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City of Iloilo Facts:
July 14, 2003
PPA is created und PD 857 and under Section 25 of its charter, PPA is exempted from paying real property tax. PPA is engaged in the business of arrastre and stevedoring and leasing of real estate. Also, it owns a warehouse for its operation. On June 11, 1984, PD 1931 withdrew all tax exemptions privileges granted to GOCC. Thus, the city of Iloilo seeks to collect from PPA business tax and real property tax from the last quarter of 1984 up to the year 1986. However, PPA claims the ff: 1. The City of Iloilo cannot collect real property taxes from PPA because the warehouse is part of the port. Under Sec 420 of Civil Code, ports are part of public dominion. 2. PPA is not subject to business tax because they are not engage in business. Their leasing of its property was not motivated by profit but duly to manage and control port operations.
Issue: Is PPA exempted from paying real property and business taxes? Held: NO. PPA cannot claim such theory that their warehouse is a public dominion because such theory is different from the theory they adopted and decided by the lower court. It is contrary and inconsistent with its former pleading- PPA claimed it is a GOCC and therefore exempt from paying the real property tax. Thus, PPA is bound by its admission of ownership of the warehouse. It is therefore liable to pay real property tax. Also, under Sec 420 of the CC, the ports mentioned are those constructed by the state . Thus, PPA should prove that its port was constructed by the state in order to conclude that such property is a public dominion. However, PPA failed to prove such. Also, granting that its port is a public dominion, its warehouse which they constructed is considered to be an improvement. And improvement s made by the occupants is not exempted from payment of tax. On their second claim, PPA is liable for business tax for the lease of their buildings to private corporations. During pre-trial, they did not refute the claims of the city of Iloilo that they are engage in business nor did they present proof of exemption from tax. PPA admitted that their act of leasing is not necessarily for government function of administering ports but for convenience. Therefore, any income or profit generated by the entity, even without any intention of realizing profit is still subject to business tax. What matters is that PPA leased its properties to private entities and from which PPA earned substantial income.