G.R. No. 168557 & G.R. No. 170628; February 16, 2007
FELS ENERGY, INC., Petitioner, vs. THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, Respondents. NATIONAL POWER CORPORATION, Petitioner, vs. LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his capacity as the Assessor of the Province of Batangas, and the PROVINCE OF BATANGAS represented by its Provincial Assessor, Respondents.

FACTS

The National Power Corporation (NPC) entered into an Energy Conversion Agreement with Polar Energy, Inc., later assigned to FELS Energy, Inc., for power barges moored in Batangas. The contract stipulated NPC’s responsibility for paying all real estate taxes on the barges. In 1995, the Provincial Assessor of Batangas issued a real property tax assessment on the power barges to FELS. FELS referred the obligation to NPC, which sought reconsideration, arguing the barges were not taxable real property. The motion was denied, prompting NPC to file a petition with the Local Board of Assessment Appeals (LBAA). The LBAA denied the petition, ruling the barges were real property for taxation and that the petition was filed out of time. FELS appealed to the Central Board of Assessment Appeals (CBAA).
During the CBAA appeal, a Notice of Levy was issued against the barges. The CBAA eventually ruled in favor of FELS and NPC, holding the power barges exempt from real property tax as machinery and equipment of NPC, a government-owned and controlled corporation (GOCC) exempt under the law. The Province of Batangas appealed to the Court of Appeals (CA), which reversed the CBAA. The CA dismissed the petitions on the ground of prescription, finding that NPC’s appeal to the LBAA was filed beyond the 60-day period from the denial of its motion for reconsideration by the Provincial Assessor.

ISSUE

Whether the Court of Appeals correctly dismissed the petitions on the ground of prescription.

RULING

No. The Supreme Court reversed the CA and reinstated the CBAA decision. The Court held that the appeal to the LBAA was timely filed. The 60-day period to appeal under the Local Government Code commences from the receipt of the written notice of assessment by the taxpayer. In this case, the assessment was issued to FELS, not NPC. NPC’s motion for reconsideration, filed on behalf of FELS pursuant to their agreement, was a mere courtesy and did not bind FELS to the resulting denial. The period for FELS to appeal began only upon its receipt of the LBAA’s adverse decision. Consequently, FELS’s appeal to the CBAA was filed within the reglementary period. On the substantive issue, the Court affirmed that the power barges, as machinery and equipment of NPC, a GOCC performing an essential public function, are exempt from real property tax under Section 234(c) of the Local Government Code, as the law in force at the time of assessment. The tax exemption, being in favor of the government entity NPC, benefits its property regardless of the private entity’s (FELS) ownership under the lease agreement.