Bureau of Local Government Finance Opinion

April 21, 2003 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned, thru the OIC-Regional Director for Local Government Finance, Department of Finance, Region IV-A, People's Mansion Compound, Batangas City, to the Provincial Assessor of Batangas, Batangas City. This refers to the letter of the former Regional Director thereat dated February 12, 2003 relative to the assessment of machinery and equipment owned by the Steel Corporation of the Philippines (STEELCORP) located in Balayan, Batangas. The then Provincial Assessor of Batangas based the fair market value of the machinery and equipment on the exchange rate prevailing at the time of the installation in 1998. In a ruling dated 02 February 2000, this Bureau opined that "By express provision of the Code, therefore, the acquisition cost of the properties should be based on the actual cost to the owner of the same. Considering that STEELCORP acquired the subject machinery and equipment in 1997, the actual cost to STEELCORP of the said properties should be based on the acquisition cost of the said properties at that time, converted at the average exchange rate then prevailing". In other words, the fair market value of the machinery and equipment shall be based on the cost thereof at the time of acquisition and not on the cost at the time of installation. The foregoing pronouncement was upheld by the Department of Finance in an Indorsement dated 22 January 2002. Records show that on 18 May 1999, the Provincial Assessor of Batangas issued the Real Property Tax Order of Payment (RPTOP) fixing the assessed value of the subject machinery and equipment at P2,017,950,180,00. The RPTOP was received by the STEELCORP on 26 May 1999. On 22 July 1999, STEELCORP filed an appeal with the Local Board of Assessment Appeals (LBAA) seeking the revision of the fair market value of the machinery and equipment as assessed by the Provincial Assessor. During the pendency of the appeal, STEELCORP sought the opinion of this Bureau, which on 02 February 2000 ruled that the valuation of machinery and equipment of STEELCORP should be based on the foreign exchange rate prevailing at the time of acquisition thereof. On 02 January 2002, the DOF upheld the said opinion. Meanwhile, on 07 February 2000, STEELCORP moved to withdraw its appeal with the LBAA, which the latter granted on 18 February 2000. Inspite of the rulings of this Bureau and the DOF and the accompanying instructions to the Provincial Assessor to make the necessary corrections on the questioned assessments, no substantive compliance was made by the latter. In fact, on 06 February 2003, Provincial Treasurer Jessie E. Cantos issued a Warrant of Levy on the property in question based on the assessment of the Provincial Assessor. The Provincial Legal Officer of Batangas is of the opinion that the assessment made on the subject property of STEELCORP has taken its appropriate legal course and there is nothing left for the Provincial Treasurer's Office to do except to collect the real property tax liabilities of STEELCORP. Said opinion was adopted by Governor Hermilando I. Mandanas in issuing a directive to the Provincial Treasurer to enforce administrative remedies by issuing the warrant of distraint and/or levy against the subject property of STEELCORP. For these reasons, that Office is seeking anew the opinion of this Bureau on the matter. ITHADC We submit that the assessment has become final and unappealable. In the case of Victorias Milling Co., Inc. vs. Court of Tax Appeals (No. L-24213, 13 March 1968, 22 SCRA 1008), it was held, thus. "It is settled in our jurisdiction that where an assessment is illegal and void, the remedy of a taxpayer who has already paid the tax under protest, is to sue for refund in the Competent Court of first instance. On the other hand, where the assessment is merely erroneous , his recourse is to file an appeal in the Provincial Board of Assessment Appeals within 60 days from receipt of the assessment." "xxx xxx xxx" "An assessment is illegal and void when the assessor has no power to act at all. It is erroneous when the assessor has the power but errs in the exercise of that power." Likewise, in the case of Montinola vs. Gonzales (G.R. No. 36155, 26 October 1989, 178 SCRA 677), it was held that: " If no appeal to the Board of Assessment Appeals is made by the property owner within the statutory period, the assessment becomes final and unappealable . The owner cannot go to court to question any errors in the assessment and to seek refund of the realty taxes paid. Since as held in Victorias Milling Co., Inc. vs. Court of Tax Appeals (22 SCRA 1008), "By the doctrine of primacy of administrative remedy, the Provincial Board of Assessment Appeals had jurisdiction over the dispute to the exclusion of the Court of First Instance, and the party's resort to the Court of First Instance instead of appealing to the Board of Assessment Appeals was held fatal to his claim for refund." In the herein case of STEELCORP, the Provincial Assessor has the power to make the assessments in question under RA 7160 but the said assessments were erroneous since the fair market value thereof was based on the cost of the subject property at the foreign exchange rate prevailing at the time of installation thereof. As already ruled by this Bureau, the execution cost should be the basis of the assessments. Moreover, in the case of Callanta vs. Office of the Ombudsman (G.R. Nos. 115253-74, 30 January 1998, 285 SCRA 648), the Supreme Court held as follows: ". . . the assessment is deemed made when the notice to this effect is released, mailed or sent to the taxpayer for the purpose of giving effect to said assessment." "With respect to real property taxes, the obligation to pay arises on the first day of January of the year following the assessment. Corollarily, on the same date, the right of the local government to collect said taxes also n arises. And where the taxpayer fails to question such assessment within the reglementary period provided by law, the local government's right becomes absolute (unless the affected parties avail of the proper judicial recourse) upon the expiration of such period with respect to that taxpayer's property ." Records show that STEELCORP filed a timely appeal with the LBAA but said appeal was later on withdrawn. It is submitted that the effect of the withdrawal of the appeal is that it is as if there was no appeal filed. ACaTIc In view of the foregoing, it is our considered view that the assessment made by the Provincial Assessor of Batangas on the subject property of STEELCORP has become final and unappealable. Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA Executive Director