Philippine Fisheries Development Authority v. Central Board of Assessment Appeals
REITERATIONFacts
The Antecedents: The Philippine Fisheries Development Authority (PFDA) was assessed real property taxes by the City Government of Lucena for the Lucena Fishing Port Complex (LFPC). The City Government of Lucena issued demand letters for payment of these taxes for the periods 1993-1999 and 1993-2000, totaling significant amounts. The LFPC, a major national government infrastructure project financed by a loan from Japan, was constructed on reclaimed land and is managed and operated by the PFDA. Procedural History: The PFDA appealed the tax assessments to the Local Board of Assessment Appeals (LBAA) of Lucena City, which dismissed the appeal. The PFDA's subsequent motion for reconsideration was also denied. The PFDA then appealed to the Central Board of Assessment Appeals (CBAA), which also dismissed the appeal, ruling that the PFDA, as the owner and beneficial user of the LFPC, was liable for real property taxes and that its charter did not provide exemption from such taxes. The Court of Tax Appeals (CTA) affirmed the CBAA's decision, holding that the PFDA, as a government-owned or controlled corporation, was subject to real property tax under the Local Government Code. The Petition: The PFDA filed this petition for review under Rule 45 of the Rules of Civil Procedure, assailing the CTA's decision. The PFDA argues that it is a government instrumentality, not a government-owned or controlled corporation, and therefore exempt from real property tax. It contends that, as an instrumentality, it is not subject to local government taxing powers and that the LFPC, being a property of public dominion owned by the Republic of the Philippines, is also exempt from real property tax.
Issue(s)
Whether the Philippine Fisheries Development Authority (PFDA) is liable for the real property tax assessed on the Lucena Fishing Port Complex (LFPC), considering its status as a government instrumentality and the portions of the property leased to private entities. Whether the Lucena Fishing Port Complex (LFPC) is exempt from real property tax, considering its classification as property of public dominion intended for public use.
Ruling
The petition is meritorious. The Supreme Court SET ASIDE the Decision dated 9 May 2007 of the Court of Tax Appeals in C.T.A. EB No. 193. It DECLARED the Lucena Fishing Port Complex EXEMPT from real property tax imposed by the City of Lucena, and DECLARED VOID all the real property tax assessments issued by the City of Lucena on the Lucena Fishing Port Complex managed by Philippine Fisheries Development Authority, EXCEPT for the portions that the Philippine Fisheries Development Authority has leased to private parties.
Ratio Decidendi
On whether PFDA is liable for real property tax: The Court ruled that the Court of Tax Appeals erred in holding that PFDA is a government-owned or controlled corporation (GOCC). Citing previous rulings, the Supreme Court clarified that PFDA is a government instrumentality, not a GOCC. As a government instrumentality, it is generally exempt from payment of real property tax. This exemption, however, does not apply to portions of the property leased to private entities for their beneficial use. The Court emphasized that local government units have no power to tax instrumentalities of the national government, as provided under Section 133(o) of the Local Government Code. Therefore, PFDA is not liable for the real property tax assessed on the LFPC, except for portions leased to private persons or entities. On whether LFPC is exempt from real property tax: The Court held that the Lucena Fishing Port Complex (LFPC) is a property of public dominion intended for public use, and thus exempt from real property tax under Section 234(a) of the Local Government Code. Properties of public dominion are owned by the State or the Republic of the Philippines. Article 420 of the Civil Code defines properties of public dominion as those intended for public use, such as ports constructed by the State. The LFPC, being a major infrastructure project undertaken by the National Government for public use and to support the fishing industry, falls under this classification. As such, it is owned by the Republic of the Philippines and is therefore exempt from real estate tax.
Main Doctrine
A government instrumentality, such as the Philippine Fisheries Development Authority (PFDA), is exempt from real property tax, as it is considered an agency of the national government and not a government-owned or controlled corporation subject to such taxes. Properties of public dominion owned by the Republic of the Philippines are also exempt from real property tax, unless their beneficial use has been granted to a taxable person.