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CITY GOVERNMENT OF QUEZON CITY VS BAYANTEL

GR NO 162015 MARCH 06 2006

FACTS:

Respondent Bayan Telecommunications, Inc.[3] (Bayantel) is a legislative


franchise holder under Republic Act (Rep. Act) No. 3259[4] to establish and
operate radio stations for domestic telecommunications, radiophone,
broadcasting and telecasting.

Of relevance to this controversy is the tax provision of Rep. Act No. 3259,
embodied in Section 14 thereof, which reads:

SECTION 14. (a) The grantee shall be liable to pay the


same taxes on its real estate, buildings and personal
property, exclusive of the franchise, as other persons or
corporations are now or hereafter may be required by law to
pay. (b) The grantee shall further pay to the Treasurer of
the Philippines each year, within ten days after the audit and
approval of the accounts as prescribed in this Act, one and one-
half per centum of all gross receipts from the business transacted
under this franchise by the said grantee (Emphasis supplied).

On January 1, 1992, Rep. Act No. 7160, otherwise known as the Local
Government Code of 1991 (LGC), took effect. Section 232 of the Code grants
local government units within the Metro Manila Area the power to levy tax on real
properties, thus:

SEC. 232. Power to Levy Real Property Tax. A province or


city or a municipality within the Metropolitan Manila Area may levy
an annual ad valorem tax on real property such as land, building,
machinery and other improvements not hereinafter specifically
exempted.

On July 20, 1992, barely few months after the LGC took effect, Congress
enacted Rep. Act No. 7633, amending Bayantels original franchise. The
amendatory law (Rep. Act No. 7633) contained the following tax provision:

SEC. 11. The grantee, its successors or assigns shall be


liable to pay the same taxes on their real estate, buildings and
personal property, exclusive of this franchise, as other persons
or corporations are now or hereafter may be required by law to
pay. In addition thereto, the grantee, its successors or assigns shall
pay a franchise tax equivalent to three percent (3%) of all gross
receipts of the telephone or other telecommunications businesses
transacted under this franchise by the grantee, its successors or
assigns and the said percentage shall be in lieu of all taxes on this
franchise or earnings thereof. Provided, That the grantee, its
successors or assigns shall continue to be liable for income taxes
payable under Title II of the National Internal Revenue Code . xxx.
[Emphasis supplied]

In 1993, the government of Quezon City, pursuant to the


taxing power vested on local government units by Section 5, Article X of
the 1987 Constitution, infra, in relation to Section 232 of the
LGC, supra, enacted City Ordinance No. SP-91, S-93, otherwise known
as the Quezon City Revenue Code (QCRC),[5] imposing, under Section 5
thereof, a real property tax on all real properties in Quezon City, and,
reiterating in its Section 6, the withdrawal of exemption from real property
tax under Section 234 of the LGC, supra.

On January 7, 1999, Bayantel wrote the office of the City Assessor


seeking the exclusion of its real properties in the city from the roll of taxable real
properties. With its request having been denied, Bayantel interposed an appeal
with the Local Board of Assessment Appeals (LBAA). And, evidently on its firm
belief of its exempt status, Bayantel did not pay the real property taxes assessed
against it by the Quezon City government.

On account thereof, the Quezon City Treasurer sent out notices of


delinquency.

Threatened with the imminent loss of its properties, Bayantel


immediately withdrew its appeal with the LBAA and instead filed
with the RTC of Quezon City a petition for prohibition with an urgent
application for a temporary restraining order (TRO) and/or writ of
preliminary injunction
ISSUE:
Whether or not Bayantels real properties in Quezon City are exempt from real
property taxes under its legislative franchise;

RULING:

The legislative intent expressed in the phrase exclusive of this franchise


cannot be construed other than distinguishing between two (2) sets of properties,
be they real or personal, owned by the franchisee, namely, (a) those actually,
directly and exclusively used in its radio or telecommunications business,
and (b) those properties which are not so used. It is worthy
to note that the properties subject of the present controversy
are only those whichare admittedly falling under the first category.

other properties of Bayantel directly used in the pursuit of its business are
beyond the pale of the delegated taxing power of local governments. In a very
real sense, therefore, real properties of Bayantel, save
those exclusive of its franchise, are subject to realty taxes. Ultimately,
therefore, the inevitable result was that all realties which are actually, directly and
exclusively used in the operation of its franchise are exempted from any property
tax.

Bayantels franchise being national in character, the exemption thus


granted under Section 14 of Rep. Act No. 3259 applies to all its real or personal
properties found anywhere within the Philippine archipelago.

, Section 14 of Rep. Act No. 3259 which was deemed impliedly repealed
by Section 234 of the LGC was expressly revived under Section 14 of Rep. Act
No. 7633. In concrete terms, the realty tax exemption heretofore enjoyed by
Bayantel under its original franchise, but subsequently withdrawn by force
of Section 234 of the LGC, has been restored by Section 14 of Rep. Act No.
7633.

Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware that the
LGC has already withdrawn Bayantels former exemption from realty taxes,
Congress opted to pass Rep. Act No. 7633 using, under Section 11 thereof,
exactly the same defining phrase exclusive of this franchise which was the
basis for Bayantels exemption from realty taxes prior to the LGC. In plain
language, Section 11 of Rep. Act No. 7633 states that the grantee, its
successors or assigns shall be liable to pay the same taxes on their real estate,
buildings and personal property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay. The Court
views this subsequent piece of legislation as an express and real intention on
the part of Congress to once again remove from the LGCs delegated taxing
power, all of the franchisees (Bayantels) properties that are actually, directly and
exclusively used in the pursuit of its franchise.

DIGITAL TELECOM VS CITY GOV OF BATANGAS


GR NO 156040 DEC 11 2008.

FACTS:
On 17 February 1994, Republic Act No. 7678 (RA 7678)[4] granted petitioner a
25-year franchise to install, operate and maintain telecommunications systems
throughout the Philippines.

in 1997, respondent issued a building permit for the installation of petitioners


telecommunications facilities in Batangas City. After the installation of the
facilities, petitioner applied with the Mayors office of Batangas City for a permit to
operate. Because of a discrepancy in the actual investment costs used in
computing the prescribed fees for the clearances and permits, petitioner was not
able to secure a Mayors Permit for the year 1998. Petitioner was also advised to
settle its unpaid realty taxes. However, petitioner claimed exemption from the
payment of realty tax, citing the first sentence of Section 5 of RA 7678

In 1999, respondent refused to issue a Mayors Permit to petitioner without


payment of its realty taxes.
On 22 June 1999, petitioner paid P68,890.39 under protest as fees for the permit
to operate, but respondent refused to accept the payment unless petitioner also
paid the realty taxes.[7]

On 2 July 1999, respondent threatened to close down petitioners operations.


Hence, on 3 July 1999, petitioner instituted a complaint for prohibition and
mandamus with prayer for a temporary restraining order or writ of preliminary
injunction.

ISSUE: whether, under the first sentence of Section 5 of RA 7678, petitioners


real properties used in its telecommunications business are exempt from the
realty tax.

RULING:

The petition has no merit.

Section 5 of RA 7678 imposes taxes


and does not exempt from realty tax

The issue in this case involves the interpretation of the phrase exclusive of this
franchise in the first sentence of Section 5 of RA 7678.
Section 5 of RA 7678 states:

Sec. 5. Tax Provisions. - The grantee shall be liable to pay the


same taxes on its real estate, buildings, and personal
property exclusive of this franchise as other persons or
corporations are now or hereafter may be required by law to
pay. In addition thereto, the grantee shall pay to the Bureau of
Internal Revenue each year, within thirty (30) days after the audit
and approval of the accounts, a franchise tax as may be prescribed
by law of all gross receipts of the telephone or other
telecommunications businesses transacted under this franchise by
the grantee; Provided, That the grantee shall continue to be liable
for income taxes payable under Title II of the National Internal
Revenue Code pursuant to Section 2 of Executive Order No. 72
unless the latter enactment is amended or repealed, in which case
the amendment or repeal shall be applicable thereto.

The grantee shall file the return with and pay the tax due thereon to
the Commissioner of Internal Revenue or his duly authorized
representative in accordance with the National Internal Revenue
Code and the return shall be subject to audit by the Bureau of
Internal Revenue. (Boldfacing and underscoring supplied)

Since 1905, no telecommunications company has claimed exemption from realty


tax based on the phrase exclusive of this franchise, until petitioner filed the
present case on 3 July 1999

The first sentence of Section 5 clearly states that the legislative franchisee shall
be liable to pay the following taxes: (1) the same taxes on its real estate,
buildings, and personal property exclusive of this franchise as other persons
or corporations are now or hereafter may be required by law to pay; (2) franchise
tax as may be prescribed by law of all gross receipts of the telephone or other
telecommunications businesses transacted under this franchise; [28] and (3)
income taxes payable under Title II of the National Internal Revenue Code.

A plain reading shows that the phrase exclusive of this franchise is meant
to exclude the legislative franchise from the properties subject to taxes under the
first sentence. In effect, petitioners franchise, which is a personal property, is not
subject to the taxes imposed on properties under the first sentence of Section 5.

However, petitioners gross receipts from its franchise are subject to the franchise
tax under the second sentence of Section 5.

The phrase unless exempted therefrom in the common provision clearly


clarifies that the phrase exclusive of this franchise does not grant any tax
exemption. To claimtax exemption, there must be an express exemption from tax
in another provision of law. On the other hand, the deletion of the phrase unless
exempted therefrom from the common provision does not give rise to any tax
exemption.

DECLARING that the plaintiff Digital Telecommunications Philippines,


Inc., under its legislative franchise RA No. 7678, is not exempted from the
payment of real property tax being collected by the defendant City
of Batangas and, accordingly.

DENY the petition. We AFFIRM the 2 May 2002 and 19 November 2002 Orders
of the Regional Trial Court.
EVANGELINE AALA VS GLOBE TELECOM

CA GR CV NO 78049 NOV 02 2005

FACTS: Petitioners-appellants Evangeline Aala, et al. are the principal, teachers,


and students of the Solano National High School, who filed a petition before the
RTC of Bayombong, Nueva Vizcaya, for the issuance of a writ of preliminary
injunction and/or temporary restraining order plus damages, against Globe
Telecoms, Inc. which was constructing a VTS on a 400 sq. m. lot at that time.

Petitioners protested against the construction of Globes cell site antenna around
the vicinity due to security, safety concerns, and health hazards that may cause
them such as the exposure to radiation.

The Executive Judge issued a 72-hour TRO and was extended into 20-day
period. However, Globe filed an opposition with Motion to Dismiss.

Various medical experts, environmentalists, and law enforcers became witnesses


who tried to prove preponderance of their evidence for or against the
construction of the cell site that later petitions filed an Ex-Parte Manifestation and
Motion. But Globe opted to adopt the testimony of the amicus curiae Director
Agnette Peralta of the bureau of Health Devices and technology under the
department of Health.

ISSUE:
Issues:

1.Whether or not an Environmental Impact Statement (EIS) is required to be


submitted by the defendant Globe before operating its cell site;
2.Whether or not the proposed cell site will prejudice the health, safety and
security concerns of the petitioners and other stakeholders;

3.Whether or not a writ on injunction should be issued to restrain the defendant


from putting up and operating its cell site; and

4.Whether or not Globe should secure an Environmental Compliance Certificate


(ECC) before putting up its cell site.

RULING:

Held:

On Health Hazard

The appellants contend the ruling of the trial court that the perceived health risk
of the cell site is unfounded. They deem that in light of the findings of the World
Health organization (WHO) that there are gaps in knowledge that have been
identified for further research to make better assess health risks. But the RTC
which the CA also affirmed ruled in favor of the appellee Globe by relying heavily
on the present stand of the Bureau of Health Devices and Technology that the
radiation emitted by cell site antennas is not hazardous to human health if the
minimum safe distance is observed.

On Environmental Concerns

The claim of the Province of Nueva Vizcaya is to be considered as


environmentally critical, it being a part of the watershed that supports the hydro-
electric dam in Ramon, Isabela, is untenable as there is no showing that said
area was declared by law as a watershed reserve nor was it declared by the
President as an environmentally critical area. Hence, not being an
environmentally critical area, the issuance of an ECC is not required. Neither is
the installation of the cell site in Barangay Quirino, Solano, Nueva Vizcaya an
environmentally critical project as it is not one of those covered or listed under
Proclamation No. 2146.
Memorandum Circular No. 4, Series of 2002 issued by the EMB-DENR listed the
Based Transceiver Station as one of the telecommunications projects which are
not covered by the EIS System, and as such, an ECC is not required prior to
project implementation for the abovementioned project.

On Preliminary Injunction

Injunction is a judicial writ, process of proceeding whereby a party is ordered to


do or refrain from doing a certain act. It may be the main action or merely a
provisional remedy for and as an incident in the main action.

The main action for injunctions is distinct from the provisional or ancillary remedy
of preliminary injunction which cannot exist except only as part or an incident of
an independent action or proceeding. As a matter of course, in an action for
injunction, the auxiliary remedy of preliminary injunction, whether prohibitory or
mandatory, may issue.

The CA sustained the trial courts dismissal of the main action for Injunction.
Appellants were not entitled to a writ of preliminary injunction, much more to a
judgment embodying a final injunction.

The Appeal is Denied for lack of merit. The Decision of the RTC is hereby
Affirmed. No Costs.

RADIO COMM VS PROVINCIAL ASSESOR


GR NO 144486 APRIL 13 2005

FACTS:

The Facts
In 1957, Republic Act No. 2036 (RA 2036)[3] granted RCPI a fifty-year
franchise. Section 14 of RA 2036, as amended by Republic Act No. 4054 (RA
4054) in 1964, reads:

Sec. 14. In consideration of the franchise and rights hereby granted and any
provision of law to the contrary notwithstanding, the grantee shall pay the same
taxes as are now or may hereafter be required by law from other individuals,
copartnerships, private, public or quasi-public associations, corporations or joint
stock companies, on real estate, buildings and other personal property except
radio equipment, machinery and spare parts needed in connection with the
business of the grantee, which shall be exempt from customs duties, tariffs and
other taxes, as well as those properties declared exempt in this section. In
consideration of the franchise, a tax equal to one and one-half per centum of all
gross receipts from the business transacted under this franchise by the grantee
shall be paid to the Treasurer of the Philippines each year, within ten days after
the audit and approval of the accounts as prescribed in this Act. Said tax shall
be in lieu of any and all taxes of any kind, nature or description levied,
established or collected by any authority whatsoever, municipal, provincial
or national, from which taxes the grantee is hereby expressly exempted.
(Emphasis supplied)

On 10 June 1985, the municipal treasurer of Tupi, South Cotabato assessed


RCPI real property taxes from 1981 to 1985.[4] The municipal treasurer
demanded that RCPI pay P166,810 as real property tax on its radio station
building in Barangay Kablon, as well as on its machinery shed, radio relay station
tower and its accessories, and generating sets,

RCPI protested the assessment before the Local Board of Assessment Appeals
(LBAA).[6] RCPI claimed that all its assessed properties are personal properties
and thus exempt from the real property tax.

RCPI also pointed out that its franchise exempts RCPI from paying any and
all taxes of any kind, nature or description in exchange for its payment of tax
equal to one and one-half per cent on all gross receipts from the business
conducted under its franchise. RCPI further claimed that any deviation from its
franchise would violate the non-impairment of contract clause of the Constitution.
Finally, RCPI stated that the value of the properties assessed has depreciated
since their acquisition in the 1960s.
The Provincial Assessor of South Cotabato (provincial assessor) opposed
RCPIs claims on all points. The provincial assessor insisted that the assessed
properties are subject to the real property tax.

the LBAA of Koronadal, South Cotabato affirmed the notices of assessment as


valid and consistent with the law
appellant is hereby ordered to pay the real property taxes, inclusive of all
penalties, surcharges and interest accruing as of the date of actual payment, on
the properties covered by Tax Declaration Nos. 7639, 7640, 7641, and 7642, as
computed.

CBAA dismissed RCPIs appeal

The CBAA ruled that RCPI was liable for the real property tax on the assessed
properties. RCPI could also not invoke the non-impairment of contract clause
since no legal right of RCPI was violated.

appellate court modified the CBAA ruling. The appellate court ruled that Section
14 of RA 2036, as amended by RA 4054, clearly exempts RCPI from tax on radio
equipment, machinery, and spare parts needed in connection with its business.
Therefore, RCPI is not liable for real property tax on the generating sets, and on
its radio relay station tower and its accessories consisting of two units of UHF
communication equipment, power distribution unit boar, and battery charger,
which are actually varying types of radio equipment.

ISSUE:

The appellate court erred when it excluded RCPIs tower, relay station
building and machinery shed from tax exemption; and
2. The appellate court erred when it did not resolve the issue of nullity of
the tax declarations and assessments due to non-inclusion of
depreciation allowance.[17]

RULING:

As found by the appellate court, RCPIs radio relay station tower, radio station
building, and machinery shed are real properties and are thus subject to the real
property tax. Section 14 of RA 2036, as amended by RA 4054, states that [i]n
consideration of the franchise and rights hereby granted and any provision of law
to the contrary notwithstanding, the grantee shall pay the same taxes as are
now or may hereafter be required by law from other individuals,
copartnerships, private, public or quasi-public associations, corporations or joint
stock companies, on real estate, buildings and other personal property x x
x.[19] The clear language of Section 14 states that RCPI shall pay the real
estate tax.
from September 2000 to July 2001, all the fourteen telecommunications
franchises approved by Congress uniformly and expressly state that the
franchisee shall be subject to all taxes under the National Internal Revenue
Code, except the specific tax. The following is substantially the uniform tax
provision in these fourteen franchises:

Tax Provisions. The grantee, its successors or assigns, shall be subject to the
payment of all taxes, duties, fees, or charges and other impositions under the
National Internal Revenue Code of 1997, as amended, and other applicable
laws: Provided, That nothing herein shall be construed as repealing any specific
tax exemptions, incentives or privileges granted under any relevant law:
Provided, further, That all rights, privileges, benefits and exemptions accorded to
existing and future telecommunications entities shall likewise be extended to the
grantee.

RCPI cannot also invoke the equality of treatment clause under Section 23 of
Republic Act No. 7925
The franchises of Smart,[23] Islacom,[24] TeleTech,[25] Bell,[26] Major
Telecoms, Island Country, and IslaTel,[29] all expressly declare that the
[27] [28]

franchisee shall pay the real estate tax, using words similar to Section 14 of
RA 2036, as amended. The provisions of these subsequent telecommunication
franchises imposing the real estate tax on franchisees only confirm that RCPI is
subject to the real estate tax. Otherwise, RCPI will stick out like a sore thumb,
being the only telecommunications company exempt from the real estate tax, in
mockery of the spirit of equality of treatment that RCPI is invoking, not to mention
the violation of the constitutional rule on uniformity of taxation.
It is an elementary rule in taxation that exemptions are strictly construed
against the taxpayer and liberally in favor of the taxing authority. It is the
taxpayers duty to justify the exemption by words too plain to be mistaken and too
categorical to be misinterpreted.[30]

We have examined the records of this case and found that RCPI raised
before the LBAA and the CBAA the nullity of the assessments due to the non-
inclusion of depreciation allowance. Therefore, RCPI did not raise this issue for
the first time. However, even if we consider this issue, under the Real Property
Tax Code depreciation allowance applies only to machinery and not to real
property.[31]
RADIO COMM VS LOCAL BOARD OF ASSESSMENT APPEALS OF SOUTH
COTABATO
GR SP NO 47446 MARCH 29 2000

FACTS:
RCPI a fifty-year franchise. Section 14 of RA 2036, as amended by Republic
Act No. 4054 (RA 4054) in 1964, reads:

Sec. 14. In consideration of the franchise and rights hereby granted and any
provision of law to the contrary notwithstanding, the grantee shall pay the same
taxes as are now or may hereafter be required by law from other individuals,
copartnerships, private, public or quasi-public associations, corporations or joint
stock companies, on real estate, buildings and other personal property except
radio equipment, machinery and spare parts needed in connection with the
business of the grantee, which shall be exempt from customs duties, tariffs and
other taxes, as well as those properties declared exempt in this section. In
consideration of the franchise, a tax equal to one and one-half per centum of all
gross receipts from the business transacted under this franchise by the grantee
shall be paid to the Treasurer of the Philippines each year, within ten days after
the audit and approval of the accounts as prescribed in this Act. Said tax shall
be in lieu of any and all taxes of any kind, nature or description levied,
established or collected by any authority whatsoever, municipal, provincial
or national, from which taxes the grantee is hereby expressly exempted.
(Emphasis supplied)

RCPI maintains that amended section 14 of its franchise unequivocally


exempts it from paying real estate taxes for its subject properties being
personal properties.

while the tax exemption in favour of RCPI under section 14 of its franchise is of a
limited character with regards to radio equipment, machinery and spare parts
needed in connection with its business, rcpi enjoys tax exemption which covers
not only customs duties, tariffs and other export and import related taxes but also
real properties and personal property taxes

the tax exemption accorded to RCPIs business related machinery covers then its
machinery which are actually varying types of radio equipment.
the tower is however subject to real property tx since a tower is not strictly a radio
equipment as it only serves as a support for antennas and other communication
equipment mounted thereon for the transmission and reception of signals.

ISSUE:

RULING:

The appellate court ruled that Section 14 of RA 2036, as amended by RA 4054,


clearly exempts RCPI from tax on radio equipment, machinery, and spare parts
needed in connection with its business. Therefore, RCPI is not liable for real
property tax on the generating sets, and on its radio relay station tower and its
accessories consisting of two units of UHF communication equipment, power
distribution unit boar, and battery charger, which are actually varying types of
radio equipment.

the decision of the Central Board of Assessment Appeals is hereby MODIFIED.


Petitioner is declared exempt from paying the real property taxes assessed upon
its machinery and radio equipment mounted as accessories to its relay tower.
The decision assessing taxes upon petitioners radio station building, machinery
shed, and relay station tower is, however, AFFIRMED