The Supreme Court (SC) has ordered the National Power Corporation (Napocor) to pay the municipality of Norzagaray in Bulacan P120.4 million in real property taxes (RPT) over machineries and land assessments for taxable years 1996 to 2006 as owner and operator of the Angat Hydro-Electric Power Plant.
It denied the petition filed by Napocor which challenged the assessments that had been affirmed by Bulacan’s Local Board of Assessment Appeals (LBAA), the Central Board of Assessment Appeals (CBAA), and the Court of Tax Appeals (CTA).
In a decision written by Associate Justice Mario V. Lopez, the SC ruled that Napocor “is liable to pay the Municipality of Norzagaray, Bulacan real property tax over the Machineries Assessment for the period from Jan. 1, 1996 to Dec. 31, 2005 in the amount of P113,960,000 and over the Land Assessment covering the period of Jan. 1, 1996 to Dec. 31, 2006 in the amount of P6,485,422.60.”
With the decision that was made public last Thursday, Nov. 30, the SC lifted the Nov. 25, 2013 temporary restraining order (TRO) issued in favor of Napocor.
The tax controversy started in 2006 with the issuance of the assessments against Napocor by the local government unit of Norzagaray town.
When no amicable settlement was reached, Napocor challenged the assessments before the LBAA. It said the properties listed in the Machineries Assessment are exempt from RPT under the Local Government Code (LGC) because they are actually, directly, and exclusively used in generating and transmitting electricity.
Also, Napocor claimed that Norzagaray erroneously issued a higher assessment for the land at 40 percent instead of only 10 percent under the LGC.
On Aug. 14, 2008, the LBAA affirmed the assessments. On Aug. 26, 2010, the CBAA dismissed Napocor’s appeal with a ruling that the power firm failed to prove that the machineries were actually, directly, and exclusively used for generating and transmitting electric power.
The CBAA said that the “dam and its auxiliaries are multi-purpose, and the other properties are either water conveyance structures, or utilized for preventive maintenance, periodic check-ups and repairs, and as safety measures, thus, negating the requirements of actuality and exclusivity in use.”
It also said that “the structures are used for retention, conservation, diversion, utilization, as well as management and control of water in different aspects, and used for irrigation, flood control and water supply system for the Greater Manila Area.”
Thus, the CBAA said that the properties assessed for tax purposes perform functions other than power generation and transmission.
Napocor elevated the case to the CTA which, on Nov. 29, 2012, affirmed the CBAA’s ruling. The case reached the SC on a petition filed by Napocor.
After discussing its previous rulings on the same issue, the SC denied Napocor’s petition and pointed out:
“This Court accords great respect to the factual findings of administrative bodies charged with their specific field of expertise, absent any erroneous appreciation of the evidence presented.
“The LBAA and the CBAA, by reason of their mandate of ascertaining the facts relative to the appeal from the action of the local assessor, have acquired expertise on specific matters within their jurisdiction. Their findings of fact will not be altered, modified, or reversed without justifiable reason.
“This Court finds no compelling reason to disturb their factual findings. The eleven properties assessed for RPT under the Machineries Assessment are not actually, directly, and exclusively used by Napocor for the exempting purpose of power generation and transmission of electricity. They may have some usage in the Angat Hydro-Electric Power Plant operation but not exclusively.
“Accordingly, the municipality of Norzagaray properly imposed RPT upon them. On the other hand, the properties actually, directly, and exclusively used in the transmission and generation of power, such as water turbines, water pumps, generators, transformers, and transmitters, were already excluded from the assessment.”
The SC also said Napocor’s properties listed in the Land Assessment are not exempt from property tax. It said:
‘Napocor’s claim for exemption from RPT on the Land Assessment because it is a ‘government instrumentality’ is misplaced. For one, Napocor admitted that it is a GOCC (government owned and controlled corporation) duly organized under and by virtue of RA No. 6395.
“Under Sections 216 and 218 of the LGC, all lands, buildings, and other improvements owned and used by GOCCs rendering essential public services in the generation and transmission of electric power are classified as special classes of real property subject to a 10 percent assessment level.
“The CTA En Banc observed that on June I, 2007, the Municipality of Norzagaray issued an amended statement of account for the Land Assessment, such that the RPT due on the lands shall be P6,485,422.60. The revised RPT due on the lands was confirmed in another letter dated July 12, 2007.
“Thus, We uphold the assessment for real property tax on the lands listed in the Land Assessment covering Jan. 1, 1996 to Dec. 31, 2006 in the reduced amount of P6,485,422.60.”