are percentage taxes as correctly
argued by Pelizloy.However, provinces are not barred from levying
amusement taxes even if amusement taxes are a form of percentage
taxes. Section 133 (i) of the LGC prohibits the levy of percentage
taxes "except as otherwise provided" by the LGC.Section 140 of the
LGC provides:SECTION 140. Amusement Tax - (a) The province may levy
an amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing
stadia, and other places of amusement at a rate of not more than
thirty percent (30%) of the gross receipts from admission fees.(b)
In the case of theaters of cinemas, the tax shall first be deducted
and withheld by their proprietors, lessees, or operators and paid
to the provincial treasurer before the gross receipts are divided
between said proprietors, lessees, or operators and the
distributors of the cinematographic films.(c) The holding of
operas, concerts, dramas, recitals, painting and art exhibitions,
flower shows, musical programs, literary and oratorical
presentations, except pop, rock, or similar concerts shall be
exempt from the payment of the tax herein imposed.(d) The
Sangguniang Panlalawigan may prescribe the time, manner, terms and
conditions for the payment of tax. In case of fraud or failure to
pay the tax, the Sangguniang Panlalawigan may impose such
surcharges, interests and penalties.(e) The proceeds from the
amusement tax shall be shared equally by the province and the
municipality where such amusement places are located. [Underscoring
supplied]Evidently, Section 140 of the LGC carves a clear exception
to the general rule in Section 133 (i). Section 140 expressly
allows for the imposition by provinces of amusement taxes on "the
proprietors, lessees, or operators of theaters, cinemas, concert
halls, circuses, boxing stadia, and other places of
amusement."However, resorts, swimming pools, bath houses, hot
springs, and tourist spots are not among those places expressly
mentioned by Section 140 of the LGC as being subject to amusement
taxes. Thus, the determination of whether amusement taxes may be
levied on admissions to resorts, swimming pools, bath houses, hot
springs, and tourist spots hinges on whether the phrase other
places of amusement encompasses resorts, swimming pools, bath
houses, hot springs, and tourist spots.Under the principle of
ejusdem generis, "where a general word or phrase follows an
enumeration of particular and specific words of the same class or
where the latter follow the former, the general word or phrase is
to be construed to include, or to be restricted to persons, things
or cases akin to, resembling, or of the same kind or class as those
specifically mentioned."17The purpose and rationale of the
principle was explained by the Court in National Power Corporation
v. Angas18as follows:The purpose of the rule on ejusdem generis is
to give effect to both the particular and general words, by
treating the particular words as indicating the class and the
general words as including all that is embraced in said class,
although not specifically named by the particular words. This is
justified on the ground that if the lawmaking body intended the
general terms to be used in their unrestricted sense, it would have
not made an enumeration of particular subjects but would have used
only general terms. [2 Sutherland, Statutory Construction, 3rd ed.,
pp. 395-400].19In Philippine Basketball Association v. Court of
Appeals,20the Supreme Court had an opportunity to interpret a
starkly similar provision or the counterpart provision of Section
140 of the LGC in the Local Tax Code then in effect. Petitioner
Philippine Basketball Association (PBA) contended that it was
subject to the imposition by LGUs of amusement taxes (as opposed to
amusement taxes imposed by the national government).1wphi1In
support of its contentions, it cited Section 13 of Presidential
Decree No. 231, otherwise known as the Local Tax Code of 1973,
(which is analogous to Section 140 of the LGC) providing the
following:Section 13. Amusement tax on admission. - The province
shall impose a tax on admission to be collected from the
proprietors, lessees, or operators of theaters, cinematographs,
concert halls, circuses and other places of amusement xxx.Applying
the principle of ejusdem generis, the Supreme Court rejected PBA's
assertions and noted that:In determining the meaning of the phrase
'other places of amusement', one must refer to the prior
enumeration of theaters, cinematographs, concert halls and circuses
with artistic expression as their common characteristic.
Professional basketball games do not fall under the same category
as theaters, cinematographs, concert halls and circuses as the
latter basically belong to artistic forms of entertainment while
the former caters to sports and gaming.21[Underscoring
supplied]However, even as the phrase other places of amusement was
already clarified in Philippine Basketball Association, Section 140
of the LGC adds to the enumeration of 'places of amusement' which
may properly be subject to amusement tax. Section 140 specifically
mentions 'boxing stadia' in addition to "theaters, cinematographs,
concert halls and circuses" which were already mentioned in PD No.
231. Also, 'artistic expression' as a characteristic does not
pertain to 'boxing stadia'.In the present case, the Court need not
embark on a laborious effort at statutory construction. Section 131
(c) of the LGC already provides a clear definition of amusement
places:Section 131. Definition of Terms. - When used in this Title,
the term:x x x(c) "Amusement Places" include theaters, cinemas,
concert halls, circuses and other places of amusement where one
seeks admission to entertain oneself by seeing or viewing the show
or performances [Underscoring supplied]Indeed, theaters, cinemas,
concert halls, circuses, and boxing stadia are bound by a common
typifying characteristic in that they are all venues primarily for
the staging of spectacles or the holding of public shows,
exhibitions, performances, and other events meant to be viewed by
an audience. Accordingly, other places of amusement must be
interpreted in light of the typifying characteristic of being
venues "where one seeks admission to entertain oneself by seeing or
viewing the show or performances" or being venues primarily used to
stage spectacles or hold public shows, exhibitions, performances,
and other events meant to be viewed by an audience.As defined in
The New Oxford American Dictionary,22show means "a spectacle or
display of something, typically an impressive one";23while
performance means "an act of staging or presenting a play, a
concert, or other form of entertainment."24As such, the ordinary
definitions of the words show and performance denote not only
visual engagement (i.e., the seeing or viewing of things) but also
active doing (e.g., displaying, staging or presenting) such that
actions are manifested to, and (correspondingly) perceived by an
audience.Considering these, it is clear that resorts, swimming
pools, bath houses, hot springs and tourist spots cannot be
considered venues primarily "where one seeks admission to entertain
oneself by seeing or viewing the show or performances". While it is
true that they may be venues where people are visually engaged,
they are not primarily venues for their proprietors or operators to
actively display, stage or present shows and/or performances.Thus,
resorts, swimming pools, bath houses, hot springs and tourist spots
do not belong to the same category or class as theaters, cinemas,
concert halls, circuses, and boxing stadia. It follows that they
cannot be considered as among the other places of amusement
contemplated by Section 140 of the LGC and which may properly be
subject to amusement taxes.At this juncture, it is helpful to
recall this Courts pronouncements in Icard:The power to tax when
granted to a province is to be construed in strictissimi juris. Any
doubt or ambiguity arising out of the term used in granting that
power must be resolved against the province. Inferences,
implications, deductions all these have no place in the
interpretation of the taxing power of a province.25In this case,
the definition of' amusement places' in Section 131 (c) of the LGC
is a clear basis for determining what constitutes the 'other places
of amusement' which may properly be subject to amusement tax
impositions by provinces. There is no reason for going beyond such
basis. To do otherwise would be to countenance an arbitrary
interpretation/application of a tax law and to inflict an injustice
on unassuming taxpayers.The previous pronouncements
notwithstanding, it will be noted that it is only the second
paragraph of Section 59, Article X of the Tax Ordinance which
imposes amusement taxes on "resorts, swimming pools, bath houses,
hot springs, and tourist spots". The first paragraph of Section 59,
Article X of the Tax Ordinance refers to "theaters, cinemas,
concert halls, circuses, cockpits, dancing halls, dancing schools,
night or day clubs, and other places of amusement".1wphi1In any
case, the issues raised by Pelizloy are pertinent only with respect
to the second paragraph of Section 59, Article X of the Tax
Ordinance. Thus, there is no reason to invalidate the first
paragraph of Section 59, Article X of the Tax Ordinance. Any
declaration as to the Province of Benguet's lack of authority to
levy amusement taxes must be limited to admission fees to resorts,
swimming pools, bath houses, hot springs and tourist
spots.Moreover, the second paragraph of Section 59, Article X of
the Tax Ordinance is not limited to resorts, swimming pools, bath
houses, hot springs, and tourist spots but also covers admission
fees for boxing. As Section 140 of the LGC allows for the
imposition of amusement taxes on gross receipts from admission fees
to boxing stadia, Section 59, Article X of the Tax Ordinance must
be sustained with respect to admission fees from boxing
stadia.WHEREFORE, the petition for review on certiorari is GRANTED.
The second paragraph of Section 59, Article X of the Benguet
Provincial Revenue Code of 2005, in so far as it imposes amusement
taxes on admission fees to resorts, swimming pools, bath houses,
hot springs and tourist spots, is declared null and void.
Respondent Province of Benguet is permanently enjoined from
enforcing the second paragraph of Section 59, Article X of the
Benguet Provincial Revenue Code of 2005 with respect to resorts,
swimming pools, bath houses, hot springs and tourist spots.SO
ORDERED.
G.R. No. 188500 July 24, 2013PROVINCE OF CAGAYAN, represented by
HON. ALVARO T. ANTONIO, Governor, and ROBERT ADAP, Environmental
and Natural Resources Officer,Petitioners,vs.JOSEPH LASAM
LARA,Respondent.R E S O L U T I O NIn order for an entity to
legally undertake a quarrying business, he must first comply with
all the requirements imposed not only by the national government,
but also by the local government unit where his business is
situated. Particularly, Section 138(2) of RA 716026requires that
such entity must first secure a governors permit prior to the start
of his quarrying operations, viz:SECTION 138. Tax on Sand, Gravel
and Other Quarry Resources. x x x.The permit to extract sand,
gravel and other quarry resources shall be issued exclusively by
the provincial governor, pursuant to the ordinance of the
sangguniang panlalawigan. (Emphasis and underscoring supplied)x x x
xIn connection thereto, the Sangguniang Panlalawigan of Cagayan
promulgated Provincial Ordinance No. 2005-07, Article H, Section
2H.04 of which provides:SECTION 2H.04. Permit for Gravel and Sand
Extraction and Quarrying. No person shall extract ordinary stones,
gravel, earth, boulders and quarry resources from public lands or
from the beds of seas, rivers, streams, creeks or other public
waters unless a permit has been issued by the Governor (or his
deputy as provided herein) x x x. (Emphasis and underscoring
supplied)A plain reading of the afore-cited provisions clearly
shows that a governors permit is a pre-requisite before one can
engage in a quarrying business in Cagayan. Records, however, reveal
that Lara admittedly failed to secure the same; hence, he has no
right to conduct his quarrying operations within the Permit Area.
Consequently, he is not entitled to any injunction.In view of the
foregoing, the Court need not delve into the issue respecting the
necessity of securing a mayors permit, especially since it is the
main issue in another case, Civil Case No. 7049, which remains
pending before the court a quo.WHEREFORE, the petition is GRANTED.
Accordingly, the June 30, 2009 Decision of the Regional Trial Court
of Tuguegarao City, Cagayan, Branch 5 in Civil Case No. 7077 is
hereby REVERSED and SET ASIDE.SO ORDERED.
G.R. No. 190818 June 5, 2013METRO MANILA SHOPPING MECCA CORP.,
SHOEMART, INC., SM PRIME HOLDINGS, INC., STAR APPLIANCES CENTER,
SUPER VALUE, INC., ACE HARDWARE PHILIPPINES, INC., HEALTH AND
BEAUTY, INC., JOLLIMART PHILS. CORP., and SURPLUS MARKETING
CORPORATION,Petitioners,vs.MS. LIBERTY M. TOLEDO, in her official
capacity as the City Treasurer of Manila, and THE CITY OF
MANILA,Respondents.D E C I S I O NThe Courts RulingThe petition is
bereft of merit.A. Respondents Petition forReview with the CTA
DivisionPetitioners argue that the CTA Division erred in extending
the reglementary period within which respondents may file their
Petition for Review, considering that Section 3, Rule 833of the
Revised Rules of the CTA (RRCTA) is silent on such matter. Further,
even if it is assumed that an extension is allowed, the CTA
Division should not have entertained respondents Petition for
Review for their failure to comply with the filing requisites set
forth in Section 4, Rule 534and Section 2, Rule 635of the
RRCTA.Petitioners arguments fail to persuade.Although the RRCTA
does not explicitly sanction extensions to file a petition for
review with the CTA, Section 1, Rule 736thereof reads that in the
absence of any express provision in the RRCTA, Rules 42, 43, 44 and
46 of the Rules of Court may be applied in a suppletory manner. In
particular, Section 937of Republic Act No. 9282 makes reference to
the procedure under Rule 42 of the Rules of Court. In this light,
Section 1 of Rule 4238states that the period for filing a petition
for review may be extended upon motion of the concerned party.
Thus, in City of Manila v. Coca-Cola Bottlers Philippines,
Inc.,39the Court held that the original period for filing the
petition for review may be extended for a period of fifteen (15)
days, which for the most compelling reasons, may be extended for
another period not exceeding fifteen (15) days.40In other words,
the reglementary period provided under Section 3, Rule 8 of the
RRCTA is extendible and as such, CTA Divisions grant of respondents
motion for extension falls squarely within the law.Neither did
respondents failure to comply with Section 4, Rule 5 and Section 2,
Rule 6 of the RRCTA militate against giving due course to their
Petition for Review. Respondents submission of only one copy of the
said petition and their failure to attach therewith a certified
true copy of the RTCs decision constitute mere formal defects which
may be relaxed in the interest of substantial justice. It is
well-settled that dismissal of appeals based purely on technical
grounds is frowned upon as every party litigant must be afforded
the amplest opportunity for the proper and just determination of
his cause, free from the unacceptable plea of technicalities.41In
this regard, the CTA Division did not overstep its boundaries when
it admitted respondents Petition for Review despite the
aforementioned defects "in the broader interest of justice."Having
resolved the foregoing procedural matter, the Court proceeds to the
main issue in this case.B. Petitioners claim for taxrefund/creditA
perusal of Section 19642of the LGC reveals that in order to be
entitled to a refund/credit of local taxes, the following
procedural requirements must concur: first, the taxpayer concerned
must file a written claim for refund/credit with the local
treasurer; and second, the case or proceeding for refund has to be
filed within two (2) years from the date of the payment of the tax,
fee, or charge or from the date the taxpayer is entitled to a
refund or credit.Records disclose that while the case or proceeding
for refund was filed by petitioners within two (2) years from the
time of payment,43they, however, failed to prove that they have
filed a written claim for refund with the local treasurer
considering that such fact although subject of their Request for
Admission which respondents did not reply to had already been
controverted by the latter in their Motion to Dismiss and Answer.To
elucidate, the scope of a request for admission filed pursuant to
Rule 26 of the Rules of Court and a partys failure to comply with
the same are respectively detailed in Sections 1 and 2 thereof, to
wit:SEC. 1. Request for admission. At any time after issues have
been joined, a party may file and serve upon any other party a
written request for the admission by the latter of the genuineness
of any material and relevant document described in and exhibited
with the request or of the truth of any material and relevant
matter of fact set forth in the request. Copies of the documents
shall be delivered with the request unless copies have already been
furnished.SEC. 2. Implied admission. Each of the matters of which
an admission is requested shall be deemed admitted unless, within a
period designated in the request, which shall not be less than
fifteen (15) days after service thereof, or within such further
time as the court may allow on motion, the party to whom the
request is directed files and serves upon the party requesting the
admission a sworn statement either denying specifically the matters
of which an admission is requested or setting forth in detail the
reasons why he cannot truthfully either admit or deny those
matters.Objections to any request for admission shall be submitted
to the court by the party requested within the period for and prior
to the filing of his sworn statement as contemplated in the
preceding paragraph and his compliance therewith shall be deferred
until such objections are resolved, which resolution shall be made
as early as practicable. (Emphasis and underscoring supplied)Based
on the foregoing, once a party serves a request for admission
regarding the truth of any material and relevant matter of fact,
the party to whom such request is served is given a period of
fifteen (15) days within which to file a sworn statement answering
the same. Should the latter fail to file and serve such answer,
each of the matters of which admission is requested shall be deemed
admitted.44The exception to this rule is when the party to whom
such request for admission is served had already controverted the
matters subject of such request in an earlier pleading. Otherwise
stated, if the matters in a request for admission have already been
admitted or denied in previous pleadings by the requested party,
the latter cannot be compelled to admit or deny them anew. In turn,
the requesting party cannot reasonably expect a response to the
request and thereafter, assume or even demand the application of
the implied admission rule in Section 2, Rule 26.45The rationale
behind this exception had been discussed in the case of CIR v.
Manila Mining Corporation,46citing Concrete Aggregates Corporation
v. CA,47where the Court held as follows:As Concrete Aggregates
Corporation v. Court of Appeals holds, admissions by an adverse
party as a mode of discovery contemplates of interrogatories that
would clarify and tend to shed light on the truth or falsity of the
allegations in a pleading, and does not refer to a mere reiteration
of what has already been alleged in the pleadings; otherwise, it
constitutes an utter redundancy and will be a useless, pointless
process which petitioner should not be subjected to.Petitioner
controverted in its Answers the matters set forth in respondents
Petitions for Review before the CTA the requests for admission
being mere reproductions of the matters already stated in the
petitions. Thus, petitioner should not be required to make a second
denial of those matters it already denied in its
Answers.1wphi1(Emphasis and underscoring supplied; citations
omitted)Likewise, in the case of Limos v. Odones,48the Court
explained:A request for admission is not intended to merely
reproduce or reiterate the allegations of the requesting partys
pleading but should set forth relevant evidentiary matters of fact
described in the request, whose purpose is to establish said partys
cause of action or defense. Unless it serves that purpose, it is
pointless, useless and a mere redundancy. (Emphasis and
underscoring supplied)Records show that petitioners filed their
Request for Admission with the RTC and also served the same on
respondents, requesting that the fact that they filed a written
claim for refund with the City Treasurer of Manila be
admitted.49Respondents, however, did not and in fact, need not
reply to the same considering that they have already stated in
their Motion to Dismiss and Answer that petitioners failed to file
any written claim for tax refund or credit.50In this regard,
respondents are not deemed to have admitted the truth and veracity
of petitioners requested fact.Indeed, it is hornbook principle that
a claim for a tax refund/credit is in the nature of a claim for an
exemption and the law is construed in strictissimi juris against
the one claiming it and in favor of the taxing
authority.51Consequently, as petitioners have failed to prove that
they have complied with the procedural requisites stated under
Section 196 of the LGC, their claim for local tax refund/credit
must be denied.WHEREFORE, the petition is DENIED. The September 8,
2009 Decision and January 4, 2010 Resolution of the Court of Tax
Appeals En Bane in CT A E.B. No. 480 are hereby AFFIRMED.SO
ORDERED.G.R. No. 173829 June 10, 2013VALBUECO,
INC.,Petitioner,vs.PROVINCE OF BATAAN, represented by its
Provincial Governor ANTONIO ROMAN;1EMMANUEL M. AQUINO,2in his
official capacity as Registrar of the Register of Deeds of Balanga,
Bataan; and PASTOR P. VICHUACO,3in his official capacity as
Provincial Treasurer of Balanga, Bataan,Respondents.The petition
lacks merit.While it has been ruled that the notices and
publication, as well as the legal requirements for a tax
delinquency sale under Presidential Decree No. 464 (otherwise known
as the Real Property Tax Code),20are mandatory and that failure to
comply therewith can invalidate the sale in view of the
requirements of due process, We have equally held that the claim of
lack of notice is a factual question.21In a petition for review,
the Court can only pass upon questions of law; it is not a trier of
facts and will not inquire into and review the evidence presented
by the contending parties during the trial and relied upon by the
lower courts to support their findings.22The issues raised in this
petition undeniably involve only questions of fact. On this ground
alone, it should be dismissed outright.Even if We dig deeper and
scrutinize the entire case records, the same conclusion would be
arrived at. Indeed, petitioner utterly failed to present
preponderant evidence to support its allegations that the auction
sale of the subject properties due to tax delinquency was attended
by irregularities. The two witnesses it presented are neither
competent nor convincing to attest with reasonable certainty that
respondents failed to observe the procedural requirements of PD
464.23The Court is thus, satisfied with the factual findings of the
trial court, as affirmed by the CA, and sees no reason to disturb
the same.We cannot lend credence to the testimony of Gaudencio P.
Juan, petitioners Forestry and Technical Consultant who claimed to
have been an employee since 1964,24that no notice of tax
delinquency, demand for tax payment or collection notice was
received and that there was no publication and posting of notice of
sale held. According to him, his duties and responsibilities
include: bringing out some technical matters to the company (e.g.,
use of grazing lands) and preparing plans for implementation by the
company (e.g., occupation of the area, the conversion of the area
for pasture purposes);25land and boundary disputes between
petitioner and owners of adjoining areas;26planning some other
plans for the implementation in the area like reforestation and
other forestry cases;27and planning preparation of reports, uses of
the land for forestry and agricultural purposes.28These, however,
have nothing to do with the duty of ensuring the prompt and timely
settlement of petitioners realty taxes or of making any
representation, for or in behalf of petitioner, with respondents in
connection thereto. In fact, Juan categorically admitted that he is
not the custodian of petitioners corporate records:Under Section
7338of PD 464 x x x notices of the sale at public auction may be
sent to the delinquent taxpayer, either (i) at the address as shown
in the tax rolls or property tax record cards of the municipality
or city where the property is located or (ii) at his residence, if
known to such treasurer or barrio captain. Plainly, Section 73
gives the treasurer the option of where to send the notice of sale.
In giving the treasurer the option, nowhere in the wordings is
there an indication of a requirement that notice must actually be
received by the intended recipient. Compliance by the treasurer is
limited to strictly following the provisions of the statute: he may
send it at the address of the delinquent taxpayer as shown in the
tax rolls or tax records or to the residence if known by him or the
barrio captain.39In this case, it is reasonable to deduce that
respondent Provincial Treasurer actually sent the notices at the
address uniformly indicated in TCT No. 47377, 47378, 47379, 47380,
47381, 47382, 47385 and 47386, as well as in the tax declarations,
which is 7th Floor, Bank of P.I. Bldg., Ayala Avenue, Makati,
Rizal. The fault herein lies with petitioner, not with respondent
Provincial Treasurer. It had a number of years to amend its address
and provide a more updated and reliable one. By neglecting to do
so, it should be aware of the chances it was taking should notices
be sent to it. Respondent Provincial Treasurer cannot be faulted
for presumably sending the notices to petitioners address indicated
in the land titles and tax declarations of the subject
properties.The principle We enunciated in Valencia v.
Jimenez,40Camo v. Riosa Boyco,41and Requiron v. Sinaban42that there
can be no presumption of regularity of any administrative action
which results in depriving a taxpayer of his property through a tax
sale does not apply in the case at bar. By and large, these cases
cited by petitioner involved facts that are way too different from
the one found in the instant case. More importantly, in the present
case, respondent Province, through its witness, Josephine Espino,
unequivocally attested that the procedural requisites mandated by
PD 464 were definitely observed. During her presentation, Espino
stated that she is a Local Treasury Operation Officer IV of the
Provincial Treasurers Office since March 2000 and that she had
previously served as Local Treasury Operations Officer and Local
Revenue Collection Officer III of the Provincial Treasurers Office,
being in charge of collecting taxes.43Under oath, she declared to
have personal knowledge of the fact that notice of tax delinquency
was sent by the Provincial Treasurers Office to petitioner. She
could not, however, show any documentary proof mainly because the
exclusive folder of petitioners properties are now missing despite
exercise of all possible means to locate them in other property
files.44Considering the long time that elapsed between the public
sale held sometime in 1987 or 1988 and the presentation of her
testimony in 2002, it is also understandable that Espino could no
longer remember the minute details surrounding the notices,
publication, and posting that respondent Provincial Treasurer
observed relative to the auction sale of the subject properties.The
Court, therefore, affirms the RTCs opinion that petitioner was not
able to establish its cause of action for its failure to submit
convincing evidence to establish a case and the CAs position that
it must rely on the strength of its evidence and not on the
weakness of respondents claim. Indeed, in Sapu-an v. Court of
Appeals,45We held:The general rule in civil cases is that the party
having the burden of proof must establish his case by a
preponderance of evidence. By "preponderance of evidence" is meant
that the evidence as a whole adduced by one side is superior to
that of the other.In determining where the preponderance or
superior weight of evidence on the issues involved lies, the court
may consider all the facts and circumstances of the case, the
witnesses manner of testifying, their intelligence, their means and
opportunity of knowing the facts on which they are testifying, the
nature of such facts, the probability or improbability of their
testimony, their interest or want of interest, and also their
personal credibility as far as the same may legitimately appear at
the trial. The court may also consider the number of witnesses,
although the preponderance is not necessarily with the greatest
number.1wphi1It is settled that matters of credibility are
addressed basically to the trial judge who is in a better position
than the appellate court to appreciate the weight and evidentiary
value of the testimonies of witnesses who have personally appeared
before him.46What petitioner has accomplished is only to cast
doubts by capitalizing on the absence of documentary evidence on
the part of respondents. While such approach would succeed if
carried out by the accused in criminal cases, plaintiffs in civil
cases need to do much more to overturn findings of fact and
credibility by the trial court, especially when the same had been
affirmed by the CA. It must be stressed that overturning judgments
in civil cases should be based on preponderance of evidence, and
with the further qualification that, when the scales shall stand
upon an equipoise, the court should find for the defendant.47The
"equiponderance of evidence" rule states that when the scale shall
stand upon an equipoise and there is nothing in the evidence which
shall incline it to one side or the other, the court will find for
the defendant.48Under this principle, the plaintiff must rely on
the strength of his evidence and not on the weakness of the
defendant's claim; even if the evidence of the plaintiff may be
stronger than that of the defendant, there is no preponderance of
evidence on his side if such evidence is insufficient in itself to
establish his cause of action.49WHEREFORE, the petition is DENIED.
The assailed October 24, 2005 Decision and July 18, 2006 Resolution
of the Court of Appeals in CAG.R. CV No. 81191, which sustained the
August 19,2003 Decision of the Regional Trial Court, Branch 1,
Balanga City, Bataan dismissing the case are hereby AFFIRMED.
G.R. No. 112497 August 4, 1994HON. FRANKLIN M. DRILON, in his
capacity as SECRETARY OF JUSTICE,petitioner,vs.MAYOR ALFREDO S.
LIM, VICE-MAYOR JOSE L. ATIENZA, CITY TREASURER ANTHONY ACEVEDO,
SANGGUNIANG PANGLUNSOD AND THE CITY OF MANILA,respondents.We do not
share that view. The lower court was rather hasty in invalidating
the provision.Section 187 authorizes the Secretary of Justice to
review only the constitutionality or legality of the tax ordinance
and, if warranted, to revoke it on either or both of these grounds.
When he alters or modifies or sets aside a tax ordinance, he is not
also permitted to substitute his own judgment for the judgment of
the local government that enacted the measure. Secretary Drilon did
set aside the Manila Revenue Code, but he did not replace it with
his own version of what the Code should be. He did not pronounce
the ordinance unwise or unreasonable as a basis for its annulment.
He did not say that in his judgment it was a bad law. What he found
only was that it was illegal. All he did in reviewing the said
measure was determine if the petitioners were performing their
functions in accordance with law, that is, with the prescribed
procedure for the enactment of tax ordinances and the grant of
powers to the city government under the Local Government Code. As
we see it, that was an act not of control but of mere
supervision.An officer in control lays down the rules in the doing
of an act. If they are not followed, he may, in his discretion,
order the act undone or re-done by his subordinate or he may even
decide to do it himself. Supervision does not cover such authority.
The supervisor or superintendent merely sees to it that the rules
are followed, but he himself does not lay down such rules, nor does
he have the discretion to modify or replace them. If the rules are
not observed, he may order the work done or re-done but only to
conform to the prescribed rules. He may not prescribe his own
manner for the doing of the act. He has no judgment on this matter
except to see to it that the rules are followed. In the opinion of
the Court, Secretary Drilon did precisely this, and no more nor
less than this, and so performed an act not of control but of mere
supervision.The case of Taule v. Santos9cited in the decision has
no application here because the jurisdiction claimed by the
Secretary of Local Governments over election contests in the
Katipunan ng Mga Barangay was held to belong to the Commission on
Elections by constitutional provision. The conflict was over
jurisdiction, not supervision or control.Significantly, a rule
similar to Section 187 appeared in the Local Autonomy Act, which
provided in its Section 2 as follows:A tax ordinance shall go into
effect on the fifteenth day after its passage, unless the ordinance
shall provide otherwise: Provided, however, That the Secretary of
Finance shall have authority to suspend the effectivity of any
ordinance within one hundred and twenty days after receipt by him
of a copy thereof, if, in his opinion, the tax or fee therein
levied or imposed is unjust, excessive, oppressive, or
confiscatory, or when it is contrary to declared national economy
policy, and when the said Secretary exercises this authority the
effectivity of such ordinance shall be suspended, either in part or
as a whole, for a period of thirty days within which period the
local legislative body may either modify the tax ordinance to meet
the objections thereto, or file an appeal with a court of competent
jurisdiction; otherwise, the tax ordinance or the part or parts
thereof declared suspended, shall be considered as revoked.
Thereafter, the local legislative body may not reimpose the same
tax or fee until such time as the grounds for the suspension
thereof shall have ceased to exist.That section allowed the
Secretary of Finance to suspend the effectivity of a tax ordinance
if,in his opinion, the tax or fee levied wasunjust,
excessive,oppressive or confiscatory. Determination of these flaws
would involve the exercise ofjudgmentordiscretionand not merely an
examination of whether or not the requirements or limitations of
the law had been observed; hence, it would smack of control rather
than mere supervision. That power was never questioned before this
Court but, at any rate, the Secretary of Justice is not given the
same latitude under Section 187. All he is permitted to do is
ascertain the constitutionality or legality of the tax measure,
without the right to declare that, in his opinion, it is unjust,
excessive, oppressive or confiscatory. He has no discretion on this
matter. In fact, Secretary Drilon set aside the Manila Revenue Code
only on two grounds, to with, the inclusion therein of certainultra
viresprovisions and non-compliance with the prescribed procedure in
its enactment. These grounds affected thelegality, not
thewisdomorreasonableness, of the tax measure.The issue of
non-compliance with the prescribed procedure in the enactment of
the Manila Revenue Code is another matter.In his resolution,
Secretary Drilon declared that there were no written notices of
public hearings on the proposed Manila Revenue Code that were sent
to interested parties as required by Art. 276(b) of the
Implementing Rules of the Local Government Code nor were copies of
the proposed ordinance published in three successive issues of a
newspaper of general circulation pursuant to Art. 276(a). No
minutes were submitted to show that the obligatory public hearings
had been held. Neither were copies of the measure as approved
posted in prominent places in the city in accordance with Sec.
511(a) of the Local Government Code. Finally, the Manila Revenue
Code was not translated into Pilipino or Tagalog and disseminated
among the people for their information and guidance, conformably to
Sec. 59(b) of the Code.Judge Palattao found otherwise. He declared
that all the procedural requirements had been observed in the
enactment of the Manila Revenue Code and that the City of Manila
had not been able to prove such compliance before the Secretary
only because he had given it only five days within which to gather
and present to him all the evidence (consisting of 25 exhibits)
later submitted to the trial court.To get to the bottom of this
question, the Court acceded to the motion of the respondents and
called for the elevation to it of the said exhibits. We have
carefully examined every one of these exhibits and agree with the
trial court that the procedural requirements have indeed been
observed. Notices of the public hearings were sent to interested
parties as evidenced by Exhibits G-1 to 17. The minutes of the
hearings are found in Exhibits M, M-1, M-2, and M-3. Exhibits B and
C show that the proposed ordinances were published in theBalitaand
the Manila Standard on April 21 and 25, 1993, respectively, and the
approved ordinance was published in the July 3, 4, 5, 1993 issues
of the Manila Standard and in the July 6, 1993 issue ofBalita, as
shown by Exhibits Q, Q-1, Q-2, and Q-3.The only exceptions are the
posting of the ordinance as approved but this omission does not
affect its validity, considering that its publication in three
successive issues of a newspaper of general circulation will
satisfy due process. It has also not been shown that the text of
the ordinance has been translated and disseminated, but this
requirement applies to the approval of local development plans and
public investment programs of the local government unit and not to
tax ordinances.We make no ruling on the substantive provisions of
the Manila Revenue Code as their validity has not been raised in
issue in the present petition.WHEREFORE, the judgment is hereby
rendered REVERSING the challenged decision of the Regional Trial
Court insofar as it declared Section 187 of the Local Government
Code unconstitutional but AFFIRMING its finding that the procedural
requirements in the enactment of the Manila Revenue Code have been
observed. No pronouncement as to costs.SO ORDERED.
SPOUSES EDUARDO and LETICIA MONTAO,Petitioners,-versus-ROSALINA
FRANCISCO, THE CITY GOVERNMENT OF ILOILO, ROMEO V. MANIKAN, City
Treasurer of Iloilo City, and ERLINDA C. ZARANDIN, Head of the
Treasurers Enforcement Group,Respondents.G.R. No.
160380Present:YNARES-SANTIAGO,J.,Chairperson,CHICO-NAZARIO,VELASCO,
JR.,NACHURA, andPERALTA,JJ.Promulgated:July 30, 2009
x----
------------------------------------------------------------------------------------xInTalusan
v. Tayag,[31]the Court held that for purposes of the collection of
real property taxes, the registered owner of the property is
considered the taxpayer.Hence, only the registered owner is
entitled to a notice of tax delinquency and other proceedings
relative to the tax sale.[32]In this case, theCourt of Appeals
correctly held that the GSIS, as the registered owner of the
subject property, was the taxpayer that was entitled to the notice
oftax delinquency and that ofthe auction sale,as well as other
related notices.It found that the GSIS was notdeprived ofits
property without due process and that notice was regularly
served.It pointed out that it had already upheld the validity of
the assessment of the real property taxes upon GSISandthe auction
sale proceedings inGSIS v. CityAssessorofIloilo City.[33]It is
important to note that both the GSIS, as the registered owner of
the subject property, and herein petitioners Spouses Montao
separately questioned the validity of the auction sale of the
subject property covered by TCT No. T-41681.The Court of Appeals
mentioned in its Decision that there are two cases involving the
same issue, namely, this action for declaration of nullity of sale
and damages filed by the Spouses Montao, and the petition for
annulment of judgment filed by the GSIS, docketed as CA-G.R. SP No.
51149, entitledGSIS v. City Assessor of Iloilo City,the Register of
Deeds of Iloilo City and Rosalina Francisco (GSIS v. City Assessor
of Iloilo City).InGSIS v. City Assessor of Iloilo City,the
GSISassailed the Order dated April 29, 1993 of the RTC of Iloilo
City, Branch 36 and the Order dated November 8, 1994 of theRTC of
Iloilo, Branch 31 in regardto the petition of herein respondent
Rosalina Francisco for the entry ofnew transfer certificates of
title in her name, which included TCT No. T-41681 covering the
subject parcel of land in this case.The GSIS claimed that the
assessment of real property taxes on the parcels of land was void
because it was exempt from all forms of taxes under its charter,
Republic Act No. 8291. The GSIS also claimed that it had no notice
of the proceedings in the assessment and levy of the taxes, as well
as the sale of the properties at public auction; hence, its right
to due process was violated.InGSIS v. City Assessor of Iloilo
City,theCourtof Appeals upheld thefindingsofthelowercourts
thatnoticesweresenttoGSIS and thebeneficial owners of the
properties in question. It gave no credence to the arguments of
GSIS and denied its petition.GSIS appealed the decision of the
Court of Appeals before this Court viaapetition for review
oncertiorari.In a Decision datedJune 27, 2006in G.R. No.
147192,[34]thisCourtdismissed the GSIS petition for review
oncertiorariof the Decision of the Court of Appeals inCA-G.R. SP
No. 51149 datedAugust 8, 2000.Hence, the finding of the Court of
Appeals in regard to the validity of the auction sale proceedings
of the subject propertyhas long been
final.WHEREFORE,thepetitionisDENIED.The Decision datedApril 24,
2003and the Resolution datedAugust 20, 2003ofthe Court of Appeals
in CA-G.R. CV No. 71004 areherebyAFFIRMED.SECOND DIVISION
TheCITYOFILOILO,Mr.ROMEO V.MANIKAN, in his capacity as the
Treasurer of Iloilo City,Petitioners,-versus-SMARTCOMMUNICATIONS,
INC. (SMART),Respondent.G.R. No. 167260Present:QUISUMBING,J.,
Chairperson,CARPIO MORALES,VELASCO,
JR.,NACHURA,*andBRION,JJ.Promulgated:February 27, 2009
x
-------------------------------------------------------------------------------------------x
THE COURTS RULINGSMART relies on two provisions of law to
support its claim for tax exemption: Section 9 of SMARTs franchise
and Section 23 of the Public Telecoms Act.After a review of
pertinent laws and jurisprudence particularly ofSMART
Communications, Inc. v. City of Davao,[4]a case which, except for
the respondent, involves the same set of facts and issues we find
SMARTs claim for exemption to be unfounded. Consequently, we find
the petition meritorious.The basic principle in the construction of
laws granting tax exemptions has been very stable.As early as 1916,
in the case ofGovernment of the Philippine Islands v. Monte de
Piedad,[5]this Court has declared that he who claims an exemption
from his share of the common burden of taxation must justify his
claim by showing that the Legislature intended to exempt him by
words too plain to be beyond doubt or mistake.This doctrine was
repeated in the 1926 case ofAsiatic Petroleum v. Llanes,[6]as well
as in the case ofBorja v. Commissioner of Internal Revenue
(CIR)[7]decided in 1961. Citing American jurisprudence, the Court
stated inE. Rodriguez, Inc. v. CIR:[8]The right of taxation is
inherent in the State. It is a prerogative essential to the
perpetuity of the government; and he who claims an exemption from
the common burden, must justify his claim by the clearest grant of
organic or statute law xxx When exemption is claimed, it must be
shown indubitably to exist. At the outset, every presumption is
against it. A well-founded doubt is fatal to the claim; it is only
when the terms of the concession are too explicit to admit fairly
of any other construction that the proposition can be supported.In
the recent case ofDigital Telecommunications, Inc. v. City
Government of Batangas, et al.,[9]we adhered to the same principle
when we said:A tax exemption cannot arise from vague
inference...Tax exemptions must be clear and unequivocal.A taxpayer
claiming a tax exemption must point to a specific provision of law
conferring on the taxpayer, in clear and plain terms, exemption
from a common burden.Any doubt whether a tax exemption exists is
resolved against the taxpayer.The burden therefore is on SMART to
prove that, based on its franchise and the Public Telecoms Act, it
is entitled to exemption from the local franchise and business
taxes being collected by the petitioner.Claim for Exemption
underSMARTs franchiseSection 9 of SMARTs franchise states:Section
9.Tax provisions. The grantee, its successors or assigns shall be
liable to pay the same taxes on their real estate buildings and
personal property, exclusive of' this franchise, as other persons
or corporations which are now or hereafter may be required by law
to pay. In addition thereto,the grantee, its successors or assigns
shall pay a franchise tax equivalent to three percent (3%) of all
gross receipts of the business transacted under this franchise by
the grantee, its successors or assigns and the said percentage
shall bein lieu of all taxeson this franchise or earnings
thereof:Provided, That the grantee, its successors or assigns shall
continue to be liable for income taxes payable under Title II of
the National Internal Revenue Code pursuant to Section 2 of
Executive Order No. 72 unless the latter enactment is amended or
repealed, in which case the amendment or repeal shall be applicable
thereto.The grantee shall file the return with and pay the tax due
thereon to the Commissioner of Internal Revenue or his duly
authorized representative in accordance with the National Internal
Revenue Code and the return shall be subject to audit by the Bureau
of Internal Revenue.[Emphasis supplied.]The petitioner posits that
SMARTs claim for exemption under its franchise is not equivocal
enough to prevail over the specific grant of power to local
government units to exact taxes from businesses operating within
its territorial jurisdiction under Section 137 in relation to
Section 151 of the LGC.More importantly, it claimed that exemptions
from taxation have already been removed by Section 193 of the
LGC:Section 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 RA
No. 6938, non-stock and non-profit hospitals and educational
institutions,are hereby withdrawn upon the effectivity of this
Code.[Emphasis supplied.]The petitioner argues, too, that SMARTs
claim for exemption from taxes under Section 9 of its franchise is
not couched in plain and unequivocal language such that it restored
the withdrawal of tax exemptions under Section 193 above.It claims
that if Congress intended that the tax exemption privileges
withdrawn by Section 193 of RA 7160 [LGC] were to be restored in
respondents [SMARTs] franchise, it would have so expressly provided
therein and not merely [restored the exemption] by the simple
expedient of including the in lieu of all taxes provision in said
franchise.[10]We have indeed ruled that by virtue of Section 193 of
the LGC, all tax exemption privileges then enjoyed by all persons,
save those expressly mentioned, have been withdrawn effective
January 1, 1992 the date of effectivity of the LGC.[11]The first
clause of Section 137 of the LGC states the same rule.[12]However,
the withdrawal of exemptions, whether under Section 193 or 137 of
the LGC, pertains only to those already existing when the LGC was
enacted.The intention of the legislature was to remove all tax
exemptions or incentives grantedpriorto the LGC.[13]As SMARTs
franchise was made effective onMarch 27, 1992 after the effectivity
of the LGC Section 193 will therefore not apply in this case.But
while Section 193 of the LGC will not affect the claimed tax
exemption under SMARTs franchise, we fail to find a categorical and
encompassing grant of tax exemption to SMART covering exemption
frombothnational and local taxes:R.A. No 7294 does not expressly
provide what kind of taxes SMART is exempted from. It is not clear
whether the in lieu of all taxes provision in the franchise of
SMART would include exemption from local or national taxation.What
is clear is that SMART shall pay franchise tax equivalent