Republic of the Philippines
CENTRAL BOARD OF ASSESSMENT APPEALS 7th Floor, EDPC Building, BSP Complex Roxas Boulevard, Manila
PFIZER, INC.,
Petitioner-Appellant,
CBAA CASE NO. L-44 – versus –
THE LOCAL BOARD OF ASSESSMENT APPEALS OF THE CITY OF PASIG,
Appellee,
– and –
THE CITY OF PASIG, CITY TREASURER OF PASIG, and THE CITY ASSESSOR OF PASIG.
Respondents-Appellees.
x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x
D E C I S I O N
This is an appeal pursuant to Section 229 (c) pf Republic Act No. 7160,
otherwise known as the Local Government Code of 1991 (“LGC”) and Rule IV,
Section 2 of the Rules of Procedure Before the Central Board of Assessment
Appeals (the “Rules”) seeking to reverse and set aside the Order dated 30 July
2003 of the Appellee LBAA dismissing for lack of jurisdiction, LBAA Case No.
01-2003 entitled “Pfizer, Inc., Petitioner v. City of Pasig, City Treasurer of Pasig
and the City Assessor of Pasig, Respondents”, concerning Petitioner-
Appellant’s appeal from the denial by Respondent-Appellee City Assessor of
Petitioner-Appellant’s request for suspension of payment of real property taxes
on real properties that are no longer actually used by Petitioner-Appellant on
account of the closure and cessation of operations of its plant located at Bgy.
Ugong, Pasig City (“Pasig Plant”)
Prior to its merger with Petitioner, Warner Lambert Philippines, Inc.
(“Warner Lambert”) owned certain buildings and other improvements situated at
the Pasig Plant and covered by Tax Declaration Nos. E-030-03274, E-030-
03275, E-030-03276, E-030-03277 and E-030-03278, E-030-03280 (“the
Reference: Book XII, pp. 104-115
Subject Properties”). Copies of said tax declarations are attached as Annexes
“A”, “A-1”, “A-2”, “A-3”, “A-4”, and “A-5” hereof.
Sometime in October 1999, Warner Lambert discontinued the
manufacturing operations of the Pasig Plant. Warner Lambert eventually
decided to close down altogether the Pasig Plant.
On January 18, 2001, Petitioner merged with Warner Lambert, with
Petitioner as the surviving entity.
Consequently, all of the assets and liabilities of Warner Lambert including
the Subject Properties, were deemed transferred to and absorbed by Petitioner
as the surviving entity.
Notwithstanding the closure of the Pasig Plant, Warner Lambert and
thereafter Petitioner, following its merger with Warner Lambert, continued to pay
real property taxes on the Subject Properties for the period from the 4th quarter
of 1999 up to the 3rd quarter of 2002.
Believing that it had been erroneously paying real property taxes on the
Subject Properties notwithstanding the cessation of operations and closure of
the Pasig Plant, Petitioner wrote a letter dated December 18, 2002 to the
Respondent City Assessor requesting that the Subject Properties be transferred
from the assessment roll to the exempt roll and not be subjected to the payment
of real property taxes during the period of non-use.
Pending resolution of its request for suspension of payment of real
property taxes on the Subject Properties, Petitioner paid under protest the real
property tax supposedly due for the 4th quarter of 2002 on December 20, 2002
in the aggregate amount of P222,412.73.
By way of reply to Petitioner’s letter-request dated December 18, 2002,
the Respondent City Assessor, in a letter dated January 2, 2003 (copy of which
was received by Petitioner only on January 9, 2003), denied Petitioner’s request
for suspension of payment of real property taxes on the Subject Properties.
Reference: Book XII, pp. 104-115
Following the denial, the Petitioner-Appellant, on March 10, 2003 filed a
petition under Section 226 of the Local Government Code of 1991 praying that
an Order be issued by the Local Board of Assessment Appeals directing the
Respondent City Assessor of Pasig City to drop the properties under Tax
Declarations Nos. E-030-03274; E-030-03275; E-030-03276; E-030-03277; E-
030-78 and E-030-03280 from the Assessment Roll and transfer the same to
the Exempt Roll; and the City Treasurer of Pasig City to refund the taxes paid
under protest on the same properties or credit the amount to the future tax
liability of the petitioners.
On July 30, 2003, the Local Board of Assessment Appeals of Pasig City
dismissed the petition for lack of jurisdiction.
Hence, this appeal.
The issues set forth in this appeal are as follows:
I
WHETHER OR NOT THE APPELLEE LBAA HAS JURISDICTION
OVER THE ISSUES RAISED BY THE APPELLANT IN ITS ORIGINAL
APPLICATION FOR REVIEW.
II
WHETHER OR NOT THE SUBJECT PROPERTIES THAT ARE NO
LONGER USED BY PETITIONER-APPELLANT DUE TO THE CESSATION
OF MANUFACTURING OPERATIONS BE SUBJECTED TO THE REAL
PROPERTY TAX DURING THE PERIOD OF NON-USE.
Issue No. I
The Appellee Local Board has jurisdiction.
Under Section 1 of Rule IV of the Rules of Procedure Before the Local
Boards of Assessment Appeals, the Local Board shall have original jurisdiction to
hear and decide appeals of owners/administrators of real property from the
action of the Provincial or City Assessors, or the Municipal Assessors in the
Metropolitan Manila Area, in the assessment of their real properties, and from the
action of the Provincial or City Treasurers, or Municipal Treasurers in the
Reference: Book XII, pp. 104-115
Metropolitan Manila Area, regarding collection of real property taxes, special
levies, or other real property taxes under Title Two, Book II of R.A. No. 7160.
Section 4 of Rule V further provides, “What may be appealed. – Any action
of the Provincial, City or Municipal Assessor in the assessment of real property,
and any action or inaction of the Provincial or City Treasurer, or Municipal
Treasurer, on the taxpayer’s claims for refund of taxes paid under protest, or on
claims for reduction or adjustment of taxes paid or for tax credits on illegally or
erroneously collected realty taxes and such other real property taxes or special
levies under Title Two, Book II of R.A. 7160, may be appealed to the Local Board
concerned.”
Section 30 of the Real Property Tax Code, (now section 226 of R.A. 7160,
otherwise known as the Local Government Code of 1991) directs every Local
Board of Assessment Appeals to entertain and pass upon application for review
of any owner who is not satisfied with the action of the Provincial or City
Assessor on the assessment of his property. In other words, the Local Board
may review any action taken by the Provincial or City Assessor in the
assessment under appeal. Since the law does not distinguish and use the all
embracing words “the action”, this should be interpreted to include all the acts of
the assessor leading to the questioned assessment, such as those which give
rise to questions of law.
“Where administrative boards or offices are established by law for the
review and correction of assessments, the remedy thus provided is exclusive,
and is the only one available in the first instance, for the purpose of granting
relief falling within the powers conferred on such administrative agencies, unless
an alternative procedure, judicially or otherwise, is expressly made available as a
method of reviewing and correcting assessments. (Codman v. Assessors of
Westwood, 35 N.E. 262). We find no such alternative procedure, judicially or
otherwise, expressly made available in Real Property Tax Code as a method of
Reference: Book XII, pp. 104-115
reviewing and correcting assessments. (Manila Medical Services v. BAA of
Manila and City Assessor, CBAA Case No. 86)
The procedure made available to the taxpayer under R.A. 7160, to the
exclusion of all others, judicially or otherwise, is explicitly provided for under
section 4, Rule V of the Rules of Procedure Before the Local Boards of
Assessment Appeals, when it provides “any action of the Provincial, City, or
Municipal Assessor in the assessment of real property, and any action or inaction
of the Provincial or City Treasurer, or Municipal Treasurer, on taxpayer’s claim
for refund of taxes paid under protest, or on claims for reduction or adjustment of
taxes paid or for tax credits on illegally or erroneously collected realty taxes and
such other real property taxes or special levies under Title Two, Book II of R.A.
7160, may be appealed to the Local Board.
As correctly pointed out by the appellant, there is no provision under R.A.
7160 that confers upon the regular courts or any administrative body or agency
other than the LBAA the power to review any action of the assessor relative to
the assessment of real property. The appellees cannot find recourse to Section
64 of the Real Property Tax Code for it is deemed repealed by R.A. 7160. There
is no analogous provision in R.A. 7160 governing real property taxation that
allows a court to impeach or entertain a suit assailing the validity of a tax
assessment. Likewise, the appellees cannot invoke Section 195 of the Local
Government Code for that provision applies only to deficiency local taxes, fees
and charges. The real property tax is governed by the Title II, Book II of the Local
Government Code.
The only issue in this appeal is whether or not certain real properties no
longer used by reason of closure or cessation of business operations, should be
transferred from the taxable rolls to the exempt rolls by the assessor. The LBAA
must be reminded that they have, not only the power but the duty to pass upon
application for review of assessments considered erroneous, illegal, or unjust by
property owners/taxpayers as a result of the action or inaction of the assessors
Reference: Book XII, pp. 104-115
and/or the treasurers. Under the doctrine of primacy of administrative remedies, it
is the local boards who has primary jurisdiction over these issues. As such the
local boards must address these issues squarely and not hide behind imagined
or far fetched “propriety and validity reservations.” In other words, they must
perform their duty and grab the bull by the horns.
Issue No. 2
Finding that the Local Board of Assessment Appeals of Pasig City has
jurisdiction over the original petition for review, let us now proceed to the next
appealed issue.
It is admitted and made clear by the appellant in its pleadings that the
subject properties are not included in the list of exempt properties enumerated in
section 234 of the Local Government Code. However, the appellant is banking
on several opinions of the Bureau of Local Government Finance (BLGF) of the
Department of Finance specifically in the Pilipinas Shell Petroleum Corporation
(1988) and Marcopper cases (1997) which opined that “when machineries are no
longer used for its (sic) purpose by reason of closure or cessation of production,
the same should be transferred from the taxable roll to the exempt roll and not be
subjected to the payment of real property taxes during the period of non-use.”
At the outset, let it be stated that while this Board accords utmost respect
and great weight to the opinions of the BLGF, it is not in anyway controlled or
influenced by that office. And let it be cited that the BLGF once opined that “the
fact that a certain company had ceased to operate, is not a ground for the
suspension of payment of the real property taxes due on the buildings and
machineries of said company, for so long as the said buildings and machineries
are still affixed and intact, and useful.” (Feb. 16, 1976) But this time, let it be of
record that we are in full concurrence with the latest opinion of the BLGF. The
basis or rationale for this conclusion can be found in the definition of machineries
in Article 290(o) of the implementing rules and regulation of R.A. 7160, which
Reference: Book XII, pp. 104-115
prescribed two elements or criteria before machineries and other physical
facilities for production can be classified as real property, to wit:
1. They are actually, directly, and exclusively used to meet the needs of a
particular industry, business, or activity; and
2. By their very nature and purpose are designed for, or necessary for
manufacturing, mining, logging, commercial, industrial or agricultural
purposes.”
The absence, or loss of these elements will deprive the object of its
character as real property, hence no longer subject to real property taxation.
This must be emphatically pointed out because the BLGF, the CBAA, even
the Department of Finance, cannot, on its own, created or grant a tax exemption.
That power is exclusive vested in Congress. That is the reason why those who
claim to be tax-exempt must point to a positive constitutional or statutory grant
before the special privilege can be availed.
Unfortunately for the appellant, the cited opinions of the BLGF which the
CBAA fully subscribed, and whose basis is the correct interpretation of a
statutory provision (section 199(o), R.A. 7160) covers only machineries. There is
no mention of buildings in those opinions. In real property taxation, while both
buildings and machineries are considered taxable improvements on the land,
these two kinds of real properties are listed, appraised, assessed and recorded
differently and distinctly. Buildings are usually assigned lower assessment levels
than machineries, hence lower taxes. On the other hand, machineries are given
a higher rate of depreciation than buildings, hence a shorter life span and
taxability. All these factors affect substantially the amount of tax imposed on
these properties. The assessors cannot just change these without inviting
sanctions for violating existing assessment rules and regulations more so if it will
render a previously taxable property exempt. As brilliantly expounded by both the
appellant and appellees, tax exemptions cannot be implied or inferred. It must
sprung from a clear and unambiguous organic or statutory grant.
Reference: Book XII, pp. 104-115
There were at least two instances in the past that buildings were exempted
from the payment of the real property tax. Under PD 535, buildings and other
improvements affixed on hands of a registered tourism enterprise, are exempt
from payment of the real property tax for the first five (5) years from the start of
operations. The other instance, under PD 745, are those buildings “owned by
domestic corporations or partnerships with at least three hundred (300)
employees or workers, which are exclusively used for housing their employees
ad workers shall enjoy exemption from payment of real property taxes.” This tax
exempting privilege was among those withdrawn by R.A. 7160.
The point of these citations is to drive home the import of the above-
mentioned principles of statutory construction as applied to tax exemptions. That
is, if it is the intention of the lawmaking authority to exempt buildings and other
installations during the period of non-use, it could have expressed that intention
in the same simple, direct and unequivocal terms.
The contention of the appellant that these buildings are physical
installations and/or appurtenant service facilities, hence machineries, holds no
water. In the Batanes case, the Department of Finance (March 6, 1995) held that
the compressor house, substation building and control house owned by
NAPOCOR, may be considered exempt from payment of real property taxes
pursuant to section 234(c) of the LGC, provided that the same are actually,
directly, and exclusively used in the generation and supply of electric power in
that region.”
The appellant cannot find solace in this opinion simply because both
Warner Lambert and Pfizer are not government owned or controlled corporations
engaged in the generation and supply of electric power. Besides the properties
sought to be equated with machineries are warehouses, office buildings,
canteen, etc., whose nature and purpose are not designed for or necessary to
manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
Reference: Book XII, pp. 104-115
This is the very same reason advanced by the appellee assessor of Pasig
for denying the request of appellant to render exempt/suspend the realty tax
payments of these subject properties: these properties are buildings and not
machineries. Under the LGC, the determination of whether a property is taxable
or exempt is vested in the assessor. It will be noted that prior to its request for tax
suspension/exemption, the appellant’s predecessor made a request to the
appellee City Assessor (Annex “A”) for the cancellation of certain tax declarations
in the name of Warner Lambert, Philippines, Inc. “due to the closure of our plant
operations” at Eagle St. Pasig last October, 1999. The letter request dated March
8, 2000 was favorably acted upon by the appellee assessor so much so that on
March 17, 2000, Warner Lambert received several Notices of Cancellation (see
Annexes “B” to “V”) from the appellee assessor. These cancelled properties
consist of industrial machineries. It will be observed that the combined
assessments of the machineries were far bigger than that of the properties
subject of this appeal. When tax declarations covering real properties subject to
tax are cancelled, said properties cease to be taxable. The appellee assessor in
the exercise of discretion obviously granted to the machineries what was denied
to the buildings of the appellant.
It has been the practice of the CBAA not to interfere with that exercise,
unless grave abuse has been alleged and proven. This Board recognizes the
presumption of accuracy of the assessment, and that a public officer has
correctly and regularly performed his duties and functions until the contrary is
proven. (Tirol vs. BAA of Capiz and Prov. Assessor of Capiz, CBAA Case No.
52)
Be that as it may, this Board, even in the absence of allegation so much
more proof of grave abuse of discretion to overcome the said presumption, in our
desire to determine the ultimate facts and ascertain the truth, decided to take the
extra mile. On 27 February 2004, this Board together with the representatives of
Reference: Book XII, pp. 104-115
both the appellant and the appellees, conducted an ocular inspection of the
subject properties located in Barangay Ugong, Pasig City.
After inspecting the premises and the subject properties, this Board without
reservation and fear of contradiction cannot help but conclude that the
properties, consisting of warehouses (bodega), office building, air conditioning,
factory building, canteen, guard house, storage, mezzanine, power and boiler
houses cannot by any stretch of the imagination be considered machineries.
They are buildings, pure and simple. They cannot be considered physical
installation for production or service facilities actually, directly and exclusively
used in the manufacture of confectionaries (candies) and medical drugs. The
very structures speak for themselves. “Res Ipsa Loquitur” as the maxim goes,
and it finds no better application as in this appeal.
The buildings cannot be considered “idle or abandoned”. The presence of
security guards and maintenance men complete with water and electric facilities
plus other amenities negate that assertion.
Finally, it is too late in the day to question the kind or type of improvement
reflected in the tax declarations as determined by the assessors after the
appellant and its predecessor in interest had accepted and made those tax
declarations the basis of their religious and voluntary tax payments. The time
allowed by law to brand the assessments as erroneous had lapsed. The
assessment had become final and the right to collect the tax on the part of the
local government had become absolute. As of now, only a ruling from the highest
court applicable to this particular situation or a new law exempting industrial
buildings during the period of non-use due to cessation/closure of business
operations can help the appellant in its predicament.
WHEREFORE, premises considered, the instant appeal is hereby
dismissed and the reliefs sought, denied.
So Ordered.
Manila, Philippines, April 19, 2005.
Reference: Book XII, pp. 104-115
(Signed) CESAR S. GUTIERREZ
Chairman
(Signed)
ANGEL P. PALOMARES Member
(Signed) RAFAEL O. CORTES
Member
Reference: Book XII, pp. 104-115