GR 183416; (October, 2016) (Digest)
G.R. No. 183416 . October 05, 2016
PROVINCIAL ASSESSOR OF AGUSAN DEL SUR, PETITIONER, VS. FILIPINAS PALM OIL PLANTATION, INC., RESPONDENT.
FACTS
Respondent Filipinas Palm Oil Plantation, Inc. (Filipinas) operates a palm oil plantation on over 7,000 hectares of land in Agusan del Sur. Following the Comprehensive Agrarian Reform Law, the National Development Company lands were transferred to beneficiaries who formed the NGPI-NGEI Cooperatives. Filipinas entered into a lease agreement with these cooperatives. The Provincial Assessor of Agusan del Sur assessed real property taxes on Filipinas’ properties within the plantation, including oil palm trees, plantation roads, residential units, and equipment like road haulers.
Filipinas contested the assessment before the Local Board of Assessment Appeals (LBAA). The LBAA adjusted some valuations but upheld the taxability of most properties. Filipinas appealed to the Central Board of Assessment Appeals (CBAA), which ruled in its favor, exempting the leased lands, roads, and certain housing units from tax, and declaring road equipment and haulers as not being real property. The Court of Appeals affirmed the CBAA’s decision. The Provincial Assessor elevated the case to the Supreme Court.
ISSUE
The primary issues were: (1) Whether the real property tax exemption granted to agricultural cooperatives extends to their lessee; and (2) Whether the road equipment and mini-haulers are subject to real property tax.
RULING
The Supreme Court affirmed the Court of Appeals with modification. On the first issue, the Court ruled that the tax exemption in favor of the cooperatives under Section 133(n) of the Local Government Code benefits their lessee, Filipinas. The exemption applies to the property itself, not merely to the owner’s personal liability. Therefore, the leased lands owned by the tax-exempt cooperatives cannot be subjected to real property tax, and Filipinas, as lessee, correctly benefits from this exemption. This prevents the tax from indirectly burdening the exempt cooperative through the lease.
On the second issue, the Court reversed the lower tribunals and held that the road equipment and mini-haulers are taxable real property. The characterization of machinery as real property is governed by the Local Government Code, not the Civil Code. Under Section 199(o) of the LGC, machinery is considered real property for taxation purposes if it is attached to the real estate in a permanent way and is directly used to meet the needs of the particular industry or works. The haulers and equipment, while movable, were essential and permanently deployed within the plantation for its operation, thus meeting the statutory definition. Consequently, they are subject to real property tax assessment.