National Grid Corp. of the Philippines v. Tenorio

[CBAA CASE NO. L-131. March 27, 2015.] NATIONAL GRID CORPORATION OF THE PHILIPPINES (NGCP) , petitioner-appellant , vs. LOCAL BOARD OF ASSESSMENT APPEALS FOR THE PROVINCE OF ILOCOS SUR , appellee , FATIMA A. TENORIO, PROVINCIAL ASSESSOR OF ILOCOS SUR and ENGR. NESTOR E. APOLONIO, MUNICIPAL ASSESSOR OF SAN ESTEBAN, ILOCOS SUR , respondents-appellees . DECISION This is an Appeal from the Order rendered by the Local Board of Assessment Appeals (LBAA) of the Province of Ilocos Sur on August 12, 2013, the dispositive portion of which reads: ASEcHI "WHEREFORE, premises considered the Petitioner is hereby directed to strictly comply with the aforementioned Rules and to pay the necessary taxes with the Municipal Treasurer of San Esteban, Ilocos Sur within fifteen (15) days from receipt hereof. The collecting officer is given five (5) days from payment to notify this office that payment by the Petitioner has been already made and only then will this Board commence to entertain the Petition. Failure to comply with this order within the period given shall be a ground for the dismissal of the Petition in accordance with law. SO ORDERED." From the Order dated August 12, 2013, the Petitioner-Appellant sought a reconsideration which was DENIED by Respondent LBAA in an Order dated January 15, 2014, the dispositive portion of which reads, thus: "WHEREFORE, the motion for reconsideration is hereby denied for lack of merit. cTDaEH SO ORDERED." STATEMENT OF FACTS AND MATERIAL DATES The factual and procedural backdrop of the instant Appeal is summarized in paragraphs 7 to 13 of the Memorandum on Appeal, thus: "7. Pursuant to the mandate of Republic Act (RA) No. 6395 (Republic Act No. 6395, Revised Charter of the National Power Corporation, Section 2 (1971)) , the National Power Corporation (NPC) undertook the total electrification of the Philippines through the development of power from all sources to meet the needs of industrial development and rural electrification. All properties in connection with such utilization, including properties for power generation and transmission, are owned and operated by NPC." ITAaHc "8. NPC was exempt from real property taxation from the time of its creation in 1936 until 31 December 1991. Upon the effectivity of the Local Government Code of 1991 ('LGC') on 01 January 1992, however, NPC's exemption from real property tax was withdrawn, except that which pertains to machineries and equipment actually, directly and exclusively used in the generation and transmission of electric power pursuant to Section 234 (c) of the LGC. As regards lands, buildings and improvements that were owned and used by NPC in the generation and transmission of electric power, these properties were classified as belonging to Special Class and were assessed at a ten percent (10%) level of assessment, in accordance with Sections 216 and 218 of the LGC ." "9. With the effectivity of RA No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 ('EPIRA'), the National Transmission Corporation (TRANSCO) assumed the electric power transmission function of NPC (Republic Act No. 9136, Electric Power Industry Reform Act, Section 8, par. 2 (2001)) . All assets owned by NPC relative to the power transmission operation, including its franchise for the operation of the transmission system and grid, were accordingly transferred to TRANSCO. The real property tax exemption and privileges under Sections 234 (c) and 218 of the LGC were similarly applied to TRANSCO ." "10. The power transmission operation of TRANSCO was subsequently privatized and formally turned-over to Petitioner-Appellant NGCP on 15 January 2009. Likewise, Republic Act No. 9511 (R.A. No. 9511), enacted on 01 December 2008, granted a legislative franchise to Petitioner-Appellant NGCP to engage in the business of conveying or transmitting electricity through high voltage back-bone system of interconnected power transmission lines, substations and related facilities, and for other purposes." "11. Pursuant to the Concession Agreement executed among Power Sector Assets and Liabilities Management Corporation (PSALM), TRANSCO, and NGCP and the latter's franchise, R.A. No. 9511, NGCP officially assumed and took over on 15 January 2009 the operation, management, and maintenance of TRANSCO's nationwide electric power transmission business, including TRANSCO's real properties actually, directly and exclusively devoted to the transmission of electric power." cSaATC "12. Under both the Concession Agreement and R.A. 9511, NGCP as a Concessionaire was granted the privilege to operate and maintain the transmission assets and other TRANSCO real properties actually, directly and exclusively devoted to the transmission of electric power, but the ownership over the transmission assets and the real properties was retained by TRANSCO." "13. On 14 August 2012, Petitioner-Appellant NGCP received Notice of Assessment 1 signed by Respondent-Appellee Apolonio for the properties in San Esteban Substation, San Estbban (sic) Ilocos Sur. The details of the properties identified as Machineries and Control House are as follows: CHTAIc ARP NO OLD ARP NO NEW KIND OF PROPERTY MARKET VALUE ASS. LEVEL ASSESSED VALUE 0008-00096 Exempt 0008-00576 Taxable Machinery PhP1,491,300.00 80% Php1,193,040.00 0008-00095 Exempt 0008-00577 Taxable Machinery PhP257,010.00 80% PhP205,610.00 0008-00094 Exempt 0008-00578 Taxable Machinery PhP143,960.00 80% PhP115,170.00 0008-00093 Exempt 0008-00579 Taxable Machinery PhP564,820.00 80% PhP451,860.00 0008-00098 Exempt 0008-00580 Taxable Machinery PhP701,400.00 80% PhP561,120.00 0008-00101 Exempt 0008-00581 Taxable Machinery PhP3,185,410.00 80% PhP2,548,330.00 0008-00102 Exempt 0008-00582 Taxable Machinery PhP3,188,960.00 80% PhP2,551,170.00 0008-00103 Exempt 0008-00583 Taxable Machinery PhP786,021.00 80% PhP628,820.00 0008-00104 Exempt 0008-00584 Taxable Machinery PhP12,238,322.00 80% PhP9,790,660.00 0008-00105 Exempt 0008-00585 Taxable Machinery PhP14,743,041.00 80% PhP11,794,430.00 0008-00106 Exempt 0008-00586 Taxable Machinery PhP467,230.00 80% PhP373,780.00 0008-00100 Exempt 0008-00587 Taxable Machinery PhP3,876,046.00 80% PhP3,100,840.00 0008-00097 Exempt 0008-00588 Taxable Machinery PhP1,981,975.00 80% PhP1,585,580.00 0008-00107 Exempt 0008-00589 Taxable Machinery PhP329,100.00 80% PhP263,280.00 0008-00099 Exempt 0008-00590 Taxable Machinery PhP1,522,563.00 80% PhP1,218,050.00 0008-00089 Control House 0008-00598 Taxable Control House PhP3,114,720.00 80% PhP2,180,300.00 "14. Attached to the said Notice of Assessment are copies of the Old Tax Declarations 2 wherein the aforementioned properties are described as Tax Exempt with 2008 as the effective date of assessment, and copies of Revised Tax Declarations 3 classifying the same properties as Taxable with 2nd Quarter of 2012 as effective date of assessment and NGCP as Administrator/Beneficial User." After the filing of the instant appeal before this Board on February 25, 2014, an "Advice to Answer Appeal was issued on March 3, 2014 directing Respondents-Appellees to file their Answer/Comment within fifteen (15) days from receipt thereof. Respondents-Appellees, by their statutory counsel, Atty. Mhelygene D. Tesoro of the Provincial Legal Office of Ilocos Sur, filed their "Comment/Answer" on April 3, 2014, wherein they reiterated their stand to the effect that: cHDAIS I. Payment under Protest is a condition sine quo non for the appeal; and II. The claim for Tax Exemption has no merits. In the instant Appeal, as well as in their Petition filed before the Respondent-Appellee LBAA, NGCP raised the following arguments, to wit: I. The machineries subject matter of the re-assessment are exempt from the payment of Real Property Tax (RPT) because ownership over the same is retained by TRANSCO, a government-owned and controlled corporation; and II. NGCP is also exempt from the payment of the RPT under R.A. No. 9511 (NGCP franchise). EATCcI The two-fold issues/assignment of errors raised in the instant Petition are: I. WHETHER RESPONDENT-APPELLEE LBAA ERRED IN ISSUING ITS ORDER DATED AUGUST 12, 2013 WHEREBY IT REFUSED TO ENTERTAIN THE PETITION/APPEAL FILED BY PETITIONER-APPELLANT UNLESS THERE BE PRIOR "PAYMENT UNDER PROTEST," AND WHEN RESPONDENT-APPELLEE SUBSEQUENTLY DENIED NGCP'S MOTION FOR RECONSIDERATION PER ORDER DATED JANUARY 15, 2014; and II. WHETHER RESPONDENT-APPELLEE ERRED WHEN IT FAILED TO CONSIDER NGCP'S VALID AND MERITORIOUS ARGUMENTS, TO WIT: A. The machineries subject matter of the re-assessment are EXEMPT from the payment of real property tax because ownership over the same is retained by TRANSCO, a government-owned and controlled corporation; B. Petitioner-Appellant NGCP is EXEMPT from the payment of the real property tax under R.A. No. 9511 (NGCP Franchise). RULING OF THIS BOARD I. Re: FIRST ISSUE/ASSIGNMENT OF ERROR : This Board finds merit in the arguments raised by Petitioner-Appellant NGCP in paragraphs 22 to 30 of the Appeal Memorandum, in this wise: "22. In its refusal to entertain the Petition/Appeal filed by NGCP, Respondent-Appellee LBAA cited Section 7 of Rule V of the governing proceedings before the LBAA in its Order dated 12 August 2013, to wit:" 'Section 7. Effect of Appeal on Collection of Taxes. An appeal shall not suspend the collection of the corresponding realty taxes on the real property subject of the appeal as assessed by the provincial, city or municipal assessor, without prejudice to subsequent adjustment depending upon the outcome of the appeal. An appeal may be entertained but the hearing thereof shall be deferred until the corresponding taxes due on the real property subject of the appeal shall have been paid under protest or the petitioner shall have given a surety bond, subject to the following conditions: (1) The amount of the bond must not be less than the total realty taxes and penalties due as assessed by the assessor nor more than double said amount; (2) The bond must be accompanied by a certification from the Insurance Commissioner (a) that the surety company is duly authorized to issue such bond; (b) that the surety bond is approved by and registered with said Commission; and (c) that the amount covered by the surety bond is within the writing capacity of the surety company; and x x x' (Emphasis supplied) "23. Likewise, in denying Petitioner-Appellant NGCP's Motion for Reconsideration, Respondent-Appellee LBAA relied on Sections 252 and 231 of the LGC in its Order dated 15 January 2014, insisting that a 'taxpayer/real property owner questioning the assessment should first pay the tax due before his protest can be entertained.' Sections 231 and 252 of the LGC provide respectively as follows: CAacTH "SEC. 231. Effect of appeal on the Payment of Real Property Tax. Appeal on assessments of real property made under the provisions of this Code shall, in no case, suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or city assessor, without prejudice to subsequent adjustment depending upon the final outcome of the appeal." "xxx xxx xxx" "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 Manila 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 credit against his existing or future tax liability . cEaSHC (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 II, Book II of this Code." "24. With all due respect to the Respondent-Appellee LBAA, it must be clearly emphasized that Petitioner-Appellant NGCP filed the Petition/Appeal under Section 226 of the LGC and this is an appeal from the action of the Respondent Provincial and Municipal Assessors in the assessment of the subject properties in the name of Petitioner-Appellant NGCP. It is NOT an appeal from the decision of the Provincial or Municipal Treasurer on a written protest filed by Petitioner-appellant NGCP. Section 226 provides as follows:" "SEC. 226. Local Board of Assessment Appeals. Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal." "25. Likewise, it must be emphasized that there is no specific provision in the LGC which clearly, categorically and mandatorily requires a taxpayer to pay first the tax before it can file an appeal/petition before the Respondent-Appellee LBAA under Section 226 of LGC or before the Respondent-Appellee LBAA can entertain such an appeal. There being no prerequisite of payment under protest for pursuing an appeal before the Respondent-Appellee LBAA pursuant to Section 226 of the LGC, the Respondent-Appellee should not have required the payment of tax under protest before it could act on Petitioner-Appellant NGCP's Petition/Appeal." IAETDc "26. A careful perusal of Section 252 of the LGC, cited by Respondent-Appellee LBAA, shows that 'payment under protest' pertains only to a protest filed by taxpayer before the Provincial, City or Municipal Treasurer and that such protest can only be entertained by the said local officials if the taxpayer pays first the tax . It does not apply to an appeal filed by the taxpayer under Section 226 of the LGC where the action or decision appealed from belongs to the Provincial, City or Municipal Assessor." "27. Under Section 252, 'payment under protest' is a condition sine qua non before the local treasurer entertains the written protest filed by the taxpayer. There is no such requirement in case of appeal on the Notice of Assessment under Section 226 of the LGC. 'Payment under protest' is material if a taxpayer is filing the written protest to the Treasurer's Office under Section 252 of the LGC, and thereafter, is taking an appeal to LBAA from the denial of written protest by the Treasurer. The appeal to the LBAA being referred to in Section 252 shall be made pursuant to Chapter 3, Title II, Book II of the LGC, which incidentally, is Section 226 of the LGC (Local Board of Assessment Appeals)." CTIEac "28. Thus, appeal under Chapter 3, Title II, Book II of the LGC may be availed of in two (2) instances. One is an appeal directly to the LBAA from the notice of assessment issued by the Assessor for which payment under protest is not required . The other one is an appeal from the denial by the Treasurer's Office of the written protest filed by the taxpayer after 'payment under protest' was made." "29. NGCP respectfully submits that there is absolutely no legal basis to extend the requirement of 'payment under protest' under Section 252 of the LGC to the 'appeals' taken before the Respondent-Appellee LBAA on the notice of assessment issued by the Respondent-Appellees Tenorio and Apolonio under Section 226 of the LGC. The mode of appeal to LBAA may be similar, that is by filing a petition under oath, within sixty (60) days from date of receipt of the written notice of assessment (in case of appeal from an assessment) or denial of written protest by the Treasurer's Office (in case of 'payment under protest'). However, it is evident that the requirement of 'payment under protest' is only applicable to appeals taken under Section 252 of the LGC, and not to appeals taken from the notice of assessment under Section 226 of the LGC." DcHSEa "30. It must be stressed that the Consolidated and Revised Rules of Procedure before the LBAA and the CBAA which took effect on 1 September 2013, has now clarified the matter on the apparent misunderstanding of the rules in taking appeals to the Local Board when it provides:" " SEC. 1. Who May Appeal to the Local Boards . Any owner or person having legal interest in the subject property (a) who is not satisfied with the action of the assessor in the assessment of his property, or (b) who is not satisfied with the action or inaction of the treasurer on his claim for refund or credit of taxes paid under protest, or (c) who is not satisfied with the action or inaction of the treasurer on his claims for refund or credit of taxes paid but found to be illegal or erroneous by competent authority, may appeal to the Local Board of Assessment Appeals of the province or city, or municipality within the Metropolitan Manila Area, where the subject property is situated." " SEC. 2. When to Appeal to the Local Boards . Appeals to the Local Boards of Assessment Appeals shall be filed with the said Boards within the periods prescribed as follows: SaCIDT a. If the subject matter of the appeal is perceived error or errors in the assessment of the property concerned, the appeal to the Local Board of Assessment Appeals with the concerned assessor as the respondent shall be filed within sixty (60) days from the appellant's receipt of the written notice of assessment from the assessor; or b. If the subject matter of the appeal is the denial by the treasurer of a claim for refund or credit of realty taxes paid under protest under Section 252 of R.A. 7160, without questioning the validity of correctness of the assessment made by the assessor . x x x" (Emphasis supplied) In view of the foregoing discussion, this Board hereby rules that the herein assailed ORDERS of the Respondent-Appellee LBAA dated August 12, 2013 and January 15, 2014 are NULL AND VOID for being contrary to law. II. Re: SECOND ISSUE/ASSIGNMENT OF ERROR : SCaITA This Board is not persuaded by the learned dissertations by Petitioner-Appellant NGCP though the same have not been controverted by any equally learned arguments by Respondents-Appellees. The arguments of Petitioner-Appellant NGCP are elaborated in paragraphs 36 to 43 of the Memorandum Appeal, thus: "a. The machineries subject matter of the re-assessment are exempt from the payment of real property tax because ownership over the same is retained by TRANSCO, government-owned and controlled corporation (GOCC)." "36. It must be emphasized that the machineries subject matter of the Petitioner-Appellant NGCP's Petition/Appeal are owned by TRANSCO, a GOCC created under R.A. No. 9136 (EPIRA). Petitioner-Appellant NGCP was granted a concession to operate the electric power transmission facilities of TRANSCO under the Concession Agreement dated 28 February 2008. Subsequently, NGCP was extended a franchise under R.A. No. 9511 which became effective on 20 December 2008, to assume the electric power transmission functions of TRANSCO." "37. However, under both the Concession Agreement and R.A. No. 9511, Petitioner-Appellant NGCP was granted a privilege to operate and maintain the electric power transmission assets merely as Concessionaire, but the ownership over the properties remained with TRANSCO." cHECAS "38. Under the Concession Agreement, it was agreed during the concession period, Petitioner-Appellant NGCP will only assume the obligations of TRANSCO to pay real property taxes on its properties not otherwise exempt from the payment of real property taxes, as there was no transfer of properties ownership." "39. Prior to Petitioner-Appellant NGCP's assumption of operation of TRANSCO's transmission facilities on 15 January 2009, TRANSCO was not paying real property taxes on machineries and equipment as they are exempt under Section 234(c) of the LGC . The relevant provisions of the LGC provides, as follows: '(o) 'Machinery' embraces machines, equipment. Mechanical contrivances, instruments, appliances or apparatus which may or may not be attached permanently or temporarily, to the real property. It includes the physical facilities for the production, the installations and appurtenant service facilities , those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes .' 'xxx xxx xxx' 'Section 234. Exemptions for Real Property Tax. The following are exempted from payment of the real property tax:' '(a) Real property owned by the Republic of the Philippines or any of its political subdivision except when the beneficial use thereof has been granted, for consideration or otherwise to a taxable person.' aTHCSE '(b) x x x' '(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned and controlled corporation engaged in the supply and distribution of water and/or generation and transmission of electric power ; x x x (Sections 199[o] and 234[c] of the LGC.' "40. The properties subject matter of the Petition/Appeal are actually, directly and exclusively used for the transmission of electric power. The same are indispensable parts of the nationwide power transmission systems or grid. Thus, under the Concession Agreement with TRANSCO, Petitioner-Appellant NGCP cannot effectively and efficiently operate the transmission system/grid and deliver the electricity to the public without such properties." "41. On the basis that TRANSCO has retained the ownership of the properties, and that Petitioner-Appellant NGCP only agreed to pay the tax obligation of TRANSCO, said properties should continue to be classified as exempt from the payment of RPT, and that Petitioner-Appellant NGCP shall not be made to pay the taxes based on the Notice of Assessment dated 11 August 2012." AHDacC "42. Further, considering that the aforesaid properties are still actually, directly and exclusively used in connection with the transmission of electric power, the assessment should be based on actual use regardless who the beneficial user is. Section 217 of the LGC provides as follows:" ' Section 217 . Actual Use of Real Property as Basis for Assessmen t. Real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. (Underscoring supplied)' "43. It must be noted that Respondents-Appellees Tenorio and Apolonio recognized the tax-exempt classification of the said properties as they were in fact classified as tax exempt under the old Tax Declarations." ' b. Petitioner-Appellant NGCP is exempt from the payment of the real property tax under R.A. No. 9511 (NGCP Franchise) ' cAaDHT In this sub-title of its arguments raised under the Second Issue/Assignment of Error, Petitioner-Appellant claims that under its franchise, particularly Section 9, R.A. 9511, it is exempt from the payment of real property tax, and that NGCP should only pay to the national government franchise tax equivalent to the 3% of all gross receipts derived from its operations, under Section 9 of Republic Act No. 9511, which provides, thus: Sec. 9. Tax Provisions. In consideration of the franchise and rights hereby granted, the Grantee, it successors or assigns, shall pay a franchise tax equivalent to three percent (3%) of all gross receipts derived by the Grantee from its operation under this franchise. Said tax shall be in lieu of income tax or description levied, established or collected by only authority whatsoever, local or national, on its franchise, rights, privileges, receipts, revenues and profits, and on properties used in connection with its franchise, from which taxes, duties and charges, the Grantee, its successors or assigns, shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, as other corporations are now or hereby may be required by law to pay : Provided, further, That payment by Grantee of the concession fees due to PSALM under the concession agreement shall not be subject to income tax and value-added tax (VAT). (Italics and underscoring supplied). Petitioner-Appellant NGCP further reiterated and amplified in paragraphs 53 to 61 of the instant Memorandum on Appeal its reading of the INTENT OF THE LAW ("Ratio Legis") as against the foregoing exposition of the LETTER OF THE LAW ("Verba Legis") , behind Section 9, R.A. 9511, thus: IDSEAH "53. To further amplify Petitioner-Appellant NGCP's tax exemption, it is clear under Section 9 of R.A. 9511, that apart from the 3% franchise tax due to the national government, NGCP is exempt from payment of: a. Income tax and any and all taxes, duties, fees and charges; b. Of any kind and nature or description; c. Levied, established or collected by any authority whatsoever, local or national; d. On properties used in connection with its franchise." "54. Simply put, Petitioner-Appellant NGCP is only liable for the payment of 3% franchise tax and no other tax can be imposed or demanded by the national or local authorities." "55. Petitioner-Appellant NGCP's Charter expressly states that the franchise fee is in lieu of all taxes of any kind and nature levied or collected by any authority whatsoever, local or national, on its properties used in connection with its franchise from which NGCP is expressly exempted . It cannot be anymore clearer, express, broader and more expansive than this." HCaDIS "56. Likewise, Petitioner-Appellant NGCP's Charter not only mentions ' local or national ' authorities specifically, it even qualifies this by using the broader phrase: ' any authority whatsoever .' It does not stop there. To remove any doubts, Petitioner-Appellant NGPC's Charter further provides that from these taxes the Grantee (NGCP) is hereby expressly exempted . This shows the clear intent of Congress to exempt Petitioner-Appellant NGCP from any and all taxes by any local or national authority on properties used in connection with its franchise." "57. The phrase " on properties used in connection with its franchise, from which taxes, duties and charges, the Grantee is hereby expressly exempted " constitutes the express and categorical statement that Petitioner-Appellant NGCP is exempt from payment of real property tax on all properties that are actually, directly and exclusively used in transmission of electricity, including its lands, machineries and buildings, thus used in the operation of its franchise." "58. Moreover, the phrase " all taxes, duties, fees, and charges of any kind, nature or description " is broad and general enough, local or national in scope, to cover real property tax which is a form of local tax." "59. Thus, the exemption of Petitioner-Appellant NGCP from the payment of real property taxes is not presumed; rather, it is clear and categorical as its franchise plainly provides." aCIHcD "60. The intent to exempt NGCP from any and all taxes, including real estate taxes is likewise evident in the sponsorship speech of Sen. Juan Ponce Enrile, thus:" "On 12 December 2007, after several attempts to privatize the National Transmission Corporation (TransCo) , the consortium of Monte Oro Grid Corporation, Calaca High Power Corporation and the State Grid Corporation of China was finally awarded the 25-year concession contract to operate the nationwide transmission system. The consortium, incorporated, under the National Grid Corporation of the Philippines, now seeks approval of its congressional franchise to operate and maintain the power grid. The grant of the congressional franchise will finally set into motion the long delayed upgrading and modernization of the country's transmission grid facilities. Parallel to the government's efforts to have a modern transmission system is the obligation of government to provide for lower consumption costs of electricity to the end users . AHCETa Finally, since the operation of the transmission grid is primordially one of public service, the Committee provided for a more reasonable tax regime. Under the present system of imposing ordinary income tax, the energy companies do not shoulder the tax but simply pass the same to the consumers. This franchise bill seeks to return to the additional system of imposing a franchise tax which is a tax directly absorbed and carried by the franchisee. This will eventually result in lower electricity to the benefit of the consuming public ." 4 "61. Then Senate President Juan Ponce Enrile further explained the rationale behind the real property exemption given to private enterprises including NGCP: Faced with the reality that my EPIRA Revision Bill is not being taken up in the Lower House, I had to find other means to attain my primary goal, and that is to immediately alleviate the financial burden of very heavy electricity costs on our consumers and industries. Thus, I am strongly pushing for the immediate passage of what I call my "TWIN POWER RATE REDUCTION BILLS. One is the Senate Bill No. 3147. The proposed law seeks to revert to the old system of imposing a franchise tax on the distribution income of power distribution utilities, including Meralco and the electric cooperatives, and other distribution companies all over the nation . cHaCAS This old system imposes a uniform franchise tax which I propose to be 3% in lieu of all taxes, duties, fees and charges . I find this old system more manageable, fair, transparent as there will no longer be suspicion that the utilities' income taxes and the other imposts that they are supposed to pay are being passed on to the consumers. The franchise tax is also in keeping with the principle that public utilities ought not and must not be used as sources of public revenues as these public utilities render public services to the taxpayers . I was shocked to know that in some areas, even the electric posts of distribution utilities and the transmission towers of TRANSCO are being charged with real estate taxes and other impositions by local governments . What is tragic is that this anomalous situation unduly increases the cost of distributing electricity to the general public. The result of this anomaly is that these real estate taxes and other imposts are ultimately borne by the electric consumers . We have already adopted the franchise tax regime for the private concessionaire of TRANSCO . We must do the same for the distribution utilities. In fact, I would go even further and apply the same policy on other public utilities such as water." 5 ScHADI As against the foregoing disquisition on the INTENT OF THE LAW ("Ratio Legis") , this Board cannot ignore the clear meaning of VERBA LEGIS. The explicit words employed by the provision of Section 234 (a) of R.A. 7160 rule out the applicability of the Ratio Legis principle. When the words of a statute are clear and indubitable, there is no room for interpretation on the Ratio Legis . To reiterate, this Board cannot ignore the express mandate of Section 234 (a) and (c) of R.A. 7160 which limits the scope of exemption from the Real Property Tax to the entities enumerated therein, thus: "SEC. 234. Exemptions from Real Property Tax . The following are exempted from payment of the real property tax:" "(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;" "(b) x x x" "(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;" "(d) x x x." III. COROLLARY ISSUE/ALTERNATIVE RELIEFS : DACcIH In paragraphs 64 to 65 of its Memorandum on Appeal, Petitioner-Appellant NGCP introduced a corollary issue/alternative relief, thus: "64. Lastly, the Charter of Petitioner-Appellant NGCP was enacted in order to upgrade and modernize the country's transmission grid facilities. It was noted in Sen. Enrile's sponsorship speech that there were several failed attempts to privatize TRANSCO before the concession was finally awarded to NGCP. The grant of exemption is therefore a commitment from the government and an incentive granted to NGCP in consideration of the capital it had to invest in upgrading and modernizing the transmission grid facilities." "65. As stated by the Supreme Court in San Roque Power Corporation vs. CIR , 6 'The legislative grant of tax relief (whether in the EPIRA Law or the Tax Code) constitutes a sovereign commitment of Government to taxpayers that the later can avail themselves of certain tax reliefs and incentives in the course of their business activities here. Such a commitment is particularly vital to foreign investors who have been enticed to invest heavily in our country's infrastructure, and who have been done so on the firm assurance that certain tax relief's and incentives can be availed of in order to enable them to achieve their projected returns on these very long-term and heavily funded investments. While the government's ability to keep its commitment is put in doubt, credit ratings turns to worse; the costs of borrowings becomes higher and the harder it will be to attract foreign investors. The country's earnest efforts to move forward will all be put to naught.'" aICcHA Petitioner-Appellant NGCP points out the fact that by virtue of the passage of R.A. 9136, otherwise known as the Electric Power Reform of 2001, or the EPIRA Law, TRANSCO was created to assume the Transmission Function of the National Power Corporation. Thereafter, with the enactment of R.A. 9511 on December 1, 2008 creating the National Grid Corporation of the Philippines (NGCP), the latter assumed the operation and management of TRANSCO's transmission lines and sub-station facilities. Hence, the beneficial use and management thereof were enjoyed by NGCP since January 15, 2009. Thus, the assertion of NGCP that the LBAA grossly erred in finding that NGCP should first pay the tax, otherwise the APPEAL ("PROTEST") shall be a GROUND FOR THE DISMISSAL OF THE PETITION. This Board finds the foregoing argument relevant and determinative of a just and equitable resolution of the instant Appeal. In the case of National Power Corporation vs. Province of Quezon and Municipality of Pagbilar , 7 the Supreme Court citing the case of Testate Estate of Concordia T. Lim v. City of Manila , 8 said: " . . . the unpaid realty tax attached to the property but is directly chargeable against the taxable person who has actual and beneficial use and possession of the property regardless of whether or not that person is the owner ." The provisions of R.A. 7160 which are applicable to this issue/alternative relief are Sections 216 and 218 thereof, thus: HSCATc "Section 216. Special Classes of Real Property . All lands, buildings, and other improvements thereon, actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and those owned and used by local water districts, and government-owned or -controlled corporations rendering essential public services in the supply and distribution of water and/or generation and transmission of electric power shall be classified as special ." (Emphasis supplied) "Section 218. Assessment Levels . The assessment levels to be applied to the fair market value of real property to determine its assessed value shall be fixed by ordinances of the sangguniang panlalawigan, sangguniang panlungsod or sangguniang bayan of a municipality within the Metropolitan Manila Area, at the rates not exceeding the following: (a) On Lands: EHaASD 'xxx xxx xxx' (b) On Buildings and Other Structures: 'xxx xxx xxx' (c) On Machineries 'xxx xxx xxx' (d) On Special Classes: The Assessment level for all lands, buildings, machineries and other improvements: Actual Use Assessment Level Cultural 15% Scientific 15% Hospital 15% Local water districts 10% Government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power 10%" In the instant case, machineries as enumerated in the August 14, 2012 Notice of Assessment, clearly fall under Special Classes of Real Property , the because following factors are present: IDTSEH (a) The lands, buildings and other improvements thereon must be owned and used by local water districts or owned and used by government-owned or -controlled corporations ; (b) The local water districts or the government-owned or -controlled corporations concerned must be rendering essential public services in the supply and distribution of water AND/OR IN THE GENERATION AND TRANSMISSION OF ELECTRIC POWER . Although, the subject properties per se do not fall under the category of EXEMPTION FROM REAL PROPERTY TAX as enumerated in Section 234 of R.A. 7160, they may be deemed as "Special Classes" of real property because (a) their ownership is retained by TRANSCO, a government-owned and -controlled corporation, and (b) the actual and beneficial use thereof has been transferred by TRANSCO to NGCP, which are rendering essential services in the generation and/or TRANSMISSION OF ELECTRIC POWER. R.A. 9511, "An Act Granting the National Grid Corporation of the Philippines a Franchise to Engage in the Business of Conveying or Transmitting Electricity through High Voltage Back-Bone System of Interconnected Transmission Lines, Substations and Related Facilities, and for Other Purposes" defines the nature and scope of the NGCP franchise, thus: DaIAcC "Section 1. Nature and Scope of Franchise. Subject to the provisions of the Constitution and applicable laws, rules and regulations, and subject to the terms and conditions of the concession agreement and other documents executed with the National Transmission Corporation (TRANSCO) and the Power Sector Assets & Liabilities Management Corporation (PSALM) pursuant to Section 21 of Republic Act No. 9136, which are not inconsistent therewith, there is hereby granted to the National Grid Corporation of the Philippines, hereunder referred to as the Grantee, its successors or assigns, a franchise to operate, manage and maintain, and in connection therewith, to engage in the business of conveying or transmitting electricity through high voltage back-bone system of interconnected transmission lines, substations and related facilities, system operations, and other activities that are necessary to support the safe and reliable operation of the transmission system and to construct, install, finance, manage, improve, expand, operate, transmission system of the Republic of the Philippines . The Grantee shall continue to operate and maintain the subtransmission system which have not been disposed by TRANSCO. Likewise, the Grantee is authorized and repair the nationwide transmission system and the grid of the Republic of the Philippines, ancillary business and any related business which maximized utilization of its assets such as, but not limited to, telecommunications system, pursuant to Section 20 of Republic Act No. 9136. The scope of the franchise shall be nationwide in accordance with the Transmission Development Plan, subject to amendments or modifications of the said Plan, as may be approved by the Department of Energy of the Republic of the Philippines." "Section 9 provides for tax incentives in favor of NGCP, thus:" SICDAa 'Section 9. Tax Provisions. In consideration of the franchise and rights hereby granted, the Grantee, its successors or assigns, shall pay a franchise tax equivalent to three percent (3%) of all gross receipts derived by the Grantee, from its operation under this franchise . Said tax shall in lieu of income tax and any and all taxes, duties, fees and charges of any kind, nature or description levied, established or collected by any authority whatsoever, local or national, on its franchise, rights, privileges, receipts, revenues and profits, and on properties used in connection with its franchise, from which taxes, duties and charges, the Grantee is hereby expressly exempted: Provided, That the Grantee, its successors or assigns, shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, as other corporations are now or hereby may be required by law to pay : Provided, further That payment by Grantee of the concession fees due to PSALM under the concession agreement shall not be subject to income tax and value-added tax (VAT).' It is clear from the charter of the NGCP, that inspite of its character as a private corporation it has been vested by law with certain powers and functions inherent in and appurtenant to the sovereign powers of the State, under the express provisions of R.A. 9511, "An Act Granting the National Grid Corporation of the Philippines a Franchise to Engage in the Business of Conveying or Transmitting Electricity through High Voltage Back-Bone System of Interconnected Transmission Lines, Substations and Related Facilities, and for Other Purposes." Such grant of powers to the NGCP under its charter includes the partial exercise of the sovereign powers of the state, such as the power of Eminent Domain under Section 4 of R.A. 9511. Likewise, the NGCP Charter embodies certain tax privileges/exemptions under Section 9 thereof, to wit: TAacHE "1) shall pay a franchise tax equivalent to three percent (3%) of all gross receipts, in lieu of income taxes, duties, fees and charges collected by any authority, local or national, on its franchise, rights, privileges, receipts, revenues and profits; and 2) provided, that the Grantee . . . shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, as other corporations are now or hereby may be required by law to pay." In interpreting and applying the aforequoted provisions of R.A. 9511, the Petitioner-Appellant NGCP attempted in paragraphs 64 and 65 of the instant Appeal to establish the intent of the law ("RATIO LEGIS") to grant NGCP tax reliefs or incentives for government-owned or -controlled corporations rendering essential public services in the supply and distribution of water and/or in the generation and transmission of electric power. Those fax reliefs and incentives as provided in Sections 216 and 218 of the same R.A. 7160 regarding the classification of SPECIAL CLASSES OF REAL PROPERTY are further defined under DOF-BLGF Circular No. 01-2007, where the BLGF categorically stated that lands, buildings and improvements owned by TRANSCO shall be assessed for real property taxation based on the ten percent (10%) assessment level pursuant to Section 218 of R.A. 7160 . DHIcET Under the constitutional restriction that taxation must be uniform and equitable, there is a proscription against the imposition and enforcement of tax collection which does not comply with the said rule. Uniform taxation means that property of the same kind must belong to the proper class and must be appraised UNIFORMLY and subject to the same ASSESSMENT LEVEL. Equitable taxation means that the appraisal and assessment must be based on fair standards so as to be equitable. Thus, it is required that the assessment must be on the basis of a uniform classification within each LGU, devoid of unjust or improper discrimination. In the case of Mactan Cebu International Airport Authority vs. Hon. Ferdinand J. Mactan, in his capacity as the Presiding Judge of the Regional Trial Court, Branch 20, Cebu City, the City of Cebu, represented by its Mayor, Hon. Tomas R. Osmea, and Eustaquio B. Cesa . 9 HDICSa "As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range , acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it . Nevertheless, effective limitations thereon may be imposed by the people through their Constitutions, Our Constitution, for instance, provides that the rule of taxation shall be uniform and equitable and Congress shall evolve a progressive system of taxation. So potent indeed is the power that it was once opined that 'the power to tax involves the power to destroy.' Verily, taxation is a destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for the support of the government. Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority . A claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations ." (Underscoring and emphasis supplied). "The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may provide which, however, must be consistent with the basic policy of local autonomy." HcDSaT In the instant case, the rigid rule of construction to the effect that " tax statutes must be strictly construed against the government and liberally in favor of the taxpayer " must be applied, particularly since the taxpayer falls under the exception to the Rule on Tax Exemption. Although Petitioner-Appellant NGCP is not a political subdivision or instrumentality of government, it is a private corporation which is vested by law and its franchise with certain public functions and essential public service such as the generation and transmission of electric power. Hence, the effect of the "Rule on Exemption" embodied in Section 234 of R.A. 7160 should not be applied strictissimi juris to NGCP, the result is merely to REDUCE the amount or levies of assessment of Real Property Tax. And so the provisions of Section 216 and 218 of R.A. 7160 shall apply, to reduce the amount of tax to be paid on the subject machineries as belonging to SPECIAL CLASS of real property, based on the assessment level of 10% of the market value thereof. In the case of Benguet Corporation vs. Central Board of Assessment Appeals, Local Board of Assessment Appeals of the Province of Benguet and Municipal Assessor of Itogon, Benguet : 10 IDaEHC "While local government units are charged with fixing the rate of real property taxes, it does not necessarily follow from that authority the determination of whether or not to impose the tax. In fact, local governments have no alternative but to collect taxes as mandated in Sec. 38 of the Real Property Tax Code, in which states:" 'Sec. 38. Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted.' "It is thus clear from the foregoing that it is the national government, expressing itself through the legislative branch, that levies the real property tax. Consequently, when local governments are required to fix the rates, they are merely constituted as agents of the national government in the enforcement of the Real Property Tax Code. The delegation of taxing power is not even involved here because the national government has already imposed realty tax in Sec. 38 above-quoted, leaving only the enforcement to be done by local governments." The rule making authority/power of the DOF-BLGF in relation to assessment of RPT is expressly provided by R.A. No. 7160, to wit: ASTcaE "SEC. 201. Appraisal of Real property. All real property, whether taxable or exempt, shall be appraised at the current and fair market value prevailing in the locality where the property is situated. The Department of Finance shall promulgate the necessary rules and regulations for the classification, appraisal, and assessment of real property pursuant to the provisions of this Code ." The Bureau of Local Government Finance (BLGF) of the Department of Finance (DOF), in the exercise of its rule-making power, laid down the specific guidelines on the application of the provisions of R.A. 7160 on local taxation. In said DOF-BLGF Circular No. 01-2007, the BLGF categorically stated that lands, buildings and improvements owned by TRANSCO shall be assessed for real property taxation based on the ten percent (10%) assessment level pursuant to Section 218 of R.A. 7160 . The restrictions on the actual exercise of the delegated power granted by the Legislature to the LGUs must be subject to the Constitutional mandate "that the rule on taxation must be uniform and equitable." Thus, although NGCP may not be exempt from payment of taxes on the subject real properties, the level of assessment must not be so arbitrary and disproportionate as to be violative of the Constitutional limitations that taxation must be uniform and equitable. DTCSHA The August 11, 2012 Notice of Assessment signed by Respondent-Appellee Nestor E. Apolonio for the properties in San Esteban, Ilocos Sur, indicates such arbitrary and excessive assessment levels of 80%, thus: ARP NO OLD ARP NO NEW KIND OF PROPERTY MARKET VALUE ASS. LEVEL ASSESSED VALUE 0008-00096 Exempt 0008-00576 Taxable Machinery PhP1,491,300.00 80% Php1,193,040.00 0008-00095 Exempt 0008-00577 Taxable Machinery PhP257,010.00 80% PhP205,610.00 0008-00094 Exempt 0008-00578 Taxable Machinery PhP143,960.00 80% PhP115,170.00 0008-00093 Exempt 0008-00579 Taxable Machinery PhP564,820.00 80% PhP451,860.00 0008-00098 Exempt 0008-00580 Taxable Machinery PhP701,400.00 80% PhP561,120.00 0008-00101 Exempt 0008-00581 Taxable Machinery PhP3,185,410.00 80% PhP2,548,330.00 0008-00102 Exempt 0008-00582 Taxable Machinery PhP3,188,960.00 80% PhP2,551,170.00 0008-00103 Exempt 0008-00583 Taxable Machinery PhP786,021.00 80% PhP628,820.00 0008-00104 Exempt 0008-00584 Taxable Machinery PhP12,238,322.00 80% PhP9,790,660.00 0008-00105 Exempt 0008-00585 Taxable Machinery PhP14,743,041.00 80% PhP11,794,430.00 0008-00106 Exempt 0008-00586 Taxable Machinery PhP467,230.00 80% PhP373,780.00 0008-00100 Exempt 0008-00587 Taxable Machinery PhP3,876,046.00 80% PhP3,100,840.00 0008-00097 Exempt 0008-00588 Taxable Machinery PhP1,981,975.00 80% PhP1,585,580.00 0008-00107 Exempt 0008-00589 Taxable Machinery PhP329,100.00 80% PhP263,280.00 0008-00099 Exempt 0008-00590 Taxable Machinery PhP1,522,563.00 80% PhP1,218,050.00 0008-00089 Control House 0008-00598 Taxable Control House PhP3,114,720.00 80% PhP2,180,300.00 This Board recognizes the laudable efforts of the local government units to implement their taxing authority under the Local Government Code. In the exercise of their taxing power, LGUs are mandated to uphold the operative principles of decentralization, particularly as embodied in Section 3 (d) and Section 3 (h) of R.A. 7160, which provide: cDSAEI Sec. 3. Operative Principles of Decentralization . The formulation and implementation of policies and measures on local autonomy shall be guided by the following operative principles: (a) x x x (b) x x x (c) x x x (d) The vesting of duty, responsibility, and accountability in local government unit shall be accompanied with provision for reasonable adequate resources to discharge their powers and effectively carry out their functions; hence, they shall have the power to create and broaden their own sources of revenue and the right to a just share in national taxes and an equitable share in the proceeds of the utilization and development of the national wealth within their respective areas; CScTED (e) x x x (f) x x x (g) x x x (h) There shall be a continuing mechanism to enhance local autonomy not only by legislative enabling acts but also by administrative and organizational reforms. Statutes must be understood not only in their literal context but also within the framework of contemporaneous events and circumstances which gave rise to and attended their passage into law. Thus, today the CBAA must take cognizance of the generally accepted fact which is that due to the advent of improving technology, not to mention the ever-increasing costs demanded by the need to manufacture more complex and powerful machinery and apparatus, the Legislature gave recognition to the need to separate the two (2) primordial activities and functions of the power generation industry: power generation proper or, to use a more readily recognizable term; 'power plants' and the so-called "access" activity called transmission and distribution. This inference is readily discernible from even a cursory reading of the provisions of both R.A. 9136 (the EPIRA law of 2001) and R.A. 9511 which are both at the heart of the controversy of this case. EDCcaS In the totality of the legal and business environment wherein the parties of this case reside, both of them have roles to fulfill, as well as responsibilities to live up to. Briefly described, the persona of the parties are: (1) on the part of local government units, is quite obvious that the Petitioner-Appellant is viewed as a rich source of revenue for the exercise by the Province of Ilocos Sur of its taxing power; and (2) on the other hand, government is mainly tasked with encouraging investors, both local and foreign, to come in and pool large amounts of their private funds into activities which are traditionally responsibility of the State. In an ideal environment, both the national government and local authorities work in total synchronicity that would benefit both local and national interests. However, on occasion, interests and responsibilities seem to collide at cross-purposes, resulting in situations like the one which is now present before us. Thus, in order to bring mutually acceptable resolution to the situation, the CBAA is once again, tasked with its responsibility to resolve the case in a manner clearly enunciating each party's roles and responsibility, all within the framework of existing laws, rules and regulations, regardless of their seeming contradiction with each other. In the performance of its duties and functions to adjudicate appeals in the assessment of real properties on the basis of substantial and relevant evidence, as mandated under Section 230 of R.A. 7160, this Board must now blaze a trail to reconcile the apparent conflicts and contradictions in the provisions of R.A. 9511 and R.A. 7160 in the spirit of the Rule in Statutory Construction "UT MAGIS VALEAT QUAM PEREAT" (Provisions of law must be viewed in their totality; that they should stand together rather than fall apart). The clauses and phrases of a statute must not be taken separately but in relation to the statute's totality. Unless clearly repugnant, the provisions of statutes must be reconciled. 11 cDCEIA The logic and rationale of this conclusion is fortified by the recent enactment of Executive Order No. 173, s. 2014 entitled "Reduction and Condonation of Real Property Taxes and Interest/Penalties Assessed on the Power Generation Facilities of Independent Power Producers under Build-Operate-Transfer Contracts with Government-Owned and/or -Controlled Corporations." The enumeration and identification of corporate entities engaged in the generation and transmission of electricity, as well as the nature and extent of tax relief and incentives mandated in E.O. 173 echo the very same rationale and objectives found in the journal of legislative deliberations that transpired during the enactment of R.A. 9511, an "Act Granting the National Grid Corporation of the Philippines to Engage in the Business of Conveying or Transmitting Electricity. . . ," as elaborated by Petitioner-Appellant in paragraphs 53 to 16 of the instant Memorandum on Appeal. E.O. No. 173 enumerates the purposes for those tax reliefs/incentives for government-owned or private entities within the context of the present conditions and the impending or incipient power crisis, thus: "WHEREAS, under Section 234 of Republic Act No. 7160 (Local Government Code of 1991), Government-Owned and/or -Controlled Corporations (GOCCs) engaged in the generation and transmission of electricity enjoy a number of exemptions/privileges with respect with respect to real property taxes, including an assessment of 10% on all its lands, buildings, machineries and other improvements (Sections 216 and 218), as well as an exemption for all machinery and equipment that are actually, directly and exclusively used in the generation and transmission of electric power and machinery and equipment used for pollution control and environmental protection." ISHaCD "WHEREAS, various Local Government Units have taken the position. . . x x x" "WHEREAS, the payment of said real property taxes by the affected IPPs, some of which obligation have been contractually assumed by the GOCCs and carries full faith of the National Government, threatens the financial stability of the GOCCs, the government's fiscal consolidation efforts, and the stability of energy prices." "WHEREAS, the forcible collection of the subject real property taxes by the LGUs concerned will trigger massive direct liabilities on the part of National Power Corporation/Power Sector Assets and Liabilities Management Corporation and other affected GOCCs, may increase the cost of electricity, and may trigger further cross-defaults and significant economic losses across all sectors." It is in this light that this Board views the whole picture of the tax provisions of R.A. 7160 on Real Property Taxation, which rule out the tax exemption by virtue of the last paragraph of Section 234 thereof but which allow under Sections 216 and 218 thereof for the classification of certain SPECIAL CLASSES OF REAL PROPERTY, including machineries and improvements thereon which shall pay reduced real property taxes at an assessment level of 10% by way of incentives for entities rendering essential services on health, water, electricity, etc. Such grant of tax incentives may be viewed as consistent with the doctrines laid down by the Supreme Court in the aforecited cases of Mactan Cebu International Airport Authority vs. Hon. Ferdinand J. Marcos, et al.; and Benguet Corporation vs. CBAA, et al. WHEREFORE , in view of all the foregoing, this Board hereby renders JUDGEMENT as follows: DHESca 1. Finding merit in the instant Appeal, and declaring the ORDERS of Respondent-Appellee LBAA dated August 12, 2013 and January 15, 2014 null and void for being contrary to law; 2. DENYING the prayer of Petitioner-Appellant NGCP that the subject properties/machineries be RECLASSIFIED and REVERTED to their classification as EXEMPT from the real property tax; and 3. WITH MODIFICATION, that the subject properties/machineries be CLASSIFIED under SPECIAL CLASS under Section 216 and Section 218 of R.A. 7160 subject to the 10% assessment level, to be paid by Petitioner-Appellant NGCP. SO ORDERED. Manila, Philippines, March 27, 2015. cDTACE (SGD.) MANUEL DE JESUS SIAYNGCO Chairman (SGD.) ROBERTO D. GEOTINA Member (SGD.) THELMA A. MARIANO Member Footnotes 1. Dated 11 August 2012. 2. Approved by Municipal Assessor Respondent Engr. Nestor E. Apolonio and a certain Romel T. Datoc as Provincial Assessor. 3. Approved by Asst. Provincial Assessor Materno P. Ato. 4. Sponsorship speech of Sen. Juan Ponce Enrile as Chairman of the Committee on Public Services, for the approval and consideration of House Bill No. 4358, under Committee Report No. 95 entitled: "AN ACT GRANTING THE NATIONAL GRID CORPORATION OF THE PHILIPPINES A FRANCHISE TO OPERATE, MANAGE AND MAINTAIN, AND IN CONNECTION THEREWITH, TO CONSTRUCT, INSTALL FINANCE, IMPROVE, EXPAND, REHABILITATE AND REPAIR THE NATIONWIDE TRANSMISSION SYSTEM AND THE GRID OF THE REPUBLIC OF THE PHILIPPINES." Senate Journal No. 13, Session 13, 01 September 2008. [Underscoring Supplied] 5. Speech of Senator Juan Ponce Enrile before the Manila Overseas Press Club on 22 July 2009. [Underscoring supplied]. 6. G.R. No. 180345, 25 November 2009. 7. G.R. No. 171586, July 15, 2009. 8. 182 SCRA 482 [1990]. 9. G.R. No. 120082, September 11, 1996. 10. G.R. No. 100959, June 29, 1992. 11. Sajonas vs. Court of Appeals , n 258 SCRA 79 (1996). n Note from the Publisher: Written as Sajoras vs. Court of Appeals in the original document.