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

SMART COMMUNICATIONS, INC., Petitioner-Appellant,

– versus –

CBAA CASE NO. V-17 (LBAA CASE NO. 2001-1)

CITY ASSESSOR OF SAN CARLOS CITY, Respondent-Appellee,

– and –

LOCAL BOARD OF ASSESSMENT APPEALS OF SAN CARLOS CITY,
Appellee. x——————————————————–x

R E S O L U T I O N

This Board, on June 28, 2002, rendered a decision in the above-entitled

case denying Petitioner-Appellant’s appeal and affirming the decision of the

Appellee Local Board dated January 21, 2002.

Not satisfied, Petitioner-Appellant filed the instant Motion for

Reconsideration, claiming that it received this Board’s said decision on

November 06, 2002.

The instant motion, which was received by this Board on November 20,

2002, is based on the ground that “The Central Board of Assessment Appeals

did not take into consideration Petitioner-Appellant’s exemption from real

property tax.”

Petitioner-Appellant’s motion is anchored on the opinion of the Executive

Director of the Bureau of Local Government Finance (BLGF) contained in a letter

dated February 24, 1998 addressed to Globe Telecom. The conclusion of said

opinion reads as follows:

“Considering, therefore, that RA 7229 having been approved on March 19, 1992 is a later law, its provisions should prevail over those of the LGC which took effect on January 1, 1992.

“Accordingly, Globe should be considered exempt from the franchise and business taxes that local governments may impose under Sections 137 and 143, respectively, of the Code. However, all real properties of the corporation not directly, actually and exclusively used in the telecommunication operations or

Reference: Book X, pp. 57-61

services shall be subject to the real property taxes that provinces and cities levy under the pertinent provisions of the Code…”

SMART argues that, since Globe is exempt from the real property tax, it

follows that SMART must likewise be exempt from the same tax because the

grant of exemption to Globe ipso facto extended the same privilege to SMART,

pursuant to the passage of R.A. 7925, otherwise known as the

Telecommunications Act of the Philippines, on February 20, 1995, in relation to

R.A. 7229 which approved the merger between Globe Mackay Cable and Radio

Corporation (Globe) and Clavecilla Radio Systems (CRS).

Section 23 of R.A. 7925 provides as follows:

“Sec. 23. Equality of Treatment in the Telecommunications Industry. – Any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises. Provided, however, That the foregoing shall neither apply or affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or type of service authorized by the franchise.”

Republic Act 7229 (approving the merger between Globe and CRS) was

passed on March 19, 1992. The franchise of CRS was granted under R.A. 402,

as amended by R.A. Nos. 1608 and 4540. Section 5 of R.A. 4540 reads as

follows:

“SEC. 5. Section twenty of the same Act is hereby amended to read as follows:

“Section 20. This franchise shall not be interpreted to mean an exclusive grant of the privileges herein provided for, however, in the event of any competing individual, partnership, or corporation receiving from the Congress of the Philippines more favorably than those herein granted or tending to place the herein grantee at any disadvantage, then such term or terms shall ipso facto become part of the terms hereof, and shall operate equally in favor of the grantee as in the case of said competing individual, partnership or corporation.”

In Philippine Long Distance Telephone Company vs. City of Davao, et al

(G.R. No. 143867 August 22, 2001), the Supreme Court said:

“To be sure, the BLGF is not an administrative agency whose findings on questions of fact are given weight and deference in the courts. . . the BLGF was created merely to provide consultative services and technical assistance to local governments and the general public on local taxation, real property assessment, and other related matters, among others. The question raised by petitioner is a legal question, to wit, the interpretation of Section 23 of R.A. 7925. There is, therefore, no basis for claiming expertise for the BLGF that administrative agencies are said to possess in their respective fields.”

Reference: Book X, pp. 57-61

The opinion of the BLGF does not expressly state that Globe was

exempted from payment of the real property tax but, nevertheless, implies that

Globe was indeed exempt from payment of said tax on all real properties of the

corporation directly, actually and exclusively used in the telecommunication

operations or services by saying that “all real properties of the corporation not

directly, actually and exclusively used in the telecommunication operations or

services shall be subject to the real property taxes that provinces and cities levy

under the pertinent provisions of the Code.”

The above-quoted pronouncement by the Supreme Court notwithstanding,

we are at a loss as to the basis of BLGF’s opinion. We venture to say that the

same opinion may have been based on the tax provision common to

telecommunications franchises. SMART was granted a franchise under R.A.

7294 which lapsed into law on March 27, 1992, Section 9 of which reads as

follows:

“Sec. 9. Tax Provisions. – The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, as other persons or corporations which are now or hereafter may be required by law to pay. . .”

With due respects, the BLGF might have misconstrued the phrase

“exclusive of this franchise” as to include real estate, buildings and personal

property as parts of its franchise. We find this interpretation erroneous.

In jurisprudence, a franchise as a right and privilege is regarded as

property, separate and distinct from the property which the corporation itself may

acquire. As property, a franchise is of great value to the corporation and its

members. (Fletcher’s Cyclopedia of the Law of Private Corporation, Vol. 6A,

pages 427-428, citing Horn Silver Min. Co vs. New York, 143 U.S. 305 36 L. Ed.

164, 12 Sup. Ct.-403; City of Campbell vs. Arkansas – Missouri Power Co., 55F

(2d) 560, as cited in the City Government of Batangas vs. Republic Telephone

Company, Inc., CA-G.R. CV No. 21897, January 21, 1992.)

The tax provision aforequoted (Sec. 9, R.A. 7294) states that “The grantee,

its successors or assigns shall be liable to pay the same taxes on their real

Reference: Book X, pp. 57-61

estate, buildings and personal property, exclusive of this franchise.” This could

only man that the grantee shall be liable to pay taxes on all its personal

properties, excluding the franchise itself.

We hasten to add that a franchise, as a right and privilege, is not even

considered real property for purposes of the real property tax.

WHEREFORE, premises considered, the instant motion is DENIED for

lack of merit.

SO ORDERED.

Manila, Philippines, December 04, 2002.

(Signed) CESAR S. GUTIERREZ
Chairman

(Signed)

ANGEL P. PALOMARES VACANT Member Member

Reference: Book X, pp. 57-61