Republic of the Philippines
CENTRAL BOARD OF ASSESSMENT APPEALS
Manila

NATIONAL POWER CORPORATION,
Petitioner-Appellant,
CBAA CASES NOS. L-52 & 81
-versus- (LBAA Cases Nos. P-03-001 & P-06-001)
Province of Pangasinan
THE LOCAL BOARD OF ASSESSMENT APPEALS OF THE PROVINCE OF PANGASINAN,
Appellee,

-and-

THE PROVINCE OF PANGASINAN AND THE PROVINCIAL ASSESSOR OF PANGASINAN,
Respondents-Appellees.
x————————————————/

D E C I S I O N
(Consolidated Cases)

Before us are appeals from the Local Board of the Province of Pangasinan’s (the “Local Board”) Decisions in CBAA Cases Nos. P-03-001 and P-06-001, now docketed as CBAA Case No. L-52 and L-81, respectively. By agreement of the parties, CBAA Cases Nos. L-52 and 81 are now consolidated per Order of this Board issued on April 2, 2009.

Antecedent Facts for:
CBAA CASE NO. L-52
(LBAA Case No. P-03-001)

As can be gleaned from the records, the antecedent facts of this case are as follows:
1. On May 20, 1994, CEPA Pangasinan Electric Limited (CEPA), now Mirant Sual Corporation (“Mirant” or “MSC”), pursuant to Republic Act No. 6597, as amended, otherwise known as “An Act Authorizing the Financing, Construction and Maintenance of Infrastructure Projects by the Private Sector, and for other Purposes” or the Build-Operate-Transfer (“BOT”) Law, entered into an Energy Conversion Agreement (“ECA”) with petitioner-appellant for the construction, operation and maintenance of the Sual Coal-Fired Thermal Power Plant (“SCFTPP”).

2. On 17 September 2003 Mirant received a Notice of Assessment from the Municipal Treasurer of Sual, Pangasinan with respect to the buildings, machineries, and equipment situated within the SCFTPP site. Mirant referred the letter to petitioner-appellant.

3. NPC filed with the LBAA its Petition for Exemption on 16 October 2003. On 28 November 2003, it received an Answer with Motion to Dismiss from respondent-appellee Province of Pangasinan. Petitioner-appellant then filed its Reply to the Answer with Motion to Dismiss dated 08 December 2003.

4. A preliminary Conference was held on 08 January 2004. On the same date, the LBAA undertook an ocular inspection of the SCFTPP site.

5. On 19 February 2004, the parties moved to submit the case for the resolution of the Honorable LBAA.

6. On 23 April 2004, petitioner-appellant NPC received the questioned Resolution of the LBAA dated 15 April 2004.

7. The dispositive portion of the questioned Resolution reads:

“It has been found and established that MSC, a private corporation, is the actual, direct and exclusive and beneficial owner and user of the power plant, buildings, machineries and equipment and NOT NPC. Hence, the subject machineries does (sic) not come under the coverage and operation of Section 216 of R.A. 7160 in relation to Article 307 of the Rules and Regulations Implementing the Local Government Code of 1991. Therefore, a re-classification is in order.

WHEREFORE, the Petition is hereby DISMISSED FOR LACK OF MERIT.”

NPC’s Appeal dated May 18, 2004, was received by this Board on May 21, 2004. In it, NPC assigned the following errors, namely:
I. The Honorable LBAA erred in ruling that petitioner-appellant NPC waived its real property tax exemption when it failed to file the proof of exemption with the Provincial Assessor of Pangasinan within thirty (30) days from the date of declaration of the real property as required under Section 206 of the Local Government Code.

II. The Honorable LBAA erred in ruling that the payment under protest of real property tax is a condition precedent for the filing of the Petition for Exemption.

III. The Honorable LBAA failed to interpret the tax exemption under Section 234(c) of the LGC in harmony with the BOT Law and the NPC Charter and thus ruled that petitioner-appellant NPC is not the owner and user of the Sual Power Plant.

IV. The Honorable LBAA’s reliance on the case of NPC vs. City of Cabanatuan is misplaced.

V. The Honorable LBAA erred in applying to petitioner-appellant’s case the rule that tax exemptions are strictly construed against the taxpayer.

Anent the first “error”, NPC argued that it is clear from the plain language of Section 206 that the 30-day period within which to submit proof of tax exemption is only for the purpose of preventing the assessor from listing the property in the assessment roll. Proof of exemption may be submitted at any time to drop the property from the assessment roll.

On the second “error”, NPC states that Section 252 of the LGC is not applicable because the issue by NPC is not the reasonableness of the amount of the assessment but the legality of the assessment; that “payment under protest” is inconsistent with NPC’s remedy under Section 253 to refund illegally and erroneously paid taxes for the preceding years.”

On the third “error”, NPC says that, in BOT arrangement, the project owner is always the government or a government-owned or controlled corporations, which NPC is in this case; that the power project owner can never be a private person; that a power plant built under a BOT arrangement is considered owned and used by NPC for purposes of Section 234(c) of the LGC; that NPC has the beneficial ownership over the machineries and equipment in question although naked ownership thereof is retained by Mirant until the latter is fully paid; that, as project owner, NPC exercises all the attributes of ownership; that the tax exemption under Section 234(c) of the LGC is a usage exemption, hence, beneficial ownership rather than naked ownership, is controlling; that Mirant is a financier holding naked title to the SCFTPP by way of security and a contractor for services for the construction and operation of the SCFTPP for the sole account of NPC.

On the fourth “error”, NPC says that the LBAA’s reliance on the case of NPC vs. City of Cabanatuan is misplaced since the issue involved in that case is the authority of the City to impose franchise tax in view of the withdrawal of tax exemption under Section 193 of the LGC; that the withdrawal of the exemption from real property tax of government-owned and controlled corporation(s) is governed by the last paragraph of Section 234 of the LGC.

On the fifth “error”, NPC says that the strict construction of tax exemptions cannot apply to NPC because it is a government-owned and controlled corporation rendering an essential public service.

NPC prays that this Board:

1) SET ASIDE and REVERSE the Resolution of the Honorable LBAA of the Province of Pangasinan dated 15 April 2004;

2) EXEMPT the petitioner-appellant with respect to the real estate taxes on machineries and equipment located in the Sual-Coal Fired Thermal Power Plant site; and

3) DIRECT the petitioner-appellant to pay real estate taxes subject to the assessment level of ten percent (10%) with respect to other real estate properties located in SCFTPP site which are classified as special classes of property.

The Answer from Respondent-Appellee Province of Pangasinan dated June 29, 2004 was received by this Board on July 9, 2004.

As to the first and second “errors” raised by NPC, Respondent-Appellee Province of Pangasinan argues that NPC should have paid the real property tax under protest as required under Section 252 of the LGC.

As to the third, fourth and fifth “errors” raised by NPC, Respondent-Appellee Province of Pangasinan says that never was there any mention of the phrase BENEFICIAL usage in the cases cited by NPC; that usage of exemption is contemplated on the basis of actual, direct and exclusive use; that Mirant is the OWNER and the actual, direct and exclusive USER of the machineries and equipment involved; and that this issue had already been resolved by the Central Board of Assessment Appeals in CBAA Case No. L-29 wherein NPC filed a similar Petition for Exemption with the LBAA against the Municipality of Pagbilao.

NPC’s Memorandum dated 10 October 2004 and filed with this Board on October 11, 2004 basically contained the same assignment of errors and arguments contained in its Appeal.

The Memorandum for Respondent-Appellee Province of Pangasinan dated 10 October 2004 and received by this Board on October 27, 2004 also contained the same arguments contained in its Answer.

Antecedent Facts for:
CBAA CASE NO. L-81
(LBAA Case No. P-06-001)

This case is an extension of LBAA Case No. P-03-001 (now CBAA Case No. L-52). The same parties are involved, notwithstanding the change of the proponent’s name from “CEPA Pangasinan Electric Limited” to “Team Energy Power Holdings Corporation” (Team Energy). The same real properties involved in LBAA Case No. P-03-001 (now CBAA Case No. L-52 are also involved in this case (LBAA Case No. P-06-001 [now CBAA Case No. L-81]). The only difference lies in the periods for which real property taxes are applicable.

The records show that, in a letter dated February 20, 2006 and addressed to “The Manager, Mirant Sual, Pangasinan” and “The President NPC, Agham Road, Diliman, Quezon City”, the Municipal Treasurer of Sual, Pangasinan informed the addressees of the “basis and reference pertaining to the payment of Real Properties of NPC lots and improvements of Sual Coal-Fired Thermal Power Plant” which “basis and references” were a copy of the “Updated Notice of Assessment and Tax Bill” and the “Notice of Payment of Real Property Tax for Calendar year 2006.”

On February 21, 2006, Mirant/Team Energy received a copy of the abovementioned letter which was, in turn, referred by Mirant/Team Energy to NPC on February 27, 2006.

On April 22, 2006, the LBAA received NPC’s Petition dated April 11, 2006. NPC prayed that an Order be issued by the LBAA:
1. Recalling the Updated Notice of Assessment and Tax Bill and/or Notice of Payment of Real Property Tax;

2. Declaring the real properties, equipment and/or machineries covered by the Updated Notice of Assessment and Tax Bill and/or Notice of Payment of Real Property Tax as EXEMPT pursuant to Section 234 of R.A. 7160 or in the alternative, the same be declared as SPECIAL CLASS pursuant to Section 216 of R.A. 7160 and the depreciation allowance for machineries and equipment be recognized; and

3. Declaring the anti-pollution devices/facilities which are included in the Updated Notice of Assessment and Tax Bill and/or Notice of Payment of Real Property Tax as EXEMPT.”

On July 18, 2007, the Local Board issued an Order LBAA Case No. P-06-001, the dispositive portion of which reads:
“FINALLY, the Board takes cognizance of the fact that CEPA PANGASINAN ELECTRIC LIMITED, the Mirant and NAPOCOR willingly and voluntarily paid the real property taxes on the machineries and equipment of Mirant in the past. Hence, NAPOCOR is now stopped and barred from claiming exemption.

WHEREFORE, the Petition is hereby DENIED FOR LACK OF MERIT.”

In an Appeal (Petition) dated August 7, 2007 and received by this Board on August 16, 2007, Petitioner-Appellant NPC admitted that it received a copy of the LBAA Order on July 27, 2007. In said Appeal/Petition, NPC states:
(a) that Team Energy is not the proper party that should be assessed of and be made liable for the payment of the real property tax. If any, covering the machineries and equipment located within Sual Power Station;

(b) that “it is worth stressing that Article II.1 of the ECA provides that:

‘NPC shall be responsible for the payment of x x x (ii) all real estate taxes and assessments, rates and other charges in respect of the site, the Ash disposal Sites, the Pipelines, the buildings and improvements thereon, the Infrastructure and the Power Station.’”

(c) that NPC, apart from being the beneficial owner of the Power Station, is actually, directly and exclusively using the same so that the real properties subject of the Updated Notice of Assessment are exempt from real property tax pursuant to Section 234(c) of the LGC;

(d) that, in the event that the real properties included in the Updated Notice of Assessment are indeed taxable, “depreciation allowance for machineries and equipment pursuant to Section 225 of R.A. 7160 was not considered by the respondents-appellees”; and

(e) that, in the event that the real properties included in the Updated Notice of Assessment are indeed taxable, the same should fall under the classification of Special Classes of Real Property pursuant to Section 216 of R.A. 7160.

To recapitulate, the “errors” assigned by Petitioner-Appellant National Power Corporation (NPC, for brevity) in its petition appealing the LBAA’s decision in LBAA Case No. P-03-001 (now CBAA Case No. L-52) are as follows:
I. The Honorable LBAA erred in ruling that petitioner-appellant NPC waived its real property tax exemption when it failed to file the proof of exemption with the Provincial Assessor of Pangasinan within thirty (30) days from the date of declaration of the real property as required under Section 206 of the Local Government Code.

II. The Honorable LBAA erred in ruling that the payment under protest of real property tax is a condition precedent for the filing of the Petition for Exemption.

III. The Honorable LBAA failed to interpret the tax exemption under Section 234(c) of the LGC in harmony with the BOT Law and the NPC Charter and thus ruled that petitioner-appellant NPC is not the owner and user of the Sual Power Plant.

IV. The Honorable LBAA’s reliance on the case of NPC vs. City of Cabanatuan is misplaced.

V. The Honorable LBAA erred in applying to petitioner-appellant’s case the rule that tax exemptions are strictly construed against the taxpayer.

On the other hand, NPC’s Petition appealing the LBAA’s decision in LBAA Case No. P-06-001 (now CBAA Case No. L-81) does not contain a formal assignment of errors. NPC, however, “prayed” that an Order be issued by this Board:
1. Recalling the Updated Notice of Assessment and Tax Bill and/or Notice of Payment of Real Property Tax;

2. Declaring the real properties, equipment and/or machineries covered by the Updated Notice of Assessment and Tax Bill and/or Notice of Payment of Real Property Tax as EXEMPT pursuant to Section 234 of R.A. 7160 or in the alternative, the same be declared as SPECIAL CLASS pursuant to Section 216 of R.A. 7160 and the depreciation allowance for machineries and equipment be recognized; and

3. Declaring the anti-pollution devices/facilities which are included in the Updated Notice of Assessment and Tax Bill and/or Notice of Payment of Real Property Tax as EXEMPT.

On April 2, 2009, this Board issued an Order stating that, as stipulated by the parties, the two cases (L-52 and L-81) were consolidated and that the parties were to submit their respective Position Papers within sixty (60) days from receipt of said Order.

Respondent-Appellee Province of Pangasinan, through its Provincial Legal Office, submitted to this Board on June 17, 20009 its Position dated June 4, 2009. Said Position Paper adopted in toto its Memorandum submitted under CBAA Case No. L-52.

In addenda, cited the case of FELS Energy, Inc. v. The Province of Batangas and The Office of the Provincial Assessor of Batangas, G.R. No. 168557 and NPC v. Local Board of Assessment Appeals of Batangas, in his capacity as the Assessor of the Province of Batangas, and the Province of Batangas, represented by its Provincial Assessor, G.R. No. 170628 and National Power Corporation, Petitioner, vs. CBAA, LBAA of La Union, et al. G.R. No. 171470.

Petitioner-appellant NPC submitted its Position Paper dated July 6, 2009 to this Board on July 14, 2009. NPC likewise repleads all the allegations in its Memorandum filed in L-52 on 8 January 2007.

NPC re-enumerated the “issues” (A to I) in its appeals and memoranda. Further, NPC says that “In addition to the foregoing, the following issues must be resolved:
“J. Whether or not the respondent Province can seek and the Honorable Board can grant affirmative relief to respondent Province and order NPC to pay real property tax on the Power Plant based on an 80% assessment level.

“K. Whether or not the respondent Province can impose an 80% assessment level for the taxable periods covered by the consolidated Petitions.

“L. Whether or not the ruling in NPC vs. CBAA, G.R. 171470, is applicable.

“M. Whether or not the consolidated decision in Fels Energy, Inc. vs. The Province of Batangas, G.R. 168557, and NPC vs. LBAA of Batangas, G.R. 170628, is applicable to the consolidated Petitions.

“N. Assuming that the Power Plant is taxable, whether or not the payment by TeaM extinguished the real property tax assessments.”

FINDINGS OF THIS BOARD

The errors raised by Petitioner-Appellant in its Appeal in Case No. L-52 and in its Petition in Case No. L-81 are hereby consolidated into the following issues, to wit:
1. Whether or not NPC waives its real property tax exemption when it failed to file the proof of exemption with the Provincial Assessor of Pangasinan within thirty (30) days from the date of declaration of the real property as required under Section 206 of the Local Government Code;

2. Whether or not payment under protest of real property tax is a condition precedent for the filing of the Petition for Exemption;

3. Whether or not the Honorable LBAA’s reliance on the case of NPC vs. City of Cabanatuan is misplaced;

4. Whether or not the Honorable LBAA erred in applying to petitioner-appellant’s case the rule that tax exemptions are strictly construed against the taxpayer;

5. Whether or not the subject real properties are exempt from payment of the real property tax under Section 234(c) of the LGC;

6. Whether or not the properties subject of the Updated Notice of Assessment are exempt from payment of the real property tax for being anti-pollution devices/facilities;

7. Whether or not the subject real properties could be considered as falling under the “Special Class” classification of real property pursuant to Section 216 of the LGC; and

8. Whether or not allowance for depreciation be recognized for the subject machinery and equipment.

Issue No. 1

Whether or not NPC waived its real property tax exemption when it failed to file the proof of exemption with the Provincial Assessor of Pangasinan within thirty (30) days from the date of declaration of the real property as required under Section 206 of the Local Government Code.

Section 206 of R.A. 7160, otherwise known as the Local Government Code of 1991, provides, thus:
“SEC. 206. Proof of Exemption of Real Property from Taxation. – Every person by or for whom real property is declared, who shall claim tax exemption for such property under this Title shall file with the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of real property sufficient documentary evidence in support of such claim including corporate charters, title of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage deeds, and similar documents.

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 the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll.” (Emphasis supplied)

As implied under the last sentence of the second paragraph of Section 206 above-quoted, a taxpayer may file with the assessor concerned, even beyond the thirty-day prescriptive period, a claim for tax exemption of his property if and when said taxpayer thinks he has the evidence to support such claim. In the meantime, however, the subject property shall continue to be taxable until proven to be tax-exempt.

We believe, therefore, and so hold, that Petitioner-Appellant did not waive its right to claim for tax exemption under said Section 206 of the LGC, but is merely sitting on it. The right to claim for tax exemption is entirely different from the privilege of tax exemption itself.
In its Memorandum dated 10 October 2004, NPC brought up, for the first time, the provisions of Section 253 of the LGC. Said Petitioner-Appellant NPC:
“Section 206 should be harmonized with Section 253 granting NPC the right to refund illegally or erroneously paid taxes. Section 253 will be rendered inoperative if the 30-day period were construed as an absolute deadline for proving a tax exemption. Section 253 of the LGC allows 2 years from the date the taxpayer is entitled to a refund within which to refund (sic) illegally or erroneously collected real property taxes, to wit:

‘SEC. 253. Repayment of Excessive Collections. – When an assessment of basic real property tax, or any other tax levied under this Title, is found to be illegal or erroneous and the tax is accordingly reduced or adjusted, the taxpayer may file a written claim for refund or credit for taxes and interests with the provincial or city treasurer within two (2) years from the date the taxpayer is entitled to such reduction or adjustment.’

‘The provincial or city treasurer shall decide the claim for tax refund or credit within sixty (60) days from receipt thereof. In case the claim for tax refund or credits is denied, the taxpayer may avail of the remedies as provided for in Chapter 3, Title Two, Book II of this Code.’

“It is a cardinal rule in statutory construction that a provision of a statute should be so construed as not to nullify or render nugatory another provision of the same statute. Accordingly, Section 206 of the LGC should not be construed to destroy and render Section 253 inoperative and ineffective.”

We are absolutely at a loss as to what NPC is or was talking about. Section 206 outlines the procedure in claiming real property tax exemption. On the other hand, Section 253 deals with claims for refund of basic real property tax, or any tax levied under this Title Two (Real Property Taxation), which is found to be illegal or erroneous. In other words, at the time when it was paid, the subject tax was not yet considered illegal or erroneous.

The thirty-day period prescribed under Section 206 is not absolute. As stated hereinabove, a taxpayer may file with the assessor concerned, even beyond the thirty-day prescriptive period, a claim for tax exemption of his property if and when said taxpayer thinks he has the evidence to support such claim.
Issue No. 2

Whether or not payment under protest of real property tax is a condition precedent for the filing of the Petition for Exemption.

At issue here is the interpretation of the provisions of Section 252 of the Local Government Code of 1991, which Section provides, thus:
“SEC. 252. Payment Under Protest. – (a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the words ‘paid under protest’. The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt.

“(b) The tax or a portion thereof paid under protest shall be held in trust by the treasurer concerned.

“(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the protestant, or applied as tax credit against his existing or future tax liability.

“(d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title Two, Book II of this Code.”

The Local Board should not have been concerned with the provisions of Section 252 of R.A. 7160. Under paragraph (a) above-quoted, it is the treasurer concerned – not the Local Board – who is prohibited from entertaining a taxpayer’s protest unless the latter first pays the tax under protest. Under said Section 252 of R.A. 7160, a taxpayer must first pay, under protest, the tax involved before filing with the treasurer concerned a claim for refund or tax credit thereof. It is only when his claim for refund or tax credit is denied by the treasurer concerned that the taxpayer may appeal such denial to the Local Board.

Anyway, the provisions of Section 252 of the Code would only apply when the taxpayer believes that the assessment made by the assessor is satisfactory or correct, but that the treasurer’s computation of the tax thereon is erroneous.

If the taxpayer believes that the assessment made by the assessor is illegal or otherwise incorrect, his recourse would be to file an appeal with the Local Board under the provisions of Section 226 of the Code, with the assessor – not the treasurer – as respondent.

There is absolutely no connection between Section 206 and Section 252. While a taxpayer’s “protest” under the provisions of Section 252 of the Code is against the payment of the real property tax to the treasurer, his claim for tax exemption under the provisions of Section 206 of the same Code is addressed to the discretion of the assessor so that the latter may drop the subject property from the assessment roll. Ergo, payment under protest under Section 252 is not a condition precedent to the claim for exemption under Section 206.

Issue No. 3

Whether or not the Honorable LBAA’s reliance on the case of NPC vs. City of Cabanatuan is misplaced.

The case of NPC vs. City of Cabanatuan touched on Section 193 of the Code. NPC said the ruling in that case does not apply to the present case.

We agree. While the case at bar concerns real property taxes, Section 193 of the Code deals with local taxes – as contra-distinguished from real property taxes. It must be noted, however, that both Section 193 and the last paragraph of Section 234, both of the Code, refer to withdrawal of tax exemption privileges by taxpayers prior to the enactment of the Code.

Issue No. 4

Whether or not the Honorable LBAA erred in applying to petitioner-appellant’s case the rule that tax exemptions are strictly construed against the taxpayer.

We believe that the expression “tax exemptions are strictly construed against the taxpayer” has no application in this case. The provisions of Section 234(c) are very clear and unambiguous to admit of any other interpretation as enunciated by the Supreme Court in a long line of cases. Thus, in Allarde vs. COA (218 SCRA 227, cited in CBAA Case No. L-32, Jan. 9, 2004), the Supreme Court said:
“It is an elementary principle of statutory construction that where the words and phrases of a statute are not obscure and ambiguous, the meaning and intention of the legislature should be determined from the language employed and where there is no ambiguity in the words, there is no room for construction.”

Issue No. 5

Whether or not the subject real properties are exempt from payment of the real property tax under Section 234(c) of the LGC.

Section 234(c) of the Local Government Code of 1991 provides, thus:
“SEC. 234. Exemption from Real Property Tax. – The following are exempted from payment of the real property tax:

x x x

“(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; x x x”

As clearly stated in Section 234(c) of the Code, in order to be exempt from real property tax, the subject real properties must be:
(1) Machineries and/or equipment;

(2) Actually, directly and exclusively used:
(a) by local water districts and government-owned or controlled corporations
(b) in the supply and distribution of water and/or generation and transmission of electric power

Admittedly, NPC is a government-owned or government-controlled corporation. However, it has no personality to claim realty tax exemption for the subject machinery and equipment for the simple reason that said machinery and equipment were/are actually, directly and exclusively used by CEPA – not NPC. In fact, the CEPA is the owner of the subject facilities until they are turned over to NPC.

Thus, paragraph 2.10 and 2.11 of Article 2 of the “Energy Conversion Energy” (ECA), entered into by and between NPC and CEPA Pangasinan Electric Limited (CEPA) on May 10, 2004, provide, thus:
“2.10 Ownership of Power Station. From the date hereof until the Transfer Date, CEPA shall directly or indirectly, own the Power Station and all the fixtures, fittings, machinery and equipment on the site and the Ash Disposal Sites or used in connection with the Power Station which have been supplied by it or at its cost. CEPA shall operate and maintain the Power Station for the purpose of converting Fuel of NPC into electricity.

“2.11 Transfer. On the Transfer Date, the power station shall be transferred by CEPA to NPC without the payment of any compensation and otherwise in accordance with the provisions of Article 8.” (Emphasis supplied)

If the NPC were the owner of the subject facilities during the contract period, it would have been unnecessary to include paragraph 11.1, Article 11, in the same ECA. Said paragraph 11.1, Article 11, stated, thus:
“11.1 Tax Responsibilities. NPC shall be responsible for the payment x x x (ii) all real estate taxes and assessments, rates and other charges in respect of the Site, the Ash Disposal Sites, the Pipelines, the buildings and improvements thereon, the Infrastructure and the Power Station.”

NPC argues that “an interpretation of Section 234(c) that covers the machineries and equipment procured by NPC on a BOT basis is the only interpretation which harmonizes such provision with NPC’s Charter and the BOT Law.” NPC clearly alludes to the exemption privileges it enjoyed under its Charter. This argument has no merit in view of the clear and unambiguous provisions of the last paragraph of Section 234(c) of the Code.

We do not see any conflict between the NPC Charter and the LGC, or between the BOT law and the LGC. Any exemption privileges enjoyed by NPC prior to the enactment of the LGC were removed upon the effectivity of the latter, as expressly provided for in the last paragraph of Section 234(e) of the Code.

Issue No. 6

Whether or not the properties subject of the Updated Notice of Assessment are exempt from payment of the real property tax for being anti-pollution devices/facilities.

The applicable provision of the Code in this issue is Section 234(e), which provides, thus:
“SEC. 234. Exemption from Real Property Tax. – The following are exempted from payment of the real property tax:

x x x

“(e) Machinery and equipment used for pollution control and environmental protection.” (Emphasis supplied)

As we stated earlier herein, pursuant to the Energy Conversion Agreement between NPC and CEPA (Mirant), the latter is the owner of the subject facilities and has the actual, direct and exclusive use thereof. As such, CEPA (Mirant) – not NPC – has the right to claim tax exemption for subject properties for being used for pollution control and environmental protection. CEPA (Mirant) has not, however, applied for such exemption.

Issue No. 7

Whether or not the subject real properties could be considered as falling under the “Special Class” classification of real property pursuant to Section 216 of the LGC.

Section 216 of the Code provides as follows:
“SEC. 216. Special Classes of Real Property. – All lands, buildings and other improvements thereon actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and those owned and used by local water districts, and government-owned or controlled corporations rendering essential public services in the supply and distribution of water and/or generation and transmission of electric power shall be classified as special.”

Although CEPA/Mirant/Team Energy is the owner of the subject facilities and in actual, direct and exclusive use thereof, it is not a government-owned or controlled corporation, but a private entity. Therefore, the said facilities do not fall under the classification of Special Class of Real Property.

Issue No. 8

Whether or not allowance for depreciation be recognized for the subject machinery and equipment.

Section 225 of the Code provides thus:
“SEC. 225. Depreciation Allowance for Machinery. – For purposes of assessment, a depreciation allowance shall be made for machinery at a rate not exceeding five percent (5%) of its original cost or its replacement or reproduction cost, as the case may be, for each year of use; Provided, however, That the remaining value for all kinds of machinery shall be fixed at not less than twenty percent (20%) of such original, replacement, or reproduction cost for so long as the machinery is useful and in operation.”

Indeed, as provided in the above-quoted Section 225, a depreciation allowance should be made for machinery to determine its net or depreciated value for assessment purposes. But then, again, the real party-in-interest in this case is the CEPA/Mirant/Team Energy – not NPC.

In its Position Paper, NPC raised “additional new issues”, among which are as follows:
“J. Whether or not the respondent Province can seek and the Honorable Board can grant affirmative relief to respondent Province and order NPC to pay real property tax on the Power Plant based on an 80% assessment level.

“K. Whether or not the respondent Province can impose an 80% assessment level for the taxable periods covered by the consolidated Petitions.

Under “additional issues” J and K, NPC says that “respondent Province did not appeal from the LBAA decisions. This being so, respondent Province can no longer pray, nor can this Honorable Board order, NPC to pay the real property taxes in question based on a different assessment level. The reason for this is evident. It has been the uniform and long standing doctrine in our jurisdiction that a party who has not appealed cannot, on appeal by the other party, seek affirmative relief, unless it has also appealed from the judgment,” citing Enecilla v. Magsaysay, 17 SCRA 125 and a host of other cases.

NPC seems to be confused. Respondents-Appellees are not asking for any affirmative relief. All they want is the dismissal of the appeal lodged by the Petitioner-Appellant NPC.
Respondents are not demanding payment for the real property tax from NPC, either. The respondents’ position, the one to which we subscribed, is that CEPA/Mirant/Team Energy, being the owner of the subject facilities and in actual, direct, and exclusive use thereof, is directly liable for the tax assessed thereon.

Of course, pursuant to paragraph 11.1, Article 11, of the Energy Conversion Agreement (ECA) entered into by and between NPC and CEPA/Mirant/Team Energy, “NPC shall be responsible for the payment of x x x (ii) all real estate taxes and assessments, rates and other charges in respect of the Site, the Ash Disposal Sites, the Pipelines, the buildings and improvements thereon, the Infrastructure and the Power Station.” The ECA was and is a private arrangement between NPC and CEPA. Respondents are not privy to, and should not be concerned with, it.

In sum, the ultimate issue in this case is: Whether or not NPC has the legal personality or capacity to question the respondent’s notices of assessments in this case. Taking into consideration the clear and unambiguous provisions of Section 234 of R.A. 7160, the real party-in-interest in this case is the CEPA/Mirant/Team Energy, the latter being the owner and the actual, direct and exclusive user of the subject facilities. In view of the provisions of paragraph 11.1, Article 11, of the Energy Conversion Agreement (ECA) between NPC and CEPA/Mirant/Team Energy, NPC could, at best, be considered an intervenor.

WHEREFORE, premises considered, the Appeal filed under CBAA Case No. L-52 and the Petition filed under CBAA Case No. L-81 are hereby DISMISSED for lack of merit.

SO ORDERED.

Manila, Philippines, April 12, 2012.

SIGNED
OFELIA A. MARQUEZ
Chairman

SIGNED SIGNED
ROBERTO D. GEOTINA CAMILO L. MONTENEGRO
Member Member

Although I agree with the conclusion, the core issue is not the legal status of NPC as intervenor but the legal status of the subject property. The record clearly shows that CEPA/Team Energy is the owner and is NOT EXEMPT.