Caltex v.

Central Board of Assesment

Caltex (Philippines) Inc., vs. Central Board of Assessment Appeals and City Assessor of Pasay
Facts:
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its
gas stations located on leased land. The machines and equipment consists of underground tanks,
elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car
washer, car hoists, truck hoists, air compressors and tireflators. The city assessor of Pasay City
characterized the said items of gas station equipment and machinery as taxable realty. The realty tax on
said equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that
they are personalty. The assessor appealed to the Central Board of Assessment Appeals. The Board,
which was in its decision of June 3, 1977 that the said machines and equipment are real property under
the Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974. The
decision was reiterated by the Board in its resolution of January 12, 1978, denying Caltex's motion for
reconsideration, a copy of which was received by its lawyer on April 2, 1979.On May 2, 1979 Caltex filed
this certiorari petition wherein it prayed for the setting aside of the Board's decision and for a declaration
that t he said machines and equipment are personal property not subject to realty tax. We hold that the
said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as
to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for
without them the gas station would be useless, and which have been attached or affixed permanently to
the gas station site or embedded therein, are taxable improvements and machinery within the meaning of
the Assessment Law and the Real Property Tax Code. Caltex invokes the rule that machinery which is
movable in its nature only becomes immobilized when placed in a plant by the owner of the property or
plant but not when so placed by a tenant, a usufructuary, or any person having only a temporary right,
unless such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).
Issue:
Whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax
Held:
Yes. This issue has to be resolved primarily under the provisions of the Assessment Law and the Real
Property Tax Code. Under, Sec. 38 of the said law: Machinery shall embrace machines, mechanical
contrivances, instruments, appliances and apparatus attached to the real estate. It includes the physical
facilities available for production, as well as the installations and appurtenant service facilities, together
with all other equipment designed for or essential to its manufacturing, industrial or agricultural purposes.
The equipment and machinery, are considered as appurtenances to the gas station building or shed
owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation
of the gas station, for without them the gas station would be useless, and which have been attached or
affixed permanently to the gas station site or embedded therein, are taxable improvements and
machinery within the meaning of the Assessment Law and the Real Property Tax Code. Improvements on
land are commonly taxed as realty even though for some purposes they might be considered personalty.
"It is a familiar phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property"
Posted by Jay Gerochi at 7:11 AM

Law School Notes and

Digests
Sunday, November 10, 2013

Commissioner of Internal Revenue v. TMX Sales Inc G.R. No.

83736. January 15, 1992
Facts: TMX Sales Inc. filed its quarterly income tax for the 1 st quarter of 1981. It declared P571,174.31 and
paying an income tax of P247,019 on May 13, 1981. However, during the subsequent quarters, TMX
suffered losses. On April 15, 1982, when TMX filed its Annual Income Tax Return for the year ended in
December 31, 1981, it declared a net loss of P6,156,525. On July 9, 1982, TMX filed with the Appellate
Division of BIR for refund in the amount of P247,010 representing overpaid income tax. His claim was
not acted upon by the Commissioner of Internal Revenue. On May 14, 1984, TMX Sales filed a petition for
review before the Court of Tax Appeals against CIR, praying that the CIR be ordered to refund to TMX the
amount of P247,010. The CIR averred that TMX is already barred for claiming the refund since more than
2 years has elapsed between the payment (May 15, 1981) and the filing of the claim in court (March 14,
1984). The Court of Tax Appeals rendered a decision granting the petition of TMX Sales and ordered CIR
to refund the amount mentioned. Hence, this appeal of CIR.

Issue: Whether or not TMX Sales Inc. is entitled to a refund considering that two years gas already
elapsed since the payment of the tax

Held: Yes. Petition denied.

Ratio: Sec. 292, par. 2 of the National Internal Revenue Code stated that in any case, no such suit or
proceeding shall be begun after the expiration of two years from the date of the payment of the tax or
penalty regardless of any supervening cause that may arise after payment. This should be interpreted in
relation to the other provisions of the Tax Code. The most reasonable and logical application of the law
would be to compute the 2-year prescriptive period at the time of the filing of the Final Adjustment
Return or the Annual Income Tax Return, where it can finally be ascertained if the tax payer has still to
pay additional income tax or if he is entitled to a refund of overpaid income tax. Since TMX filed the suit
on March 14, 1984, it is within the 2-year prescriptive period starting from April 15, 1982 when they filed
their Annual Income Tax Return.

StatCon maxim: The intention of the legislature must be ascertained from the whole text of the law and
every part of the act is taken into view.

Posted by MichelleValeCruz at Sunday, November 10, 2013

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