G.R. No. L-18125; May 31, 1963
BOARD OF ASSESSMENT APPEALS, PROVINCE OF LAGUNA, petitioner, vs. COURT OF TAX APPEALS and THE NATIONAL WATERWORKS AND SEWERAGE AUTHORITY (NAWASA), respondents.

FACTS

The National Waterworks and Sewerage Authority (NAWASA), a public corporation owned by the Government of the Philippines, took over the Cabuyao-Sta. Rosa-Biñan Waterworks System from the Province of Laguna pursuant to Republic Act No. 1383 . The Provincial Assessor of Laguna subsequently assessed the water pipes, reservoir, intake, and buildings comprising this system for real estate tax. NAWASA protested, claiming exemption, but the Provincial Board of Assessment Appeals denied the protest.
NAWASA appealed to the Court of Tax Appeals, which reversed the Board’s decision. The Board then elevated the case to the Supreme Court, contending that the properties are subject to tax because they are held by the Republic in a proprietary, not governmental, capacity. It further argued that any exemption must yield to Republic Act No. 101 , which subjects government-owned corporations to taxation.

ISSUE

Are the waterworks system properties owned by NAWASA, and thus by the Republic of the Philippines, exempt from real estate tax under Section 3(a) of Commonwealth Act No. 470 ?

RULING

Yes, the properties are exempt. The legal logic is clear and direct. Section 3(a) of Commonwealth Act No. 470 explicitly exempts from real estate tax “property owned by . . . the Republic of the Philippines.” It is a stipulated fact that the properties in question are owned by the Government. The law makes no distinction between property held in a governmental capacity and property held in a proprietary or patrimonial capacity. The Court emphasized that where the law does not distinguish, neither should the courts, absent a clear legislative intent to the contrary. The use of the broad terms “property” and “owned” indicates the exemption is based on dominion, not the character of use.
The petitioner’s reliance on prior cases (City of Baguio and City of Cebu v. NAWASA) is misplaced. Those cases only established that municipal waterworks are patrimonial property for purposes of the government’s power of eminent domain, requiring just compensation for takeover. They did not rule that such patrimonial property is taxable. The Court clarified that the doctrines in those cases are irrelevant to the tax exemption issue.
Furthermore, the Court rejected the argument based on Republic Act No. 101 . This law subjects government corporations to duties and taxes on their “transactions, business, industries, sale, or income.” It does not encompass real property taxes, which are levied on ownership, not on business or transactions. Thus, it is inapplicable. Finally, the Court noted the impracticality of taxing government property, as it would merely transfer public funds from one pocket to another without generating net revenue and would incur unnecessary administrative costs. The decision of the Court of Tax Appeals was affirmed.