Real property taxation 8. Allied Banking vs. the Quezon City Government, G. R. NO.

154126, September 15, 2006 FACTS: On July 1, 1998, Allied Banking, as trustee for College Assurance Plan of the Philippines, Inc., purchased from Liwanag C. Natividad et al. a 1,000 square meter parcel of land located along Aurora Boulevard, Quezon City in the amount of P38,000,000.00.Prior to the sale, Natividad et al. had been paying the total amountof P85,050.00 as annual real property tax based on the propertys fair market valueof P4,500,000.00 and assessed value of P1,800,000.00 under Tax Declaration No. D-102-03778. After its acquisition of the property, petitioner was, in accordance with Section 3of the ordinance, required to payP102,600.00 as quarterly real estate tax(or P410,400.00 annually) under Tax Declaration No. D-10203780 which pegged themarket value of the property at P38,000,000.00 the consideration appearing in theDeed of Absolute Sale, and its assessed value atP15,200,000.00. Petitioner paid thequarterly real estate tax for the property from the 1 st quarter of 1999 up to the 3 rd quarter of 2000 which is paid under protest.Petitioner filed a petition for prohibition and declaratory relief before the RTC of Quezon City assailing the validity of Sec. 3 of the Quezon City Ordinance which statesthat:Sec. 3. xxx He shall apply the new assessment level of 15% for residential and 40%for commercial and industrial classification, respectively as prescribed in Section 8 (a) of the 1993 Quezon City Revenue Code to determine the assessed value of the land.Provided; however, that parcels of land sold, ceded, transferred and conveyed forremuneratory consideration after the effectivity of this revision shall be subject toreal estate tax based on the actual amount reflected in the deed of conveyance or the current approved zonal valuation of the Bureau of Internal Revenue prevailing at the time of sale, cession, transfer and conveyance, whichever is higher, as evidenced by the certificate of payment of the capital gains tax issued therefor. Petitioner contends that the proviso is contrary to the Local Government Codeand the Local Assessment Regulations No. 1-92. RTC later on dismissed the petition. ISSUE: Whether or not section 3, Quezon City Ordinance No. 357, Series of 1995,which was abrogated for being unconstitutional, can be the basis of collecting realestate taxes prior to its repeal.

33 Taxation ICase Digests RULING:

No. The validity of the proviso fixing the appraised value of property at the statedconsideration at which the property was last sold is invalid as it adopts a method of assessment or appraisal of real property contrary to the Local Government Code, itsImplementing Rules and Regulations and the Local Assessment Regulations No. 1-92issued by the Department of Finance. Under these immediately stated authorities, realproperties shall be appraised at the current and fair market value prevailing in thelocality where the property is situated and classified for assessment purposes on thebasis of its actual use. Fair market value is the price at wh ich a property may be sold by a seller who isnot compelled to sell and bought by a buyer who is not compelled to buy, taking intoconsideration all uses to which the property is adapted and might in reason be applied.The criterion established by the statute contemplates a hypothetical sale. Hence, thebuyers need not be actual and existing purchasers

CALTEX PHILS. V. CENTRAL BOARD OF ASSESSMENT APPEALS 114 SCRA 296 FACTS: The City Assessor characterized the items in gas stations of petitioner as taxable realty. These items included underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, etc. These items are not owned by the lessor of the land wherein the equipment are installed. Upon expiration of the lease agreement, the equipment should be returned in good condition. HELD: The equipment and machinery as appurtenances to the gas station building or shed owned by Caltex and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached and fixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code. Manila International Airport Authorityvs. City of Pasay April 2, 2009 | Carpio Facts: P e t i t i o n e r M a n i l a I n t e r n a t i o n a l A i r p o r t Authority (MIAA) operates and administerst h e N i n o y A q u i n o I n t e r n a t i o n a l A i r p o r t (NAIA) Complex under Executive Order No.9 0 3 ( E O 9 0 3 ) , o t h e r w i s e k n o w n a s t h e Revised Charter of the Manila InternationalA i r p o r t A u t h o r i t y . U n d e r S e c t i o n s 3 a n d 22 of EO 903, approximately 600 hectaresof land, including the runways, the airportt o w e r , a n d o t h e r a i r p o r t b u i l d i n g s , w e r e transferred to MIAA. The NAIA Complex islocated along the border between PasayCity and Paraaque

City.M I A A r e c e i v e d F i n a l N o t i c e s o f R e a l Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. T h e C i t y o f P a s a y , t h r o u g h i t s C i t y T r e a s u r e r , issued notices of levy andw a r r a n t s o f l e v y f o r t h e N A I A P a s a y properties. Thereafter, the City Mayor of Pasay threatened to sell at public auctiont h e N A I A P a s a y p r o p e r t i e s i f t h e d e l i n q u e n t r e a l p r o p e r t y t a x e s r e m a i n unpaid.M I A A f i l e d w i t h t h e C o u r t o f A p p e a l s a petition for prohibition and injunction withp r a y e r f o r p r e l i m i n a r y i n j u n c t i o n o r temporary restraining order. The petitions o u g h t t o e n j o i n t h e C i t y o f P a s a y f r o m imposing real property taxes on, levyingagainst, and auctioning for public sale theNAIA Pasay properties. Court of Appeals: Upheld the power of t h e C i t y o f P a s a y t o i m p o s e a n d c o l l e c t realty taxes on the NAIA Pasay properties.Sections 193 and 234 of Republic Act No.7 1 6 0 o r t h e L o c a l G o v e r n m e n t C o d e withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including government-o w n e d o r c o n t r o l l e d c o r p o r a t i o n s . S i n c e MIAA is a government-owned corporation,i t f o l l o w s t h a t i t s t a x e x e m p t i o n u n d e r Section 21 of EO 903 has been withdrawnu p o n t h e e f f e c t i v i t y o f t h e L o c a l Governmen t Code. Issue: W O N t h e N A I A P a s a y p r o p e r t i e s o f M I A A are exempt from real property tax YES. Held: 1. M I A A i s a g o v e r n m e n t "inst rumentality" that does not qualifyas a "government-owned or controlledc o r p o r a t i o n . U n d e r S e c t i o n 1 3 3 ( o ) o f t h e L o c a l G o v e r n m e n t C o d e , l o c a l government units have no power totax instrumentalitie s o f t h e n a t i o n a l g o v e r n m e n t . T h e r e f o r e , M I A A i s ex empt from any kind of tax from thelocal governments.A g o v e r n m e n t " i n s t r u m e n t a l i t y " m a y o r m a y n o t b e a " g o v e r n m e n t - o w n e d o r controlled corporation" (Section 2(10) of t h e I n t r o d u c t o r y P r o v i s i o n s o f t h e A d m i n i s t r a t i v e C o d e o f 1 9 8 7 ) . A g o v e r n m e n t - o w n e d o r c o n t r o l l e d corporation must be "organized as a stocko r n o n stock corporation." MIAA is noto r g a n i z e d a s a s t o c k o r n o n - s t o c k corporation. It is not a stock corporationb e c a u s e i t h a s n o c a p i t a l s t o c k d i v i d e d i n t o s h a r e s . I t i s a l s o n o t a n o n - s t o c k corporation because it has no members. The Government cannot be considered ast h e s o l e m e m b e r o f M I A A b e c a u s e n o n stock corporations cannot distribute anyp a r t o f t h e i r i n c o m e t o t h e i r m e m b e r s . Section 11 of the MIAA Charter mandatesM I A A t o r e m i t 2 0 % o f i t s a n n u a l g r o s s o p e r a t i n g i n c o m e t o t h e N a t i o n a l Treasury.M I A A i s l i k e a n y o

t h e r g o v e r nm e n t instrumentality, but is vested wit h corporate powers to perform efficiently itsg o v e r n m e n t a l f u n c t i o n s . W h e n t h e l a w v e s t s i n a g o v e r n m e n t i n s t r u m e n t a l i t y c o r p o r a t e p o w e r s , t h e i n s t r u m e n t a l i t y does not become a corporation. 2. The airport lands and buildings of MIAAa r e p r o p e r t i e s o f p u b l i c d o m i n i o n i n t e n d e d f o r p u b l i c use, and as sucha r e e x e m p t f r o m r e a l p r o p e r t y t a x u n d e r S e c t i o n 2 3 4 ( a ) o f t h e L o c a l Government Code Lung Center of the Philippines vs. Quezon City [GR No. 144104 June 29, 2004] Post under case digests, Taxation at Tuesday, March 20, 2012 Posted by Schizophrenic Mind Facts: Lung Center of the Philippines is a non-stock and non-profit entity established by virtue of PD No. 1823. It is the registered owner of the land on which the Lung Center of the Philippines Hospital is erected. A big space in the ground floor of the hospital 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. Also, a big portion on the right side of the hospital is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. When the City Assessor of Quezon City assessed both its land andhospital building for real property taxes, the Lung Center of thePhilippines filed a claim for exemption on its averment that it is a charitable institution with a minimum of 60% of its hospital beds exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The claim forexemption was denied, prompting a petition for the reversal of the resolution of the City Assessor with the Local Board of Assessment Appeals of Quezon City, which denied the same. On appeal, the Central Board of Assessment Appeals of Quezon City affirmed the local boards decision, finding that Lung Center of the Philippines is not a charitable institution and that its properties were not actually, directly and exclusively used for charitable purposes. Hence, the present petition for review with averments that the Lung Center of the Philippines is a charitable institution under Section 28(3), Article VI of the Constitution, notwithstanding that it accepts paying patients and rents out portions of the hospital building to private individuals and enterprises. Issue: Is the Lung Center of the Philippines a charitable institution within the context of the Constitution, and therefore, exempt from realproperty tax? Held: The Lung Center of the Philippines is a charitable institution. To determine whether an enterprise is a charitable institution 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, that character of the services rendered, the indefiniteness of the beneficiaries and the use and occupation of the properties. However, under the Constitution, in order to be entitled to exemptionfrom real property tax, there must be clear and unequivocal proof that (1) it is a charitable institution and (2)its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. While portions of the hospital are used for 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 and enterprises. Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred from participation or enjoyment. 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. LRTA v CENTRAL BOARD (2000)FACTS: LRTA is a GOCC engaged in public transportation. By virtue of its charter, it acquiredreal properties. It entered into a contract of management with Metro wherein Metroundertook to manage, operate, and maintain the LRT system owned by LRTA.The City Assessor assessed LRTA for realty tax. LRTA paid the realty tax, except theassessment made on its carriageways and passenger terminal stations including theland on which they were constructed on the ground that the same were not rea properties under the Real Property Tax Code, and that even if the same were real property, it is still exempt from paying the realty tax because said properties are for public use. ISSUE: WON a profit-oriented GOCC is exempt from paying realty t a x u n d e r t h e R e a l Property Tax Code. HELD: No. A profit-oriented GOCC is not exempt from paying realty tax under the RealProperty Tax Code.Though the creation of the LRTA was impelled by public service -- to provide masstransportation to alleviate the traffic and transportation situation in Metro Manila -itso p e r a t i o n u n d e n i a b l y p a r t a k e s o f o r d i n a r y b u s i n e s s . P e t i t i o n e r i s c l o t h e d w i t h corporate status and corporate powers in the furtherance of its proprietary objectives.Indeed, it operates much like any private corporation engaged in the mass transportindustry. Given that it is engaged in a service-oriented commercial endeavor, itsc a r r i a g e w a y s a n d t e r m i n a l s t a t i o n s a r e p a t r i m o n i a l p r o p e r t y s u b j e c t t o t a x , notwithstanding its claim of being a government-owned or controlled corporation.True, petitioner's carriageways and terminal stations are anchored, at certain points,on public roads. However, it must be emphasized that these structures do not formpart of such roads, since the former have been constructed over

the latter in such away that the flow of vehicular traffic would not be impeded. These carriageways andterminal stations serve a function different from that of the public roads. The former are part and parcel of the light rail transit (LRT) system which, unlike the latter, are notopen to use by the general public. The carriageways are accessible only to the LRTtrains, while the terminal stations have been built for the convenience of LRTA itself and its customers who pay the required fare.Unlike public roads which are open for use by everyone, the LRT is accessible only tothose who pay the required fare. It is thus apparent that petitioner does not exist solelyfor public service, and that the LRT carriageways and terminal stations are notexclusively for public use. Although petitioner is a public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utilitybusiness and earns money therefrom. Other grounds: 1. The charter of LRTA does not provide for any real estate tax exemption.Executive Order No. 603, the charter of petitioner, does not provide for any real estatetax exemption in its favor. Its exemption is limited to direct and indirect taxes, duties or fees in connection with the importation of equipment not locally available, as thefollowing provision shows:2. The beneficial use of the properties have been transferred to a taxable entity.Even granting that the national government indeed owns the carriageways andterminal stations, the exemption would not apply because their beneficial use hasbeen granted to petitioner, a taxable entity

NATIONAL POWER CORPORATION vs. PROVINCE OF QUEZON - Real Property Tax

FACTS:
NPC is a GOCC that entered into an Energy Conversion Agreement (ECA) under a build-operatetransfer (BOT) arrangement with Mirant Pagbilao Corp. Under the agreement, Mirant will build and finance a thermal power plant in Quezon, and operate and maintain the same for 25 years, after which, Mirant will transfer the power plant to the Respondent without compensation. NPC also undertook to pay all taxes that the government may impose on Mirant. Quezon then assessed Mirant real property taxes on the power plant and its machineries.

ISSUES:
(1) Can Petitioner file the protest against the real property tax assessment? (2) Can Petitioner claim exemption from the RPT given the BOT arrangement with Mirant? (3) Is payment under protest required before an appeal to the LBAA is made?

HELD:
(1) NO. The two entities vested with personality to contest an assessment are (a) the owner or (b) the person with legal interest in the property. NPC is neither the owner nor the possessor/user of the subject machineries even if it will acquire ownership of the plant at the end of 25 years. The Court said that legal interest should be an interest that is actual and material, direct and immediate, not simply contingent or expectant. While the Petitioner does indeed assume responsibility for the taxes due on the power plant and its machineries, the tax liability referred to is the liability arising from law that the local government unit can rightfully and successfully enforce, not the contractual liability that is enforceable between the parties to a contract. The local government units can neither be compelled to recognize the protest of a tax assessment from the Petitioner, an entity against whom it cannot enforce the tax liability. (2) NO. To successfully claim exemption under Section 234 (c) of the LGC, the claimant must prove two elements: a) the machineries and equipment are actually, directly, and exclusively used by local water districts and government-owned or controlled corporations; and b) the local water districts and government-owned and controlled corporations claiming exemption must be engaged in the supply and distribution of water and/or the generation and transmission of electric power. Since neither the Petitioner nor Mirant satisfies both requirements, the claim for exemption must fall. (3) YES. If a taxpayer disputes the reasonableness of an increase in a real property tax assessment, he is required to "first pay the tax" under protest. The case of Ty does not apply as it involved a situation where the taxpayer was questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. A claim for tax exemption, whether full or partial, does not question the authority of local assessors to assess real property tax.

In the case of Testate Estate of Concordia Lim V. City of Manila, it was held that the unpaid tax attaches to the property and is chargeable against the person who had actual or beneficial use and possession of it regardless of whether or not he is the owner. To impose the real property tax on the subsequent owner who was neither the owner nor the beneficial user of the property during the designated periods would not only be contrary to law but also unjust.