FACTS
The exemption of NPC from indirect taxation was revoked and repealed by Presidential Decree No. 938. Ernesto Maceda sought to have the said issuance be declared void, arguing that when PD 938 consolidated previous tax exemption provisions for NPC under several prior laws and used the words “all forms of taxes,” that wording pertaining to NPC’s tax exemption did not comprehend “indirect taxes”.
He invoked the principle in taxation that the exception contained in the tax statutes must be strictly construed against the one claiming the exemption, and that a tax statute granting exemption must be strictly construed against the one claiming the exemption.
RULING: For the Government.
By looking at the history of NPC law provisions relating to tax exemption and the NPC Charter, by considering the intent of the law, and by statutory construction, NPC was in fact exempted from both direct and indirect taxes.
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 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.
