G.R. No. L-28034. February 27, 1971
THE BOARD OF ASSESSMENT APPEALS OF ZAMBOANGA DEL SUR AND PLACIDO L. LUMBAY, IN HIS CAPACITY AS PROVINCIAL ASSESSOR OF ZAMBOANGA DEL SUR, PETITIONERS, VS. SAMAR MINING COMPANY, I…
ZALDIVAR, J.:
Appeal from the decision
of the Court of Tax Appeals, in its CTA Case No. 1705, declaring respondent Samar Mining Company, Inc. (hereinafter referred to as Samar for short) exempt from paying the real property tax
assessed against it by the Provincial Assessor of Zamboanga
del Sur.
There is no dispute as to
the facts of this case. Samar is a domestic corporation engaged in the
mining industry. As the mining claims
and the mill of Samar are located inland and at a
great distance from the loading point or pier site, it decided to construct a
gravel road as a convenient
means of hauling its ores from the mine site at Buug
to the pier area at Pamintayan, Zamboanga
del Sur; that as an initial step in the construction
of a 42-kilometer road which would traverse public lands Samar,
in 1958 and 1959, filed with the Bureau of Lands and the Bureau of Forestry
miscellaneous lease applications for a road right of way on lands under the jurisdiction of said bureaus where
the proposed road would traverse; that having been given temporary permit to
occupy and use the lands applied for by it, said respondent constructed a road
thereon, known as the Samico road; that although the
gravel road was finished in
1959, and had since then been used by the respondent in hauling its iron ores
from its mine site to the pier area, and that its lease applications were
approved on October 7, 1965, the execution of the corresponding lease contracts
were held in abeyance even up to the time this case was brought to the Court of
Tax Appeals.[1]
On June 5, 1964,
Samar received a letter from
the Provincial Assessor of Zamboanga del Sur assessing the 13.8 kilometer road[2]
constructed by it for real estate tax purposes in the total sum of P1,117,900.00. On July
14, 1964, Samar appealed to the Board of Assessment
Appeals of Zamboanga del Sur,
(hereinafter referred to as Board, for short), contesting the validity of the
assessment upon the ground that the road having been constructed entirely on a
public land cannot be considered an improvement subject to tax within the
meaning of section 2 of Commonwealth Act 470, and invoking further the decision
or this Court in the case of Bislig Bay Lumber
Company, Inc. vs. The Provincial Government of Surigao,
G.R. No. L-9023, promulgated on November 13, 1956. On February 10, 1965, after the parties
had submitted a stipulation of facts, Samar
received a resolution of the Board, dated December 22, 1964, affirming the validity of the
assessment made by the Provincial Assessor of Zamboanga
del Sur under tax declaration No. 3340, but holding
in abeyance its enforceability until the lease contracts were duly executed.
On February 16, 1965, Samar moved to
reconsider the resolution of the Board, praying for the cancellation of tax
declaration No. 3340, and on August 3, 1965, Samar received
Resolution No. 13 not only denying its motion for reconsideration but modifying
the Board’s previous resolution of December 22, 1964 declaring the assessment
immediately enforceable, and that the taxes to be paid by Samar
should accrue or commence with the year 1959. When its second motion for reconsideration was again denied by the Board, Samar
elevated the case to the Court of Tax
Appeals.
The jurisdiction of the Court of Tax Appeals to take cognizance
of the case was assailed by herein petitioners (the Board and the Provincial
Assessor of Zamboanga del Sur)
due to the failure of Samar to first pay the realty tax imposed upon it
before interposing the appeal, and prayed that the resolution of the Board appealed from be
affirmed. On June 28, 1967, the Court of Tax Appeals ruled that it had jurisdiction to entertain
the appeal and then reversed the
resolution of the Board. The Court of Tax Appeals ruled that
since the road is constructed on public lands such that it is an integral part
of the lands and not an
independent improvement thereon, and that upon the termination of the lease the
road as an improvement will automatically be owned by the national government, Samar should be exempt from paying the real estate tax
assessed against it. Dissatisfied with
the decision of the Court of Tax Appeals, petitioners Board and Placido L. Lumbay, as Provincial
Assessor of Zamboanga del Sur,
interposed the present petition for review before this Court.
The issue to be resolved in the present appeal is whether or not respondent Samar should pay realty tax on the assessed
value of the road it constructed on alienable or disposable public lands tnat are leased to it by the government.
Petitioners maintain that
the road is an improvement and, therefore, taxable under Section 2 of the
Assessment Law (Commonwealth Act No. 470) which provides as follows:
“Sec. 2. Incidence of real
property tax. – Except in chartered cities, there shall be levied,
assessed, and collected, an annual ad valorem
tax on real property including land, buildings, machinery, and other
improvements not hereinafter specifically exempted.”
There is no question that
the road constructed by respondent Samar 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 negative by this Court.
In the case of Bislig Bay Lumber Co., Inc. vs.
Provincial Government of Surigao, 100 Phil., 303,
where a similar issue was raised as to whether the timber concessionaire
should be required to pay realty tax for the road it constructed at its own
expense within the territory of the lumber concession granted to it, this
Court, after citing Section 2 of Commonwealth Act 470, held:
“Note that said section authorizes the levy of real tax not
only on lands, buildings, or machinery that may be erected thereon, but also on
any other improvements, and considering the road constructed by appellee on the timber concession granted to it as an
improvement, appellant assessed the tax now in dispute upon the authority of
the above provision of the law.
“It is the theory of appellant that, inasmuch as the road was
constructed by appellee for its own use and benefit
it is subject to real tax even if it was constructed on a public land. On the other hand, it is the theory of appellee that said road is exempt from real tax because (1)
the road belongs to the national government by right of accession, (2) the road
cannot be removed or separated from the land on which it is constructed and so
it is part and parcel of the public land, and (3), according to the evidence,
the road was built not only for the use and benefit of appellee
but also of the public in general.
“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 of 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 (Articles 440 and 445, new Civil Code; Tobatabo vs. Molero, 22 Phil.,
418). 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, its use can also be availed of by the employees
of the government and by the public in general.
x x x 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.
“We are not oblivious of the fact that the present assessment was made by appellant on the strength
of an opinion rendered by the Secretary of
Justice, we find that the same is predicated on authorities which are
not in point, for they refer to improvements that belong to the lessees
although constructed on lands belonging to the government. It is
well settled that a real tax,
being a burden upon the capital, shod be paid by the owner of
the land and not by a usufructuary
(Mercado vs. Rizal, 67 Phil., 608; Article 597, new
Civil Code). Appellee
is but a partial usufructuary of the road in
question.”
Again, in the case of
Municipality of Cotabato, et al. vs. Santos, et al., 105 Phil., 963, this Court
ruled that the lessee who introduced improvements consisting of dikes, gates
and guard-houses on swamp lands leased to him by the Bureau of Fisheries, in convertihg the swamps into fishponds, is exempt from
payment of realty taxes on those improvements.
This Court held:
“We however believe that the assessment on the improvements introduced
by defendant on the fishpond has included more than what is authorized by
law. The improvements as assessed
consist of dikes, gates and guardhouses and bodegas totals P6,850.00 which
appellants are not now questioning, but they dispute the assessment on the dikes and gates in this wise: ‘After the swamps were leased to appellants,
the latter cleared the swamps and built dikes, by pushing the soil to form
these dikes in the same way that paddies are built on lands intended for the
cultivation of palay,
the only difference being that dikes used in fishponds are relatively much
larger than the dikes used in ricelands.’ We believe this contention to be correct,
because those dikes can really be considered
as integral parts of the fishponds and not as independent improvements. They cannot be taxed under the assessment law. The
assessment, therefore, with regard to improvements should be modified by excluding the dikes and
gates.”
It is contended by petitioners that the ruling in the Bislig case is not applicable in the present case because
if the concessionaire in the Bislig case was exempt
from paying the realty tax it was because the road in that case was constructed
on a timberland or on an indisposable
public land, while in the instant case what is being taxed is the
13.8 kilometer portion or the road traversing alienable public lands. This contention has no merit. The pronouncement in the Bislig
case contains no hint whatsoever that the road was not subject to tax because it was constructed on inalienable
public lands. 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 (Com. Act 470), all properties owned by the government, without
any distinction, are exempt from taxation.
It is also contended by
petitioners that the Court of Tax Appeals can not take cognizance or the appeal
of Samar from the resolution of the Board assessing
realty tax on the road in question, because Samar had
not first paid under protest the realty tax assessed against it as required
under the provisions of Section 54 of the Assessment Law (Com. Act 470), which
partly reads as follows:
“SEC. 54. Restriction upon power of Court to impeach tax. — No court shall entertain any suit assailing the validity of
a tax assessment under this Act until the taxpayer shall have paid under
protest the taxes assessed against him, nor shall any court declare any tax
invalid by reason ….”
The extent and scope of the jurisdiction of the Court of Tax
Appeals regarding matters related to assessment of real property taxes are
provided for in Section 7, paragraph (3) and Section 11 of Republic Act No.
1125, which partly read as follows:
“SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise
exclusive appellate jurisdiction to review by appeal, as herein provided –
x x x x
(3)
Decisions of provincial or city Board of
Assessment Appeals in cases involving the assessment and taxation of real
property or other matters arising under the Assessment Law, including rules and
regulations relative thereto.”
“SEC. 11. Who may appeal; effect of appeal. –
Any person, association or corporation adversely affected by a decision or
ruling of x x
x any provincial or city Board of Assessment Appeals
may file an appeal in the Court of Tax Appeals within thirty days after the
receipt of such decision or ruling.”
In this connection the
Court or Tax Appeals, in the decision appealed from, said:
“Prior to the enactment or Republic Act No. 1125, all civil
actions involving the legality of any tax, impost or assessment were under the jurisdiction
of the Court of First Instance (Sec. 44, Republic Act No. 296). It is clear, therefore, tnat
before the creation of the Court or Tax Appeals all cases involving the legality of assessments
for real property taxes, as well as the refund thereof, were properly brought
and taken cognizance by the said
court. However, with the passage by
Congress and the approval by the President of Republic Act No. 1125, the
jurisdiction over cases involving the validity of realty tax assessment were
transferred from the Court of First
Instance to the Court of Tax Appeals (See Sec. 22, Rep. Act
No. 1125). The only exception to the
grant of exclusive appellate jurisdiction to the Tax Court relates to cases
involving the refund of real property taxes which remained with the Court of First Instance (See City of Cabanatuan,
et al. vs. Gatmaitan, et al., G.R. No. L-19129, February
28, 1963).
“A critical and analytical study of Section 7 of Republic Act
No. 1125, in relation to subsections (1), (2) and (3) thereof, will readily
show that it was the intention of Congress to lodge in the Court of Tax Appeals
the exclusive appellate jurisdiction over cases involving the legality of real
property tax assessment, as distinguished from cases involving the refund of
real property taxes. To require the
taxpayer, as contended by respondents, to pay first the disputed real property
tax before he can file an appeal assailing the legality and validity of the
realty tax assessment will render nugatory the appellate jurisdictional power
of the Court of Tax Appeals as envisioned in Section 7(3), in relation to
Section 11, of Republic Act No. 1125. If
we follow the contention of respondents to its logical conclusion, we cannot
conceive of a case involving the legality and validity of real property tax
assessment, decided by the Board of Assessment Appeals, which can be appealed
to the Court of Tax Appeals. The
position taken by respondents is, therefore, in conflict with the Explanatory
Note contained in House Bill No. 175, submitted during the First Session, Third
Congress of the Republic of the
Philippines, and the last paragraph of Section 21 of Republic Act No. 1125
which provides as follows:
SEC. 21. General provisions. –
x x x
Any law or part of law, or any executive order, rule or regulation
or part thereof, inconsistent with the provisions of this Act is hereby
repealed.
“Accordingly, we hold that this Court can entertain and give
due course to petitioner’s appeal assailing the legality and validity of the
real property tax assessment here in question without paying first the
disputed real property tax as required by Section 54 of the Assessment Law.”
We agree with the
foregoing view of the Court of Tax Appeals.
It should be noted that what is involved in the present case is simply
an assessment of realty tax, as fixed
by the Provincial Assessor of Zamboanga del Sur, which was disputed by Samar before the Board of Assessment Appeals of
said province. There was no demand yet
for payment of the realty tax. In fact
the letter of the Provincial Assessor, of June 5, 1964, notifying Samar of the assessment, states as follows:
“Should you find the same to be not in accordance with law or
its valuation to be not satisfactory, you may appeal this assessment under Section
17 of Commonwealth Act 470 to the Board of Assessment Appeals, through the
Municipal Treasurer of Buug, Zamboanga del Sur, within 60
days from the date of your receipt hereof.”[3]
Accordingly
Samar appealed to the Board questioning the
validity of the assessment. The Board
rendered a resolution over-ruling the contention of Samar that the assessment was illegal. Then Samar availed of its right to appeal from the
decision of the Board to the Court of Tax Appeals as provided in Section 11 of
Republic Act 1125. Section 11 does
not require that before an appeal
from the decision of the Board of Assessment Appeals can be brought to the
Court of Tax Appeals it must first be shown that the party disputing the
assessment had paid under protest the realty tax assessed. In the absence of such a requirement under
the law, all that is necessary for a party aggrieved by the decision of the
Board of Assessment Appeals is to file his notice of appeal to the Court of Tax
Appeals within 30 days after receipt of the decision of the
Board of Assessment Appeals, as provided in Section 11 of Republic Act 1125.
This Court, in the case
of City of Cabanatuan vs. Gatmaitan[4], said:
“… if the real estate tax has already been paid it is futile
for a taxpayer to take the matter to the City Board of Assessment Appeals for
the jurisdiction of that body is merely confined to the determination of the
reasonableness of the assessment or taxation of the property and is not
extended to the authority of requiring the refund of the tax unlike cases
involving assessment of internal
revenue taxes. In the circumstances, we
hold that this case comes under the jurisdiction of the proper court of first
instance it involving the refund of a real estate tax which does not come under
the appellate jurisdiction of the Court of Tax Appeals.”
From the aforequoted portion of the decision of this Court, We
gather that the only question that may be brought before the City or Provincial
Board of Assessment Appeals is the question which relates to the reasonableness
or legality of the realty tax that is assessed against a taxpayer. Such being the case, it would be unjust to require the realty owner to first pay the tax, that
he precisely questions, before he can lodge an appeal to the Court of Tax
Appeals. We believe that it is not the
intendment of the law that in questioning before the Court of Tax Appeals the
validity or reasonableness of the assessment approved by the Board of
Assessment Appeals the taxpayer should first pay the questioned tax. It is Our view that in so far as appeals from
the decision or resolution of the Board of Assessment Appeals, Section 54 of
Commonwealth Act 470 does not apply, and said section can be considered as
impliedly repealed by Sections 7, 11 and 21 of Republic Act 1125.
IN VIEW OF THE
FOREGOING, the decision of
the Court of Tax Appeals, appealed from, is affirmed, without pronouncement as
to costs.
IT IS SO ORDERED.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Ruiz Castro,
Fernando, Teehankee, Villamor, and Makasiar, JJ., concur.
Barredo, J., took no part.
[1]
October 25, 1965.
[2]
Although the road constructed was 42 kilometers in length only 13.8 kilometers
was assessed because they traversed alienable or disposable public lands while the
rest traversed timber lands which are inalienable or indisposable.
[3]
See page 6 of Brief for respondents, on
page 90 of the rollo.
[4]
G. R. No. L-19129, February 28, 1963.