LGC SEC. 234. Exemptions from Real Property Tax and SEC. 133.

Common Limitations
on the Taxing Poers of Lo!al Go"ernment #nits

G.R. $o. 1%11&% '(ly 1)* 2&12

REP#+L,C - T/E P/,L,PP,$ES* represented 0y the P/,L,PP,$E RECLT,-$

#T/-R,T PR5*Petitioner, vs.
C,T - PR$6#E* Respondent.

This is a petition for review on certiorari assailing the Order of the Regional Trial Court,
Branch 195,Paranaque Cit !RTC", which ruled that petitioner Philippine Recla#ation $uthorit
!PR$" is a govern#ent%owned and controlled corporation !&OCC", a ta'a(le entit, and,
therefore, not e'e#pt fro# pa#ent of real propert ta'es.

The Pu(lic )states $uthorit !P)$" is a govern#ent corporation created ( virtue of P.*. +o.
1- toprovide a coordinated, econo#ical and efficient recla#ation of lands, and
the ad#inistration andoperation of lands (elonging to, #anaged and/or operated
(, the govern#ent with the o(0ect of #a'i#iing their utiliation and hastening their
develop#ent consistent with pu(lic interest.
On Octo(er 23, 2, then President &loria 4acapagal%$rroo issued ).O. +o. -
 transfor#ing P)$ into PR$, which shall perfor# all the powers and functions of the P)$
relating to recla#ation activities.

B virtue of its #andate, PR$ reclai#ed several portions of the foreshore and offshore areas
of 4anila Ba,including those located in Para6aque Cit. Para6aque Cit Treasurer
issued 7arrants of 8ev on PR$s reclai#ed properties (ased on the assess#ent for
delinquent real propert for ta' ears 21 and 22.

PR$ clai#ed that it is not a &OCC under the $d#inistrative Code, nor is it a &OCC under 
:ection 13, $rticle ;<< of the 19-=Constitution (ecause it is not required to #eet the test
of econo#ic via(ilit.

<t is a govern#ent instru#entalit vested with corporate powers and perfor#ing an essential
pu(lic service. <t insists that it #a not (e classified as a non%stoc> corporation (ecause it has
no #e#(ers and it is not organied for charita(le, religious, educational, professional, cultural,
recreational, fraternal, literar, scientific, social, civil service, or si#ilar purposes, li>e
trade, industr, agriculture and li>e cha#(ers as provided in :ection -- of the Corporation
Code.

Thus, PR$ insists that, as an incorporated instru#entalit of the +ational &overn#ent, it is

e'e#pt fro# pa#ent of real propert ta' e'cept when the (eneficial use of the real propert is
granted to a ta'a(le person. PR$ clai#s that (ased on :ection 1!o" of the 8&C,
local govern#ents cannot ta' the national govern#ent which delegate to local
govern#ents the power to ta'.
,ss(e7

7hether or not Philippine Recla#ation $uthorit !PR$" is an incorporated instru#entalit of

the national govern#ent and is, therefore, e'e#pt fro# pa#ent of real propert ta' under
sections 2!a" and 1!o" of Repu(lic $ct =13?
/eld7

@es it is a &overn#ent <nstru#entalit.

<n the case at (ench, PR$ is not a &OCC (ecause it is neither a stoc> nor a non%stoc>
corporation. <t cannot (e considered as a stoc> corporation (ecause although it has a capital
stoc> divided into no par value shares as provided in :ection =  of P.*. +o. 1-, it is not
authoried to distri(ute dividends, surplus allot#ents or profits to stoc>holders. PR$ is
a govern#ent instru#entalit vested with corporate powers and perfor#ing an essential
pu(lic service pursuant to :ection 2!1" of the <ntroductor Provisions of the $d#inistrative
Code. Being an incorporated govern#ent instru#entalit, it is e'e#pt fro# pa#ent of real
propert ta'.

4an govern#ent instru#entalities are vested with corporate powers (ut the do not (eco#e
stoc> or non%stoc> corporations, which is a necessar condition (efore an
agenc or instru#entalit is dee#ed a &OCC. The funda#ental provision a(ove authories
Congress to create &OCCs through special charters on two conditionsA 1" the &OCC #ust (e
esta(lished for the co##on good and 2" the &OCC #ust #eet the test of econo#ic via(ilit. <n
this case, PR$ #a have passed the first condition of co##on good (ut failed the second
one % econo#ic via(ilit. ndou(tedl, the purpose (ehind the creation of PR$ was not
for econo#ic or co##ercial activities.

Clearl, respondent has no valid or legal (asis in ta'ing the su(0ect reclai#ed lands #anaged
( PR$. On the other hand, :ection 2!a" of the 8&C, in relation to its :ection 1!o", e'e#pts
PR$ fro# paing realt ta'es and protects it fro# the ta'ing powers of local govern#ent
units.

:ection 2!a" of the 8ocal &overn#ent Code states that real propert owned ( the Repu(lic of
the Philippines !the Repu(lic" is e'e#pt fro# real propert ta' unless the (eneficial use
thereof has (een granted to a ta'a(le person.

:ection 1 of the 8ocal &overn#ent Code states that Dunless otherwise providedD in the Code,
local govern#ents cannot ta' national govern#ent instru#entalities.
<n this case, there is no proof that PR$ granted the (eneficial use of the su(0ect reclai#ed lands
to a ta'a(le entit. There is no showing on record either that PR$ leased the su(0ect reclai#ed
properties to a private ta'a(le entit.

8/ERE-RE* the petition is GR$TE9. The Order of the Regional Trial Court, Branch 195,
Para6aque Cit, is RE:ERSE9 and SET S,9E.