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Payment Under Protest Required To Contest Real Property Tax Assessment Even If Exemption Is Claimed

NATIONAL POWER CORPORATION, Petitioner, v. THE PROVINCIAL TREASURER OF BENGUET, THE PROVINCIAL ASSESSOR OF BENGUET, THE MUNICIPAL TREASURER OF ITOGON, BENGUET AND THE MUNICIPAL ASSESSOR OF ITOGON, BENGUET, Respondents.

NPC v. Provincial Treasurer
G.R. No. 209303
14 November 2016

 

Facts:

Sometime in May 2000, the Municipal Assessor of Itogon, Benguet assessed the National Power Corporation (NPC) the amount of 62,645,668.80 real property tax for several properties located within the Binga Hydro-Electric Power Plant.

On March 17, 2006, NPC received a letter dated February 16, 2006 from OIC- Provincial Treasurer of Benguet demanding the payment of real property tax delinquency in the amount of 62,645,668.80.

On April 20, 2006, NPC challenged before the Local Board of Assessment Appeals (LBAA) the legality of the assessment and the authority of the respondents to assess and collect real property taxes from it when its properties are exempt pursuant to Section 234 (b) and (c) of Republic Act (R.A.) No. 7160, otherwise known as the Local Government Code (LGC) of 1991. In the letters dated September 3, 2000 and April 19, 2001, NPC filed its requests for exemption, which the respondent Municipal Treasurer of Itogon, Benguet has not acted upon.

In an Order dated July 28, 2006, the LBAA deferred the proceedings upon NPC’s payment under protest of the assessed amount, or upon filing of a surety bond to cover the disputed amount of tax. NPC moved to reconsider the Order on the ground of lack of legal basis, but the same was denied in a Resolution dated October 3, 2006.

NPC filed a petition for review before the Central Board of Assessment Appeals (CBAA) claiming that payment under protest was not required before it could challenge the authority of respondents to assess tax on tax exempt properties before the LBAA.

Should the taxpayer/real property owner question the excessiveness or reasonableness of the assessment, Section 252 of the LGC of 1991 directs that the taxpayer should first pay the tax due before his protest can be entertained...

In their Answer, respondents pursuant to Section 252 of the LGC, payment under protest was a necessary condition to a protest against the assessment issued by respondents.

On July 28, 2011, the CBAA dismissed the appeal for being filed out of time.

The CBAA, in an Order dated February 23, 2012, denied NPC’s motion for reconsideration. It ruled that it is incumbent upon NPC to pay under protest before the LBAA could entertain its appeal as provided under Section 252 of the LGC.

Undaunted, NPC appealed to the CTA En Banc by filing a Petition for Review dated April 13, 2012. The CTA En Banc denied the same for lack of merit. It ruled that as expressly provided in Section 252 of the LGC, a written protest against the assessment may be filed before the LBAA within thirty (30) days from payment under protest. NPC failed to pay under protest the contested assessment, a condition sine qua non for invocation of LBAA’s appellate authority.

Issue:

Whether payment under protest of the assessed real property taxes is required before the LBAA could entertain the protest filed by NPC.

Ruling:

Yes.

Settled is the rule that should the taxpayer/real property owner question the excessiveness or reasonableness of the assessment, Section 252 of the LGC of 1991 directs that the taxpayer should first pay the tax due before his protest can be entertained, thus:

SEC. 252. Payment Under Protest. — (a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the words “paid under protest”. The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer, or municipal treasurer, in the case of a municipality within Metropolitan Area, who shall decide the protest within sixty (60) days from receipt.

(b) The tax or a portion thereof paid under protest shall be held in trust by the treasurer concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the protestant, or applied as tax credits against his existing or future tax liability.

(d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title Two, Book II of this Code.

It is only after the taxpayer has paid the tax due that he may file a protest in writing within 30 days from payment of the tax to the Provincial, City or Municipal Treasurer, who shall decide the protest within sixty days from receipt. In no case is the local treasurer obliged to entertain the protest unless the tax due has been paid.

A claim for exemption from the payment of real property taxes does not actually question the assessor's authority to assess and collect such taxes, but pertains to the reasonableness or correctness of the assessment by the local assessor...

NPC alleges that payment under protest under Section 252 of the LGC is required when the reasonableness of the amount assessed is being questioned. Challenging the very authority and power of the assessor to impose the assessment and of the treasurer to collect the tax is an attack on the very validity on any increase and not merely on the amounts of increase in tax. Thus, such payment is not a condition sine qua non for the LBAA to entertain the NPC’s challenge on the validity of the tax imposed on its tax-exempt properties.

As settled in jurisprudence, a claim for exemption from the payment of real property taxes does not actually question the assessor’s authority to assess and collect such taxes, but pertains to the reasonableness or correctness of the assessment by the local assessor, a question of fact which should be resolved, at the very first instance, by the LBAA. The same may be inferred in Section 206 of the LGC of 1991, to wit:

SEC. 206. Proof of Exemption of Real Properly from Taxation. — Every person by or for whom real property is declared, who shall claim tax exemption for such propertyunder this Title shall file with the provincial, city or municipal assessor within thirty (30) days from the date of the declaration of real prpperty sufficient documentary evidence in support of such claim including corporate charters, title of ownership, articles of incorporation, bylaws, contracts, affidavits, certifications and mortgage deeds, and similar documents. If the required evidence is not submitted within the period herein prescribed, the property shall be listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll.

If the property being taxed has not been dropped from the assessment roll, taxes must be paid under protest if the exemption from taxation is insisted upon...

Section 206 of the LGC categorically provides that every person by or for whom real property is declared, who shall claim exemption from payment of real property taxes imposed against said property, shall file with the provincial, city or municipal assessor sufficient documentary evidence in support of such claim. The burden of proving exemption from local taxation is upon whom the subject real property is declared. By providing that real property not declared and proved as tax-exempt shall be included in the assessment roll, the above quoted provision implies that the local assessor has the authority to assess the property for realty taxes, and any subsequent claim for exemption shall be allowed only when sufficient proof has been adduced supporting the claim. Thus, if the property being taxed has not been dropped from the assessment roll, taxes must be paid under protest if the exemption from taxation is insisted upon.

Records reveal that the petitioner sent a letter dated September 5, 2000 to the respondent Municipal Treasurer seeking clarification on the assessment levels used by the Assessor in the billing taxes, as well as claiming tax exemption on certain properties. It reiterated its claim of exemption in its letter dated April 19, 2001. NPC received the final demand for payment of tax delinquency issued by the Provincial Treasurer in a letter dated February 16, 2006. Thereafter, petitioner filed a petition purportedly questioning the authority of the respondents to assess and to collect taxes against some of its properties before the LBAA, without payment under protest of the assessed real property taxes.

Nothing in the said petition before the LBAA supports petitioner’s claim regarding the respondents’ alleged lack of authority. Instead, it raises the following issues, which involve a question of fact: 1.) the properties such as reservoir, machineries and equipment which are actually, directly and exclusively used by NPC in the generation and transmission of electricity, and the school buildings are exempt from taxation; and 2.) regarding the escape revision which was made retroactive from 1994, said taxes could no longer be assessed and collected since they should have been assessed within five (5) years from the date they became due. Though couched in terms which challenge the validity of the assessment and authority of the respondents, NPC, as a government-owned and controlled corporation engaged in the generation and transmission of electric power, essentially anchors its petition based on a claim of exemption from real property tax.

Records are bereft of evidence which proves that, within 30 days from the filing of its Tax Declaration, NPC filed with the Municipal Assessor of Itogon, Benguet an application for exemption or any documentary evidence of the exempt status of its properties. Respondent Municipal Assessor assessed petitioner’s properties for real property tax since they were not dropped from the assessment roll upon failure of NPC to comply with the requirements of the law. As found by the CTA En Banc:

x x x Evidently, the two letters requesting exemption from payment of realty tax dated September 3, 2000 and April 19, 2001 addressed to respondent Municipal Assessor were filed beyond the required thirty (30)-day period from the declaration of the subject properties for realty tax purposes in May 2000. There is also no showing that petitioner submitted together with the said formal requests sufficient documents in support of such claim. Significantly, in the proceedings below, respondents categorically stated that petitioner failed to prove its claimed tax exemption. This declaration remains undisputed to date. Precisely, the subject properties were listed as taxable in the assessment roll giving respondents the authority to issue the assailed assessment.

Hence, payment under protest of the assessed real property tax is required before the LBAA can entertain the protest filed by NPC.

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