BENGUET CORPORATION VS.

CENTRAL BOARD OF ASSESSMENT APPEALS ET AL

G.R. No. 106041, January 29, 1993

FACTS:
In 1985, the Provincial Assessor of Zambales assessed petitioner’s tailings dam and land thereunder as
taxable improvements over its protest. The realty tax assessment amounted to P11,319,304.00. The
assessment was appealed to the Board of Assessment Appeals of the Province of Zambales. The appeal
was dismissed on the ground of the petitioner's failure to pay the realty taxes that fell due during the
pendency of the appeal.

On appeal, respondent CBAA reversed the dismissal of the appeal but agreed that the tailings dam and the
lands submerged were subject to realty tax.

Petitioner’s contention
While petitioner does not dispute that the tailings dam may be considered realty within the meaning of
Article 415 of the Civil Code, it insists, however, that the dam cannot be subjected to realty tax as a
separate and independent property because it does not constitute an "assessable improvement" on the
mine although a considerable sum may have been spent in constructing and maintaining it.

OSG’s contention
OSG argued that the dam is an assessable improvement because it enhances the value and utility of the
mine. The primary function of the dam is to receive, retain and hold the water coming from the operations
of the mine, and it also enables the petitioner to impound water, which is then recycled for use in the
plant.

ISSUES:
1. Whether or not the tailings dam is subject to realty tax?
2. Whether or not it can be considered as immovable property?

HELD:
Yes. Petition is denied.

It would appear that whether a structure constitutes an improvement so as to partake of the status of
realty would depend upon the degree of permanence intended in its construction and use. The expression
"permanent" as applied to an improvement does not imply that the improvement must be used
perpetually but only until the purpose to which the principal realty is devoted has been accomplished. It is
sufficient that the improvement is intended to remain as long as the land to which it is annexed is still
used for the said purpose.

The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty
tax is imposed on "real property, such as lands, buildings, machinery and other improvements affixed or
attached to real property." In the absence of such a definition, we apply Article 415 of the Civil Code, the
pertinent portions of which state:
Art. 415. The following are immovable property.
(1) Lands, buildings and constructions of all kinds adhered to the soil;
xxx xxx xxx
(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.

Section 2 of C.A. No. 470 or the Assessment Law provides that the realty tax is due "on the real property,
including land, buildings, machinery and other improvements" not specifically exempted in Section 3
thereof. Thus, the tailings dam does not fall under any of the classes of exempt real properties
enumerated.
Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code defines
improvement as follows:
(k) Improvements — is a valuable addition made to property or an amelioration in its condition,
amounting to more than mere repairs or replacement of waste, costing labor or capital and
intended to enhance its value, beauty or utility or to adopt it for new or further purposes.

The Court held that the subject dam falls within the definition of an "improvement" because it is
permanent in character and it enhances both the value and utility of petitioner's mine. Moreover, the
immovable nature of the dam defines its character as real property under Article 415 of the Civil Code and
thus makes it taxable under Section 38 of the Real Property Tax Code.

Likewise, the Court gave respect to the conclusions of quasi-judicial agencies like the CBAA, which,
because of the nature of its functions and its frequent exercise, has developed expertise in the resolution
of assessment problems. The only exception to this rule is where it is clearly shown that the administrative
body has committed grave abuse of discretion.