G.R. No. 168557 February 16, 2007
FACTS
Two consolidated cases were filed
by FELS Energy, Inc. (FELS) and National Power Corporation (NPC),
respectively.
NPC
entered into a lease contract with Polar Energy, Inc. over diesel engine power
barges moored at Batangas. The contract, denominated as an Energy Conversion
Agreement, was for a period of five years wherein, NPC shall be responsible for
the payment of:
(a) all taxes, import duties, fees, charges
and other levies imposed by the National Government
(b) all real estate taxes and assessments, rates and other
charges in respect of the Power Barges
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement
to FELS. Thereafter, FELS received an assessment of real property taxes on the
power barges. The assessed tax, which likewise covered those due for 1994,
amounted to P56,184,088.40
per annum. FELS referred the matter to NPC, reminding it of its obligation
under the Agreement to pay all real estate taxes. It then gave NPC the full
power and authority to represent it in any conference regarding the real
property assessment of the Provincial Assessor.
NPC sought reconsideration of the Provincial Assessor’s decision to
assess real property taxes on the power barges. However, the motion was denied.
The Local Board of Assessment Appeals (LBAA) ruled
that the power plant facilities, while they may be classified as movable or
personal property, are nevertheless considered real property for taxation
purposes because they are installed at a specific location with a character of
permanency.
FELS appealed the LBAA’s ruling to the Central Board of Assessment
Appeals (CBAA). The CBAA rendered a Decision finding
the power barges exempt from real property tax.
It was later reversed by the cbaa upon reconsideration and affirmed by
the CA
ISSUE
Whether power
barges, which are floating and movable, are personal properties and therefore,
not subject to real property tax.
RULING
No. Article 415 (9) of the
New Civil Code provides that "[d]ocks and structures which, though
floating, are intended by their nature and object to remain at a fixed place on
a river, lake, or coast" are considered immovable property. Thus, power
barges are categorized as immovable property by destination, being in the nature
of machinery and other implements intended by the owner for an industry or work
which may be carried on in a building or on a piece of land and which tend
directly to meet the needs of said industry or work.
The
findings of the LBAA and CBAA that the owner of the taxable properties is
petitioner FELS is the entity being taxed by the local government. As
stipulated under the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the
Power Barges and all the fixtures, fittings, machinery and equipment on the
Site used in connection with the Power Barges which have been supplied by it at
its own cost. POLAR shall operate, manage and maintain the Power Barges for the
purpose of converting Fuel of NAPOCOR into electricity.
It follows then that FELS cannot escape liability from the payment of
realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160,
…the law states that
the machinery must be actually, directly and exclusively used by the government
owned or controlled corporation;
The agreement POLAR undertakes that
until the end of the Lease Period, it will operate the Power Barges to convert
such Fuel into electricity. Therefore, FELS shall be liable for the realty
taxes and not the NPC who is not
actually, directly and exclusively using the same. It is a basic rule that
obligations arising from a contract have the force of law between the parties
CONCLUSION
Petitions are DENIED.
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