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YANGCO VS. CITY OF MANILA FACTS: Plaintiff Teodoro Yangco owns a parcel of land in Sta. Cruz, Manila.

From 1901-1906 the land was assessed for taxation purposes in the same manner as other lots in the section of the city (value per square meter x land area). The assessed value for the said period was on the basis that the land contained 6,610 square meters. After 1906 the area of the lot was fixed at 4, 243.63 square meters. Yangco paid the assessed value from 1901-1906 without raising any objection. But in this case petitioner now seeks to recover the excess of what he paid in 1901-1906 claiming that the basis should have been 4, 243.63 square meters. ISSUE: WON Yangco can recover the tax he paid in excess of the assessment beyond 1906. HELD: NO RATIO: Under sec. 46 of the Manila Charter, it shall be the duty of every owner of real estate in the city of Manila to prepare a statement of the amount of land and its improvements and a description sufficient in detail to enable the city assessor and collector to identify the same on examination. The section also provides that the owner or his authorized agent shall verify such statement and swear the same before any authorized officer of the law. In this case, Yangco prepared his declaration for assessment in which he set forth under oath that the parcel of land in question contained 6,610 square meters. It was upon this sworn declaration of the appellee that the taxes were assessed and collected for 6 years. No objection was made to the payment of these taxes. It was not until after the city surveyed the lot and found that it contained only 4,243.63 square meters that the appellee moved in the matter. Yangco claims that though there was no express provision of the tax law providing for the correction of any errors it is a well established doctrine of quasi contract that money paid and received under a mutual mistake of fact must be returned. But the SC held that taxes are not contracts between parties but rather positive acts of the government binding upon inhabitants. The appellee is presumed to know better than anyone else the size of his lot. Yangco cannot, after his long silence and negligence compel the city to refund the difference. (BUT NOTE THAT THE SC SAID THAT THE CONCLUSION WAS BASED ON THE PARTICULAR FACTS OF THIS CASE WITHOUT ATTEMPTING TO ESTABLISH ANY GENERAL DOCTRINE WITH REFERENCE TO THE REFUND OF TAXES PAID)

CAMO v. RIOSA BOYCO (1915; C.J. Arellano)

RATIO Declaration for assessment is not a ground on which to base proof of ownership of realty

FACTS Arsenio Camo, judicial administrator of Claro Crusillos estate, while making an inventory of the property, noticed that certain parcels of realty which belonged to the decedent were advertised for sale at public auction After the sale had been consummated, Camo filed a complaint in the CFI and with it the titles of ownership of Claro Crusillo, because the latter was the one who had acquired them in his lifetime for himself, exclusively; Mariano Crusillo, who appears to have been the judgment debtor, had nothing to do with said property o When Mariano Crusillo was presented and testified regarding Claro Crusillos right of ownership, the defendant (Boyco, the judgment creditor) protested, alleging that he was estopped from testifying that the lands in question were not his after he had declared for assessment purposes that they were his. But the court overruled the objection on the ground that the parties themselves are the only ones that can be estopped

HELD the dominating idea of the defense seems to be: The declaration for the land tax is the only record in existence regarding the land, a record made in the name of Mariano and not of Claro Crusillo, against which record no objection has been presented by any member of the family, and so the defendant just as any other interested party is entitled to confide in said record. SC: The assessment office is not a property registry, but simply an office for collection of the land tax. o He who neglects to declare his realty that is subject to such tax, allowing opportunity for another to declare and inscribe it in his own name, exposes himself to the penalties fixed in the law regulating such tax, but never to loss of his ownership under the consideration that it is conveyed to the one who made the declaration and inscription in his own name o even payment of such tax by the usurper is not one of the ways of losing ownership or possession according to the fundamental laws that regulate ownership of property Even though Mariano Crusillo might have borrowed the P656 that he got from the Chinaman Ayeng and in order to obtain the loan he might have deliberately and intentionally induced him to believe that he was the owner of the realty in question, exhibiting to him the declaration for assessment that he had made, the real and lawful owner of said realty, Claro Crusillo, would not thereby have lost his right of ownership o once this has been asserted the court cannot do less in truth and justice than to declare to be the owner he who is actually such and to annul the ownership fictitiously created by him who is not Sale of a persons land, assessed in the name of a person other than the lawful owner, is completely invalid and cannot convey any right to the purchaser.

Banez v. CA Facts: Respondent Arcilla occupied land owned by the Phil. Homesite and Housing Corp. (PHHC) and erected a house thereon. Subject lot was awarded to Laquihon who was indebted to Banez so the former assigned the rights to the lot in favor of the latter. Arcilla was asked to vacate but protested alleging that Laquihon acquired no rights over it. Pertinent issue is WON petitioners are not qualified to acquire the lot for having allegedly a lot in San Juan. Held: The sole evidence submitted by respondent Arcilla to prove that petitioners herein were disqualified to be transferees of the lot in question was the certification of the Treasurer of San Juan that there is a tax declaration of the land records of said municipality in the name of Ramon and Aurea Baez. Said Tax declaration is insufficient to prove ownership. It has been held anent this matter that assessment alone is of little value as proof of title. Mere tax declaration does not vest ownership of the property in the declarant. It is well-settled that neither tax receipts nor declaration of ownership for taxation purposes are evidence of ownership or of the right to possess realty when not supported by other effective proofs. It has not been proven, therefore, that petitioners herein are owners of a lot in San Juan, and consequently disqualified to be transferees of the questioned lot.
FELS ENERGY, INC. v. PROVINCE OF BATANGAS (Feb. 16, 2007; J. Callejo)

FACTS NPC entered into a least contract with Polar Energy over diesel engine power barges o NPC assumed the obligation to pay all (b) real estate taxes and assessments, rates, and other charges o Polar subsequently assigned its rights to FELS Aug. 7, 95 FELS received real property tax assessment on the barges from the Provincial Assessor of Batangas o reminded NPC of its obligation; NPC filed MR with the Assessor, which was denied o NPC appealed to Local Board of Assessment Appeals; denied on the ground of prescription o on appeal, CBAA reversed LBAA; on MR by the Provincial Assessor, CBAA reversed earlier decision FELS filed petition for review with the CA (CA-GR No. 67940); NPC filed a separate petition (CA-GR No. 67491) o CA ordered NPC to file motion for consolidation with FELSs petition; NPC failed to comply o CA decided FELS petition, ruling against it also on the ground of prescription NPC filed a petition for review with the SC o SC dismissed, concurring with CA on prescription o CA subsequently dismissed NPCs petition before it (CA-GR No. 67491), ruling that the right to question the Provincial Assessors assessment already prescribed upon failure of FELS to appeal to the LBAA within the prescribed period NPC and FELS filed separate petitions before the SC

ISSUE: Whether the action is barred by prescription

HELD: YES NPC argues that when it filed the MR with the Assessor, the prescriptive period was tolled; the 60-day period for filing an appeal with the LBAA should be computed from receipt of the denial of the MR SC: Sec. 226 LGC Any person having legal interest in the property not satisfied with the action of the Assessormay, within 60 days from receipt of written notice of assessment, appeal to the LBAA o The notice of assessment was sent to FELS, which even contained a statement that If you are not satisfied with the assessment, you may appeal to the LBAA within 60 days from receipt o Callanta v. Ombudsman Under Sec. 226 LGC, the last action of the local assessor on a particular assessment shall be the notice of the assessment This last action gives the property owner the right to appeal to the LBAA; an MR is not allowed Upon failure of the taxpayer to appeal in due course, the right of the LGU to collect the taxes due with respect to the property becomes absolute upon expiration of the period to appeal

ISSUE: Whether the power barges are taxable real property

HELD: YES Petitioners maintain that the power barges are exempt from real estate tax under Sec. 234 (c) LGC because they are actually, directly and exclusively used by petitioner NPC, a GOCC engaged in the supply, generation, and transmission of electric power SC: the owner of the taxable properties is FELS, which is the entity being taxed by the LGU o Though the law states that the machinery must be actually, directly and exclusively used by the GOCC, FELS still cannot find solace in this provision because the Agreement provides that Polar Energy (now FELS) will operate the power barges throughout the term of the lease The mere undertaking of NPC that it shall be responsible for the payment of all real estate taxes and assessments, does not justify exemption of FELS. o The privilege granted to NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas

NPC V. PROVINCE OF QUEZON & MUNICIPALITY OF PAGBILAO Facts: NPC entered into an Energy Conversion Agreement (ECA) w/ Mirant providing for a build-operatetransfer (BOT) arrangement. Mirant will build & finance a coal-fired thermal power plant on the lots owned by NPC in Pagbilao, Quezon for the purpose of converting fuel into electricity, and thereafter, operate & maintain the power plant for a period of 25 years. The NPC will supply the necessary fuel to Mirant & use the power generated to supply the electric power needs of the country. At the end of the term, Mirant will transfer the power plant to NPC w/o compensation. Among the obligations undertaken by NPC was the payment of all taxes that the government may impose on Mirant (Article 11.1 of ECA). Municipality of Pagbilao assessed Mirants real property taxes on the power plant and its machineries.

NPC filed a petition before LBAA, objecting to the assessment against Mirant on the claim that it (the NPC) is entitled to tax exemptions in Section 234, par (c) & (e) of LGC1. LBAA dismissed NPCs petition. NPC appealed with CBAA. CBAA affirmed denial of NPCs claim for exemption. NPC instituted an appeal before CTA which dismissed it. NPC filed the present petition. Issue: W/N NPC, as a GOCC, can claim tax exemption under Sec 234 of LGC for the taxes due from Mirant whose tax liabilities the NPC has contractually assumed. NO. Held: Preliminary issue: W/N NPC initiated a valid protest against the assessment. NO. The entity liable for tax has the right to protest the assessment. A taxpayer's failure to question the assessment before the LBAA renders the assessment of the local assessor final, executory, and demandable, thus precluding the taxpayer from questioning the correctness of the assessment, or from invoking any defense that would reopen the question of its liability on the merits. Section 2262 & 2503 of the LGC lists down the two entities vested with the personality to contest an assessment: the owner and the person with legal interest in the property. The liability for taxes generally rests on the owner of the real property at the time the tax accrues. This is a necessary consequence that proceeds from the fact of ownership. However, personal liability for realty taxes may also expressly rest on the entity with the beneficial use of the real property, such as the tax on property owned by the government but leased to private persons or entities, or when the tax assessment is made on the basis of the actual use of the property. The NPC is neither the owner nor the possessor/user of the subject machineries. The ECAs terms4 regarding the power plants machineries clearly vest their ownership with Mirant. NPC: beneficial owner since it will acquire ownership at the end of 25 years. COURT: Cario v. Ofilado: legal interest should be an interest that is actual and material, direct and immediate, not simply contingent or expectant. Until the lapse of 25 years, NPC's claim of ownership is merely contingent, i.e., dependent on whether the plant and its machineries exist at that time. Prior to this event, the NPCs real interest is only in the continued operation of the plant for the generation of electricity. This interest has not been shown to be adversely affected by the realty taxes imposed and is an interest that NPC can protect, not by claiming exemption, but by paying the taxes it has assumed for Mirant.

Section 234. Exemptions from Real Property Tax. The following are exempted from payment for the real property tax: xxx xxx xxx (c) All machineries and equipment that are actually, directly, and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; xxx xxx xxx (e) Machinery and equipment used for pollution control and environmental protection. Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including government-owned or controlled corporations are hereby withdrawn upon the effectivity of the Code. 2 SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city xxx. 3 SECTION 250. Payment of Real Property Taxes in Instalments. - The owner of the real property or the person having legal interest therein may pay the basic real property tax xxx due thereon without interest in four (4) equal instalments xxx. 4 2.12 (of ECA) OWNERSHIP OF POWER STATION. From the Effective Date until the Transfer Date [that is, the day following the last day of the 25-year period], [Mirant] shall, directly or indirectly, own the Power Station and all the fixtures, fittings, machinery and equipment on the Site or used in connection with the Power Station which have been supplied by it or at its cost. [Mirant] shall operate, manage, and maintain the Power Station for the purpose of converting fuel of [NPC] into electricity.

To show that Mirant only retains naked title, NPC has selectively cited provisions of the ECA. However, a complete reading of the ECA shows that Mirant has more substantial powers in the control and supervision of the power plant's construction & operations. Under Articles 2.1 & 3.1 of the ECA, Mirant is responsible for the design, construction, equipping, testing, & commissioning of the power plant. Article 5.1 on the operation of the power plant states that Mirant shall be responsible for the power plants management, operation, maintenance, and repair until the Transfer Date. This is reiterated in Article 5.3 where Mirant undertakes to operate the power plant to convert fuel into electricity. While the NPC asserts that it has the power to authorize the closure of the power plant without any veto on the part of Mirant, the full text of Article 8.55 of the ECA shows that Mirant is possessed with similar powers to terminate the agreement. As to NPCs assumption of Mirants tax liabilities: The tax liability for standing is the liability arising from law that the LGU can rightfully and successfully enforce, not the contractual liability that is enforceable between the parties to a contract. By law, the tax liability rests on Mirant based on its ownership, use, and possession of the plant and its machineries. The stipulation is entirely between NPC and Mirant, and does not bind third persons who are not privy to the contract between these parties (Art. 1311, CC). There is no privity between the LGU and the NPC. An LGU is independent and autonomous in its taxing powers (Section 1306, LGC). An exception to the rule on relativity of contracts is a stipulation in favor of a third person. The NPCs assumption of tax liability does not appear to for the benefit of the Municipality of Pagbilao & the Province of Quezon. A contractual assumption of liability must be supplemented by an interest that the party assuming liability had on the property taxed. NPC is neither owner, nor possessor or user of the property taxed. Only the parties to the ECA can exact and demand enforcement of rights & obligations it established. The LGUs, as third parties to the ECA, cannot demand payment from the NPC on the basis of Article 11.1 of the ECA alone. Corollarily, the LGUs can neither be compelled to recognize the protest of a tax assessment from the NPC, an entity against whom it cannot enforce the tax liability. The test of exemption is the nature of the use, not ownership, of the subject machineries. To successfully claim exemption under Section 234(c) of the LGC, the claimant must prove two elements: (a.) the machineries and equipment are actually, directly, and exclusively used by local water districts and goccs; and (b) the local water districts and goccs claiming exemption must be engaged in the supply and distribution of water and/or the generation and transmission of electric power. Although the plants machineries are devoted to the generation of electric power, Mirant a private corporation uses and operates them. That Mirant operates the machineries solely in compliance with the will of the NPC only underscores the fact that NPC does not actually,
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8.5 BUYOUT. If the circumstances set out in Article 7.18, Article 9.4, Article 14.4 or Article 28.4 arise or if, not earlier than 20 years after the Completion Date, [the NPC] gives not less than 90 days notice to [Mirant] that it wishes to close the power station, or if [the NPC] has failed to ensure the due payment of any sum due hereunder within three months of its due date then, upon [Mirant] giving to [the NPC] not less than 90 days notice requiring [the NPC] to buy out [Mirant] or, as the case may be, [the NPC] giving not less than 90 days notice requiring [Mirant] to sell out to [NPC], [NPC] shall purchase all [Mirant's] right, title, and interest in and to the Power Station and thereupon all [Mirant's] obligations hereunder shall cease. 6 SECTION 130. Fundamental Principles. - The following fundamental principles shall govern the exercise of the taxing and other revenue-raising powers of local government units: xxx (d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; xxx.

directly, and exclusively use them. The machineries must be actually, directly, and exclusively used by the gocc for the exemption under Section 234(c) to apply. NPC: it utilizes generated electricity. COURT: It is the machineries that are exempted, not the water or electricity generated and distributed. NPC: it has beneficial ownership. COURT: The test of exemption is the use, not the ownership. The nature of the NPCs ownership is material only in resolving NPCs claim of legal interest in protesting the tax assessment on Mirant.

NPC v. Province of Isabela (2006) J. Callejo Sr. FACTS: R Province of Isabela filed a complaint for sum of money against P NPC, a GOCC engaged in the generation and sale of electric power. R imposed franchise tax on NPC since its Magat River Hydroelectric Plant was allegedly within Rs territory. Ps defense was that it was a GOCC/instrumentality of the government and therefore it was exempt from the payment of local taxes under Section 13 of its charter and under 133 (o) of the LGC. ISSUE: WON NPC was liable to pay local franchise taxes HELD: YES This case is on all fours with NPC v. Cabanatuan City. Section 193 of the LGC withdrew, subject to limited exceptions, the sweeping tax privileges previously enjoyed by private and public corporations. Contrary to the contention of P, Section 193 of the LGC is an express, albeit general, repeal of all statutes granting tax exemptions from local taxes. Not being a local water district, a cooperative registered under R.A. No. 6938, or a non-stock and non-profit hospital or educational institution, petitioner clearly does not belong to the exception. Expressio unius est exclusio alterius. 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. A franchise tax is a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state. To determine whether the P is covered by the franchise tax in question, the following requisites should concur: (1) that P 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 respondent city government. P fulfills the first requisite -> Commonwealth Act No. 120, as amended by RA No. 6395, constitutes Ps primary and secondary franchises. As its secondary franchise, Commonwealth Act No. 120, as amended, vests P [with x x x certain] powers which are not available to ordinary corporations. P also fulfills the second requisite. It is operating within the city governments territorial jurisdiction pursuant to the powers granted to it by Commonwealth Act No. 120, as amended.

NPC v CITY OF CABANATUAN Petitioner was assessed franchised tax pursuant to Sec 37 Ordinance No 165-92. The issue is WON NPC was exempt as provided for by its charter (last amended, i think, in 1976).

PETITIONER: City has no authority to impose tax on government entities. As a non-profit organization, it is exempted from the payment of all forms of taxes (RA 6395 13). The accumulation of profit is merely incidental to its operation, it is required by law to be channeled for expansion and improvement of its facilities and services. 137 and 151 of the LGC limit the taxing power of City to private entities that are engaged in trade or occupation for profit. LGC 131(m): franchise is conferred upon private persons or corporations, thus the franchise taxable in LGC should refer specifically to franchises granted to private entities only. Basco v Pagcor: LGUs have no power to tax instrumentalities of the national government. LGC 193 is an implied repeal. NPCs charter is a special law, which cannot be amended impliedly by the LGC, a general law. The charter is also a valid exercise of police power. The LGUs power to impose franchise tax is subordinate to petitioners exemption from taxation.

City: NPCs exemption from local taxes has been repealed by LGC 193. Held: Yes, NPC is liable to pay. AUTHORITY TO TAX: The city government has authority to issue assailed ordinance imposing an annual tax on "businesses enjoying a franchise," pursuant to section 151 in relation to section 137 of the LGC. GR: LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities; BUT this rule now admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities. In view of 133(o), Basco no longer applies. The case was decided prior to the effectivity of the LGC MCIAA v Marcos: nothing prevents Congress from decreeing that even instrumentalities or agencies of the government may be subject to tax. 151 in relation to 137 clearly authorizes the City to impose franchise tax on NPC.

LIABLE FOR FRANCHISE TAX: A franchise may refer to a general or primary franchise (the right to exist as a corporation) or to a special or secondary franchise (the right or privileges conferred upon an existing corporation; these are charged with public use). In LGC 131(m), Congress unmistakably defined a franchise in the sense of a secondary or special franchise. In the context of taxation, 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, but on its exercise of the rights or privileges granted to it by the government. REQUISITES: (1) that petitioner has a secondary or special franchise; and

(2) that it is exercising its rights or privileges under this franchise within the territory of the LGU. Here: NPC fulfills the first requisite. As its secondary franchise, Commonwealth Act No. 120 vests powers which are not available to ordinary corporations, i.e. construct and operate power plants, with which it eventually had the monopoly in the generation and distribution of electricity. (NOTE: see case for specific powers conferred to NPC). It also fulfills the second requisiteit operates within Cabanatuan City with a gross income of ~P108M. NOT EXEMPT: The ownership by the national government of its entire capital stock does not necessarily imply that petitioner is not engaged in business. PD 2029 2 classifies GOCCs into those performing governmental functions (administration of government, and are treated as absolute obligation on the part of the state to perform) and proprietary functions (undertaken only by way of advancing the general interest of society, and are optional). NPC is a commercial enterprise, declared by this Court as proprietary functions of government aimed at advancing the general interest of society. In fact, its charter reveals that even the legislature treats NPC as a business. Tax exemptions are construed strongly against the claimant. It must be shown to exist clearly and categorically. Here: NPCs sole refuge is RA 6395 13. However, LGC 1937 withdrew the sweeping tax privileges previously enjoyed by private and public corporations. It is an express, albeit general, repeal of all statutes granting tax exemptions from local taxes. Not being one of the three exceptions, NPC is no longer tax-exempt. LGC 137 clearly states that the LGUs can impose franchise tax "notwithstanding any exemption granted by any law or other special law." San Pablo v Reyes and Manila Electric Co v Laguna: franchise tax in question is imposable despite any exemption enjoyed by MERALCO under special laws; Reading together sections 137 and 193 of the LGC, the LGU may now impose a local tax. 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. LGC 192 empowers the LGUs to grant tax exemptions, initiatives or reliefs. In enacting section 37 of Ordinance No. 165-92 which imposes an annual franchise tax "notwithstanding any exemption," the city government clearly did not intend to exempt the petitioner from the coverage thereof.

NPC v CITY OF CABANATUAN Petitioner was assessed franchised tax pursuant to Sec 37 Ordinance No 165-92. The issue is WON NPC was exempt as provided for by its charter (last amended, i think, in 1976). PETITIONER:
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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.

City has no authority to impose tax on government entities. As a non-profit organization, it is exempted from the payment of all forms of taxes (RA 6395 13). The accumulation of profit is merely incidental to its operation, it is required by law to be channeled for expansion and improvement of its facilities and services. 137 and 151 of the LGC limit the taxing power of City to private entities that are engaged in trade or occupation for profit. LGC 131(m): franchise is conferred upon private persons or corporations, thus the franchise taxable in LGC should refer specifically to franchises granted to private entities only. Basco v Pagcor: LGUs have no power to tax instrumentalities of the national government. LGC 193 is an implied repeal. NPCs charter is a special law, which cannot be amended impliedly by the LGC, a general law. The charter is also a valid exercise of police power. The LGUs power to impose franchise tax is subordinate to petitioners exemption from taxation.

City: NPCs exemption from local taxes has been repealed by LGC 193. Held: Yes, NPC is liable to pay. AUTHORITY TO TAX: The city government has authority to issue assailed ordinance imposing an annual tax on "businesses enjoying a franchise," pursuant to section 151 in relation to section 137 of the LGC. GR: LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities; BUT this rule now admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities. In view of 133(o), Basco no longer applies. The case was decided prior to the effectivity of the LGC MCIAA v Marcos: nothing prevents Congress from decreeing that even instrumentalities or agencies of the government may be subject to tax. 151 in relation to 137 clearly authorizes the City to impose franchise tax on NPC.

LIABLE FOR FRANCHISE TAX: A franchise may refer to a general or primary franchise (the right to exist as a corporation) or to a special or secondary franchise (the right or privileges conferred upon an existing corporation; these are charged with public use). In LGC 131(m), Congress unmistakably defined a franchise in the sense of a secondary or special franchise. In the context of taxation, 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, but on its exercise of the rights or privileges granted to it by the government. REQUISITES: (1) that petitioner has a secondary or special franchise; and (2) that it is exercising its rights or privileges under this franchise within the territory of the LGU.

Here: NPC fulfills the first requisite. As its secondary franchise, Commonwealth Act No. 120 vests powers which are not available to ordinary corporations, i.e. construct and operate power plants, with which it eventually had the monopoly in the generation and distribution of electricity. (NOTE: see case for specific powers conferred to NPC). It also fulfills the second requisiteit operates within Cabanatuan City with a gross income of ~P108M. NOT EXEMPT: The ownership by the national government of its entire capital stock does not necessarily imply that petitioner is not engaged in business. PD 2029 2 classifies GOCCs into those performing governmental functions (administration of government, and are treated as absolute obligation on the part of the state to perform) and proprietary functions (undertaken only by way of advancing the general interest of society, and are optional). NPC is a commercial enterprise, declared by this Court as proprietary functions of government aimed at advancing the general interest of society. In fact, its charter reveals that even the legislature treats NPC as a business. Tax exemptions are construed strongly against the claimant. It must be shown to exist clearly and categorically. Here: NPCs sole refuge is RA 6395 13. However, LGC 1938 withdrew the sweeping tax privileges previously enjoyed by private and public corporations. It is an express, albeit general, repeal of all statutes granting tax exemptions from local taxes. Not being one of the three exceptions, NPC is no longer tax-exempt. LGC 137 clearly states that the LGUs can impose franchise tax "notwithstanding any exemption granted by any law or other special law." San Pablo v Reyes and Manila Electric Co v Laguna: franchise tax in question is imposable despite any exemption enjoyed by MERALCO under special laws; Reading together sections 137 and 193 of the LGC, the LGU may now impose a local tax. 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. LGC 192 empowers the LGUs to grant tax exemptions, initiatives or reliefs. In enacting section 37 of Ordinance No. 165-92 which imposes an annual franchise tax "notwithstanding any exemption," the city government clearly did not intend to exempt the petitioner from the coverage thereof.

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.