Bureau of Local Government Finance Opinion

March 16, 1999 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Lino S. Cruz VP-Northern Luzon Regional Center National Power Corporation Corner Quezon Avenue and Agham Road Diliman, Quezon City S i r : This refers to your letter dated October 1, 1998 requesting reconsideration of the ruling embodied under our 2nd Indorsement dated July 16, 1998, the dispositive portion of which resolved as follows: "Apparently, although BPPC is engaged in the generation of electric power, the same may not enjoy real property tax exemption on its machineries for reason that the said company does not fall under the category of a government-owned or controlled corporation referred to in Section 234(c) of the Code." It is your contention that the machineries and equipment were put up by BPPC under the Build, Operate and Transfer (BOT) scheme, wherein during the co-operation period of fifteen (15) years, its ownership would still remain in the name of the private company BPPC, but the NPC shall have the actual, direct and exclusive use of the same. Moreover, you also argued that the provision of Section 234(c) of R.A. No. 7160 specifically refers to the usage of the machineries and equipment thereon and not as to who owns the said machineries. You state also that the law does not speak of ownership of the equipment and machineries but only refers to actual, direct and exclusive usage. To support your contention, you cited the following Supreme Court rulings, viz : In Allarde vs. COA , 218 SCRA 227: "It is an elementary principle of statutory construction that where the words and phrases of a statute are not obscure and ambiguous, the meaning and intention of the legislature should be determined from the language employed, and where there is no ambiguity in the words, there is no room for construction." In JMM Promotion and Management, Inc., vs. National Labor Relations Commission , 228 SCRA 129: "In interpreting a statute, care should be taken that every part be given effect and construction that would render a provision inoperative should be avoided and inconsistent provisions should be reconciled whenever possible as parts of harmonious whole." In Marina Port Services, Inc. vs. Iniega , 181 SCRA 304: "When the words and language of documents are clear and plain of readily understandable by an ordinary reader thereof, there is absolutely no room for interpretation or construction anymore." In a letter dated November 12, 1998, the Officer-in-Charge, Provincial Treasurer's Office of La Union, submitted that under the provision of the FAST TRACK BUILD, OPERATE AND TRANSFER PROJECT AGREEMENT signed by NAPOCOR and the FIRST PRIVATE POWER CORPORATION (FPPC-BPPC), "it is very clear that the said machineries and equipment under assessment in the Bauang Power Plant Corporation in Barangay Poyocpoc Sur, Bauang, La Union, ARE BEING USED by BPPC in its power plant and not NAPOCOR. The said machineries and equipment . . . are actually, directly and exclusively being used by BPPC in the conversion of bunker fuel to electricity for NAPOCOR for fee." Apparently, the properties in question are actually, directly and exclusively need by Bauang Private Power Corporation in the conversion of bunker fuel to electricity for NAPOCOR for a fee. It is also worthwhile to note that BPPC is not a government-owned or controlled corporation considering that the same falls under the category of a private corporation having been incorporated on February 3, 1993 primarily to engage in the business of generating electric power which the company sells to the NAPOCOR on a wholesale basis. In view thereof, and the fact that the subject real properties are actually, directly and exclusively used by a private company (BPPC) in the operation of its business, the same is, therefore, liable to pay real property taxes. SDHAcI This Bureau much to its regret could not favorably act on your abovementioned request for reconsideration for lack of legal basis. Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge