G.R. No. 127316 - LRTA vs. Central Board of Assessment Appeals

The Light Rail Transit Authority (LRTA) is a government-owned and controlled corporation created by Executive Order No. 603 (July 12, 1980) “primarily responsible for the construction, operation, maintenance and/or lease of [a] light rail transit system in the Philippines” (LRTA vs. Commission on Audit, GR No. 88365).
Pursuant to EO 603, LRTA acquired real properties and constructed structural improvements including buildings, carriageways (elevated guideways) and passenger terminal stations, and installed machinery and equipment for its operations.

For effective operation, LRTA entered into a Contract of Management with Meralco Transit Organization (METRO), under which METRO managed, operated, and maintained the LRT system in exchange for a management fee and assumed payment of real property taxes.
LRTA commenced full operations in 1984.

In 1984, the City Assessor of Manila assessed LRTA’s properties—lands, buildings, carriageways, passenger terminal stations, machinery and equipment—under the Real Property Tax Code to take effect in 1985.
LRTA paid taxes on all properties except the carriageways and passenger terminal stations, claiming (a) these structures are not “real property” under the Code, and (b) even if they were real property, they are devoted for public use and thus exempt. The City Assessor denied the exemption claim.

LRTA appealed to the Local Board of Assessment Appeals of Manila; in its June 26, 1992 Resolution, the Board declared carriageways and terminal stations as taxable improvements and denied LRTA’s appeal. A motion for reconsideration was likewise denied.
The Central Board of Assessment Appeals (CBAA) affirmed the Local Board’s Resolution.
On October 15, 1994, the Court of Appeals (CA) in CA-GR SP No. 38137 affirmed the CBAA decision, prompting LRTA to file a Petition for Review before the Supreme Court.

Whether LRTA’s carriageways and passenger terminal stations are “improvements” subject to real property tax under the Real Property Tax Code.
Whether the carriageways and terminal stations, being attached to national roads owned by the government, should be considered government property and thus exempt from taxation.
Whether the charging of fares for LRT services alters the public-use character of the carriageways and terminal stations, making them taxable.
Whether the Court should have considered the Department of Finance’s view that the carriageways and terminal stations are not subject to realty taxes.
Whether LRTA’s real property tax assessments are unjustified—especially in light of their magnitude relative to LRTA’s annual earnings—thus warranting relief.