Mindanao Bus Co. v. City Assessor Digest G.R. No.

L-17870 29 September
1962 G.R. No. L-17870 September 29, 1962

Facts: Petitioner is a public utility company engaged in the transport of passengers
and cargo by motor vehicles in Mindanao with main offices in Cagayan de Oro (CDO).
Petitioner likewise owned a land where it maintains a garage, a repair shop and
blacksmith or carpentry shops. The machineries are placed thereon in wooden and
cement platforms.
The City Assessor of CDO then assessed a P4,400 realty tax on said machineries and
repair equipment. Petitioner appealed to the Board of Tax Appeals but it sustained the
City Assessor's decision, while the Court of Tax Appeals (CTA) sustained the same.
Note: This is merely a case digest to aid in remembering the important points of a
case. It is still advisable for any student of law to read the full text of assigned cases.
Issue: Whether or not the machineries and equipments are considered
immobilized and thus subject to a realty tax
Held: The Supreme Court decided otherwise and held that said machineries and
equipments are NOT subject to the assessment of real estate tax.
Said equipments are not considered immobilized as they are merely
incidental, not esential and principal to the business of the petitioner. The
transportation business could be carried on without repair or service shops of
its rolling equipment as they can be repaired or services in another shop
belonging to another.
Mindanao Bus Company vs City Assessor 116 PHIL 501 GR No. L-17870
September 29, 1962
FACTS
The City Assessor of Cagayan de Oro City assessed a realty tax on several equipment
and machineries of Mindanao Bus Co. These equipment were placed on wooden or
cement platforms and can be moved around in the bus companys repair shop. The
bus company appealed the assessment to the Board of Tax Appeals on the ground
that the same are not realty. The Board of Tax Appeals of the City, however, sustained
the city assessor. Thus, the bus company appealed to the Court of Tax Appeals, which
likewise sustained the city assessor.
FACTS:
Petitioner is a public utility solely engaged in transporting passengers and cargoes by
motor trucks. It owns a land where it maintains and operates a garage for its TPU
motor trucks; a repair shop; blacksmith and carpentry shops, and with machineries
placed therein, its TPU trucks are made; body constructed; and same are repaired in a
condition to be serviceable in the TPU land transportation business it operates.
The machineries have never been or were never used as industrial equipment to
produce finished products for sale, nor to repair machineries, parts and the like offered
to the general public indiscriminately for business or commercial purposes.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioners
above-mentioned equipment. Petitioner appealed the assessment to the respondent
Board of Tax Appeals on the ground that the same are not realty. The Board of Tax
Appeals of the City sustained the city assessor, so petitioner herein filed with the Court
of Tax Appeals a petition for the review of the assessment.
The CTA held the petitioner liable to the payment of the realty tax on its maintenance
and repair equipment mentioned above. Hence, this petition.
ISSUE:
Should the tools and equipment in the petitioner companys repair shop be considered
immovable taxable real properties?
DOCTRINE:
NO. Movable equipment to be immobilized in contemplation of the law must first be
essential and principal elements of an industry or works without which such industry
or works would be unable to function or carry on the industrial purpose for which it
was established. The tools and equipment are not essential and principle municipal
elements of petitioners business of transporting passengers and cargoes by motor
trucks. They are merely incidentals acquired as movables and used only for
expediency to facilitate and/or improve its service. The transportation business could
be carried on without the repair or service shop if its rolling equipment is repaired or
serviced in another shop belonging to another.

HELD :

Art. 415 of the NCC classifies the following as immovable property:xxx

(5) Machinery, receptacles, instruments or implements intended by the owner

pf the tenement for an industry or works which may be carried on in a building
or on a piece of land, and which tend directly to meet the needs of the said
industry or works;

Note that the stipulation expressly states that the equipment are placed on
wooden or cement platforms. They can be moved around and about in
petitioner's repair shop.

Before movables may be deemed immobilized in contemplation of Article 415

(5), it is necessary that they must first be essential and principal elements
of an industry or works without which such industry or works would be unable
to function or carry on the industrial purpose for which it was established.

In this case, the tools and equipment in question are by their nature, not
essential and principal elements of Mindanao Bus Co.s business of
transporting passengers and cargoes by motor trucks. They are merely
incidentals acquired as movables and used only for expediency to facilitate
and/or improve its service. Even without such tools and equipments, its
business may be carried on.

Aside from the element of essentiality the Art.415 (5) also requires that the industry or
works be carried on in a building or on a piece of land. A sawmill would also be
installed in a building on land more or less permanently, and the sawing is conducted
in the land/building.

However, in the instant case, the equipments in question are destined only to repair or
service the transportation business, which is not carried on in a building or
permanently on a piece of land, as demanded by law. The equipments in question are
not absolutely essential to the petitioner's transportation business, and petitioner's
business is not carried on in a building, tenement or on a specified land.

As such, the equipments in question are not deemed real property because the
transportation business is not carried on in a building or permanently on a piece of
land, as demanded by law.

The transportation business could be carried on without the repair or service shop, if
its rolling equipment is repaired or serviced in another shop belonging to another.

Therefore, the imposition of realty tax on the maintenance and repair equipment was
not proper because the properties involved were not real property under Article 415
(5).

MINDANAO BUS COMPANY v. THE CITY ASSESSOR & TREASURER and the
BOARD OF TAX APPEALS of Cagayan de Oro City