BIR Ruling [DA-153-06]

March 22, 2006 BIR RULING [DA-153-06] Dist. Engr. Leopoldo F. Mendoza Department of Public Works and Highways Region I, 3rd Pangasinan Engineering District Office of the District Engineer Tumana, Rosales, Pangasinan S i r : This refers to your letter dated February 23, 2006 requesting for the deferment of the implementation of the 2nd Revised Zonal Values of Real Property for Urdaneta City for a period of six (6) months to a maximum of one (1) year, or until such time the acquisition of the right-of-way and the road widening project are completed. The facts, as represented are as follows: 1. That the Department of Public Works and Highways (DPWH), Region I is in the process of acquiring road right-of-way (ROW) relative to the on-going road widening of the national road along Manila North Road, Urdaneta City, Pangasinan; 2. That payments were already made to as many property owners based on the old zonal valuation; 3. That there are still on-going negotiations with some private owners who refused to accept the proffered value or purchase price for the compensation of the affected land; 4. The property owners are demanding for a compensation based on the current zonal valuation issued by the BIR District Office in Urdaneta City which is higher by 67% as against the old zonal valuation; 5. That it would be grossly unfair if the remaining land owners will be paid based on current zonal land valuation; 6. That it would also be a bad and dangerous precedent as the project is as yet uncompleted; 7. That the implementation of the current zonal land valuation was strongly opposed by the City Government of Urdaneta, as manifested in the Resolution of the Sangguniang Panlungsod, anchored on the principle that local taxation must be fair and reasonable according to taxpayer's ability to pay; CIAHaT 8. That available funds for the ROW acquisition are limited to the old zonal land valuation which will greatly affect the construction operations of the project considering the tight financial position of the DPWH; 9. That the current project is already five years running due to the non-availability of program funds; 10. That the 2nd revision of the zonal values for Urdaneta City was made while the area was still in a depressed or disorderly state; 11. That there is an utter lack or absence of an efficient drainage system complementing the road widening project because the project itself has not been fully implemented; 12. That in its place are diggings all along the area; 13. That the revision is not only untimely and inappropriate but also, the increment in values of real properties in the area is unrealistic and unreasonable at this time; 14. That these provide the reason in fact for the Bureau to reverse its increased valuation; 15. That the implementation of the revised zonal values will only cause a bandwagon effect as it will encourage other property owners, even those who have already agreed with the old valuation level or those who have already been compensated, to demand for more compensation, thereby exposing the department to unnecessary legal or extra judicial disturbance; 16. That not all interested parties were directly invited to or notified of the public hearing; that the DPWH, being the lead agency of the national government in the implementation of its national infrastructure program, should have been directly consulted or invited to the hearing so that it can properly inform the Technical Committee of the adverse effects of the revision against the interest of the government; 17. That the implementation of the revised zonal values for Urdaneta City will negate the objective of raising more revenues for the government; 18. That on the contrary, it will only compromise DPWH's fiscal position since it will have to look for more funds for the increased amount of budgetary support for the acquisition of the ROW; 19. That the latest zonal valuation has greatly affected the construction operations of the project causing prolonged delays particularly the non-acquisition of the required ROW; and 20. That when this project is finally completed and all the inconveniences and physical interruptions have been removed, then raising the values would become justifiable along the improved areas. In reply, please be informed that the value of the land and its character at the time it was taken by the government are the criteria for determining just compensation, ( Camarines Norte Electric Cooperative, Inc. v. Court of Appeals , 345 SCRA 85, November 20, 2000), thus, just compensation shall be determined as of the time of taking. ( Commissioner of Public Highways v. Burgos , 96 SCRA 831, March 31, 1980) TAEcCS Considering that the 2nd Revised Zonal Values of Real Property for Urdaneta City was already approved and became effective on May 7, 2005, after due process in the determination and approval of the proposed values were observed and timely objections have already been considered and deliberated upon, this Office opines that the value of the real properties already acquired prior to May 7, 2005 shall be based on the prescribed zonal value during that time. However, those in which the process of acquisition commenced after May 7, 2005 shall be based on the 2nd Revised Zonal Values of Real Property for Urdaneta City. Therefore, the payment of just compensation shall be based on the prescribed zonal valuation, as determined by the Commissioner in accordance with Section 6(E) of the Tax Code of 1997, as amended, at the time of taking by the government. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null or void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue