Provincial Assessor of Marinduque v. CA | G.R No. 170532 | April 30, 2009 | Austria-Martinez, J.

Nature: SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

Petitioners: Provincial Assessor of Marinduque
Respondents: Court of Appeals; Marcopper Mining Corporation
TOPIC: Real Property Taxation > Fundamental Principles > Secs. 197-225
SUMMARY: Respondent was assessed property tax for their Siltation Dam and Decant System. They paid under
protest. The LBAA and CBAA ruled that the subject property is not tax exempt, because it does not fall within the
definition of “machinery used for pollution control”, which was exempt from tax under the LGC. CA reversed, citing
RA 7942 which expanded the coverage of exemption to pollution control devices (not just machineries). The CA also
held that the subject property was intended for pollution control, and its current non-usage cannot take it out of the
exemption. SC REVERSED the CA and held that the subject property is TAXABLE. The exemptions for taxes in the LGC
are based on the ownership, character, and use of property. The fact of non-usage makes the property taxable.

Other Tax Concepts:

 Tax laws are prospective in application, unless expressly provided to apply retroactively
o RA 7942, which expanded the exemption to pollution control devices (and not just machineries), was
promulgated after the assessment was issued. Thus, it cannot apply to the case at bar.
 A claim for exemption should be supported by evidence. And the burden is upon the taxpayer to prove, by
clear and convincing evidence, that his claim for exemption has legal and factual basis.

FACTS
 Petitioner Provincial Assessor of Marinduque issued a tax assessment for real property taxes against
Respondent Marcopper Mining Corporation for the latter’s Siltation Dam and Decant System (subject
property).
o Respondent paid but appealed the assessment on the ground that the subject property is exempt from
real property taxes.
 Respondent:
o Sec 234(e) of LGC: “Exemptions from real property tax: xxx Machinery and equipment used for
pollution control and environmental protection.”
o Affidavit of Engr Esquieres: subject property was constructed to comply with DENR which required
Respondent to prevent run-offs and silt materials from contaminating nearby rivers.
o DENR Certification: the subject property is a Siltation Dam structure intended for pollution control.
 Local Board of Assessment Appeals (LBAA): DISMISSED the appeal for having been filed out of time. Held that
the subject property is taxable as an improvement on real property.
o Benguet Corp v. CBAA: a tailings dam is a permanent improvement not exempt from real property
taxation.
 Central Board of Assessment Appeals (CBAA): AFFIRMED the finding that the subject property is taxable.
o Sec 199(o)1 of LGC provided for the definition of “machinery” and the subject property does not fall
within the definition, therefore the exemption on machinery does not apply to it. CBAA also noted
that the subject property had not been actually used for pollution control, since it has been out of
operation since 1993 (when Marinduque was hit by a typhoon).
 Court of Appeals: REVERSED and directed the Municipal Treasurer to refund or credit the payments made by
Respondent.
o Sec 91 of RA 7942: Pollution control devices shall not be considered as improvements and shall not be
subject to taxes.

1
RA 7160, Sec 199(o). Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be
attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities,
those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively
used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its
manufacturing, mining, logging, commercial, industrial or agricultural purposes
 o Non-operational state of the subject property does not remove it from the exemption in the absence
of evidence that it is inutile to achieve its purpose.

ISSUE: (jump to Issue #2 for LocGov)

1. WON the action by Petitioners should be dismissed for being an improper mode of appeal? – NO
 The property remedy is Petition for Review on Certiorari under Rule 45. Rule 45 being available, Rule 65
petition is improper.
 BUT, public interest requires the disposition of the issues as they involve the LGU’s power of taxation and its
stewardship over the environment.

2. WON the subject property is exempt from real property taxation? – NO

 The Assessment Notice was dated March 28, 1994, and took effect on January 1, 1995. RA 7942 which the CA
used to justify the exemption came into effect only on April 14, 1995.
o Therefore, RA 7942 could not be used to justify the exemption, and it is the LGC which governs this
case.
o Tax laws are prospective in application, unless expressly provided to apply retroactively.
 Mactan Cebu International Airport Authority v. Marcos: the exemptions for taxes in the LGC are based on the
ownership, character, and use of property.
o Sec 234(e) exempts “Machinery and equipment used for pollution control and environmental
protection.”
o The exemption of pollution control is based on usage. Direct, immediate, and actual application of the
property to the exempting purpose is necessary.
 A claim for exemption under Sec. 234(e) of R.A. No. 7160 should be supported by evidence that the property
sought to be exempt is actually, directly and exclusively used for pollution control and environmental
protection.
o Records are bereft of any allegation or evidence that the subject property was actually, directly, and
exclusively used for pollution control during the period of assessment under protest.
o CBAA finding that subject property is apparently out of commission stands undisputed.
o Sec 206. Sufficient documentary evidence in support of claim of exemption must be submitted within
30 days from date of declaration of property.
 If not submitted, the property will be listed as taxable.
 If property is proven exempt, it will be dropped from the assessment roll.
 Here, there is no allegation nor evidence that Respondent ever filed for an application for
exemption or any documentary evidence of the exempt status of the subject property.
 The burden is upon the taxpayer to prove, by clear and convincing evidence, that his claim for exemption
has legal and factual basis.
o The evidence submitted by Respondent even helped point out that the subject property is not tax
exempt.
o DENR certification classified the subject property as a structure, not a machinery. The Affidavit of Engr.
Esquieres and the project design further pointed out that the subject property is not a machinery and
has no mechanical functions.
 That the definition of machinery for pollution control in the LGC was expanded by RA 7942 is proof that the
definition under the LGC is insufficient to cover other pollution control measures.
o This is a recognition that the exemption under the LGC is limited.

DISPOSITION: WHEREFORE, the petition is GRANTED. The Decision dated May 30, 2005 and Resolution dated
September 29, 2005 are REVERSED and SET ASIDE. The Assessment Notice dated March 28, 1994 is declared VALID
under the then applicable Republic Act No. 7160.

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