Republic of the Philippines



– versus –


– and –

Respondents-Appellees, x – – – – – – – – – – – – – – – – – – – – – – – – – – – – x


This appeal steams from the decision of the Provincial Board of

Assessment Appeals of Rizal as assailed by Pililla Poultry Processing Plant,

Inc. the penultimate portion of which is herein below quoted, viz:

“WHEREFORE, for failure on the part of the petitioner to prove its cause of action, this Board thereby holds the petitioner liable and bound to pay the realty tax for the year 1997 and declares this petition DISMISSED for lack of merit and for being without basis in fact and in law”.

In this case, the parties dwell on the sole issue of whether or not Pililla

Poultry Processing Plant, Inc. (“PPPPI” for brevity) is liable to pay real

property tax for the year 1997.

As culled from the records of the case and the findings of the Board as

well, it shows that:

On April 30, 1998, PPPPI received a notice of assessment from the

Provincial Assessor of Rizal through the Municipal Assessor of Pililla Rizal, Mr.

Alejandro V. Amores, effectivity of which retroacts to the year 1997.

On the matter of the request for a first year consideration on the

effectivity of the notice of assessment contending that 1997 was a dry run for

the firm to operate, a letter addressed to the above-named assessor was sent

Reference: Book VIII, pp. 279-286

by Mr. Louie L. Borja, general manager of PPPPI on May 12, 1998.

Unfortunately, that same request was referred to Mr. Oscar R. Baraquero,

provincial assessor of Rizal, only on July 6, 1998. For the purpose of proving

their point, it submitted copies of building and Mayor’s permits which have

bearing on their case. Since there was an apparent lapse of time when such

letter was referred to assessor Baraquero, the latter advised Mr. Amores to

make the necessary immediate reply to the letter of reconsideration being made

by the said company official. In compliance therewith, Mr. Amores informed the

Provincial Assessor of Rizal that based on their findings “PPPPI” assumed

operation in 1996 when buildings were already completed, machineries were

installed and operated and contractual employees were hired such that,

impliedly, it should be held liable for taxes for the year 1997.

Seeing the possibility that its request will be turned down and will go

nowhere, PPPPI elevated the case to the Local Board of Assessment Appeals

of Rizal on October 15, 1998, almost six (6) months from the time the firm

received the notice of assessment. However, in its appeal, it abandoned the

premise that the subject business started only in the year 1997 and relied much

on the certification by Hon. Nicodemes F. Patenia, municipal mayor of Pililla on

the matter of Tax Holiday allegedly granted by the said municipality to foreign

and local investors. Sticking on its position, petitioner anchored its claim on that

ground alone and took its refuge on the legality of the action of said town Mayor

based on the provisions of the Local Government Code of 1991 more

particularly sections 444, 30, and 192, to wit:

“’(b) For efficient, effective and economical governance the purpose of which is the general welfare of the municipality and its inhabitants pursuant to section 16 of this Code, the Municipal Mayor shall:

(1) Exercise general supervision and control over all programs, projects, services and activities of the municipal government, and in this connection, shall:

(i) Determine the guidelines of municipal policies and be responsible to the Sanggunian Bayan for the program of government;

Reference: Book VIII, pp. 279-286

(ii) Direct the formulation of the municipal development plan, with the assistance of the municipal development council and upon approval thereof by the Sangguniang Bayan, implement the same;

x x x

(3) Initiate and maximize the generation of resources and revenues and apply the same to the implementation of development plans, program objectives and priorities as provided for under Section 18 of this Code, particularly those resources and revenues programmed for agro-industrial development and countrywide growth and progress, x x x’”

“’Section (30) (a) Except as otherwise provided under the Constitution and special statutes, the governor shall review all executive orders promulgated by component city or municipal mayor within his jurisdiction. The city or municipal mayor shall review all executive orders promulgated by the punong barangay within his jurisdiction. Copies of such order shall be forwarded to the governor or the city or municipal mayor, as the case may be, within three (3) days from their issuance. In all instances of review, the local chief executive concerned shall ensure that such executive orders are within the powers granted by law and in conformity with provincial, city or municipal ordinances.

(b) If the governor or the city or municipal mayors fails to act on said executive orders within thirty (30) days after submission, the same shall be deemed consistent with law and therefore valid.’”

As it rely on these cited provisions of law, it is their conclusion that there

is nothing illegal nor anomalous with the exemption granted by the Municipality

of Pililla to PPPPI and that in the absence of any executive order nullifying the

certification issued by Mayor Patenia, the same will remain valid and in

accordance with law. Aside from this argument, it is of the opinion that the

Principle of Estoppel has already set in with respect to the non-payment of

taxes due to the representation allegedly made by Mayor Patenia regarding the

grant of a one (1) year tax exemption.

On the ground of fair play that the appellant exerted its effort, manifested

by its long and tireless follow ups and the seeming negligence on the part of the

municipal assessor to transmit the request to the Provincial assessor for

appropriate action, the appellees on their part did not invoke prescription

considering that more than five (5) months have already elapsed before the

petitioner has brought is appeal to the jurisdiction of the LBAA of Rizal.

On July 26, 1999, the pertinent portion of which is therein extracted, the

Local Board of Assessment Appeals of Rizal laid down its ruling which states


Reference: Book VIII, pp. 279-286

“The certification alone issued by the mayor without any ordinance duly approved cannot be made as basis for exemption of payment of the 1997 realty tax of the petitioner. It is very clear and explicit in the language of the law, Section 192 of the local Government Code which was even cited by the petitioner in its position paper which says “Local government units may, through ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and conditions as they may deem necessary.” Neither can the principle of estoppel be applied in this case because it is the belief of this Board that the certification made by the mayor was without basis and therefore has no force and effect, hence the reliance by the PPPPI on this representation by the Mayor cannot be the basis of estoppel.”

HENCE, this appeal.

Subject to the following discussions, we find for respondents-appellees.

Prefatorily, there are two (2) concomitant reasons catapulted by the

appellant in support of their appeal. First, it is the argument of the herein

appellant that the Notice of Assessment it received was made in the year 1998

and therefore effective only in the year 1999, citing Section 221 of the Local

Government Code which provides:

“All assessments or reassessments made after the first (1st) day of January of any year shall take effect on the first (1st) day of the succeeding year: xxx”

Apparently, PPPPI quoted the wrong provision of law because Section

222 of that same Code so states that:

“Real Property declared for the first time shall be assessed for taxes for the period during which it would have been liable but in no case for more than ten (10) years prior to the date of initial assessment: Provided, however, That such taxes shall be computed on the basis of the applicable schedule of values in force during the corresponding period”

Since the property of PPPPI was assessed for the first time in the year

1998, it is safe and perfectly correct for the provincial assessor to apply the

provision explicitly provided by section 222 (LGC), thereby giving the

assessment a retroactive effect. And for failure to invoke that 1997 was a dry

run year while the case is in the appellate Local Board, the facts of the case

unequivocably manifest as it affirms the fact that indeed it is liable to pay realty

taxes for the said year.

Secondly, Petitioner-appellant is on the honest belief that a certification

by the Pililla Mayor is a valid exercise of his function as chief executive of the

local unit concerned to give a tax holiday in order to attract local as well as

Reference: Book VIII, pp. 279-286

foreign investors which is consonant with the goal of the government of

promoting investments. But granting EN ARGUENDO that indeed, in issuing a

tax holiday, he may have been motivated by noble intentions and that his

inclinations were directed towards the welfare of their municipality, this order is

wanting of color of legality considering that there are legal prerequisites that

have to be sufficiently complied with to make it perfectly valid. These

requirements are the very safeguards of executive issuances from capricious,

whimsical and arbitrary decisions. Equally important to note is the fact that even

if said issuance is not tainted with arbitrariness or that capriciousness does not

come into the picture, the spirit and the letter of the law must not have to be

dispensed with for that is the very intent of such enactment by the legislature.

Unquestionably, Section 5 Article X of the 1987 Constitution vividly points

out that a general delegation of the power to tax is granted in favor of the local

government units, as stated:

“Sec. 5 Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide consistent with the basic policy of local autonomy. XXX”.

Enunciated in the case of Manila Electric Company vs. Province of

Laguna and Benito Balazo, (G.R. No. 131359 May 5, 1999) “Where there is

neither a grant nor a prohibition by statute, the tax power must be deemed to

exist although Congress may provide statutory limitations and guidelines. The

basic rationale for the current rule is to safeguard the viability and self-

sufficiency of local government units by directly granting these general and

broad tax powers. The fundamental law did not intend the delegation to be

absolute and unconditional”.

Now, it is a basic principle in taxation that the power to tax carries with it

the power to grant exemption such that when Congress passed R.A. 7160

otherwise known as the Local Government Code of 1991, it provided the

limitations for the grant of tax exemptions in accordance with the mandate of

the fundamental law of the land, one of which is Section 192 of the same Code.

Reference: Book VIII, pp. 279-286

Clear as it is that even if such tax holiday is said to be pursuant to an

ordinance passed, which in this case is not, by the Sanggunian, a claim of

statutory exemption from taxation should be manifest and unmistakable from

the language of the law on which it is based. It is construed strictissimi juris

(Commissioner of Internal Revenue vs. C.A. G.R. No. 124043).

So, in the discussions made by the appellees as reflected in their answer

to the appeal and surprisingly, even in the position paper submitted by the

herein petitioner while the case is still pending before the Local Board of

Assessment Appeals of Rizal, they both focused on Section 192 of the local

Government Code of 1991. Expressly stated therein is the primordial condition

that it is only through an ordinance duly approved that the local Government

Units may grant tax exemptions, incentives or reliefs under such terms and

conditions as they may deem necessary. In citing said provision, the appellant

itself indirectly then admits the need for the passing of an ordinance before a

person, whether juridical or not, can avail of the benefit of the exemption.

During the hearing, the appellant was ordered to submit a copy of the

ordinance passed by the Sanggunian granting such tax exemption to PPPPI or

to local investors. For failure to furnish this Board a copy, it became obvious

that there is no such thing in the municipality concerned and that the

certification given by Mayor Patenia dated December 5, 1997 was Ultra Vires.

And lastly, it is the observation of this Board that the grant of the alleged

tax holiday was made verbally by the Mayor and that it was not concretized in

any written order or issuances. So, PPPPI’s contention is laid on soft ground

and may not be able stand firm for its root is attached on something that is


WHEREFORE, in view of the foregoing, the decision of the Board of

Assessment Appeals of Rizal declaring subject properties as taxable is hereby

affirmed in toto and that the herein appeal of PPPPI is hereby dismissed for

lack of merit.

Reference: Book VIII, pp. 279-286


Manila, Philippines, April 23, 2001.




Reference: Book VIII, pp. 279-286