Agatha Bernice G.

Macalalad December 10, 2013

11186569 Taxation Law II

LIGHT RAIL TRANSIT AUTHORITY, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS,
BOARD OF ASSESSMENT APPEALS OF MANILA and the CITY ASSESSOR OF
MANILA, respondents.
[G.R. No. 127316. October 12, 2000, PANGANIBAN, J.:]
FACTS:
Light Rail Transit Authority (LRTA) is a government-owned and controlled corporation created and
organized under E.O. No. 603. It provides that LRTA is responsible for the construction, operation,
maintenance and/or lease of light rail transit system in the Philippines. It fulfilment of its purpose it
acquired real properties and eventually constructed structural improvements including buildings,
carriageways, passenger terminal stations, and installed various kinds of machinery and equipment and
facilities in order to operate.
In 1984, the City Assessor of Manila assessed the real properties of LRTA including the
improvements it constructed and installed, as provided in the Real Property Tax Code, commencing with
the year 1985. LRTA paid almost all the real property taxes except the taxes for the carriageways and
passenger terminal stations. It reasoned that those properties are not real properties under the Real
Property Tax Code being for public use or purpose, but the City Assessor denied the claim.
LRTA appealed with the Local Board of Assessment Appeals of Manila (LBAA-Manila) but was
also denied by the latter. LBAA-Manila held that the carriageways and passenger terminal stations are
improvements; thus they are real property under the Real Property Tax Code. The Court of Appeals (CA)
also denied the appeal of LRTA. CA added to the ruling of the LBAA-Manila that the properties in question
were not owned by the government; thus no exemption should be given. The CA also held that LRTA is a
taxable entity and it uses the LRT system for its benefit. Lastly the CA explained that LRTA is a profit-
oriented enterprise who only serves those paying the fare.

ISSUE: Whether LRTA’s carriageways and passenger terminal stations are subject to real property taxes.

HELD:
Both carriageways and passenger terminal stations are subject to real property taxes. The
Supreme Court raised three points in its ruling:
First, the improvements in question are real property due to its characteristics. For tax purposes
the concept of industrial accession as pointed out by LRTA is not important, rather it should be
determined based on the real property’s incidents and from its natural and legal effects. As illustrated in
the case, the carriageways and passenger terminal stations despite its attachment to public roads still
shows its physical separability being elevated structures and inaccessible to the public. The Court further
pointed out that the accessibility of public roads are different from the improvements since the latter are
accessible to the train and its passengers.
Second, the basis of assessment or its actual use of the properties are for those who can afford
the fare. The LRT is different with public roads as to its actual use. Public roads are freely utilized by all
types of vehicles and people, but the improvements made by are only accessible to trains and those who
can afford the fare imposed.
Third, LRTA failed to show proof that it can claim exemption from real property tax. An important law
pointed out by the Court was E.O. No. 603 which created and organized LRTA, but it did not state that it
can claim exemption from real property taxes. Article 4 of E.O. No. 603 only provides exemption as to
direct and indirect taxes, duties or fees in connection with the importation of equipment not locally
available. The Court also held at this point that pretending that the national government owns the
improvements, LRTA cannot be granted exemption because it operates like a private corporation
engaged in mass transport industry; wherein it is clothed with corporate status and power in fulfilment of
its proprietary purpose. Thus LRTA is a taxable entity.
Given all the points raised by Supreme Court, it only goes to shows that the City Assessor of
Manila was correct in including the carriageways and passenger terminal stations in the assessment for
real property taxes.