Case Summary (G.R. No. L-17870)
Procedural History
Mindanao Bus Company appealed an assessment of ₱4,400 on its maintenance and repair equipment to the Board of Tax Appeals, which sustained the City Assessor’s ruling. The petitioner then sought review in the Court of Tax Appeals, which likewise upheld the assessment and denied reconsideration. The company filed a petition for review with the Supreme Court, challenging the classification of its equipment as taxable real property.
Stipulated Facts
- The petitioner operates its main office and garage in Cagayan de Oro City, with branches in Iligan, Pagadian, Davao, and Kibawe.
- The assets assessed include a Hobart electric welder, storm boring machine, lathe with motor, Black & Decker grinder, PEMCO hydraulic press, battery charger, and Waukesha‐M‐Fuel engine.
- These machines rest on cement or wooden platforms within the petitioner’s repair shop.
- The equipment has been used exclusively for the petitioner’s in-house repair and maintenance of its own trucks; they have never been offered to the general public.
Issues
- Whether the listed machines are “immovable property” under Article 415(5) of the Civil Code by reason of immobilization by destination.
- Whether Section 31(c) of Republic Act No. 521 restricts the assessor’s power to levy real estate tax on such machinery.
- Whether the Court of Tax Appeals erred in its interpretation of Article 415(5) and in denying the motion for reconsideration.
Applicable Legal Standard
Article 415(5) of the Civil Code classifies as immovable “machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works… which tend directly to meet the needs of the said industry or works.” Immobilization by destination requires that the asset be an essential and principal element of an industry carried on permanently in a building or on land. Section 31(c) of R.A. 521 defines the scope of assessor’s authority but does not override the Civil Code’s criteria for real property.
Analysis
Drawing on Berkenkotter v. Cu Unjieng (61 Phil. 663), the Court confirmed that only machinery indispensable to the operation of an industry—and installed in a fixed, permanent manner—loses its movable character. Incidental tools and equipment that merely facilitate or expedite business operations, and which can be relocated without undermining the enterprise, remain mova
...continue readingCase Syllabus (G.R. No. L-17870)
Procedural History
- The City Assessor of Cagayan de Oro City assessed petitioner’s maintenance and repair equipment at ₱4,400, treating them as real property.
- Mindanao Bus Company appealed the assessment to the Board of Tax Appeals (BTA), arguing the equipment were movable.
- The BTA sustained the assessor’s valuation.
- Petitioner then filed a petition for review with the Court of Tax Appeals (CTA), which likewise upheld the assessment and denied reconsideration.
- Petitioner elevated the case to the Supreme Court, assigning errors in the characterization of the equipment as immovable property and in the CTA’s denial of relief.
Stipulated Facts
- Petitioner is a public utility engaged in transporting passengers and cargo by motor trucks over authorized Mindanao routes with PSC-approved rates.
- Main office and repair shop located in Cagayan de Oro City; branch offices in Iligan, Pagadian, Davao, and Kibawe.
- Equipment assessed:
- Hobart Electric Welder Machine (Annex A)
- Storm Boring Machine (Annex B)
- Lathe Machine with Motor (Annex C)
- Black & Decker Grinder (Annex D)
- PEMCO Hydraulic Press (Annex E)
- Battery Charger (Tungar Charge Machine) (Annex F)
- D-Engine Waukesha-M-Fuel (Annex G)
- Each machine sits on a cement or wooden platform within petitioner’s garage, repair, blacksmith, and carpentry shops.
- These machines are used solely for maintaining and repairing petitioner’s own trucks; they have never been used to produce goods for sale or to service the general public.
Issues Presented
- Whether the subject equipment, though movable by nature, were rendered immovable (immobilized by destination) under Article 415(5) of the Civil Code.
- Whether the CTA misinterpreted Article 415(5) in holdin