GR L 50466; (May, 1982) (Digest)
G.R. No. L-50466. May 31, 1982.
CALTEX (PHILIPPINES) INC., petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents.
FACTS
Caltex (Philippines) Inc. owned and installed various machinery and equipment, including underground tanks, gasoline pumps, car hoists, and air compressors, in its gas stations situated on leased land. These items were loaned to gas station operators under lease agreements stipulating that the equipment must be returned to Caltex upon demand. The City Assessor of Pasay classified these items as taxable real property and imposed an annual realty tax. The local Board of Tax Appeals ruled the items were personalty, but the Central Board of Assessment Appeals reversed this, holding them to be real property subject to tax under the Real Property Tax Code (P.D. No. 464). Caltex filed a petition for certiorari, arguing the equipment remained personal property.
ISSUE
Whether the gas station equipment and machinery installed by Caltex on leased land are subject to real property tax.
RULING
Yes, the equipment is subject to realty tax. The Court affirmed the decision of the Central Board of Assessment Appeals. The resolution hinges on the application of tax statutes, not solely the Civil Code provisions on immovability. The Real Property Tax Code explicitly defines real property for taxation purposes to include “machinery and other improvements” affixed to real property. The Court examined the nature of the installation: the equipment, such as underground tanks connected by steel pipes to pumps embedded in concrete pavements, was permanently attached to the gas station site to form an integral part of the service station operation. This permanent attachment and integration for business use bring them within the statutory definition of taxable real property.
The Court distinguished the cited precedent of Davao Saw Mill Co. vs. Castillo, which dealt with machinery immobilization for purposes of execution under civil law principles favoring a lessee. The present case concerns taxation, where the statutory criterion for classifying property as realty is broader. The Court emphasized that for real property taxation, improvements are commonly taxed as realty even if they might be considered personalty under other contexts. Since the equipment was permanently affixed to the land’s improvements (the pavement and structures), the Board correctly characterized it as taxable real property. No grave abuse of discretion was committed in upholding the assessment.