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THE COLLECTOR OF INTERNAL REVENUE, petitioner, aspect of the business prosecuted, but may be shown by extrinsic evidence,

vs. including the by-laws and the method of operation.


THE CLUB FILIPINO, INC. DE CEBU, respondent. It is conceded that the Club derived profit from the operation of its bar and
FACTS: The Club owns and operates a club house, a bowling alley, a golf restaurant, but such fact does not necessarily convert it into a profit-making
course (on a lot leased from the government), and a bar-restaurant where it enterprise. The bar and restaurant are necessary adjuncts of the Club to
sells wines and liquors, soft drinks, meals and short orders to its members foster its purposes and the profits derived therefrom are necessarily
and their guests. The bar-restaurant was a necessary incident to the incidental to the primary object of developing and cultivating sports for the
operation of the club and its golf-course. The club is operated mainly with healthful recreation and entertainment of the stockholders and members.
funds derived from membership fees and dues. Whatever profits it had, That a Club makes some profit, does not make it a profit-making Club. As
were used to defray its overhead expenses and to improve its golf-course. In has been remarked a club should always strive, whenever possible, to have
1951. as a result of a capital surplus, arising from the re-valuation of its real surplus
properties, the value or price of which increased, the Club declared stock
dividends; but no actual cash dividends were distributed to the G.R. No. 191109 July 18, 2012
stockholders. In 1952, a BIR agent discovered that the Club has never paid REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE
percentage tax on the gross receipts of its bar and restaurant. CIR assessed RECLAMATION AUTHORITY (PRA),Petitioner,
against and demanded from the Club taxes allegedly due. vs.
ISSUE: WON Club Filipino is liable for the taxes (WON it is a stock CITY OF PARANAQUE, Respondent.
corporation)
HELD: No (it is non-stock)
The Club was organized to develop and cultivate sports of all class and This is a petition for review on certiorari assailing the Order of the Regional
denomination for the healthful recreation and entertainment of its Trial Court, Branch 195,Paranaque City (RTC), which ruled that petitioner
stockholders and members. There was in fact, no cash dividend distribution Philippine Reclamation Authority (PRA) is a government-owned and
to its stockholders and whatever was derived on retail from its bar and controlled corporation (GOCC), a taxable entity, and, therefore, not exempt
restaurants used were to defray its overhead expenses and to improve its from payment of real property taxes.
golf course.
For a stock corporation to exist, 2 requisites must be complied with: The Public Estates Authority (PEA) is a government corporation created by
(1) A capital stock divided into shares virtue of P.D. No. 1084 toprovide a coordinated, economical and efficient
(2) An authority to distribute to the holders of such shares, dividends or reclamation of lands, and the administration andoperation of lands
allotments of the surplus profits on the basis of shares held. belonging to, managed and/or operated by, the government with the object
In the case at bar, nowhere in the AOI or by-laws of Club Filipino could be of maximizing their utilization and hastening their development consistent
found an authority for the distribution of its dividends or surplus with public interest.
profits. Strictly speaking, it cannot, therefore, be considered a stock On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O.
corporation, within the contemplation of the corporation law. No. 380 transforming PEA into PRA, which shall perform all the powers and
The fact that the capital stock of the respondent Club is divided into shares, functions of the PEA relating to reclamation activities.
does not detract from the finding of the trial court that it is not engaged in
the business of operator of bar and restaurant. What is determinative of By virtue of its mandate, PRA reclaimed several portions of the foreshore
whether or not the Club is engaged in such business is its object or purpose, and offshore areas of Manila Bay,including those located in Parañaque City.
as stated in its articles and by-laws. It is a familiar rule that the actual Parañaque City Treasurer issued Warrants of Levy on PRA’s reclaimed
purpose is not controlled by the corporate form or by the commercial properties based on the assessment for delinquent real property for
tax years 2001 and 2002.
special charters on two conditions: 1) the GOCC must be established for the
PRA claimed that it is not a GOCC under the Administrative Code, nor is it a common good; and 2) the GOCC must meet the test of economic viability. In
GOCC under Section 16, Article XII of the 1987Constitution because it is not this case, PRA may have passed the first condition of common good but
required to meet the test of economic viability. failed the second one - economic viability. Undoubtedly, the purpose behind
the creation of PRA was not for economic or commercial activities.
It is a government instrumentality vested with corporate powers and
performing an essential public service. It insists that it may not be classified Clearly, respondent has no valid or legal basis in taxing the subject
as a non-stock corporation because it has no members and it is not reclaimed lands managed by PRA. On the other hand, Section 234(a) of the
organized for charitable, religious, educational, professional, cultural, LGC, in relation to its Section 133(o), exempts PRA from paying realty taxes
recreational, fraternal, literary, scientific, social, civil service, or similar and protects it from the taxing powers of local government units.
purposes, like trade, industry, agriculture and like chambers as provided in
Section 88 of the Corporation Code. Section 234(a) of the Local Government Code states that real property
Thus, PRA insists that, as an incorporated instrumentality of the National owned by the Republic of the Philippines (the Republic) is exempt from real
Government, it is exempt from payment of real property tax except when property tax unless the beneficial use thereof has been granted to a taxable
the beneficial use of the real property is granted to a taxable person. PRA person.
claims that based on Section 133(o) of the LGC, local governments cannot
tax the national government which delegate to local governments the Section 133 of the Local Government Code states that "unless otherwise
power to tax. provided" in the Code, local governments cannot tax national government
instrumentalities.
Issue: In this case, there is no proof that PRA granted the beneficial use of the
Whether or not Philippine Reclamation Authority (PRA) is an incorporated subject reclaimed lands to a taxable entity. There is no showing on record
instrumentality of the national government and is, therefore, exempt from either that PRA leased the subject reclaimed properties to a private taxable
payment of real property tax under sections 234(a) and 133(o) of Republic entity.
Act 7160? WHEREFORE, the petition is GRANTED. The Order of the Regional Trial
Court, Branch 195, Parañaque City, is REVERSED and SET ASIDE.
Held: Yes it is a Government Instrumentality.

In the case at bench, PRA is not a GOCC because it is neither a stock nor a Manila International Airport Authority vs CA
non-stock corporation. It cannot be considered as a stock corporation GR No. 155650, July 20, 2006, 495 SCRA 591
because although it has a capital stock divided into no par value shares as
provided in Section 74 of P.D. No. 1084, it is not authorized to distribute Facts:
dividends, surplus allotments or profits to stockholders. PRA is a Manila International Airport Authority (MIAA) is the operator of the
government instrumentality vested with corporate powers and performing Ninoy International Airport located at Paranaque City. The Officers of
an essential public service pursuant to Section 2(10) of the Introductory Paranaque City sent notices to MIAA due to real estate tax delinquency.
Provisions of the Administrative Code. Being an incorporated government MIAA then settled some of the amount. When MIAA failed to settle the
instrumentality, it is exempt from payment of real property tax. entire amount, the officers of Paranaque city threatened to levy and subject
Many government instrumentalities are vested with corporate powers but to auction the land and buildings of MIAA, which they did. MIAA sought for
they do not become stock or non-stock corporations, which is a necessary a Temporary Restraining Order from the CA but failed to do so within the 60
condition before an agency or instrumentality is deemed a GOCC. The days reglementary period, so the petition was dismissed. MIAA then sought
fundamental provision above authorizes Congress to create GOCCs through for the TRO with the Supreme Court a day before the public auction, MIAA
was granted with the TRO but unfortunately the TRO was received by the fees, this is for support of its operation and for regulation and does not
Paranaque City officers 3 hours after the public auction. change the character of the land and buildings of MIAA as part of the public
dominion. As part of the public dominion the land and buildings of MIAA are
MIAA claims that although the charter provides that the title of the land and outside the commerce of man. To subject them to levy and public auction is
building are with MIAA still the ownership is with the Republic of the contrary to public policy. Unless the President issues a proclamation
Philippines. MIAA also contends that it is an instrumentality of the withdrawing the airport land and buildings from public use, these properties
government and as such exempted from real estate tax. That the land and remain to be of public dominion and are inalienable. As long as the land and
buildings of MIAA are of public dominion therefore cannot be subjected to buildings are for public use the ownership is with the Republic of the
levy and auction sale. On the other hand, the officers of Paranaque City Philippines.
claim that MIAA is a government owned and controlled corporation
therefore not exempted to real estate tax.

Issues:
Whether or not MIAA is an instrumentality of the government and not a
government owned and controlled corporation and as such exempted from
tax.
Whether or not the land and buildings of MIAA are part of the public
dominion and thus cannot be the subject of levy and auction sale.

Ruling:
Under the Local government code, government owned and
controlled corporations are not exempted from real estate tax. MIAA is not
a government owned and controlled corporation, for to become one MIAA
should either be a stock or non stock corporation. MIAA is not a stock
corporation for its capital is not divided into shares. It is not a non stock
corporation since it has no members. MIAA is an instrumentality of the
government vested with corporate powers and government functions.

Under the civil code, property may either be under public dominion
or private ownership. Those under public dominion are owned by the State
and are utilized for public use, public service and for the development of
national wealth. The ports included in the public dominion pertain either to
seaports or airports. When properties under public dominion cease to be for
public use and service, they form part of the patrimonial property of the
State.

The court held that the land and buildings of MIAA are part of the
public dominion. Since the airport is devoted for public use, for the
domestic and international travel and transportation. Even if MIAA charge

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