Yamane vs. BA Lepanto

 G.R. No. 154993 October 25, 2005

LUZ R. YAMANE, in her capacity as the CITY TREASURER OF MAKATI CITY, Petitioner,

vs.

BA LEPANTO CONDOMINUM CORPORATION, Respondent.

FACTS:

Respondent BA-Lepanto Condominium (Corporation) received a Notice of Assessment stated that the Corporation is "liable to pay the correct city business taxes, fees and charges," computed as totaling ₱1,601,013.77 for the years 1995 to 1997. The Notice of Assessment was silent as to the statutory basis of the business taxes assessed.

Corporation responded with a written tax protest addressed to the City Treasurer. It was evident in the protest that the Corporation was perplexed on the statutory basis of the tax assessment. Corporation argue that they are not liable for business taxes and surcharges and interest thereon, under the Makati [Revenue] Code or even under the [Local Government] Code as those do not contain any provisions on which the Assessment could be based. 

The protest was rejected by the City Treasurer. From the denial of the protest, the Corporation filed an Appeal with the Regional Trial Court (RTC) of Makati.

Makati RTC rendered a Decision dismissing the appeal for lack of merit. RTC concluded that the activities of the Corporation fell squarely under the definition of "business" under Section 13(b) of the Local Government Code, and thus subject to local business taxation.

From this Decision of the RTC, the Corporation filed a Petition for Review under Rule 42 of the Rules of Civil Procedure with the Court of Appeals. The appellate court reversed the RTC and declared that the Corporation was not liable to pay business taxes to the City of Makati.

In doing so, the Court of Appeals delved into jurisprudential definitions of profit, and concluded that the Corporation was not engaged in profit. For one, it was held that the very statutory concept of a condominium corporation showed that it was not a juridical entity intended to make profit, as its sole purpose was to hold title to the common areas in the condominium and to maintain the condominium.

The Court of Appeals likewise cited provisions from the Corporation’s Amended Articles of Incorporation and Amended By-Laws that, to its estimation, established that the Corporation was not engaged in business and the assessment collected from unit owners limited to those necessary to defray the expenses in the maintenance of the common areas and management the condominium.

Upon denial of City Treasurer's Motion for Reconsideration, the City Treasurer elevated the present Petition for Review under Rule 45.

It is argued that the Corporation is engaged in business, for the dues collected from the different unit owners is utilized towards the beautification and maintenance of the Condominium, resulting in "full appreciative living values" for the condominium units which would command better market prices should they be sold in the future. The City Treasurer likewise avers that the rationale for business taxes is not on the income received or profit earned by the business, but the privilege to engage in business. 

The City Treasurer also claims that the Corporation had filed the wrong mode of appeal before the Court of Appeals when the latter filed its Petition for Review under Rule 42. It is reasoned that the decision of the Makati RTC was rendered in the exercise of original jurisdiction, it being the first court which took cognizance of the case. Accordingly, with the Corporation having pursued an erroneous mode of appeal, the RTC Decision is deemed to have become final and executory.

ISSUES:

(1) Whether the RTC, in deciding an appeal taken from a denial of a protest by a local treasurer under Section 195 of the Local Government Code, exercises "original jurisdiction" or "appellate jurisdiction."

(2) Whether the City of Makati may collect business taxes on condominium corporations.

RULING:

(1) In this case, the decision of the Makati RTC was rendered in the exercise of original jurisdiction. City Treasurer is correct as a matter of law, and that the proper remedy of the Corporation from the RTC judgment is an ordinary appeal under Rule 41 to the Court of Appeals. 

The jurisdiction of a court to take cognizance of a case should be clearly conferred and should not be deemed to exist on mere implications,30 and this settled rule would be needlessly emasculated should we declare that the Corporation’s position is correct in law.

Be that as it may, characteristic of all procedural rules is adherence to the precept that they should not be enforced blindly, especially if mechanical application would defeat the higher ends that animates our civil procedure—the just, speedy and inexpensive disposition of every action and proceeding.

(2) No. What determines tax liability is the tax ordinance, the Local Government Code being the enabling law for the local legislative body. In this case, the careful examination of the record reveals a highly disconcerting fact. At no point has the City Treasurer been candid enough to inform the Corporation, the RTC, the Court of Appeals, or this Court for that matter, as to what exactly is the precise statutory basis under the Makati Revenue Code for the levying of the business tax on petitioner. The SC have examined all of the pleadings submitted by the City Treasurer in all the antecedent judicial proceedings, as well as in this present petition, and also the communications by the City Treasurer to the Corporation which form part of the record. Nowhere therein is there any citation made by the City Treasurer of any provision of the Revenue Code which would serve as the legal authority for the collection of business taxes from condominiums in Makati.

The fact that the Corporation did not fall within the enumerated classes of taxable businesses under either the Local Government Code or the Makati Revenue Code already forewarns that a clear demonstration is essential on the part of the City Treasurer on why the Corporation should be taxed anyway. "Full appreciative living values" is nothing but blather in search of meaning, and to impose a tax hinged on that standard is both arbitrary and oppressive.

Accordingly, and with a significant degree of comfort, SC hold that condominium corporations are generally exempt from local business taxation under the Local Government Code, irrespective of any local ordinance that seeks to declare otherwise. Nevertheless, SC ruled that still, we can note a possible exception to the rule. It is not unthinkable that the unit owners of a condominium would band together to engage in activities for profit under the shelter of the condominium corporation. Such activity would be prohibited under the Condominium Act, but if the fact is established, we see no reason why the condominium corporation may be made liable by the local government unit for business taxes.

There is no contemplation of business, no orientation towards profit in this case. Hence, the assailed tax assessment has no basis under the Local Government Code or the Makati Revenue Code, and the insistence of the city in its collection of the void tax constitutes an attempt at deprivation of property without due process of law.

WHEREFORE, the petition is DENIED. 

Additional Notes for Bar Exam:

The power of local government units to impose taxes within its territorial jurisdiction derives from the Constitution itself, which recognizes the power of these units "to create its own sources of revenue and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy."

These guidelines and limitations as provided by Congress are in main contained in the Local Government Code of 1991 (the "Code"), which provides for comprehensive instances when and how local government units may impose taxes. The significant limitations are enumerated primarily in Section 133 of the Code, which include among others, a prohibition on the imposition of income taxes except when levied on banks and other financial institutions. None of the other general limitations under Section 133 find application to the case at bar.

China Banking vs. City Treasurer of Manila

 G.R. No. 204117               July 1, 2015

CHINA BANKING CORPORATION, Petitioner,

vs.

CITY TREASURER OF MANILA, Respondent.

FACTS:

CBC was assessed by City Treasurer of Manila of local business tax, business permits, and other fees. 

On January 15, 2007, CBC paid such and protested, thru a Letter dated January 12, 2007, the imposition of business tax under Section 21 of the Manila Revenue Code in the amount of ₱154,398.50, on the ground that it is not liable of said additional business tax and the same constitutes double taxation.

City Treasurer of Manila acknowledged receipt of CBC 's payment under protest.

On March 27, 2007, CBC wrote a letter-reply to City Treasurer Letter dated February 8, 2007, reiterating that CBC already protested the additional assessment under Section 21 of the Manila Revenue Code in its Letter dated January 12, 2007. In the same Letter, CBC averred that pursuant to Section 195 of the Local Government Code ("LGC ''), City Treasurer had until March 16, 2007 within which to decide the protest, and considering that CBC received the Letter dated February 8, 2007, four days after the deadline to decide and City Treasurer did not even resolve the protest, CBC formally demanded the refund of the amount of ₱154,398.50, representing the business tax collected under Section 21 of the Manila Revenue Code.

On April 17, 2007, CBC filed a Petition for Review with the RTC of Manila raising the sole issue of whether or not respondent is subject to the local business tax imposed under Section 21 of the Manila Revenue Code.

CBC insisted on the invalidity of the City Treasurer’s assessment, this time, claiming that its petition for review filed with the RTC was timely filed. It explained that the 60-day period within which the City Treasurer should have acted on the protest, and the consequent 30-day period within which it had to appeal the inaction of the City Treasurer should have been reckoned not from January 15, 2007, when it filed its letter questioning the imposition and paid the assessed amount, but from March 27, 2007, the day it filed the letter reiterating its objection to the City Treasurer imposition of ₱154,398.50 and demanding the return of the said amount. With the reckoning point being March 27, 2007, CBC argued that the petition for review was filed well within the reglementary period because it had until June 25, 2007 to file the said appeal.

RTC rendered its decision granting the petition filed by CBC and ordered the City Treasurer to refund the amount of ₱154,398.50, representing the assessment paid by it under Section 21 of Manila Ordinance No. 7988, as amended by Tax Ordinance No. 8011.

RTC denied the motion for reconsideration filed by the City Treasurer.

Hence appeal to CTA Division, the latter reversed the decision of the RTC, effectively dismissing CBC’s protest against the disputed assessment. CBC sought reconsideration of the decision, but was denied by the CTA Division.

Aggrieved, CBC elevated the matter to the CTA En Banc. CTA En Banc affirmed the ruling of the CTA Division in toto. CBC filed its motion for reconsideration of the said decision but the CTA En Banc denied the same.

Hence, this petition.

ISSUE:

(1) Whether CBC claim for refund should be dismissed for being filed out of time.

(2) Whether RTC has jurisdiction over the case.

RULING:

(1) Yes. While it is true that CBC was able to properly file its protest against the assessment of the City Treasurer when it filed its letter on January 15, 2007, questioning the imposition while paying the assessed amount. In the said letter, the petitioner was unequivocal in its objection, stating that it took exception to the assessment made by the City Treasurer under Section 21 of the city’s revenue code, arguing that it was not liable to pay the additional tax imposed under the subject ordinance and that the imposition "constitute[d] double taxation" and, for said reason, invalid. Despite its objection, it remitted the total amount of ₱267,128.70 under protest "to avoid penalties/surcharges and any threat of closure."

The Court, however, is of the view that the period within which the City Treasurer must act on the protest, and the consequent period to appeal a "denial due to inaction," should be reckoned from January 15, 2007, the date CBC filed its protest, and not March 27, 2007. Consequently, the Court finds that the CTA En Banc did not err in ruling that CBC had lost its right to challenge the City Treasurer’s "denial due to inaction." On this matter, Section 195 of the LGC is clear:

SECTION 195. Protest of Assessment. -When the local treasurer or his duly authorized representative finds that 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 canceling 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 (60)-day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.

Time and again, it has been held that the perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also jurisdictional. The failure to perfect an appeal as required by the rules has the effect of defeating the right to appeal of a party and precluding the appellate court from acquiring jurisdiction over the case. At the risk of being repetitious, the Court declares that the right to appeal is not a natural right nor a part of due process. It is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the law.

(2) None. CBC's claim is below the jurisdictional amount of the RTC anchored with Section 33(1), B.P. 129, thus Court finds that the claim of petitioner CBC for refund should be dismissed not only for being filed out of time but also for not being filed before a court of competent jurisdiction.

WHEREFORE, the petition is DENIED.

NOTE:

JANUARY 15, 2007 file sya ng protest

APRIL 17, 2007 sya nag appeal sa RTC

Following sec. 195. 

Di nag act si Local Treasurer within 60 days. Thus, Dapat nag file na sya ng appeal 30days after the lapse of 60 days. Sa case nadelay sya ng 1 araw kasi april 17 na sya nagfile sa RTC. You do the math. Hehehe!

City Treasurer of Manila vs. Philippine Beverage Partners, Inc.

 G.R. No. 233556, September 11, 2019

CITY TREASURER OF MANILA, PETITIONER, v. PHILIPPINE BEVERAGE PARTNERS, INC., SUBSTITUTED BY COCA-COLA BOTTLERS PHILIPPINES, RESPONDENT.

FACTS:

Petitioner City Treasurer of Manila issued SOA to Philippine Beverage Partners, Inc. (respondent). The SOA showed that respondent is liable to pay petitioner local business taxes and regulatory fees.

Respondent protested the assessment arguing that Tax Ordinance Nos. 7988 and 8011, amending the Revenue Code of Manila (RCM), have been declared null and void. Respondent also argued that the collection of local business tax under Section 21 of the RCM in addition to Section 14 of the same code constitutes double taxation.

Petitioner issued a letter to respondent denying the latter's protest which respondent. Thus respondent paid the total amount stated in the SOA. Then, respondent filed a written claim for refund of erroneously/illegally collected tax with petitioner in the same amount paid. Further, respondent filed a Complaint for the Revision of SOA and for Refund or Credit of LBT Erroneously/Illegally Collected with the RTC of Manila.

RTC ordered the refund of the overpayment made by respondent. It held that respondent is already taxed under Section 14 of the RCM, thus, it should no longer be subjected to tax under Section 21 of the same Code.

Petitioner moved for reconsideration but the same was denied by the RTC.

Aggrieved, petitioner filed a Petition for Review with the CTA Second Division.

CTA Second Division affirmed the RTC ruling. 

Petitioner moved for reconsideration, but the same was denied by the CTA Second Division.

Undaunted, petitioner filed a Petition for Review before the CTA En Banc which was DENIED for lack of merit. Petitioner moved for reconsideration, but the same was denied by the CTA En Banc.

Hence, this Petition for Review on Certiorari.

ISSUE:

WHETHER A TAXPAYER  WHO  PROTESTED  AN ASSESSMENT MAY  LATER  ON  INSTITUTE  A  JUDICIAL ACTION FOR REFUND.

RULING:

YES. There are two conditions that must be satisfied in order to successfully prosecute an action for refund in case the taxpayer had received an assessment. One, pay the tax and administratively assail within 60 days the assessment before the local treasurer, whether in a letter-protest or in a claim for refund. Two, bring an action in court within thirty (30) days from decision or inaction by the local treasurer, whether such action is denominated as an appeal from assessment and/or claim for refund of erroneously or illegally collected tax.12 (Emphases supplied and citations omitted)

In this case, after respondent received the assessment on January 17, 2007, it protested such assessment on January 19, 2007. After payment of the assessed taxes and charges, respondent wrote petitioner another letter asking for the refund and reiterating the grounds raised in the protest letter. Then, on February 6, 2007, respondent received the letter denying its protest.

Thus, on March 8, 2007, or exactly thirty (30) days from its receipt of the denial, respondent brought the action before the RTC of Manila. Hence, respondent was justified in filing a claim for refund after timely protesting and paying the assessment.

To reiterate, respondent, after it had protested and paid the assessed tax, is permitted by law to seek a refund having fully satisfied the twin conditions for prosecuting an action for refund before the court.

Consequently, the CTA did not commit a reversible error when it allowed the refund in favor of respondent.

WHEREFORE, the petition is DENIED for lack of merit. 

NOTE:

Application of Section 195 is triggered by an assessment made by the local treasurer or his duly authorized representative for nonpayment of the correct taxes, fees or charges. Should the taxpayer find the assessment to be erroneous or excessive, he may contest it by filing a written protest before the local treasurer within the reglementary period of sixty (60) days from receipt of the notice; otherwise, the assessment shall become conclusive. The local treasurer has sixty (60) days to decide said protest. In case of denial of the protest or inaction by the local treasurer, the taxpayer may appeal with the court of competent jurisdiction; otherwise, the assessment becomes conclusive and unappealable. 

On the other hand, Section 196 may be invoked by a taxpayer who claims to have erroneously paid a tax, fee or charge, or that such tax, fee or charge had been illegally collected from him. The provision requires the taxpayer to first file a written claim for refund before bringing a suit in court which must be initiated within two years from the date of payment. By necessary implication, the administrative remedy of claim for refund with the local treasurer must be initiated also within such two-year prescriptive period but before the judicial action.

Unlike Section 195, however, Section 196 does not expressly provide a specific period within which the local treasurer must decide the written claim for refund or credit. It is, therefore, possible for a taxpayer to submit an administrative claim for refund very early in the two-year period and initiate the judicial claim already near the end of such two-year period due to an extended inaction by the local treasurer. In this instance, the taxpayer cannot be required to await the decision of the local treasurer any longer, otherwise, his judicial action shall be barred by prescription.

Ledesma vs. CA

 G.R. No. 106646 June 30, 1993

JAIME LEDESMA, petitioner,

vs.

COURT OF APPEALS and RIZAL COMMERCIAL BANKING CORPORATION, respondents.

Ledesma, Saludo & Associates for petitioner.

Meer, Meer & Meer Law Office for private respondent.

FACTS:

On August 21, 1980, private respondent Rizal Commercial Banking Corporation filed Case No. 38287 in the then Court of First Instance of Rizal against petitioner to enforce the terms of Trust Receipt Agreement No. 7389 executed by them on April 1, 1974 but which petitioner had failed to comply with. As summons could not be served on the latter, said case was dismissed without prejudice on March 3, 1981.

On December 2, 1988, private respondent bank instituted Civil Case No. 88-2572 in the Regional Trial Court of Makati, Metro Manila, Branch 133, against petitioner on the same cause of action and subject matter.

Petitioner's motion to dismiss on the ground of prescription which was denied and judgment was rendered in favor of private respondent. Said judgment was affirmed by respondent Court and petitioner's motion for reconsideration thereof was denied.

Petitioner's petition for review on certiorari of the said judgment was denied  its present motion for reconsideration contending that the second action filed by private respondent bank had already prescribed.

ISSUE:

Whether the second action filed by private respondent bank had already prescribed.

RULING:

No. The Court ruled that the filing of the first action interrupted the running of the period, and then declared that at any rate, the second action was filed within the balance of the period remaining. 

Article 1155 of the Civil. Code provides that the prescription of an action, involving in the present case the 10-year prescriptive period for filing an action on a written contract under Article 1144(1) of the Code, is interrupted by (a) the filing of an action, (b) a written extrajudicial demand by the creditor, and (c) a written acknowledgment of the debt by the debtor.

The correct interpretations of Article 1155 of the Civil Code are reflected in and furnished by the doctrinal pronouncements in the case of Overseas Bank of Manila and Philippine National Railways Company.

Article 1155 has been interpreted in both case to mean that upon the cessation of the suspension of the prescriptive period, the full period of prescription commences to run anew. 

Petitioner is wrong in insisting that in case of the filing of an action, the prescriptive period is merely tolled and continues to run again, with only the balance of the remaining period available for the filing of another action. This postulation of petitioner, if we are to adopt it, would result in an absurdity wherein Article 1155 would be interpreted in two different ways, i.e., the prescriptive period is interrupted in case of an extrajudicial demand and a written acknowledgment of a debt, but it is merely tolled where an action is filed in court.

Hence, the present motion is hereby DENIED with FINALITY.

Iloilo Bottlers vs. City of Iloilo

 G.R. No. L-52019 August 19, 1988

ILOILO BOTTLERS, INC., plaintiff-appellee,

vs.

CITY OF ILOILO, defendant-appellant.

Efrain B. Trenas for plaintiff-appellee.

Diosdado Garingalao for defendant-appellant

FACTS:

Iloilo Bottlers, Inc. filed a complaint with the Court of First Instance of Iloilo praying for the recovery of the sum of P3,329.20, which amount allegedly constituted payments of municipal license taxes under Ordinance No. 5 series of 1960, as amended, that the company paid under protest.

Said tax ordinance imposes a tax on persons, firms, and corporations engaged in the business of:

1. distribution of soft-drinks

2. manufacture of soft-drinks, and

3. bottling of softdrinks within the territorial jurisdiction of the City of Iloilo.

Iloilo Bottlers, Inc. disclaims liability on two grounds: First, it contends that since it is not engaged in the independent business of distributing soft-drinks, but that its activity of selling is merely an incident to, or is a necessary consequence of its main or principal business of bottling, then it is NOT liable under the city tax ordinance. Second, it claims that only manufacturers or bottlers having their plants inside the territorial jurisdiction of the city are covered by the ordinance.

ISSUE:

Whether the Iloilo Bottlers, Inc. which had its bottling plant in Pavia, Iloilo, but which sold softdrinks in Iloilo City, is liable under Iloilo City tax Ordinance No. 5, series of 1960, as amended, which imposes a municipal license tax on distributors of soft-drinks.

RULING:

Yes. In the case at bar, the company distributed its softdrinks by means of a fleet of delivery trucks which went directly to customers in the different places in lloilo province. Sales transactions with customers were entered into and sales were perfected and consummated by route salesmen. Truck sales were made independently of transactions in the main office. The delivery trucks were not used solely for the purpose of delivering softdrinks previously sold at Pavia. They served as selling units. They were what were called, until recently, "rolling stores". The delivery trucks were therefore much the same as the stores and warehouses.

The tax imposed under Ordinance No. 5 is an excise tax. It is a tax on the privilege of distributing, manufacturing or bottling softdrinks. Being an excise tax, it can be levied by the taxing authority only when the acts, privileges or businesses are done or performed within the jurisdiction of said authority, the situs of the act of distributing, bottling or manufacturing softdrinks must be within city limits, before an entity engaged in any of the activities may be taxed in Iloilo City.

As stated above, sales were made by Iloilo Bottlers, Inc. in Iloilo City. Thus, it is correct to declare the company liable under the tax ordinance.

Petron vs. Tiangco

 G.R. No. 158881             April 16, 2008

PETRON CORPORATION, petitioner,

vs.

MAYOR TOBIAS M. TIANGCO, and MUNICIPAL TREASURER MANUEL T. ENRIQUEZ of the MUNICIPALITY OF NAVOTAS, METRO MANILA, respondents.

FACTS:

Petitioner Petron filed a Petition for Review on Certiorari under Rule 45 directly assailing the Decision of the (RTC) of Malabon which dismissed petitioner’s complaint for cancellation of assessment made by the then municipality (now City) of Navotas (Navotas) for deficiency taxes, and ordering the payment of P10,204,916.17 pesos in business taxes to Navotas.

In this case, 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;

Article 232 of the IRR defines with more particularity the capacity of a municipality to impose taxes on businesses. The enumeration that follows is generally a positive list of businesses which may be subjected to business taxes, and paragraph (h) of Article 232 does allow the imposition of local business taxes "[o]n any business not otherwise specified in the preceding paragraphs which the sanggunian concerned may deem proper to tax," but subject to this important qualification, thus:

"xxx provided further, that in line with existing national policy, any business engaged in the production, manufacture, refining, distribution or sale of oil, gasoline and other petroleum products shall not be subject to any local tax imposed on this article.

In this case, Malabon RTC declared Art. 232(h) of the IRR void because the Code purportedly does not contain a provision prohibiting the imposition of business taxes on petroleum products.

ISSUE:

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

RULING:

No. Under Section 133(h) the phrase "taxes, fees or charges on petroleum products" does not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision. The absence of qualification leads to the conclusion that all sorts of taxes on petroleum products, including business taxes, are prohibited by Section 133(h). Where the law does not distinguish, we should not distinguish.

The language of Section 133(h) makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all "taxes, fees and charges." The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to "taxes, fees and charges" pertains only to one class of articles of the many subjects of excise taxes, specifically, "petroleum products". While local government units are authorized to burden all such other class of goods with "taxes, fees and charges," excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.

While Section 133(h) does not generally bar the imposition of business taxes on articles burdened by excise taxes under the NIRC, it specifically prohibits local government units from extending the levy of any kind of "taxes, fees or charges on petroleum products." Accordingly, the subject tax assessment is ultra vires and void.

WHEREFORE, the Petition is GRANTED.

PLDT vs. City of Davao

 G.R. No. 143867            August 22, 2001

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC., petitioner,

vs.

CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as the City Treasurer of Davao, respondents.

FACTS:

PLDT applied for a Mayor's Permit to operate its Davao Metro Exchange. Respondent City of Davao withheld action on the application pending payment by petitioner of the local franchise tax.

Petitioner protested the assessment of the local franchise tax and requested a refund of the franchise tax previously paid. Petitioner contended that it was exempt from the payment of franchise tax on the basis of Section 23 of RA 7925, PLDT as a telecommunications franchise holder becomes automatically covered by the tax exemption provisions of RA 7925, which took effect on March 16, 1995. Petitioner argued that they shall be exempt from the payment of franchise and business taxes imposable by LGUs under Sections 137 and 143, respectively, of the LGC, upon the effectivity of RA 7925 on March 16, 1995. 

Respondent City Treasurer of Davao, denied the protest and claim for tax refund of petitioner.

Thus, petitioner filed a petition in the RTC of Davao seeking a reversal of respondent City Treasurer's denial of petitioner's protest.

The RTC denied it and affirmed the City Treasurer's decision. 

The trial court held that, under Sec 137 and 143 of LGC, which took effect on January 1, 1992, those sections provides that all exemptions granted to all persons, whether natural and juridical, including those which in the future might be granted, are withdrawn unless the law granting the exemption expressly states that the exemption also applies to local taxes. 

Hence petition for review.

ISSUES:

(1) Whether RTC is correct in ruling that all exemptions granted to all persons, whether natural and juridical, including those which in the future might be granted are withdrawn unless the law granting the exemption expressly states that the exemption also applies to local taxes, as provided under sections 137 and 143 of LGC.

(2) Whether, after the withdrawal of its exemption by virtue of Sec. 137 of the LGC, petitioner has again become entitled to exemption from local franchise tax.

RULING:

(1) No. Sec. 137 does not state that it covers future exemptions. The Tax Code provision withdrawing the tax exemption was not construed as prohibiting future grants of exemptions from all taxes.

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.

(2) No. Petitioner justifies its claim of tax exemption by strained inferences. It argues that because Smart and Globe are exempt from the franchise tax, it follows that it must likewise be exempt from the tax being collected by the City of Davao because the grant of tax exemption to Smart and Globe ipso facto extended the same exemption to it.

Tax exemptions are highly disfavored.

The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.

When exemption is claimed, it must be shown indubitably to exist. At the outset, every presumption is against it.

In this case, it does not appear that, in approving Sec. 23 of R.A. No. 7925, Congress intended it to operate as a blanket tax exemption to all telecommunications entities. Applying the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers, thus, Sec. 23 of R.A. No. 7925 cannot be considered as having amended petitioner's franchise so as to entitle it to exemption from the imposition of local franchise taxes.