G.R. No. 87479, June 4, 1990
NATIONAL POWER CORPORATION, petitioner, vs. THE PROVINCE OF ALBAY, ALBAY GOVERNOR ROMEO R. SALALIMA, and ALBAY PROVINCIAL TREASURER ABUNDIO M. NUÑEZ, respondents.

FACTS

The National Power Corporation (NAPOCOR) sought to prevent the Province of Albay from auctioning its properties in Tiwi, Albay, to satisfy alleged real property tax delinquencies amounting to over P214 million for the period from June 11, 1984, to March 10, 1987. The provincial government had published a notice of auction sale, prompting NAPOCOR to file a petition and secure a temporary restraining order from the Supreme Court. However, the order was not served in time, and the auction proceeded on March 30, 1989, with the province as the highest bidder.
NAPOCOR claimed exemption from real property taxes based on its charter, Republic Act No. 6395, which declared it exempt from all taxes. It also relied on subsequent issuances, particularly Fiscal Incentives Review Board (FIRB) Resolution No. 17-87, which restored its tax exemptions effective March 10, 1987, and a confirming memorandum from the Executive Secretary. The core dispute centered on whether these exemptions covered the period in question, given the enactment of Presidential Decree No. 1931 in 1984, which generally withdrew tax exemptions from government-owned corporations.

ISSUE

The principal issue was whether NAPOCOR was liable for real property taxes to the Province of Albay for the period from June 11, 1984, to March 10, 1987.

RULING

The Supreme Court ruled against NAPOCOR and upheld the validity of the tax assessment and auction sale. The Court held that NAPOCOR was not exempt from real property taxes for the contested period. The legal logic proceeded from the principle that tax exemptions are construed strictly against the claimant and must be granted in clear and categorical terms.
The Court found that Presidential Decree No. 1931, effective June 11, 1984, expressly withdrew all tax exemptions previously granted to government-owned and controlled corporations, including NAPOCOR. While the FIRB had the authority under Executive Order No. 93 to restore exemptions, its resolutions did not effectively restore NAPOCOR’s exemption for real property taxes during the specific period. FIRB Resolution No. 17-87, which NAPOCOR heavily relied upon, restored exemptions only effective March 10, 1987, and thus did not retroactively cover the liabilities accrued from 1984 to 1987. The earlier FIRB resolutions (Nos. 10-85 and 1-86) were deemed ineffective as they were issued before Executive Order No. 93 formally authorized the FIRB to grant such restorations.
Furthermore, the Court emphasized that real property taxes are local taxes, and the power to tax is inherent in local governments as a principal source of revenue. Exemptions from such local taxes must be explicitly granted. Since no valid restoration of exemption covered the period from June 11, 1984, to March 10, 1987, NAPOCOR’s liability stood. The auction sale was consequently declared valid. The decision reinforced the doctrine that taxes are the lifeblood of the government and exemptions are not presumed.