Republic of the Philippines
CENTRAL BOARD OF ASSESSMENT APPEALS Manila
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC.,
Petitioner-Appellant,
– versus –
LOCAL BOARD OF ASSESSMENT APPEALS OF THE PROVINCE OF SOUTH COTABATO,
Appellee,
– and –
PROVINCIAL ASSESSOR AND TREASURER OF SOUTH COTABATO, MUNICIPAL ASSESSOR AND TREASURER OF TUPI, SO. COTABATO,
Respondents-Appellees.
x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x
CBAA CASE NO. M-09 In Re:
Tax Dec. Nos. 7639, 7640
7641 and 7642 LBAA Case No. 001
Province of
South Cotabato
D E C I S I O N
It appears from the records that, in a petition dated August 16, 1985 and
actually received by the Appellee Local Board on August 26, 1985, Petitioner-
Appellant averred that it received on June 19, 1985 from the Municipal Treasurer
of Tupi, South Cotabato a letter dated June 10, 1985. With that letter were
Owner’s copies of Tax Declaration Nos. 7639, 7640, 7641 and 7642 and a
Statement of Realty Tax Delinquency from 1981 to 1985 amounting to
P166,810.00.
Radio Telecommunications of the Philippines, Inc., RCPI for brevity,
protected the assessments on the grounds that the properties subject of said tax
declarations were considered personal properties under Art. 41 of the New Civil
Code; that said properties were attached to and/or installed on the lot not owned
by RCPI; that RCPI was exempt from real property taxes under its franchise; and
that the assessments were unjust, excessive, erroneous and confiscatory.
On May 19, 1995 the Local Board rendered its decision, the dispositive
portion of which reads as follows:
Reference: Book X, pp. 129-152
“WHEREFORE, the appellant is hereby ordered to pay the real property taxes, inclusive of all penalties, surcharges and interest accruing as of the date of actual payment, on the properties covered by Tax Declaration Nos. 7639, 7640, 7641 and 7642, as computed.”
In its appeal dated July 03, 1995 and actually received by this Board on
July 19, 1995, RCPI stated that it received the Decision of the Local Board on
June 18, 1995 and that it was appealing said Decision on the following grounds:
1. The LBAA erred in ruling that Petitioner-Appellant’s properties are
not exempt from real property taxation;
2. The LBAA erred in ruling that the taxation of Petitioner-Appellant’s
properties does not impair the latter’s contract with the Government;
3. The LBAA erred in ruling that the subject properties are subject to
real property tax; and
4. The LBAA erred in ruling that the real property taxes imposed on
Petitioner-Appellant’s properties are not unjust, excessive, erroneous, oppressive
and confiscatory.
Anent the first ground, RCPI states that the subject properties are exempt
from real property taxation in view of the ‘in lieu of all taxes’ provision found on
Section 14 of Rep. Act No. 4054 (RCPI’s franchise):
“Sec. 14. In consideration of the franchise and rights hereby granted and any provision of law to the contrary notwithstanding, the grantee shall pay the same taxes as are now or may hereafter be required by law from other individuals, co-partnerships, private, public or quasi-public associations, private, public or joint stock companies, on real estate, buildings and other personal property except radio equipment, machinery and spare parts needed in connection with the business of the grantee, which shall be exempt from customs duties, tariffs and other taxes, as well as those properties declared exempt in this section. In consideration of the franchise, a tax equal to one and one-half per centum of all gross receipts from the business transacted under this franchise by the grantee shall be paid to the Treasurer of the Philippines each year, within ten (10) days after the audit and approval of the accounts as prescribed in this Act. Said tax shall be in lieu of any all taxes of any kind, nature or description levied, established or collected by any authority whatsoever, municipal, provincial or national, from which taxes the grantee is hereby expressly exempted.”
In support of its contention, Petitioner-Appellant cited the case of Philippine
Long Distance Telephone Co. vs. The Public Service Commission and Manila
Electric Co. vs. The Public Service Commission, 66 SCRA 341), where the
Supreme Court ruled that PLDT and MERALCO cannot be ordered to pay the
supervision and regulation fees if imposed not only for the purpose of regulation
Reference: Book X, pp. 129-152
and/or supervision but as a tax measure. In the cited case, the Supreme Court
ruled:
x x x
The franchise of each of these two petitioners contains the so-called “in lieu of” provision. In the case of the Meralco the franchise tax paid by it shall be in lieu of all taxes and assessments of whatsoever nature and by whatsoever authority upon the privileges, earnings, income, franchise, x x x of the grantee, from which taxes and assessments the grantee is hereby expressly exempted.” (Par. 9, Part II of Act 484 as adopted in R.A. Nos. 150 and 4159). In the case of the PLDT, it pays a percentage tax on all gross receipts . . . transacted under its franchise, and “the said percentage shall be in lieu of all taxes on this franchise or earnings thereof.” (Act No. 3436, as amended by C.A. 407 and R.A. 6146).
“In an opinion dated August 8, 1974, the Department of Justice ruled that a provision in a legislative franchise which ordains the franchise tax prescribed thereon should be “in lieu of all taxes” is equivalent to a “complete foreclosure against the imposition of any other tax or decree of the tax therein vested by any of the state’s taxing authorities.” The ruling was reiterated in another opinion of the same office opinion of the Secretary of Finance dated March 19, 1975. These opinions are not in question here (and) are binding upon the respondent SRB, which is an agency under the Executive Department. To insist therefore that Section 40(e) of the Public Service Act as amended is not only for the purpose of regulation and/or supervision but is a tax measure would preclude the collection of the fees thereunder.” (at 348)
Petitioner-Appellant argues that its situation is similar to that of PLDT and
MERALCO and, hence, the aforecited ruling is applicable to it.
Petitioner-Appellant also cited the case of Province of Misamis Oriental vs.
Cagayan Electric Power and Light Company, Inc., 181 SCRA 38, where the
Supreme Court said:
“In an earlier case, the phrase “shall be in lieu of all taxes and at any time levied, established by, or collected by any authority: found in the franchise of the Visayan Electric Company was held to exempt the company from payment of the 5% tax on corporate franchise provided in Section 259 of the Internal Revenue Code (Visayan Electric Co. vs. David, 49 O.G. [No. 4] 1385).
“Similarly, we ruled that the provision: “shall be in lieu of all taxes of every name and nature” in the franchise of the Manila Railroad from payment of Internal Revenue tax for its importation of coal and oil under Act No. 2432 and the Amendatory Acts of the Philippine Legislature (Manila Railroad vs. Rafferty, 40 Phil. 224).
“The same phrase found in the franchise of the Philippine Railway Co. (Sec. 13, Act No. 1497) justified the exemption of the Philippine Railway Company from payment of the tax on its corporate franchise under Section 159 of the Internal Revenue Code, as amended by R.A. No. 39 (Philippine Railway Co. vs. Collector of Internal Revenue, 91 Phil. 35).
“Those magic words “shall be in lieu of all taxes” also excused the Cotabato Light and Ice Plant Company from the payment of the tax imposed by Ordinance No. 7 of the City of Cotabato (Cotabato Light and Power Co. vs. City of Cotabato, 32 SCRA 231).
Petitioner-Appellant states that its congressional franchise, R.A. Nos.
2036, 2963, and 4054, are special laws applicable only to Petitioner-Appellant,
Reference: Book X, pp. 129-152
while P.D. No. 464, otherwise known as the Real Property Tax Code, is a
general tax law; that special statutes are exceptions to the general law because
they pertain to a special charter granted to meet a particular set of conditions and
circumstances; and that there is no provision in P.D. 464 which expressly or
impliedly amended or repealed Section 14 of R.A. 2036, as amended, thus the
Supreme Court in the same case of CEPALCO, supra, said:
x x x
“There is no provision in P.D. No. 231 expressly or impliedly amending or repealing Section 3 of R.A. No. 6020. The perceived repugnancy between the two statutes should be very clear before the Court may hold that the prior one has been repealed by the later, since there is no express provision to that effect (Manila Railroad Co. vs. Rafferty, 40 Phil. 224). The rule is that a special and local statute applicable to a particular case is not repealed by a later statute which is general in its terms, provisions and application even if the terms of the genera act are broad enough to include the cases in the special law, (id.) unless there is manifest intent to repeal or alter the special law.
“Republic Acts Nos. 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while P.D. No. 231 is a general tax law. The presumption is that the special statutes are exceptions to the general law (P.D. No. 231) because they pertain to a special charter granted to meet a particular set of conditions and circumstances.” (at 41-42)
On the second ground or Error No. 2, Petitioner-Appellant argues that,
since Section 40 of P.D. 464 states that real properties exempt under other laws
are exempt from real property tax, its properties are exempt from the said tax
because R.A. 2063 and its amendatory laws are other laws within the meaning of
said Section 40, P.D. 464; that real property taxation of Petitioner-Appellant’s
properties impairs Petitioner-Appellant’s contract with the government because
the result will be a withdrawal of Petitioner-Appellant’s exemption from other
taxes under the “in lieu of all taxes” proviso under its franchise, thus the Supreme
Court in CEPALCO, supra, said:
“So was the exemption upheld in favor of the Carcar Electric and Ice Plant Company when it was required to pay the corporate franchise tax under Section 259 of the Internal Revenue Code, as amended by R.A. No. 39 (Carcar Electric & Ice Plant vs. Collector of Internal Revenue, 53 O.G. [No. 4] 1068). This Court pointed out that such exemption is part of the inducement for the acceptance of the franchise and the rendition of public service by the granted. As a charter is in the nature of a private contract, the imposition of another franchise tax on the corporation by the local authority would constitute an impairment of the contract between the government and the corporation.” (at 42-43)
On the third ground or Error No. 3, Petitioner-Appellant states that its
properties in question are not subject to the real property tax for the simple
Reference: Book X, pp. 129-152
reason that they (the properties), by their very nature and characteristics, are
personal properties and are not real properties under the purview of the New
Civil Code; that, even if some of them are attached to the building/s and/or lot not
owned by Petitioner-Appellant, they are so attached by bolts/screws in a manner
not permanent but temporary and easily removable and transportable from place
to place, without impairment of or damage to the prorperty/ies to which they are
so attached; and that the subject properties are installed on the land not owned
by Petitioner-Appellant, but by a Hanibal Guerrero.
On the fourth and last ground, or Error No. 4, Petitioner-Appellant states
that Respondent-Appellee failed to consider allowances for depreciation for
subject machineries.
Respondents-Appellees, in their Reply-Brief dated August 30, 1995,
reiterated the grounds set forth in their Motion to Dismiss dated December 13,
1990, which grounds were:
A. That the Local Board failed to consider the date of receipt of tax
declarations/notices of assessments by Petitioner-Appellant RCPI (June 19,
1985) against the time of actual receipt of formal protest by that Honorable board
(August 26, 1985), a clear indication that the same was filed out of time.
B. That proof of payments of realty taxes was not required as a basic
requirement precedent to the promulgation of the decision.
The Respondents-Appellees then proceeded to make a counter-
assignment of errors which, actually, are the same errors assigned by Petitioner-
Appellant.
On Error No. 1, Respondents-Appellees state that the cases cited by
Petitioner-Appellant were not applicable in this case because the subjects
involved in said cited cases were either the imposition of local franchise tax,
business tax and/or internal revenue taxes, that the exemption claimed by
Petitioner-Appellant “is limited to taxes on personal property (e.g. poles, wires,
insulators, transformers, conductors x x x) used by the grantee, and does not
Reference: Book X, pp. 129-152
confer a blanket tax exemption” in accordance with Opinion No. 89, s. 1974,
Secretary of Justice.
On Error No. 2, Respondents-Appellees state that “there is no valid ground
for Petitioner-Appellant to invoke or allege that subjecting their real properties to
taxation violates the constitutional non-impairment clause for we are not
imposing additional provincial or local franchise taxes but real property tax of
which they never enjoyed exemption.”
On Error No. 3, Respondents-Appellees state that Petitioner-Appellant
never asked nor showed any valid proof, for exemption from real property tax
pursuant to Section 9, P.D. 464, now Section 206, R.A. 7160.
On Error No. 4, Respondents-Appellees state that Petitioner-Appellant
denied the respondent Assessor vital information it repeatedly asked for in
connection with the cost of the properties in question.
Respondents-Appellee, in their Memorandum dated January 31, 1996 also
stated that Petitioner-Appellant failed to seasonably file their appeal to the
Central Board. They alleged that a copy of the Local Board’s decision was
received by Petitioner-Appellant on June 05, 1995 but the Municipal Assessor
and the Municipal Treasurer of Tupi were furnished with copies of the appeal
only on July 12, 1995 and July 13, 1995, respectively.
The issue in this case may be simplified as follows:
1. Whether Petitioner-Appellant’s appeal with the Local Board was filed
within the reglementary period;
2. Whether Petitioner-Appellant’s appeal with the Central Board was
filed within the reglementary period;
3. Whether proof of payments of realty taxes was required as a basic
requirement precedent to the promulgation of the decision;
4. Whether Petitioner-Appellant is exempted from the payment of the
real property tax;
Reference: Book X, pp. 129-152
5. Whether the properties in question are real properties within the
meaning or purview of P.D. 464; and
6. Whether the real property taxes imposed on Petitioner-Appellant’s
properties are unjust, excessive, erroneous, oppressive and confiscatory.
Was Petitioner-Appellant’s appeal with the Local Board filed within the
reglementary period?
Section 30 of P.D. 464 states and we quote:
“SEC. 30. Local Board of Assessment Appeals. – Any owner who is not satisfied with the action of the provincial or city assessor in the assessment of his property may, within sixty (60) days from the date of receipt by him of the written notice of assessment as provided in this Code, appeal to the Board of Assessment Appeals of the province or city, filing with it a petition under oath using the form prescribed for the purpose, together with copies of the tax declaration and such affidavit or documents submitted in support of the appeal.” (Emphasis supplied)
There is no dispute that the tax declaration/notices of assessments were
received by Petitioner-Appellant on June 19, 1985. The records show that the
petition was dated August 16, 1985 and that copies of the said petition were sent
by registered mail on August 17, 1985 to the Provincial Assessor of South
Cotabato, the Municipal Treasurer of Tupi, South Cotabato per Registry Receipt
Nos. 6942, 6943 and 6944, respectively, as shown by the copy of the petition
filed with the Local Board.
Although the Local Board’s copy of the petition is marked as received on
“8/26/85”, it is safe to assume that the said petition was also sent by registered
mail on August 17, 1985 – well within the prescribed period of sixty (60) days –
for we cannot imagine any reason why Petitioner-Appellant would delay the
transmittal thereof.
Was Petitioner-Appellant’s appeal with the Central Board filed within the
reglementary period?
The pertinent provision of law on this matter is Section 34 of P.D. 464, or
Section 229 of R.A. 7160. Both Section 34 of P.D. 464 and Section 229 of R.A.
7160 provide that the “owner or administrator of the property (or the person
having legal interest therein) or the assessor who is not satisfied with the
Reference: Book X, pp. 129-152
decision of the Board of Assessment Appeals may, within thirty (30) days after
receipt of the decision of the Local Board, appeal to the Central Board of
Assessment Appeals x x x.”
Petitioner-Appellant admits that it received a copy of the Local Board’s
decision on June 05, 1995. The records show that the envelope which contained
the Notice of Appeal and Appeal itself and addressed to this Board is postmarked
“July 4, 1995” at the Araneta Center Post Office and bear Registry Receipt No.
11280. We have no reason to doubt the markings on the said envelope and,
since there are only twenty-nine (29) days between June 05, 1995 and July 04,
1995, we believe, and so hold, that the appeal by Petitioner-Appellant to this
Board was seasonably filed.
Was proof of payments of realty taxes required as a basic requirement
precedent to the promulgation of the decision?
In a Motion to Dismiss Appeal filed with the Local Board on December 13,
1990, Respondents-Appellees moved to dismiss the appeal on the ground “that
the appellant failed to pay the taxes due as a condition precedent to the filing or
hearing of the appeal on assessment.”
The Local Board, however, chose not to address this issue and, instead,
proceeded to decide the case on the merits. Considering the length of time that
this case has been pending, we thought that, in the interest of justice, it would be
best for all parties concerned if we decided the case on the merits.
Is Petitioner-Appellant exempted from the payment of the real property
tax?
Petitioner-Appellant leaned heavily on the ‘in lieu of all taxes’ proviso found
in Section 14 of Rep. Act No. 4054 (RCPI’s franchise):
“Sec. 14. In consideration of the franchise and rights hereby granted and any provision of law to the contrary notwithstanding, the grantee shall pay the same taxes as are now or may hereafter be required by law from other individuals, co-partnerships, private, public or quasi-public associations, corporations or joint stock companies, on real estate, buildings and other personal property except radio equipment, machinery and spare parts needed in connection with the business of the grantee, which shall be exempt from customs duties, tariffs and other taxes, as well as those properties declared exempt in this section. In consideration of the franchise, a tax equal to one and
Reference: Book X, pp. 129-152
one-half per centum of all gross receipts from the business transacted under this franchise by the grantee shall be paid to the Treasurer of the Philippines each year, within ten (10) days after the audit and approval of the accounts as prescribed in this Act. Said tax shall be in lieu of any and all taxes of any kind, nature or description levied, established or collected by any authority whatsoever, municipal, provincial or national, from which taxes the grantee is hereby expressly exempted.” (Emphasis supplied)
In the case of Board of Assessment Appeals vs. Manila Electric Company,
10 SCRA 68, 73-74, the franchise of MERALCO had a provision similar to
Section 14 of Rep. Act No. 4054, Petitioner-Appellant’s franchise. Paragraph 9,
Part Two, Act No. 484 (MERALCO’s franchise), stated:
“Par. 9. The grantee shall be liable to pay the same taxes upon its real estate, building, plant (not including poles, wires, transformers, and insulators), machinery and personal property a other persons are or may be hereafter required by law to pay. x x x and shall be in lieu of all taxes and assessments of whatever nature, and by whatsoever authority upon the privileges, earnings, income franchise, and poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted. (Emphasis supplied)
In BAA vs. MERALCO, supra, the issue was not whether Meralco was
liable for, or exempted from, the payment of real property taxes. Meralco was
liable to the real property tax. Rather, the issue of whether the steel supports or
towers constituted real property. Thus, as quoted by Petitioner-Appellant itself on
page 11 of its Appeal, the Supreme Court said:
x x x
“Granting for the purpose of argument that the steel supports or towers in question are not embraced within the terms poles, the logical question posited is whether they constitute real properties so that they can be subject to a real property tax . . . (Emphasis supplied)
From the very words of Section 14, Act No. 4054 (Petitioner-Appellant’s
franchise), as in the case of Meralco, the grantee “shall pay the same taxes as
are now or may hereafter be required by law from other individuals, x x x,
on real estate, buildings and other personal property x x x.” If the legislature
wanted Petitioner-Appellant to be exempt from the payment of the real property
tax, it (the legislature) should not have expressly provided that Petitioner-
Appellant “shall pay the same taxes which are now or may hereafter be
required by law x x x on real estate, buildings x x x.” The only items which are
exempted from the payment of taxes as are now or may hereafter be required
Reference: Book X, pp. 129-152
by law are personal properties such as radio equipment, machinery and spare
parts, which shall be exempt from customs duties, tariffs and other taxes.
It has always been the rule that “exemptions from taxation are construed in
strictissimi juris against the taxpayer and liberally in favor of the taxing authority”
primarily because “taxes are the lifeblood of the government and their prompt
and certain availability is an imperious need.” Thus, to be exempted from the
payment of taxes, it is the taxpayer’s duty to justify the exemption “by words too
plain to be mistaken and too categorical to be misinterpreted.” (Province of
Tarlac vs. Alcantara, 216 SCRA 790, 797-798)
The issues involved in the cases cited in CEPALCO, supra, were either the
imposition of the franchise tax under Section 259 of the National Internal
Revenue Code (Visayan Electric Co. vs. David, 49 O.G. {No. 4} 1385; Philippine
Railway Co. vs. Collector of Internal Revenue, 53 O.G. {No. 4} 1068), or local
franchise tax (Cotabato Light & Power Co. vs. City of Cotabato, 32 SCRA 231),
or revenue tax on importation of coal and oil under Act No. 2432 (Manila Railroad
vs. Rafferty, 40 Phil. 224).
We believe therefore, and so hold, that Petitioner-Appellant’s exemption
from taxes embodied in Section 14 of Act No. 4054 (Petitioner-Appellant’s
Franchise) does not include exemption from the payment of the real property tax.
The non-impairment clause invoked by Petitioner-Appellant has no bearing
in this case as there is no right being impaired in the first place.
Are the properties in question real properties within the meaning or
purview of P.D. 464?
The properties involved in this case are a Radio Station Building under Tax
Declaration No. 7639, a Machinery Shed under Tax Declaration No. 7640, a
Radio Relay Station Tower and Accessories under Tax Declaration No. 7641,
and Machineries Accessories under Tax Declaration No. 7642.
The terms “real property” includes real estate, land, tenements, and
hereditaments, corporal or incorporal (36 Words and Phrases, 221). The terms
Reference: Book X, pp. 129-152
“real property”, “real estate” and “land”, when used in statutes relating to taxation
include, not only the land itself, but all the buildings, fixtures, improvements,
rights and privileges pertaining thereto (51 Am. Jr. 164). Real property is also
defined as the interests, benefits, and rights inherent in the ownership of the
physical real estate. It is the bundle of rights which the ownership of real estate is
endowed (Real Estate Appraisal Terminology, Rev. Ed. 290).
Article 414 of the New Civil Code provides that “all things which are or may
be the object of appropriation are considered either: (1) immovable or real
property; or (2) movable or personal property.” Article 415 of the same Code
enumerates the following as immovable property:
“(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
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;
x x x
“(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;
x x x
Section 38 of P.D. 464, on the other hand, provides and we quote:
“SEC. 38. Incidence of Real Property Tax. – There shall be levied, assessed and collected in the provinces, cities and municipalities an annual ad valorem tax on real property, such as lands, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted.”
Petitioner-Appellant insists that the properties in question are not subject to
real property tax for the following reasons: (1) they are attached to or found on
the land not owned by the Petitioner-Appellant but by one Hanibal Guerrero; (2)
the machinery shed (TD 7641) and machineries and accessories (TD 7642) are
not permanently attached to the soil but removable and transportable from place
to place; and (3) the machineries and apparatus are not designed or essential, by
their very nature and purpose, to manufacturing, commercial, mining, industrial or
Reference: Book X, pp. 129-152
agricultural purposes. Petitioner-Appellant says that it is not engaged in
manufacturing, commercial, mining, industrial or agricultural purpose.
Section 19, P.D. 464, provides that “real property shall be assessed on the
basis of its actual use regardless of where located and whoever uses it.”
Ownership of the property being assessed and ownership of the realty on which
the property being assessed is located, is not a controlling factor in determining
whether the property being assessed is subject to real property tax. The real
property tax is levied against the real property, although it is the owner who is
liable for it..” Ownership of the property being assessed and ownership of the
realty on which the property being assessed is located, is not a controlling factor
in determining whether the property being assessed is subject to real property
tax. The real property tax is levied against the real property, although it is the
owner who is liable for it.
There is no question that the Radio Station Building under Tax Declaration
No. 7639 and the Machinery Shed under Tax Declaration No. 7640 are “building”
and are, therefore, real properties.
Section 3(m) of P.D. 464, as amended by P.D. 1383, defines the term
“machinery” thus:
“Machinery – shall embrace machines, equipment, mechanical contrivances, instruments, appliances and apparatus attached to the real estate. It shall include the physical facilities available for production, as well as the installations and appurtenant service facilities, together with all those not permanently attached to the real estate but are actually, directly and essentially used to meet the needs of the particular industry, business or works, which by their very nature and purpose are designed for or essential to manufacturing, commercial, mining, industrial or agricultural purposes.” (Emphasis supplied)
Accordingly, pursuant to Section 1 of Presidential Decree No. 1383, the
following machineries are considered real property for taxation purposes:
a. Machines, equipment, mechanical contrivances, instruments,
appliances, and apparatus permanently attached to the real estate including their
auxiliary facilities and/or accessories;
b. Machines, equipment, mechanical contrivances, instruments,
appliances and apparatus although not permanently attached to the real estate
Reference: Book X, pp. 129-152
but are actually, directly and essentially used to meet the needs of the particular
industry, business or works which by their very nature and purpose are designed
for, or essential to manufacturing, commercial, mining, industrial or agricultural
purposes, including their auxiliary and/or accessories. (Rule 1, Assessment
Regulations No. 2-79)
Machineries which are not considered real property include the following:
a. Machines, equipment, mechanical contrivances, instruments,
appliances and apparatus, which are mobile, self-powered or self-propelled,
operating on wheels or floaters, such as cars, trucks, airplanes, tractors,
bulldozers, graders, loaders, yarders, cranes, trains, ships, boats and/or similar
kinds, although essential to meet the needs of a particular industry, business and
works; (Rule 2, Assessment Regulations No. 2-79)
b. Table-mounted or free-standing production equipment, such as
those used in electronics and other high technology operations which are
normally considered as movable. (Assessment Regulations No. 1-80)
Section 199(o) of R.A. 7160, on the other hand, defines “machinery” thus:
“Machinery” embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes.” (Emphasis supplied)
Assuming for the sake of argument that the subject machineries and
accessories are not attached to the land or building, this assumption does not
matter for as long as they are actually, directly, and exclusively used to meet the
needs of the particular industry, business or activity and which by their very
nature and purpose are designed for, or necessary to manufacturing, mining,
logging, commercial, industrial or agricultural purposes.
Petitioner-Appellant stated that it now uses high technology equipment and
sends wires through satellite – not Morse Code anymore – implying that the
Reference: Book X, pp. 129-152
subject machineries and equipment are no longer needed in its business. If
subject properties are no longer needed by Petitioner-Appellant, it should remove
or dismantle said properties and request the Respondent Assessor to revise the
assessments in accordance with Section 221 of R.A. 7160.
The Radio Relay Station Tower under Tax Declaration No. 7641 and the
Machinery Accessories under Tax Declaration No. 7642, by destination and
purpose, are actually, directly and exclusively used to meet the needs of
Petitioner-Appellant’s business. They are, therefore, real properties under the
purview of the Real Property Tax Code.
Are the real property taxes imposed on Petitioner-Appellant’s properties
unjust, excessive, erroneous, oppressive and confiscatory?
Section 28 of the Real Property Tax Code provides for the procedure in the
appraisal of machinery, and Section 29 of the same Code dictates that “a
depreciation allowance shall be made for machinery at a rate not exceeding ten
per cent of its original cost or its replacement or reproduction cost (new), as the
case may be, for each year of use: Provided, that the remaining value of all kinds
of machinery shall be fixed at not less than twenty per cent of such original or
replacement cost for so long as the machinery is useful and in operation.”
Petitioner-Appellant said that Respondent-Assessor failed to take into
consideration the allowance for depreciation in the assessment of the subject
machineries. Respondent Assessor admits this as a fact but stated that
Petitioner-Appellant, despite repeated written requests, denied them information
vital to the establishment of the correct costs of subject machineries.
It is interesting to note that Petitioner-Appellant never attempted to present
its own computations to support the subject machineries valuations as perceived
by it. If the contested assessments were indeed incorrect, it would have been so
easy for Petitioner-Appellant to present contrary evidence from its records. But
Petitioner-Appellant did not. Which leads us to believe that Petitioner-Appellant
was hiding something.
Reference: Book X, pp. 129-152
In the absence of evidence to the contrary, we have no other recourse but
to hold that, in the assessment of Petitioner-Appellant’s properties, Respondent
Assessor regularly and correctly performed his official duties as such {Sec. 5(m),
Rule 131, Revised Rules of court}.
WHEREFORE, the Decision rendered by the Local Board of Assessment
Appeals of the Province of South Cotabato, dated May 19, 1995, is hereby
AFFIRMED and the instant appeal is hereby DISMISSED.
SO ORDERED.
Manila, Philippine, November 7, 1996.
(Signed) MARGARITA G. MAGISTRADO
Chairman
(Signed) ELEANOR A. SANTOS
Member
Reference: Book X, pp. 129-152