RCPI v. Provincial Assesor of South Cotabato, et. al.

Chester Cabalza recommends his visitors to please read the original & full text of the case cited. Xie xie!

G.R. No. 144486. April 13, 2005

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), Petitioner,
vs.
PROVINCIAL ASSESOR OF SOUTH COTABATO, PROVINCIAL TREASURER OF SOUTH COTABATO, MUNICIPAL ASSESSOR OF TUPI, SOUTH COTABATO, and MUNICIPAL TREASURER OF TUPI, SOUTH COTABATO, Respondents.

Facts:

R.A. No. 2036 of 1957, as amended by R.A. No. 4054, granted RCPI a 50-year franchise. Thus, Sec. 14 of the amended law, in gist, provides that the grantee shall pay the same taxes as may be required by law. Said tax shall be in lieu of any and all taxes of any kind, nature or description levied, established or collected by any authority whatsoever, municipal, provincial or national, from which taxes the grantee is hereby expressly exempted.

On 10 June 1985, the municipal treasurer of Tupi, South Cotabato assessed RCPI real property taxes from 1981 to 1985. The municipal treasurer demanded that RCPI pay P166,810 as real property tax on its radio station building in Barangay Kablon, as well as on its machinery shed, radio relay station tower and its accessories, and generating sets, based on the following tax declarations.

RCPI protested the assessment before the Local Board of Assessment Appeals (LBAA') and claimed that all its assessed properties are personal properties and thus exempt from the real property tax. It also pointed out that its franchise exempts RCPI from 'paying any and all taxes of any kind, nature or description in exchange for its payment of tax equal to one and one-half per cent on all gross receipts from the business conducted under its franchise. It further claimed that any deviation from its franchise would violate the non-impairment of contract clause of the Constitution. Finally, RCPI stated that the value of the properties assessed has depreciated since their acquisition in the 1960s.

The Provincial Assessor of South Cotabato opposed RCPI's claims on all points.
The Local Board of Assessment Appeals ruled that appellant is ordered to pay the real property taxes, inclusive of all penalties, surcharges and interest accruing as of the date of actual payment, on the properties covered; in which the Central Board of Assessment Appeals affirmed.

The Appelate Court ruled that decision of the Central Board of Assessment Appeals is hereby MODIFIED. Petitioner is declared exempt from paying the real property taxes assessed upon its machinery and radio equipment mounted as accessories to its relay tower. The decision assessing taxes upon petitioner's radio station building, machinery shed, and relay station tower is, however, affirmed.

Issues:

1. Whether the appellate court erred when it excluded RCPI's tower, relay station building, and machinery shed from tax exemption; and

2. Whether the appellate court erred when it did not resolve the issue of nullity of the tax declarations and assessments due to non-inclusion of depreciation allowance.

Held:

Exemption from Real Property Tax

First, Congress passed the Local Government Code that withdrew all the tax exemptions existing at the time of its passage including that of RCPI's. Second, Congress enacted the franchise of telecommunications companies, such as Islacom, Bell, Island Country, IslaTel, TeleTech, Major Telecoms, and Smart, with the 'in lieu of all taxes' proviso. Third, Congress passed RA 7925 entitled 'An Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunications Services' which, through Section 23, mandated the equality of treatment of service providers in the telecommunications industry.

The existing legislative policy is clearly against the revival of the 'in lieu of all taxes' clause in franchises of telecommunications companies. After the VAT on telecommunications companies took effect on January 1, 1996, Congress never again included the 'in lieu of all taxes' clause in any telecommunications franchise it subsequently approved. RCPI cannot also invoke the equality of treatment clause under Section 23 of Republic Act No. 7925. The franchises of the petitioners all expressly declare that the franchisee shall pay the real estate tax, using words similar to Section 14 of RA 2036, as amended.

It is an elementary rule in taxation that exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority. It is the taxpayer's duty to justify the exemption by words too plain to be mistaken and too categorical to be misinterpreted.

Exclusion of Depreciation Allowance

RCPI contends that the tax declarations and assessments covering its radio relay station tower, radio station building, and machinery shed are void because the assessors did not consider depreciation allowance in their assessments. The Court have examined the records of this case and found that RCPI raised before the LBAA and the CBAA the nullity of the assessments due to the non-inclusion of depreciation allowance. Therefore, RCPI did not raise this issue for the first time. However, even if the court considers this issue, under the Real Property Tax Code depreciation allowance applies only to machinery and not to real property.

The petition is denied and affirmed the decision of the Court of Appeals.