Philippine political subdivisions' real property EXEMPT from taxation

There is yet another cogent reason why the properties in question are not subject to realty tax. Section 40 (a) of the Real Property Tax Code, P.D. 464, as amended, expressly exempts them from such tax. Said Section provides: "Exemptions from Real Property Tax. -- The exemption shall be as follows: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government owned corporation so exempt by its charter: Provided, however, that this exemption shall not apply to real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person. x x x." The exemption is not only legally defensible, but also logically unassailable. The properties in question comprise the site of the entire Agus II Hydroelectric Power Plant Complex, which generates and supplies relatively cheap electricity to the island of Mindanao. These are government properties, wholly owned by petitioner and devoted directly and solely for public service and utilized in the implementation of the state policy of bringing about the total electrification of the country at the least cost to the public, through the development of power from all sources to meet the needs of industrial development and rural electrification. It can be noted, from RA 6395, P.D. 380 and P.D. 938, that petitioner's non-profit character has been maintained throughout its existence, and that petitioner is mandated to devote all its returns from capital investment and excess revenues from operations to its expansion. On account thereof, and to enable petitioner to pay its indebtedness and obligations and in furtherance of the state policy on electrification and power generation, petitioner has always been exempted from taxes. Consequently, the assessment and levy on (as well as the sale of) the properties of petitioner by respondents were null and void for having been made in violation of Section 10 of P.D. 938 and Section 40 (a) of the Real Property Tax Code. [G.R. No. 96700. November 19, 1996]

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