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Capitol Wireless V Digest

The Supreme Court ruled that MERALCO is subject to real property tax on its transformers, electric posts, transmission lines, insulators, and electric meters, which qualify as 'machinery' under the Local Government Code. The Court determined that these properties are no longer exempt from taxation and do not need to be permanently attached to real property to be considered taxable. The ruling emphasizes that the definition of machinery includes items that are mobile and necessary for the operation of the business.

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CYRUZE EGAN ANGOG
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5 views2 pages

Capitol Wireless V Digest

The Supreme Court ruled that MERALCO is subject to real property tax on its transformers, electric posts, transmission lines, insulators, and electric meters, which qualify as 'machinery' under the Local Government Code. The Court determined that these properties are no longer exempt from taxation and do not need to be permanently attached to real property to be considered taxable. The ruling emphasizes that the definition of machinery includes items that are mobile and necessary for the operation of the business.

Uploaded by

CYRUZE EGAN ANGOG
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Capitol Wireless v.

Province of Batangas, 30 May 2016

FACTS: MERALCO is a electric corporation that has be granted a franchise


to operate in the City of Lucena from 1992 until present time.

On February 20, 1989, MERALCO received from the City Assessor of


Lucena a copy of Tax Declaration No. 019-6500 covering the following
electric facilities, classified as capital investment, of the company: (a)
transformer and electric post; (b) transmission line; (c) insulator; and (d)
electric meter. these electric facilities had a market value of
P81,811,000.00 and an assessed value of P65,448,800.00, and were
subjected to real property tax as of 1985.

MERALCO appealed Tax Declaration No. 019-6500 before the LBAA of


Lucena City, which was docketed as LBAA-89-2. MERALCO claimed that
its capital investment consisted only of its substation facilities, the true
and correct value of which was only P9,454,400.00; and that MERALCO
was exempted from payment of real property tax on said substation
facilities.

The LBAA rendered the decision MERALCO was required to pay the City
Government of Lucena a tax equal to 5% of its gross earnings, and
"[s]aid tax shall be due and payable quarterly and shall be in lieu of any
and all taxes of any kind, nature, or description levied, established, or
collected . . ., on its poles, wires, insulators, transformers and structures,
installations, conductors, and accessories, . . ., from which taxes the
grantee (MERALCO) is hereby expressly exempted." As regards the issue
of whether or not the poles, wires, insulators, transformers, and electric
meters of MERALCO were real properties.

MERALCO appealed to the CBAA the appeal was denied. that


MERALCO could no longer claim exemption from real property tax on its
machineries with the enactment of Republic Act No. 7160, otherwise
known as the Local Government Code of 1991,

Then MERALCO Appealed to the CA and sustained the ruling of the CBAA.

MERALCO Appealed to the SC, arguing that that its transformers, electric
posts, transmission lines, insulators, and electric meters are not subject
to real property tax, given that: (1) the definition of "machinery" under
Section 199 (o) of the Local Government Code, on which real property
tax is imposed, must still be within the contemplation of real or
immovable property under Article 415 of the Civil Code because it is
axiomatic that a statute should be construed to harmonize with other
laws on the same subject matter as to form a complete, coherent, and
intelligible system.
And that the computation of the Assessment of real property tax is void
because the assessment of real property tax only showed the simply
state a lump sum market value for all the transformers, electric posts,
transmission lines, insulators, and electric meters covered and did not
provide an inventory/list showing the actual number of said properties, or
a schedule of values presenting the fair market value of each property or
type of property.

ISSUE:
Is MERALCO subject to real property tax on the said properties?

RULING:
Yes. The Court finds that the transformers, electric posts, transmission
lines, insulators, and electric meters of MERALCO are no longer exempted
from real property tax and may qualify as "machinery" subject to real
property tax under the Local Government Code.
The transformers, electric posts, transmission lines, insulators,
and
electric meters of MERALCO may qualify as "machinery" under
the
Local Government Code subject to real property tax. Because
under Section 199 (o) of the Local Government Code, machinery, to be
deemed real property subject to real property tax, need no longer be
annexed to the land or building as these "may or may not be attached,
permanently or temporarily to the real property," and in fact, such
machinery may even be "mobile."

The same provision though requires that to be machinery subject to real


property tax, the physical facilities for production, installations, and
appurtenant service facilities, those which are mobile, self-powered or
self-propelled, or not permanently attached to the real property (a) must
be actually, directly, and exclusively used to meet the needs of the
particular
industry, business, or activity; and (2) by their very nature and purpose,
are designed for, or necessary for manufacturing, mining, logging,
commercial, industrial, or agricultural purposes.

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