Republic of the Philippines
Department of Finance
CENTRAL BOARD OF ASSESSMENT APPEALS
7th Floor, EDPC Building, BSP Complex
Manila

LUZON HYDRO CORPORATION and NATIONAL POWER CORPORATION,
Petitioners-Appellants,
CBAA CASE NOS. L-96 & L-99
-versus- (LBAA Case No. 08-01-03)

LOCAL BOARD OF ASSESSMENT APPEALS OF THE PROVINCE OF ILOCOS SUR,
Appellee,

-and-

FATIMA A. TENORIO, IN HER OFFICIAL CAPACITY AS PROVINCIAL ASSESSOR OF ILOCOS SUR; ANTONIO A. GUNDRAN, IN HIS OFFICIAL CAPACITY AS THE PROVINCIAL TREASURER OF ILOCOS SUR; REYNALDO BOTERES, IN HIS OFFICIAL CAPACITY AS THE MUNICIPAL ASSESSOR OF ALILEM, ILOCOS SUR; AND CRISTINA MONDERIN, IN HER OFFICIAL CAPACITY AS THE MUNICIPAL TREASURER OF ALILEM, ILOCOS SUR,
Respondents-Appellees.
X- – – – – – – – – – – – – – – – – – – – – – – – – -/

RESOLUTION
Of Respondents-Appellees’
Motion for Partial Reconsideration

On September 26, 2012, this Board rendered a Decision in the above-entitled case.
Not satisfied, Respondents-Appellees filed this instant Motion for Partial Reconsideration by registered mail, which Motion reached us on November 22, 2012. This instant Motion seeks the reconsideration of this Board’s Decision/Ruling in Issue No. 4 which states:
“WHETHER LHC/NPC CAN PROPERLY BE MADE LIABLE FOR INTERESTS, SURCHARGES AND PENALTIES.”

Respondents-Appellees assigned the following errors, viz:

“1. THE HONORABLE BOARD HAD ERRED IN HOLDING THAT THE LHC/NPC IS NOT LIABLE FOR SURCHARGES OR PENALTIES UNTIL THE REAL PROPERTY TAX IS FULLY PAID.

“2. THE HONORABLE BOARD HD (sic) ERRED IN NOT APPRECIATING THE DEFICIENCY IN THE TAX LIABILITY OF LUZON HYDRO CORPORATION (LHC) DUE TO THE MISDECLARATION/UNDERDECLARATION OF OTHER PROPERTIES, COSTS OF INSTALLATION AD (sic) FREIGHT OR TRANSPORTATION.”

THIS BOARD’S RULING

On the First Assigned Error:

On the matter of “WHETHER LHC/NPC CAN PROPERLY BE MADE LIABLE FOR INTERESTS, SURCHARGES AND PENALTIES”, this Board, in its Decision of September 26, 2012, had stated as follows:
“The LBAA quoted the provisions of Sections 167 and 168 of the LGC, as well as those of Section 255 of the same Code, in page 11 of the assailed resolution (Records, p. 46, Folder 1).

“The provisions of Sections 167 and 168 of the LGC are applicable only to local taxes under “Local Government Taxation” (Title One, Book II of the LGC). “Real Property Taxation” is governed by the LGC’s provisions under Title Two of the same Book II of the Code. To demonstrate why Section 168, in particular, is applicable only to local taxation and has no effect on real property taxation, consider the following:

For late payment of local taxes, fees, and charges, Section 168 on Local Government Taxation calls for a twenty-five percent (25%) surcharge, and two percent (2%) interest per month until the local tax, fee, or charge due is fully paid, but in no case shall the interest exceed 6 (should have been 36) months.

For late payment of the real property tax, Section 255 on Real Property Taxation calls for an interest at two percent (2%) per month until the real property tax due is fully paid, but in no case shall the interest exceed 6 (should have been 36) months.

“Surely, the real property tax due could not be subjected to a twenty-five percent (25%) surcharge and a two percent (2%) interest per month under Section 168 of the LGC and, at the same time, be subjected to another two percent (2%) per month under the provisions of Section 255.

“It was improper for the LBAA to order LHC to pay interests, surcharges and penalties as supposedly provided under Section 167 or 168 because these Sections have no effect on real property taxation. Likewise, the LBAA did not have to order LHC to pay interest as provided for in Section 255 because interest charges automatically apply if the tax remains unpaid on its due date. In the same manner, discounts automatically apply for early/prompt payments as provided for in applicable laws.

As above-stated, “it was wrong for the LBAA to order LHC to pay interests, surcharges and penalties as supposedly provided under Section 167 or 168 because these Sections have no effect on real property taxation.” Sections 167 and 168 of the LGC belong to Title One, Book II (Local Government Taxation) of the Local Government Code of 1991, R.A. 7160. They have no application to real property taxation cases, the latter being governed by Title Two, Book II of the Code.

As also stated above, “the LBAA did not have to order LHC to pay interest as provided for in Section 255 because interest charges automatically apply if the tax remains unpaid on its due date. In the same manner, discounts automatically apply for early/prompt payments as provided for in applicable laws.”

Also quoted hereunder is the argument of LHC on the subject, thus:
“Appellant LHC says that LHC/NPC cannot be made liable for the payment of interest, surcharges and penalties because LHC/NPC is (sic) not delinquent in the payment of the assessed real property taxes, thus:

1. There was actual payment by LHC/NPC of the assessed real property taxes, which payment was expressly accepted and agreed to by the Municipality and the Province. Paragraph 3 of the Compromise Agreement states:

The public respondents accept the above mentioned amount as payment under protest and/or advance payment of the real property taxes covered under all Notices of Assessment subject to the instant case under the following conditions, to wit: (a) acceptance shall be without prejudice to the collection of a higher amount and, (b) it shall likewise be without prejudice to the issue of prompt payment and advance payment discounts, which shall be resolved in the main case.

2. The issue of the imposition of interest, surcharges and penalties was never raised before the LBAA.”

From the wording of paragraph 3 of the Compromise Agreement, it is sufficiently clear that the amount paid by LHC “under protest” was just a partial payment, subject to the final outcome of the case and to the provisions of the Code on discounts for prompt payment (Section 251) and interests for late payment (Section 255). Real property taxes unpaid as of their due dates are considered delinquent.
LHC said in No. 2, above-quoted that “the issue of the imposition of interest, surcharges and penalties was never raised before the LBAA.” This is correct and, as we stated in the Decision, “the LBAA did not have to order LHC to pay interest as provided for in Section 255 because interest charges automatically apply if the tax remains unpaid on its due date.”

Therefore, to put it clearly, late payments by LHC on the real property taxes due on the subject properties are not subject to twenty-five percent (25%) surcharge and two percent (2%) interest under the provisions of Section 168 of the LGC. Late payments are subject only to two percent (2%) interest pursuant to the provisions of Section 255 of the same Code.

On the Second Assigned Error:
On page 13 of their instant Motion for Partial Reconsideration, Respondents-Appellees stated:
“Having included the discussion on the misdeclaration of taxable items such as Engineering, mobilization, etc. in its evidence, the Respondents-Appellees had hoped that the same would be treated as an issue by the Honorable Board. The Board, however, did not include a disquisition and ruling on the same in its Decision. To the Respondents, this issue is material to their cause and it is implored of the Honorable Board to make a ruling that the properties and costs of installation, etc. would be added to the computation of the tax liability of LHC plus interest and reasonable penalties/surcharges as may be deemed fair by the Honorable Board from 2002, when the operation of the plant got underway, up to the present.”

On pages 14 to 15 of the Decision, we stated:
“Since his repeated requests for copies of documents needed to determine the costs of the subject properties were not heeded by LHC, Respondent Municipal Assessor did his best to appraise and assess the same properties based on the provisions of Section 224 of the LGC which provides:

‘SEC. 224. Appraisal and Assessment of Machinery.– (a) The fair market value of a brand-new machinery shall be the acquisition cost. In all other cases, the fair market value shall be determined by dividing the remaining economic life of the machinery by its estimated economic life and multiplied by the replacement or reproduction cost.

‘(b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and other charges, brokerage, arrastre and handling, duties and taxes, plus cost of inland transportation, handling, and installation charges at the present site. The cost in foreign currency of imported machinery shall be converted to peso cost on the basis of foreign currency exchange rates as fixed by the Central Bank.’

“The costs of the machinery and equipment appearing on the Statement subscribed and sworn to by Mr. Guest of LHC on September 5, 2002 must have been arrived at basing on the documents surrounding the acquisitions. To establish and prove that said costs of the subject machinery and equipment include freight, insurance, bank and other charges, brokerage, arrastre and handling, duties and taxes, plus cost of inland transportation, handling, and installation charges at the present site, LHC should not have had any reservations in furnishing the Respondent Assessor with copies of the supporting documents.

“Granting that Petitioners-Appellants simply forgot about the assessor’s letters-requests, the Petitioners-Appellants could have refuted the assessment by presenting to the LBAA, or even to this Board, documents to prove that the figures appearing on the Sworn Statement represent the true, current and fair market value of the machinery and equipment involved. Petitioners-Appellants did not do so. Instead, Petitioners-Appellants argue that Respondent Assessor has the burden to prove that the assessment is correct or, more likely to the point, to prove that the figures appearing on the Sworn Statement do not represent the true, current and fair market values of the subject machinery and equipment. The failure of the Petitioner-Appellant to comply with the assessor’s legal and reasonable requests left him no choice but to exercise his powers under Section 224 of R.A. 7160.

“Therefore, we believe that the Respondent Assessor did not commit any error in the valuation of subject properties.”

Our Decision was based on the reasonable assumption that the assessments made by the assessor were made in accordance with the provisions of Section 224 of the Code. Therefore, the said assessments included freight, insurance, bank and other charges, brokerage, arrastre and handling, duties and taxes, plus cost of inland transportation, handling, and installation charges at the present site. Petitioners-Appellants NPC and LHC would not have questioned the fifty-five percent (55%) additional cost representing installation (40%) and freight charges (15%).

When we stated in the said Decision that “we believe that the Respondent Assessor did not commit any error in the valuation of subject properties,” we simply meant that we upheld the subject assessments made by the assessor. If this is not clear enough, we are at a loss as to what “ruling” Respondents-Appellees want from us. As to “interests and penalties/surcharges”, these matters were ruled upon herein under the “First Assigned Error”.

WHEREFORE, premises considered, this Board hereby reiterates that: (1) the subject assessments made by Respondent Assessor, now being questioned by Petitioners-Appellants, are upheld; and (2) the real property taxes due on subject properties, based on the said assessments, which were unpaid as of their due dates are subject to two percent (2%) interest pursuant to the provisions of Section 255 of the LGC.
SO ORDERED.

Manila, Philippines, June 18, 2013.

SIGNED
OFELIA A. MARQUEZ
Chairman

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