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