G.R. No. 168557 Case Digest

G.R. No. 168557, February 16, 2007

FELS Energy, Inc.

vs Province of Batangas and the Office of the Provincial Assessor of Batangas

Ponente: Callejo, Sr.

Facts:

January 1993, NPC entered into a lease contract with Polar Energy over MW diesel engine power barges in Batangas for a period of 5 years. Subsequently, Polar assigned its rights under the agreement to FELS. NPC initially opposed.

August 1995, FELS received an assessment of real property taxes on the barges. FELS referred the matter to NPC reminding it of its obligation under the agreement to pay the real estate taxes. NPC sought for reconsideration of the decision but the motion was denied.

NPC filed a petition to the Local Board Assessment Appeals. The provincial Assessor averred that the barges were real property for the purpose of taxation. LBAA still denied the petition filed by NPC and ordered FELS to pay the taxes.

LBAA Ruling: power plant facilities are considered real property because they are installed at a specific location with a character of permanency. The owner of the barges-FELS is a private corporation-is the one being taxed, not NPC. The agreement will not justify the exemption of FELS.

FELS then appealed to Central BAA. CBAA rendered s decision finding the power barges exempt from real property tax.

CBAA Ruling: the power barges belong to NPC since they are actually used by it. FELS appealed before the CA but was denied as well.

Held:

YES. The CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. Besides, factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed. We find no reason to depart from this rule in this case.

Moreover, Article 415 (9) of the New Civil Code provides that “docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast” are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.

Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a government- owned and controlled corporation engaged in the supply, generation, and transmission of electric power.

We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement:

“OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site used in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into electricity.”

It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160. Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace.