City Gov’t of QC vs.

Bayan Telecom, Inc Tax1 #49 KPG

2006 | Second Division | Garcia, J. | Administrative Issuances

DOCTRINE: “The power to tax is still ultimately with Congress and the grant of taxing powers to local government units under the
Constitution and the LGC cannot affect the power of Congress to grant exemptions.”

SUMMARY: Bayantel was granted a tax exemption on real properties used in connection of its grant of franchise by Congress. However, this
exemption was forecibly withdrawn by virtue of the LGC. In addition, the LGC also granted the power to levy taxes to local government units thus the QC
government enacted its own Revenue Code. Shortly after, an amendatory law was passed by Congress which sought to restore the tax exemptions to
Bayantel. Later, the City Treasurer of QC, acting on the QC Revenue Code, assessed property taxes over Bayantel’s properties but the latter refused to
pay because they insist that they still enjoy the tax exemption. The SC ruled that despite the LGUs being granted the power to levy taxes on properties,
such power was still limited by the LGC in so far as such local taxes shall not apply to properties specifically exempted. Since there was a valid
amendatory law that resorted the exemption in favor of Bayantel, then they should not be made to pay the taxes even if the LGC requires so (power to
tax still ultimately rests with Congress).

FACTS
1. Bayan Telecommuications, Inc. (Bayantel) is a legislative franchise holder (through RA 3259).
2. Pursuant to RA 3259, Bayantel is exempt from paying taxes on real estate, buildings and personal property used fin
connection with its franchise
3. Sometime later, the Local Government Code took effect which granted (thru Sec.232) local governments within Metro
Manila the power to levy taxes on real properties; the LGC, through Sec.234, also withdrew all real property tax exemptions
4. A few more months later, Congress enacted RA 7633 which amended Bayantel’s original franchise, including once again
therein, Bayantel’s exemption from paying real estate, building and personal property tax
5. Meanwhile, pursuant to the LGC grant to local governments the power to levy taxes without need of act of congress, the
government of QC enacted the Quezon City Revenue Code which had a provision (Sec.230) that removed any existing tax
exemption granted to all person whether natural or juridical
6. QC assessed Bayantel’s real properties in accordance with their new Revenue Code
7. RA 7925 “Public Telecommunications Policy Act of the Philippines” took effect which provided, among others, that any
exemption enjoyed by existing franchises shall ipso facto become part of previously granted telecommunications franchise and
shall be according immediately and unconditionally to the grantees of such franchises.
8. Bayantel wrote the City Assessor seeking exclusion of its properties from the roll of taxable real properties of QC but the
latter refused and instead sent delinquency assessments and even issued several warrants of levy (for eventual auction sale)
on the subject properties against Bayantel
9. Bayantel elevated the case to the SC immediately, for fear of the nearing auction sale
10. Petitioner argues that the text RA 7633 involving the grant of exemption is not clear and not unequivocal thus it cannot be
understood as a valid exemption in favor of Bayantel

MAIN ISSUE: W/N the local government’s delegated power to tax can override the exemption of Bayantel – NO, such exemptions
were restored by the amendatory law (RA 7633)

RULING:
Bayantel still enjoys the exemption
1. Most importantly, the SC explained that the realty tax exemption enjoyed by Bayantel under its original franchise(RA 3259),
which was subsequently withdrawn by force of Section 234 of the LGC, has been restored by Section 14 of RA 7633
a. SC ruled in favor of Bayantel that it is only "liable to pay the same taxes, as any other persons or corporations on
all its real or personal properties, exclusive of its franchise."
i. The power to tax is still primarily vested in the Congress even if the LGC mas modified the former
doctrine of local government units’ delegated power to tax
ii. Furthermore, the LGC itself actually limits the power of the LGU in imposing local taxes; Sec. 232 of
which reads: "a province or city or municipality within the Metropolitan Manila Area may levy an annual ad
valorem tax on real property such as land, building, machinery, and other improvement not hereinafter
specifically exempted."
1. Thus, the LGU cannot levy a tax on property specifically exempted
a. More illustrative is the case of PLDT v Davao, where the Court held: “the grant of taxing
powers to local government units under the Constitution and the LGC does not
affect the power of Congress to grant exemptions.”
2. Considering the above explanations, next we must make sure W/N RA 7633 did in fact grant anew the original exemption
enjoyed by Bayantel to which the Court herein ruled in the affirmative
a. SC explained that the Congress was fully aware that the LGC removed Bayantel’s exemptions, that’s why they
enacted the amendatory law (RA7633), precisely to restore such benefit back to Bayantel which is also why the
amendatory law used almost the exact same phrasing in the text regarding the grant of exemption as what was in the
original franchise.
3. With regard to the issue of ‘exhaustion of administrative remedies’, the SC ruled that there was no error in seeking recourse
before the SC because an appeal to the Local Board of Assessment Appeals is not anymore a plain, speedy and adequate
remedy because of the fact that Bayantel’s properties were already in fact levied upon and the auction sale date was fast
approaching

DISPOSITION: This petition for review certiorari is DENIED.

Provisions:

RA 3259, Sec.14, which was the original grant of franchise and tax exemptions:
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).

LGC 232
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.

LGC 234
Except as provided herein, any exemption from payment of real property tax previously granted to, or enjoyed by, all persons, whether
natural or juridical, including government-owned-or-controlled corporations is hereby withdrawn upon effectivity of this Code.

LGC 230
SEC. 230. 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 RA 6938, non-stock and non-pro t hospitals and educational institutions, business
enterprises certi ed by the Board of Investments (BOI) as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively, .
. . are hereby withdrawn effective upon approval of this Code

RA 7633, which is the amendatory law that restored Bayantel’s exemption

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