796 Phil. 547; 113 OG No. 29, 5215 (July 17, 2017)
LEONEN, J.:
(1.) The [petitioner] Provincial Assessors of Agusan del Sur ERRED in finding that the Market Value of a single fruit bearing oil palm tree is P207.00 when it should only be P42.00 pesos per tree;
(2.) The [petitioner] ERRED in finding that the total number of standing and fruit bearing oil palm tree is PI 10 [sic] trees per hectare when it should be only 92 trees;
(3.) The [petitioner] ERRED in finding that the Market Value[s] of the plantation roads are:A.) P270,000.00 per kilometer for primary roadsIt should only be:
B.) P135,000.00 for secondary roads
C.) P67,567.00 for tertiary roads constructed by the company.A.) P105,000.00 for primary roadsLikewise, bridges, culverts, canals and pipes should not be assessed separately from plantation roads, the same being components of the roads thereof;
B.) P52,300.00 for secondary roads
C.) P26,250.00 for tertiary roads
(4.) The [petitioner] ERRED in imposing real property taxes against the petitioner for roads, bridges, culverts, pipes and canals as these belonged to the cooperatives;
([5].) The [petitioner] ERRED in finding that the Market Value of NDC service area is P11,000.00 per hectare when it should only be P6,000.00 per hectare;
([6].) The [petitioner] ERRED in imposing realty taxes on Residential areas built by [respondent] except for three of them;
([7].) The [petitioner] ERRED when it included haulers and other equipments [sic] which are unmovable as taxable real properties.[14]
WHEREFORE, this Board has decided to set aside, as it does hereby set aside, the decision rendered by the Local Board of Assessment Appeals of the Province of Agusan del Sur on June 8, 1999 in an unnumbered case entitled "[F]ilipinas Palm Oil Co., Inc. Petitioner, versus the Provincial Assessors Office of Agusan del Sur, Respondent" and hereby orders as follows:
A. The market value for each oil palm tree should be FIFTY- SEVEN & 55/100 PESOS (57.55), effective January 1, 1991. The assessment for each municipality shall be based on the corresponding number of trees as listed in Petitioner-Appellee's "Hectarage Statement" discussed hereinabove;
B. Petitioner-Appellee should not be made to pay for the real property taxes due on the roads starting from January 1, 1991;
C. Petitioner-Appellee is not liable to the Government for real property taxes on the lands owned by the Multi-purpose Cooperative;
D. The housing units with a market value of PI75,000.00 or less each shall be subjected to 0% assessment level, starting 1994;
E. Road Equipment and haulers are not real properties and, accordingly, Petitioner-Appellee is not liable for real property tax thereon;
F. Any real property taxes already paid by Petitioner-Appellee which, by virtue "of this decision, were not due, shall be applied to future taxes rightfully due from Petitioner-Appellee.
SO ORDERED.[27] (Emphasis supplied)
SECTION 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:
. . . .(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines." (Emphasis supplied)
SECTION 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property tax:
. . . .(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938[.] (Emphasis supplied)
We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that was constructed by appellee belongs to the government by right accession not only because it is inherently incorporated or attached to the timber land leased to appellee but also because upon the expiration of the concession, said road would ultimately pass to the national government. In the second place, while the road was constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract entered into by the appellee and the government and by public in by the general. Thus, under said lease contract, appellee cannot prevent the use of portions, of the concession for homesteading purposes. It is also in duty bound to allow the free use of forest products within the concession for the personal use of individuals residing in or within the vicinity of the land. . . . In other words, the government has practically reserved the rights to use the road to promote its varied activities. Since, as above shown, the road in question cannot be considered as an improvement which belongs to appellee, although in part is for its benefit, it is clear that the same cannot be the subject of assessment within the meaning of section 2 of Commonwealth Act No. 470.[36] (Citations omitted)
Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially.
. . . .
Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon, belong to the owner of the land, subject to the provisions of the following articles.
SECTION 199. Definition of Terms. — When used in this Title, the term:
. . . .
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It 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.
Article 415. The following are immovable property:
. . . .(5) Machinery, 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[.]
SECTION 198. Fundamental Principles. — The appraisal, assessment, levy and collection of real property tax shall be guided by the following fundamental principles:
. . . .
(b) Real property shall be classified for assessment purposes on the basis of its actual use[.]
. . . .
SECTION 199. Definition of Terms. — When used in this Title, the term:
. . . .
(b) "Actual Use" refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof[.]
. . . .
SECTION 205. Listing of Real Property in the Assessment Rolls. —
. . . .
(d) Real property owned by the Republic of the Philippines, its instrumentalities and political subdivisions, the beneficial use of which has been granted, for consideration or otherwise, to a taxable person, shall be listed, valued and assessed in the name of the possessor, grantee or of the public entity if such property has been acquired or held for resale or lease.
. . . .
SECTION 217. Actual Use of Real Property as Basis for Assessment. — Real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. (Emphasis supplied)
SECTION 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property tax:
. . . .
(d) All real property owned by duly registered cooperatives as provided for under [Republic Act] No. 6938[.] (Emphasis supplied)
[S]ection 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the L[ocal] G[overnment] C[ode], we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units"; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "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," as provided in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the L[ocal] G[overnment] C[ode] prescribes the general rule, viz., they are withdrawn upon the effectivity of the L[ocal] G[overnment] C[ode], except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the L[ocal] Gfovernment] C[ode]. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the L[ocal] G[overnment] C[ode]. Moreover, even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the L[ocal] G[overnment] C[ode], exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234.
In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government units cannot extend to the levy of:(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local government units.
It must show that the parcels of land in question, which are real property, are any one of those enumerated in Section 234, either by virtue of ownership, character, or use of the property.[63] (Emphasis supplied)
We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that was constructed by appellee belongs to the government by right accession not only because it is inherently incorporated or attached to the timber land leased to appellee but also because upon the expiration of the concession, said road would ultimately pass to the national government. ... In the second place, while the road was constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract entered into by the appellee and the government and by public in by the general. Thus, under said lease contract, appellee cannot prevent the use of portions, of the concession for homesteading purposes. ... It is also in duty bound to allow the free use of forest products within the concession for the personal use of individuals residing in or within the vicinity of the land. ... In other words, the government has practically reserved the rights to use the road to promote its varied activities. Since, as above shown, the road in question cannot be considered as an improvement which belongs to appellee, although in part is for its benefit, it is clear that the same cannot be the subject of assessment within the meaning of section 2 of Commonwealth Act No. 470.[71]
There is no question that the road constructed by respondent Saimar on the public lands leased to it by the government is an improvement. But as to whether the same is taxable under the aforequoted provision of the Assessment Law, this question has already been answered in the negaitive by this Court. In the case of Bislig Bay Lumber Co., Inc. vs. Provincial Government of Surigao, where a similar issue was raised. . ..
. . . .
. . . What is emphasized in the Bislig case is that the improvement is exempt from taxation because it is an integral part of the public land on which it is constructed and the improvement is the property of the government by right of accession. Under Section 3(a) of the Assessment Law, all properties owned by the government, without any distinction, are exempt from taxation.[79] (Emphasis supplied, citations omitted)
Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially.
. . . .
Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon, belong to the owner of the land[.]
On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and NDC-Guthrie Plantations, Inc., as Lessee, entered into a "Lease Agreement" . . . covering the agricultural lands transferred by NDC to the DAR, which lands the DAR ultimately distributed undivided to qualified workers-beneficiaries. . . .
. . . .
Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased Property except those improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of the LESSEE."
Clause No. 9.4 of the same lease agreement provides that ". . . All fixed and permanent improvements, such as roads and palm trees introduced on the Leased Property, shall automatically accrue to the LESSOR upon termination of this Lease Agreement without need of reimbursement."
All the above-cited stipulations in the lease agreement between NGPI Multi-Purpose Cooperative and NDC-Guthrie Plantations, Inc. were reconfirmed and reaffirmed in the Addendum to Lease Agreement entered into by and between NGPI Multi-Purpose Cooperative and Filipinas Palmoil Plantations, Inc. on January 30, 1998. . . . The main subject of the said Addendum was the extension of the term of the lease agreement up to December 31, 2032, along with economic benefits to the lessor other than rentals.
There is no dispute that the roads are on the land owned by NGPI Multi-Purpose Cooperative which leased the same to Petitioner-Appellee. These roads belong to the Multi-Purpose Cooperative, not only by right of accession but also by express provisions of the Contract of Lease[.][81]
"2.1. In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR the following annual rentals:"1) An annual fixed rental, in the following amount — "SIX HUNDRED THIRTY FIVE PESOS" (P635.00) PER HECTARE PER ANNUM which would cover the following:Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased Property except those improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of the LESSEE."[83] (Emphasis supplied)
"(1) All Taxes on the Land
"(2) Administration Charges
"(3) Amortization charges
"It is understood that, if the annual fixed rental of "SIX HUNDRED THIRTY FIVE PESOS" (p 635.00) is insufficient to pay any increase on the land taxes, the Lessee shall pay the difference, provided such increase does not exceed ten percent (10%) of the immediately preceding tax imposed on the land; provided further, that any increase beyond these percentage shall be borne equally by the LESSOR and LESSEE.
"The foregoing notwithstanding, it is understood and agreed that at all times, liability for realty taxes on the Leased Property Primarily and principally lies with the LESSOR and any reference herein to payment by LESSEE of said taxes is only for purposes of earmarking the proceeds of the rentals herein agreed upon."
SECTION 199. Definition of Terms. — When used in this Title, the term:
. . . .(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It 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[.]
Article 415. The following are immovable property:
. . . .
(5) Machinery, 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[.] (Emphasis supplied)
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] (Emphasis supplied, citations omitted)
As between the Civil Code, a general law governing property and property relations, and the Local Government Code, a special law granting local government units the power to impose real property tax, then the latter shall prevail. As the Court pronounced in Disomangcop v. The Secretary of the Department of Public Works and Highways Simeon A. Datumanong:It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a general one. Lex specialis derogant generali. As this Court expressed in the case of Leveriza v. Intermediate Appellate Court, "another basic principle of statutory construction mandates that general legislation must give way to special legislation on the same subject, and generally be so interpreted as to embrace only cases in which the special provisions are not applicable, that specific statute prevails over a general statute and that where two statutes are of equal theoretical application to a particular case, the one designed therefor specially should prevail."
The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation that:A general law and a special law on the same subject are statutes in pari materia and should, accordingly, be read together and harmonized, if possible, with a view to giving effect to both. The rule is that where there are two acts, one of which is special and particular and the other general which, if standing alone, would include the same matter and thus conflict with the special act, the special law must prevail since it evinces the legislative intent more clearly than that of a general statute and must not be taken as intended to affect the more particular and specific provisions of the earlier act, unless it is absolutely necessary so to construe it in order to give its words any meaning at all.Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, the Court acknowledged that "[i]t is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property[.]"
The circumstance that the special law is passed before or after the general act does not change the principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later, the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary implication.
Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements under the Local Government Code are controlling.[93] (Emphasis supplied, citations omitted)
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 [.] (Emphasis supplied)