Republic of the Philippines

CENTRAL BOARD OF ASSESSMENT APPEALS Manila

CULTURAL CENTER OF THE PHILIPPINES,
Petitioner-Appellant,

– versus –

BOARD OF ASSESSMENT APPEALS OF PASAY CITY,
Appellee,

CBAA CASE NO. L-02 Tax Dec. No. B001-112 Pasay City

– and –

CITY ASSESSOR AND CITY TREASURER OF PASAY CITY,
Respondents-Appellees. x – – – – – – – – – – – – – – – – – – – – – – – – – – – x

DECISION

BEFORE this Board is an appeal filed by the Cultural Center of the

Philippines and the Folk Arts Theater (CCP/FAT) assailing the validity of the

decision of Appellee Board of Assessment Appeals of Pasay City (PCBAA), on

the assessments of the real properties of Cultural Center of the Philippines

(CCP), more specifically that of the Folk Arts Theater (FAT). Petitioner-

Appellant herein, by the Respondent-Appellee, City Assessor of Pasay City,

dispositive portion of which is herein below quoted, viz:

“WHEREFORE, and for the foregoing considerations, we find this appeal in favor of appellee City Assessor of Pasay and against appellant CCP/FAT. The instant appeal is hereby DISMISSED.”

In support of its appeal, Petitioner-Appellant assigned the following

errors, viz:

1. The PCBAA erred in finding that tax exemption privileges of Appellant which were granted under its charter were withdrawn by Presidential Decree No. 1931;

2. The PCBAA erred in finding that the exempt status of Appellant cannot be claimed because it has granted the beneficial use of the subject property to taxable activities; and

3. The PCBAA erred in finding that the appellant has failed to prove its tax exempt privilege within thirty (30) days from receipt of the tax assessment as provided for under Section 9 of Pres. Decree No. 464.

Reference: Book VII, pp. 16-28

As culled from the records as well as the findings of this Board, it shows

that:

On February 19, 1991, the Administrator of the Petitioner-Appellant

received a letter from the City Treasurer of Pasay City, dated February 19,

1991, regarding the alleged real property tax obligation of the Folk Arts Theater,

a subsidiary of the Petitioner-Appellant, under Tax Declaration No. B-001-

11201. The letter declared that said properties became taxable pursuant to

Executive Order (E.O.) No. 93, dated December 17, 1986. (Annex A, Letter,

page 9, Expediente).

On February 25, 1991, Petitioner-Appellant sought a reconsideration of

the Respondent-Appellee, City Assessor’s assessments, on the ground that the

Folk Arts Theater (FAT), being a facility and subsidiary of the Cultural Center of

the Philippines is included in the exemption privilege of the Center. Thus, it is

exempt from the payment of the real property taxes, pursuant to Presidential

Decree (P.D.) No. 15, as amended, and that EO 93 did not categorically

withdraw en toto tax exemption privilege previously enjoyed, but restored the

exemption to those already conferred under the basic code and the Real

Property Tax Code, (Annex “B” Letter, page 10 Expediente). However, said

request for reconsideration was denied. Petitioner-Appellant appealed the

assessment of Respondent-Appellee, City Assessor of Pasay City with the

Appellee Local Board, which, in its decision dated March 31, 1992, dismissed

Petitioner-Appellant’s appeal. (Decision, pages 98-103, Expediente).

Hence, this appeal.

To the first assignment of error, it may be noted that the Cultural Center

of the Philippines, including the Folk Arts Theater, created under Presidential

Decree (P.D.) No. 15, is a non-municipal corporation, and under the said

charter “x x x shall be exempt from all forms of taxation whatever x x x” (Section

13, P.D. 15, as amended), including real property taxes. However in June,

Reference: Book VII, pp. 16-28

1984, this exemption was withdrawn by the promulgation of Presidential Decree

(P.D.) 1931, which states as follows:

“SECTION 1. The provisions of special or general law to the contrary notwithstanding, all exemption from the payment of duties, taxes, fees, imposts and other charges heretofore granted in favor of government-owned or controlled corporations ‘including their subsidiaries, are hereby withdrawn.” (Underlining supplied)

But in October, 1984, the said exemption was restored under Letter of

Instruction (LOI) 1437, viz:

“SECTION 1. The Cultural Center of the Philippines (CCP) is hereby exempted from the provisions of Presidential Decree No. 1931. X x x.”

which then excluded CCP/FAT from the ambit of P.D. 1931. Under (EO) No. 93

of 1986, this exempt status of Petitioner-Appellant was preserved, pertinent

portion of which is quoted, viz:

SEC. 1, E.O. 93:

“The provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives granted to government and private entities are hereby withdrawn, except:

x x x x x x

c. those conferred under the four basic codes namely

x x x

IV. the Real Property Tax Code as amended.”

It may be noteworthy to mention that the Government Corporate

Counsel, in his Opinion No. 229, dated October 23, 1989, Series of 1989,

pertinent portion of which is herein below quoted as follows, opined:

“X x x. The Charter of CCP (Presidential Decree No. 15 issued on October 5, 1972) expressly confers unto it tax exemption privileges, the pertinent provision of which reads as follows:

‘SEC. 13. Tax Exemption. The Center shall be exempt from all forms of taxation whatever, and X x x.’

There is no question that the phrase “all forms of taxation whatever” includes realty tax.

While the Charter of CCP had undergone several amendments, the tax exemption privileges of CCP has been preserved by the pertinent amending legislations. Thus, in Presidential Decree No. 179 issued in April 26, 1973, it is provided as follows:

Section 5. Section thirteen of the same Decree is hereby amended to read as follows:

‘Section 13. Tax Exemption. – The Center shall be exempt from all forms of taxation whatever, X x x.’

Reference: Book VII, pp. 16-28

Later, the said charter of CCP was further amended on June 10, 1978 through Presidential Decree (P.D.) No. 1444. Significantly, the tax exemption privileges of CCP was likewise preserved under Section 6 thereof which is quoted hereunder, to wit:

‘Section 13. Tax Exemption. – The Center shall be exempt from all forms of taxation whatever, X x x.’

Gleaned from the aforequoted section of P.D. No. 1444, it is clear that CCP continues to enjoy exemption from all forms of taxation except only for income tax as provided in the last sentence of the aforequoted provision.

The CCP Charter was last amended on January 16, 1981, through Presidential Decree (P.D.) Nos. 1815 and 1825. Again, the same tax exemption privileges of CCP were retained except for the payment of income tax (as provided in the previous P.D. 1444) and taxes on the business ventures of CCP (a new imposition under PD 1815 and 1825).

It is evident from the foregoing brief historical background of CCP’s legal creation and existence that CCP was exempt, and continues to enjoy exemption from the payment of all forms of taxes including realty tax, except only for income taxes and taxes on its business operations.

X x x.”

Accordingly, the two (2) year period claimed by Respondents-Appellees

as non-exempt status of Petitioner-Appellants, and in which they tried to collect

realty taxes in the amount of P 4,254,000.00 was totally abrogated by the

promulgation of LOI 1437 (Supra) which excluded Petitioner-Appellant from the

provision of P.D. 1931. And, this exemption was preserved upon the

implementation of EO 93 of 1986.

Regarding the second assignment of error, as to whether or not the Folk

Arts Theater, a facility and subsidiary of the Cultural Center of the Philippines,

being leased to a taxable entity for use as concert hall, seminars, conventions

and the like, is taxable under Section 40 (a) of Presidential Decree (P.D.) No.

464, under the “beneficial use theory”, the applicable Section thereof provides

as follows:

“SEC. 40. Exemption from Real Property Tax. The exemption shall be as follows:

“(a) Real Property owned by the Republic of the Philippines or any of its political sub-divisions and any government-owned corporation so exempt by its charter: Provided, however, that this exemption shall not apply to the real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise to a taxable person.” (Underlining supplied)

Reference: Book VII, pp. 16-28

Respondents-Appellees contended that inasmuch as the Folk Arts

Theater is being leased to taxable entity, the “beneficial use theory” applies,

thus the Folk Arts Theater’s exemption is removed and the property is taxable.

The Supreme Court of the Philippines in GR 111955, October 27, 1993, entitled

Board of Assessment Appeals of Tacloban City versus Central Board of

Assessment Appeals et al, affirmed the decision of this Board in CBAA Case

No. V-01-02, which resolved the issue of “Beneficial Use” theory, as follows:

“X x x. Petitioner-Appellant, is not liable to pay real property taxes under the ‘Beneficial Use’ theory pursuant to Section 40(a) for the reason that’ Under this subsection, real property owned by the Republic of the Philippines or its political subdivisions (provinces, cities, municipalities and barangays) to be taxable in the name of the person who is using, refers to their patrimonial or private properties under Article 421 and 423 of the Civil Code of the Philippines and excludes real properties for public use and for public services, which are beyond the commerce of man, and to lands of public domain granted, sold or leased under Commonwealth Act No. 141 and Forestry Laws.

Thus, under the foregoing, only patrimonial properties of the state which are not intended for public use or public services or for development of national wealth may be subject to the “beneficial use theory, X x x.”

“Beneficial use” is not granted or transferred to an occasional lessee or

tenant, as claimed by Respondent-Appellee, merely because the lessee or

tenant is a taxable person.

This Board has adapted in the Tacloban City case (Supra) the following

definition as our concept of “Beneficial use”, viz:

“The right to use and enjoy property according to one’s own liking or so as to derive a profit or benefit from it, including all that makes it desirable or habitable, as light, air, and access as distinguished from a mere right of occupancy or possession. Such right to enjoyment of property where legal title is in one person while right to such use or interest is in another.” (Christiansen vs. Department of Social Security, 15 Washington, 29 465, 131 p 2d 189, 191 cited and adopted in Black’s Law Dictionary)

In the instant case, the occasional lessee or renter has access to the

place but no real right over the property is transferred. The use and enjoyment

of the property is subject to the interest and control of the Petitioner-Appellant.

The case does not partake of the nature of a lease contract to which Section

40(a), P.D. 464 applies. The application of the “beneficial use theory” is that,

once the state or an exempt government corporation grants the beneficial use

of its property for a consideration or otherwise to a taxable entity, the exemption

Reference: Book VII, pp. 16-28

of the subject property is removed and the said property is listed as taxable in

the name of the beneficial user who shall be liable for the payment of the tax,

but not the grantor or lessor which under the applicable law remains exempt. In

the instant case, admitting that the Folk Arts Theater is leased for a

consideration for use to a taxable person, then that lessee or grantee is the one

to be listed in the taxable roll, who shall be liable in the payment of taxes. “X x x

we believe that under Section 8, P.D. 464 now Section 205 R.A. 7160, which

provides as follows:

“Sec. 8. Listing of Real Property in the Assessment Rolls. – In every province and city, there shall be prepared and maintained by the provincial or city assessor an assessment roll wherein shall be listed all real property, whether taxable or exempt, located within the province or city. Real property shall be listed and valued in the name of the owner or administrator, or anyone having legal interest in the property.

X x x.

Real property owned by the Republic of the Philippines, its political subdivisions and any government-owned corporation so exempt by its charter the beneficial use of which has been granted, for consideration or otherwise, to a taxable person, shall be listed for purposes of taxation, in the name of the grantee, or the public entity if such property has been acquired for resale of lease (underlying supplied).”

taken in connection with Section 40(a) of P.D. 464, (Supra) the exempt

character of subject property is removed and such property has to be listed for

purposes of taxation “in the name of the Beneficial user, the lessee in the

present case. An interpretation which would place in the owner (which is an

exempt entity) instead of in the beneficial user, the liability for the realty tax in

this case would render these provisions nugatory.” (Opinion No. 133, Series of

1979 by the Minister [now Secretary] of Justice, [Underlining supplied])

In a related case, a taxpayer

“X x x, contends that Section 40(a), above quoted merely removes the exempt character of the government owned real properties enumerated therein but does not expressly impose the tax on the beneficial user thereof. This is true if this provision is to be taken alone and by itself. However, it must be read and construed together with Section 8, (P.D. 464 (pursuant to the cardinal rule of construction that all parts, provisions, or section of a statute must be read, considered or construed, each to be considered with respect to all the others, and in harmony with the whole. (Chartered Bank vs. Imperial, 48 Phil. 947 (1921, cited and quoted by the Secretary [formerly Minister] of Justice in its Opinion No. 133, Series of 1979, [Underlining supplied])

Reference: Book VII, pp. 16-28

Folk Arts Theater, a facility and subsidiary of the Cultural Center of the

Philippines, wherein the latter, under its charter is a tax exempt non-municipal

corporation does not lose its tax exemption privilege, even if it is leased to a

taxable person, for under the beneficial use theory, it is the lessee or grantee

who shall be liable for the payment of taxes but never the grantor or lessor.

Now, to the third and last issue, where the Petitioner-Appellant failed to

prove its tax exemption privilege within thirty (30) days from receipt of the tax

assessment6 as provided for under Section 9 of P.D. 464, the same is amply

settled under paragraph 2 of the said Section 9 as follows:

“X x x.
If the required evidence is not submitted within the period herein prescribed, the property shall be listed as taxable in the assessment roll. However, if it shall be proven to be tax exempt the same shall be dropped from the roll of taxable properties.”

Nonetheless, inasmuch as the issue on the tax exemption of CCP/FAT

has been fully resolved in its favor then this third assignment of error is deemed

moot and academic.

WHEREFORE, premises considered, the decision of the Board of

Assessment Appeals of Pasay City is hereby REVERSED. According to its

charter, the Cultural Center of the Philippines including the Folk Arts Theater is

exempt from the payment of real property taxes on its lands and buildings.

Therefore Respondent-Appellee City Assessor of Pasay is hereby ordered to

drop subject properties under Tax Declaration No. B001-11201, from the List of

Taxable Properties and enter the same under the List of Exempt Properties in

the Assessment Roll. The City Treasurer of Pasay City is hereby directed to act

accordingly.

SO ORDERED.

Manila Philippines.

February 8, 1994

(Signed) MARGARITA G. MAGISTRADO

Reference: Book VII, pp. 16-28

Chairman

(Signed) ELEANOR A. SANTOS
Member

(Signed) ALFONSO M. MEDADO
Member

Reference: Book VII, pp. 16-28