DIGI1AL 1LLLCOMMUNICA1IONS PHILIPPINLS, INC. v.

CI1Y GOVLRNMLN1 OI BA1ANGAS

G.R. No. JS6040, JJ December 2008, LN BANC, (Carpio, J.)

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On 1 lebruary 1994, Republic Act ,R.A., 68 granted Digital 1elecommunications
Philippines, Inc. a 25-year ranchise to install, operate and maintain telecommunications system
throughout the Philippines. Section 5 o said Act proides that the grantee shall be liable to pay the
same taxes on its real estate, buildings, and personal property exclusie o the ranchise.

1he City Goernment o Batangas issued a building permit or the installation o petitioner`s
acilities in Batangas City. 1hen, the petitioner applied or a permit to operate with the Mayor`s oice o
Batangas City. Petitioner was not able to secure a Mayor`s Permit or the year 1998, because o a
discrepancy in the computation or the prescribed ees or the clearances and permits. Petitioner was also
adised to settle its unpaid realty taxes. loweer, petitioner claimed exemption rom the payment o
realty tax.

1he respondent reused to issue a Mayor`s permit to petitioner without payment o its realty
taxes. 1he petitioner paid P68,890.39 under protest as ees or the permit to operate, but respondent
reused to accept the payment unless petitioner also paid the realty taxes.

On 2 July 1999, respondent threatened to close down petitioner`s operations. 1he ollowing
day, petitioner instituted a complaint or prohibition and writ o preliminary injunction. 1he case was
raled to R1C-Branch 3. On the same date, respondent sered a Cease and Desist Order on petitioner.

During the pendency o the complaint, petitioner paid its realty taxes o P2,043,265 under
protest. Petitioner resumed its business, rendering the other issues raised in petitioner`s complaint moot.
1he only issue let or resolution is whether petitioner is exempt rom the realty tax under Section 5 o
RA 68.

1he Regional 1rial Court o Batangas City - Branch 3 ruled that the petitioner`s real properties
used in its telecommunications business are not subject to realty taxes. 1he respondent moed or
reconsideration. 1he case was re-raled to Regional 1rial Court o Batangas City -Branch 8. 1he R1C
granted the Motion or Reconsideration, declaring that the petitioner under its legislatie ranchise R.A.
68, is not exempted rom the payment o real property tax being collected by the respondent. 1he
R1C denied petitioner`s motion or reconsideration.

ISSUL:

\hether or not petitioner`s real properties used in its telecommunications business are exempt
rom the realty tax

HLLD:

Petition DISMISSLD.

Section S of RA 7678 Imposes 1axes and Does Not Lxempt from Realty 1ax

1he irst sentence o Section 5 clearly states that the legislatie ranchisee shall be liable to pay
the ollowing taxes: ,1, the same taxes on its real estate, buildings, and personal property exclusie o
this ranchise as other persons or corporations are now or hereater may be required by law to pay`, ,2,
ranchise tax as may be prescribed by law o all gross receipts o the telephone or other
telecommunications businesses transacted under this ranchise`, and ,3, income taxes payable under
1itle II o the National Internal Reenue Code.`

1he phrase exclusie o this ranchise` simply means that petitioner`s ranchise shall not be
subject to the taxes imposed in the irst sentence o Section 5. 1he irst sentence lists the properties that
are subject to taxes, and the list excludes the ranchise. loweer, petitioner`s gross receipts rom its
ranchise are subject to the ranchise tax` under the second sentence o Section 5.

In short, petitioner`s ranchise is excluded rom the properties taxable under the irst sentence o
Section 5 but the gross receipts rom its ranchise are expressly taxable under the second sentence o the
same Section

1he irst sentence o Section 5 imposes on the ranchisee the same taxes` that non-ranchisees
are subject to with respect to real and personal properties. 1he clear intent is to put the ranchisees and
non-ranchisees in parity in the taxation o their real and personal properties. Since non-ranchisees hae
obiously no ranchises, the ranchise must be excluded rom the list o properties subject to tax to
maintain the parity between the ranchisees and non-ranchisees. loweer, the ranchisee is taxable
separately rom its ranchise. 1hus, the second sentence o Section 5 imposes the ranchise tax` on
gross receipts, which under R.A. 16 has been replaced by the 10 Valued Added 1ax eectie 1
January 1996.

Section 5 can be diided into three parts. lirst is the irst sentence which imposes taxes on real
and personal properties, excluding one property, that is, the ranchise. 1his puts in parity the
ranchisees and non-ranchisees in the taxation o real and personal properties. Second is the second
sentence which imposes the ranchise tax, which is applicable solely to the ranchisee. And third is the
proiso in the second sentence that imposes the income tax on the ranchisee, the same income tax
payable by non-ranchisees.

1he irst sentence expressly reers to taxes on real estate` and on personal property.`
Clearly, the irst sentence does not reer only to taxes on real properties, but also to taxes on personal
properties. 1he trial court correctly obsered that petitioner pays taxes on its motor ehicles, which are
personal properties, that are used in its telecommunications business. 1here is also the documentary
stamp tax on transactions inoling real and personal properties, which petitioner and other taxpayers
are liable or.

1here is no language in the irst sentence o Section 5 expressly or een impliedly exempting
petitioner rom the realty tax. 1he phrases exemption rom real estate tax,` ree rom real estate tax`
or not subject to real estate tax` do not appear in the irst sentence. No matter how one reads the irst
sentence, there is no grant o exemption, express or implied, rom realty tax. In act, the irst sentence
expressly imposes taxes on both real and personal properties, excluding only the intangible personal
property that is the ranchise.

1o claim tax exemption, there must be an express exemption rom tax in another proision o
law. On the other hand, the deletion o the phrase unless exempted thererom` rom the common
proision does not gie rise to any tax exemption.

Nowhere in the language o the irst sentence o Section 5 o RA 68 does it expressly or een
impliedly proide that petitioner`s real properties that are actually, directly and exclusiely used in its
telecommunications business are exempt rom payment o realty tax. On the contrary, the irst sentence
o Section 5 speciically states that the petitioner, as the ranchisee, shall pay the same taxes on its real
estate, buildings, and personal property exclusie o this ranchise as other persons or corporations are
now or hereater may be required by law to pay.`

1he heading o Section 5 is 1ax Proisions,` not 1ax Lxemptions. 1o reiterate, the phrase
exemption rom real estate tax` or other words coneying exemption rom realty tax do not appear in
the irst sentence o Section 5. 1he phrase exclusie o this ranchise` in the irst sentence o Section 5
merely qualiies the phrase personal property` to exclude petitioner`s legislatie ranchise, which is an
intangible personal property. Petitioner`s ranchise is subject to tax in the second sentence o Section 5
which imposes the ranchise tax.` 1hus, there is no grant o tax exemption in the irst sentence o
Section 5.

1ax exemptions must be clear and unequiocal. A taxpayer claiming a tax exemption must point
to a speciic proision o law conerring on the taxpayer, in clear and plain terms, exemption rom a
common burden. Any doubt whether a tax exemption exists is resoled against the taxpayer.