MIAA v. Court of Appeals G.R. No.

155650, July 20, 2006 Facts: The Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Paraaque City under Executive Order No. 903 (MIAA Charter), as amended. As such operator, it administers the land, improvements and equipment within the NAIA Complex. In March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061 to the effect that the Local Government Code of 1991 (LGC) withdrew the exemption from real estate tax granted to MIAA under Section 21 of its Charter. Thus, MIAA paid some of the real estate tax already due. In June 2001, it received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. The City Treasurer subsequently issued notices of levy and warrants of levy on the airport lands and buildings. At the instance of MIAA, the OGCC issued Opinion No. 147 clarifying Opinion No. 061, pointing out that Sec. 206 of the LGC requires persons exempt from real estate tax to show proof of exemption. According to the OGCC, Sec. 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax. MIAA, thus, filed a petition with the Court of Appeals seeking to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the airport lands and buildings, but this was dismissed for having been filed out of time. Hence, MIAA filed this petition for review, pointing out that it is exempt from real estate tax under Sec. 21 of its charter and Sec. 234 of the LGC. It invokes the principle that the government cannot tax itself as a justification for exemption, since the airport lands and buildings, being devoted to public use and public service, are owned by the Republic of the Philippines. On the other hand, the City of Paraaque invokes Sec. 193 of the LGC, which expressly withdrew the tax exemption privileges of government-owned and controlled corporations (GOCC) upon the effectivity of the LGC. It asserts that an international airport is not among the exceptions mentioned in the said law. Meanwhile, the City of Paraaque posted and published notices announcing the public auction sale of the airport lands and buildings. In the afternoon before the scheduled public auction, MIAA applied with the Court for the issuance of a TRO to restrain the auction sale. The Court issued a TRO on the day of the auction sale, however, the same was received only by the City of Paraaque three hours after the sale. Issue: Whether or not the airport lands and buildings of MIAA are exempt from real estate tax? Held: The Petition is GRANTED. The airport lands and buildings of MIAA are exempt from real estate tax imposed by local governments. Sec. 243(a) of the LGC exempts from real estate tax any real property owned by the Republic of the Philippines. This exemption should be read in relation with Sec. 133(o) of the LGC, which provides that the exercise of the taxing powers of local governments shall not extend to the levy of taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities. These provisions recognize the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. This rule applies with greater force when local governments seek to tax national government instrumentalities. Moreover, a tax exemption is construed liberally in favor of national government instrumentalities. MIAA is not a GOCC, but an instrumentality of the government. The Republic remains the beneficial owner of the properties. MIAA itself is owned solely by the Republic. At any time, the President can transfer back to the Republic title to the airport lands and buildings without the Republic paying MIAA any consideration. As long as the airport lands and buildings are reserved for public use, their ownership remains with the State. Unless the President issues a proclamation withdrawing these properties from public use, they remain properties of public dominion. As such, they are inalienable, hence, they are not subject to levy on execution or foreclosure sale, and they are exempt from real estate tax. However, portions of the airport lands and buildings that MIAA leases to private entities are not exempt from real estate tax. In such a case, MIAA has granted the beneficial use of such portions for a consideration to a taxable person.

Digital Telecom Phils. Vs. Pangasinan, Gr. No. 152534, February 23, 2007 Facts:

On 13 November 1992, petitioner DIGITEL was granted, under Provincial Ordinance No. 18-92, a provincial franchise to install, maintain and operate a telecommunications system within the territorial jurisdiction of respondent Province of Pangasinan. Under the said provincial franchise, the grantee is required to pay franchise and real property taxes, viz: SECTION 6. The grantee shall pay to the Province of Pangasinan the applicable franchise tax as maybe provided by appropriate ordinances in accordance with the Local Government Code and other existing laws. Except for the foregoing and the real estate tax on its land and building, it shall be subject to no other tax. The telephone posts, apparatus, equipment and communication facilities of the grantee are exempted from the real estate tax. Pursuant to the mandate of Sections 137 and 232 of the Local Government Code, the Sangguniang Panlalawigan of respondent Province of Pangasinan enacted on 29 December 1992, Provincial Tax Ordinance No. 1, entitled "The Real Property Tax Ordinance of 1992." Section 4 thereof imposed a real property tax on real properties located within the territorial jurisdiction of the province. The particular provision, however, technically expanded the application of Sec. 6 of the provincial franchise of petitioner DIGITEL to include machineries and other improvements, not thereinafter exempted, to wit: Section 4. Imposition of Real Property Tax. There shall be levied an annual AD VALOREM tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted, situated or located within the territorial jurisdiction of Pangasinan at the rate of one percent (1%) of the assessed value of said real property. (Emphasis supplied.)6 Thereafter, petitioner DIGITEL was granted by Republic Act No. 7678,7 a legislative franchise authorizing the grantee to install, operate and maintain telecommunications systems, this time, throughout the Philippines. Under its legislative franchise, particularly Sec. 5 thereof, petitioner DIGITEL became liable for the payment of a franchise tax "as may be prescribed by law of all gross receipts of the telephone or other telecommunications businesses transacted under it by the grantee,"8 as well as real property tax "on its real estate, and buildings "exclusive of this franchise." Later, respondent Province of Pangasinan, in its examination of its record found that petitioner DIGITEL had a franchise tax deficiency for the years 1992, 1993 and 1994. It was alleged that apart from the Php40,000.00 deposit representing the grantees acquiescence or acceptance of the franchise, as required by respondent Province of Pangasinan, petitioner DIGITEL had never paid any franchise tax to respondent Province of Pangasinan since the former started its operation in 1992. On 16 March 1995, Congress passed Republic Act No. 7925, otherwise known as "The Public Telecommunications Policy Act of the Philippines." Section 23 of this law entitled Equality of Treatment in the Telecommunications Industry, provided for the ipso facto application to any previously granted telecommunications franchises of any advantage, favor, privilege, exemption or immunity granted under existing franchises, or those still to be granted, to be accorded immediately and unconditionally to earlier grantees. The provincial franchise and real property taxes remained unpaid despite the foregoing measures instituted. Consequently, in a letter9 dated 30 October 1998, the Provincial Legal Officer of respondent Province of Pangasinan, Atty. Geraldine U. Baniqued, demanded from petitioner DIGITEL compliance with Provincial Tax Ordinance No. 4., specifically the first paragraph of Section 4 thereof but which was wittingly or unwittingly misquoted10 to read: No persons shall establish and / or operate a public utility business enterprises (sic) within the territorial jurisdiction of the Province of Pangasinan whether in one municipality or group of municipalities, except by virtue of a franchise granted by the Sangguniang Panlalawigan of Pangasinan. In ruling against the claimed exemption, the court a quo held that petitioner DIGITELs legislative franchise does not work to exempt the latter from payment of provincial franchise and real property taxes. The court a quo reasoned that the provincial and legislative franchises are separate and distinct from each other; and, that prior to the grant of its legislative franchise, petitioner DIGITEL had already benefited from the use of it. Moreover, it pointed out that

Section 137 of the Local Government Code had already withdrawn any exemption granted to anyone; as such, the local government of a province may impose a tax on a business enjoying a franchise. On the other hand, petitioner DIGITEL maintains that its legislative franchise being an earlier enactment, by virtue of Section 23 of Republic Act No. 7925, the ipso facto, immediate and unconditional application to it of the tax exemption found in the franchises of Globe, Smart and Bell, i.e., in Section 9 (b) of Republic Act No. 7229, Globes legislative franchise; in Section 9 of Republic Act No. 7294, Smarts legislative franchise; and Section 9 of Republic Act No. 7294, Bells legislative franchise, all basically or similarly containing the phrase "shall pay a franchise tax equivalent to x x x of all gross receipts of the business transacted under this franchise by the grantee, its successors or assigns and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof. Stated simply, Section 23 of Republic Act No. 7925, in relation to the pertinent provisions of the legislative franchises of Globe, Smart and Bell, "the national franchise tax for which petitioner (DIGITEL) is liable to pay shall be in lieu of any and all taxes of any kind, nature or description levied, established or collected by any authority whatsoever, municipal, provincial, or national, from which the grantee is hereby expressly granted. ISSUE: Whether or the in lieu of all taxes provision in the legislative franchise of SMART, GLOBE, and DELL is applicable to DIGITAL, such that they are exempt from National taxes and Income taxes. Whether or not the Digital is exempted from paying Real Property Taxes.

RULING: The instant Petition is denied The assailed Decision dated 14 June 2001, and the Resolution dated 15 February 2002, both rendered by the RTC of Lingayen, Pangasinan, Branch 68 in Civil Case No. 18037, are hereby AFFIRMED in so far as it finds petitioner DIGITEL liable for the payment of provincial franchise and real property taxes. However, the amount of taxes owing to respondent Province of Pangasinan must be recomputed in accordance with the foregoing discussion. The case at bar is actually not one of first impression. Indeed, as far back as 2001, this Court has had the occasion to rule against the claim for tax exemption under Republic Act No. 7925. In the case of Philippine Long Distance Telephone Company, Inc. v. City of Davao,16 we already clarified the confusion brought about by the effect of Section 23 of Republic Act No. 7925 that the word "exemption" as used in the statute refers or pertains merely to an exemption from regulatory or reporting requirements of the DOTC or the NTC and not to the grantees tax liability. In denying PLDTs petition, this Court, speaking through Mr. Justice Vicente V. Mendoza, held that in approving Section 23 of Republic Act No. 7925, Congress did not intend it to operate as a blanket tax exemption to all telecommunications entities; thus, it cannot be considered as having amended petitioner PLDTs franchise so as to entitle it to exemption from the imposition of local franchise taxes. R.A. No. 7925 is thus a legislative enactment designed to set the national policy on telecommunications and provide the structures to implement it to keep up with the technological advances in the industry and the needs of the public. The thrust of the law is to promote gradually the deregulation of the entry, pricing, and operations of all public telecommunications entities and thus promote a level playing field in the telecommunications industry(citation omitted). There is nothing in the language of 23 nor in the proceedings of both the House of Representatives and the Senate in enacting R.A. No. 7925 which shows that it contemplates the grant of tax exemptions to all telecommunications entities, including those whose exemptions had been withdrawn by the LGC. The foregoing pronouncement notwithstanding, in view of the passage of Republic Act No. 7716,22 abolishing the franchise tax imposed on telecommunications companies effective 1 January 1996 and in its place is imposed a 10 percent Value-Added-Tax (VAT),23 the "in-lieu-of-all-taxes" clause/provision in the legislative franchises of Globe, Smart and Bell, among others, has now become functus officio, made inoperative for lack of a franchise tax.Therefore, taking into consideration the above, from 1 January 1996, petitioner DIGITEL ceased to be liable for national franchise tax and in its stead is imposed a 10% VAT in accordance with Section 108 of the Tax Code. As to the issue relating to the claim of payment of real property taxes, of particular import is Section 5 of Republic Act No. 7678, the legislative franchise of petitioner DIGITEL. Sec. 5 of said law again states that:

SECTION 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be required by law to pay x x x. (Emphasis supplied.) Owing to the phrase "exclusive of this franchise," petitioner DIGITEL stands firm in its position that it is equally exempt from the payment of real property tax. It maintains that said phrase found in Section 5 above-quoted qualifies or delimits the scope of its liability respecting real property tax that real property tax should only be imposed on its assets that are actually, directly and exclusively used in the conduct of its business pursuant to its franchise.