MCIAA vs. MARCOS G.R. No. 120082, September 11, 1996 261 SCRA 667 Public Corporation, Taxation, Local Government Code, Realty Tax

MCIAA vs. MARCOS G.R. No.
120082, September 11,

1996 261 SCRA 667 Public Corporation, Taxation, Local
Government Code, Realty Tax,
OCTOBER 30, 2017
FACTS:
Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act
6958. Since the time of its creation, MCIAA enjoyed the privilege of exemption from payment of
realty taxes in accordance with Section 14 of its Charter. However on 11 October 1994, the
Office of the Treasurer of Cebu, demanded for the payment of realty taxes on several parcels of
land belonging to the petitioner.
Petitioner objected to such demand for payment as baseless and unjustified and asserted that it
is an instrumentality of the government performing governmental functions, which puts
limitations on the taxing powers of local government units.
The City refused to cancel and set aside petitioner’s realty tax account, insisting that the MCIAA
is a government controlled corporation whose tax exemption privilege has been withdrawn by
virtue of Sections 193 and 234 of the Local Government Code (LGC), and not an instrumentality
of the government but merely a government owned corporation performing proprietary
functions. MCIAA paid its tax account “under protest” when City is about to issue a warrant of
levy against the MCIAA’s properties.
MCIAA filed a Petition of Declaratory Relief with the RTC contending that the taxing power of
local government units do not extend to the levy of taxes or fees on an instrumentality of the
national government. It contends that by the nature of its powers and functions, it has the
footing of an agency or instrumentality of the national government; which claim the City
rejects. The trial court dismissed the petition, citing that close reading of the LGC provides the
express cancellation and withdrawal of tax exemptions of Government Owned and Controlled
Corporations.
ISSUE: Whether the MCIAA is exempted from realty taxes.
RULING:
Tax statutes are construed strictly against the government and liberally in favor of the taxpayer.
But since taxes are paid for civilized society, or are the lifeblood of the nation, the law frowns
against exemptions from taxation and statutes granting tax exemptions are thus construed
strictissimi juris against the taxpayer and liberally in favor of the taxing authority.
A claim of exemption from tax payments must be clearly shown and based on language in the
law too plain to be mistaken. Taxation is the rule, exemption therefrom is the exception.
However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid
rule of construction does not apply because the practical effect of the exemption is merely to
reduce the amount of money that has to be handled by the government in the course of its
operations.
Further, since taxation is the rule and exemption therefrom the exception, the exemption may
be withdrawn at the pleasure of the taxing authority. The only exception to this rule is where
the exemption was granted to private parties based on material consideration of a mutual
nature, which then becomes contractual and is thus covered by the non-impairment clause of
the Constitution.
MCIAA is a “taxable person” under its Charter (RA 6958), and was only exempted from the
payment of real property taxes. The grant of the privilege only in respect of this tax is
conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except
real property tax.
Since Republic Act 7160 or the Local Government Code (LGC) expressly provides that “All
general and special laws, acts, city charters, decrees [sic], executive orders, proclamations and
administrative regulations, or part of parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified accordingly.”
With that repealing clause in the LGC, the tax exemption provided for in RA 6958 had been
expressly repealed by the provisions of the LGC. Therefore, MCIAA has to pay the assessed
realty tax of its properties effective after January 1, 1992 until the present.
Tax Case Digest Mactan Cebu International Airport
Authority vs Marcos et al GR No 120082
By PactaSuntServanda - July 08, 2014
Mactan Cebu International Airport Authority vs Marcos, et al.,
GR No 120082 September 11, 1996
Facts:
Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of
Republic Act No. 6958, mandated to “principally undertake the economical, efficient and
effective control, management and supervision of the Mactan International Airport in the
Province of Cebu and the Lahug Airport in Cebu City, and such other airports as may be
established in the Province of Cebu. Since the time of its creation, petitioner MCIAA
enjoyed the privilege of exemption from payment of realty taxes in accordance with Section
14 of its Charter:
"Sec. 14. Tax Exemptions. -- The Authority shall be exempt from realty
taxes imposed by the National Government or any of its political
subdivisions, agencies and instrumentalities."
On October 11, 1994, however, the Office of the Treasurer of the City of Cebu, demanded
payment for realty taxes on several parcels of land belonging to the petitioner located at
Barrio Apas and Barrio Kasambagan, Lahug, Cebu City, in the total amount of
P2,229,078.79. Petitioner objected to such demand for payment as baseless and
unjustified, claiming in its favor the aforecited Section 14 of RA 6958 which exempts it from
payment of realty taxes. It was also asserted that it is an instrumentality of the government
performing governmental functions, citing Section 133 of the Local Government Code of
1991 which puts limitations on the taxing powers of local government units:
"Section 133. Common Limitations on the Taxing Powers of Local

Government Units. -- Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
a) x x x
xxx
o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities, and local
government units"
Respondent City refused to cancel and set aside petitioner’s realty tax account, insisting
that the MCIAA is a government-controlled corporation whose tax exemption privilege has
been withdrawn by virtue of Sections 193 and 234 of the Local Government Code that took
effect on January 1, 1992:
"Section 193. Withdrawal of Tax Exemption

Privilege.— 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 No. 6938, non-stock and
non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.
Section 234. Exemptions from Real Property Taxes. — x x x
(a) x x x
xxx
(e) x x x
Except as provided herein, any exemption from payment of real
property tax previously granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-
owned or controlled corporations are hereby withdrawn upon the
effectivity of this Code."
Issues:
Whether the parcels of land in question belong to the Republic of the Philippines whose
beneficial use has been granted to the petitioner, and
Whether the petitioner is a “taxable person.”
Ruling:
Section 15 of the petitioner’s Charter provides:
Sec. 15. Transfer of Existing Facilities and Intangible Assets. —

All existing public airport facilities, runways, lands, buildings and
other properties, movable or immovable, belonging to or presently
administered by the airports, and all assets, powers, rights,
interests and privileges relating on airport works or air operations,
including all equipment which are necessary for the operations of
air navigation, aerodrome control towers, crash, fire, and rescue
facilities are hereby transferred to the Authority: Provided,
however, that the operations control of all equipment necessary
for the operation of radio aids to air navigation, airways
communication, the approach control office, and the area control
center shall be retained by the Air Transportation Office. No
equipment, however, shall be removed by the Air Transportation
Office from Mactan without the concurrence of the Authority. The
Authority may assist in the maintenance of the Air Transportation
Office equipment.
It may be reasonable to assume that the term “lands” refer to “lands” in Cebu City then
administered by the Lahug Air Port and includes the parcels of land the respondent City of
Cebu seeks to levy on for real property taxes. This section involves a “transfer” of the
“lands,” among other things, to the petitioner and not just the transfer of the beneficial use
thereof, with the ownership being retained by the Republic of the Philippines.
This “transfer” is actually an absolute conveyance of the ownership thereof because the
petitioner’s authorized capital stock consists of, inter alia, “the value of such real estate
owned and/or administered by the airports.” Hence, the petitioner is now the owner of the
land in question and the exception in Section 234(c) of the LGC is inapplicable.
Moreover, the petitioner cannot claim that it was never a “taxable person” under its Charter.
It was only exempted from the payment of real property taxes. The grant of the privilege
only in respect of this tax is conclusive proof of the legislative intent to make it a taxable
person subject to all taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable person for purposes of real
property tax, in light of the foregoing disquisitions, it had already become, even if it be
conceded to be an “agency” or “instrumentality” of the Government, a taxable person for
such purpose in view of the withdrawal in the last paragraph of Section 234 of exemptions
from the payment of real property taxes, which, as earlier adverted to, applies to the
petitioner.

MCIAA vs. MARCOS G.R. No. 120082, September 11, 1996 261 SCRA 667 Public Corporation, Taxation, Local Government Code, Realty Tax

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MCIAA vs. MARCOS G.R. No. 120082, September 11, 1996 261 SCRA 667 Public Corporation, Taxation, Local Government Code, Realty Tax

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MCIAA vs. MARCOS G.R. No.

120082, September 11,

ISSUE: Whether the MCIAA is exempted from realty taxes.

Mactan Cebu International Airport Authority vs Marcos, et al.,

GR No 120082 September 11, 1996

"Section 133. Common Limitations on the Taxing Powers of Local

"Section 193. Withdrawal of Tax Exemption

Whether the petitioner is a “taxable person.”

Section 15 of the petitioner’s Charter provides:

Sec. 15. Transfer of Existing Facilities and Intangible Assets. —

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