Republic of the Philippines
CENTRAL BOARD OF ASSESSMENT APPEALS 7th Floor, EDPC Building, BSP Complex Roxas Boulevard, Manila
LIGHT RAIL TRANSIT AUTHORITY,
Petitioner-Appellant, CBAA Case No. L-06
– versus – Re: Tax Dec. No. B-071000417
BOARD OF ASSESSMENT APPEALS OF MANILA,
Appellee,
– and –
CITY ASSESSOR OF MANILA, Respondent-Appellee.
x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x
D E C I S I O N
THIS is an appeal of the Petitioner-Appellant, the LIGHT RAIL TRANSIT
AUTHORITY, hereinafter knows as LRTA, assailing the validity of the
Resolution of Appellee Board of Assessment Appeals of Manila, dated June 26,
1992, sustaining the assessments of the Respondent-Appellee, City Assessor
of Manila, dispositive portion of which is hereinbelow quoted, viz:
“The Board finds no cogent reason to sustain the contention of LRTA that it is exempt from realty tax when the law creating it does not provide any grant or exemption. To do so the City government of Manila would virtually denounce the taxation of LRTA’s properties as real property and inevitably, a failure on the part of the city government, being a self-reliant and stable local government unit, to provide adequate funds for development and underwrite basic and essential public service.
WHEREFORE, the Light Rail Transit Authority (LRTA) is hereby required to pay the assessment on its properties made by the City Assessor of Manila effective 1985.”
In support of its appeal LRTA contended that:
(1) Carriageways and passenger terminal stations are not improvements for purposes of the Real Property Tax Code (P.D. 464) and thus not subject to assessments and therefore exempt from the payment of real property taxes;
(2) Carriageways and passenger terminal stations being constructed on the National Road owned by the national government, may be considered as property of the National Government according to Article 445 of the Civil Code of the Philippines, and therefore exempt from the payment of real property taxes under Section 40(a) of P.D. 464, as amended, known as the Real Property Tax Code; and
(3) Carriageways and passenger terminal stations are for public use.
Reference: Book VII, pp. 53-76
On the other hand, Respondent-Appellee, in his comment/answer to
Petitioner-Appellant’s appeal countered and raised the following issues, viz:
“1. Whether or not the Central Board, acquired jurisdiction over the herein appeal;
2. Whether or not LRTA is a taxable person;
3. Whether or not the carriageways and terminals of the LRTA are considered real estate;
4. Whether or not the carriageways and terminals are used for public purpose; and
5. Whether or not the land on which each post of the carriageways and terminals are erected is taxable.”
As it appears, some of the issues involved are interrelated, except the
issues on the non-payment of taxes. The main points at issue therefore may be
simplified, as follows, to wit:
I. Whether or not the Local Board has the authority to entertain the
appeal, inspite of the non-payment of real property taxes as a
condition precedent of any appeal before this Board;
II. Whether or not carriageways and passenger terminal stations are
considered improvements under the Real Property Tax Code and
being constructed on the land belonging to the government belong
to the government and for purposes of taxation are exempt;
III. Whether or not carriageways and passenger terminal stations are
for public use; and
IV. Whether or not the LRTA is exempt under its charter.
The facts of the case, according to the findings of this Board as culled
from the records are as follows:
1. The LRTA is a government-owned and controlled corporation
created and organized under Executive Order No. 603, dated July 12, 1980,
“which made the body primarily responsible for the construction, operation,
maintenance and/or lease of light rail transit system in the Philippines, giving
Reference: Book VII, pp. 53-76
due regard to the reasonable requirements of the public transportation of the
country” (LRTA vs. The Hon. Commission on Audit G.R. No. 88365);
2. That by reason of the foregoing Executive Order No. 603, LRTA,
acquired real properties, such as lands, constructed structural improvements,
such as buildings, carriageways, passenger terminal stations, and installed
various kinds of machineries and equipments and facilities for the purpose of its
operations;
3. That for the purpose of an effective maintenance, operation and
management, it entered into a Contract of Management with the Meralco
Transit Organization (METRO) in which the latter undertook to manage, operate
and maintain the Light Rail Transit System owned by the LRTA subject to the
specific stipulations contained in said agreement, including payments of a
management fee and real property taxes; (Additional Exhibit “I”, Records.)
4. That it commenced its operations in 1984, and that sometime in
that year, Respondent-Appellee City Assessor of Manila assessed the real
properties of Petitioner-Appellant, consisting of lands, buildings, carriageways
and passenger terminal stations, machineries and equipments which he
considered real properties under the Real Property Tax Code, to commence
with the year 1985;
5. That Petitioner-Appellant paid its real property taxes on all its real
property holdings, except the carriageways and passenger terminal stations
including the land where it is constructed, on the ground that the same are not
real properties under the Real Property Tax Code, and if the same are real
properties, these properties are for public use/purpose, therefore exempt from
realty taxation, which claim was denied by the Respondent-Appellee City
Assessor of Manila; and
6. That Petitioner-Appellant, aggrieved by the action of the
Respondent-Appellee City Assessor, filed an appeal with the Local Board of
Assessment Appeals of Manila. The Board of Assessment Appeals of Manila,
Reference: Book VII, pp. 53-76
Appellee, herein, after due hearing, in its resolution dated June 26, 1992,
denied Petitioner-Appellant’s appeal, and declared that carriageways and
passenger terminal stations are improvements, therefore are real properties
under the Code, and not exempt from the payment of real property tax.
A motion for reconsideration filed by Petitioner-Appellant, was likewise
denied.
HENCE, this appeal.
Subject to the following discussions, WE find for Respondent-Appellee,
City Assessor of Manila. It appearing that the herein appeal was filed before the
effectivity of the New Local Government Code of 1991, this Board shall resolve
the issues in consonance with the provisions of P.D. 464, as amended.
As to the first issue: Whether or not the Local Board of Assessment
Appeals of Manila, the Appellee, herein, had the authority to entertain the
subject appeal, inspite of the non-payment of real property taxes due on the
questioned properties, WE have this to say:
Section 37 of P.D. 464, provides as follows, viz:
“Sec. 37. Effect of Appeal on the Payment of the Real Property Tax. – Appeals on assessments of real property made under the provisions of this Code shall, in no case, suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or city assessor, without prejudice to subsequent adjustment depending upon the final outcome of the appeal.”
In CBAA Case No. 10 (Manila Electric Company vs. BAA of Batangas and
Provincial Assessor of Batangas), it was held that “this provision of law is
explicit and self-explanatory. Collection of the realty taxes as assessed by the
city assessor shall not be suspended by an appeal filed thereunder. While the
law does not contain any express provision that an appeal to this Board may
not be entertained unless the taxes in question are paid as expressly provided
in Section 54 of Commonwealth Act No. 470, the result of the implementation of
the above-quoted provision would substantially be the same. For under the
latter, the protestant-appellant is obligated to pay the realty taxes as assessed
by the city assessor notwithstanding the filing of the appeal. We believe that
Reference: Book VII, pp. 53-76
any other interpretation would defeat or nullify this provision — for if the appeal
were entertained without requiring the protestant-appellant to pay the realty tax
as assessed by the provincial or city assessor the effect would be that the
appeal will have suspended the collection of the said taxes, contrary to the
express mandated of said provision. Any interpretation which would defeat or
nullify a provision is by settled rules of construction to be abhorred and
avoided.”
From the context thereat, Petitioner-Appellant should pay the realty taxes
on the properties in question before this Board may entertain its appeal.
However, as ruled by this Board in CBAA Case No. 69, Fortune Cement
Corporation vs. BAA of Batangas et al., in granting Fortune Cement
Corporation’s alternative prayer that it be allowed to file a surety bond in lieu of
cash which shall guarantee the real property taxes due the government, this
Board believes that the surety bond when approved can serve the same
purpose as the payment of taxes under protest if it will guarantee the payment
of realty taxes due the government.
This Board, therefore, for purposes of the herein appeal, on its own by
reason of its special jurisdiction, may allow Petitioner-Appellant to file the
aforestated surety bond. However, considering that it is a government-owned
and controlled corporation, whose financial standing is duly guaranteed and
subsidized by the government, the filing of the surety bond, in lieu of cash
payment of taxes due, to guarantee the payment of the realty taxes due on the
said property may not be required. It is our considered view that the
presumption of the solvency of the LRTA is guaranteed.
As to the issue of whether or not “carriageways and passenger terminal
stations” are considered improvements under the provisions of the Real
Property Tax Code (P.D. 464), Petitioner-Appellant insisted that the
carriageways and passenger terminal stations are not improvements as
Reference: Book VII, pp. 53-76
contemplated in the Real Property Tax Code, and therefore should not be
assessed as such and declared taxable.
This is untenable.
The records reveal that pursuant to the provisions of Executive Order No.
603, creating and organizing the LRTA, it constructed, maintained and operated
an elevated railway system. For that purpose carriageways were constructed
from a certain point at Baclaran, Pasay City, over and along a national road
(Taft Avenue and Rizal Avenue) to a certain point at Monumento, Kalookan
City, interspaced at regular intervals by a building which houses and serves as
the passenger terminal stations, and linked to the aforesaid buildings are
carriageways. The carriageways are those portions of the elevated railways,
constructed in a U-shape form, of concrete with sidings of concrete and a
roadbed at the center, where two sets of twin rails attached end to end and laid
on crossties, anchored in the concrete roadbed and cushioned by crushed
rocks, and serves as the track where the electric railway cars run or pass along.
It is akin to that of a railroad track, where the train passes.
To remove, separate, repair or replace there rails would eventually stop
the operations of the LRT and will greatly affect the riding public and as a result
they would render the railroad system ineffective. Along these carriageways
and part thereof, a building was erected to house the passenger terminal
station, where the activities of ticketing, loading and unloading of passengers
take place. While the carriageways are not actually embedded in the land, they
are supported by a solid reinforced concrete which serves as the post or
abutment, erected at a regular interval from Baclaran to Kalookan. Said
carriageways are constructed at an A-one engineering specifications and are
immovable. Both the carriageways and the passenger terminal stations are
constructed over a national road so as not to impede the flow of vehicular traffic
below.
Reference: Book VII, pp. 53-76
Article 415, (1) and (3) of the Civil Code of the Philippines which provides
as follows, viz:
“Art. 415 – The following are immovable property:
(1) Lands, buildings, roads and construction of all kinds adhered to the soil:
(2) x x x.
(3) Everything attached to an immovable in a fixed manner in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object.”
classifies the aforementioned properties as immovables, these are real
properties. The Supreme Court in the case of Meralco Securities Industrial
Corporation vs. Central Board of Assessment Appeals, G.R. No. 46245, May
31, 1982, ruled that pipeline system of Meralco Securities is classified as real
property and subject to tax the same being machinery or improvements as
contemplated in the Assessment Law and the Real Property Tax Code and
does not fall within the classes of exempt real property. Section 2 of the
Assessment Law provides that the realty tax is due “on real property, including
land, buildings, machinery, and other improvements” not specifically exempted
in Section 3 thereof. Likewise, Article 415 [1] and [3] provides that real property
may consist of constructions of all kinds adhered to the soil and everything
attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object.
Furthermore, Section 38, P.D. 464, provides as follows:
“Section 38. Incidence of Real Property Tax. – There shall be levied, assessed, and collected in the province, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not herein after specifically exempted.”
There is no question that carriageways and the building housing the
passenger terminal stations are real properties, and under the foregoing
provisions of law the same are not those classes of exempt properties
enumerated under Section 40 of P.D. 464, hence the assessment by
Respondent-Appellee on the said properties in question is believed to be in
accordance with the provisions of the Real Property Tax Code.
Reference: Book VII, pp. 53-76
As to the contention of Petitioner-Appellant that carriageways and
passenger terminal stations being built and/or attached to the road owned by
the national government belongs to the national government and may be
considered as property of the national government, thus exempt from the
payment of real property taxes, in accordance to Section 40(a) of P.D. 464, as
amended, the same is not sustainable under the provisions of the Real Property
Tax Code (P.D. 464). It may be of note that under the provisions of the previous
assessment law, as well as the charter of Manila City, ownership is the test for
real property tax assessments. However, upon the effectivity of P.D. 464,
otherwise known as the Real Property Tax Code, which took effect in 1974, it
changed the basis of real property taxation. It adopted the policy of taxing real
property on the basis of “actual use”, even if the user is not the owner. The
Supreme Court in the case of Nueva Ecija vs. Imperial Mining Co., Inc., L-
59463, November 19, 1982, ruled that P.D. 464,
“ X x x, changed the basis of real property taxation. It adopted the policy of taxing real property on the basis of actual use even if the user is not the owner. (underlining supplied)
Sections 3(a) and 19 of P.D. 464 provides as follows:
“Sec. 3 (a) Actual Use – shall refer to the purpose for which the property is principally or predominantly utilized by the person in possession of the property.”
“Sec. 19 Actual/Use of Real Property as Basis for Assessment – Real Property shall be assessed on the basis of is actual use regardless of where located and whoever uses it.”
The above policy declaration is given substance in various provisions of
the Real Property Tax Code. Thus, Section 40 (a) of P.D. 464, which is quoted
hereinbelow, specifies exemptions from real property tax:
“Section 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 subdivisions and any government owned corporation so exempt by its charter: Provided, however, That this exemption shall not apply to real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise to a taxable person.” (Underlining supplied)
For all intents and purposes therefore, Petitioner-Appellant may be
considered merely as “beneficial user” and under the aforesaid provision of law,
Reference: Book VII, pp. 53-76
the exemption shall not apply, including the land where the properties in
question are constructed.
As to its contention that the LRT is for public use, hence should be
exempt from the payment of real property taxes, the same cannot be
countenanced.
The term public works for public service or use, must be viewed in the
light of the ruling of the Supreme Court in the case of the City of Cebu, vs. The
NAWASA, L-12892 April 30, 1960, as follows:
“The term “public works for public service” must be interpreted, following the principle of ejusdem generic, in the concept of the preceding words: provincial roads, city streets, municipal streets, the squares, fountains, public waters and promenades – under Article 424 of the New Civil Code – which are used freely by all. Without distinction. Hence, if the public works is not for free public service, it is not within the purview of the first paragraph, but of the second paragraph of Article 424, and consequently, patrimonial in character. A municipal water system designed to supply water to the inhabitants for profit is a corporate function of the municipality.” (Mendoza vs. De Leon, 33 Phil. 508, citing Omaha Water Co. vs. Omaha 12 L.R.A. (N.S.) 736; 77 C.C.A. 267; 147 Fed. 1; Jodson vs. Borough of Winsted, 80 Conn. 834; 15 L.R.A. (N.S.), 91).
“X x x. The flaw in appellant’s contention that system is a public works for public service is due to an apparent misapprehension that because the System serves the public is not necessarily for public service. The contention overlooks the fact that only those of the general public, who pay the required rental or charge authorized and collected by the System, do make use of the water. In other words, the System serves all who pay the charges. It is open to the public (in this sense, it is public service), but upon the payment only of a certain rental x x x. (Underlining supplied)
Accordingly, the LRTA was created to serve the needs of the riding
public, who pays the required rates for the use of the Light Rail Transit System
from which the Authority derives material gains. It is in this concept that the
LRTA may not be considered to be engaged in purely governmental or public
service which does not qualify the LRTA for tax exemptions.
Finally, Petitioner-Appellant maintains that being a government owned
entity, created and organized under Executive Order No. 603, it should be
exempt from the payment of real property taxes. However, a close scrutiny of
the provisions of the aforesaid law discloses that nowhere is there a provision
exempting Petitioner-Appellant from payment of real property taxes. Section 8,
Article 4 of Executive Order No. 603, titled Tax and Duty Exemptions, wherein
Petitioner-Appellant banks its exemptions, provides as follows:
Reference: Book VII, pp. 53-76
“Sec. 8 Equipment, Machineries, Spare Parts and Other Accessories and Materials. – The importation of equipment, machineries, spare parts, accessories, and other materials, including supplies and services, used directly in the operations of Light Rail Transit System not obtainable locally on favorable terms, out of any funds from the authority including, as stated in Section 7 above, proceeds from foreign loans, credits or indebtedness, shall, likewise, be exempted from all direct and indirect taxes, custom duties, fees, imposts, tariff duties, compensating taxes, wharfage fees and provisions of existing laws to the contrary notwithstanding.”
The abovecited law allows only certain tax and duty exemptions and does not
clearly and expressly provide the grant of real property tax exemptions on its
real properties. While it grants certain tax and duty exemptions, it does not
include real property taxes.
In fact LRTA, paid its real property taxes as to its lands, buildings and
machineries and other real properties, except the properties in question.
(Additional Exhibits: Certificate of Payment, Folder 2, BTAA Records).
Accordingly, therefore, LRTA under its charter is a taxable entity with
respect to real property taxes. There is no cogent reason to conclude that LRTA
is exempt from realty tax when the law creating it does not provide for such
exemptions, with respect to real property taxes.
To sustain its claim for tax exemptions, Petitioner-Appellant submitted as
additional evidence the letter of Acting Secretary of Finance Ms. Juanita D.
Amatong, which in effect concurs with the opinion of the Office of the
Government Corporate Counsel, viz:
“x x x. With regard to the issue on jurisdiction over real property taxes, we concur to the opinion of the Office of the Government Corporate Counsel (OGCC) that LRT structures should not be subjected to real estate taxes inasmuch as they are similar in nature to railroads and are, therefore, public property. Since the matter is now pending appeal with the CBAA, which is the proper tribunal under Section 229 (c) of the Local Government Code of 1991, we suggest that we wait for the decision of CBAA. The Department of Finance has jurisdiction only over claims for refund of real property tax payments.” (Exhibit “A” for Appellant, Records).
In effect, from the context of the said letter, the Acting Secretary of
Finance merely agrees with the opinion of the OGCC which in this particular
case is the legal counsel of Petitioner-Appellant. However, she acknowledges
in the aforesaid letter that the final disposition of the matter behooves upon this
Reference: Book VII, pp. 53-76
Board. Her opinion is not binding on this Board, being an independent tribunal
clothed and entrusted with the specific jurisdiction to decide the issues at hand.
It should be noted that additional exhibits submitted by Petitioner-
Appellant to bolster its theory that it is exempt from the payment of real property
taxes do not justify its allegations. The need therefore to discuss the relevancy
of these additional exhibits is believed not necessary.
To recapitulate, the findings of this Board are as follows:
(a) Carriageways and passenger terminal stations are real properties under the provisions of the Real Property Tax Code:
(b) Actual use of the real property shall be the basis for realty tax assessment and not ownership;
(c) It is not for public use or public service, its use is limited to the public who can afford to pay the charges of fares imposed and collected by LRTA; and
(d) The charter creating the LRTA does not so provide realty tax exemption.
WHEREFORE, in view of the foregoing, the decision of the Board of
Assessment Appeals of Manila, declaring subject properties as taxable, is
hereby affirmed in toto and that the herein appeal of the LRTA is hereby
dismissed for lack of merit.
SO ORDERED.
Manila, Philippines, October 15, 1994.
(Signed) MARGARITA G. MAGISTRADO
Chairman
(Signed) ELEANOR A. SANTOS
Member
(Signed) ALFONSO M. MEDADO
Member
Reference: Book VII, pp. 53-76