Republic of the Philippines
CENTRAL BOARD OF ASSESSMENT APPEALS M a n I l a

ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION,
Petitioner-Appellant,

– versus –

CITY ASSESSOR OF TOLEDO CITY, Respondent-Appellee,

CBAA CASE NO. V-16 LBAA CASE NOS.
88-1-12, 89-1, & 94-01

– and –

LOCAL BOARD OF ASSESSMENT APPEALS OF THE CITY OF TOLEDO,
Appellee. x——————————————————–x

D E C I S I O N

This is an appeal filed on July 5, 1999 by Petitioner-Appellant Atlas

Consolidated Mining and Development Corporation (“ACMDC” for brevity) from

the decision rendered by the Local Board of Assessment Appeals of the City of

Toledo on May 25, 1999 in LBAA Case No. 88-1-12, 89-1 and 94-01.

During the scheduled clarificatory hearing of this case in Cebu City on the

18th of January, 2000, the following persons were in attendance:

For the Petitioner-Appellant:

Atty. Giovanni Alo

For the Respsondent-Appellee:

Atty. Teofanio C. Nunez, Toledo City Legal Officer (OIC) Mrs. Rosita L. Nillas, Toledo City Assessor (OIC)
Mr. Jerimias C. Barcenas, Toledo City Asst. Assessor Ms. Corselinda R. Tango-an, Office of the City Assessor

During that hearing, Atty. Teofanio C. Nunez submitted a “manifestation”

saying that his representation was in doubt as his appointment as City Legal

Officer of Toledo City was by then not confirmed by the Sangguniang

Panlungsod of Toledo City. Atty. Nunez then asked for about fifteen (15) days

from then within which to clarify his status as counsel for Respondent-Appellee.

Reference: Book X, pp. 1-45

Atty. Alo did not register any objection as he in fact agreed to grant the request of

Atty. Nunez.

Whereupon, this Board then and there ordered Atty. Nunez and the City

Assessor, Mrs. Nillas, to advise this Board on the status of the appointment of

Atty. Nunez within said period of fifteen (15) days. When the required advice did

not come, this Board on June 13, 2002 summoned the parties to yet another

clarificatory hearing on June 25, 2002 at 9:00 o’clock in the morning.

As in the hearing of 18 January 2000, the same persons appeared. Atty.

Nunez manifested orally that, as City Legal Officer duly appointed by the City

Mayor with confirmation by the Sangguniang Panlungsod, he was fully

authorized to act as counsel for Respondent-Appellee. However, Atty. Giovanni

Alo verbally manifested that his law firm or office could not, despite maximum

effort exerted, contact the authorized officers of ACMDC and that, although his

law office was the counsel for ACMDC on record, he was not certain as to

whether or not his office was still authorized to act as such counsel.

So, upon agreement by counsels, the hearing was reset to August 01,

2002 at 9:30 o’clock in the morning. However, the Toledo City Assessor filed on

July 23, 2002 an ex-parte motion to reset the hearing on the ground that she

would be attending a Government Executive Forum from July 29 through August

02, 2002 where her presence was required. In view thereof, this Board on July

25, 2002 sent out a notice resetting the hearing to Thursday, August 5, 2002 at

9:30 o’clock in the morning.

ACMDC, claiming that it received a copy of the LBAA decision on June 3,

1999, assigned the following issues:

I

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT TAX DECLARATION NOS. 50936, 50992 AND 50587 ARE NOT DUPLICATE TAX DECLARATIONS OF EXISTING AND PREVIOUS TAX DECLARATIONS.

II

THE LOCAL BOARD COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT HELD THAT THE PROPERITES COVERED BY TAX DECLARATION

Reference: Book X, pp. 1-45

NOS. 51499, 51498, 51375, 51376, 51377, 51381, 51383, 51384, 51386 AND 51388 ARE REAL PROPERTIES.

III

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT HELD THAT THE PROPERTIES COVERED BY TAX DECLARATION NOS. 51368, 51369, 41645, 41646, 41485, 51403, 51405, 51535, 51537, 51389, 51536, 51370, 34981, 41482 AND 50787 DO NOT CONSTITUTE POLLUTION CONTROL DEVICES; AND THAT THE PROPERTIES COVERED BY TAX DECLARATION NOS. 51387, 51408 AND 51416 DO NOT CONSTITUTE ENVIRONMENTAL PROTECTION FACILITIES AS CONTEMPLATED BY LAW.

IV

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT HELD THAT THE RECKONING DATE, TO DETERMINE WHEN ALL PROPERTIES WHICH HAVE NOT BEEN USED BY REASON OF CLOSURE AND CESSATION OF PRODUCTION AND STOPPAGE OF OPERATIONS SHOULD BE TRANSFERRED TO THE EXEMPT ROLL, IS AUGUST 15, 1994.

V

THE LOCAL BOARD COMMITTER REVERSIBLE ERROR WHEN IT UPHELD THE RESPONDENT-APPELLEE IN MAKING ASSESSMENTS ON PROPERTIES SUBJECT TO TAX HOLIDAY AND INVESTMENT INCENTIVES GRANTED UNDER SPECIAL LAWS FOR THE MINING INDUSTRY.

VI

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT HELD THAT THE EXCAVATIONS IN THE GROUND REFERRED TO BY PETITIONER-APPELLANT AS HOLES IN THE GROUND ARE CONSIDERED REAL PROPERTIES.

VII

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT THE ASSESSED AMOUNT OF P66,900,675.60, REFERRING TO TAXES FOR THE PERIOD SEPTEMBER 1988 TO DECEMBER 1992, WAS NOT INCLUDED IN THE COMPROMISE AGREEMENT BETWEEN ACMDC AND THE CITY GOVERNMENT OF TOLEDO, BASED ONLY RESPONDENT-APPELLEE’S UNSUBSTANTIATED AND SELF SERVING ALLEGATION THAT THE SAID ASSESSED AMOUNT WAS IMPOSED ON ACMDC’S NEWLY DISCOVERED ASSETS.

VIII

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE DISCREPANCIES BETWEEN THE 1993 AND 1995 TAX DUE COMPUTATION BY TAKING INTO ACCOUNT ACMDC’S TAX LIABILITIES FOR 1994 AND 1995 EVEN IF THE LATTER HAD COMPLETELY STOPPED ITS OPERATIONS IN 1993.

The tax declarations involved under the First Issue are the following:

43206 1990 43205 1990 38625 1985

Ball Mill #6 Carcon Sigpit-Biga Hydrocone Crusher #5 (inc In 5) Sigpit-Biga Copper Concentrate Thickener Sigpit-Biga

Mach-Ind. 80.00% Mach-Ind 80.00% Mach-Ind 80.00%

4,358,860 726,650 767,950

3,487,090 581,320 614,360

Alleged Duplications:
50936 1990 Ball Mill #6 Carcon Sigpit-Biga 50992 1990 Hydrocone Crusher #5 (inc In 5) Sigpit-Biga 38625 1985 Copper Concentrate Thickener Sigpit-Biga

Mach-Ind. 80.00% Mach-Ind 80.00% Mach-Ind 80.00%

5,999,370 4,199,410 928,200

4,799,500 3,359,530 742,560

Reference: Book X, pp. 1-45

ACMDC stated that Tax Declaration (TD) Nos. 50936, 50992 and 50857

and duplicate of TD Nos. 43206, 43205 and 38625, respectively. ACMDC alleges

that the duplications arose from the Mortgage Trust Indenture dated October 31,

1990 submitted to the Register of Deeds for Toledo City for registration, pursuant

to which document TD Nos. 50936, 50992 and 50857 were issued; and that said

Mortgage Indenture used different terms to describe the same properties already

covered by TD Nos. 43206, 43205 and 38625.

On the front pages of TD Nos. 50936, 50992 and 50857 are the following

notes:

“1. Partial Stipulation of Facts and Compromise Agreement

“2. Letter dated October 4, 1991 addressed to Atty. Teodoro A. Almase “3. Letter dated August 19, 1991 addressed to Atty. Teodoro A. Almase “4. Letter dated August 12, 1991 addressed to Mr. Francisco R.
Macapobre

“5. Report of Investigation

“6. Assessment protest by ACMDC dated May 31, 1991 “7. Sworn Statements
“8. SP Resolution No. 553; Series of 1992”

It appears from the records that ACMDC cited fourteen (14) tax

declarations (51448, 51496, 50936, 50992, 50857, 34834, 51539, 51540, 51541,

34683, 51547, 51554, 51555 and 51558) which were allegedly duplications of

previously issued ones.

Respondent-Appellee’s “Comment to Appellant’s Position Paper” filed with

the Local Board admitted to the duplication of eleven (11) of said tax declarations

but denied the allegation of ACMDC on three (3) tax declarations, namely, TD

Nos. 50936, 50992 and 50857, claiming that the properties covered thereby are

separate units which were confirmed in the inventory contained in the Partial

Stipulation of Facts dated December 10, 1992. Whereupon, the Local Board

ruled that except with respect to properties covered by Tax Declaration Nos.

50936, 50992 and 50857, the tax declarations which are duplications of previous

and existing tax declarations should be cancelled.

In effect, therefore, the Local Board ruled that there was no duplication

with respect to TD Nos. 50936, 50992 and 50857.

Reference: Book X, pp. 1-45

A check with the records reveals that the “Partial Stipulation of Facts and

Compromise Agreement” dated December 10, 1992 does not contain the

“inventory” mentioned by Respondent-Appellee.

The properties described in all six tax declarations (Nos. 43206, 43205,

38625 and the alleged duplicates which were Nos. 50936, 50992 and 50857) are

supposed to be located at Sigpit-Biga. The descriptions of the properties covered

by TD #43206 and TD #50936 are similar, as are the descriptions of properties

covered by TD #38625 and TD #50857. The description of the property covered

by TD #43205 differs from that of the property covered by TD #50992 in that TD

#43205 calls for Hydrocone Crusher #5 while TD #50992 calls for 5 units Tertiary

Hydrocone Crushers.

It is noted, however, that TD Nos. 50936, 50992 and 50857 supposedly

cancelled TD #45006-part, TD #45008-part and TD #45004-part, respectively,

and that TD Nos. 43206, 43206 and 38625, in turn, cancelled TD Nos. 40295,

40294 and 34748, respectively. If TD Nos. 50936, 50992 and 50857 were indeed

issued pursuant to that Mortgage Trust Indenture and were duplications of

previous and existing tax declarations as alleged by ACMDC, the said tax

declarations would have been “new” (not cancelling any other TDs) and the

properties described thereon “newly discovered assets”.

In view of the foregoing, we are inclined to agree with Respondent-

Appellee that TD Nos. 50936, 50992 and 50857 cover properties separate and

distinct from those covered by TD Nos. 43206, 43205 and 38625.

SECOND ISSUE

TD# Year 51499 1983 51498 1983 51375 1983 51377 1983 51381 1983 51383 1983 51384 1983 51386 1983 51388 1983 51376 1983

Description
Second Lift-Mine Underground First Lift-Mine Underground Primary Crushing-Biga Grinding Section-Biga
Lime Slaking Plant-Biga Yard & Outside Mach-Biga
Tailing Pond Pumphouse-Biga Aggregate Plant (KYC)-Biga Malubog Area Mach-Biga
Secondary, Tertiary & Screening-Biga

Class Level Mach-Ind. 80.00% Mach-Ind. 80.00% Mach-Ind. 80.00% Mach-Ind. 80.00% Mach-Ind. 80.00% Mach-Ind. 80.00% Mach-Ind. 80.00% Mach-Ind. 80.00% Mach.Ind. 80.00% Mach.Ind. 80.00%

Mkt. Value 327,327,100
56,700,500 13,532,460 47,919,520 871,300 66,200 1,447,680 1,794,640 4,132,000 16,057,640

Ass. Value 261,861,680
45,360,400 10,825,970 38,335,620 697,040
52,960 1,158,140 1,435,710 3,305,600 12,846,110

Reference: Book X, pp. 1-45

It would seem that the machinery and equipment covered by the tax

declarations above-listed were declared by lot – not itemized – and per their

respective locations. The itemized descriptions of properties covered by said tax

declarations, according to ACMDC, are as follows, respectively:

Property Covered TD Nos. Per Tax Declaration

#51499 Second Lift Machinery

51498 First Lift Machinery & Equipment (Mine Underground)

51375 Primary Crushing (Mach. & Equip.)

Property Actually Covered

15 Loaders Eimco RSB5

& Equipment (Mine Underground) (all units are defective)
5 Loaders Eimco RSB5 (buried during mudflow in
January 1994) Loaders-Atlas Copco Loaders-Eimco Production Locomotive Rock Drill-Eimco Secoma
Mercury 14

Rock-Drill Eimco Secoma Pluton 17
42 Rock Drills-Atlas Copco 47 Rock Drills-Atlas Copco 21 Rock Drills-Puma
167 Production Cars 20 Granby Cars
21 Flocrete Pots-Steel Welded constructions, rail cart-mounted w/ shotcrete machine
(loaned to AVI-Mactan)

45 Caplamps, charging racks static charger
3,499 Caplamps-only 2,165 remained (poly carbonate construction)
4 Loaders-Eimco RSB5 (Defective) Production Locomotive-Goodman
(Greenburg, Gemco & not found) 18 Rockdrills-Atlas Copco
(5 defective)

46 Prod’n cars-shop fabricated (only 16 units are in running
condition)

3 Granby Cars-shop fabricated (welded steel construction)
6 Flocrete pots-steel welded construction
65 batteries-HS 250 Stationary Welding machines-elec. arc Oxy-Acety Welding Outfit

Arc Welding Machine Arc Welding Machine

Reference: Book X, pp. 1-45

Biga Concentrator Area

51376 Secondary & Tertiary & Screening Mach. Biga Concentrator Area

51377 Grinding Section Mach. & Equipment Biga Concentrator Area

51381 Lime Slaking Plant Mach. & Equipment Biga Concent. Area

51383 Yard & Outside Mach. & Equip.-Biga Con-centrator Area

51384 Tailings Pond Pump-house Mach. & Equip. Biga Concent. Area

51386 Aggregate Plant (KYC) Mach. & Equip.-Biga Concentrator Area

51388 Malubog Area Mach. & Equip.-Biga Concentra-tor Area

Welding Machine (ESAB)

2-Welding Machine (MILLER) Welding Machine (DAIDEN) Arc Welding Machine
Arc Welding Machine (DAIDEN)

2-Arc Welding Machine (MILLER) Arc Welding Machine (ESAB)
2-Arc Welding Machine (DAIDEN) Welding Machine (DAIDEN) Welding Machine (HOBART)
5-Arc Welding Machine (DAIDEN)

Welding Machine (YANMAR) Arc Welding Machine (HOBART) Welding Machine (DAIDEN)

Welding Machine (LINCOLN) Welding Machine (HOBART) Welding Machine (DAIDEN) Welding Machine (DAIDEN)

Welding Machine (DAIDEN) Chain Block

Welding Outfit Welding Machine

Welding Machine (DAIDEN) Welding Machine (DAIDEN) Chain Block
Chain Block

ACMDC alleges that the properties in question under the Second Issue are

machineries which do not directly meet the needs of ACMDC’s operations, as

they are not used for production but are only support service machineries.

ACMDC describes some of the equipment involved as follows:

“Welding Device” – an equipment for fusing or uniting objects together; not used for direct and actual mining works but used for urgent minor repairs of the service equipment to include trucks and other service vehicles; is easily movable and not used principally, much less indispensable in a mining industry.

“Flocrete Pot” – an equipment for transporting and dispensing of concrete; used in all building constructions for pouring concrete; used by ACMDC during developmental phase of its mining area to transport mixed concrete to the underground openings prior to production; is easily movable.

“Rock Drill” – an equipment weighing 30-40 kilos, operated by hand by a single man; usually used by construction workers in drilling holes on roadsides when laying water pipes or telephone cables; used by ACMDC during developmental phase

Reference: Book X, pp. 1-45

of the miners to facilitate construction works, in the same way that the loaders and battery charges were used as support service equipment; is easily movable.

All of the above tax declarations were issued pursuant to the Mortgage

Trust Indenture dated October 31, 1990 between ACMDC and the Hongkong and

Shanghai Banking Corporation and subjected to ten years back taxes starting

1983. However, properties covered by TD Nos. 51375, 51377, 51381, 51383,

51384, 51386 and 51388 were exempted from payment of the real property tax

starting July 1, 1993 and the property covered by TD #51376 was exempted from

payment of the real property tax starting July 30 1993.

In supporting its claim that the properties involved in this issue are

personal – not real – properties, ACMDC cited the case of Mindanao Bus Co. vs.

City Assessor and Treasurer (No. L-17870, September 29, 1962, 6 SCRA 197,

200-201) where the Supreme Court ruled:

“We may here distinguish, therefore, those movables which become immobilized by destination because they are essential and principal elements in the industry from those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theatres, etc. are merely incidental and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equipments. Airline companies use forklifts, jeep wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their mobile nature. . .

“Similarly, the tools and equipments in question in this instant case (referring to a Hobart Electric Welder Machine, Storm Boring Machine, Lathe Machine, Black and Decker Grinder, PEMCI Hydraulic Press, Battery charger and D-Engine Waukesha-M-Fuel) are, by their nature, not essential and principal elements of petitioner’s business of transporting passengers and cargoes by motor trucks. They are incidentals – acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as has been carried on, without such equipments, before the war.”

The Local Board ruled that the above-described properties are real

properties under the provisions of Article 415 of the New Civil Code and Section

199(o) of the Local Government Code of 1991.

Article 415 of the New Civil Code reads as follows:

“Art. 415. The following are immovable property:

“(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
“(2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable;

Reference: Book X, pp. 1-45

“(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;
“(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements;
“(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”

On the other hand, Section 199(o) of the Local Government Code of 1991

reads as follows:

“SEC. Definitions. – When used in this Title:

“x x x

“(o) “Machinery” embraces machines, equipment, mechanical contrivances, instruments, appliances and apparatus which may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installation 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.”

“x x x.”

Section 199(o) of R.A. 7160 seems to convey that all things “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” should be considered “machinery” for

purposes of the real property tax. On the other hand, Article 415 of the New Civil

Code provides that, in order for an apparently movable machinery to be

“immovable”, the intention of the owner thereof to make that machinery

“immovable” must be manifest.

The Local Board ruled that the above-described properties “are classified

as real properties for taxation purposes because although they are not

permanently attached to the land, they are essentially used for the mining

operation of appellant and are situated within its mining area and they tend to

meet the needs of said industry or work, unlike the case of Mindanao Bus Co.

Vs. City Assessor and Treasurer (6 SCRA 97), where the repair shop put up by

Reference: Book X, pp. 1-45

the bus company for its transportation business was declared personal property

being merely incidental to its business as they could cause the repair of their

buses in any other shops.”

The Local Board seems to imply that ACMDC, probably because of its

location, has difficulty in obtaining similar repair services by or from other

persons or entities and, except for this perceived difficulty, ACMDC’s properties

under this particular issue would have been classified as personal properties.

Article 415, paragraph 5, of the New Civil Code used the phrase “tend

directly to meet the needs of the said industry” and Section 199(o) of the Local

Government Code of 1991 used the phrase “actually, directly, and exclusively

used to meet the needs of the particular industry.” The repair shop of Mindanao

Bus Co. was indirectly used by the bus company – to repair and service its buses

which were the equipment directly used in its business of public transportation. In

the instant case, the tools and equipment subject matter of the Second Issue are

used by ACMDC indirectly – not directly – to repair and service machinery and

equipment directly used in its mining operations.

The definition of “machinery” as real property under Section 199(o) of R.A.

7160 is so sweeping and all-embracing that we find it compelling, necessary and

proper to resort to the legislative intent behind said provision of law.

Hereunder are quoted the proceedings found on pages 414 to 416 of the

Journal and Record of the House of Representatives Proceedings and Debates,

4th Regular Session 1990-1991, Volume Two (September 4-November 6, 1990),

viz:

“CONSIDERATION OF H.B. NO. 31046 “(Local Government Code) “Continuation

“PERIOD OF SPONSORSHIP AND DEBATE

“MR. DEL MAR. Mr. Speaker, I move that we continue the consideration of House Bill No. 31046 submitted jointly by the Committee on Local Government, the Committee on Appropriations, and the Committee on Ways and Means, the title of which I request the Secretary to read.

“THE PRESIDING OFFICER. (Mr. Matti). Is there any objection? (Silence) The Chair hears none; the motion is approved.

Reference: Book X, pp. 1-45

“The Secretary is directed to read the title of the bill.

“THE SECRETARY. House Bill No. 31046, entitled AN ACT PROVIDING FOR A LOCAL GOVERNMENT CODE.

“MR. DEL MAR. Mr. Speaker, the parliamentary status of the measure is that it is under the period of sponsorship and debate and I ask that the Gentleman from Antique, the Honorable Exequiel Javier be recognized to continue sponsorship of the measure.

‘SUSPENSION OF SESSION

“THE PRESIDING OFFICER (Mr. Matti). With leave of the House, the session is suspended.

“It was 6:04 p.m.

“RESUMPTION OF SESSION

“At 6:05 p.m. the session was resumed.

“THE PRESIDING OFFICER (Mr. Matti). The Acting Floor Leader is recognized.

“SUSPENSION OF SESSION

“THE PRESIDING OFFICER (Mr. Matti). The session is resumed. “The distinguished Gentleman from Antique is hereby recognized.

“MR. JAVIER (E). Thank you, Mr. Speaker.

“MR. DEL MAR. Mr. Speaker, may I ask also that the Gentleman from Quezon City, the Hon. Antonio Aquino, be recognized to continue his interpellation of the sponsor.

“MR. AQUINO (A). Thank you, Mr. Speaker.
“Mr. Speaker, to continue with the interpellation, may I refer the honorable sponsor to page 147 of Book II. On Item 13, under the title “machinery,” this Representation believes that the definition of machinery here for purposes of appraisal and assessment of real property for taxation should include movable machines but immovable by destination or purpose or for purposes of taxation to cover sewing machines, forklifts, cranes, bulldozers, and similar equipment as falling under the purview of the coverage of machinery as has been defined?

“MR. JAVIER (E). Mr. Speaker, this provision involves real property taxation and, therefore, the taxation should only be limited to real properties. Movable machines like sewing machines, bulldozers could not be classified as real property if they can be mobilized or can be moved from the place of production or from the place of activity. But there are some machines, defined under the Civil Code, which are considered as real property by destination, Mr. Speaker.

“MR. AQUINO (A.). Yes. That is what this Representation was referring to. That is why we specifically mentioned sewing machines, forklifts, cranes, bulldozers, and similar equipment which under the Civil Code are really defined as movable machines but immovable by destination or purpose.

“MR. JAVIER (E.). We are trying to preserve the definition of real property, Mr. Speaker, under the Civil Code. And that is the definition that we have used here in defining machinery as real property. Therefore, if we accede to the request of the honorable Gentleman from Quezon City, what will happen is all types of movables will be taxed as real property, and where do we stop, Mr. Speaker.
“So, Mr. Speaker, I do not think we can agree on a redefinition of machinery as real property under this provision because if we agree, what will prevent, let us say, the assessors from taxing movable equipment or property although they are not really real property? This will give the assessors discretion, Mr. Speaker. If we give these functionaries so much discretion, we will be giving

Reference: Book X, pp. 1-45

them the opportunity for graft. So we have to stick by the definition under this provision, Mr. Speaker.
“Before the honorable Gentleman from Quezon City proceeds to his next question, Mr. Speaker, may I request that the Chairman of the Committee of Local Government be recognized. He has some important announcements.

“X X X

“THE PRESIDING OFFICER (Mr. Matti). The Rules Committee will consider the proposal and will report to the House tomorrow after the start of the session.
“The Gentleman from Quezon City may continue his interpellation of the Gentleman from Antique.

“MR. AQUINO (A.). Thank you, Mr. Speaker.
“Mr. Speaker, with the clarification made by the honorable sponsor as to the contemplation of the Civil Code in defining movable machines, but immovable by destination or purpose, this Representation will desist from further discussing this issue.”

It is clear from the words of Congressman E. Javier that Congress wanted

to confine the definition of “machinery” (as real property under Section 199(o) of

R.A. 7160) within the meaning of Article 415 of the New Civil Code, thus:

“MR. JAVIER (E.). Mr. Speaker, this provision involves real property taxation and, therefore, the taxation should only be limited to real properties. Movable machines like sewing machines, bulldozers could not be classified as real property if they can be mobilized or can be moved from the place of production or from the place of activity. But there are some machines, defined under the Civil Code, which are considered as real property by destination, Mr. Speaker.

“MR. AQUINO (A.). Yes. That is what this Representation was referring to. That is why we specifically mentioned sewing machines, forklifts, cranes, bulldozers, and similar equipment which under the Civil Code are really defined as movable machines but immovable by destination or purpose.

“MR. JAVIER (E.). We are trying to preserve the definition of real property, Mr. Speaker, under the Civil Code. And that is the definition that we have used here in defining machinery as real property. Therefore, if we accede to the request of the honorable Gentleman from Quezon City, what will happen is all types of movables will be taxed as real property, and where do we stop, Mr. Speaker.
“So Mr. Speaker, I do not think we can agree on a redefinition of machinery as real property under this provision because if we agree, what will prevent, let us say, the assessors from taxing movable equipment or property although they are not really real property? This will give the assessors discretion, Mr. Speaker. If we give these functionaries so much discretion, we will be giving them the opportunity for graft. So we have to stick by the definition under this provision, Mr. Speaker. (Underscoring supplied)

In view of the foregoing, we find for the Petitioners-Appellants. The

properties in question are personal in nature, and, therefore, not subject to

payment of the real property tax. To uphold the contention of Respondent-

Appellee would be to give assessors extra wide discretion which could be used

as an avenue for graft. This is precisely what the Congress of the Philippines

seeked to prevent.

Reference: Book X, pp. 1-45

THIRD ISSUE

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT HELD THAT THE PROPERTIES COVERED BY TAX DECLARATION NOS. 51368, 51369, 41645, 41646, 41485, 51403, 51405, 51535, 51537, 51389, 51536, 51370, 34981, 41482 AND 50787 DO NOT CONSTITUTE POLLUTION CONTROL DEVICES; AND THAT THE PROPERTIES COVERED BY TAX DECLARATION

NOS. 51387, 51408 ENVIRONMENTAL

AND 51416 DO PROTECTION

NOT CONSTITUTE FACILITIES AS

CONTEMPLATED BY LAW.

The tax declarations involved under the third issue are as follows:

TD# Year Description
Pollution Control Devices, per ACMDC: 50787 1991 7 Tailings Thickeners 41482 1989 Tailings Open Lauder 34981 1985 Tailings Disposal Discharge 41485 1989 Tailings Disposal System 41646 1989 Industrial Building
41645 1989 Building Office
51370 1983 Tailings Pond (Abaca Water Treat. Plt.) 51536 1983 Tailings Open Lauder/Disposal-Biga 51389 1983 Power Distribution System-Biga
51537 1983 Tailing Open Lauder-Biga 51535 1983 Tailings Thickener 250’D
51405 1983 Tailings, Water Pumphouse-Biga 51403 1983 Tailings Pond Pumphouse, Tank-Biga 51369 1983 Mechanic House-Magdugo Area 51368 1983 Field Office, Tailings-Magdugo Environmental Protection Facilities, says ACMDC: 51387 1983 Drain Tunnel-Biga
51408 1983 Sigpit-Biga Drain Tunnel 51416 1983 Ilag River-Diversion Tunnel

Class

Mach-Ind Mach-Ind Mach-Ind Mach-Ind Bldg-Ind Bldg-Ind Bldg-Ind Mach-Ind Mach-Ind Mach-Ind Mach-Ind Bldg-Ind Bldg-Ind Bldg-Ind Bldg-Ind

Mach-Ind Bldg-Ind Bldg-Ind

Level Mkt. Value Ass. Value

80.00% 4,849,680 3,879,740 80.00% 1,158,890 927,110 80.00% 293,980 235,180 80.00% 468,750 375,000 60.00% 19,710 9,860 60.00% 51,420 30,860 80.00% 305,980 244,780 80.00% 2,722,310 2,177,850 80.00% 14,946,600 11,957,280 80.00% 3,447,570 2,758,060 80.00% 9,169,000 7,335,200 80.00% 552,960 442,370 80.00% 852,480 681,980 60.00% 56,960 34,180 75.00% 216,960 162,720

80.00% 18,180 14,540 80.00% 37,615,360 30,092,290 80.00% 92,984,960 74,387,970

According to ACMDC, the tailings disposal system consists of lauders,

pumps, office and mechanics’ house containing the welding machines and spare

pipes to maintain the waste disposal system and that all the foregoing listed

machineries, equipments and structures are integral parts of the whole disposal

system.

ACMDC says that it constructed the Ilag River Diversion Tunnel in order to

re-direct the flow of the river and ensure the safety of the people living in the

vicinity whenever the river overflows in times of typhoon; that the river walls were

reinforced with concrete cement to avoid further soil erosion and thereby created

stability at the national road along the Ilag River at the Masaka area.

ACMDC says that the Sigpit/Biga Drain Tunnel is another environmental

protection facility constructed 4 meters x 4 meters underground excavation with a

total length of 3,806 meters; that accumulated water from the open pits and

surrounding areas, especially during strong rain and typhoon, is confined and

Reference: Book X, pp. 1-45

drained through this tunnel to Sigpit Dam; that, consequently, flooding and

erosion of the surface land is prevented; and that, in effect, this tunnel is similar

to a series of concrete culvert buried in the ground to maintain an effective and

efficient drainage system.

ACMDC explains that the Ilag River Diversion Tunnel and the Sigpit-Biga

Drain Tunnel are not industrial buildings, as classified by Respondent-Appellee,

but appurtenant service facilities which should be classified as industrial

machineries.

ACMDC says that the above properties should have been exempted from

payment of the real property tax as pollution control devices and environmental

protection facilities in accordance with the provisions of Section 234 of R.A.

7160, thus:

“SEC. 234. Exemptions 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.”

Tax Declaration Nos. 51370, 51536, 51389, 51537, 51535, 51405, 51403,

51369, 51368, 51387, 51408 and 51416 were all issued pursuant to the

Mortgage Trust Indenture dated October 31, 1990 between ACMDC and the

Hongkong Shanghai Banking Corporation and the properties described thereon

were subjected to ten years back taxes starting 1983. However, only the

properties described on Tax Declaration Nos. 51536, 51389, 51537, 51535 and

51387 were exempted from payment of real property tax starting July 1, 1993.

The descriptions of properties covered by TD Nos. 51536 (Tailings Open

Lauder/Disposal), 51537 (Tailings Open Lauder) and 51535 (Tailings Thickener)

are similar to those of properties covered by TD Nos. 50787 (Tailings

Thickeners), 41482 (Tailings Open Lauder), 34981 (Tailings Disposal Discharge),

and 41485 (Tailings Disposal System). We see no reason why TD Nos. 50787,

41482, 34981, 41485 and 51370 should be treated differently from TD Nos.

51536, 51537 and 51535.

Reference: Book X, pp. 1-45

Although the description of the property covered by TD #51387 (Drain

Tunnel-Biga) is similar to those properties covered by TD #51408 (Sigpit-Biga

Drain Tunnel) and TD #51416 (Ilag River Diversion Tunnel), the property under

TD 51387 is classified as “industrial machinery”, while the properties under TD

Nos. 51408 and 51416 are classified as “industrial building”. Again, we see no

reason why TD Nos. 51408 and 51416 should be treated differently from TD

#51387.

The properties covered by TD Nos. 41646 (Industrial Building), 41645

(Office Building), 51370 (Tailings Pond-Abaca Water Treatment Plant), 51405

(Tailings, Water-Pumphouse-Biga), 51403 (Tailings Pond Pumphouse), 51369

(Mechanic House-Magdugo) and 51368 (Field Office, Tailings-Magdugo) are, of

course, not “machineries”. However, they should have been classified as

“industrial equipment” since they exist primarily for pollution control and/or

environmental protection purposes.

ACMDC says the Ilag River Diversion Tunnel was completed and in

operation only on 30 April 1988 yet, Respondent-Appellant assessed it with back

taxes starting 1983.

The Local Board sustained the contention of Respondent-Appellee that the

above properties were not merely pollution control devices and environmental

protection facilities but were essentially part of the mining operations of appellant;

that they were not mere devices but physical facilities and installations; that

pollution control and environmental protection were only incidental effects but

were not the primary purposes for their installation or construction; and that they

are not the ones referred to as tax exempt under Section 234, paragraph (e) of

the Local Government Code of 1991.

In a way, the Local Board’s contention that the said properties “are

essentially part of the mining operations” of ACMDC is correct, since mining

companies, such as ACMDC, are required under existing laws to install pollution

control and environmental protection devices or facilities. However, to say that

Reference: Book X, pp. 1-45

“pollution control and environmental protection were only incidental effects but

were not the primary purposes for their installation or construction” is not quite

correct. If not for pollution control and environmental protection, what then was or

were the primary and ultimate purpose or purposes for which these properties

were installed or constructed? Besides which, Section 234, paragraph (e), does

not contain any condition to the effect that, in order to be exempt from payment

of the real property tax, such pollution control devices and environmental

protection facilities should not be “essentially parts” of the main operations.

Where the law does not distinguish, we should not distinguish.

We believe that no one in his right mind would install and/or construct –

and the government would never require the installation of – pollution control

devices and environmental protection facilities if the potential pollution problem or

environmental damage, which these devices and/or facilities seek to prevent,

does not exist in the first place.

We agree with ACMDC that the law applicable to this issue is Section

234(e) of the Local Government Code of 1991. All the properties involved in this

issue are considered pollution control devices and/or environmental protection

facilities and should have been exempted from payment of the real property tax

starting January 1, 1992, the day R.A. 7160 took effect, if such devices and

facilities were already existing by then.

FOURTH ISSUE

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT HELD THAT THE RECKONING DATE, TO DETERMINE WHEN ALL PROPERTIES WHICH HAVE NOT BEEN USED BY REASON OF CLOSURE AND CESSATION OF PRODUCTION AND STOPPAGE OF OPERATIONS SHOULD BE TRANSFERRED TO THE EXEMPT ROLL, IS AUGUST 15, 1994.

ACMDC filed its appeal with the Local Board of Assessment Appeals of

Toledo City on February 17, 1994. Its Position Paper was filed with the same

office on September 15, 1997.

Reference: Book X, pp. 1-45

Attached to ACMDC’s Position Paper, among others, were Annexes “IV-A”

and “IV-B” which were opinions made by the Department of Finance dated

January 25, 1988 and April 27, 1992. Both opinions dealt with the interpretation

of Section 3, paragraph (m) of P.D. 464, otherwise known as the Real Property

Tax Code. In effect, the said opinions say, as follows:

“In connection, attention is invited to Section 3(m) of PD 464, as amended, which reads as follows:

“Sec. 3. Definition of Terms. – When used in Code. –

“x x x.

“(m) 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 purposes are designed for, or essential to manufacturing, commercial, mining, industrial or agricultural purposes.” (Underscoring supplied)

“From the abovequoted provision of law, it is clear that machinery shall be assessed for taxation purposes when the same 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 manufacturing and industrial purposes. Conversely, when machineries are no longer actually used for its purpose by reason of closure or cessation of production the same should be transferred from the Taxable Roll to the Exempt Roll and not be subjected to the payment of real property taxes during the period of non-use.”

The Local Board subscribes to the abovequoted opinion of the Department

of Finance and states that:

“In the instant cases, out of sixty six (66) tax declarations on machineries, seven (7) were cancelled for being duplications of previous and still existing tax declarations; forty seven (47) bear notations “Exempted from realty taxes starting July 1, 1993” with reason “Machinery not in operation” or similar statements; and twelve (12) do not bear the “tax exempt” notation including the two (2) tax declarations covering second lift machineries which will be treated differently below. So, forty seven tax declarations were already transferred to the “tax exempt” roll starting July 1, 1993. With respect to the remaining twelve (12), they shall be transferred to the “tax exempt” roll only starting August 16, 1994 because appellant stopped its mining operation on August 15, 1994. (Annex IV-;L Appellant’s Position Paper re: Notice of Lay-off To All Employees Concerned).

“This should be so because appellant failed to submit proof that the subject properties were mothballed or had ceased operations on the dates they alleged. Exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. That’s the general rule. (Floro Cement Corporation vs. Gorospe, 200 SCRA 472; Philippine Petroleum Corp. vs. Municipality of Pililla, Rizal, 198 SCRA 82).”

ACMDC’s Position Paper, which was filed with the same office on

September 15, 1997, contained the various dates when the operations of certain

properties were supposedly stopped, thus:

Reference: Book X, pp. 1-45

Date Operation
Stopped No. of TDs Property Covered ——————– ————– ———————–
Never Operated 3 Carmen Decline Tunnel Tax Declaration Nos. 51408 51413 51415
December 1991 12 Mine Underground, 1st Lift Tax Declaration Nos.:
34828 34834 51414 51500 51501 51502 51503 51504 51505 51506 51507 51508
December 1993 25 Mine Underground, 2nd Lift Tax Declaration Nos.:
51412 51499 51508 51509 51510 51511 51512 51513 51514 51515 51516 51517 51518 51519 51520 51521 51522 51523 51524 51525 51526 51527 51528 51529 51416
February 1992 90 Biga Concentrator Tax Declaration Nos.:
51390 51391 51392 51393 51394 51395 51396 51397 51398 51399 51400 51401 51402 51403 51404 51405 51406 51407 51409 51410 51411 51375 51376 51377 51378 51379 51380 51381 51382 51383 51384 51385 51386 51387 51388 51389 51530 51531 51532 51533 51534 51535 51536 51537 51538 51539 51540 51541 51542 51543 51544 51545 51546 51547 51548 51549 51550 51551 51552 51553 51554 51555 51556 51557 51558 51559 51560 51561 51562 51563 51564 51565 51566 51567 51568 34682 34683 34684 34685 34686 34687 34688 34705 34961 34967 34988 38619 38621 41742 (should be 89 TD’s only)
December 1993 307 Carmen Concentrator Tax Declaration Nos.:
27212 34628 34629 34690 34706 34707 34708 34709 34710 34712 34713 34766 34767 34768 34769 34830 34903 34905 38625 38631 38633 43205 43206 43661 43662 43663 44505 45002 50787 50788 50789 50790 50791 50792 50793 50794 50795 50796 50797 50798 50799 50800 50801 50802 50803 50804 50805 50806 50807 50808 50809 50810 50811 50812 50813 50814 50815 50816 50817 50818 50819 50820 50821 50822 50823 50824 50825 50826 50827 50828 50829 50830 50831 50832 50833 50834 50835 50836 50837 50838 50839 50840 50841 50842 50843 50844 50845 50846 50847 50848 50849 50850 50851 50852 50853 50854 50855 50856 50857 50858 50859 50860 50861 50862 50863 50864 50865 50866 50867 50870 50871 50872 50873 50874 50875 50876 50877 50878 50879 50880 50881 50882 50883 50885 50886 50887 50888 50889 50890 50891 50892 50893 50894 50895 50896 50897 50898 50899 50900 50901 50902 50903 50904 50905 50906 50907 50908 50909 50910 50911 50912 50913 50914 50915 50916 50917 50918 50919 50920 50921 50922 50923 50924 50925 50926 50927 50928 50929 50930 50931 50932 50933 50934 50935 50936 50937 50938 50939 50940 50941 50942 50943 50944 50945 50946 50947 50948 50949 50950 50951 50952 50953 50954 50955 50956 50957 50958 50959 50960 50961 50962 50963 50964 50965 50966 50967 50969 50971 50972 50973 50974 50975 50976 50980 50982 50983 50984 50985 50986 50987 50988 50989 50990 50992 50993 50994 50995 50997 50998 50999 51000 51001 51002 51003 51004 51005 51006 51007 51008 51009 51010 51011 51012 51013 51014 51015 51016 51017 51018 51019 51020 51021 51022 51023 51024 51025 51026 51027 51028 51029 51030 51031 51032 51033 51034 51035 51036 51037 51038 51039 51040 51041 51042 51043 51044 51045 51046 51047 51048 51049 51050 51051 51052 51053 51054 51055 51056 51057

Amount Erroneously Assessed
—————–P48,240,500.90

4,176,049.58

15,101,399.88

8,136,466.10

13,395,774.20

Reference: Book X, pp. 1-45

51058 51059 51060 51061 51062 51063 51066 51067 51068 51069 51070 51071 51072 51073 51074 51075 51077 51081
December 1993 131 Various Equipment & Machineries within Barangay Don Andres Soriano (DAS) area
Tax Declarations:
34630 34631 34632 34633 34634 34635 34636 34637 34638 34639 34640 34642 34643 34644 34645 34646 34647 34648 34649 34650 34651 34652 34654 34655 34656 34657 34658 34659 34660 34661 34662 34663 34664 34666 34668 34669 34671 34672 34673 34674 34675 34693 34694 34695 34696 34697 34698 34699 34701 34715 34718 34915 41484 41780 51370 51371 51372 51373 51374 51417 51418 51419 51420 51421 51422 51423 51424 51436 51437 51438 51439 51440 51441 51442 51443 51444 51445 51446 51447 51448 51449 51450 51451 51452 51453 51454 51455 51456 51457 51458 51459 51460 51461 51462 51463 51464 51465 51466 51467 51468 51469 51470 51471 51472 51473 51474 51475 51476 51477 51478 51479 51480 51481 51482 51483 51484 51485 51486 51487 51488 51489 51490 51491 51492 51493 51494 51495 51496 51497 (should be 129 TDs only)
November 1992 16 Foundry & Machine Shop Tax Declaration Nos.:
34677 34678 34680 34679 34714 34716 34717 34719 34720 34770 34771 34962 34965 34967 37367 41478

5,878,439.17

726,403.98

ACMDC argues that, since the properties ceased operations not at the

same time, the reckoning dates, for purposes of transferring those properties

from the taxable to the exempt roll, should correspond to the actual dates these

properties ceased operations.

Section 3, Sub-section 4, of Local Assessment Regulations No. 1-92

issued by the Department of Finance on October 6, 1992 pursuant to Sections

201 and 219 of R.A. 7160, otherwise known as the Local Government Code of

1991, provides as follows:

“Section 4. Valuation of Real Property – In cases where (a) real property is declared for the first time; (b) there is an on-going general revision of property classification and assessment; or (c) a request is made by the person in whose name the property is declared, the provincial, city or municipal or his duly authorized deputy shall, in accordance with the provisions of this Regulations make a classification, appraisal and assessment of the real property listed and described in the valuation thereon: Provided, however, That the assessment of real property shall not be increased oftener than once every three (3) years except in case of a new improvement substantially increasing the value of the said property or any change in actual use.

“1. Undeclared property found at any time or during a general revision of real property assessments shall be listed, classified, and valued like similar property in the locality on the basis of the schedule of base market values, or on the schedule of base unit construction cost in force, and assessed also like similar properties in the locality and shall be subject to back taxes of not exceeding ten (10) years from the initial assessment.

Reference: Book X, pp. 1-45

“2. Owners of real property may request the provincial or city assessor or the municipal assessors of municipalities within the Metropolitan Manila Area to revise the assessment of real property, regardless of existing assessments or valuations declared by the owner under the following circumstances:

“a. If real property has suffered permanent loss of value by reason of typhoon, flood, fire or other calamity.

“b. If improvements have been introduced to real property or there has been change in the classification or use of property, such as agricultural lands converted into urban subdivisions, or residential to commercial. In the absence of such new improvements or change of use, the assessment or real property shall not be changed during the three-year period.

“c. Effectivity of assessment under the foregoing cases shall be as follows:

“(1) Cancellation or reduction of assessment shall be made effective the quarter next following the quarter during which the cause or ground for cancellation or reduction has occurred.

“(2) Increased assessment shall be made effective the year following the year or re-assessment, i.e., revised assessment made this year (1992) shall be made effective in 1993.

“(3) No re-assessment or real property should be made in the absence of any circumstances aforementioned.

An owner of real property may request for a revision of the assessment of

his real property if the same has suffered permanent loss of value for any reason,

or there has been a change in the use thereof or, for that matter, there has been

a cessation of the use thereof.

Section 3, Sub-Section 04(2-c-1) of the same Local Assessment

Regulations states that the “Cancellation or reduction of assessment shall be

made effective the quarter next following the quarter during which the cause or

ground for cancellation or reduction has occurred.

In relation to the above provisions of Local Assessment Regulations 1-92,

Section 221 of R.A. 7160 provides as follows:

“SEC. 221. Date of Effectivity of Assessment or Reassessment. – All assessments or reassessments made after the first (1s) day of January of any year shall take effect on the first (1st) day of January of the succeeding year:

Reference: Book X, pp. 1-45

Provided, however, That the reassessment of real property due to its partial or total destruction, or to a major change in its actual use, or to any great and sudden inflation or deflation or real property values, or to the gross illegality of the assessment when made or to any other abnormal cause, shall be made within ninety (90) days from the date any such cause or causes occurred, and shall take effect at the beginning of the quarter next following the reassessment6.” (Underlining supplied)

ACMDC, in a letter dated May 10, 1993 and received by Respondent-

Appellee on May 14, 1993, advised Respondent-Appellee of the shutdown of

ACMDC’s Biga Concentrator. Said letter is quoted hereunder:

May 10, 1993

“Mr. Rodrigo Villaceran “City Assessor
“Toledo City

“Dear Mr. Villaceran:

“In connection with the complete shutdown of our Biga Concentrator, attached herewith is the list of tax declarations covering machineries and equipment which the company has mothballed and/sidelined, as per attached list.

“Pursuant to previous Agreements and Stipulation of Facts (please see attached) entered into by and between ACMDC and the Toledo City Government, we request that the above tax declarations be cancelled from the Assessment Rolls for the 3rd quarter of 1993.

“Hoping that this request will merit your favorable consideration.

“Thank you and regards.

Very truly yours,

“ATLAS CONSOLIDATED MINING “& DEVELOPMENT CORPORATION

“By:
“ORIGINAL SIGNED” “TEODORO C. VILLACERAN, JR. “Director, Legal Services”

Attached to the above-quoted letter is a list containing the following tax

declarations, to wit:

34958 34959 34968 34970 34972 35348 41481 41483 41712 41713 41714 41715 41716 41717 41718 41719 41720 41721 41722 41723 41724 41725 41726 41727 41728 41729 41730 41731 41732 41733 41734 41735 41736 41737 41738 41740 41741 41743

Although ACMDC’s memorandum of lay-off to all employees dated August

15, 1994 does not appear to have a copy thereof furnished the Respondent-

Appellee, much less contained a request for the Assessor to transfer properties

from the taxable to the exempt roll, Respondent-Appellee, on the basis of said

memorandum, did transfer certain properties from the taxable roll to the exempt

Reference: Book X, pp. 1-45

roll on August 16, 1994. The Local Board says that the transfer of certain

properties from the taxable to the exempt roll should only be on August 16, 1994,

the date following the date of the memorandum of lay-off to all employees,

“because appellant failed to submit proof that the subject properties were

mothballed or had ceased operations on the dates they alleged.”

Except for the aforequoted letter dated May 10, 1993, no other direct

advices of cessation of operations are found in the records. However, ACMDC’s

Position Paper, in itself, can be considered a request for said transfers.

Section 4 of the Local Assessment Regulations 1-92 provides that “In

cases where . . . a request is made by the person in whose name the property is

declared, the provincial, city or municipal assessor or his duly authorized deputy

shall, in accordance with the provisions of this Regulations make a classification,

appraisal and assessment of the real property listed and described in the

declaration irrespective of any previous assessment or taxpayer’s valuation

thereon. . .”

It was not, therefore, incumbent upon ACMDC to provide proof of stoppage

of operations. All it had to do was request the assessor to make the

corresponding reassessment. It was the duty of the assessor to ascertain the

veracity of the request and make the reassessment accordingly. However, as

stated earlier, except for that letter dated May 10, 1993 from ACMDC and the

Position Paper of ACMDC, no the requests were made by ADMDC to transfer

certain properties from the taxable to the exempt roll.

Based on the provisions of Section 221 of R.A. 7160, the transfer from the

taxable roll to the exempt roll of the tax declarations under this Fourth Issue

should have been October 1, 1997, the beginning of the quarter following the

receipt of ACMDC’s Position Paper on September 15, 1997. However, since

Respondent-Appellee recognizes as fact ACMDC’s complete stoppage of all

operations on August 15, 1994, the date of ACMDC’s memorandum of lay-off to

Reference: Book X, pp. 1-45

all employees, the tax declarations which are not yet transferred from the taxable

roll to the exempt roll should be so transferred effective October 1, 1994.

FIFTH ISSUE

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE RESPONDENT-APPELLEE IN MAKING ASSESSMENTS ON PROPERTIES SUBJECT TO TAX HOLIDAY AND INVESTMENT INCENTIVES GRANTED UNDER SPECIAL LAWS FOR THE MINING INDUSTRY.

This issue consists of two parts: First, ACMDC’s claim of the benefit of

suspension of payments under LOI 1416 and subsequent waiver by the

government under P.D. 2027 of the suspended payment; and Second, ACMDC’s

claim of tax holiday under Section 53 of P.D. 463.

On the first part of this issue, ACMDC pointed out that on July 7, 1984, the

late President Marcos issued Letter of Instruction No. 1416 suspending the

payment of all taxes, duties, fees, imposts and other charges, whether direct or

indirect, due and payable by the copper mining companies in distress to the

national and local governments. Pursuant to this LOI, then Minister of Trade and

Industry Roberto B. Ongpin issued on August 9, 1984 a “Certificate of Eligibility

to Suspend Payments” in favor of ACMDC which is quoted as follows:

“This is to certify that, pursuant to the approval by the President, ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION is issued this certificate in accordance with the provisions of Letter of Instructions No 1416 and is, therefore, entitled to the suspension of the payment of all taxes, duties, fees, imposts and other charges, whether direct or indirect, due and payable by the said Mining Company to the National and Local Governments subject to the representations and commitments set forth in each application, the provisions of the above-mentioned Letter of Instructions, rules and regulations and its amendments, if any, of the Ministry of Trade and Industry and the terms and conditions therein prescribed.

“This certificate will be valid until such time as revoked in accordance with Condition No. 2 of LOI No. 1416.”

Pursuant to the above—quoted “certificate”, ACMDC, in a letter-application

dated August 3, 1984 addressed to the then Ministry of Trade and Industry. Said

letter-application contained the following detailed list of the taxes, etc. the

payments for which ACMDC wanted suspended, thus:

Underground – First Lift

Period Amount of Taxes

Reference: Book X, pp. 1-45

July 1984 – Dec. 1984 1985
1986

P 575,722.47 1,163,155.65 1,163,155.65

1987 August 1988 Sub-total

1,161,155.65
759,822.84
P 4,823,715.42

Biga Concentrator

Period
July 1984 – Dec. 1984 1985
1986 1987
August 1988 Sub-total

Amount of Taxes P 2,255,880.66
4,505,636.37 4,505,636.37 4,513,597.71
2,682,919.65
P18,463,670.76

Carmen Concentrator

Period
July 1984 – Dec. 1984 1985
1986 1987
August 1988 Sub-total

Amount of Taxes P 1,696,523.16
3,393,046.31 3,327,499.90 2,871,039.25
174,002.56
P11,462,111.18

Various Service Equipments at barangay Don Andres Soriano

Period Amount of Taxes

July 1984 – Dec. 1984 1985
1986 1987

P 2,028,327.89 4,056,655.49 4,067,146.09 4,011,515.80

August 1988 Sub-total

2,426,645.52
P16,590,290.79

Foundry Shop Equipments at barangay Sangi

Period Amount of Taxes

July 1984 – Dec. 1984 1985
1986

P 166,968.74 333,757.47 1,930,242.08

1987 August 1988 Sub-total

Grand Total

1,684,919.39
94,603.73

P 4,210,491.41 ——————-P55,550,279.56 ============

Then President Marcos issued Presidential Decree No. 2027 on February

4, 1986 wherein the then President ordered that:

Reference: Book X, pp. 1-45

“1. The accumulated taxes, duties, fees, imposts and other charges of copper mining companies which have been suspended pursuant to LOI 1416, may be waived under the conditions herein provided.

“2. Only mining companies as determined by the Ministry of Trade and Industry to be in distress such that the payment of accumulated taxes, duties, fees, imposts and other charges under present economic conditions will cause irrepairable damage to their viable operations may avail of the above waiver.

“3. The evaluation of the Ministry of Trade and Industry will be done on a quarterly basis upon application by a distressed mining company and shall take into account the existing copper world market prices, foreign exchange earnings of the applicant, cash position of the company, profitability of the company, and such other criteria indicative of the continuing inability to pay the aforesaid obligations to the government.

“4. The Ministry of Trade and Industry shall have the authority to certify copper mining companies as eligible for waiver of accumulated taxes, duties, fees, imposts and other charges. The actual waiver shall be effective upon approval by the President.

“5. The Ministry of Trade and Industry is authorized to promulgate the implementing rules of this Order.

“This Order shall take effect immediately.”

The Local Board states that “that issue had been definitely settled in the

case of Caltex Philippines, Inc. vs. Commission on Audit, 208 SCRA 726,

decided by the Supreme Court en banc on May 8, 1992 with formerly Associate

Justice and now Chief Justice Hilario G. Davide, as the ponente and without

dissent, emphatically stating, to wit: Letter of Instruction No. 1416 has no binding

force after the decision in the above-mentioned case. . . Tax exemption as a

general rule are construed strictly against the grantee and liberally in favor of the

taxing authority.”

ACMDC countered that what was declared by the Supreme Court in Caltex

Philippines v. Commission on Audit “to be of no binding effect” was only LOI

1416 but not P.D. 2027; that P.D. 2027 is still very much valid and binding; that,

even without LOI 1416, ACMDC was still entitled to tax holiday as it was P.D.

2027 which actually waived the tax due to the government for the corresponding

period claimed by ACMDC; and that, consequently, all taxes in the amount of

P55,550,279.56 should be deducted from the total tax assessment against

ACMDC.

Presidential Decree No. 2027 mandates that “The Ministry of Trade and

Industry shall have the authority to certify copper mining companies as eligible

Reference: Book X, pp. 1-45

for waiver of accumulated taxes, duties, fees, imposts and other charges. The

actual waiver shall be effective upon approval by the President.” No such

certification from the Ministry of Trade and Industry, much less a waiver duly

approved by the President, is found in the records. This Board, during the

hearing on August 15, 2002, even gave ACMDC a chance to present copies of

said documents. Atty. Alo, counsel for ACMDC, asked and was granted five (5)

days within which to present the same. On August 22, 2002 Atty. Alo did file a

manifestation with a copy of the Certificate of Eligibility to Suspend Payment

under LOI 1416 – not the Certificate of Eligibility for Waiver duly approved by the

President under P.D. 2027.

There is, therefore, no proof that the said amount of P55,550,279.56 had

been waived in accordance with the provisions of P.D. No. 2027.

On the second part of this issue, ACMDC says that Presidential Decree

No. 463, the Mineral Resources Development Decree of 1974, has granted

ACMDC a tax exemption on all machineries, equipment, and tools from all taxes,

except income tax, for a period starting from exploration and ending five (5) years

from the first date of actual commercial production of saleable mineral products.

Section 53 of PD No. 463 provides as follows:

“SEC. 53. Tax Exemptions. – Machineries, equipment, tools for production plants to convert mineral ores into saleable forms, spare parts, supplies, materials, accessories, explosives, chemicals and transportation and communications facilities imported by and for the use of new mines and old mines which resume operation when certified as such by the Secretary upon recommendation of the Director, are exempt from the payment of customs duties and all taxes except income tax for a period starting from exploration and ending five (5) years from the first date of actual commercial production of saleable mineral products. Provided that such articles are not locally available in reasonable quantity, quality and price and are necessary or incidental in the proper operation of the mine. x x x “

Under the above-quoted provision of PD 463, ACMDC was issued by the

Board of Investments a Certificate of Authority dated December 18, 1979 to

import certain machinery and equipment (Annex “V-G” to ACMDC’s Petition to

the Local Board).

Reference: Book X, pp. 1-45

ACMDC alleges that all the machinery and equipment listed under the said

authority were imported for the use of the second lift tunnel which operated only

in January 1985.

ACMDC argues that all the machineries, equipment and tools of production

in the second lift tunnel should have been exempted from all taxes for a period

starting from exploration and ending five (5) years from the first date of actual

commercial production of saleable mineral products but ACMDC only claims for

five (5) years starting from January 1985, the date of actual commercial

production.

ACMDC states that Respondent-Appellee assessed the same second lift

tunnel from 1983 to 1990 in the total amount of P139,377,473.12 and that,

deducting therefrom taxes assessed for the grizzly and haulage development

level, the Ilag River Diversion Tunnel and movable equipment in the aggregate

amount of P84,301,779.44 (which ACMDC claims as deduction under other

grounds), the taxes erroneously assessed is P55,075,693.68, thus:

Assessment for the period 1983 – 1990 on equipment covered by tax holiday
of five (5) years ——————————————————————————–P139,377,473.12

Less: Items claimed under other grounds:
Grizzly & Haulage Level P52,093,292.80 Ilag River Diversion 18,448,216.56 Movable 13,760,270.08
——————–Net Total Erroneously Assessed

84,301,779.44 ———————–
P 55,075,693.68 ============

The Local Board says that the abovementioned claim of ACMDC appears

to be misleading as the tax declarations enumerated cover buildings. The Local

Board finds that only Tax Declaration Nos. 51412 and 51499 cover machineries

in the Second Lift Tunnel; that the five-year exemption period pursuant to Section

53 of PD No. 463 could have been over in 1985.

ACMDC counters that the Local Board’s statement that “the five-year

investment incentive pursuant to Section 53 of Presidential Decree No. 463

(Mineral Resources Development Decree of 1974) could have been over in

1985” is mere speculation which has no place in the administration of justice.

Reference: Book X, pp. 1-45

ACMDC’s claim for exemption under Section 53 of P.D. No. 463 involved

the following tax declarations, to wit:

TD# Year Description Class

51412 1983 2nd Lift Haulage & Grizzly Levels Mach-Ind 51499 1983 2nd Lift Mach. & Equip.-Mine Underground Mach-Ind. 51416 1983 Ilag River Diversion Tunnel Bldg-Ind. 51508 1983 Mug Complex Bldg. 2nd Lift Area Bldg.-Ind. 51509 1983 Change House, 2nd Lift Area Bldg.-Ind. 51510 1983 Compressor House-2nd Lift Area Bldg.-Ind. 51511 1983 Timekeeper’s House, 2nd Lift Area Bldg.-Ind. 51512 1983 Sub-station Bldg.-2nd Lift Area Bldg.-Ind. 51513 1983 Mechanical/Machine Shop Bldg.-Ind. 51514 1983 Battery Shop-2nd Lift Area Bldg.-Ind. 51515 1983 Carpentry Shop-2nd Lift Area Bldg.-Ind. 51516 1983 Vault Bodega-2nd Lift Area Bldg.-Ind. 51517 1983 Blasting Cap-2nd Lift Area Bldg.-Ind. 51518 1983 Service Hoist Bldg.-2nd Lift Area Bldg.-Ind. 51519 1983 45-Tam Production Staff Hoist, 2nd Lift Area Bldg.-Ind. 51520 1983 Cement Bodega-2nd Lift Area Bldg.-Ind. 51521 1983 2nd Lift Hoist Bldg.-2nd Lift Area Bldg.-Ind. 51522 1983 Hoist House-2nd Lift Area Bldg.-Ind. 51523 1983 Zeolite House-2nd Lift Area Bldg.-Ind. 51524 1983 Caplamp Room Bldg.-2nd Lift Area Bldg.-Ind. 51525 1983 Covered Walkway-2nd Lift Area Bldg.-Ind. 51526 1983 L-195 Car Repair Shop-2nd Lift Area Bldg.-Ind. 51527 1983 Office-2nd Lift Area Bldg.-Ind. 51528 1983 Pump Chamber-2nd Lift Area Bldg.-Ind. 51529 1983 Battery Shop-2nd Lift Area Bldg.-Ind.

Mkt. Ass. Assessed Value Lvl. Value
P262,567,000 80% P210,053,600 327,327,100 80% 261,861,680
92,984,960 80% 74,387,970 2,384,000 80% 1,907,200 4,423,680 80% 3,538,940 387,840 80% 310,270 41,150 55% 22,630 241,920 75% 181,440 1,125,760 80% 900,610 186,240 75% 139,680 100,860 60% 65,560 67,580 60% 40,550 49,280 55% 27,100 459,520 80% 367,620 1,984,640 80% 1,587,710
14,720 50% 7,360 539,520 80% 431,620 350,720 80% 280,580
16,640 50% 8,320 945,920 80% 756,740 81,280 65% 52,830 4,795,260 80% 3,836,210 40,320 55% 22,180 1,193,600 80% 954,880 328,320 80% 262,660

The Local Board agrees with Respondent-Appellee that the taxes on Tax

Declaration Nos. 51412 and 51499 “should commence in the year 1986 and

continuously up to the year 1994, because appellant stopped its operation on

August 15, 1994 and pursuant to Section 246 of Republic Act No. 7160 (The

Local Government Code of 1991), ‘the real property tax for any year shall accrue

on the first day of January.’”

Section 53 of P.D. No. 463 enumerates only “machineries, equipment,

tools for production plants to convert mineral ores into saleable forms, spare

parts, supplies, materials, accessories, explosives, chemicals and transportation

and communication facilities imported by and for the use of new mines and old

mines which resume operation. . .”

Buildings are not among those enumerated. From the above list of twenty-

five (25) tax declarations, only two (2) – Nos. 51412 and 51499 – cover

machineries. The rest cover buildings.

The Local Board’s ruling is, therefore, party correct. Only Tax Declaration

Nos. 51412 and 51419 are qualified for exemption under Section 53 of P.D. 463.

However, the exemption should at least start from the year 1985, the “first date of

commercial operation” – not 1986 – and end five (5) years thereafter. Since the

Reference: Book X, pp. 1-45

“first date of commercial operation” is not given, the five-year exemption period

should be from January 1, 1985 to December 31, 1989. Therefore, Tax

Declaration Nos. 51412 and 51419 were subject to payment of the real property

tax from January 1, 1990 up to August 15, 1994 and should have been

transferred from the taxable to the exempt roll as of August 16, 1994, the

effective date of total cessation of operations of ACMDC.

SIXTH ISSUE

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT HELD THAT THE EXCAVATIONS IN THE GROUND REFERRED TO BY PETITIONER-APPELLANT AS HOLES IN THE GROUND ARE CONSIDERED REAL PROPERTIES.

The tax declarations involved in this issue are the following:

TD# Year Description Class

51412 1983 2nd Lift Haulage & Grizzly Levels Mach-Ind. 51414 1983 1st Lift Haulage & Grizzly Levels
Dev Mach-Ind. 51415 1983 Shafts Mach-Ind.

Mkt. Value
P262,567,000

243,357,000 39,522,000

Ass. Assessed Lvl. Value
80% P210,053,600

80% 194,685,600 80% 31,617,600

ACMDC says that the above-listed tax declarations pertain to mere

excavations or holes in the ground which are known to ACMDC as the first and

second level of the grizzly and haulage development.

The Local Board ruled that the “holes in the ground” are considered real

properties falling under the term “roads and constructions of all kinds adhered to

the soil” under Article 415, paragraph 1, of the New Civil Code.

ACMDC contends that the phrase “constructions of all kinds adhered to the

soil” contemplates of immovable which are “attached permanently to the land”;

that, since the “holes” are mere excavations, it defies imagination how these

holes can be considered immovable permanently attached to the land when in

fact there is nothing attached to the land in the first place.

ACMDC explains that first lift grizzly level is an underground excavation

situated at 50 meters below sea level; that the first haulage level is an

underground excavation situated at 70 meters below sea level; the second

grizzly and haulage levels are basically similar to the first lift levels but situated

deeper at 175 meters and 195 meters below sea level; that all these are

Reference: Book X, pp. 1-45

openings or holes excavated below the ground surface with a dimension of 2.5

meters wide and 3 meters high with an approximate length of 33,203 meters; that

these excavations serve as either access to the orebody, airways or ore transport

drifts; and that shafts are vertical circular openings of about 7.0 meters in

diameter and are used for service and ventilation.

ACMDC believes that the error in the assessment of these excavations

resulted from a sweeping copy of the Mortgage Trust Indenture submitted to the

Register of Deeds; that the values reflected for the excavations in said Mortgage

Trust Indenture were for accounting purposes only and cannot be made the basis

for tax assessments; that the cost of excavation was treated as a deferred

charge, a cost or expense spread out over a certain number of years depending

on the life of the ore body.

We are inclined to agree with ACMDC. The “holes in the ground” could not

even be considered as assets, much less real property. The amounts spent by

ACMDC for these items were deferred charges spread over a certain period of

time. In layman’s language, they are “prepaid expenses” proportionately

deducted from income over a certain number of productive years.

SEVENTH ISSUE

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT THE ASSESSED AMOUNT OF P66,900,675.60, REFERRING TO TAXES FOR THE PERIOD SEPTEMBER 1988 TO DECEMBER 1992, WAS NOT INCLUDED IN THE COMPROMISE AGREEMENT BETWEEN ACMDC AND THE CITY GOVERNMENT OF TOLEDO, BASED ONLY RESPONDENT-APPELLEE’S UNSUBSTANTIATED AND SELF SERVING ALLEGATION THAT THE SAID ASSESSED AMOUNT WAS IMPOSED ON ACMDC’S NEWLY DISCOVERED ASSETS.

The Local Board ruled that “Appellant’s contention that an assessed

amount of P66,900,675.60 referring to taxes for the period September 1988 to

December 1992 should be deleted as it was already subject of a Compromise

Agreement between ACMDC and the City Government of Toledo City is without

merit, First, said compromise agreement referred to taxes due on appellant’s

properties which were not newly discovered assets. Second, no proof is shown

Reference: Book X, pp. 1-45

that appellant religiously complied with the terms and conditions of said

compromise agreement. Third and last, if there were payments of taxes made for

the period from September 1988 to December 1992, said payments should be

deducted only from the amount due but not the whole P66,900,675.60 claimed

by appellant.”

ACMDC alleges that on 10 December 1992, the City Government of

Toledo expressly stipulated on the unpaid realty tax liability of ACMDC in the

total amount of Five Million Eight Hundred Twenty Three Thousand Four

Hundred Seventy Nine Pesos & 30/100 (P5,823,479.30) as of December 31,

1992; that this compromise agreement took into consideration all relevant factors

including the need of Toledo City for money for its urgent projects, the financial

problems of ACMDC, and the pending protest of ACMDC on the valuation of its

properties; that, consequently, after due evaluation, negotiations and series of

discussions, Toledo City represented by its City Mayor, Vice Mayor and presiding

officer for the Sangguniang Panglunsod, the Chairman of the Committee on

Laws of its Sangguniang Panglunsod, the City Treasurer, and the Acting City

Assessor assisted by the City Legal Officer stipulated together with the officers of

ACMDC, the following:

“b. After a joint recomputation of the valuation and assessment factors, the parties agree, confirm, affirm and ratify that ATLAS unpaid realty tax liability as of December 31, 1992 is in the total sum of FIVE MILLION EIGHT HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED SEVENTY NINE PESOS & 30/100 (P5,823,479.30) which excludes the suspended taxes under P.D. 2027.”

ACMDC says that Respondent-Appellee failed to specify which assets

were supposed to be newly discovered; that granting arguendo, that ACMDC

failed to deliver its end of the bargain in the Compromise Agreement, this does

not render the Compromise Agreement null and void, that the remedy of the

Toledo City Government should have been to demand from ACMDC compliance

with the terms of the Compromise Agreement; that it is not the office of the Local

Board to presume, let alone declare, that such Compromise Agreement has no

more binding effect.

Reference: Book X, pp. 1-45

The compromise agreement referred to by ACMDC contained the following

terms and conditions:

“NOW, THEREFORE, for their mutual benefit, the parties determined and decided to assist each other by entering into a compromise agreement regarding the realty tax protest pending before the Local Board of Assessment Appeals, hence, have agreed as they hereby agree as follows: That –

“a. The City Assessor adjusted the valuation of ACMDC properties per applicable assessment regulations;

“b. After a joint recomputation of the valuation and assessment factors, the parties agree, confirm, affirm and ratify that ATLAS unpaid realty tax liability as of December 31, 1992 is in the total sum of FIVE MILLION EIGHT HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED SEVENTY NINE & 30/100 (P5,823,479.30) which excludes the suspended taxes under P.D. 2027;

“c. ATLAS shall allow Toledo City to spend or use the amount of FOUR MILLION EIGHT HUNDRED THIRTEEN THOUSAND THREE HUNDRED SIXTEEN PESOS & 16/100 (P4,813,316.16) which was paid under protest, and waive its right, if any to the refund of said amount paid under protest, which payment maybe deemed to be absolute and unconditional as if paid without protest;

“d. ATLAS shall pay on or before December 31, 1992 without protest the amount of TWO MILLION SIX HUNDRED NINETY SEVEN THOUSAND FOUR HUNDRED ELEVEN & 50/100 (P2,697,411.50) the realty tax due for the last quarter of 1992;

“e. ATLAS shall pay the amount of THREE MILLION ONE HUNDRED TWENTY SIX THOUSAND SIXTY EIGHT PESOS (P3,126,068.00) for 37 tax declarations, TWO MILLION SEVEN HUNDRED FIFTY SEVEN THOUSAND FOUR HUNDRED FIVE PESOS (P2,757,405.00) of which shall be paid on or before March 31, 1993, and the amount of THREE HUNDRED SIXTY EIGHT THOUSAND SIX HUNDRED SIXTY TWO & 80/100 (P368,662.80) shall be paid on or before July 31, 1993, without penalty;

“f. Toledo City confirms the valuation of the properties subject hereof as final and effective until the next general revision of values of all ATLAS properties under the New Local Government Code;

“g. The parties shall hold action, in the meantime, on the question of the suspended taxes under LOI 1416 until the question will be resolved as not condoned or waived as claimed by ATLAS.

“h. This Agreement shall be effective only upon confirmation by the Sangguniang Panlungsod through an appropriate resolution.

The resolution called for its SP Resolution No. 553, Series of 1992,

approved by the Sangguniang Panglunsod of Toledo City on December 14,

1992, a certified copy of which was furnished this Board by the Respondent-

Appellee on August 15, 1992.

ACMDC further says that, at any rate, the City of Toledo has already

unilaterally and unequivocally waived and condoned all penalties and interest

charges on the real property tax liability of ACMDC due and payable prior to

1994 through Ordinance No. 30, a certified copy of which was furnished this

Reference: Book X, pp. 1-45

Board on August 15, 2002 by Respondent-Appellee. Said ordinance was

approved by the Sangguniang Panglunsod of Toledo City on February 14, 1994

and is quoted hereunder as follows:

“AN ORDINANCE GRANTING ASSISTANCE

“TO THE DISTRESSED COMPANIES OF TOLEDO CITY

“WHEREAS, some companies now operating in Toledo City such as ACMDC, which is the largest single employer that have been giving thousands of Toledo City residents employment, livelihood, infrastructure and has also given several services in Toledo City since 1953 until the present;

“WHEREAS, these companies, like ACMDC, have also been, since 1953, the biggest taxpayers and generators of economic activity and growth, so much that their presence in the City of Toledo had been a factor to its becoming a city in 1961;

“WHEREAS, said companies like ACMDC has sustained and suffered financial difficulties and impairment of 25% of its capital so that their survival have been seriously threatened as a result thereof;

“WHEREAS, it has been determined that it is for the greater interest and benefit of the City of Toledo and its inhabitants that these companies should survive and continue in being a factor to the growth and progress of Toledo City for the general welfare of the inhabitants therein;

“WHEREAS, it has also been determined that one of the greatest hindrances to the survival of the companies are the tax imposition levelled by the City Government of Toledo;

“WHEREAS, it is important to declare companies suffering from 25% impairment of their paid up capital as distressed.

“NOW, THEREFORE, be it resolved, as it is hereby RESOLVED to declare these companies suffering 25% impairment of their paid up capital, like ACMDC, distressed companies and to grant them as such distressed companies, assistance and relief as follows:

“x x x

“2. Penalties and interest charges on real property tax due and payable before the promulgation hereof are condoned. x x x”

This issue involves two items: First, the compromise agreement between

ACMDC and the City of Toledo dated December 10, 1992; and Second,

Ordinance No. 30 of the Sangguniang Panlungsod of Toledo City.

The Local Board implies that the said compromise agreement, wherein the

tax liability of ACMDC was fixed at P5,823,479.30 as of December 31, 1992,

excluding the suspended taxes under PD 2027, in relation to LOI 1416, was no

longer binding because “no proof is shown that appellant religiously complied

with the terms and conditions of said agreement.”

Reference: Book X, pp. 1-45

We disagree. An examination of the said compromise agreement reveals

that there is no express condition to the effects that failure on ACMDC’s part to

comply strictly with the terms and conditions of said agreement would render the

same agreement null and void.

As to Ordinance No. 30 of the Sangguniang Panlungsod of Toledo City,

the Local Board is silent on the Sangguniang’s waiver of penalties and interest

due and payable before the promulgation of said ordinance.

Therefore, in the recomputation of the tax liability of ACMDC, all penalties

and interest charges accrued as of February 13, 1994, the day immediately

before the promulgation of Ordinance No. 30, should be excluded.

EIGHT ISSUE

THE LOCAL BOARD COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE DISCREPANCIES BETWEEN THE 1993 AND 1995 TAX DUE COMPUTATION BY TAKING INTO ACCOUNT ACMDC’S TAX LIABILITIES FOR 1994 AND 1995 EVEN IF THE LATTER HAD COMPLETELY STOPPED ITS OPERATIONS IN 1993.

On this issue the Local Board ruled as follows:

“Regarding the alleged discrepancies between the 1993 and 1995 tax due computations even while the assessed value of the property remain the same with respect to that covered by Tax Dec. No. 51412, appellee explained that the aggregate total of the sum from the period 1983 to 1992 or ten (10) years was P31,508,040.00. In the years 1993, 1994 and 1995, the property incurred a tax liability of P9,453,412.00, thus the tax due for said property totalled P40,960,452.00. So, this explains the alleged discrepancy.

“However, it is observed that there are six (6) tax declarations covering properties claimed by appellant to be among the pollution control devices (Ground III) and around four hundred six (406) tax declarations, more or less, on machineries allegedly not used by reason of closure or cessation of operation (Ground IV) which were not newly discovered properties from the Mortgage Tax Indenture of 1990 but were already subjected to tax and were probably the subject matter in LBAA Case No. 88-1-12 and 89-1. As ruled earlier, the properties claimed by appellant to be pollution control devices were in reality physical facilities and installations which were essentially part of the mining operations of appellant. Pollution control and environmental protection were only incidental effect. So, they are not tax exempt.

“With respect to the 406 machineries, more or less, they are taxable from the y ear they were made taxable by the appellee City Assessor up to the year they were transferred from the “taxable roll” to the “tax exempt” roll, if ever they were transferred. If they were not transferred to the “tax exempt roll”, then, they are taxable until the year 1994 because it was in August 16, 1994 that appellant totally stopped its mining operation.”

ACMDC says that it is “not limiting itself to Tax Dec. 51412 in questioning

the discrepancy between 1993 and 1995 tax due computation.” (A complete list

Reference: Book X, pp. 1-45

of tax declarations which are subjects of this issue are attached as Annexes “IX-

B” to “IX-B-13” to ACMDC’s Position Paper submitted to the Local Board.)

ACMDC contends that there should have been no real property

assessments for the years 1994 and 1995 since ACMDC ceased operations in

1993, at the latest.

The subject of transfer of certain tax declarations from the taxable to the

exempt roll due to cessation of ACMDC’s operations was thoroughly and

sufficiently discussed under the Fourth Issue of the appeal. There is, therefore,

no necessity of discussing the same subject matter here.

WHEREFORE, in view of all the foregoing, this Board have decided and

hereby rules, as follows:

1. That Tax Declaration Nos. 50936, 50992 and 50857 are not

duplications of Tax Declaration Nos. 43206, 43205 and 38625 and are, therefore,

valid;

2. That Tax Declaration Nos. 51499, 51498, 51375, 51376, 51377,

51381, 51383, 51384, 51386 and 51388 should be cancelled and considered

without effect from their respective inceptions as the properties covered thereby

are personal – not real – properties and are not, therefore, subject to the

payment of the real property tax;

3. That the properties covered by Tax Declaration Nos. 51368, 51369,

41645, 41646, 41485, 51403, 51405, 51535, 51537, 51389, 51536, 51370,

34981, 41482, 50787, 51387, 51408 and 514169 constitute pollution control

devices and/or environmental protection facilities which are exempt from the

payment of real property tax under Section 234(e) of R.A. 7160 and, therefore, all

said tax declarations should be transferred from the taxable to the exempt roll

effective January 1, 1992, the date R.A. 7160 took effect, if said devices and/or

facilities were already in existence by then;

4. That the following tax declarations, if not already transferred from the

taxable to the exempt roll, should be so transferred effective October 1, 1994 (the

Reference: Book X, pp. 1-45

beginning of the quarter following the complete cessation of ACMDC’s operations

on August 15, 1994):

A. For Carmen Decline Tunnel, Tax Declaration Nos. 51408 51413 and 51415;

B. For Mine Underground, 1st Lift, Tax Declaration Nos.: 34828 34834 51414 51500 51501 51502 51503 51504 51505 51506 51507 and 51508;

C. For Mine Underground, 2nd Lift, Tax Declaration Nos.: 51412 51509 51510 51511 51512 51513 51514 51515 51516 51517 51518 51519 51520 51521 51522 51523 51524 51525 51526 51527 51528 51529 and 51416;

D. For Biga Concentrator, Tax Declaration Nos.: 51390 51391 51392 51393 51394 51395 51396 51397 51398 51399 51400 51401 51402 51404 51406 51407 51409 51410 51411 51377 51378 51379 51380 51382 51385 51387 51530 51531 51532 51533 51534 51538 51539 51540 51541 51542 51543 51544 51545 51546 51547 51548 51549 51550 51551 51552 51553 51554 51555 51556 51557 51558 51559 51560 51561 51562 51563 51564 51565 51566 51567 51568 34682 34683 34684 34685 34686 34687 34688 34705 34961 34967 34988 38619 38621 and 41742;

E. For Carmen Concentrator, Tax Declaration Nos.: 27212 34628 34629 34690 34706 34707 34708 34709 34710 34712 34713 34766 34767 34768 34769 34830 34903 34905 38625 38631 38633 43205 43206 43661 43662 43663 44505 45002 50787 50788 50789 50790 50791 50792 50793 50794 50795 50796 50797 50798 50799 50800 50801 50802 50803 50804 50805 50806 50807 50808 50809 50810 50811 50812 50813 50814 51805 50816 50817 50818 50819 50820 50821 50822 50823 50824 50825 50826 50827 50828 50829 50830 50831 50832 50833 50834 50835 50836 50837 50838 50839 50840 50841 50842 50843 50844 50845 50846 50847 50848 50849 50850 50851 50852 50853 50854 50855 50856 50857 50858 50859 50860 50861 50862 50863 50864 50865 50866 50867 50870 50871 50872 50873 50874 50875 50876 50877 50878 50879 50880 50881 50882 50883 50885 50886 50887 50888 50889 50890 50891 50892 50893 50894 50895 50896 50897 50898 50899 50900 50901 50902 50903 50904 50905 50906 50907 50908 50909 50910 50911 50912 50913 50914 50915 50916 50917 50918 50919 50920 50921 50922 50923 50924 50925 50926 50927 50928 50929 50930 50931 50932 50933 50934 50935 50936 50937 50938 50939 50940 50941 50942 50943 50944 50945 50946 50947 50948 50949 50950 50951 50952 50953 50954 50955 50956 50957 50958 50959 50960 50961 50962 50963 50964 50965 50966 50967 50969 50971 50972 50973 50974 50975 50976 50980 50982 50983 50984 50985 50986 50987 50988 50989 50990 50992 50993 50994 50995 50997 50998 50999 51000 51001 51002 51003 51004 51005 51006 51007 51008 51009 51010 51011 51012 51013 51014 51015 51016 51017 51018 51019 51020 51021 51022 51023 51024 51025 51026 51027 51028 51029 51030 51031 51032 51033 51034 51035 51036 51037 51038 51039 51040 51041 51042 51043 51044 51045 51046 51047 51048 51049 51050 51051 51052 51053 51054 51055 51056 51057 51058 51059 51060 51061

Reference: Book X, pp. 1-45

51062 51063 51066 51067 51068 51069 51070 51071 51072 51073 51074 51075 51077 and 51081;

F. For Various Equipment & Machineries within Barangay Don Andres Soriano (DAS) area, Tax Declaration Nos.: 34630 34631 34632 34633 34634 34635 34636 34637 34638 34639 34640 34642 34643 34644 34645 34646 34647 34648 34649 34650 34651 34652 34654 34655 34656 34657 34658 34659 34660 34661 34662 34663 34664 34666 34668 34669 34671 34672 34673 34674 34675 34693 34664 34666 34668 34669 34671 34672 34673 34674 34675 34693 34694 34695 34696 34697 34698 34699 34701 34715 34718 34915 41484 41780 51371 51372 51373 51374 51417 51418 51419 51420 51421 51443 51444 51445 51446 51447 51448 51449 51450 51451 51452 51453 51454 51455 51456 51457 51458 51459 51460 51461 51462 51463 51464 51465 51466 51467 51468 51469 51470 51471 51472 51473 51474 51475 51476 51477 51478 51479 51480 51481 51482 51483 51484 51485 51486 51487 51488 51489 51490 51491 51492 51493 51494 51495 51496 and 51497;

G. For Foundry & Machine Shop at Sangi, Tax Declaratiom Nos.: 34677 34678 34679 34680 34714 34716 34717 34719 34720 34770 34771 34962 34965 37367 and 41478;

5(a). That, the said amount of P55,550,279.56, the payment of which was supposed to have been suspended under LOI 1416 had not been waived by the government in the absence of a certificate of eligibility, duly approved by the President, for waiver of accumulated taxes in accordance with the provisions of P.D. No. 2027;

5(b). That only Tax Declaration Nos. 51412 and 51419, which cover machinery and equipment, are qualified for exemption under Section 53 of P.D. 463, and the exemption period should be from January 1, 1985 to December 31, 1989; the same tax declarations are subject to payment of the real property tax from January 1, 1990 up to August 15, 1994 but should be subsequently transferred from the taxable to the exempt roll as of August 16, 1994;

6. That Tax Declaration Nos. 51412, 51414 and 51415 should be cancelled and considered without effect from their respective inceptions on the ground that the items covered thereby are deferred charges or prepaid expenses – not assets, much less, real property;

7. As embodied in the compromise agreement by and between ACMDC and the City Government of Toledo, the total property tax liability of ACMDC as of December 31, 1992 was FIVE MILLION EIGHT HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED SEVENTY NINE & 30/100 PESOS (P5,823,479.30), plus the sum of FIFTY FIVE MILLION FIVE HUNDRED FIFTY THOUSAND TWO HUNDRED SEVENTY NINE & 56/100 PESOS (P55,550,279.56), the amount supposedly suspended taxes under LOI 1415 but not waived under P.D. 2027;

8. That, from SIXTY-ONE MILLION THREE HUNDRED SEVENTY-THREE THOUSAND SEVEN HUNDRED FIFTY-EIGHT & 86/100 PESOS (P61,373,758.86) as of December 31, 1992 (P5,823,479.30 plus P55,550,279.56), the total realty tax liability of ACMDC due presently to the City Government of Toledo shall be

Reference: Book X, pp. 1-45

recomputed based on all of the above, taking into consideration the partial payments made by ACMDC but, in accordance with the provisions of Ordinance No. 30 of the City of Toledo, penalties and interest charges accrued as of February 13, 1994, the date immediately preceding the promulgation of said Ordinance, should be excluded.

SO ORDERED.

Manila, Philippines, November 18, 2002

(Signed) CESAR S. GUTIERREZ
Chairman

(Signed)

ANGEL P. PALOMARES VACANT Member Member

Reference: Book X, pp. 1-45