G.R. No. 127316; October 12, 2000
LIGHT RAIL TRANSIT AUTHORITY, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF MANILA and the CITY ASSESSOR OF MANILA, respondents.

FACTS

The Light Rail Transit Authority (LRTA), a government-owned and controlled corporation, was assessed real property taxes by the City Assessor of Manila for its carriageways and passenger terminal stations commencing 1985. LRTA paid taxes on its other real properties but contested the assessment on these specific assets. It argued that the carriageways and terminal stations were not taxable improvements under the Real Property Tax Code, and even if they were, they were exempt as properties devoted to public use. The City Assessor denied the claim, a decision upheld by the Local and Central Boards of Assessment Appeals.
The Court of Appeals affirmed the CBAA ruling. It held that the carriageways and passenger terminals constituted improvements and were thus real property subject to tax. The CA emphasized that these properties did not fall under any statutory exemption. It found that while the land was government-owned, the beneficial use of the improvements resided with the LRTA, a taxable entity. The appellate court characterized LRTA’s operations as a proprietary, service-oriented business catering to the paying public, not a purely governmental function.

ISSUE

Whether the LRTA’s carriageways and passenger terminal stations are subject to real property tax.

RULING

Yes, the properties are subject to tax. The Supreme Court affirmed the Court of Appeals’ decision. The governing law was the Real Property Tax Code, which levied a tax on real property, including buildings, machinery, and other improvements not specifically exempted. The Court ruled that the carriageways and terminal stations are indisputably permanent improvements attached to the land, constituting real property for taxation purposes.
The Court rejected LRTA’s claim for exemption. Tax exemptions must be granted expressly and categorically; none existed in LRTA’s charter or the tax code for these properties. The claim of being “for public use” was insufficient. The test for exemption is not merely the performance of public functions but the proprietary versus governmental nature of the activity. LRTA operates as a service-oriented business entity charging fares, which is proprietary. Consequently, its assets used in this proprietary endeavor are subject to tax. The transfer of beneficial use of the improvements to the LRTA, a taxable entity, made them taxable regardless of government ownership of the underlying land. The petition was denied for lack of merit.