Tax 2

Local Taxation Cases

(1) Pepsi Cola Bottling vs. Municipality of Tanuan 69 SCRA 460

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN

69 SCRA 460
GR No. L-31156, February 27, 1976

"Legislative power to create political corporations for purposes of local self-government carries with it the power to
confer on such local governmental agencies the power to tax.

FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of
Republic Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of
taxing authority as well as to declare Ordinances Nos. 23 and 27 denominated as "municipal production tax" of the
Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft drinks producers and
manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27
levies and collects on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a
tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. Aside from the undue
delegation of authority, appellant contends that it allows double taxation, and that the subject ordinances are void for
they impose percentage or specific tax.

ISSUE: Are the contentions of the appellant tenable?

HELD: No. On the issue of undue delegation of taxing power, it is settled that the power of taxation is an essential
and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without being
expressly conferred by the people. It is a power that is purely legislative and which the central legislative body
cannot delegate either to the executive or judicial department of the government without infringing upon the theory
of separation of powers. The exception, however, lies in the case of municipal corporations, to which, said theory
does not apply. Legislative powers may be delegated to local governments in respect of matters of local concern. By
necessary implication, the legislative power to create political corporations for purposes of local self-government
carries with it the power to confer on such local governmental agencies the power to tax.
Also, there is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory
of double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the
taxes over which local taxation may not be exercised. The reason is that the State has exclusively reserved the same
for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, so that
double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental
entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and
the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature of a percentage tax on sales, or other taxes in
any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume
capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on
the products, but there is not set ratio between the volume of sales and the amount of the tax.

(2) Mactan Cebu International Airport Authority vs. Marcos – GR No. 120082, Sept. 11, 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 LGU’s.
xxx

Respondent City refused to cancel and set aside petitioner’s 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 Local Government Code that took effect on January 1, 1992.

Issue:
Whether or not the petitioner is a “taxable person”

Rulings:

Taxation is the rule and exemption is the exception. MCIAA’s exemption from payment of taxes is withdrawn by
virtue of Sections 193 and 234 of Local Government 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.

(3) Manila Electric Company vs. Province of Laguna – GR No. 131359, May 5, 1999
FACTS:
MERALCO was granted a franchise by several municipal councils and the National Electrification Administration
to operate an electric light and power service in the Laguna. Upon enactment of Local Government Code, the
provincial government issued ordinance imposing franchise tax. MERALCO paid under protest and later claims for
refund because of the duplicity with Section 1 of P.D. No. 551. This was denied by the governor (Joey Lina) relying
on a more recent law (LGC). MERALCO filed with the RTC a complaint for refund, but was dismissed. Hence, this
petition.

ISSUE:
Whether or not the imposition of franchise tax under the provincial ordinance is violative of the non-impairment
clause of the Constitution and of P.D. 551.

HELD:
No. There is no violation of the non-impairment clause for the same must yield to the inherent power of the state
(taxation). The provincial ordinance is valid and constitutional.

RATIO:
The Local Government Code of 1991 has incorporated and adopted, by and large, the provisions of the now repealed
Local Tax Code. The 1991 Code explicitly authorizes provincial governments, notwithstanding “any exemption
granted by any law or other special law, . . . (to) impose a tax on businesses enjoying a franchise.” A franchise
partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution.
Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935 and the 1973
Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the
condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the
common good so requires.

(4) NPC vs. City of Cabanatuan GR No. 149110, April 9, 2003

NATIONAL POWER CORPORATION, petitioner,

vs.
CITY OF CABANATUAN, respondent.
FACTS: Petitioner is a government-owned and controlled corporation created under Commonwealth Act No. 120,
as amended.
For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992.7 Pursuant to section 37 of Ordinance No. 165-92,8 the respondent assessed the petitioner
a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter’s gross receipts for the preceding
year.

Petitioner refused to pay the tax assessment arguing that the respondent has no authority to impose tax on
government entities. Petitioner also contended that as a non-profit organization, it is exempted from the payment of
all forms of taxes, charges, duties or fees in accordance with sec. 13 of Rep. Act No. 6395, as amended.

The respondent filed a collection suit in the RTC, demanding that petitioner pay the assessed tax due, plus
surcharge. Respondent alleged that petitioner’s exemption from local taxes has been repealed by section 193 of the
LGC, which reads as follows:

“Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government owned
or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.”
RTC upheld NPC’s tax exemption. On appeal the CA reversed the trial court’s Order on the ground that section 193,
in relation to sections 137 and 151 of the LGC, expressly withdrew the exemptions granted to the petitioner.

ISSUE: W/N the respondent city government has the authority to issue Ordinance No. 165-92 and impose an annual
tax on “businesses enjoying a franchise

HELD: YES. Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor
endure. A principal attribute of sovereignty, the exercise of taxing power derives its source from the very existence
of the state whose social contract with its citizens obliges it to promote public interest and common good. The
theory behind the exercise of the power to tax emanates from necessity;32 without taxes, government cannot fulfill
its mandate of promoting the general welfare and well-being of the people.
Section 137 of the LGC clearly states that the LGUs can impose franchise tax “notwithstanding any exemption
granted by any law or other special law.” This particular provision of the LGC does not admit any exception.
In City Government of San Pablo, Laguna v. Reyes,74 MERALCO’s exemption from the payment of franchise taxes
was brought as an issue before this Court. The same issue was involved in the subsequent case of Manila Electric
Company v. Province of Laguna.75 Ruling in favor of the local government in both instances, we ruled that the
franchise tax in question is imposable despite any exemption enjoyed by MERALCO under special laws, viz:
“It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support their
position that MERALCO’s tax exemption has been withdrawn. The explicit language of section 137 which
authorizes the province to impose franchise tax ‘notwithstanding any exemption granted by any law or other special
law’ is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special
laws.

Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that 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 (1) local water districts, (2) cooperatives
duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn
upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. It is a
basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes
all others as expressed in the familiar maxim expressio unius est exclusio alterius. In the absence of any provision of
the Code to the contrary, and we find no other provision in point, any existing tax exemption or incentive enjoyed by
MERALCO under existing law was clearly intended to be withdrawn.

Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local government unit may
now impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding calendar
based on the incoming receipts realized within its territorial jurisdiction. The legislative purpose to withdraw tax
privileges enjoyed under existing law or charter is clearly manifested by the language used on (sic) Sections 137
and 193 categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be not
only tedious and impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or
privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or privileges. No more
unequivocal language could have been used.”76 (emphases supplied)

Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad
activities of the local government units for the delivery of basic services essential to the promotion of the general
welfare and the enhancement of peace, progress, and prosperity of the people. As this Court observed in the Mactan
case, “the original reasons for the withdrawal of tax exemption privileges granted to government-owned or
controlled corporations and all other units of government were that such privilege resulted in serious tax base
erosion and distortions in the tax treatment of similarly situated enterprises.” With the added burden of devolution, it
is even more imperative for government entities to share in the requirements of development, fiscal or otherwise, by
paying taxes or other charges due from them.

(5) City Government of Quezon City vs. Bayan Telecommunications – GR No. 162015, March
6, 2006

FACTS:

BAYANTEL is a legislative franchise holder under RA 3259 to establish and operate radio stations for domestic
telecommunications, radiophone, broadcasting and telecasting. On January 1, 2992, RA 7160 of the “Local
Government Code of 1991” took effect. Section 232 of the Code grants local government units within the Metro
Manila area the power to levy tax on real properties. Section 234 of the same Code withdrew any exemption from
realty tax granted to all persons, natural or juridical.

On July 20, 1992, few months after the LGC took effect, Congress enacted RA 7633, amending Bayantel’s original
franchise. In 1993, the Quezon City government enacted the Quezon City Revenue Code imposing real property tax
on all real properties in Quezon City.

ISSUE:What is the extent of the Power of Local Taxation?

RULING:
The power to tax is primarily vested in the Congress; however, it may be exercised by local legislative bodies
pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the
power may be subject to such guidelines and limitations as Congress may provide.

Since RA 7633 amended Bayantel’s original franchise and granted it real property tax exemption from its real
properties that is directly used in its operations, the Quezon City government cannot levy real property taxes on the
real properties of Bayantel that are in Quezon City area.

For sure, in Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of Davao, this Court has upheld the
power of Congress to grant exemptions over the power of local government units to impose taxes. There, the Court
wrote:

Indeed, the grant of taxing powers to local government units under the Constitution and the LGC does not
affect the power of Congress to grant exemptions to certain persons, pursuant to a declared national policy. The
legal effect of the constitutional grant to local governments simply means that in interpreting statutory provisions on
municipal taxing powers, doubts must be resolved in favor of municipal corporations.

(6) Film Development Council of the Philipines vs. Colon Heritage Realty, GR No. 203754
dated June 16, 2015.
Facts:

The City of Cebu passed Ordinance No. 69 whereby Sections 42 and 43 thereof require proprietors, lessees
or operators of theatres, cinemas, concert halls, circuses, boxing stadia, and other places of amusement, to pay an
amusement tax equivalent to thirty percent (30%) of the gross receipts of admission fees to the Office of the City
Treasurer of Cebu City. Thereafter, Republic Act (R.A.) No. 9167, Sections 13 and 14 thereof states that producers
of graded A and B films shall be entitled to incentives equivalent to the amusement tax imposed and collected on
such graded films. The Film Development Council of the Philippines (FDCP), in implementing the statute, argued
that the Congress restricted the delegated power of the City of Cebu in imposing amusement taxes, when it enacted
Secs. 13 and 14 of R.A. No. 9167. The lower court ruled, however, that said provisions are contrary to the basic
policy in local autonomy that all taxes, fees, and charges imposed by the LGUs shall accrue exclusively to them, as
articulated in Article X, Sec. 5 of the 1987 Constitution.

Issue:

Whether or not Secs. 13 and 14 of R.A. No. 9167 violates fiscal autonomy

Ruling:

Yes, Secs. 13 and 14 of R.A. No. 9167 violates fiscal autonomy.

The basic rationale for the current rule on local fiscal autonomy is the strengthening of LGUs and the
safeguarding of their viability and self-sufficiency through a direct grant of general and broad tax powers.
Nevertheless, the fundamental law did not intend the delegation to be absolute and unconditional. The legislature
must still see to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable
impositions; (b) each LGU will have its fair share of available resources; (c) the resources of the national
government will not be unduly disturbed; and (d) local taxation will be fair, uniform, and just.

It is beyond cavil that the City of Cebu had the authority to issue its City Ordinance No. LXIX and impose
anamusement tax on cinemas pursuant to Sec. 140 in relation to Sec. 151 of the LGC. Sec. 140 states, among other
things, that a “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.” By operation of said Sec. 151, extending to them the
authority of provinces and municipalities to levy certain taxes, fees, and charges, cities, such as respondent city
government, may therefore validly levy amusement taxes subject to the parameters set forth under the law.
 For RA 9167, however, the covered LGUs were deprived of the income which they will otherwise be
collecting should they impose amusement taxes, or, in petitioner’s own words, “Section 14 of [RA 9167] can be
viewed as an express and real intention on the part of Congress to remove from the LGU’s delegated taxing power,
all revenues from the amusement taxes on graded films which would otherwise accrue to [them] pursuant to Section
140 of the [LGC].”

Taking the resulting scheme into consideration, it is apparent that what Congress did in this instance was
not to exclude the authority to levy amusement taxes from the taxing power of the covered LGUs, but to earmark, if
not altogether confiscate, the income to be received by the LGU from the taxpayers in favor of and for transmittal to
FDCP, instead of the taxing authority. This, to Our mind, is in clear contravention of the constitutional command
that taxes levied by LGUs shall accrue exclusively to said LGU and is repugnant to the power of LGUs to apportion
their resources in line with their priorities.

(7) Petron Corp. vs. Mayor Tobias Tiangco – GR No. 158881, April 16, 2008

FACTS:

Petron maintains a depot or bulk plant at the Navotas Fishport Complex, and through that depot, it has engaged in
the selling of diesel fuels to vessels used in commercial fishing in and around Manila Bay.

Petron received a letter from the office of Navotas Mayor, respondent Toby Tiangco, wherein the corporation was
assessed taxes relative to the figures covering sale of diesel, stating the total amount due of P6,259,087.62, a figure
derived from the gross sales of the depot from 1997 to 2001. The computation sheets that were attached to the letter
made reference to Ordinance 92-03, or the New Navotas Revenue Code (Navotas Revenue Code), though such
enactment was not cited in the letter itself.

Petron filed with the Malabon RTC a Complaint for Cancellation of Assessment for Deficiency Taxes with Prayer
for the Issuance of a Temporary Restraining Order (TRO) and/or Preliminary Injunction. The RTC rendered its
Decision dismissing Petron’s complaint and ordering the payment of the assessed amount.

Petron has opted to assail the RTC Decision directly before this Court since the matter at hand involves pure
questions of law, a characterization conceded by the RTC Decision itself. Particularly, the controversy hinges on the
correct interpretation of Section 133(h) of the LGC, and the applicability of Article 232 (h) of the IRR.

Section 133(h) of the LGC reads as follows:

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

xxx

(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or
charges on petroleum products;

ISSUE:

Whether a local government unit is empowered under the Local Government Code to impose business taxes on
persons or entities engaged in the sale of petroleum products.
RULING:

Evidently, Section 133 prescribes the limitations on the capacity of local government units to exercise their taxing
powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions two kinds of
taxes which cannot be imposed by local government units, namely: excise taxes on articles enumerated under the
NIRC; and taxes, fees or charges on petroleum products.

The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the
provision, a municipality is authorized to impose business taxes on a whole host of business activities. Suffice it to
say, unless there is another provision of law which states otherwise, Section 143, broad in scope as it is, would
undoubtedly cover the business of selling diesel fuels, or any other petroleum product for that matter.

As earlier observed, Section 133(h) provides two kinds of taxes which cannot be imposed by local government
units: excise taxes on articles enumerated under the NIRC, as amended; and taxes, fees or charges on petroleum
products. There is no doubt that among the excise taxes on articles enumerated under the NIRC are those levied on
petroleum products, per Section 148 of the NIRC.

The power of a municipality to impose business taxes derives from Section 143 of the Code that specifically
enumerates several types of business on which it may impose taxes, including manufacturers, wholesalers,
distributors, dealers of any article of commerce of whatever nature; those engaged in the export or commerce of
essential commodities; retailers; contractors and other independent contractors; banks and financial institutions; and
peddlers engaged in the sale of any merchandise or article of commerce. This obviously broad power is further
supplemented by paragraph (h) of Section 143 which authorizes the sanggunian to impose taxes on any other
businesses not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax.

This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987
Constitution. Section 5, Article X assures that [e]ach local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees and charges, though the power is subject to such guidelines and
limitations as the Congress may provide. There is no doubt that following the 1987 Constitution and the Code, the
fiscal autonomy of local government units has received greater affirmation than ever. Previous decisions that have
been skeptical of the viability, if not the wisdom of reposing fiscal autonomy to local government units have fallen
by the wayside.

Respondents cite our declaration in City Government of San Pablo v. Reyes that following the 1987 Constitution the
rule thenceforth in interpreting statutory provisions on municipal fiscal powers, doubts will have to be resolved in
favor of municipal corporations. Such policy is also echoed in Section 5(a) of the Code, which states that any
provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any
question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. But
somewhat conversely, Section 5(b) then proceeds to assert that [i]n case of doubt, any tax ordinance or revenue
measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the
taxpayer. And this latter qualification has to be respected as a constitutionally authorized limitation which Congress
has seen fit to provide. Evidently, local fiscal autonomy should not necessarily translate into abject deference to the
power of local government units to impose taxes.

(8) Hagonoy Market vs. Mun. Of Hagonoy GR No. 137621, Feb. 6, 2002

The Sanggunian Bayan of Hagonoy enacted an ordinace, Kautusan Blg. 28, increasing the stall rentals of the market
vendors in Hagonoy. Article 3 provided that it shall take effect upon approval. The petitioner’s President filed an
appeal with the Secretary of Justice assailing the constitutionality of the tax ordinance. The Secretary of Justice
dismissed the appeal on the ground that it was filed out f time (beyond 30 days from the effectivity of the
Ordinance).

SC held that the appeal of the petitioner with the Secretary of Justice is already time-barred. The periods stated in
Section 187 of the Local Government Code are mandatory. Ordinance No. 28 is a revenue measure adopted by
the municipality of Hagonoy to fix and collect public market stall rentals. It is essential that the validity of revenue
measures is not left uncertain for a considerable length of time. Furthermore, it was held that Section 6c.04 of the
1993 Municipal Revenue Code and Section 191 of the Local Government Code limiting the percentage of increase
that can be imposed apply to tax rates, not rentals.

Facts:
1. The Sangguniang Bayan of Hagonoy, Bulacan, enacted an ordinance,
a. Kautusan Blg. 28: increasing the stall rentals of the market vendors in Hagonoy.
b. Article 3 provided that it shall take effect upon approval.

c. The subject ordinance was posted from November 4-25, 1996.

2. The petitioner’s members were personally given copies of the approved Ordinance and were informed that
it shall be enforced in January, 1998.

a. The petitioner’s President filed an appeal with the Secretary of Justice assailing the
constitutionality of the tax ordinance.

b. Petitioner claimed it was unaware of the posting of the ordinance.

3. Respondent opposed the appeal.

a. It contended that the ordinance took effect on October 6, 1996 and that the ordinance, as
approved, was posted as required by law.

4. Petitioner’s appeal, made over a year later, was already time-barred.

a. Secretary of Justice: Dismissed the appeal on the ground that it was filed out of
time, i.e., beyond thirty (30) days from the effectivity of the Ordinance on October 1, 1996

b. Citing the case of Tañada vs. Tuvera, the Secretary of Justice held that the date of effectivity of
the subject ordinance retroacted to the date of its approval in October 1996, after the required
publication or posting has been complied with, pursuant to Section 3 of said ordinance

5. Motion for reconsideration was denied

a. Petitioner appealed to the Court of Appeals.

b. Petitioner did not assail the finding of the Secretary of Justice that their appeal was filed
beyond the reglementary period.

c. Instead, it urged that the Secretary of Justice should have overlooked this “mere technicality” and
ruled on its petition on the merits

6. CA: dismissed for being formally deficient as it was not accompanied by certified true copies of the
assailed Resolutions of the Secretary of Justice

Issue: WON the appeal by the petitioner with the Secretary of Justice time-barred.

Held: YES. The appeal of the petitioner with the Secretary of Justice is already time-barred.

Ratio:
1. On failure to attach certified true copies of the assaild decision of the Secretary of Justice:

a. the petitioner satisfactorily explained the circumstances relative to its failure to attach to its appeal
certified true copies of the assailed Resolutions of the Secretary of Justice

b. Due to bad weather, the person in charge (at the Department of Justice) was no longer
available to certify to (sic) the Resolutions.

c. The following day, October 22, 1998, was declared a non-working holiday because of
(t)yphoon “Loleng.”

d. We find that the Court of Appeals erred in dismissing petitioner’s appeal on the ground that
it was formally deficient.

e. It is clear from the records that the petitioner exerted due diligence to get the copies of its appealed
Resolutions certified by the Department of Justice, but failed to do so on account of typhoon
“Loleng.”

f. respondent appellate court should have tempered its strict application of procedural rules in view
of the fortuitous event considering that litigation is not a game of technicalities

2. However, the appeal of the petitioner with the Secretary of Justice is already time-barred.

a. Any question on the constitutionality or legality of tax ordinances or revenue measures may
be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of
Justice

b. Section 187 of the Local Gov’t Code : appeal of a tax ordinance or revenue measure should be
made to the Secretary of Justice within thirty (30) days from effectivity of the ordinance and even
during its pendency, the effectivity of the assailed ordinance shall not be suspended.

c. Municipal Ordinance No. 28 took effect in October 1996. Petitioner filed its appeal only in
December 1997, more than a year after the effectivity of the ordinance in 1996.

d. Clearly, the Secretary of Justice correctly dismissed it for being time-barred.

e. The timeframe fixed by law for parties to avail of their legal remedies before competent courts is
not a “mere technicality” that can be easily brushed aside.

3. The periods stated in Section 187 of the Local Government Code are mandatory

a. Ordinance No. 28 is a revenue measure adopted by the municipality of Hagonoy to fix and collect
public market stall rentals.

b. It is essential that the validity of revenue measures is not left uncertain for a considerable
length of time.

4. On the argument that its period to appeal should be counted not from the time the ordinance took effect in
1996 but from the time its members were personally given copies of the approved ordinance in November
1997.

a. Two (2) grounds: first, no public hearing was conducted prior to the passage of the ordinance
and, second, the approved ordinance was not posted.

b. Petitioner’s bold assertion that there was no public hearing conducted prior to the passage
of Kautusan Blg. 28 is belied by its own evidence.
 c. In petitioner’s two (2) communications with the Secretary of Justice, it enumerated the various
objections raised by its members before the passage of the ordinance in several meetings called by
the Sanggunian for the purpose.

d. These show beyond doubt that petitioner was aware of the proposed increase and in fact
participated in the public hearings therefore.

5. On the issue of publication or posting

a. In contrast, the respondent Sangguniang Bayan of the Municipality of Hagonoy, Bulacan,

presented evidence which clearly shows that the procedure for the enactment of the assailed
ordinance was complied with

b. After its approval, copies of the Ordinance were given to the Municipal Treasurer on the same
day.

c. On November 9, 1996, the Ordinance was approved by the Sangguniang Panlalawigan. The
Ordinance was posted during the period from November 4 - 25, 1996 in three (3) public
places, viz: in front of the municipal building, at the bulletin board of
the Sta. Ana Parish Church and on the front door of the Office of the Market Master in the
public market

d. Posting was validly made in lieu of publication as there was no newspaper of local
circulation in the municipality of Hagonoy.

6. Section 6c.04 of the 1993 Municipal Revenue Code and Section 191 of the Local Government Code
limiting the percentage of increase that can be imposed apply to tax rates, not rentals.

a. Neither can it be said that the rates were not uniformly imposed or that the public markets
included in the Ordinance were unreasonably determined or classified.

b. To be sure, the Ordinance covered the three (3) concrete public markets: the two-storey Bagong
Palengke, the burnt but reconstructed Lumang Palengke and the more recent Lumang
Palengkewith wet market. However, the Palengkeng Bagong Munisipyo or Gabaldon was
excluded from the increase in rentals as it is only a makeshift, dilapidated place, with no doors or
protection for security, intended for transient peddlers who used to sell their goods along the
sidewalk

(9) Victorias Milling Co., Inc. vs. Municipality of Victorias – L-21183, September 27,
1968
FACTS:
St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co (VMC). In the course of
their dealings, VMC issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among
these was SLDR No. 1214M.SLDR No. 1214M, dated October 16, 1989, covers 25,000 bags of sugar. Each bag
contained 50 kg and priced at P638.00 per bag. The transaction covered was a “direct sale”.

On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in
the same SLDR for P14,750,000.00. CSC issued checks in payment. That same day, CSC wrote petitioner that it had
been authorized by STM to withdraw the sugar covered by the said SLDR. Enclosed in the letter were a copy of
SLDR No. 1214M and a letter of authority from STM authorizing CSC to “withdraw for and in our behalf the
refined sugar covered by the SLDR” 
 On Oct. 27, 1989, STM issued checks to VMC as payment for 50,000 bags,
covering SLDR No. 1214M. 
 CSC surrendered the SLDR No. 1214M and to VMC’s NAWACO Warehouse and
was allowed to withdraw sugar. But only 2,000 bags had been released because VMC refused to release the other
23,000 bags.
 Therefore, CSC informed VMC that SLDR No. 1214M had been “sold and endorsed” to it. But VMC
replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because STM had already
withdrawn all the sugar covered by the cleared checks. VMC also claimed that CSC was only representing itself as
STM’s agent as it had withdrawn the 2,000 bags against SLDR No. 1214M “for and in behalf” of STM. Hence, CSC
filed a complaint for specific performance against Teresita Ng Sy (doing business under STM's name) and VMC.
However, the suit against Sy was discontinued because later became a witness. RTC ruled in favor of CSC and
ordered VMC to deliver the 23,000 bags left. CA concurred. Hence this appeal.

ISSUES:
W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon SLDR No. 1214M as
assignee.

HELD:
NO. CSC was not an agent of STM. VMC heavily relies on STM’s letter of authority that said CSC is authorized to
withdraw sugar “for and in our behalf”. It is clear from Art. 1868 that the: basis of agency is representation. On
the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from
his words or actions, and on the part of the agent, there must be an intention to accept the appointment and
act on it, and in the absence of such intent, there is generally NO agency. One factor, which most clearly
distinguishes agency from other legal concepts, is control; one person – the agent – agrees to act under the control
or direction of another – the principal. Indeed, the very word “agency” has come to connote control by the principal.
The control factor, more than any other, has caused the courts to put contracts between principal and agent in a
separate category. Where the relation of agency is dependent upon the acts of the parties, the law makes no
presumption of agency and it is always a fact to be proved, with the burden of proof resting upon the persons
alleging the agency, to show not only the fact of its existence but also its nature and extent. It appears that CSC was
a buyer and not an agent of STM. CSC was not subject to STM’s control. The terms “for and in our behalf” should
not be eyed as pointing to the existence of an agency relation. Whether or not a contract is one of sale or agency
depends on the intention of the parties as gathered from the whole scope and effect of the language employed.
Ultimately, what is decisive is the intention of the parties. (In fact, CSC even informed VMC that the SLDR was
sold and endorsed to it.)
Agency distinguished from sale.

In an agency to sell, the agent, in dealing with the thing received, is bound to act according to the instructions of his
principal, while in a sale, the buyer can deal with the thing as he pleases, being the owner. The elementary notion of
sale is the transfer of title to a thing from one to another, while the essence of agency involves the idea of an
appointment of one to act for another. Agency is a relationship which often results in a sale, but the sale is a
subsequent step in the transaction. (Teller, op. cit., p. 26; see Commissioner of Internal Revenue vs. Manila
Machinery & Supply Co., 135 SCRA 8 [1985].) An authorization given to another containing the phrase “for and in
our behalf’’ does not necessarily establish an agency, as ultimately what is decisive is the intention of the parties.
Thus, the use of the words “sold and endorsed’’ may mean that the parties intended a contract of sale, and not a
contract of agency.

(10) Panaligan vs. City of Tacloban – GR No. L-9319, September 27, 1957
(11) Palma Development Corp vs. Municipality of Malangas – GR No. 152492, October 16,
2003

Facts: Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to wholesalers in
Zamboanga City. It uses the municipal port of Malangas, Zamboanga del Sur as transshipment port for its goods.
The port, as well as the surrounding roads leading to it, belong to and are maintained by the Municipality of
Malangas, Zamboanga del Sur. On January 16, 1994, the municipality passed municipal revenue code no. 09 series
of 1993, which was subsequently approved by the Sangguniang Panlalawigan of Zamboanga del Sur in resolution
no. 1330 dated August 4, 1994. Section 56.01 of the ordinance reads as follows:

Sec 56.01 Imposition of Fees. There shall be collected service fee for its use of the municipal roads or streets
leading to the wharf and to any point along the shorelines within the jurisdiction of the municipality and for police
surveillance on all goods and all equipment harboured or sheltered in the premises of the wharf and other within
the jurisdiction of the municipality [xxx]

Accordingly, the service fees imposed by section 56.01 of the ordinance was paid by petitioner under protest. It
contended that under Republic Act No. 7160, otherwise known as the local government code of 1991, municipal
governments did not have authority to tax goods and vehicles that passed through their jurisdictions. Thereafter,
before the Regional Trial Court of Pagadian City, petitioner filed against the Municipality of Malangas on
November 29, 1995, an action for declaratory relief assailing the validity of section 56.01 of the municipal
ordinance.

Issue: Whether or not the imposition of service fee is proper and valid.

Held: No. By the express language of section 153 and 155 RA 7160, local government units, through their
sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for the use of any
public road, pier or wharf funded and constructed by them. A service fee imposed on vehicles using municipal roads
leading to the wharf is thus valid, however, section 133 (e) of RA 7160 prohibits the imposition, in the guise of
wharfage fees — as well as other taxes or charges in any form whatsoever on goods or merchandise. It is therefore
irrelevant if the fee imposed are actually for police surveillance on the goods, because any other form of imposition
on goods passing through the territorial jurisdiction of the municipality is clearly prohibited by section 133 (e).

(12) City of Cebu vs. IAC 144 SCRA 710

(13) Petron Corp. Vs. Mayor Tobias Tiangco – GR No. 158881, April 16, 2008
(above)

(14) Province of Bulacan vs. CA – GR No. 126232, November 27, 1998

Facts: On June 26, 1992, the Sangguniang Panlalawigan passed provincial ordinance no. 3 known as “Ordinance
Enacting The Revenue Code Of The Bulacan Province” which was to take effect on July 1, 1992 Section 21 of the
ordinance provides as follows:

Sec 21. Imposition of Tax – There is hereby levied and collected a tax of 10% of the fair market value in the locality
per cubic meter of ordinary stores, sand, gravel, earth and other quarry resources, such but not limited to marble,
granite, volcanic cinders, basalt, tuff and rock phosphate, extracted from public lands or from beds of seas, lakes,
rivers, streams, creeks and other public waters within its territorial jurisdiction.

Pursuant thereto, the provincial treasurer of Bulacan in a letter dated November 11, 1992, assessed private
respondent Republic Cement Corporation Php2,524,692.13 for extracting lime stones, shale and silica from several
parcels of private land in the province during the third quarter of 1992 until the second quarter of 1993. Believing
that the province, on the bases of the above-said ordinance, had no authority to impose taxes on quarry resources
extracted from private lands, Republic Cement formally contested the same on December 23, 1993. The same was,
however, denied by the provincial treasurer on January 17, 1994. Republic Cement, consequently filed a petition for
declaratory relief with the Regional Trial Court (RTC) of Bulacan on February 14, 1993. The province filed a
motion to dismiss Republic Cement’s petition which was granted by the trial court on May 13, 1993, which ruled
that declaratory relief was improper, allegedly because a breach of the ordinance had been committed by Republic
Cement.

Issue: Whether or not provincial ordinance no. 3 is valid to allow the petitioner to impose taxes on ordinary stones,
sand, gravel, earth, and other quarry resources.

Held: No. On the basis of section 134 of Republic Act No. 7169, the local government code, ruled that a province
was empowered to impose taxes only on sand, gravel, and other quarry resources extracted from public lands, its
authority to tax being limited to by said provision only to those taxes, fees and charges provided in article 1, chapter
2, title I of Book II of the local government code.
As correctly pointed out by petitioners, section 186 of the same code allows petitioners to levy taxes other than those
specifically enumerated under the code, subject to the conditions specified therein.

The tax imposed by the province of Bulacan is an excise tax, being a tax upon the performance, carrying or an
excise of an activity. Under section 133 of the local government code, a province may not, therefore, levy excise
taxes on articles already taxed by the National Internal Revenue Code (NIRC).

The NIRC levies a tax on all quarry resources, regardless of origin, whether extracted from public or private land.
Thus, a province may not ordinarily impose taxes on stones, sand,gravel, earth and other quarry resources, as the
same are already taxed under NIRC. The province can, however, impose a tax on stones, sand, gravel, earth and
other quarry resources extracted from public lands because it is expressly empowered to do so under the local
government code. As to stones, sand, gravel, earth and other quarry resources extracted from private land, however
it may not do so, because of the limitation provided by section 133 of the code in relation to section 151 of the
NIRC.

Given the above disquisition, petitioners cannot claim that the appellate court unjustly deprived them of the power to
create their sources of revenue, their assessment of taxes against Republic Cement being ultra vires, traversing as it
does the limitations set by the local government code.

Furthermore, section 21 of provincial ordinance no. 3 is practically only a reproduction of section 138 of the local
government code. A cursory reading of both could show that both refer to ordinary sand, gravel, stone, earth and
other quarry resources extracted from public lands. Even if we disregard the limitation set by section 133 of the local
government code, petitioners, may not impose taxes on stone, sand, gravel, earth and other quarry resources
extracted from private lands. Petitioners may not involve the regalian doctrine to extend coverage of their ordinance
to quarry resources extracted from private lands, for taxes, being burdens, are not to be presumed beyond what the
applicable statute expressly and clearly declares, tax statutes being construed strictissimi juris against the
government.

(15) Batangas City vs. Pilipinas Shell Petroleum Corporation – GR No. 187631 dated July 8,
2015.
Pepsi Cola Bottling vs. Municipality of Tanuan 69 SCRA 460
(16) Matalin Coconut Co, Inc. vs. The Municipal Council of Malabang, Lanao del Sur, GR No.
L-28138 August 13, 1986
Facts:
1. The Municipal Council of Malabang, Lanaodel Sur enacted the Municipal Ordinance No. 45-46 imposing a
police inspection fee of P0.30 per sack of Cassava Starch produced and shipped out of the said
Municipality where penalties are imposed for violations thereof.

It made unlawful for any company, person, or group of persons to ship out goods – specifically Cassava
Starch or Flour without paying to the Municipal Treasurer (or his duly authorized representatives) a fee
fixed by the Ordinance and a police inspection fee of P0.30 (shouldered by the shipper if moving the goods
outside the Municipality).

In case of violations, the Ordinance prescribed the payment of a fine of P100 < P1,000; an additional
payment of P1.00 per sack that was illegally shipped; or imprisonment of 20 days, or both, depends in the
discretion of the Court.

2. Validity of the Ordinance was challenged by Matalin Coconut Inc., alleging being violative of R.A. 2264,
unreasonable, oppressive and confiscatory.

Purakan Plantation Companty is also affected, crippling its operations to transport its goods to the port
through the said Municipality.
 3. Trial Court decided the Municipal Ordinance is null and void; ordered the Municipal Treasurer refund the
payments it made from the period of: Sept. 27, ’66 to May 2, ’67 with a total amount of: P25,000.00 and
subsequent payments; and, prohibiting the collection of P0.30 police inspection fees.

Issue: Whether the said Ordinance is valid.

Held: Invalid.

 The Court ruled that tax should be based on sales, not in the quantity of goods that have yet to be sold.
Moreover, for taxes to be valid, it should be levied “for public purposes, just, and uniform.”

 The imposition of a police inspection fee of P0.30 per bag was found to be unjust and unreasonable.

(17) Pelizloy Realty Corp., vs. Province of Benguet, GR No. 183137, April 10, 2013

Petitioner Pelizloy Realty Corporation owns Palm Grove Resort in Tuba, Benguet, which has facilities like
swimming pools, a spa and function halls.

In 2005, the Provincial Board of Benguet approved its Revenue Code of 2005. Section 59, the tax ordinance levied a
10% amusement tax on gross receipts from admissions to "resorts, swimming pools, bath houses, hot springs and
tourist spots."

Pelizloy's posits that amusement tax is an ultra vires act. Thus, it filed an appeal/petition before the Secretary of
Justice. Upon the Secretary’s failure to decide on the appeal within sixty days, Pelizloy filed a Petition for
Declaratory Relief and Injunction before the RTC.

Pelizloy argued that the imposition was in violation of the limitation on the taxing powers of local government units
under Section 133 (i) of the Local Government Code, which provides that the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of percentage or value-added tax (VAT)
on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided.

The Province of Benguet assailed the that the phrase ‘other places of amusement’ in Section 140 (a) of the
LGC encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots since Article 131 (b) of the
LGC defines "amusement" as "pleasurable diversion and entertainment synonymous to relaxation, avocation,
pastime, or fun."

RTC rendered a Decision assailed Decision dismissing the Petition for Declaratory Relief and Injunction for lack of
merit. Procedurally, the RTC ruled that Declaratory Relief was a proper remedy. However, it gave credence to the
Province of Benguet's assertion that resorts, swimming pools, bath houses, hot springs, and tourist spots are
encompassed by the phrase ‘other places of amusement’ in Section 140 of the LGC.

ISSUE: W/N provinces are authorized to impose amusement taxes on admission fees to resorts, swimming pools,
bath houses, hot springs, and tourist spots for being "amusement places" under the LGC.

RULING: NO.

Amusement taxes are percentage taxes. However, provinces are not barred from levying amusement taxes even if
amusement taxes are a form of percentage taxes. The levying of percentage taxes is prohibited "except as otherwise
provided" by the LGC. Section 140 provides such exception.

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 these places 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."

Section 131 (c) of the LGC already provides a clear definition: "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.

As defined in The New Oxford American Dictionary, ‘show’ means "a spectacle or display of something, typically
an impressive one"; while ‘performance’ means "an act of staging or presenting a play, a concert, or other form of
entertainment." As 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.

(18) First Philippine Industrial Corporation vs. CA – GR No. 125948, December 29, 1998 City
of Manila vs. Colet, GR No. 120051, December 10, 2014

Facts:

Petitioner is a grantee of a pipeline concession under Republic Act No. 387. Sometime in January 1995, petitioner
applied for mayor’s permit in Batangas. However, the Treasurer required petitioner to pay a local tax based on gross
receipts amounting to P956,076.04. In order not to hamper its operations, petitioner paid the taxes for the first
quarter of 1993 amounting to P239,019.01 under protest. On January 20, 1994, petitioner filed a letter-protest to the
City Treasurer, claiming that it is exempt from local tax since it is engaged in transportation business. The
respondent City Treasurer denied the protest, thus, petitioner filed a complaint before the Regional Trial Court of
Batangas for tax refund. Respondents assert that pipelines are not included in the term “common carrier” which
refers solely to ordinary carriers or motor vehicles. The trial court dismissed the complaint, and such was affirmed
by the Court of Appeals.

Issue:

Whether a pipeline business is included in the term “common carrier” so as to entitle the petitioner to the exemption

Held:

Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public."

The test for determining whether a party is a common carrier of goods is:
(1) He must be engaged in the business of carrying goods for others as a public employment, and must hold himself
out as ready to engage in the transportation of goods for person generally as a business and not as a casual
occupation;

(2) He must undertake to carry goods of the kind to which his business is confined;

(3) He must undertake to carry by the method by which his business is conducted and over his established roads; and

(4) The transportation must be for hire.

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged
in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it
from the definition of a common carrier.

(19) LTO vs. City of Butuan – GR No. 131512, January 20, 2000

Facts: Respondent city of Butuan asserts that one of the salient provisions introduced by the local government code
is in the area of local taxation which allows LGUs to collect registration fees or charges along with, its view, the
corresponding issuance of all kinds of licenses or permits for the driving of tricycles. Relying on the provisions of
the local government code, the sangguniang panlungsod of Butuan, on August 16, 1992 passed SP Ordinance no.
916-42 entitled “An Ordinance Regulating The Operation Of Tricycles-For-Hire, Providing Mechanism For The
Issuance of Franchise, Registration and Permit and Imposing Penalties For Violations Thereof and for Other
Purposes.” The ordinance provided for among other things, the payment of franchise fees for the grant of the
franchise of tricyles-for-hire, fees for the registration of the vehicle, and fees for the issuance of a permit for the
driving thereof. Petitioner LTO explains that one of the functions of the national government that, indeed, has been
transferred to local government units is the franchising authority over tricycles-for-hire of the land transportation
franchising and regulatory board but not, it asseverates, the authority of LTO to register all motor vehicles and to
issue qualified persons of licenses to drive such vehicles.

Issue: Whether or not respondent city of Butuan may issue license and permit and collect fees for the operation of
tricycle.

Held: No. LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant
franchises for the operation thereof. “To regulate” means to fix, establish or control; to adjust by rule, method or
established made; to direct by rule or restriction; or to subject to governing principles of law. A franchise is defined
to be a special privilege to do certain things conferred by government on an individual or corporation and which
does not belong to citizens generally of common right. On the other hand, to register means to record formally and
exactly, to enroll, or to enter precisely in a list or the like, and a driver’s license is the certificate or license issued by
the government which authorizes a person to operate a motor vehicle. The devolution of the functions of the DOTC,
performed by the LTFRB, to the LGUs, as so aptly observed by the solicitor general is aimed at curbing the
alarming in on case of accidents in national highways involving tricycles. It has been the perception that local
governments are in good position to achieve the end desired by the law making body because of their proximity to
the situation that can enable them to address that serious concern better than the national government.

It may not be amiss to state nevertheless, that under article 458 (a) [3-VI] of the local government code, the power of
the LGUs to regulate the operation of tricycles and to grant franchises for the operation thereof is still subject to the
guidelines prescribed by the DOTC. In compliance therewith, the Department of Transportation and
Communications (DOTC) issued guidelines to implement the devolution of LTFRBs franchising authority over
tricycles-for-hire to local government units pursuant to the local government code.

The reliance made by the respondents on the broad taxing power of local government units, specifically under
section 133 of the local government code, is tangential. Police power and taxation, along with eminent domain, are
inherent powers of sovereignty which the state might share with local government units by delegation or given under
a constitutional or a statutory fiat. All these inherent powers are for a public purpose and legislative in nature but the
similarities just about end there. The basic aim of police power is public good and welfare. Taxation, in its case,
focuses on the power of government to raise revenue in order to support its existence and carry out its legitimate
objectives. Although correlative to each other in many respects, the grant of one does not necessarily carry with it
the grant of the other. The two powers are by tradition and jurisprudence separate and distinct powers, varying in
their respecting concepts, character, scopes, and limitations. To construe the tax provisions of section 133 (1)
indistinctively would result in the repeal to that extent of LTOs regulatory power which evidently has not been
intended. If it were otherwise, the law could have just said so in section 447 and 458 of Book III of the local
government code in the same manner that the specific devolution of LTFRBs power on franchising of tricycles has
been provided. Repeal by implication is not favored. The power over tricycles granted under section 458 (8) (3) (VI)
of the local government code to LGUs is the power to regulate their operation and to grant franchises for the
operation thereof. The government’s exclusionary clause contained in the tax provisions of section 133 (1) of the
local government code must be held to have had the effect of withdrawing the express powers of LTO to cause the
registration of all motor vehicles and the issuance of license for the driving thereof. These functions of the LTO are
essentially regulatory in nature, exercised pursuant to the police power of the state, whose basic objectives are to
achieve road safety by insuring the road worthiness of these motor vehicles and the competence of drivers
prescribed by RA 4136. Not insignificant is the rule that a statute must not be construed in isolation but must be
taken in harmony with the extent body of laws.

(20) Philippine Fisheries Dev’t Authority vs. CA GR No. 169836, GR No. July 31, 2007
FACTS:

 The PFDA was created by then President Marcos and became an attached agency of the Department of
Agriculture.
 Meanwhile, the then Ministry of Public Works and Highways reclaimed from the sea a 21-hectare parcel of
land in Barangay Tanza, Iloilo City, and constructed thereon the Iloilo Fishing Port Complex (IFPC),
consisting of breakwater, a landing quay, a refrigeration building, a market hall, a municipal shed, an
administration building, a water and fuel oil supply system and other port related facilities and machineries.
- Upon its completion, the Ministry of Public Works and Highways turned over IFPC to the
Authority, pursuant to Section 11 of PD 977, which places fishing port complexes and related
facilities under the governance and operation of the PFDA.
- Notwithstanding said turn over, title to the land and buildings of the IFPC remained with the
Republic.
 The Authority thereafter leased portions of IFPC to private firms and individuals engaged in fishing related
businesses.
 Sometime in May 1988, the City of Iloilo assessed the entire IFPC for real property taxes.

ISSUES:

1.) Whether or not PFDA is liable to pay real property tax to the City of Iloilo.

HELD:

Yes but only insofar as those properties which are leased to private firms and individuals!

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
real property tax.
 The Authority which is tasked with the special public function to carry out the government’s policy "to promote
the development of the country’s fishing industry and improve the efficiency in handling, preserving, marketing, and
distribution of fish and other aquatic products," exercises the governmental powers of eminent domain, and the
power to levy fees and charges. At the same time, the Authority exercises "the general corporate powers conferred
by laws upon private and government-owned or controlled corporations."

In light of the foregoing, the Authority should be classified as an instrumentality of the national government
which is liable to pay taxes only with respect to the portions of the property, the beneficial use of which were vested
in private entities. When local governments invoke the power to tax on national government instrumentalities, such
power is construed strictly against local governments. The rule is that a tax is never presumed and there must be
clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved
against taxation. This rule applies with greater force when local governments seek to tax national government
instrumentalities.20

Thus, the 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. In Chavez v. Public Estates Authority it was held
that reclaimed lands are lands of the public domain and cannot, without Congressional fiat, be subject of a sale,
public or private

In sum, the Court finds that the Authority is an instrumentality of the national government, hence, it is liable to
pay real property taxes assessed by the City of Iloilo on the IFPC only with respect to those portions which are
leased to private entities. Notwithstanding said tax delinquency on the leased portions of the IFPC, the latter or any
part thereof, being a property of public domain, cannot be sold at public auction. This means that the City of Iloilo
has to satisfy the tax delinquency through means other than the sale at public auction of the IFPC.

(21) Mactan Cebu International Airport Authority vs. Marcos – GR No. 120082, Sept. 11, 1996
above

(22) MIAA vs. CA – GR No. 155650, July 20, 2006

Facts:

MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992
to 2001. MIAA’s real estate tax delinquency was estimated at P624 million. The City of Parañaque, through its City
Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of
Parañaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real
estate tax delinquency.

MIAA filed a petition sought to restrain the City of Parañaque from imposing real estate tax on, levying against, and
auctioning for public sale the Airport Lands and Buildings.

The City of Parañaque contended that Section 193 of the Local Government Code expressly withdrew the tax
exemption privileges of “government-owned and-controlled corporations” upon the effectivity of the Local
Government Code. Thus, MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

MIAA argued that Airport Lands and Buildings are owned by the Republic. The government cannot tax itself. The
reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such
a case the tax debtor is also the tax creditor.

Issue:

Whether or not the City of Parañaque can impose real tax, levy against and auction for public sale the Airport Lands
and Buildings.

Held:
MIAA is Not a Government-Owned or Controlled Corporation. The Airport Lands and Buildings of MIAA are
property of public dominion and therefore owned by the State or the Republic of the Philippines. No one can dispute
that properties of public dominion mentioned in Article 420 of the Civil Code, like “roads, canals, rivers, torrents,
ports and bridges constructed by the State,” are owned by the State. The term “ports” includes seaports and airports.
The MIAA Airport Lands and Buildings constitute a “port” constructed by the State.

Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and
thus owned by the State or the Republic of the Philippines. The Airport Lands and Buildings are devoted to public
use because they are used by the public for international and domestic travel and transportation. The fact that the
MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands
and Buildings as properties for public use. The charging of fees to the public does not determine the character of the
property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion
as one “intended for public use.”

The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the
subject of an auction sale. Properties of public dominion, being for public use, are not subject to levy, encumbrance
or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of
public dominion is void for being contrary to public policy. Essential public services will stop if properties of public
dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Parañaque can
foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.

(23) MIAA vs. City of Pasay – GR No. 163072, April 2, 2009

The Facts
MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992
to 2001.

Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent
real property taxes remain unpaid.

MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for preliminary
injunction or temporary restraining order

Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes
on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence,
this petition.

The Issue
The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax.

The Court’s Ruling

The petition is meritorious.

In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of
the Local Government Code.

The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real
property tax on the airport lands, consisting mostly of the runways, as well as the airport buildings, of MIAA. In the
2006 MIAA case, this Court held:

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory
Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is
MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution
because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested
with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory
Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by
 local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section
234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such
exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.
Finally, the 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.
A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show that
MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a
"government-owned or controlled corporation." As explained in the 2006 MIAA case:
A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is
not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock
divided into shares. MIAA has no stockholders or voting shares. x x x
MIAA is also not a non-stock corporation because it has no members.

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental
functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with
corporate powers.

Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government
instrumentality exercising not only governmental but also corporate powers.

Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and
as such are exempt from real property tax under Section 234(a) of the Local Government Code. However, under the
same provision, if MIAA leases its real property to a taxable person, the specific property leased becomes subject to
real property tax.12 In this case, only those portions of the NAIA Pasay properties which are leased to taxable
persons like private parties are subject to real property tax by the City of Pasay.

WHEREFORE, we GRANT the petition.

(24) City of DavaoCity vs. RTC – GR No. 127383, August 18, 2005

o tax exemption rules governing GSIS and exceptions

o the plenary powers of Congress cannot be limited by passage of un-repealable laws

FACTS:

GSIS Davao City branch office received a Notice of Public Auction, scheduling public bidding of its properties for
non-payment of realty taxes from 1992-1994, amounting to the sum total of Php 295, 721.61. The auction was,
however, subsequently reset by virtue of a deadline extension given by Davao City.

On July 28, 1994, GSIS received Warrants of Levy and Notices of Levy on three parcels of land it owned and
another Notice of Public Auction. In September of that same year, GSIS filed a petition for Certiorari, Prohibition,
Mandamus and/or Declaratory Relief with the Davao City RTC.

During pre-trial, the only issue raised was whether sec. 234 and 534 of the Local Government Code, which have
withdrawn real property tax from GOCCs, have also withdrawn from the GSIS its right to be exempted from
payment of realty tax.

RTC rendered decision in favor of GSIS. Hence this petition.

ISSUE/S:

Whether the GSIS tax exemptions can be deemed as withdrawn by the LGC
W/N sec. 33 of P.D. 1146 has been repealed by the LGC

HELD:
Reading together sec. 133, 232, and 234 of the LGC, as a general rule: the taxing powers of LGUs cannot extend to
the levy of “taxes, fees, and charges of any kind on the National Government, its agencies and instrumentalities, and
LGUs.”

However, under sec. 234, exemptions from payment of real property taxes granted to natural or juridical persons,
including GOCCs, except as provided in said section, are withdrawn upon effectivity of LGC. GSIS being a GOCC,
then it necessarily follows that its exemption has been withdrawn.

Regarding P.D. 1146 which laid down requisites for repeal on the laws granting exemption, Supreme Court found a
fundamental flaw in Sec. 33, particularly the amendatory second paragraph.

Said paragraph effectively imposes restrictions on the competency of the Congress to enact future legislation on the
taxability of GSIS. This places an undue restraint on the plenary power of the legislature to amend or repeal laws.

Only the Constitution may operate to preclude or place restrictions on the amendment or repeal laws. These
conditions imposed under P.D. 1146, if honored, have the precise effect of limiting the powers of Congress.

Supreme Court held that they cannot render effective the amendatory second paragraph of sec. 33, for by doing so,
they would be giving sanction to a disingenuous means employed through legislative power to bind subsequent
legislators to a subsequent mode of repeal. Thus, the two conditions under sec. 33 cannot bear relevance whether the
LGC removed the tax-exempt status of GSIS.

Furthermore, sec. 5 on the rules of interpretation of LGC states that “any tax exemption, incentive or relief granted
by any LGU pursuant to the provision of this Code shall be construed strictly against the person claiming it.”

The GSIS tax-exempt stats, in sum, was withdrawn in 1992 by the LGC but restored by the GSIS Act of 1997, sec.
39. The subject real property taxes for the years 1992-1994 were assessed against GSIS while the LGC provisions
prevailed and thus may be collected by the City of Davao.

(25) NPC vs. City of Cabanatuan GR No. 149110, April 9, 2003

above

(25) Quezon City vs. ABS-CBN GR No. 166408. October 6, 2008

Facts: Petitioner City Government of Quezon City is a local government unit duly organized and existing by virtue
of Republic Act (R.A.) No.537, otherwise known as the Revised Charter of QuezonCity. Petitioner City Treasurer of
Quezon City is primarily responsible for the imposition and collection of taxes within the territorial jurisdiction of
Quezon City. ABS-CBN was granted the franchise to install and operate radio and television broadcasting stations in
the Philippines under R.A. No.7966. ABS-CBN had been paying local franchise tax imposed by Quezon City.
However, in view of the provision in R.A. No. 9766 that it “shall pay a franchise tax x xx in lieu of all taxes,” the
corporation developed the opinion that it is not liable to pay the local franchise tax imposed by Quezon City. ABS-
CBN filed a written claim for refund for local franchise tax paid to Quezon City for 1996and for the first quarter of
1997. For failure to obtain any response from the Quezon City Treasurer, ABS-CBN filed a complaint before the
RTC in Quezon City seeking the declaration of nullity of the imposition of local franchise tax by the City
Government of Quezon City for being unconstitutional. The RTC rendered judgment declaring as invalid the
imposition on and collection from ABS-CBN of local franchise tax and ordered the refund of all payments made.
The City of Quezon and its Treasurer filed a motion for reconsideration which was subsequently denied by the RTC.
Thus, appeal was made to the CA. The CA dismissed the petition of Quezon City and its Treasurer. According to the
appellate court, the issues raised were purely legal questions cognizable only by the Supreme Court.

ISSUE: Whether or not the phrase "in lieu of all taxes" indicated in the franchise of the respondent appellee (Section
8 of RA 7966) serves to exempt it from the payment of the local franchise tax imposed by the petitioners-appellants.
HELD: NO

The "in lieu of all taxes" provision in its franchise does not exempt ABS-CBN from payment of local
franchise tax.

The present controversy essentially boils down to a dispute between the inherent taxing power of Congress and the
delegated authority to tax of local governments under the 1987 Constitution and effected under the LGC of
1991.Petitioners argue that the "in lieu of all taxes" provision in ABS-CBN's franchise does not expressly exempt it
from payment of local franchise tax. They contend that a tax exemption cannot be created by mere implication and
that one who claims tax exemptions must be able to justify his claim by clearest grant of organic law or statute.

Taxes are what civilized people pay for civilized society. They are the lifeblood of the nation. Thus, statutes granting
tax exemptions are construed stricissimi juris against the taxpayer and liberally in favor of the taxing authority. A
claim of tax exemption must be clearly shown and based on language in law too plain to be mistaken. Otherwise
stated, taxation is the rule, exemption is the exception.The burden of proof rests upon the party claiming the
exemption to prove that it is in fact covered by the exemption so claimed.The basis for the rule on strict construction
to statutory provisions granting tax exemptions or deductions is to minimize differential treatment and foster
impartiality, fairness and equality of treatment among taxpayers. He who claims an exemption from his share of
common burden must justify his claim that the legislature intended to exempt him by unmistakable terms. For
exemptions from taxation are not favored in law, nor are they presumed. They must be expressed in the clearest and
most unambiguous language and not left to mere implications. It has been held that "exemptions are never
presumed, the burden is on the claimant to establish clearly his right to exemption and cannot be made out of
inference or implications but must be laid beyond reasonable doubt. In other words, since taxation is the rule and
exemption the exception, the intention to make an exemption ought to be expressed in clear and unambiguous terms.

Section 8 of R.A. No. 7966 imposes on ABS-CBN a franchise tax equivalent to three (3) percent of all gross receipts
of the radio/television business transacted under the franchise and the franchise tax shall be "in lieu of all taxes" on
the franchise or earnings thereof.The "in lieu of all taxes" provision in the franchise of ABS-CBN does not expressly
provide what kind of taxes ABS-CBN is exempted from. It is not clear whether the exemption would include both
local, whether municipal, city or provincial, and national tax. What is clear is that ABS-CBN shall be liable to pay
three (3) percent franchise tax and income taxes under Title II of the NIRC. But whether the "in lieu of all taxes
provision" would include exemption from local tax is not unequivocal.

As adverted to earlier, the right to exemption from local franchise tax must be clearly established and cannot be
made out of inference or implications but must be laid beyond reasonable doubt. Verily, the uncertainty in the "in
lieu of all taxes" provision should be construed against ABS-CBN. ABS-CBN has the burden to prove that it is in
fact covered by the exemption so claimed. ABS-CBN miserably failed in this regard.

ABS-CBN cites several cases to support its claim that that the "in lieu of all taxes" clause includes exemption from
all taxes.However, a review of the case laws reveals that the grantees' respective franchises expressly exempt them
from municipal and provincial taxes and ABS-CBN's franchise did not embody an exemption similar to those cases.
Too, the franchise failed to specify the taxing authority from whose jurisdiction the taxing power is withheld,
whether municipal, provincial, or national. In fine, since ABS-CBN failed to justify its claim for exemption from
local franchise tax, by a grant expressed in terms "too plain to be mistaken" its claim for exemption for local
franchise tax must fail.

(26) City of Iriga vs. Camarines Sur III Electric Cooperative, Inc., GR No. 192945, September
5, 2012
FACTS:
  CASURECO III is an electric cooperative duly organized by PD 269 and registered with the National
Electrification Administration(NEA). It is engaged in the business of electric power distribution to various
end-users and consumers within the City of Iriga and the Rinconada area. Sometime in 2003, petitioner
City of Iriga required CASURECO III to submit a report of its gross receipts for the period 1997-2002 to
serve as the basis for the computation of franchise taxes, fees and other charges. The latter complied and
was subsequently assessed taxes.
 In 2004, petitioner made final demand on CASURECO III to pay the franchise taxes due for the period
1998-2003 and real property taxes due for the period 1995-2003. CASURECO III, however, refused to pay
said taxes on the ground that it is an electric cooperative provisionally registered with the Cooperative
Development Authority (CDA), and therefore exempt from the payment of local taxes.
 Thereafter, petitioner filed a complaint for collection of local taxes against CASURECO III amounting to
P17,037,936.89 and interest of P916,536.50 before the RTC, citing its power to tax under the Local
Government Code and the Revenue Code of Iriga City. CASURECO denied liability for the assessed taxes
asserting that the computation of the petitioner was erroneous because it included 1) gross receipts from
service areas beyond the latter’s territorial jurisdiction; 2) taxes that had already prescribed; and 3) taxes
during the period when it was still exempt from local government tax by virtue of its then subsisting
registration with the CDA.
 RTC ruled that the real property taxes due for the years 1995-1999 had already prescribed. However, it
found CASURECO III liable for franchise taxes for the years 2000-2003 based on its gross receipts and on
the ground that the situs of taxation is the place where the privilege is exercised.
 On appeal to the CA, the CA found CASURECO III to be a non-profit entity, not falling within the purview
of “businesses enjoying a franchise” pursuant to Section 137 of the LGC. It explained that CASURECO
III’s non-profit nature is diametrically opposed to the concept of a “business”, which, as defined under
Section 131 of the LGC, is a “trade or commercial activity regularly engaged in as a means of livelihood or
with a view to profit.” Consequently, it relieved CASURECO III from liability to pay franchise taxes.
Hence, this petition.

ISSUE:

Whether an electric cooperative registered under PD 269 but not under RA 6938 is liable for the payment of
local franchise taxes

HELD: YES

RATIO:

 In Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA) v. The Secretary, Department of
Interior and Local Government, the Court held that the tax privileges granted to electric cooperatives
registered with NEA under PD 269 were validly withdrawn and only those registered with the CDA under
RA 6938 may continue toenjoy the tax privileges under the Cooperative Code.Therefore, CASURECO III
can no longer invoke PD 269 to evade payment of local taxes. Moreover, its provisional registration with
the CDA which granted it exemption for the payment of local taxes was extended only until May 4, 1992.

 Thereafter, it can no longer claim any exemption from the payment of local taxes, including the subject
franchise tax. Indisputably, petitioner has the power to impose local taxes. The power of the local
government units to impose and collect taxes is derived from the Constitution itself which grants them “the
power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines
and limitation as the Congress may provide.” This explicit constitutional grant of power to tax is consistent
with the basic policy of local autonomy and decentralization of governance. With this power, local
 government units have the fiscal mechanisms to raise the funds needed to deliver basic services to their
constituents and break the culture of dependence on the nationalgovernment. Thus, consistent with these
objectives, the LGC was enacted granting the local government units, like petitioner, the power to impose
and collect franchise tax.

 Furthermore, in National Power Corporation v. City of Cabanatuan, the Court declared that “a franchise tax
is a tax on the privilege of transacting business in the state and exercising corporate franchises granted by
the state.” It is not levied on the corporation simply for existing as a corporation, upon its property or its
income, but on its exercise of the rights or privileges granted to it by the government. “It is within this
context that the phrase tax on businesses enjoying a franchise in Section 137 of the LGC should be
interpreted and understood.” To be liable for local franchise tax, the following requisites should concur: (1)
that one has a “franchise” in the sense of a secondary or special franchise; and (2) that it is exercising its
rights or privileges under this franchise within the territory of the pertinent local government unit.

 In the case at bar, there is a confluence of these requirements. By virtue of PD 269, NEA granted
CASURECO III a franchise to operate an electric light and power service for aundisputed that
CASURECO III operates within Iriga City and the Rinconada area. It is, therefore, liable to pay franchise
tax notwithstanding its non-profit nature.

(27) Smart Communications vs. City of Davao – GR No. 155491, September 16, 2008

Facts: On February 18, 2002, Smart filed a special civil action for declaratory relief, for the ascertainment of its
rights and obligations under the Tax Code of the City of Davao. Smart contends that its telecenter in Davao City is
exempt from payment of franchise tax to the City because the power of the City of Davao to impose a franchise tax
is subject to statutory limitations such as the “in lieu of all taxes” clause found in Section 9 of R.A. No. 7294
(Smart’s franchise). Respondents contested the tax exemption claimed by Smart. They invoked the power granted
by the Constitution to local government units to create their own sources of revenue. On July 19, 2002, the RTC
rendered its Decision denying the petition. The trial court noted that the ambiguity of the in “lieu of all taxes”
provision in R.A. No. 7294, on whether it covers both national and local taxes, must be resolved against the
taxpayer.

Issue: Whether or not Smart is liable to pay the franchise tax imposed by the City of Davao.

Held: Yes. The SC find that there is no violation of Article III, Section 10 of the 1987 Philippine Constitution. Tax
exemptions are never presumed and are strictly construed against the taxpayer and liberally in favor of the taxing
authority. They can only be given force when the grant is clear and categorical. Moreover, Smarts franchise was
granted with the express condition that it is subject to amendment, alteration, or repeal. In this case since there is
doubt it must be resolved in favor of the City of Davao. The “in lieu” of all taxes clause applies only to national
internal revenue taxes and not to local taxes.

(28) Municipality of San Fernando vs. Sta. Romana L-GR No. 30159, Mar. 31, 1987

Taxation – Local Taxation – Taxes Levied By a Province – Sand and Gravel Fee
In 1968, the Municipality of San Fernando, La Union undertook road constructions. It sent its trucks to the nearby
Municipality of Luna, La Union to gather sand and gravel. But then the agents of the Luna, La Union imposed fees
on each truck. Mayor Lorenzo Dacanay of San Fernando then filed for injunction against the mayor of Luna
(Timoteo Sta. Romana), its treasurer and their agents to enjoin them from collecting said fees. Sta. Romana, in their
defense, averred that the collection of said fees is pursuant to an ordinance duly approved by the Municipal Council
of Luna in consonance with its power to tax, and that the fees collected are reasonable, fair and legal.
ISSUE: Whether or not the Municipality of Luna is validly exacting the assailed fees on the hauling of gravel and
sand.
HELD: No. Pursuant to the then Local Tax Code, a municipality like Luna is not authorized to exact fees for the
hauling of gravel and sand within it. Such power is lodged only in the province, in this case, the province of La
Union. Only La Union has the authority to exact taxes for sand and gravel extracted within its jurisdiction. The tax
ordinance of Luna providing for such power to the municipality is therefore void. Corollarily, San Fernando cannot
extract sand and gravel from the Municipality of Luna without paying the corresponding taxes or fees that may be
imposed by the province of La Union.

(29) Province of Bulacan vs. CA – GR No. 126232, November 27, 1998

above

(30) Pelizloy Realty Corp., vs. Province of Benguet, GR No. 183137, April 10, 2013 (Compare
with old case of PBA vs. CA GR No. 119122, August 8, 2000)

The PBA received an assessment letter from the Commissioner of Internal Revenue (CIR) for the payment of
deficiency amusement tax.

The PBA contested the assessment by filing a protest with the CIR who denied the same. The PBA then filed a
petition for review with the Court of Tax Appeals (CTA), in which they held against the PBA.

The PBA filed an appeal with the Court of Appeals which was also denied.

ISSUES:

Whether the amusement tax on admission tickets to PBA games is a national tax.

Whether the cession of advertising and streamer spaces to Vintage Enterprises, Inc. subject to amusement tax.

RULING:

YES. The Local Tax Code does not provide for professional basketball games but rather in PD 1959. It is clear that
the "proprietor, lessee or operator of professional basketball games" is required to pay an amusement tax of 15% of
their gross receipts to the BIR, which payment is a national tax.

YES. The definition of gross receipts is broad enough to embrace the cession of advertising and streamer spaces as
the same embraces all the receipts of the proprietor, lessee or operator of the amusement place. The law being clear,
there is no need for an extended interpretation.

(31) Alta Vista Golf and Country Club vs. The City of Cebu, GR No. 180235 dated January 20,
2016
FACTS:

Alta Vista Golf & Country Club is a non-stock and non-profit corporation operating a golf course in Cebu City.
Sometime in June 1993, the Sangguniang Panglungsod of Cebu enacted CTO No. LXIX known as the Revised
Omnibus Tax Ordinance. It stated therein that an amusement tax of 20% of gross receipts on entrance, playing
green, and/or admission fees will be charged on golf courses and polo grounds. In 1998, Alta Vista Golf was
assessed deficiency business taxes, fees, and other charges amounting to P3,820,095.68, including amusement tax
on its golf course. Cebu repeatedly attempted to collect from petitioner. However, the latter refused to pay the
amusement tax arguing that the imposition of said tax by Section 42 of the Revised Omnibus Tax Ordinance, as
amended, was irregular, improper, and illegal. Also, petitioner said that amusement tax can be only imposed
operators of theaters, cinemas, concert halls, or places where one seeks to entertain himself by seeing or viewing a
show or performance.Teresita Camarillo sought to collect once more from Alta Vista Golf but the latter still argued
for the same reason.

After some time, Mayor Osmefia sent petitioner a Closure Order which states that the latter committed violations of
the laws and Cebu City Ordinances. This prompted Alta Vista Golf to file with RTC a Petition for Injunction,
Prohibition, Mandamus, Declaration of Nullity of Closure Order, Declaration of Nullity of Assessment, and
Declaration of Nullity of Section 42 of Cebu City Tax Ordinance, with Prayer for Temporary Restraining Order and
Writ of Preliminary Injunction against respondents alleging that said Closure Order was unconstitutional. Also, it
alleged that Section 42 of the Revised Omnibus Tax Ordinance, as amended, is null and void for being ultra vires or
beyond the taxing authority of respondent Cebu City, and consequently, the assessment against petitioner for
amusement tax for 1998 based on said Section 42 is illegal and unconstitutional; and assuming arguendo that
respondent Cebu City has the power to impose amusement tax on petitioner, such tax for 1998 already prescribed
and could no longer be enforced. On the contrary, respondents filed a Motion to Dismiss on the following grounds,
lack of jurisdiction of RTC, non-exhaustion of administrative remedies, noncompliance with sec. 187, 252 of Local
Government Code and sec 75 of RA 3857. RTC denied the prayer of Alta Vista Golf for issuance of TRO.
Meanwhile, petitioner paid respondent the assessed amusement tax including its penalties, interests and surcharges.

RTC granted respondent’s motion to dismiss adjudging that when a taxpayer questions the validity of a tax
ordinance passed by a local government legislative body, a different procedure directed in Section 187 is to be
followed. Thus, said provision is mandatory. The Motion for Reconsideration filed by Alta Vista Golf was denied.
Hence, a petition was filed before the Supreme Court raising pure questions of law.

ISSUE:

Whether or not the power of Judicial Review over the validity of a local tax ordinance has been restricted
by section 187 of the Local Government Code

HELD:

The Court recognized exceptional circumstances that justify noncompliance by a taxpayer with Section 187
of the Local Government Code. In the case of, Ongsuco v. Malones, it stated that, it is true that the general rule is
that before a party is allowed to seek the intervention of the court, he or she should have availed himself or herself of
all the means of administrative processes afforded him or her. The doctrine of exhaustion of administrative remedies
is based on practical and legal reasons. The availment of administrative remedy entails lesser expenses and provides
for a speedier disposition of controversies.However, there are several exceptions to this rule. The rule on the
exhaustion of administrative remedies is intended to preclude a court from arrogating unto itself the authority to
resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of special
competence. Thus, a case where the issue raised is a purely legal question, well within the competence; and the
jurisdiction of the court and not the administrative agency, would clearly constitute an exception. Resolving
questions of law, which involve the interpretation and application of laws, constitutes essentially an exercise of
judicial power that is exclusively allocated to the Supreme Court and such lower courts the Legislature may
establish.

Since the parties in this case raised the issue whether Municipal Ordinance No. 98-01 was valid and
enforceable despite the absence, prior to its enactment, of a public hearing held in accordance with Article 276 of the
Implementing Rules and Regulations of the Local Government Code. This is undoubtedly a pure question of law,
within the competence and jurisdiction of the RTC to resolve.

Moreover, Paragraph 2(a) of Section 5, Article VIII of the Constitution, expressly establishes the appellate
jurisdiction of this Court, and impliedly recognizes the original jurisdiction of lower courts over cases involving the
constitutionality or validity of an ordinance. The Supreme Court is vested the power to review, revise, reverse,
modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of
lower courts in all cases in which the constitutionality or validity of any treaty, international or executive agreement,
law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.
 (32) Ericsson Telecommunication vs. City of Pasig GR No. 176667, November 22. 2007

FACTS:

Ericsson Telecommunications, Inc. (petitioner), a corporation with principal office in Pasig City (respondent), is
engaged in the design, engineering, and marketing of telecommunication facilities/system. In an Assessment Notice
dated October 25, 2000 issued by the City Treasurer of Pasig City, petitioner was assessed a business tax deficiency
for the years 1998 and 1999 amounting to P9,466,885.00 and P4,993,682.00, respectively, based on its gross
revenues as reported in its audited financial statements for the years 1997 and 1998. Petitioner filed a Protest
claiming that the computation of the local business tax should be based on gross receipts and not on gross revenue.

Respondent issued another Notice of Assessment to petitioner on November 19, 2001, this time based on business
tax deficiencies for the years 2000 and 2001, amounting to P4,665,775.51 and P4,710,242.93, respectively, based on
its gross revenues for the years 1999 and 2000. Again, petitioner filed a Protest, reiterating its position that the local
business tax should be based on gross receipts and not gross revenue. Respondent denied petitioner’s protest and
gave the latter 30 days within which to appeal the denial.

Petitioner filed a petition for review with the RTC of Pasig, praying for the annulment and cancellation of
petitioner’s deficiency local business taxes totaling P17,262,205.66.

ISSUE:What is the extent of the Power of Local Taxation?

RULING:

The power to tax is primarily vested in the Congress; however, it may be exercised by local legislative bodies
pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the
power may be subject to such guidelines and limitations as Congress may provide. Respondent assessed deficiency
local business taxes on petitioner based on the latter’s gross revenue as reported in its financial statements, arguing
that gross receipts is synonymous with gross earnings/revenue, which, in turn, includes uncollected earnings.
Petitioner, however, contends that only the portion of the revenues which were actually and constructively received
should be considered in determining its tax base.

Thus, respondent committed a palpable error when it assessed petitioner’s local business tax based on its gross
revenue as reported in its audited financial statements, as Section 143 of the Local Government Code and Section
22(e) of the Pasig Revenue Code clearly provide that the tax should be computed based on gross receipts.

(34)Yamane vs. BA Lepanto – GR No 154992, October 25, 2005

Taxation – Tax Remedies – Local Taxation – Original & Appellate Jurisdiction in Tax Cases
In 1998, BA Lepanto Condominium Corporation (Lepanto) received a tax assessment in the amount of P1.6 million
from Luz Yamane, the City Treasurer of Makati, for business taxes. Lepanto protested the assessment as it averred
that Lepanto, as a corporation, is not organized for profit; that it merely exists for the maintenance of the
condominium. Yamane denied the protest. Lepanto then appealed the denial to the RTC of Makati. RTC Makati
affirmed the decision of Yamane. Lepanto then filed a petition for review under Rule 42 with the Court of Appeals.
The Court of Appeals reversed the RTC.
Yamane now filed a petition for review under Rule 45 with the Supreme Court. Yamane avers that a.) Lepanto is
liable for local taxation because its act of maintaining the condominium is an activity for profit because the end
result of such activity is the betterment of the market value of the condominium which makes it easier to sell it; that
Lepanto is earning profit from fees collected from condominium unit owners; and that b.) Lepanto’s petition for
review of the decision of the RTC to the CA is erroneous because when the RTC decided on the appeal brought to it
by Lepanto, the RTC was exercising its original jurisdiction and not its appellate jurisdiction; that as such, what
Lepanto should have done is to file an ordinary appeal under Rule 41.
ISSUE: Whether or not a RTC deciding an appeal from the decision of a city treasurer on tax protests is exercising
original jurisdiction. Whether or not a condominium corporation organized solely for the maintenance of a
condominium is liable for local taxation.
HELD:
1. Yes. Although the LGC (Section 195) provides that the remedy of the taxpayer whose protest is denied by the
local treasurer is “to appeal with the court of competent jurisdiction” or in this case the RTC (considering the
amount of tax liability is P1.6 million), such appeal when decided by the RTC is still in the exercise of its original
jurisdiction and not its appellate jurisdiction. This is because appellate jurisdiction is defined as the authority of a
court higher in rank to re-examine the final order or judgment of a lower court which tried the case now elevated
for judicial review. Here, the City Treasurer is not a lower court.
The Supreme Court however clarifies that this ruling is only applicable to similar cases before the passage of
Republic Act 9282 (effective April 2004). Under RA 9282, the Court of Tax Appeals (CTA), not CA, exercises
exclusive appellate jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in
local tax cases whether originally decided or resolved by them in the exercise of their original or appellate
jurisdiction.
2. No. Lepanto was not organized for profit. The fees it was collecting from the condominium unit owners
redound to the owners themselves because the fees collected are being used for the maintenance of the condo.
Further, it appears that the assessment issued by Yamane did not state the legal basis for the tax being imposed on
Lepanto – it merely states that Makati is authorized to collect business taxes under the Local Government Code
(LGC) but no other reference specific reference to specific laws were cited.
(35) City of Manila vs. Coca Cola Bottlers, GR No. 181845, August 4, 2009

FACTS:

Respondent paid the local business tax only as a manufacturers as it was expressly exempted from the business tax
under a different section and which applied to businesses subject to excise, VAT or percentage tax under the Tax
Code. The City of Manila subsequently amended the ordinance by deleting the provision exempting businesses
under the latter section if they have already paid taxes under a different section in the ordinance. This amending
ordinance was later declared by the Supreme Court null and void. Respondent then filed a protest on the ground of
double taxation. RTC decided in favor of Respondent and the decision was received by Petitioner on April 20, 2007.
On May 4, 2007, Petitioner filed with the CTA a Motion for Extension of Time to File Petition for Review asking
for a 15-day extension or until May 20, 2007 within which to file its Petition. A second Motion for Extension was
filed on May 18, 2007, this time asking for a 10-day extension to file the Petition. Petitioner finally filed the Petition
on May 30, 2007 even if the CTA had earlier issued a resolution dismissing the case for failure to timely file the
Petition.

ISSUES:

(1) Has Petitioner’s the right to appeal with the CTA lapsed?
(2) Does the enforcement of the latter section of the tax ordinance constitute double taxation?

HELD:

(1) NO. Petitioner complied with the reglementary period for filing the petition. From April 20, 2007, Petitioner had
30 days, or until May 20, 2007, within which to file their Petition for Review with the CTA. The Motion for
Extension filed by the petitioners on May 18, 2007, prior to the lapse of the 30-day period on 20 May 2007, in which
they prayed for another extended period of 10 days, or until 30 May 2007, to file their Petition for Review was, in
reality, only the first Motion for Extension of petitioners. Thus, when Petitioner filed their Petition via registered
mail their Petition for Review on 30 May 2007, they were able to comply with the period for filing such a petition.
(2) YES. There is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of the
tax ordinance since these are being imposed: (1) on the same subject matter — the privilege of doing business in the
City of Manila; (2) for the same purpose — to make persons conducting business within the City of Manila
contribute to city revenues; (3) by the same taxing authority — petitioner City of Manila; (4) within the same taxing
jurisdiction — within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods — per
calendar year; and (6) of the same kind or character — a local business tax imposed on gross sales or receipts of the
business.

(36) Alabang Supermarket Corporation vs. City of Muntinlupa, CTA EB Case No. 386
February 12, 2009 (read also case decided by the CTA Division)
(37) Cagayan Electric Power and Light Co., Inc., vs. City of Cagayan de Oro, GR No.
191761, November 14, 2012.
(38) Mobil Phils. vs. City Treasurer of Makati GR No. 154092, July 14, 2005
Facts: Mobil Philippines Inc is a domestic corporation engaged in the manufacturing, importing, exporting and
wholesaling of petroleum products, while respondents are the local government officials of the City of Makati
charged with the implementation of the Revenue Code of the City of Makati, as well as the collection and
assessment of business taxes, license fees and permit fees within said city. Prior to September 1998, petitioner’s
principal office was in Makati City. On August 20, 1998, petitioner filed an application with the City Treasurer of
Makati for the retirement of its business within the City of Makati as it moved its principal place of business to Pasig
City.
The OIC of the License Division issued a billing slip of business taxes amounting to P 1,898,106.96 which the
petitioner paid under protest on September 1998. In 1999, petitioner filed a claim for refund but was denied. The
trial court rules that the payments made by the petitioner in 1998 are payments for the business taxes in 1997.
Issue: Are the business taxes paid by petitioner in 1998, business taxes for 1997 or 1998?
Ruling: 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.
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 person’s income, emoluments, profits and the like. It is tax on income, whether net or gross
realized in one taxable year. It is due on or before the 15th day of the 4th month following the close of the taxpayer’s
taxable year .
Under the Makati Revenue Code, it appears that the business tax, like income tax, is computed based on the
previous year’s figures. 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. 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.
Under the same Code, 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
year’s gross sales or receipts, is less than the actual tax due based on the current year’s gross sales or receipts. For
the year 1998, petitioner paid a total of P2,262,122.48 to the City Treasurer of Makati as business taxes for the year
1998. The amount of tax as computed based on petitioner’s gross sales for 1998 is only P1,331,638.84. Since the
amount paid is more than the amount computed based on petitioner’s actual gross sales for 1998, petitioner upon its
retirement is not liable for additional taxes to the City of Makati. Thus, the Court ruled that the respondent
erroneously treated the assessment and collection of business tax as if it were income tax, by rendering an additional
assessment of P1,331,638.84 for the revenue generated for the year 1998.
Therefore, respondents City Treasurer and Chief of the License Division of Makati City are ordered to
refund to petitioner business taxes paid in the amount of P1,331,638.84.
 (39) Shell Co vs. Mun. Of Sipocot – 105 Phil. 1263
(40) Phil. Match vs. City of Cebu – L-30745 – Jan. 1888, 197778

Facts: Petitioner, engaged in manufacturing of matches, assails the legality of the tax which the city treasure
collected on out-of-town deliveries of matches by virtue of the city ordinance which taxes good stored and/or sold
within the city. The company sought refund of the sales tax and for damages against the city treasurer fo r not
following the advise of the city fiscal, as legal adviser of the city, that all out-of-town deliveries of matches are not
subject to sales tax. The trial court dismissed the complaint against the city treasurer.

Issue: WON the city treasurer can be held liable for damages under art. 27 of the CC

Ruling: Judgment AFFIRMED.

Article 27 of the Civil Code provides that "any person suffering material or moral lose because a public servant or
employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and
other relief against the latter, without prejudice to any disciplinary administrative action that may be taken." Article
27 presupposes that the refuse or omission of a public official is attributable to malice or inexcusable negligence. In
the case at bar, the records clearly show that the city treasurer honestly believed that he was justified under the
ordinance to collect taxes. The fiscal’s opinion on the legality of such or any other ordinance is merely advisory and
has no binding effects.
As a rule, Where an officer is invested with discretion in matters brought before him and when so acting he is
usually given immunity from liability to persons who may be injured as the result or an erroneous or mistaken
decision, provided the acts complained of are done within the scope of the officer's authority and without malice, or
corruption. It has been held previously by the SC that an erroneous interpretation of an ordinance does not constitute
nor does it amount to bad faith that would entitle an aggrieved party to an award for damages Cabungcal vs.
Cordovan 120 Phil. 667).

(41) Iloilo bottlers vs. City of Iloilo GR No. 52019 – Aug. 18, 1988
(42) Figuerres vs. CA, GR No. 119172, March 25, 1999
Doctrine:
After the proposed schedule of fair market values of the different classes of real property in a local government unit
within Metro Manila, as prepared jointly by the local assessors of the district to which the city or municipality
belongs, has been published or posted in accordance with §212 of R.A. No. 7160 and enacted into ordinances by the
sanggunians of the municipalities and cities concerned, the ordinances containing the schedule of fair market values
must themselves be published or posted in the manner provided by §188 of R.A. No. 7160

Facts:
Belen C. Figuerres is the owner of a parcel of land located at Amarillo Street, Barangay Mauway, City of
Mandaluyong. In 1993, she received a notice of assessment from the municipal assessor of the Municipality of
Mandaluyong..

The assessment was based on a number of ordinances issued by the Sangguniang Bayan of Mandaluyong. Ordinance
No. 119 contains a schedule of fair market values of the different classes of real property in the municipality.
Ordinance No. 125 fixes the assessment levels applicable to such classes of real property. Finally, Ordinance No.
135 amended Ordinance No. 119, by providing that only one third (1/3) of the increase in the market values
applicable to residential lands pursuant to the said ordinance shall be implemented in the years 1994, 1995, and
1996.

Figuerres brought a prohibition suit in the CA against the Assessor, the Treasurer, and the Sangguniang Bayan to
stop them from enforcing the ordinances in question on the ground that the ordinances were invalid for having been
adopted allegedly without public hearings and prior publication or posting and without complying with the
implementing rules yet to be issued by the Department of Finance.
CA dismissed the petition stating that the approval and determination by the Department of Finance is not needed
under the Local Government Code of 1991, since it is now the city council of Mandaluyong that is empowered to
determine and approve the aforecited ordinances. Furthermore, the Finance Local Assessment Regulation No. 1-92
provides for the rules relative to the conduct of general revisions of real property assessments pursuant to Sections
201 and 219 of the Local Government Code of 1991.

Issue/s:.
1.Whether or not public hearings are required to be conducted prior to the enactment of an ordinance imposing real
property taxes

2.Whether or not there is a need for the publication of fair market values.

Held:
1.Yes. R.A. No. 7160, §186 provides that an ordinance levying taxes, fees, or charges “shall not be enacted without
any prior public hearing conducted for the purpose.”

However, it is noteworthy that apart from her bare assertions, Figuerres has not presented any evidence to show that
no public hearings were conducted prior to the enactment of the ordinances in question. On the other hand, the
Municipality of Mandaluyong claims that public hearings were indeed conducted before the subject ordinances were
adopted, although it likewise failed to submit any evidence to establish this allegation.

In accordance with the presumption of validity in favor of an ordinance, their constitutionality or legality should be
upheld in the absence of evidence showing that the procedure prescribed by law was not observed in their
enactment.

Furthermore, the lack of a public hearing is a negative allegation essential to petitioner’s cause of action in the
present case. Hence, as petitioner is the party asserting it, she has the burden of proof. Since petitioner failed to
rebut the presumption of validity in favor of the subject ordinances and to discharge the burden of proving that no
public hearings were conducted prior to the enactment thereof, we are constrained to uphold their constitutionality or
legality.

2. Yes. R.A. No. 7160, §212 which in part states:

. . . . The schedule of fair market values shall be published in a newspaper of general circulation in the province,
city, or municipality concerned, or in the absence thereof, shall be posted in the provincial capitol, city or municipal
hall and in two other conspicuous public places therein.

Hence, after the proposed schedule of fair market values of the different classes of real property in a local
government unit within Metro Manila, as prepared jointly by the local assessors of the district to which the city or
municipality belongs, has been published or posted in accordance with §212 of R.A. No. 7160 and enacted into
ordinances by the sanggunians of the municipalities and cities concerned, the ordinances containing the schedule of
fair market values must themselves be published or posted in the manner provided by §188 of R.A. No. 7160.

Figuerres has not presented any evidence to show that the subject ordinances were not disseminated in accordance
with these provisions of R.A. No. 7160. On the other hand, the Municipality of Mandaluyong presented a
certificatef of Williard S. Wong, Sanggunian Secretary of the Municipality of Mandaluyong that “Ordinance No.
125, S-1993 . . . has been posted in accordance with §59(b) of R.A. No. 7160. Thus, considering the presumption of
validity in favor of the ordinances and the failure of petitioner to rebut such presumption, we are constrained to
dismiss the petition in this case.

(43) Alabang Supermarket Corporation vs. City of Muntinlupa, CTA EB Case No. 386
February 12, 2009 (read also case decided by the CTA Division)
(44) Mindanao Shopping Destination Corporation vs. Duterte, GR No. 211093 dated June
6, 2017
FACTS:Petitioners Mindanao Shopping Destination Corporation et al. are corporations engaged in the retail
business of selling general merchandise within the territorial jurisdiction of Davao City.

Respondent Sangguniang Panglungsod of Davao City (Sanggunian), after due notice and hearing, enacted the
assailed Davao City Ordinance No. 158-05, Series of 2005, otherwise known as “An Ordinance Approving the 2005
Revenue Code of the City of Davao, as Amended.”

Petitioners' particular concern is Section 69 (d) of the questioned Ordinance which provides:

Section 69. Imposition of Tax. There is hereby imposed on the following persons who establish, operate,
conduct or maintain their respective business within the City a graduated business tax in the amounts
prescribed:

xxx

(d) On retailers

Gross Rates of Tax Per

Sales/Receipts for Annum
the Preceding Year

More than 2%
P50,000.00 but not
over P400,000.00
1 1/2%
In excess of
P400,000.000

However, barangays shall have exclusive power to levy taxes on stores where the gross sales or receipts of
the preceding calendar year does not exceed P50,000.00 subject to existing laws and regulations.

The DOJ-Sec dismissed the appeal and denied petitioner’s motion for reconsideration.

Meanwhile, Davao City Ordinance No. 0253, Series of 2006 (Amended Ordinance), amended Section 69 (d) of the
questioned ordinance. In it, tax rate on retailers with gross receipts in excess of P400,000.00 was reduced from one
and one-half percent (1 1/2%) to one and one-fourth percent (1 1/4%); Section 69 (d), as amended, now reads:

(d) On retailers

Gross Rates of Tax Per

Sales/Receipts for Annum
the Preceding Year

More than 2%
P50,000.00 but not
over P400,000.00
1 1/2%
In excess of
P400,000.000
 However, barangays shall have the exclusive power to levy taxes on stores where the gross sales or receipts
of the preceding calendar year does not exceed Fifty Thousand Pesos (P50,000) subject to existing laws
and regulations.

With the above development, respondents maintained that the adjustment in the tax base no longer exceeds the
limitation as set forth in Section 191 of the LGC considering that the current Davao City tax rate of 1.25% on
retailers with gross receipts/sales of over P400,000.00 under the assailed ordinance is way below or 0.25% short of
the maximum tax rates of 1.5% for cities sanctioned by the LGC. Respondents insist that there is thus no increase or
adjustment to speak of under the premises which is violative of Section 191 of the LGC.

From the dismissal of the appeal and the denial of their motion for reconsideration, petitioners filed an appeal before
the Office of the President (OP). The OP, finding no merit on petitioners' appeal, dismissed the latter. Petitioners
moved for reconsideration, but the same was denied.

Unperturbed, petitioners filed a petition for review before the Court of Appeals. The appellate court dismissed the
petition and affirmed the OP. Petitioners moved for reconsideration of the appellate court’s decision, but the same
was denied. Hence, this Petition for Review under Rule 45 before the Supreme Court.

ISSUE: Whether the Court of Appeals erred in upholding the validity of the assailed ordinance.

Petitioners assert that although the maximum rate that may be imposed by cities on retailers with gross receipts
exceeding P400,000.00 is 1.5% of the gross receipts, the maximum adjustment which can be applied once every five
(5) years, is only 0.15% or 10% of the maximum rate of 1.5% of the gross receipts in accordance with Section 191
of the LGC. However, the assailed Ordinance increased the tax rate on them, as retailers, by more than the
maximum allowable rate of 0.15%, from 50% of 1% (0.5%) of the gross receipts to 1.5% (now, 1.25%) of the gross
receipts, thus, violative of the Local Government Code, specifically Section 191, in relation to Sections 143 and 151,
to wit:

Section 191. Authority of Local Government Units to Adjust Rates of Tax Ordinances. — Local
government units shall have the authority to adjust the tax rates as prescribed herein not oftener than once
every five (5) years, but in no case shall such adjustment exceed ten percent (10%) of the rates fixed under
this Code.

Section 143 (d). Tax on Business. — The municipality may impose taxes on the following businesses:

xxx

(d) On retailers

With gross sales or Rates of Tax Per

receipts for the Annum
preceding calendar
year in the amount
of:

P400,000.00 or 2.00%
less
1.00%
More than
P400,000.000

xxx
 Section 151. Scope of taxing powers. – Except as otherwise provided in this Code, the city, may levy the
taxes, fees, and charges which the province or municipality may impose: Provided, however, That the
taxes, fees and charges levied and collected by highly urbanized and independent component cities shall
accrue to them and distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes.

RULING: The Supreme Court disagreed with petitioners, and affirmed the ruling of the appellate court with
modification that the tax rate to be imposed is reduced to 1.21%.

Firstly, Section 191 of the LGC presupposes that the following requirements are present for it to apply, to wit:
(i) there is a tax ordinance that already imposes a tax in accordance with the provisions of the LGC; and (ii) there is
a second tax ordinance that made adjustment on the tax rate fixed by the first tax ordinance. In the instant case, both
elements are not present.

As to the first requirement, it cannot be said that the old tax ordinance (first ordinance) was imposed in accordance
with the provisions of the LGC. The old tax ordinance of Davao City was enacted before the LGC came into
law. Thus, the assailed new ordinancewas actually the first to impose the tax on retailers in accordance with
the provisions of the LGC.

As to the second requirement, the new tax ordinance (second ordinance) imposed the new tax base and the new tax
rate as provided by the LGC for retailers. It must be emphasized that a tax has two components, a tax base and a tax
rate. However, Section 191 contemplates a situation where there is already an existing tax as authorized under
the LGC and only a change in the tax rate would be effected.The new ordinance Davao City provided, not only a
tax rate, but also a tax base that were appropriate for retailers, following the parameters provided under the LGC.
Suffice it to say, the second requirement is absent. Thus, given the absence of the above two requirements for the
application of Section 191 of the LGC, there is no reason for the latter to cover a situation where the
ordinancewas an initial implementation of R.A. 7160.

Secondly, Section 191 of the LGC will not apply because with the assailed tax ordinance, there is no outright or
unilateral increase of tax to speak of. The resulting increase in the tax rate for retailers was merely incidental.
When Davao City enacted the assailed ordinance, it merely intended to rectify the glaring error in the classification
of wholesaler and retailer in the old ordinance. Petitioners are retailers as contemplated by the LGC. Being retailers,
they are subject to the tax rate provided under Section 69 (d) and not under Section 69 (b) of the assailed ordinance.
In effect, under the assailed ordinance as amended, petitioners as retailers are now assessed at the tax rate of one and
one-fourth (1 1/4%) percent on their gross sales and not the fifty-five (55%) percent of one (1%) percent on their
gross sales since the latter tax rate is only applicable to wholesalers, distributors, or dealers. The assailed ordinance
merely imposes and collects the proper and legal tax due to the local government pursuant to the LGC. While it may
appear that there was indeed a significant adjustment on the tax rate of retailers which affected the petitioners, it
must, however, be emphasized that the adjustment was not by virtue of a unilateral increase of the tax rate of
petitioners as retailers, but again, merely incidental as a result of the correction of the classification of
wholesalers and retailers and its corresponding tax rates in accordance with the provisions of the LGC.

Section 191 is a limitation upon the adjustment, specifically on the increase in the tax rates imposed by the local
government units. As hed by the CA thus:

x x x Section 191 has no bearing in the instant case because what actually took place in the questioned
Ordinance was the correction of an erroneous classification, and not, an upward adjustment or increase
 of tax rates. The fact that there occurred an increase in payment due to the reclassification is of no moment,
because: (1) reclassification is not prohibited; (2) reclassification was made to effect a correction; and (3)
the taxes imposed upon the reclassified taxpayers, was not amended or increased from that stated in the
Local Government Code. And, it is worthwhile to mention that petitioners have not denied that they are
engaged in the retail business, hence, the reclassification was right, proper and legal.

Thirdly, it must be pointed out that the limitation under Section 191 of the LGC was provided to guard against
possible abuse of the LGU's power to tax. In this case, there is merely a rectification of an erroneous classification of
taxpayers and tax rates, i.e., of grouping retailers and wholesalers in one category, and their corresponding rates. The
amendment of the old tax ordinance was not intended to abuse the LGU's taxing powers but merely sought to
impose the rates as provided under the LGC as in fact the tax rate imposed was even lower than the rate authorized
by the LGC. In effect, the assailed ordinance merely corrected the old ordinance so that it will be in accord with the
LGC.

While Davao City may rectify and amend their old tax ordinance in order to give full implementation of the LGC, it,
however, cannot impose a straight 1.25% at its initial implementation of the LGC in so far as retailers are concerned.
Davao City should, at the very least, start with 1% (the minimum tax rate) as provided under Section 143 (d) of the
LGC. While Davao City cannot be faulted in failing to immediately implement the LGC, petitioners cannot likewise
be unjustly prejudiced by its initial implementation of the LGC. It is but fair and reasonable that Davao City at its
initial implementation of the LGC, impose the tax rates as provided in Section 143. It is only then that the
imposition of the tax rate on retailers will not be considered as confiscatory or oppressive, considering that the
reclassification of wholesaler and retailer and their corresponding tax rate being observed now is in accord with the
LGC.

Davao City should, at the very least, start with 1% (the minimum tax rate) as provided under Section 143 (d) of the
LGC. Considering that 11 years had already elapsed from its implementing in 2006, Davao City could adjust its tax
rate twice now which will make its adjusted tax rate for retailers pegged at 1.2%, in accordance with Section 191 of
the LGC. To clarify, from 2006-2011 (first 5 years), the initial tax rate should start with 1%; from 2011-2016 (next 5
years) — 1.1%, thus, for the years 2017-2021, the tax adjustment is 1.21%. However, for this purpose, Davao City
should pass an ordinance to give effect to the above-discussed tax adjustments.

Based on the foregoing, Davao City merely implemented the LGC, albeit it resulted in — an increase in retailer's tax
liability — which nevertheless is not covered by Section 191 of the LGC. In any case, an ordinance based on
reasonable classification does not violate the constitutional guaranty of the equal protection of the law.

(45) PLDT vs. City of Davao GR No. 143867, August 22, 2001
Facts:

PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise tax was paid “in lieu of all
taxes on this franchise or earnings thereof” pursuant to RA 7082. The exemption from “all taxes on this franchise or
earnings thereof” was subsequently withdrawn by RA 7160 (LGC), which at the same time gave local government
units the power to tax businesses enjoying a franchise on the basis of income received or earned by them within their
territorial jurisdiction. The LGC took effect on January 1, 1992.
The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part provides: Notwithstanding
any exemption granted by law or other special laws, there is hereby imposed a tax on businesses enjoying a
franchise, a rate of seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the
preceding calendar year based on the income receipts realized within the territorial jurisdiction of Davao City.
Subsequently, Congress granted in favor of Globe Mackay Cable and RadioCorporation (Globe) and Smart
Information Technologies, Inc. (Smart) franchises which contained “in leiu of all taxes” provisos.
In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec. 23 of which provides
that any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be
granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded
immediately and unconditionally to the grantees of such franchises. The law took effect on March 16, 1995.
In January 1999, when PLDT applied for a mayor’s permit to operate its Davao Metro exchange, it was required to
pay the local franchise tax which then had amounted to P3,681,985.72. PLDT challenged the power of
the citygovernment to collect the local franchise tax and demanded a refund of what had been paid as a local
franchise tax for the year 1997 and for the first to the third quarters of 1998.

Issue:

Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from payment of the local
franchise tax in view of the grant of tax exemption to Globe and Smart.

Held:

Petitioner contends that because their existing franchises contain “in lieu of all taxes” clauses, the same grant of tax
exemption must be deemed to have become ipso facto part of its previously granted telecommunications franchise.
But the rule is that tax exemptions should be granted only by a clear and unequivocal provision of law “expressed in
a language too plain to be mistaken” and assuming for the nonce that the charters of Globe and of Smart grant tax
exemptions, then this runabout way of granting tax exemption to PLDT is not a direct, “clear and unequivocal” way
of communicating the legislative intent.
Nor does the term “exemption” in Sec. 23 of RA 7925 mean tax exemption. The term refers to exemption from
regulations and requirements imposed by the National Telecommunications Commission (NTC). For instance, RA
7925, Sec. 17 provides: The Commission shall exempt any specific telecommunications service from its rate or tariff
regulations if the service has sufficient competition to ensure fair and reasonable rates of tariffs. Another exemption
granted by the law in line with its policy of deregulation is the exemption from the requirement of securing permits
from the NTC every time a telecommunications company imports equipment.
Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language too plain
to be mistaken.

(46) NPC vs. City of Cabanatuan GR No. 149110, April 9, 2003

Above

(47) NPC vs. City of Cabanatuan, GR No. 177332 dated October 1, 2014
(48) Drilon vs. Lim GR No. 111249, August 4, 1994
Facts:
The principal issue in this case is the constitutionality of Section 187 of the Local Government Code1. The
Secretary of Justice (on appeal to him of four oil companies and a taxpayer) declared Ordinance No. 7794 (Manila
Revenue Code) null and void for non-compliance with the procedure in the enactment of tax ordinances and for
containing certain provisions contrary to law and public policy.

The RTC revoked the Secretary’s resolution and sustained the ordinance. It declared Sec 187 of the LGC as
unconstitutional because it vests on the Secretary the power of control over LGUs in violation of the policy of local
autonomy mandated in the Constitution. The Secretary argues that the annulled Section 187 is constitutional and that
the procedural requirements for the enactment of tax ordinances as specified in the Local Government Code had

1
Procedure For Approval And Effectivity Of Tax Ordinances And Revenue Measures; Mandatory Public Hearings. The procedure for approval of local tax
ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the
purpose prior to the enactment thereof; Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures
may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days
from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and
the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse
of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of
competent jurisdiction.
indeed not been observed. (Petition originally dismissed by the Court due to failure to submit certified true copy of
the decision, but reinstated it anyway.)

Issue:
WON the lower court has jurisdiction to consider the constitutionality of Sec 187 of the LGC

Held:
Yes. BP 129 vests in the regional trial courts jurisdiction over all civil cases in which the subject of the
litigation is incapable of pecuniary estimation. Moreover, Article X, Section 5(2), of the Constitution vests in the
Supreme Court appellate jurisdiction over final judgments and orders of lower courts in all cases in which the
constitutionality or validity of any treaty, international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in question.

In the exercise of this jurisdiction, lower courts are advised to act with the utmost circumspection, bearing
in mind the consequences of a declaration of unconstitutionality upon the stability of laws, no less than on the
doctrine of separation of powers. It is also emphasized that every court, including this Court, is charged with the
duty of a purposeful hesitation before declaring a law unconstitutional, on the theory that the measure was first
carefully studied by the executive and the legislative departments and determined by them to be in accordance with
the fundamental law before it was finally approved. To doubt is to sustain. The presumption of constitutionality can
be overcome only by the clearest showing that there was indeed an infraction of the Constitution.

Issue:
WON Section 187 of the LGC is unconstitutional

Held:
Yes. 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.. 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.

Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act. That section allowed the
Secretary of Finance to suspend the effectivity of a tax ordinance if, in his opinion, the tax or fee levied was unjust,
excessive, oppressive or confiscatory. Determination of these flaws would involve the exercise of judgment or
discretion and 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 certain ultra vires
provisions and non-compliance with the prescribed procedure in its enactment. These grounds affected the legality,
not the wisdom or reasonableness, of the tax measure.

The issue of non-compliance with the prescribed procedure in the enactment of the Manila Revenue Code
is another matter. (allegations: No written notices of public hearing, no publication of the ordinance, no minutes of
public hearing, no posting, no translation into Tagalog)
 Judge Palattao however found 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. We 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.
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 the Balita and 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 of Balita, 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.

(49) Cagayan Electric Power and Light Co., Inc., vs. City of Cagayan de Oro, GR No.
191761, November 14, 2012.
above

(50) Smart Communications, Inc. vs. Municipality of Malvar, GR No. 204429, GR No.
204429 dated February 18, 2014.
FACTS:

 Smart constructed a telecommunications tower within the territorial jurisdiction of the Municipality of
Malvar. The construction of the tower was for the purpose of receiving and transmitting cellular
communications within the covered area.

 On 24 August 2004, Smart received from the Permit and Licensing Division of the Office of the Mayor of
the Municipality an assessment letter with a schedule of payment for the total amount of P389,950.00 for
Smart’s telecommunications tower.

 On 9 September 2004, Smart filed a protest, claiming lack of due process in the issuance of the assessment
and closure notice. In the same protest, Smart challenged the validity of Ordinance No. 18 on which the
assessment was based. The protest was denied.
 Smart filed with the RTC an Appeal/Petition assailing the validity of Ordinance No. 18
 On 2 December 2008, the trial court rendered a Decision partly granting Smart’s Appeal/Petition. The trial
court confined its resolution of the case to the validity of the assessment, and did not rule on the legality of
Ordinance No. 18. The trial court held that the assessment covering the period from 2001 to July 2003 was
void since Ordinance No. 18 was approved only on 30 July 2003. However, the trial court declared valid
the assessment starting 1 October 2003,
 Smart filed a petition for review before the CTA. CTA First Division denied the petition for lack of merit.
Smart filed a motion for recon before the CTA En banc.

 CTA En Banc dismissed the petition on the ground of lack of jurisdiction. CTA En Banc held that the CTA
has exclusive appellate jurisdiction to review on appeal, decisions, orders or resolutions of the Regional
Trial Courts in local tax cases originally resolved by them in the exercise of their original or appellate
jurisdiction. However, the same provision does not confer on the CTA jurisdiction to resolve cases where
the constitutionality of a law or rule is challenged.

Note: Smart raises 3 issues in this case including the jurisdiction of the CTA, but matubag rani sa ultimate
issue which is:

ISSUE:
 1. Are the fees imposed under ordinance No. 18 are in fact taxes?

HELD:

1. No, the fees imposed under Ordinace No. 18 are not taxes.

 Smart argues that the "fees" in Ordinance No. 18 are actually taxes since they are not regulatory,
but revenue-raising.

 In this case, the Municipality issued Ordinance No. 18, which is entitled "An Ordinance
Regulating the Establishment of Special Projects," to regulate the "placing, stringing, attaching,
installing, repair and construction of all gas mains, electric, telegraph and telephone wires,
conduits, meters and other apparatus, and provide for the correction, condemnation or removal of
the same when found to be dangerous, defective or otherwise hazardous to the welfare of the
inhabitant[s]. It was also envisioned to address the foreseen "environmental depredation" to be
brought about by these "special projects" to the Municipality.21 Pursuant to these objectives, the
Municipality imposed fees on various structures, which included telecommunications towers

 As clearly stated in its whereas clauses, the primary purpose of Ordinance No. 18 is to regulate the
"placing, stringing, attaching, installing, repair and construction of all gas mains, electric,
telegraph and telephone wires, conduits, meters and other apparatus" listed therein, which included
Smart’s telecommunications tower. Clearly, the purpose of the assailed Ordinance is to regulate
the enumerated activities particularly related to the construction and maintenance of various
structures.

 The fees in Ordinance No. 18 are not impositions on the building or structure itself; rather, they
are impositions on the activity subject of government regulation, such as the installation and
construction of the structures.22

 Since the main purpose of Ordinance No. 18 is to regulate certain construction activities of the
identified special projects, which included "cell sites" or telecommunications towers, the fees
imposed in Ordinance No. 18 are primarily regulatory in nature, and not primarily revenue-raising.
While the fees may contribute to the revenues of the Municipality, this effect is merely incidental.
Thus, the fees imposed in Ordinance No. 18 are not taxes.
 Considering that the fees in Ordinance No. 18 are not in the nature of local taxes, and Smart is
questioning the constitutionality of the ordinance, the CTA correctly dismissed the petition for
lack of jurisdiction.

(51) Coca-Cola Bottlers vs. City of Manila - GR No. 156252, June 27, 2006
above

(52) San Juan vs. Castro – GR No. 174617, December 27, 2007

FACTS:

Petitioner, registered owners of real properties in Marikina City, with consent of his wife, conveyed by deed of
assignment, the properties to the Saints and Angels Realty Corp. (SARC), by virtue of incorporations, in exchange
for shares of stock therein with a par value of P2,000,000.0, placed in San Juan’s name and the remaining par value
in the name of his wife. Respondents’ representatives went to the City Treasurer’s Office of Marikina to pay the
transfer tax based on the consideration stated in the deed of assignment. City Treasurer Castro informed him
however that the tax due is based on the fair market value of the property.
Petitioner protested the basis of the tax due. To which, the respondent replied stating that in cases of transfer or real
property not involving monetary consideration, it is certain that the fair market value or the zonal value of the
property is the basis of the tax rate.

Petitioner filed before the RTC of Marikina a petition for mandamus and damages against respondent in his capacity
as City Treasurer, among others, praying that respondent be compelled to “perform a ministerial duty to accept
payment of transfer tax based on the actual consideration” of the transfer and assignment”, citing Section 135 of the
LGC.

ISSUE:

When can a protest of assessment be availed of?

RULING:

Under Section 195 of the Local Government Code, a taxpayer who disagrees with a tax assessment made by a local
treasurer may file a written protest thereof:

SECTION 195. Protest of Assessment. – When the local treasurer or his duly authorized representative finds that the
correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax,
fee, or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the
receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the
assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest
within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly
meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if the local treasurer
finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the
taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of
the sixty-day (60) period prescribed herein within which to appeal with the court of competent jurisdiction,
otherwise the assessment becomes conclusive and unappealable.

That petitioner protested in writing against the assessment of tax due and the basis thereof is on record as in fact it
was on that account that respondent sent him the above-quoted July 15, 2005 letter which operated as a denial of
petitioner’s written protest.

Petitioner should thus have, following the earlier above-quoted Section 195 of the Local Government Code, either
appealed the assessment before the court of competent jurisdiction[15] or paid the tax and then sought a refund.

Petitioner did not observe any of these remedies available to him, however. He instead opted to file a petition for
mandamus to compel respondent to accept payment of transfer tax as computed by him.

(53) PLDT vs. City of Balanga, CTA EB Case No. 413, June 3, 2009
(54)China Banking vs. City Treasurer of Manila, GR No. 204117 dated July 1, 2015 –
(jurisdiction issue)
(55)Alabang Supermarket Corporation vs. City of Muntinlupa, CTA EB Case No. 386
February 12, 2009 (read also case decided by the CTA Division)
(56)Mindanao Shopping Destination Corp. Vs. Davao City, CTA AC No. 6, May 31, 2011
(57)Angeles City vs. Angeles Electric Corporation, GR No. 166134 dated June 29, 2010.
Doctrine: The prohibition on the issuance of a writ of injunction to enjoin the collection of taxes applies only to
national internal revenue taxes, and not to local taxes.

Facts: Angeles Electric Corporation (AEC) was granted a legislative franchise under RA 4079 to construct,
maintain and operate an electric light, heat, and power system for the purpose of generating and distributing electric
light, heat and power for sale in Angeles City, Pampanga. Then PD 551 reduced the franchise tax of electric
franchise holders. Section 1 of PD 551 provided that: “Any provision of law or local ordinance to the contrary
notwithstanding, the franchise tax payable by all grantees of franchises to generate, distribute and sell electric
current for light, heat and power shall be 2% of their gross receipts received from the sale of electric current and
from transactions incident to the generation, distribution and sale of electric current.” Such franchise tax shall be
payable to the CIR or his duly authorized representative. Thereafter the LGC of 1991 was passed, conferring upon
provinces and cities the power to impose tax on businesses enjoying franchise. In accordance with the LGC, the
Sangguniang Panlungsod of Angeles City enacted the Revised Revenue Code of Angeles City (RRCAC).

Then a petition seeking the reduction of the tax rates and a review of the provisions of the RRCAC was filed with
the Sangguniang Panlungsod by Metro Angeles Chamber of Commerce and Industry Inc. (MACCI) of which AEC
is a member. There being no action taken MACCI elevated the petition to the Department of Finance, which referred
the same to the Bureau of Local Government Finance (BLGF). In the petition, MACCI alleged that the RRCAC is
oppressive, excessive, unjust and confiscatory; that it was published only once and that no public hearings were
conducted prior to its enactment.

The BLGF issued a 1st Indorsement instructing the City Treasurer of Angeles City to make representations with the
Sangguniang Panlungsod for the appropriate amendment of the RRCAC in order to ensure compliance with the
provisions of the LGC. The City Treasurer issued a Notice of Assessment to AEC for payment of business tax,
license fee and other charges for the period 1993-2004 in the total amount of P94,861,194.10. Then AEC filed with
the RTC an Urgent Motion for Issuance of TRO and/or Writ of Preliminary Injunction to enjoin Angeles City and its
City Treasurer from levying, annotating the levy, seizing, confiscating, garnishing, selling and disposing at public
auction the properties of AEC. After due notice and hearing, the RTC issued a TRO followed by an Order granting
the issuance of a Writ of Preliminary Injunction, conditioned upon the filing of a bond in the amount of P10M.

Issue:

Whether the RTC gravely abused its discretion in issuing the writ of preliminary injunction enjoining Angeles City
and its City Treasurer from levying, selling, and disposing the properties of AEC.

Held: No grave abuse of discretion was committed by the RTC. The LGC does not specifically prohibit an
injunction enjoining the collection of taxes. A principle deeply embedded in our jurisprudence is that taxes being the
lifeblood of the government should be collected promptly, without unnecessary hindrance or delay. In line with this
principle, the NIRC expressly provides that no court shall have the authority to grant an injunction to restrain the
collection of any national internal revenue tax, fee or charge imposed by the code. An exception to this rule obtains
only when in the opinion of the CTA. The collection thereof may jeopardize the interest of the government and/or
the taxpayer.

Unlike the NIRC, the Local Tax Code does not contain any specific provision prohibiting courts from enjoining the
collection of local taxes. Such statutory lapse or intent, however it may be viewed, may have allowed preliminary
injunction where local taxes are involved but cannot negate the procedural rules and requirements under Rule 58.
Although there is no express prohibition in the LGC, injunctions enjoining the collection of local taxes are frowned
upon. Courts therefore should exercise extreme caution in issuing such injunctions. Two requisites must exist to
warrant the issuance of a writ of preliminary injunction, namely: (1) the existence of a clear and unmistakable right
that must be protected; and (2) an urgent and paramount necessity for the writ to prevent serious damage.

It appearing that the two essential requisites of an injunction have been satisfied, as there exists a right on the part of
Angeles City to be protected, its right[s] of ownership and possession of the properties subject of the auction sale,
and that the acts (conducting an auction sale) against which the injunction is to be directed, are violative of the said
rights of the Angeles City, the Court has no other recourse but to grant the prayer for the issuance of a writ of
preliminary injunction considering that if the AEC will not be restrained from doing the acts complained of, it will
preempt the Court from properly adjudicating on the merits the various issues between the parties, and will render
moot and academic the proceedings before this court.

As a rule, the issuance of a preliminary injunction rests entirely within the discretion of the court taking cognizance
of the case and will not be interfered with, except where there is grave abuse of discretion committed by the court.
For grave abuse of discretion to prosper as a ground for certiorari, it must be demonstrated that the lower court or
tribunal has exercised its power in an arbitrary and despotic manner, by reason of passion or personal hostility, and it
must be patent and gross as would amount to an evasion or to a unilateral refusal to perform the duty enjoined or to
act in contemplation of law. In other words, mere abuse of discretion is not enough. We find no grave abuse of
discretion on the part of the RTC in issuing the writ of injunction. Angeles City has the burden to prove grave abuse
of discretion, failed to show that the RTC acted arbitrarily and capriciously in granting the injunction. Neither was it
able to prove that the injunction was issued without any factual or legal justification. In assailing the injunction, it
primarily relied on the prohibition on the issuance of a writ of injunction to restrain the collection of taxes. But as
we have already said, there is no such prohibition in the case of local taxes. Records also show that before issuing
the injunction, the RTC conducted a hearing where both parties were given the opportunity to present their
arguments. During the hearing, AEC was able to show that it had a clear and unmistakable legal right over the
properties to be levied and that it would sustain serious damage if these properties, which are vital to its operations,
would be sold at public auction. As we see it then, the writ of injunction was properly issued.

A final note. While we are mindful that the damage to a taxpayer’s property rights generally takes a back seat to the
paramount need of the State for funds to sustain governmental functions, this rule finds no application in the instant
case where the disputed tax assessment is not yet due and demandable. Considering that AEC was able to appeal the
denial of its protest within the period prescribed under Section 195 of the LGC, the collection of business taxes
through levy at this time is, to our mind, hasty, if not premature. The issues of tax exemption, double taxation,
prescription and the alleged retroactive application of the RRCAC, raised in the protest of AEC now pending with
the RTC, must first be resolved before the properties of AEC can be levied. In the meantime, AEC’s rights of
ownership and possession must be respected.