Treasurer-Assessor v. University of the Philippines
REITERATIONFacts
1. The Antecedents: The University of the Philippines (U.P.) was granted approximately 5,000 hectares of public land in Basilan City in 1940, known as the "U.P. — Basilan Land Grant," to be administered for its support and maintenance. U.P. developed portions of this land for agricultural purposes, with all income exclusively devoted to the university's established objectives. From 1940 to 1955, this land was not assessed for real property tax. However, in 1955, the Treasurer-Assessor of Basilan City began demanding payment of real property taxes on the land grant, initiating a dispute over its tax-exempt status. 2. Procedural History: Following demands for payment and threats of enforcement, U.P. paid the assessed real property taxes under protest for the years 1956 and 1957. After receiving an opinion from the Secretary of Justice affirming its tax-exempt status, U.P. refused further payments and requested a cancellation of the assessment and a refund of taxes paid. The City Treasurer-Assessor denied this request and subsequently demanded a substantial sum for alleged unpaid taxes and penalties. U.P. appealed to the Board of Assessment Appeals of Basilan City, which dismissed the appeal. U.P. then appealed to the Court of Tax Appeals (CTA), which reversed the Board's decision, declared the U.P. Basilan Land Grant exempt from realty tax, canceled the assessments, and ordered a refund of the taxes illegally collected. 3. The Petition: The Treasurer-Assessor, Board of Tax Appeals, and City of Basilan (petitioners) filed a petition for review with the Supreme Court, challenging the CTA's decision. They argued that the CTA erred in not dismissing U.P.'s appeal for failure to pay the assessed taxes under protest before filing suit, in ruling that the land grant is tax-exempt, and in ordering the refund of taxes already paid. The petition raises questions regarding the procedural requirements for appealing tax assessments to the CTA and the substantive issue of whether the U.P. Basilan Land Grant, as government property administered for public educational purposes, is subject to real property tax.
Issue(s)
Whether the Court of Tax Appeals erred in entertaining U.P.'s appeal without prior payment of the assessed taxes under protest. Whether the U.P. Basilan Land Grant is exempt from real estate taxes. Whether the Court of Tax Appeals erred in ordering the refund of real estate taxes already collected.
Ruling
The Supreme Court affirmed the decision of the Court of Tax Appeals. The U.P. Basilan Land Grant is declared exempt from the payment of realty tax, the real estate tax assessments are cancelled, and the respondents are ordered to refund the amounts paid by the University of the Philippines.
Ratio Decidendi
On the issue of payment under protest: The Court held that the contention of the petitioners is untenable. Republic Act No. 1125, which created the Court of Tax Appeals, grants it exclusive appellate jurisdiction to review decisions of provincial or city Boards of Assessment Appeals concerning real property assessment and taxation. Section 7 of R.A. 1125 does not impose the condition of prior payment under protest before the CTA can entertain an appeal. While Section 54 of Commonwealth Act 470 (Assessment Law) requires payment under protest for suits assailing tax validity in regular courts, this provision is deemed impliedly repealed by R.A. 1125 concerning appeals to the CTA. The Court reiterated its ruling in Board of Assessment Appeals of Zamboanga del Sur vs. Samar Mining Co., Inc. that the CTA can entertain appeals assailing the legality and validity of a real property tax assessment without prior payment of the disputed tax. It would be unjust to require a taxpayer to pay a tax they are precisely questioning before lodging an appeal. On the issue of tax exemption: The Court found the petitioners' contention that Act No. 3608 did not provide for tax exemption to be untenable. The U.P. Basilan Land Grant is considered government property administered for public purposes. Act No. 3608 explicitly states that income derived from the land grants shall form part of the general funds of the U.P. and be devoted only to its established purposes. The control and administration are vested in the Board of Regents, but alienation requires legislative consent, and undeveloped portions revert to the public domain. These provisions indicate state ownership. Citing foreign jurisprudence, the Court established that property belonging to universities like U.P., which are instrumentalities of the government performing governmental functions, is public property belonging to the State. Therefore, the U.P. Basilan Land Grant is exempt from real property tax under Section 3(a) of C.A. 470, which exempts property owned by the Republic of the Philippines. On the issue of refund: The Court held this contention to be also untenable. The power of the CTA to order the refund of realty taxes collected on the basis of an assessment it declared invalid is incidental to its exclusive appellate jurisdiction. This incidental jurisdiction is embraced within the phrase "other matters arising under the Assessment Law" in Section 7(3) of R.A. 1125. The law vests the CTA with the power to declare an assessment illegal or unreasonable, and it logically follows that it can grant consequential relief, such as ordering a refund, to avoid multiplicity of suits. The Court cited its ruling in Philippine Air Lines Employees Association vs. Philippine Air Lines, Inc. regarding incidental jurisdiction and the case of Ramon A. Gonzales, et al. vs. Province of Iloilo, which settled that the CTA has special and exclusive appellate jurisdiction over disputed real estate assessments, including ordering refunds when the assessment is found illegal.
Main Doctrine
The University of the Philippines' Basilan Land Grant, being government property administered for public purposes, is exempt from real property tax. Furthermore, the Court of Tax Appeals has the jurisdiction to order the refund of illegally collected real property taxes as an incident to its appellate jurisdiction.