Tax exemption for government, political subdivision or instrumentality

Hence, petitioner cannot invoke the rule on strictissimi juris with respect to the interpretation of statutes granting tax exemptions to NPC.

Moreover, it is a recognized principle that the rule on strict interpretation does not apply in the case of exemptions in favor of a government political subdivision or instrumentality.

The basis for applying the rule of strict construction to statutory provisions granting tax exemptions or deductions, even more obvious than with reference to the affirmative or levying provisions of tax statutes, is to minimize differential treatment and foster impartiality, fairness, and equality of treatment among taxpayers.

The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax liability of such agencies.

In the case of property owned by the state or a city or other public corporations, the express exemption should not be construed with the same degree of strictness that applies to exemptions contrary to the policy of the state, since as to such property "exemption is the rule and taxation the exception." (G.R. No. 88291)