DIAZ VS. SECRETARY OF FINANCE- Value Added Tax (VAT)

FACTS: Renato V. Diaz and Aurora Ma. F. Timbol filed a petition for declaratory relief1 assailing the validity of the impending imposition of VAT by BIR on the collections of tollway operators. Petitioners claim that, since the VAT would result in increased toll fees, they have an interest as regular users of tollways in stopping the BIR action. Diaz claims that he sponsored the approval of Republic Act 7716 (EVAT Law) and Republic Act 8424 (the 1997 NIRC) at the House of Representatives. Timbolclaims that she served as Assistant Secretary of DTI and consultant of the TRB in the past administration. Petitioners allege that the BIR attempted during the administration of President Gloria MacapagalArroyo to impose VAT on toll fees. But the imposition was deferred in view of the consistent opposition of Diaz and other sectors to such move. But, upon President Benigno C. Aquino IIIs assumption of office in 2010, the BIR revived the idea and would impose the challenged tax on toll fees beginning August 16, 2010 unless judicially enjoined. Petitioners hold the view that: Congress did not, when it enacted the NIRC, intend to include toll fees within the meaning of "sale of services" that are subject to VAT; a toll fee is a "users tax," not a sale of services; to impose VAT on toll fees would amount to a tax on public service; since VAT was never factored into the formula for computing toll fees, its imposition would violate the non-impairment clause of the constitution. Court issued a TRO enjoining the implementation of the VAT. The Court required the government, represented by respondents Cesar V. Purisima, SOF, and Kim S. Jacinto-Henares, CIR, to comment on the petition within 10 days from notice. Later, the Court issued another resolution treating the petition as one for prohibition. Office of the Solicitor General filed the governments comment. The government (SOLGEN) avers that: 1. NIRC imposes VAT on all kinds of services of franchise grantees, including tollway operations, except where the law provides otherwise; that the Court should seek the meaning and intent of the law from the words used in the statute; and that the imposition of VAT on tollway operations has been the subject as early as 2003 of several BIR rulings and circulars. 2. petitioners have no right to invoke the non-impairment of contracts clause since they clearly have no personal interest in existing toll operating agreements (TOAs) between the government and tollway operators. At any rate, the non-impairment clause cannot limit the States sovereign taxing power which is generally read into contracts. 3. non-inclusion of VAT in the parametric formula for computing toll rates cannot exempt tollway operators from VAT. In any event, it cannot be claimed that the rights of tollway operators to a reasonable rate of return will be impaired by the VAT since this is imposed on top of the toll rate. Further, the imposition of VAT on toll fees would have very minimal effect on motorists using the tollways. petitioners point out that tollway operators cannot be regarded as franchise grantees under the NIRC since they do not hold legislative franchises. Finally, BIR Revenue Memorandum Circular 63-2010 (BIR RMC 63-2010), which directs toll companies to record an accumulated input VAT of zero balance in their books as of August 16, 2010, contravenes Section 111 of the NIRC which grants entities that first become liable to VAT a transitional input tax credit of 2% on beginning inventory. For this reason, the VAT on toll fees cannot be implemented.

May toll fees collected by tollway operators be subject to VAT?

YES.(1) VAT is imposed on all kinds of services and tollway operators who are engaged in constructing, maintaining, and operating expressways are no different from lessors of property, transportation contractors, etc.

(2) Not only do they fall under the broad term under (1) but also come under those described as all other franchise grantees which is not confined only to legislative franchise grantees since the law does not distinguish. They are also not a franchise grantee under Section 119 which would have made them subject to percentage tax and not VAT.

(3) Neither are the services part of the enumeration under Section 109 on VAT-exempt transactions.

(4) The toll fee is not a users tax and thus it is permissible to impose a VAT on the said fee. The MIAA case does not apply and the Court emphasized that toll fees are not taxes since they are not assessed by the BIR and do not go the general coffers of the government. Toll fees are collected by private operators as reimbursement for their costs and expenses with a view to a profit while taxes are imposed by the government as an attribute of its sovereignty. Even if the toll fees were treated as users tax, the VAT can not be deemed as a tax on tax since the VAT is imposed on the tollway operator and the fact that it might pass-on the same to the tollway user, it will not make the latter directly liable for VAT since the shifted VAT simply becomes part of the cost to use the tollways.

(5) The assertion that the VAT imposed is not administratively feasible given the manner by which the BIR intends to implement the VAT (i.e., rounding off the toll rates and putting any excess collection in an escrow account) is not enough to invalidate the law. Non-observance of the canon of administrative feasibility will not render a tax imposition invalid except to the extent that specific constitutional or statutory limitations are impaired.

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC.,plaintiff-appellant,vs.CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL BOARD,THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF BUTUAN,defendants-appellees.Sabido, Sabido and Associates for plaintiff-appellant.The City Attorney of Butuan City for defendants-appellees.CONCEPCION,C.J.:Direct appeal to this Court, from a decision of the Court of First Instance of Agusan, dismissing plaintiff's complaint, with costs.Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with offices and principal place of business in Quezon City. The defendants are the City of Butuan, its City Mayor, the members of its municipal board and its City Treasurer. Plaintiff seeks to recover the sums paid by it to the City of Butuan hereinafter referred to as the City and collected by the latter, pursuant to its Municipal Ordinance No. 110, as amended by Municipal Ordinance No. 122, both series of 1960, which plaintiff assails as null and void, and to prevent the enforcement thereof. Both parties submitted the case for decision in the lower court upon a stipulation to the effect:1. That plaintiff's warehouse in the City of Butuan serves as a storage for its products the "Pepsi-Cola" soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province of Agusan. These "Pepsi-Cola Cola" soft drinks are bottled in Cebu City and shipped to the Butuan City warehouse of plaintiff for distribution and sale in the City of Butuan and all municipalities of Agusan. .2. That on August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was subsequently amended by Ordinance No. 122 and effective November 28, 1960. A copy of Ordinance No. 110, Series of 1960 and Ordinance No. 122 are incorporated herein as Exhibits "A" and "B", respectively.3. That Ordinance No. 110 as amended, imposes a tax on any person, association, etc., of P0.10 per case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest the amount of P4,926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961.4. That the plaintiff filed the foregoing complaint for the recovery of the total amount of P14,177.03 paid under protest and those that if may later on pay until the termination of this case on the ground that Ordinance No. 110 as amended of the City of Butuan is illegal, that the tax imposed is excessive and that it is unconstitutional.5. That pursuant to Ordinance No. 110 as amended, the City Treasurer of Butuan City, has prepared a form to be accomplished by the plaintiff for the computation of the tax. A copy of the form is enclosed herewith as Exhibit "C".6. That the Profit and Loss Statement of the plaintiff for the period from January 1, 1961 to July 30, 1961 of its warehouse in Butuan City is incorporated herein as Exhibits "D" to "D-1" to "D-5". In this Profit and Loss Statement, the defendants claim that the plaintiff is not entitled to a depreciation of P3,052.63 but only P1,202.55 in which case the profit of plaintiff will be increased from P1,254.44 to P3,104.52. The plaintiff differs only on the claim of depreciation which the company claims to be P3,052.62. This is in accordance with the findings of the representative of the undersigned City Attorney who verified the records of the plaintiff.7. That beginning November 21, 1960, the price of Pepsi-Cola per case of 24 bottles was increased to P1.92 which price is uniform throughout the Philippines. Said increase was made due to the increase in the production cost of its manufacture.8. That the parties reserve the right to submit arguments on the constitutionality and illegality of Ordinance No. 110, as amended of the City of Butuan in their respective memoranda.x x x x x x x x x1wph1.tSection 1 of said Ordinance No. 110, as amended, states what products are "liquors", within the purview thereof. Section 2 provides for the payment by "any agent and/or consignee" of any dealer "engaged in selling liquors, imported or local, in the City," of taxes at specified rates. Section 3 prescribes a tax of P0.10 per case of 24 bottles of the soft drinks and carbonated beverages therein named, and "all other soft drinks or carbonated drinks." Section 3-A, defines the meaning of the term "consignee or agent" for purposes of the ordinance. Section 4 provides that said taxes "shall be paid at the end of every calendar month." Pursuant to Section 5, the taxes "shall be based and computed from the cargo manifest or bill of lading or any other record showing the number of cases of soft drinks, liquors or all other soft drinks or carbonated drinks received within the month." Sections 6, 7 and 8 specify the surcharge to be added for failure to pay the taxes within the period prescribed and the penalties imposable for "deliberate and willful refusal to pay the tax mentioned in Sections 2 and 3" or for failure "to furnish the office of the City Treasurer a copy of the bill of lading or cargo manifest or record of soft drinks, liquors or carbonated drinks for sale in the City." Section 9 makes the ordinance applicable to soft drinks, liquors or carbonated drinks "received outside" but "sold within" the City. Section 10 of the ordinance provides that the revenue derived therefrom "shall be alloted as follows: 40% for Roads and Bridges Fund; 40% for the General Fund and 20% for the School Fund."Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature of an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and confiscatory; (4) it is highly unjust and discriminatory; and (5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is an unconstitutional delegation of legislative powers.The second and last objections are manifestly devoid of merit. Indeed independently of whether or not the tax in question, when considered in relation to the sales tax prescribed by Acts of Congress, amounts to double taxation, on which we need not and do not express any opinion - double taxation, in general, is not forbidden by our fundamental law. We have not adopted, as part thereof, the injunction against double taxation found in the Constitution of the United States and of some States of the Union.1Then, again, the general principle against delegation of legislative powers, in consequence of the theory of separation of powers2is subject to one well-established exception, namely: legislative powers may be delegated to local governments to which said theory does not apply3 in respect of matters of local concern.The third objection is, likewise, untenable. The tax of"P0.10 per case of 24 bottles,"of soft drinks or carbonated drinks in the production and sale of which plaintiff is engaged or less than P0.0042 per bottle, is manifestly too small to be excessive, oppressive, or confiscatory.The first and the fourth objections merit, however, serious consideration. In this connection, it is noteworthy that the tax prescribed in section 3 of Ordinance No. 110, as originally approved, was imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. Thus, it would seem that the intent was then to levy a tax upon the sale of said merchandise. As amended by Ordinance No. 122, the tax is, however, imposed only upon "any agent and/or consignee of any person, association, partnership, company or corporation engaged in selling ... soft drinks or carbonated drinks." And, pursuant to section 3-A, which was inserted by said Ordinance No. 122:... Definition of the Term Consignee or Agent. For purposes of this Ordinance, a consignee of agent shall mean any person, association, partnership, company or corporation who acts in the place of another by authority from him or one entrusted with the business of another or to whom is consigned or shipped no less than 1,000 cases of hard liquors or soft drinks every month forresale, either retail or wholesale.As a consequence, merchants engaged in the sale of soft drink or carbonated drinks, are not subject to the tax,unless they are agents and/or consignees of another dealer,who, in the very nature of things, must be one engaged in businessoutsidethe City. Besides, the tax would not be applicable to such agent and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to him every month. When we consider, also, that the tax "shall be based and computed from thecargo manifestorbill of lading... showing the number of cases" not sold but "received" by the taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax partakes of the nature of an import duty, which is beyond defendant's authority to impose by express provision of law.4Even however, if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor, since only sales by "agents or consignees" ofoutsidedealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants,regardless of the volumeof their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would beexemptfrom the disputed tax.It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation.5The classification made in the exercise of this authority, to be valid, must, however, be reasonable6and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally all those who belong to the same class.7These conditions are not fully met by the ordinance in question.8Indeed, if its purpose were merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales thereof by sealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax.WHEREFORE, the decision appealed from is hereby reversed, and another one shall be entered annulling Ordinance No. 110, as amended by Ordinance No. 122, and sentencing the City of Butuan to refund to plaintiff herein the amounts collected from and paid under protest by the latter, with interest thereon at the legal rate from the date of the promulgation of this decision, in addition to the costs, and defendants herein are, accordingly, restrained and prohibited permanently from enforcing said Ordinance, as amended. It is so ordered.

Facts:CIR assails the CA decision which affirmed CTA, ordering CIR to desist from collecting the 1985 deficiency income, branch profit remittance and contractors taxes from Marubeni Corp after finding the latter to have properly availed of the tax amnesty under EO 41 & 64, as amended.Marubeni, a Japanese corporation, engaged in general import and export trading, financing and construction, is duly registered in the Philippines with Manila branch office. CIR examined the Manila branchs books of accounts for fiscal year ending March 1985, and found that respondent had undeclared income from contracts with NDC and Philphos for construction of a wharf/port complex and ammonia storage complex respectively.On August 27, 1986, Marubeni received a letter from CIR assessing it for several deficiency taxes. CIR claims that the income respondent derived were income from Philippine sources, hence subject to internal revenue taxes. On Sept 1986, respondent filed 2 petitions for review with CTA: the first, questioned the deficiency income, branch profit remittance and contractors tax assessments and second questioned the deficiency commercial brokers assessment.On Aug 2, 1986,EO 41declared a tax amnesty for unpaid income taxes for 1981-85, and that taxpayers who wished to avail this should on or before Oct 31, 1986. Marubeni filed its tax amnesty return on Oct 30, 1986.On Nov 17, 1986,EO 64expanded EO 41s scope to include estate and donors taxes under Title 3 and business tax under Chap 2, Title 5 of NIRC, extended the period of availment to Dec 15, 1986 and stated those who already availed amnesty under EO 41 should file an amended return to avail of the new benefits. Marubeni filed a supplemental tax amnesty return on Dec 15, 1986.CTA found that Marubeni properly availed of the tax amnesty and deemed cancelled the deficiency taxes. CA affirmed on appeal.Issue:W/N Marubeni is exempted from paying taxHeld:Yes.1. On date of effectivityCIR claims Marubeni is disqualified from the tax amnesty because it falls under the exception in Sec 4b of EO 41:Sec. 4. Exceptions.The following taxpayers may not avail themselves of the amnesty herein granted: xxx b)Those with income tax cases already filed in Court as of the effectivity hereof;Petitioner argues that at the time respondent filed for income tax amnesty on Oct 30, 1986, a case had already been filed and was pending before the CTA and Marubeni therefore fell under the exception. However, the point of reference is the date ofeffectivityof EO 41 and that the filing of income tax cases must have been made before and as of its effectivity.EO 41 took effect on Aug 22, 1986. The case questioning the 1985 deficiency was filed with CTA on Sept 26, 1986. When EO 41 became effective, the case had not yet been filed. Marubeni does not fall in the exception and is thus, not disqualified from availing of the amnesty under EO 41 for taxes on income and branch profit remittance.The difficulty herein is with respect to the contractors tax assessment (business tax) and respondents availment of the amnesty under EO 64, which expanded EO 41s coverage. When EO 64 took effect on Nov 17, 1986, it did not provide for exceptions to the coverage of the amnesty for business, estate and donors taxes. Instead, Section 8 saidEO provided that:Section 8. The provisions of Executive Orders Nos. 41 and 54 which are not contrary to or inconsistent with this amendatory Executive Order shall remain in full force and effect.Due to the EO 64 amendment, Sec 4b cannot be construed to refer to EO 41 and its date of effectivity. The general rule is that an amendatory act operates prospectively. It may not be given a retroactive effect unless it is so provided expressly or by necessary implication and no vested right or obligations of contract are thereby impaired.2. On situs of taxationMarubeni contends that assuming it did not validly avail of the amnesty, it is still not liable for the deficiency tax because the income from the projects came from the Offshore Portion as opposed to Onshore Portion.It claims all materials and equipment in the contract under the Offshore Portion were manufactured and completed in Japan, not in the Philippines, and are therefore not subject to Philippine taxes.(BG: Marubeni won in the public bidding for projects with government corporations NDC and Philphos. In the contracts, the prices were broken down into a Japanese Yen Portion (I and II) and Philippine Pesos Portion and financed either by OECF or by suppliers credit. The Japanese Yen Portion I corresponds to the Foreign Offshore Portion, while Japanese Yen Portion II and the Philippine Pesos Portion correspond to the Philippine Onshore Portion. Marubeni has already paid the Onshore Portion, a fact that CIR does not deny.)CIR argues that since the two agreements are turn-key, they call for the supply of both materials and services to the client, they are contracts for a piece of work and are indivisible. The situsof the two projects is in the Philippines, and the materials provided and services rendered were all done and completed within the territorial jurisdiction of the Philippines. Accordingly, respondents entire receipts from the contracts, including its receipts from the Offshore Portion, constitute income from Philippine sources. The total gross receipts covering both labor and materials should be subjected to contractors tax (a tax on the exercise of a privilege of selling services or labor rather than a sale on products).Marubeni, however, was able to sufficiently prove in trial that not all its work was performed in the Philippines because some of them were completed in Japan (and in fact subcontracted) in accordance with the provisions of the contracts. All services for the design, fabrication, engineering and manufacture of the materials and equipment under Japanese Yen Portion I were made and completed in Japan.These services were rendered outside Philippines taxing jurisdiction and are therefore not subject to contractors tax.Petition denied.

G.R. No. L-18125 May 31, 1963BOARD OF ASSESSMENT APPEALS, PROVINCE OF LAGUNA,petitioner,vs.COURT OF TAX APPEALS and THE NATIONAL WATERWORKS AND SEWERAGE AUTHORITY (NAWASA),respondents.Gabriel V. Valero and Rodolfo F. de Gorostiza for petitioner.Manuel B. Roo for respondent National Waterworks and Sewerage Authority.CONCEPCION,J.:This is a petition for review of a decision of the Court of Tax Appeals reversing a resolution or decision of the Board of Assessment Appeals for the Province of Laguna.The question involved in this case is whether the water pipes, reservoir, intake and buildings used by herein respondent, National Waterworks and Sewerage Authority hereinafter referred to as NAWASA in the operation of its waterworks system in the municipalities of Cabuyao, Sta. Rosa and Bian, province of Laguna, are subject to real estate tax.Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts.1wph1.tThe parties have submitted in the Court of Tax Appeals a stipulation of facts. The pertinent parts thereof are to the effect:1. That the petitioner National Waterworks and Sewerage Authority (NWSA) is a public corporation created by virtue of Republic Act No. 1383, and that it is owned by the Government of the Philippines as well as all property comprising waterworks and sewerage systems placed under it:.2. That, pursuant to the provisions of Republic Act No. 1383, petitioner NWSA took over all the property of the former Metropolitan Water District and all the existing local government-owned waterworks and sewerage systems all over the Philippines, including the Cabuyao-Sta. Rosa-Bian Waterworks System owned by the Province of Laguna (Section 8, Republic Act No. 1283);3. That the functions and activities of petitioner NWSA, as enumerated in Republic Act No. 1383, more particularly Section 2 thereof, are the same and identical with the functions of the defunct Metropolitan Water District, particularly Section 2, Act 2832, is amended;4. That petitioner National Waterworks and Sewerage Authority (NWSA) has no capital stock divided into shares of stocks, no stockholders, and is not authorized by its Charter to distribute dividends; and, on the other hand, whatever surplus funds it has realized, may and will after meeting its yearly obligations, have been, are and may be, used for the construction, expansion and improvement of its waterworks and sewer services;5. That at the time that the Cabuyao-Sta. Rosa-Bian Waterworks System was taken over by petitioner NWSA in 1956, the former was self-supporting and revenue-producing, but that all its surplus income are not declared as profits as this surplus are or may be invested for the expansion thereof;6. That in the year 1956 the Provincial Assessor of Laguna assessed, for purposes of real estate taxes, the property comprising the Cabuyao-Sta. Rosa-Bian Waterworks System and described in Tax Declaration No. 5987 (Exh. "A-l") which, as stated in Paragraph 2 hereof, herein petitioner NWSA had taken over;7. That against the above-mentioned assessment made by the Provincial Assessor of Laguna, petitioner NWSA protested, claiming that the property described under Tax Declaration No. 5987 (Exh. "A-l") are exempted from the payment of real estate taxes in view of the nature and kind of said property and functions and activities of petitioner, as provided in Republic Act No. 1383;.8. That the said protest of petitioner NWSA was overruled on appeal before the herein respondent Board of Assessment Appeals, hence the present petition for review filed by petitioner;x x x x x x x x x "After appropriate proceedings, the Court of Tax Appeals rendered the aforementioned decision reversing the action taken by petitioner Board, which, accordingly, has brought the case to us for review, under the provisions of Republic Act No. 1125, contending that the properties in question are subject to real estate tax because: (1) although said properties belong to the Republic of the Philippines, the same holds it, not in its governmental, political or sovereign capacity, but in a private, proprietary or patrimonial character, which, allegedly, is not covered by the exemption contained in section 3(a) of Republic Act No. 470; and 2) this exemption, even if applicable to patrimonial property, must yield to the provisions of section 1 of Republic Act No. 104, under which all corporations, agencies or instrumentalities owned or controlled by the Government are subject to taxation, according to petitioner appellant.Sections 2 and 3(a) of Commonwealth Act No. 470 provide:SEC. 2.Incidence of real property tax. Except in chartered cities, there shall be levied, assessed, and collected, an annual ad valorem tax on real property, including land, buildings, machinery, and other improvements not hereinafter specifically exempted.SEC. 3.Property exempt from tax. The exemptions shall be as follows:(a) Property owned by . . . the Republic of the Philippines, any province, city, municipality or municipal district. . . .It is conceded, in the stipulation of facts, that the property involved in this case "is owned by the Government of the Philippines". Hence, it belongs to the Republic of the Philippines and falls squarely within the letter of the above provision. This notwithstanding, petitioner Board maintains that respondent NAWASA is not entitled to the benefits of the exemption established in said section 3(a), inasmuch as, in the case of the City of Cebu vs. NAWASA, G. R. No. L-12892, decided on April 30, 1960, we ruled that the assets of the water system of the City of Cebu, which the NAWASA had sought to take over, pursuant to the provisions of Republic Act No. 1383 as it did in the case at bar, with respect to the Cabuyao-Sta. Rosa-Bian Waterworks System are patrimonial property of said city, which held it in a proprietary character, not in its governmental capacity.We did not declare, however, in the Cebu case that said assets were subject to taxation. In that case we merely reiterated the doctrine, laid down in the case of City of Baguio vs. NAWASA, G. R. No. L-12032, decided on August 31, 1959, that municipal corporations hold in their proprietary character, the assets of their respective waterworks, which, accordingly, cannot be taken or appropriated by the National Government and placed under the NAWASAwithout payment of just compensation. Neither the Cebu case nor that of Baguio sustains the theory that said assets are taxable.Upon the other hand, in exempting from taxation "property owned by the Republic of the Philippines, any province, city, municipality or municipal district . . .," said section 3(a) of Republic Act No. 470 makes no distinction between property held in a sovereign, governmental or political capacity and those possessed in a private, proprietary or patrimonial character. And where the law does not distinguish neither may we, unless there are facts and circumstances clearly showing that the lawmaker intended the contrary, but no such facts and circumstances have been brought to our attention. Indeed, the noun "property" and the verb "owned" used in said section 3(a) strongly suggest that the object of exemption is considered more from the view point of dominion, than from that of domain. Moreover, taxes are financial burdens imposed for the purpose of raising revenues with which to defray the cost of the operation of the Government, and a tax on property of the Government, whether national or local, would merely have the effect of taking money from one pocket to put it in another pocket (Cooley on Taxation, Sec. 621, 4th Edition.) Hence, it would not serve, in the final analysis, the main purpose of taxation. What is more, it would tend to defeat it, on account of the paper work, time and consequently, expenses it would entail. (The Law on Local Taxation, by Justiniano Y. Castillo, p. 13.)Section 1 of the Republic Act No. 101, upon which petitioner relies, reads:. . . All corporations, agencies, or instrumentalities owned or controlled by the government shall pay such duties, taxes, fees and other charges upon their transaction, business, industries, sale, or income as are imposed by law upon individuals, associations or corporations engaged in any taxable business, industry, or activity except on goods or commodities imported or purchased and sold or distributed for relief purposes as may be determined by the President of the Philippines.This provision is inapplicable to the case at bar for it refers only to duties, taxes, fees and other charges upon "transaction, business, industry, sale or income" and does not include taxes on property like real estate tax.WHEREFORE, the decision appealed from is hereby affirmed, without special pronouncement as to costs. It is so ordered.

FACTS:Petitioner was created by virtue of RA 6958. Section 1 thereof states that the authority shall be exempt from realty taxes imposed by the National Government or any of its political subdivisions, agencies and instrumentalities. However, the Treasurer of Cebu City demanded payment for realty taxes from petitioner. Petitioner filed a declaratory relief before the Regional Trial Court. The trial court dismissed the petitioner ruling that the Local Government Code withdrew the tax exemption granted to Government owned and controlled corporation.

ISSUE:Whether the city of Cebu has the power to impose taxes on petitioner

RULING:Yes. Taxation is the rule and exemption is the exception, the exemption may thus be withdrawn at the pleasure of the taxing authority. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government- owned and controlled corporations, section 193 of the LGC prescribes the general rule, viz, they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives, duly registered under RA 6938, non stock and nonprofit hospitals and educational institutions and unless otherwise provided in the LGC.

Mactan Cebu International Airport Authority v. Marcos 261 SCRA 667(1996)Facts:Petitioner Mactan Cebu International Airport Authority was created by virtue of R.A. 6958, mandated to principally undertake the economical, efficient, and effective control, management, and supervision of the Mactan International Airport and Lahug Airport, and such other airports as may be established in Cebu.Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its charter. However, on October 11, 1994, Mr. Eustaquio B. Cesa, Officer in Charge, Office of the Treasurer of the City of Cebu, demanded payment from realty taxes in the total amount of P2229078.79. Petitioner objected to such demand for payment as baseless and unjustified claiming in its favor the afore cited Section 14 of R.A. 6958. It was also asserted that it is an instrumentality of the government performing governmental functions, citing Section 133 of the Local Government Code of 1991.Section 133. Common limitations on the Taxing Powers of Local Government Units.The exercise of the taxing powers of the provinces, cities, barangays, municipalities shall not extend to the levi of the following:xxx Taxes, fees or charges of any kind in the National Government, its agencies and instrumentalities, and LGUs. xxxRespondent City refused to cancel and set aside petitioners realty tax account, insisting that the MCIAA is a government-controlled corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193 and 234 of Labor Code that took effect on January 1, 1992.Issue:Whether or not the petitioner is a taxable personRulings:Taxation is the rule and exemption is the exception. MCIAAs exemption from payment of taxes is withdrawn by virtue of Sections 193 and 234 of Labor Code. Statutes granting tax exemptions shall be strictly construed against the taxpayer and liberally construed in favor of the taxing authority.The petitioner cannot claim that it was never a taxable person under its Charter. It was only exempted from the payment of realty taxes. The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property tax.

FACTS:Respondent Navotas assessed real estate taxes due from petitioner PFDA for the period 1981-1990 on properties under its jurisdiction, management and operation located inside the Navotas Fishing Port Complex. The assessed taxes remained unpaid, the complex was scheduled for a public auction. Despite DOFs order to make an ocular inspection of said complex, respondent municipality proceeded with the sale. RTC issued writ of preliminary injunction enjoining Navotas from proceeding with the auction. RTC subsequently dismissed the case, ratiocinating that: assailing the validity of the tax assessments of the NFPC propertiers is not the proper recourse of the plaintiff but to pay first the assessments under protest and then raise the same on appeal to the LBAA, then to CBAA then ultimately to CTA. CA affirmed the ruling.ISSUE:Whether or not petitioner is liable to pay the assessed tax.RULING:Common limitations to the taxing power of LGUs are those taxes, fees, charges of any kind on the national government, its agencies and instrumentalities, and local government units. This does not apply when the beneficial use of the government property has been granted to a taxable person. Thus, as a rule, PFDA, being an instrumentality of the national government, is exempt from real property tax but the exemption does not extend to the portions of the NFPC that were leased to taxable or private persons and entities for their beneficial use. NFPC cannot be sold at public auction in satisfaction of the tax delinquency assessments made by the municipality on the entire complex. The land on which the NFPC property sits is a reclaimed land, which belongs to the state.