CASE DIGEST : Board of Assessment Appeals, Province of Laguna v. Court of Tax Appeals and National Waterworks and Sewerage Authority (NAWASA) G.R. No. L-18125 May 31, 1963

 

FACTS

The Provincial Assessor of Laguna assessed for real property tax the water pipes, reservoirs, intake facilities, and buildings comprising the Cabuyao–Sta. Rosa–Biñan Waterworks System, which had been transferred to the National Waterworks and Sewerage Authority (NAWASA) pursuant to Republic Act No. 1383, the law creating NAWASA. RA No. 1383 vested in NAWASA ownership and administration of government-owned waterworks and sewerage systems throughout the country. NAWASA protested the assessment, arguing that the properties were owned by the Government of the Philippines and were therefore exempt from real property taxation under Section 3(a) of Commonwealth Act No. 470, which exempts property owned by the Republic and its political subdivisions from real estate tax.

The Board of Assessment Appeals denied NAWASA's protest, ruling that the properties were subject to taxation because NAWASA operated them in a proprietary capacity. On appeal, however, the Court of Tax Appeals (CTA) reversed the Board's decision and declared the properties exempt from real property tax. The Board elevated the case to the Supreme Court, insisting that Republic Act No. 104, which required government-owned or controlled corporations to pay taxes unless expressly exempt, removed NAWASA's tax exemption.

ISSUE

Whether the waterworks properties owned and operated by NAWASA are subject to real property tax, notwithstanding that they are government-owned assets.

Whether Section 3(a) of Commonwealth Act No. 470 exempting government-owned properties from real estate tax prevails over Republic Act No. 104, and whether the governmental or proprietary nature of NAWASA's operations affects such exemption.

HELD

The Supreme Court denied the petition and affirmed the decision of the Court of Tax Appeals, holding that the waterworks properties are exempt from real property tax. The Court ruled that Section 3(a) of Commonwealth Act No. 470 expressly exempts from real estate taxation properties owned by the Republic of the Philippines. Since Republic Act No. 1383 provides that NAWASA is a government-owned public corporation and that the waterworks systems transferred to it remain government-owned, the properties retain their exempt status. The Court further explained that Republic Act No. 104 refers only to the payment of duties, taxes, fees, and charges imposed upon government-owned or controlled corporations in the conduct of their business, but does not repeal or modify the specific exemption from real property tax granted under Commonwealth Act No. 470.

The Court also rejected the argument that the exemption depended on whether the properties were used for governmental or proprietary functions. It emphasized that ownership, not the nature of use, is the controlling factor under the law. Because the properties belonged to the Government and were devoted to the public purpose of providing water services, they remained beyond the reach of local real property taxation. The ruling established that government-owned property expressly exempted by law cannot be subjected to local taxation absent a clear legislative intent withdrawing such exemption, reinforcing the principle that tax exemptions granted by statute remain effective until expressly repealed.