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