CASES:

Machineries and improvements

Provincial Assessor of Agusan del Sur v. Filipinas Palm oil (GR 183416)

Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in palm oil
plantation. Within the plantation, there are also three (3) plantation roads and a
number of residential homes constructed by Filipinas for its employees.
The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a government agency
in charge with the assessment of lands under the public domain. 12 It assessed Filipinas'
properties found within the plantation area.

SC: The road equipment and mini haulers shall be considered as real property, subject
to real property tax.
While the Local Government Code still does not provide for a specific definition of "real
property," Sections 199(o) and 232 of the said Code, respectively, gives an extensive
definition of what constitutes "machinery" and unequivocally subjects such machinery
to real property tax. The Court reiterates that the machinery subject to real property
tax under the Local Government Code "may or may not be attached, permanently or
temporarily to the real property"; and the physical facilities for production, installations,
and appurtenant service facilities, those which are mobile, self-powered or self-
propelled, or are not permanently attached must (a) be actually, directly, and
exclusively used to meet the needs of the particular industry, business, or activity; and
(b) by their very nature and purpose, be designed for, or necessary for manufacturing,
mining, logging, commercial, industrial, or agricultural purposes.

Article 415, paragraph (5) of the Civil Code considers as immovables or real properties
"[m]achinery, 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." The
Civil Code, however, does not define "machinery."

The properties under Article 415, paragraph (5) of the Civil Code are immovables by
destination, or "those which are essentially movables, but by the purpose for which
they have been placed in an immovable, partake of the nature of the latter because of
the added utility derived therefrom." These properties, including machinery, become
immobilized if the following requisites concur: (a) they are placed in the tenement by
the owner of such tenement; (b) they are destined for use in the industry or work in
the tenement; and (c) they tend to directly meet the needs of said industry or
works. The first two requisites are not found anywhere in the Local Government Code. 92

Therefore, for determining whether machinery is real property subject to real property
tax, the definition and requirements under the Local Government Code are controlling
Respondent is engaged in palm oil plantation. 94 Thus, it harvests fruits from palm trees
for oil conversion through its milling plant. 95 By the nature of respondent's business,
transportation is indispensable for its operations.

Under the definition provided in Section 199(o) of the Local Government Code, the road
equipment and the mini haulers are classified as machinery, thus:
chanRoblesvirtualLawlibrary

SECTION 199.  Definition of Terms. — When used in this Title, the terra:
....

(o) "Machinery" . . . includes the physical facilities for production, the

installations 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 [.]
The indispensability of the road equipment and mini haulers in transportation makes it
actually, directly, and exclusively used in the operation of respondent's business.

Capital Wireless v. Prov. Treasurer (GR 180110)

Petitioner Capitol Wireless Inc. (Capwire) is a Philippine corporation in the business of providing
international telecommunications services.   As such provider, Capwire has signed agreements with
3

other local and foreign telecommunications companies covering an international network of

submarine cable systems.

In essence, the Provincial Assessor had determined that the submarine cable systems described in
Capwire's Sworn Statement of True Value of Real Properties are taxable real property, a
determination that was contested by Capwire in an exchange of letters between the company and
the public respondent.

Capwire's resort to judicial action, premised on its legal conclusion that its cables (the equipment
being taxed) lie entirely on international waters, without first administratively substantiating such a
factual premise, is improper and was rightly denied. Its proposition that the cables lie entirely beyond
Philippine territory, and therefore, outside of Philippine sovereignty, is a fact that is not subject to
judicial notice since, on the contrary, and as will be explained later, it is in fact certain that portions of
the cable would definitely lie within Philippine waters. Jurisprudence on the Local Government Code
is clear that facts such as these must be threshed out administratively, as the courts in these types
of cases step in at the first instance only when pure questions of law are involved.

Issue: whether submarine wires or cables used for communications may be taxed like other real
estate.
SC: Yes. Submarine or undersea communications cables are akin to electric transmission lines
which this Court has recently declared in Manila Electric Company v. City Assessor and City
Treasurer of Lucena City,   as "no longer exempted from real prope1iy tax" and may qualify as
37

"machinery" subject to real property tax under the Local Government Code. To the extent that the
equipment's location is determinable to be within the taxing authority's jurisdiction, the Court sees no
reason to distinguish between submarine cables used for communications and aerial or underground
wires or lines used for electric transmission, so that both pieces of property do not merit a different
treatment in the aspect of real property taxation. 
Both electric lines and communications cables, in the strictest sense, are not directly adhered to the
soil but pass through posts, relays or landing stations, but both may be classified under the term
"machinery" as real property under Article 415(5)  of the Civil Code for the simple reason that such
38

pieces of equipment serve the owner's business or tend to meet the needs of his industry or works
that are on real estate.

A classic example is a boathouse which, by its nature, is a vessel and, therefore, a personal property
but, if it is tied to the shore and used as a residence, and since it floats on waters which is
immovable, is considered real property

Thus, absent any showing from Capwire of any express grant of an exemption for its lines and
cables from real property taxation, then this interpretation applies and Capwire's submarine cable
may be held subject to real property tax.

Having determined that Capwire is liable, and public respondents have the right to impose a real
property tax on its submarine cable, the issue that is unresolved is how much of such cable is
taxable based on the extent of Capwire's ownership or co-ownership of it and the length that is laid
within respondents' taxing jurisdiction. 

It is not in dispute that the submarine cable system's Landing Station in Nasugbu, Batangas is
owned by PLDT and not by Capwire. Obviously, Capwire is not liable for the real property tax on this
Landing Station. Nonetheless, Capwire admits that it co-owns the submarine cable system that is
subject of the tax assessed and being collected by public respondents. 

In Prof Magallona v. Hon. Ermita, et al.  this Court held that "whether referred to as Philippine
43

'internal waters' under A1iicle I of the Constitution  or as 'archipelagic waters' under UNCLOS Part
44

III, Article 49(1, 2, 4),45 the Philippines exercises sovereignty over the body of water lying landward
of (its) baselines, including the air space over it and the submarine areas underneath." Further,
under Part VI, Article 7946 of the UNCLOS, the Philippines clearly has jurisdiction with respect to
cables laid in its territory that are utilized in support of other installations and structures under its
jurisdiction.

And as far as local government units are concerned, the areas described above are to be
considered subsumed under the term "municipal waters" which, under the Local Government Code,
includes "not only streams, lakes, and tidal waters within the municipality, not being the subject of
private ownership and not comprised within the national parks, public forest, timber lands, forest
reserves or fishery reserves, but also marine waters included between two lines drawn
perpendicularly to the general coastline from points where the boundary lines of the municipality or
city touch the sea at low tide and a third line parallel with the general coastline and fifteen (15)
kilometers from it."  Although the term "municipal waters" appears in the Code in the context of the
47

grant of quarrying and fisheries privileges for a fee by local governments,  its inclusion in the Code's
48

Book II which covers local taxation means that it may also apply as guide in determining the
territorial extent of the local authorities' power to levy real property taxation.

Thus, the jurisdiction or authority over such part of the subject submarine cable system lying within
Philippine jurisdiction includes the authority to tax the same, for taxation is one of the three basic and
necessary attributes of sovereignty,  and such authority has been delegated by the national
49

legislature to the local governments with respect to real property.  taxation.

50
Exemption from RPT
MIAA v. CA (GR 155650)

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International
Airport (NAIA) Complex in Parañaque City under ("MIAA Charter").

MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the
name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since
the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA
Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general
public. Since the Airport Lands and Buildings are devoted to public use and public service, the
ownership of these properties remains with the State. The Airport Lands and Buildings are thus
inalienable and are not subject to real estate tax by local governments.

MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the
payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234
of the Local Government Code because the Airport Lands and Buildings are owned by the Republic.
To justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA
points out that the reason for tax exemption of public property is that its taxation would not inure to
any public advantage, since in such a case the tax debtor is also the tax creditor.

Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax
exemption privileges of "government-owned and-controlled corporations" upon the effectivity of
the Local Government Code. Respondents also argue that a basic rule of statutory construction is
that the express mention of one person, thing, or act excludes all others. An international airport is
not among the exceptions mentioned in Section 193 of the Local Government Code. Thus,
respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from
real estate tax.

Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos 8 where we
held that the Local Government Code has withdrawn the exemption from real estate tax granted to
international airports. Respondents further argue that since MIAA has already paid some of the real
estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are
exempt from real estate tax.

ISSUE: whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under
existing laws. 

SC: We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by
local governments.

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the

National Government and thus exempt from local taxation. 

Government-owned or controlled corporation refers to any agency organized as a stock or non-

stock corporation, vested with functions relating to public needs. A government-owned or
controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not
organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no
capital stock divided into shares. MIAA has no stockholders or voting shares.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-
owned or controlled corporation. What then is the legal status of MIAA within the National
Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its

governmental functions. MIAA is like any other government instrumentality, the only difference is that
MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:

SEC. 2. General Terms Defined. –– x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within

the department framework, vested with special functions or jurisdiction by law, endowed
with some if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. x x x (Emphasis supplied)

When the law vests in a government instrumentality corporate powers, the instrumentality does not
become a corporation. Unless the government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, 12 police
authority13 and the levying of fees and charges.14 At the same time, MIAA exercises "all the powers of
a corporation under the Corporation Law, insofar as these powers are not inconsistent with the
provisions of this Executive Order."

Many government instrumentalities are vested with corporate powers but they do not become stock
or non-stock corporations, which is a necessary condition before an agency or instrumentality is
deemed a government-owned or controlled corporation.

Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt
from real estate tax.

A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code,
which states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units.(Emphasis and underscoring supplied)

Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the powers of local governments, local
governments may only exercise such power "subject to such guidelines and limitations as the
Congress may provide."

The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article
420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and
thus owned by the State or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for
international and domestic travel and transportation. The fact that the MIAA collects terminal
fees and other charges from the public does not remove the character of the Airport Lands and
Buildings as properties for public use. The operation by the government of a tollway does not
change the character of the road as one for public use. Someone must pay for the maintenance of
the road, either the public indirectly through the taxes they pay the government, or only those among
the public who actually use the road through the toll fees they pay upon using the road. The tollway
system is even a more efficient and equitable manner of taxing the public for the maintenance of
public roads.

The charging of fees to the public does not determine the character of the property whether it is of
public dominion or not. Article 420 of the Civil Code defines property of public dominion as one
"intended for public use." Even if the government collects toll fees, the road is still "intended for
public use" if anyone can use the road under the same terms and conditions as the rest of the public.
The charging of fees, the limitation on the kind of vehicles that can use the road, the speed
restrictions and other conditions for the use of the road do not affect the public character of the road.

The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines,
constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees
does not change the character of MIAA as an airport for public use. 

The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the
Philippines for both international and domestic air traffic," 22 are properties of public dominion
because they are intended for public use. As properties of public dominion, they indisputably
belong to the State or the Republic of the Philippines.

e. Real Property Owned by the Republic is Not Taxable

Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property
owned by the Republic of the Philippines." Section 234(a) provides:

SEC. 234. Exemptions from Real Property Tax. — The following are exempted from
payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;

x x x. (Emphasis supplied)

This exemption should be read in relation with Section 133(o) of the same Code, which prohibits
local governments from imposing "[t]axes, fees or charges of any kind on the National Government,
its agencies and instrumentalities x x x." The real properties owned by the Republic are titled either
in the name of the Republic itself or in the name of agencies or instrumentalities of the National
Government. The Administrative Code allows real property owned by the Republic to be titled in the
name of agencies or instrumentalities of the national government. Such real properties remain
owned by the Republic and continue to be exempt from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of the
national government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement does
not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that
real property owned by the Republic loses its tax exemption only if the "beneficial use thereof has
been granted, for consideration or otherwise, to a taxable person." MIAA, as a government
instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus,
even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and
Buildings, such fact does not make these real properties subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not
exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to
private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use
of such land area for a consideration to a taxable person and therefore such land area is subject to
real estate tax.

Lung Center v. QC (GR. 144104)

The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on
January 16, 1981 by virtue of Presidential Decree.

Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A
big space at the ground floor is being leased to private parties, for canteen and small store spaces,
and to medical or professional practitioners who use the same as their private clinics for their
patients whom they charge for their professional services. Almost one-half of the entire area on the
left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right side,
at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a
private enterprise known as the Elliptical Orchids and Garden Center.

The petitioner accepts paying and non-paying patients. It also renders medical services to out-
patients, both paying and non-paying. Aside from its income from paying patients, the petitioner
receives annual subsidies from the government.

On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real
property taxes. the petitioner filed a Claim for Exemption 5 from real property taxes with the City
Assessor, predicated on its claim that it is a charitable institution. 

The petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitution, the property is
exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are
exclusively used for charity patients and that the major thrust of its hospital operation is to serve
charity patients. The petitioner contends that it is a charitable institution and, as such, is exempt from
real property taxes.

It asserts that its character as a charitable institution is not altered by the fact that it admits paying
patients and renders medical services to them, leases portions of the land to private parties, and
rents out portions of the hospital to private medical practitioners from which it derives income to be
used for operational expenses. 

The issues for resolution are the following: (a) whether the petitioner is a charitable institution within
the context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section
234(b) of Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt
from real property taxes.

SC: On the first issue, we hold that the petitioner is a charitable institution within the context of
the 1973 and 1987 Constitutions. To determine whether an enterprise is a charitable institution/entity
or not, the elements which should be considered include the statute creating the enterprise, its
corporate purposes, its constitution and by-laws, the methods of administration, the nature of the
actual work performed, the character of the services rendered, the indefiniteness of the
beneficiaries, and the use and occupation of the properties.
The word "charitable" is not restricted to relief of the poor or sick. 14 The test of a charity and a
charitable organization are in law the same. The test whether an enterprise is charitable or not is
whether it exists to carry out a purpose reorganized in law as charitable or whether it is maintained
for gain, profit, or private advantage.

As a general principle, a charitable institution does not lose its character as such and its exemption
from taxes simply because it derives income from paying patients, whether out-patient, or confined
in the hospital, or receives subsidies from the government, so long as the money received is devoted
or used altogether to the charitable object which it is intended to achieve; and no money inures to
the private benefit of the persons managing or operating the institution.

The money received by the petitioner becomes a part of the trust fund and must be devoted to public
trust purposes and cannot be diverted to private profit or benefit. Under P.D. No. 1823, the petitioner
is entitled to receive donations. The petitioner does not lose its character as a charitable institution
simply because the gift or donation is in the form of subsidies granted by the government.

Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that
those portions of its real property that are leased to private entities are not exempt from real property
taxes as these are not actually, directly and exclusively used for charitable purposes.

The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi
juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and
exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, a
claim for exemption from tax payments must be clearly shown and based on language in the law too
plain to be mistaken. “Such an intention must be expressed in clear and unmistakable terms, or must
appear by necessary implication from the language used, for it is a well settled principle that, when a
special privilege or exemption is claimed under a statute, charter or act of incorporation, it is to be
construed strictly against the property owner and in favor of the public. This principle applies with
peculiar force to a claim of exemption from taxation” (Salavation army v. Hoehn)

Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that
the petitioner shall enjoy the tax exemptions and privileges:

SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock corporation

organized primarily to help combat the high incidence of lung and pulmonary diseases in the
Philippines, all donations, contributions, endowments and equipment and supplies to be
imported by authorized entities or persons and by the Board of Trustees of the Lung Center
of the Philippines, Inc., for the actual use and benefit of the Lung Center, shall be exempt
 from income and gift taxes, the same further deductible in full for the purpose of determining
the maximum deductible amount under Section 30, paragraph (h), of the National Internal
Revenue Code, as amended.

The Lung Center of the Philippines shall be exempt from the payment of taxes, charges and
fees imposed by the Government or any political subdivision or instrumentality thereof with
respect to equipment purchases made by, or for the Lung Center.29

It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption
privileges for its real properties as well as the building constructed thereon.

It is a settled rule of statutory construction that the express mention of one person, thing, or
consequence implies the exclusion of all others. The rule is expressed in the familiar
maxim, expressio unius est exclusio alterius.

The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation of
the rule is the principle that what is expressed puts an end to that which is implied. Expressium facit
cessare tacitum. Thus, where a statute, by its terms, is expressly limited to certain matters, it may
not, by interpretation or construction, be extended to other matters.

...

The rule of expressio unius est exclusio alterius and its variations are canons of restrictive
interpretation. They are based on the rules of logic and the natural workings of the human mind.
They are predicated upon one’s own voluntary act and not upon that of others. They proceed from
the premise that the legislature would not have made specified enumeration in a statute had the
intention been not to restrict its meaning and confine its terms to those expressly mentioned.

Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:

(3) Charitable institutions, churches and parsonages or convents appurtenant thereto,

mosques, non-profit cemeteries, and all lands, buildings, and
improvements, actually, directly and exclusively used for religious, charitable or educational
purposes shall be exempt from taxation. 32

The tax exemption under this constitutional provision covers property taxes only.33 As Chief Justice
Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission, explained: ". . . what is
exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings
and improvements actually, directly and exclusively used for religious, charitable or educational
purposes."

Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No.
7160 (otherwise known as the Local Government Code of 1991) as follows:

SECTION 234. Exemptions from Real Property Tax. – The following are exempted from
payment of the real property tax:

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,

mosques, non-profit or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable or
educational purposes.
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the
exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a
charitable institution; and (b) its real properties
are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is
defined as possessed and enjoyed to the exclusion of others; debarred from participation or
enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a privilege
exclusively."40 If real property is used for one or more commercial purposes, it is not exclusively used
for the exempted purposes but is subject to taxation. 41 The words "dominant use" or "principal use"
cannot be substituted for the words "used exclusively" without doing violence to the Constitutions
and the law.42 Solely is synonymous with exclusively.43

What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct
and immediate and actual application of the property itself to the purposes for which the charitable
institution is organized. It is not the use of the income from the real property that is determinative of
whether the property is used for tax-exempt purposes. 44

The petitioner failed to discharge its burden to prove that the entirety of its real property is actually,
directly and exclusively used for charitable purposes. While portions of the hospital are used for the
treatment of patients and the dispensation of medical services to them, whether paying or non-
paying, other portions thereof are being leased to private individuals for their clinics and a canteen.
Further, a portion of the land is being leased to a private individual for her business enterprise under
the business name "Elliptical Orchids and Garden Center." Indeed, the petitioner’s evidence shows
that it collected ₱1,136,483.45 as rentals in 1991 and ₱1,679,999.28 for 1992 from the said lessees.

Accordingly, we hold that the portions of the land leased to private entities as well as those parts of
the hospital leased to private individuals are not exempt from such taxes. 45 On the other hand, the
portions of the land occupied by the hospital and portions of the hospital used for its patients,
whether paying or non-paying, are exempt from real property taxes.

NPC v. Province of Quezon (GR. 171586) & resolution

The NPC is a government-owned and controlled corporation mandated by law to undertake, among
others, the production of electricity from nuclear, geothermal, and other sources, and the
transmission of electric power on a nationwide basis.2 To pursue this mandate, the NPC entered into
an Energy Conversion Agreement (ECA) with Mirant. Mirant will build and finance a coal-fired
thermal power plant on the lots owned by the NPC in Pagbilao, Quezon for the purpose of
converting fuel into electricity, and thereafter, operate and maintain the power plant for a period of 25
years. The NPC, in turn, will supply the necessary fuel to be converted by Mirant into electric power,
take the power generated, and use it to supply the electric power needs of the country. At the end of
the 25-year term, Mirant will transfer the power plant to the NPC without compensation. Among the
obligations undertaken by the NPC under the ECA was the payment of all taxes that the government
may impose on Mirant.

In a letter dated March 2, 2000, the Municipality of Pagbilao assessed Mirant’s real property taxes
on the power plant and its machineries.

NPC filed a petition before the Local Board of Assessment Appeals (LBAA) entitled "In Re: Petition
to Declare Exempt from Payment of Property Tax on Machineries and Equipment Used for
Generation and Transmission of Power, under Section 234(c) of RA 7160 [LGC], located at
Pagbilao, Quezon --- read procedure

The NPC contends that the CTA en banc erred in ruling that the NPC is estopped from questioning
the LBAA’s sin perjuicio judgment; the LBAA decision, it posits, cannot serve as an appealable
decision that would vest the CBAA with appellate jurisdiction; a sin perjuicio decision, by its nature,
is null and void.

The NPC likewise assails the CTA en banc ruling that the NPC was not the proper party to protest
the real property tax assessment, as it did not have the requisite "legal interest." The NPC claims
that it has legal interest because of its beneficial ownership of the power plant and its machineries;
what Mirant holds is merely a naked title. Under the terms of the ECA, the NPC also claims that it
possesses all the attributes of ownership, namely, the rights to enjoy, to dispose of, and to recover
against the holder and possessor of the thing owned. That it will acquire and fully own the power
plant after the lapse of 25 years further underscores its "legal interest" in protesting the assessment.

The NPC’s assertion of beneficial ownership of the power plant also supports its claim for tax
exemptions under Section 234(c) of the LGC. The NPC alleges that it has the right to control and
supervise the entire output and operation of the power plant. This arrangement, to the NPC, proves
that it is the entity actually, directly, and exclusively using the subject machineries. Mirant’s
possession of the power plant is irrelevant since all of Mirant activities relating to power generation
are undertaken for and in behalf of the NPC. Additionally, all the electricity Mirant generates is
utilized by the NPC in supplying the power needs of the country; Mirant therefore operates the power
plant for the exclusive and direct benefit of the NPC. Lastly, the NPC posits that the machineries
taxed by the local government include anti-pollution devices which should have been excluded from
the assessment under Section 234(e) of the LGC.

Assuming that the NPC is liable to pay the assessed real property tax, it asserts that a reassessment
is necessary as it is entitled to depreciation allowance on the machineries and to the lower 10%
assessment level under Sections 225 and 218(d) of the LGC, respectively. This position is
complemented by its prayer to have the case remanded to the LBAA for the proper determination of
its tax liabilities.

Procedure:
NPC filed a petition before the Local Board of Assessment Appeals (LBAA) entitled "In Re: Petition
to Declare Exempt from Payment of Property Tax on Machineries and Equipment.

The LBAA dismissed the NPC’s petition on the Municipality of Pagbilao’s motion

The NPC appealed the denial of its petition with the Central Board of Assessment Appeals (CBAA).
Although it noted the incompleteness of the LBAA decision for failing to state the factual basis of its
ruling, the CBAA nevertheless affirmed, in its decision of August 18, 2003, the denial of the NPC’s
claim for exemption. The CBAA likewise denied the NPC’s subsequent motion for reconsideration,
prompting the NPC to institute an appeal before the Court of Tax Appeals (CTA).

Before the CTA, the NPC claimed it was procedurally erroneous for the CBAA to exercise jurisdiction
over its appeal because the LBAA issued a sin perjuicio 7 decision, that is, the LBAA pronounced a
judgment without any finding of fact. It argued that the CBAA should have remanded the case to the
LBAA. On substantive issues, the NPC asserted the same grounds it relied upon to support its
claimed tax exemptions.
The CTA en banc resolved to dismiss the NPC’s petition on February 21, 2006. From this ruling, the
NPC filed the present petition seeking the reversal of the CTA en banc’s decision.

Filipinas Palm Oil case

LRTA v. QC (GR. 221626)

Who should pay

Herarc Realty v. Provincial Treasurer (GR. 210736)
PFDA v. CA (GR. 169836)
GSIS v. City treasurer (GR. 186242)
City of Pasig v. Republic (GR. 185023)
Philippine Heart Center v. LG QC (GR. 225409)

Remedies on RPT

Lapu-lapu v PEZA (184203)

Manila Electric Company case (GR. 166102)
Olivarez v. Marquez (GR. 155591)
NPC case & Resolution (GR. 171586)
Camp John Hay v. CBAA (GR. 169234)
- Concurring opinion of Justice Carpio
- Sec. 206, LGC (exemption)

Payment under protest

NPC v. Navotas (GR. 192300)
TY v. Trampe (GR. 117577)
City of Lapu-Lapu v. PEZA (GR. 184203)

Compare with recent cases

NPC v. Prov. Treasurer Benguet (GR. 209303)
Metropolitan Waterworks v. CBAA (GR. 215955)

Refund
Ramie Textile v. Mathay (GR. 32364)
Metropolitan Waterworks case (GR. 215955)
RPT delinquency
Solco v. Megaworld Corp (GR. 213669)
Beaumont Holding v. Reyes (GR. 203706)
Alvarado v. Ayala Land (GR. 208426)