Joatham Anry T.

Genovis Taxation 1 Case Digest Block A

G.R. No. 168557 February 16, 2007

FELS ENERGY, INC., Petitioner,
vs.
THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS,
Respondents.
Facts:
NPC has signed a barge lease agreement with Polar Energy. NPC agrees to be responsible for
paying any taxes, fees, charges or obligations that Polar may impose in connection with
performance of its obligations under this Agreement. Polar then transferred its rights under the
contract to his FELS. The province of Batangas provided her FELS with a riverboat property tax
estimate, which he also included in taxes of 56 million annually due in 1994. FELS notified the
NPC of the valuation, and FELS gave the NPC full authority and authority to represent it at the
State Appraisers' Meetings on Property Valuation. An NPC has requested a review of the rating.
It was denied and the NPC was asked to pay. NPC filed an application with the Local Board of
Assessment Appeals (LBAA) to drop the barge assessment and declare it exempt from taxation.
The Department of Finance (DOF) has expressed an opinion that the barge is not property.
Regardless, the LBAA has ruled that power plants are considered tax assets because they are
built on specific locations that are of a permanent nature. Additionally, the LBAA said the NPC
cannot extend its exemption to the FELS by mere agreement, and the FELS, the private
company that owns the barge, will be taxed, not the NPC. FELS went to the Central Board of
Assessment Appeals (CBAA). A Notice of Collection and Warrant by Foreclosure (NLWD) was
issued and served against FELS seeking to collect P232 million in property taxes. The CBAA
overturned the levy and foreclosure order before making a decision stating the barge was
exempt from property taxes. The CBAA ruled in favor of FELS and NPC, arguing that the barge
belonged to NPC. Batangas wants to vacate the CBAA's decision that it has no jurisdiction to
appeal because FELS did not file it within the statutory deadline.
Issue:
Whether or not the barges are real property making them subject to real property tax.
Ruling:
Yes, because the taxable owner is FELS. Therefore, FELS cannot absolve itself of liability for
paying property taxes by relying on an exemption under Section 234(c) of the R.A. No. 7160.
The law stipulates that a machine must actually, directly and exclusively be used by the GOCC in
order to be released. The mere obligation of Petitioner NPC to be responsible for payment of all
property taxes and assessments under Section 10.1 of the Agreement does not justify
exemption. Permissions granted to the requesting NPC cannot be extended to her FELS. The
contract is made between FELS and NPC and is not binding on the novice third party, in this
case the province of Batangas. This is because G.R. #165113 was rejected because it failed to
properly indicate reversible errors. Tax assessments by tax auditors are deemed to be accurate
and made in good faith. Taxpayers bear the burden of proof to the contrary. Moreover, factual
Joatham Anry T. Genovis Taxation 1 Case Digest Block A

findings by administrative agencies that have acquired expertise in the field are usually binding
and conclusive for courts. We should not expect to preclude the exercise of sound judgment by
persons specially trained in the valuation of property. If the judicial decision remains
questionable, it is a good policy to leave the evaluation as is. In this case there is no reason to
deviate from this rule. Therefore, FELS cannot absolve itself of liability for paying property taxes
by relying on an exemption under Section 234(c) of the R.A. No. 7160. In fact, the law stipulates
that machinery must be used directly and exclusively by a state-owned enterprise or state-
controlled enterprise.