Facts:

The case involves the Provincial Assessor of Agusan del Sur, petitioner, against Filipinas Palm Oil Plantation, Inc., respondent. The decision was rendered on October 5, 2016, concerning a dispute about real property taxes arising from assessments made on the lands and assets of Filipinas. Filipinas, a private corporation engaged in palm oil production, operates on more than 7,000 hectares of land previously owned by the National Development Company (NDC). After the Comprehensive Agrarian Reform Law was enacted, the lands were transferred to the NGPI-NGEI Cooperatives, which are tax-exempt cooperative entities. Filipinas entered into a lease agreement with these cooperatives. The Provincial Assessor assessed various properties related to Filipinas’ operations, including the value of oil palm trees, plantation roads, and residential units. Filipinas disputed the assessment on multiple grounds, claiming the assessments were inflated and that many of the properties were exempt from

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Facts:

Parties and Background

• The Petitioner is the Provincial Assessor of Agusan del Sur, a government agency responsible for the assessment of public lands.
• The Respondent is Filipinas Palm Oil Plantation, Inc.—a private corporation engaged in palm oil plantation operations located on lands originally belonging to the National Development Company (NDC) in Agusan del Sur.

Lease and Land Arrangement

• Filipinas operates on more than 7,000 hectares of NDC lands that were transferred to beneficiaries under the Comprehensive Agrarian Reform Law.
• The beneficiaries formed cooperatives (NGPI-NGEI), which acquired ownership of the lands and subsequently leased the property to Filipinas under a formal lease agreement.
• The lease agreement contains express stipulations regarding the payment of taxes and the disposition of improvements (such as roads), including provisions that state any permanent improvements automatically accrue to the cooperative upon termination of the lease.

Assessments and Disputed Valuations

• The Provincial Assessor assessed several elements of Filipinas’ properties including:
• Harvested oil palm trees – where the market value per tree was set at P207.00 rather than the lower figure claimed by Filipinas (P42.00 or adjusted figures suggested by the Local Board of Assessment Appeals).
• The total number of standing/fruit-bearing oil palm trees per hectare, with contrasting figures presented by the assessor and Filipinas.
• Plantation infrastructure such as roads (classified as primary, secondary, and tertiary) with disputed market values for each road type.
• Additional improvements and facilities including bridges, culverts, canals, residential houses, and equipment (e.g., haulers and road equipment) which were variously contested as taxable real property.

Procedural History and Lower Court Decisions

• Filipinas assailed the assessed values before the Local Board of Assessment Appeals (LBAA), arguing that certain values and inclusions (e.g., roads, equipment, housing units) were either unreasonable or improperly classified as taxable.
• The LBAA ruled in favor of Filipinas by:
• Adopting a lower market value per oil palm tree and adjusting the number of trees considered in the assessment.
• Exempting roads, improvements, certain housing units, and equipment (classified as movables) from real property taxation.
• The Central Board of Assessment Appeals (CBAA) later affirmed the LBAA decision, including the exemption on roads and the exclusion of certain equipment from the taxable real property list.
• The Provincial Assessor subsequently filed a Petition for Review, leading to the Court of Appeals affirming the decisions of the LBAA and CBAA—with the finding that:
• The land, being owned by the cooperative, should remain tax-exempt despite being leased to Filipinas.
• Roads constructed on the leased land are likewise exempt due to their status as improvements on land owned by the cooperatives.

Statutory and Contractual Framework

• Relevant statutory provisions include:
• Section 133(n) of the Local Government Code – preventing local governments from imposing taxes on properties of duly registered cooperatives.
• Section 234(d) of the Local Government Code – specifically exempting all real property owned by cooperatives from real property taxes.
• Section 199(o) of the Local Government Code – providing the definition of “machinery” (which includes equipment used in production and other appurtenant facilities).
• The lease agreement explicitly states that any fixed and permanent improvements (such as roads and planted palm trees) shall automatically become the property of the cooperative upon lease termination, thereby reinforcing the tax exemption for those improvements.

Dispute on the Nature of Equipment

• A particular point of contention arose with respect to road equipment and mini haulers:
• Filipinas contended that these items should not be subject to real property tax as they are inherently “movable” property, essential to its business operations.
• The Petition for Review raised issues regarding whether proper classification of such equipment should be as machinery (immovables when by destination) or remain as movables, as per their usage and placement by the lessee.
• Prior case law, including rulings in Bislig Bay Lumber Company, Inc. and Samar Mining Company, Inc., was cited regarding the principles of accession and the taxability of improvements built on public or quasi-government land.

Issue:

• Whether the tax exemption granted to cooperatives under Section 234(d) of the Local Government Code extends automatically to the lessee (Filipinas Palm Oil Plantation, Inc.) leasing land from the NGPI-NGEI cooperatives.

• Whether the road equipment and mini haulers, which are utilized in respondent’s palm oil production operations, should be classified as “machinery” (and thus treated as real property subject to real property tax) or remain as movables not subject to such taxation, considering their mode of attachment and usage.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)