Provincial Assessor of Agusan del Sur v. Filipinas Palmoil Plantation, Inc.

[CBAA CASE NO. M-12. November 21, 2001.] PROVINCIAL ASSESSOR OF AGUSAN DEL SUR , respondent-appellant , vs. LOCAL BOARD OF ASSESSMENT APPEALS OF AGUSAN DEL SUR , appellee , FILIPINAS PALMOIL PLANTATION, INC. , petitioner-appellee . DECISION This is an appeal filed on July 16, 1999 by Respondent-Appellant Provincial Assessor of Agusan del Sur from the decision rendered by the Local Board of Assessment Appeals of the Province of Agusan del Sur on June 8, 1999 in an unnumbered case entitled "Pilipinas Palm Oil Co., Inc., Petitioner, versus The Provincial Assessor's Office of Agusan del Sur, Respondent." Respondent-Appellant alleges that he received a copy of the questioned decision on June 18, 1999. The records of this case are not complete but Respondent-Appellant stated that in "February and March 1993, the company filed appeals with the appellee Local Board, contesting herein appellant's revised assessments for the period 1991 to 1993 , on the market value of said company's oil palm trees, its density per hectare, plantation roads, culverts, bridges, pipes and canals, the lands, staff houses and road equipment and haulers." We assume, therefore, that the appeal of the Petitioner-Appellee before the Local Board was filed seasonably and that the assessments questioned were those for 1991-1993 revisions. Respondent-Appellant assigned the following errors or issues, to wit: I. The Decision rendered by Appellee is null and void ab initio , its proceedings fatally defective. II. On the merits, the Appellee Local Board ERRED in finding that: A. The market value of one-fruit bearing oil palm tree is P85.00 when, as duly assessed, it should be P207. B. The total number of fruit bearing oil palm tree is only 98 per hectare when as duly assessed, it is 110. C. The company's plantation roads, whether primary, secondary or tertiary, and its bridges, culverts, pipes and canals should not be subject to tax when in fact, even the company itself does not seek exemption but merely asks for the reduction of the market value thereof which, as duly assessed per linear kilometer are: Primary Road P279,270 (62.550 km.) Secondary 135,135 (171.050 km.) Tertiary 67,567 (289.652 km.) while bridges, culverts and pipes, being separate and distinct structures with different cost estimates should be, as they are, being appraised/assessed separately from the roads. CAIHTE D. The market value for the lands assessed at P11,000 per hectare as against the company's claim of P6,000, should be resolved in accordance with the rules and regulations of the Department of Agrarian Reform, when under Republic Act No. 7160, same shall be prepared in accordance with the rules and regulations of the Department of Finance. E. Residential housing units with market valuation of P150,000 or less are exempt from taxation, when under Republic Act 7160 and local ordinance, the exemption for qualified buildings (P150,000 or less) is effective only starting 1994, not for the revision period in question (1991-1993). F. The company's road equipment and haulers are not real properties but movables, when under Republic Act 7160 they are properties subject to taxation. G. The milling plant shall be assessed at only 20% of its acquisition cost even if fully depreciated when, under Republic Act 7160, the depreciation allowance shall not exceed 5% of original/replacement cost for each year or use. ISSUE NO. I Respondent-Appellant says that the Decision rendered by Appellee is null and void ab initio , its proceedings fatally defective on the following grounds: 1. The Board members took no oath of office. 2. The Appellee Local Board never had a quorum; only one member appeared at the hearing. 3. The Local Board never deliberated on its Decision, never conducted an ocular inspection. 4. The assailed Decision speaks for itself; it was not on substantial evidence, but purely on the company's self-serving documents and bare assertions, totally ignoring the evidence for respondent-appellant. In support of the above statement, Respondent-Appellant cited the testimony of Engr. Domingo A. Ranario during a joint hearing of the committees on Ways and Means, Justice and Human Rights, and Civil Service of the Sangguniang Panlalawigan of Agusan del Sur on July 7, 1999. Engr. Ranario was the Assistant Provincial Engineer/OIC of the Provincial Engineering Office of Agusan del Sur. The gist of Mr. Ranario's testimony in said joint hearing was to the effect that they (the Register of Deeds, Atty. Eduardo Sanchez as Chairman, the Provincial Prosecutor, Atty. Hilarion Clapis, and Engr. Ranario) did not take their oaths of office as Chairman and Members of the Local Board; that the Local Board did not conduct any ocular inspection of the subject properties; and that the Local Board never deliberated on the case. In its Comment/Answer dated September 30, 1999, Petitioner-Appellee Filipinas Palm Oil Plantation, Inc. contends that "respondent-appellant is already estopped from questioning the authority of the appellee just because of the so-called lack of oath of office of the members of the LBAA when they took action on the petition of the herein petitioner/appellee. Granting for the sake of argument that the appellee took no oath of office when they assumed as chairman and members of the LBAA, this issue is not enough to nullify or void the decision it rendered. Their membership in the Board is not by virtue of appointment but by virtue of their respective offices they are holding of which they took their necessary oath. Furthermore, Petitioner-Appellee should not be made to share the blame nor suffer from the alleged lack of oath of office of the Chairman and Members of the LBAA as it has no hand or control over them." DETACa With respect to the second ground of Issue No. I, Petitioner-Appellee says that "Again, respondent-appellant should have questioned this right then and there for he was around and actively participated in the hearing and was even presented by his counsel. And why only now? As to the third ground that the appellee never deliberated on its decision and never conducted an ocular inspection is a matter best address(ed) to the appellee and should not in any way affect the petitioner-appellee. The fact that the chairman and all the members of the board affixed their signatures in their written decision is already sufficient to prove that they have deliberated the issues raised by both parties before coming up with their decision." On August 15, 2000, this Board received in Manila from Respondent-Appellant a "Manifestation With Motion to Admit Additional Evidence" alleging that Provincial Prosecutor Hilarion Clapis was a member of the Board of Directors of NDC-Guthrie Plantations, Inc. (NGPI), predecessor of herein petitioner-appellee at the time petitioner-appellee filed its appeal with the LBAA in February and June 1994. Attached to said manifestation was a machine copy of NGPI's General Information Sheet as of 08 March 1994 filed with the Securities and Exchange Commission wherein it was shown that a "Hilarion Clapis, Jr." was a member of the Board of Directors of NGPI. Also received in Manila on September 22, 2000 by this Board was a "Motion to Admit Another Newly Discovered Evidence." Attached to said motion was a "Counter-Affidavit" supposedly executed by Atty. Eduardo C. Sanchez, Acting Register of Deeds for Agusan del Sur, wherein it was stated that Atty. Sanchez "do not recall having convened the Board of Assessment Appeals for Agusan Province on September 16, 1998 which, as records show, was presided over, without my knowledge or consent, by respondent HILARION CLAPIS, the then incumbent Provincial Prosecutor of Agusan del Sur" and "I have not even been aware, except at this time, that respondent Clapis had been a member of the Board of Directors of Filipinas Palm Oil Plantation, Inc., the tax assessment of which were the subject of the September 6, 1998 proceedings held by respondent Clapis in my absence." It amazes us to note that Atty. Eduardo Sanchez, as Chairman, and Engr. Domingo Ranario, as a Member, of the LBAA of Agusan del Sur, after voluntarily affixing their signatures unto the decision under review, disclaims any responsibility for it. In a criminal case, this is tantamount to pleading insanity as a defense. Anyway, since this case has been pending for a long period of time, this Board has decided to set aside the questioned decision and decide this case on its merits. ISSUE NOS. II(A) AND II(B) We shall discuss Issues II(A) and II(B) together since they are inter-related with each other. On Issue No. II(A), the Respondent-Appellant maintains that the market value of each fruit-bearing oil palm tree should be P207.00, instead of P85.00 as stated in the contested decision of the Local Board. Respondent-Appellant explained that the market value of P42.00 per tree had "stagnated" from 1981 to 1990; that the increase in value in 1991 was only 130%. The increase in value for 1992 and 1993 was only 260% gradually implemented as provided for under BLGF MC No. 36-90; that P207.00 was the third class market value applied in the 1991-93 revaluation duly approved by the Department of Finance. The position of Respondent-Appellant is that the P207.00 market value per tree is based on his findings; that there are 110 effective fruit-bearing trees out of 128 trees density per hectare; that are two (2) Fresh Fruit Bunches (FFBs) per tree per harvest; that there are three (3) harvests in a month during the eight-month high yielding season the total production is 5,280 FFBs per hectare; the during the low-yielding season of four months the average yield is 50 FFBs for all 110 trees per harvest; that there are three (3) harvests per month with a total of 600 FFBs for four (4) months per hectare; that the total harvest in a year is 5,880 FFBs per hectare; and that the average weight of each FFB is ten (10) kilograms. In short, therefore, Respondent-Appellee, based the market value of P207.00 per tree on the assumption that each hectare of 110 trees yields 58.80 metric tons of FFBs per year. aDSIHc Petitioner-Appellee, for its part, stated that Respondent-Appellant came up with the questioned assessment in 1993 using the data coming from KENRAM (Phils.), Inc. of Sultan Kudarat and Menzi Agricultural Corporation of Basilan which alleged that for every one hectare of palm oil tree plantation 51.8 metric tons of Fresh Fruit Bearing Bunches is produced per year which data are more than 100% higher than the actual yearly production of petitioner-appellee (19.04) metric tons per hectare per year). Attached to Petitioner-Appellee's Comment/Answer are: (a) a Certification dated July 19, 1999 from Kenram (Philippines) Inc., as Exhibit "D", stating the annual production for Fresh Fruit Bunches (FFB) from 1991 through 1998 with an average of 15.103 FFBs for the period; (b) a Certification dated July 16, 1999 from Menzi Agricultural Corporation, as Exh. "E", stating that "per records the 279-hectare oil palm plantation of MENZI AGRICULTURAL CORPORATION in Isabela Basilan produced an average of 3,730 tons of fresh fruit bunches (FFB) annually from 1990 to 1993 before its turn-over to land reform. This translates to 710 tons palm oil annually at an average FFB to palm oil recovery of 19%, or a plantation average of 13.40 tons FFB and 2.54 tons palm oil per hectare per year"; and (c) a Certification from AMOIL, Incorporated dated July 22, 1999, as Exh. "F", stating the number of tons FFB produced from 1991 to 1998. This last certification shows that the average number of tons FFB per hectare per year is 14.774. For the year 1998 the average was 16.28 tons FFB per hectare. Respondent-Appellant cited a portion of Petitioner-Appellee's 'Motion to Dismiss/Answer' dated November 07, 1995 in Civil Case No. 1038, RE: National Power Corporation (Plaintiff) versus Filipinas Palm Oil Industries, Inc. et al., (Defendant) , viz. : x x x "3. The defendant admits partially the allegations in Paragraph 4, but denies that the unit per tree (highest) is P207.00, the truth being that the unit value per palm oil tree is P2,903.23. This is based on the compensation paid by Philippine Long Distance Telephone Company for thirty one (31) oil palm trees it cut down to put up its relay station in Bayugan per Official Receipt No. 0929, x x x " Petitioner-Appellee explains that "The P2,903.23 as compensation for every oil palm tree affected by the NPC lines is based on the life expectancy of the tree and its economic value for its entire life span. On Issue No. II(B), Respondent-Appellant says that the total number of fruit-bearing oil palm tree per hectare is 110, instead of only 98 as stated the Local Board's decision. It (Respondent-Appellant) cited the letter (Annex K of Appeal) of the general of NDC-Guthrie Plantation, Inc. (predecessor of Petitioner-Appellee) dated 4 May 1998 and addressed to the Sangguniang Panlalawigan of Agusan del Sur in which it is stated that the density and effective number of trees per hectare is 107. Respondent-Appellant also stated that KENRAM (Phils.) Inc. (Sultan Kudarat) has a plant density and effective number of trees of 142 per hectare; that Menzi Agricultural Corp. (Isabela, Basilan) has a density of 140 trees with effective trees of 135-137 per hectare; and that Agusan Plantations, Inc. (Agusan del Sur) has a density of 128 trees per hectare with effective trees of 102. Petitioner-Appellee opined that its predecessor, NDC-Guthrie Plantation, Inc. could have erred in claiming that for every hectare of palm oil tree plantation there is an average density of 107 hills and its effective or fruit bearing trees is also 107. "Petitioner-Appellee may agree that the average density per hectare is 107 but cannot agree on the claim that every hectare has an average density of 107 hills also because it is an admitted fact that not all growing trees are fruit-bearing. In fact the claim of Petitioner-Appellee is that for every hectare, the effective or fruit-bearing trees is 92." ETHIDa To support its claim, Petitioner-Appellee attached to its Comment-Answer, as Exh. "G", a document entitled "HECTARAGE STATEMENT (ACQUISITION RECORDS) ACTUAL PALM COUNT 1996 & PALMS PER HECTARE," which document is reproduced as follows: MALIGAYA CABANTAO Field No. Hectares Actual Hill Count Palms per Hectare Hectares Actual Hill Count Palms per Hectare 1 123 13,970 114 91 9,393 103 2 102 10,743 105 104 9,840 95 3 101 10,710 106 109 10,209 94 4 106 10,996 104 103 10,332 100 5 56 6,880 123 102 9,424 92 6 118 14,267 121 136 14,756 109 7 101 12,721 126 125 12,400 99 8 138 11,784 85 59 6,448 109 9 129 10,021 78 91 9,102 100 10 64 5,944 93 110 12,322 112 11 - - - - - - 1,038 108,036 106 1,030 104,226 101 MATI LAPINIGAN Field No. Hectares Actual Hill Count Palms per Hectare Hectares Actual Hill Count Palms per Hectare 1 102 8,804 86 166 16,740 101 2 114 10,540 92 135 12,028 89 3 115 10,664 93 118 13,020 110 4 102 11,656 114 137 11,160 81 5 117 10,292 88 94 8,184 87 6 100 10,912 109 74 7,936 107 7 102 14,508 142 140 12,400 89 8 98 8,804 90 135 10,416 77 9 96 10,168 106 - - - 10 111 12,028 108 - - - 11 - - - - - - 1,057 108,376 103 999 91,884 93 EBRO BUENA SUERTE Field No. Hectares Actual Hill Count Palms per Hectare Hectares Actual Hill Count Palms per Hectare 1 48 6,514 136 117 13,013 1111111 2 130 12,761 98 111 11,550 104 3 86 10,141 118 111 11,288 102 4 118 12,342 105 91 11,001 121 5 110 10,369 94 69 6,844 99 6 113 11,081 98 126 13,384 106 7 77 7,987 104 116 11,433 99 8 116 11,927 103 108 9,932 92 9 96 9,448 98 - - - 10 72 7,312 102 - - - 11 - - - - - - 966 99,882 106 849 88,445 104 TAGBAYAGAN BAYUGAN Field No. Hectares Actual Hill Count Palms per Hectare Hectares Actual Hill Count Palms per Hectare 1 115 14,146 123 112 12,162 109 2 85 10,145 119 105 12,699 121 3 89 10,963 123 78 9,484 122 4 119 14,189 119 123 12,594 102 5 111 13,870 125 82 8,795 107 6 122 12,969 106 80 8,866 111 7 130 15,319 118 78 8,432 108 8 101 12,453 123 93 10,401 112 9 124 13,332 108 129 14,541 - 10 106 11,969 113 41 5,112 - 11 63 7,431 - - - - 1,165 136,786 118 921 103,086 112 During the hearing of this case on November 24, 1999 in Patin-ay, Prosperidad, Agusan del Sur, the Hearing Officer pushed for an actual count to be conducted on the entire plantation, but both parties informed that it would take a long period of time to complete the task. Therefore, it was agreed, and so ordered by the Hearing Officer, that a sample field inventory be conducted jointly by authorized representatives of both parties. Field No. 8, containing an area of 108 hectares, located at Barangay Suerte, San Francisco, Agusan del Sur was chosen as the subject of the sample field inventory. The actual field count was conducted on December 1, through 14, 1999. Sent to this Board in Cebu under cover dated January 4, 2000, the Inspection/Inventory Report dated December 22, 1999 shoed the actual number of trees counted in the Field No. 8 abovementioned as 9,820. The report concluded that the number of trees per hectare was 119.75 or 119, arrived at by dividing 9,820 by 82 hectares, because the remaining 26 hectares did not count for being allegedly brushland and swampland where no palm oil tree was planted. The report was signed by representatives of the Municipal and Provincial Assessment Offices. Contrary to the agreement, the representatives of petitioner-appellee were left out in the reporting process, for which, Petitioner-Appellee cries foul. The 26 hectares of brushland or swampland is equivalent to 24.07% of the total area of Field No. 8 mentioned above. There is no evidence showing that Field No. 8 is differently situated from the other fields in the plantations. Hence, it is safe to assume that the condition of Field No. 8 is true to all the Fields in the entire plantation. If we used the figure 119.75 or 119 as the average number of trees per hectare to arrive at the total number of trees in the plantation, we should deduct from the total plantation area 24.07% thereof before we multiply the net area (75.93%) by 119.75 or 119 trees per hectare. If we divided the total number of trees in Field No. 8, which is 9,820 trees, by the total number of hectares in the same field, which is 108 hectares, the answer would be 90.926 trees per hectare. This, more or less, coincides with the Petitioner-Appellee's "Hectarage Statement" shown above which lists Field No. 8 in Buena Suerte as having an area of 108 hectares with a total 9,932 trees or 92 trees per hectare. We are, therefore, inclined to believe, as we do believe, the listings under the "Hectarage Statement" of Petitioner-Appellee as true and correct. Annex "A" to the Petitioner-Appellee's original appeal to the LBAA, which is the "Crop Statement For Years 1991-1997," reveals that the harvests for the years 1991 through 1993 were as follows: cSEDTC 1991 1992 1993 Area Has % of Bunches # of Tons Yield/ Yr. % of Bunches # of Tons Yield/ Yr. % of Bunches # of Tons Yield/ Yr. Maligaya 1,038 1,079,322 14,890 14.34 1,151,305 17,308 16.67 927,166 15,769 15.19 Cabantao 1,030 824,179 11,985 11.64 886,933 14,419 14.00 664,765 12,452 12.09 Mati 1,057 1,159,822 16,478 15.59 1,106,871 17,077 16.16 890,064 16,207 15.33 Lapinigan 999 1,210,479 13,601 13.61 1,187,364 15,285 15.30 934,193 14,846 14.86 Ebro 966 1,532,346 16,356 16.93 1,411,978 17,970 18.60 1,165,517 16,782 17.37 Buena Suerte 849 1,406,898 13,375 15.75 1,440,284 15,710 18.50 1,151,754 14,745 17.37 Tagbayagan 1,165 2,343,616 22,910 19.67 2,374,391 24,275 20.84 1,913,099 21,440 18.40 Bayugan 921 1,525,723 15,394 16.71 1,519,012 17,758 19.28 1,388,483 17,563 19.07 Total 8,025 11,082,385 124,989 15.57 11,078,138 139,802 17.42 9,035,041 129,804 16.07 On the other hand, the Notes to Financial Statements prepared by the Commission on Audit reveal the following: Total production for the year in metric tons: 1991 1992 1993 Fresh Fruit Bunches: Harvested 124,958 139,597 129,810 Processed 144,964 153,579 146,447 Crude Palm Oil 33,665 34,767 33,638 Palm Kernel 7,599 7,970 7,555 Sales for the year in metric tons: Crude Palm Oil 34,805 32,525 33,975 Palm Kernel 7,654 7,713 7,289 If we divided the tons of FFBs found by the Commission on Audit by the total number of hectares (8,025) in Petitioner-Appellee's plantation, the results would be 15.57, 16.175 and 17.395 tons per hectare for the years 1991, 1992 and 1993, respectively, figures which are, more or less, equal to those reported by Petitioner-Appellee. We are, therefore, inclined to believe, as we do believe, as true and correct, the findings of the Commission on Audit for we have no reason to doubt it. There are a total of 840,721 trees in Petitioner-Appellee's plantations. Divide this by 8,025 hectares and we have an average of 104.76 trees per hectare. The market value of P207.00 per tree used by the Assessors is based on 110 trees per hectare producing 58.80 metric tons per year. Since there are only 104.76 trees per hectare, the production per year per hectare, as far as the Assessors are concerned, should have been 56.00 metric tons, that is, 58.80 divided by 110 and multiplied by 104.76. As we said earlier, we believe that the average yield per hectare per year for 1993 was 15.57 metric tons. This is equivalent to 27.80% of the assessors' findings based on 104.76 trees per hectare. The correct market value per tree, is P57.55, that is, 15.57 divided by 56.00 and multiplied by P207.00. In view of the foregoing, the market value for each oil palm tree should be FIFTY-SEVEN & 55/100 (P57.55). The assessment for each municipality shall be based on the corresponding number of trees as listed in Petitioner-Appellee's "Hectarage Statement" discussed hereinabove. ISSUE NO. II(C) On Issue No. II(C), Respondent-Appellant stated that Appellee Local Board erred in finding that the Company's plantation roads are not subject to tax on the ground "that these roads are intermittently used by the general public" since these roads "are accessible only to outsiders who sign under oath a company form 'Undertaking/Waiver' . . . whereby for a limited period the outsider 'obligates himself to voluntarily submit to searches by the company guards.' SDAaTC While Petitioner-Appellant impliedly admits that it claimed that the correct assessed values of the roads are P105,000.00 for Primary Roads, P52,500.00 for Secondary Roads and P26,250.00 for Tertiary Roads, it disclaims any liability for realty taxes on the roads and bridges on the ground that Petitioner-Appellee is but the lessee of these properties, the owner of the land being the lessor-cooperative. The roads are permanent improvements on the land and, although the same improvements were introduced by Petitioner-Appellee, they inure to the benefit of the landowner by right of accession. Further these roads and bridges, although built for the use and benefit of Petitioner-Appellee are also being used by members of the lessor-cooperative and by the general public. To support its contention, Petitioner-Appellee cited the case of Bislig Bay Lumber Company, Inc. versus the Provincial Government of Surigao, 100 Phil. 303, where the Supreme Court ruled as follows: "We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that was constructed by appellee belongs to the government by right of accession not only because it is inherently incorporated or attached to the timber land leased to appellee but also because upon the expiration of the concession, said road would ultimately pass to the national government (Art. 440 and 445, New Civil Code, Tabotabo vs. Molero , 22 Phil. 418). In the second place, while the road was constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract entered by the appellee and the government, its use can also be availed of by the employees of the government and by the public in general." Petitioner-Appellee also stated that, although the lease contract between Petitioner-Appellee and the cooperative provides that real property taxes on the improvements made by the Petitioner-Appellee shall be for the account of the latter, there are no realty taxes to speak of since the lessor, being a duly registered Multi-Purpose Cooperative, is exempted from payment of the realty taxes pursuant to the provisions of Section 234 of R.A. 7160, otherwise known as the Local Government Code of 1991, thus: "Sec. 234. Exemption from Realty Property Tax. The following are exempted from payment of the Real Property Tax: "xxx xxx xxx "(d) All real property owned by duly registered cooperative as provided for under R.A. No. 6939, and "xxx xxx xxx" During the clarificatory hearing of this case on November 24, 1999 it was established that the Petitioner-Appellant requires persons entering the compound to sign a certain undertaking for security purposes only. Other than this, the general public used the roads freely. acEHCD On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and NDC-Guthrie Plantations, Inc., as Lessee, entered into a "Lease Agreement" (acknowledged before Notary Public Ms. Nora C. Dimagondayao as Doc. No. 68, Page No. 15, Book No. 1, Series of 1990) covering the agricultural lands transferred by NDC to the DAR, which lands the DAR ultimately distributed undivided to qualified workers-beneficiaries. As stated in the first "whereas" clause of this lease agreement, the same agricultural lands were originally covered by a Contract of Lease executed by and between NDC as Lessor and NGPI as Lessee on December 29, 1982, the term of lease being twenty-five (25) years from January 1, 1982. The second "whereas" clause of this Lease agreement states that the transfer of subject lands from NDC to DAR was made on September 27, 1988. On RENTALS, the same agreement between NGPI Multi-Purpose Cooperative, Inc. and NDC-Guthrie Plantations, Inc. provides thus: "2.1 In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR the following annual rentals: "1) An annual fixed rental, in the following amount "SIX HUNDRED THIRTY FIVE PESOS" (P635.00) PER HECTARE PER ANNUM which would cover the following: "(1) All Taxes on the Land "(2) Administrative charges "(3) Amortization charges "It is understood that, if the annual fixed rental of "SIX HUNDRED THIRTY FIVE PESOS" (P635.00) is insufficient to pay any increase on the land taxes, the Lessee shall pay the difference, provided such increase does not exceed ten percent (10%) of the immediately preceding tax imposed on the land; provided further, that any increase beyond these percentage shall be borne equally by the LESSOR and LESSEE. "The foregoing notwithstanding, it is understood and agreed that at all times, liability for realty taxes on the Leased Property Primarily and principally lies with the LESSOR and any reference herein to payment by LESSEE of said taxes is only for purposes of earmarking the proceeds of the rentals herein agreed upon." Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased Property except those improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of the LESSEE." Clause No. 9.4 of the same lease agreement provides that ". . . All fixed and permanent improvements, such as roads and palm trees introduced on the Leased Property, shall automatically accrue to the LESSOR upon termination of this Lease Agreement without need of reimbursement." All the above-cited stipulations in the lease agreement between NGPI Multi-Purpose Cooperative and NDC-Guthrie Plantations, Inc. were reconfirmed and reaffirmed in the Addendum to Lease Agreement entered into by and between NGPI Multi-Purpose Cooperative and Filipinas Palmoil Plantations, Inc. on January 30, 1998 and acknowledged before Notary Public Mr. Nicasio R. Paderra as Doc. No. 18, Page No. 04, Book No. 1, Series of 1998. The main subject of said Addendum was the extension of the term of the lease agreement up to December 31, 2032, along with economic benefits to the lessor other than rentals. There is no dispute that the roads are on the land owned by NGPI Multi-Purpose Cooperative which leased the same to Petitioner-Appellee. These roads belong to the Multi-Purpose Cooperative, not only by right of accession but also by express provisions of the Contract of Lease. The liability of Petitioner-Appellee for realty taxes, if any, on these roads would be due to the Multi-Purpose Cooperative in accordance with the lease agreement. ISSUE NO. II(D) The appellee Local Board ERRED in finding that the market value for the lands assessed at P11,000 per hectare as against the company's claim of P6,000, should be resolved in accordance with the rules and regulations of the Department of Agrarian Reform, when under Republic Act No. 7160, same shall be prepared in accordance with the rules and regulations of the Department of Finance. Respondent-Appellant stated that, based on the average conversion factor of the Foreign Exchange Rate of Peso/Dollar (FOREX) and the Consumer Price Index (CPI) of all Income Household in the Philippines, of years 1979 and 1988, the equivalent value of P4,300.00 cost per hectare in 1979 would be P13,659.38 per hectare in 1988. This based on the following computations: SDHTEC FOREX 1988 = 21.8500 = 2.9617 or 296.17% FOREX 1979 = 7.3776 CPI 1988 = 398.5 = 3.3915 or 339.15% CPI 1979 = 117.5 Average Conversion Factor: 296.17% + 339.15% = 317.66% 2 The acquisition cost of P4,300.00 per hectare in 1979 by NDC, when multiplied by the average conversion factor of 317.66%, would translate to P13,659.38 per hectare in 1988. Respondent-Appellant assessment for 1991-93 was P11,290.00 per hectare. Petitioner-Appellee contends that when NDC acquired the land at P4,300.00 per hectare the land was still undeveloped, forested and with no infrastructures, like roads and bridges, yet. When the DAR acquired it from the NDC at P6,000.00 per hectare, the subject land was already fully planted to oil palm trees, with several improvements, such as roads and bridges. The amount of P6,000.00 per hectare was the valuation made by independent land valuation officers from the Land Bank of the Philippines. Hence, it is the contention of Petitioner-Appellee that the P6,000.00 per hectare is the correct land valuation of these so-called service areas and not P11,000.00 per hectare as assessed by Respondent-Appellant. We are talking here of lands acquired by NDC in 1979 at P4,300.00 per hectare, then purchased by the DAR from NDC on September 28, 1988 at P6,000.00 per hectare which lands, the DAR distributed on November 28, 1988 to qualified workers-beneficiaries who formed themselves into Multi-Purpose Cooperatives, which cooperatives leased back the same properties to Petitioner-Appellee. We are puzzled as to why Petitioner-Appellee, while disclaiming any liability for real property taxes on subject properties, continues to be willing to pay certain amounts of said taxes. As to the subject agricultural lands, the liability of Petitioner-Appellee, formerly NDC-Guthrie Plantations, Inc., for realty taxes thereon ceased the moment the National Development Company (NDC), on September 27, 1988, transferred, ceded or sold the same lands to the Department of Agrarian Reform (DAR) for distribution to qualified workers-beneficiaries. If at all, said liability continued only up to November 28, 1988 when the DAR awarded these properties to the Multi-Purpose Cooperatives. As quoted in the discussions under Issue Nos. II(A) and II(B), the terms and conditions of the Contract of Lease by and between the Multi-Purpose Cooperatives and Petitioner-Appellee are explicit. Petitioner-Appellee is not directly liable for any real property taxes on said lands. The liability of Petitioner-Appellee is to the Multi-Purpose Cooperatives, if the latter is at all liable for the real property taxes on said land. ISSUE NO. II(E) The appellee Local Board ERRED in finding that Residential housing units with market valuation of P150,000 or less are exempt from taxation, when under Republic Act 7160 and local ordinance, the exemption for qualified buildings (P150,000 or less) is effective only starting 1994, not for the revision period in question (1991-1993). Respondent-Appellant stated that "The effectivity of the adjustments for qualified buildings (P175,000 or less) is 1994, pursuant to Article 309 and 310 of the Implementing Rules and Regulations (IRR) of RA 7160, and under Sangguniang Panlalawigan Ordinance No. 11, series of 1995. Prior years shall be covered by P.D. 464 as amended, pursuant to Article 309 (c) of the IRR." AScHCD Petitioner-Appellee stated in its Comment/Answer that in its appeal before the LBAA it prayed only for the striking out of its realty tax liability on the residential units except for those units which have an assessed value of more than P175,000.00 and petitioner-appellee agreed that it should be made effective starting 1994. Republic Act No. 7160, otherwise known as the Local Government Code of 1991, took effect on January 1st, 1992, thus: "SEC. 536. Effectivity Clause . This Code shall take effect on January first, nineteen hundred ninety-two, unless otherwise provided herein, after its complete publication in at least one (1) newspaper of general circulation." Sec. 218 of the same Code provides as follows: "SEC. 218. Assessment Levels . The assessment level 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 panglungsod or sangguniang bayan of a municipality within the Metropolitan Manila Area, at the rates not exceeding the following: "(a) x x x "(b) On Buildings and other Structures: "(1) Residential Over Not Over Assessment Levels P175,000.00 0% P175,000.00 300,000.00 10% 300,000.00 500,000.00 20% 500,000.00 750,000.00 25% 750,000.00 1,000,000.00 30% 1,000,000.00 2,000,000.00 35% 2,000,000.00 5,000,000.00 40% 5,000,000.00 10,000,000.00 50% 10,000,000.00 60% "(2) x x x" We should like to think that both Sections 536 and 218 of the Code are self-explanatory. Note, however, the phrase "rates not exceeding" in Section 218. This means that the Municipal or City Councils or Provincial Boards may not increase the rates of the assessment levels provided under Section 218 of the Code. Likewise, the Councils or the Boards may not delay or postpone the effectivity of the exemption enjoyed or to be enjoyed by taxpayers, like postponing the 0% assessment level to 1994, or otherwise do anything which would tend to increase the burden by Section 218, like reducing the value for 0% assessment level from P175,000.00 to P150,000.00. Since, however, Petitioner-Appellee "agreed" to have the zero percent (0%) assessment level on residential unit with market values of P175,000.00 or less to be made effective in 1994, so be it. ISSUE NO. II(F) The appellee Local Board ERRED in finding that the company's road equipment and haulers are not real properties but movables, when under Republic Act 7160 they are properties subject to taxation. Respondent-Appellant stated that the company's transport and road equipment/machineries are necessary to the Petitioner-Appellee's business and, therefore, should be taxable as 'machinery.' On the other hand, Petitioner-Appellee said that road equipment and haulers, from their very nature, are movables. These properties are merely incidental to the business of Petitioner-Appellee and should not be considered as machineries in the ambit of the Local Government Code of 1991. Section 199 (O) of R.A. 7160 provides and we quote: "SEC. 199. Definitions . When used in this title: "xxx xxx xxx "(O) "Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances and apparatus which may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installation 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; x x x." AcICHD While it is true that the roads shall necessarily be maintained, it is not necessary for Petitioner-Appellee to own the road equipment to be used in maintaining the roads. Haulers are similar in nature to delivery trucks and yet the latter are never considered real property for purposes of the real property tax. Not all things which are actually, directly and exclusively used to meet the needs of a particular industry, business or activity are considered real property for purposes of the real property tax. Central airconditioning systems have the same functions as window airconditioning units and yet the latter are never considered realty for purposes of the real property tax. Adding machines and/or calculators are always necessary to any kind of business, yet they are not subject to real property tax. To classify, therefore, the road equipment and haulers as real properties for purposes of the real property tax would be stretching the meaning of Section 199 (O) too far. ISSUE NO. II(G) The appellee Local Board ERRED in finding that the milling plant shall be assessed at only 20% of its acquisition cost even if fully depreciated when, under Republic Act 7160, the depreciation allowance shall not exceed 5% of original/replacement cost for each year of use. Respondent-Appellant says that the company's equipment/machineries were appraised pursuant to Section 224 (a) of R.A. 7160, by dividing its remaining economic useful life by its estimated economic life and multiplied by its replacement or reproduction cost, and correspondingly applied with the appropriate depreciation allowance under Section 225 of R.A. 7160, where the depreciation rate shall not exceed five percent of its replacement or reproduction cost for each year of use. Petitioner-Appellee desires that a reassessment of the milling plant be made on the existing laws to come up with a more accurate and acceptable assessed value. We do not really have an inkling as to what the parties are squabbling about. There is no mention of how much the milling plant was assessed by the Respondent-Appellant nor on how much Petitioner-Appellee wants the plant to be valued. Petitioner-Appellee "desires that a reassessment of the milling plant be made on the existing laws to come up with a more accurate and acceptable assessed value" but neglected to mention the acceptable amount at which the milling plant should be valued or on how it could be arrived at. caITAC Despite our requests, this Board was not furnished a copy of the tax declarations in question or copies of any documents which may support any valuation. The Notes to Financial Statements prepared by the Commission on Audit for the Calendar Years 1993 and 1992 state as follows: "Property, Plant and Equipment "Property, plant and equipment are carried at appraised values as determined on February, 1990 by and independent firm of appraisers. Subsequent additions are stated at cost. "The net appraisal increment resulting from the revaluation was credited to the Revaluation Increment in Property account shown under Stockholder's Equity in the balance sheets. The amount of the revaluation increment absorbed through depreciation is being transferred to retained earnings (deficit). "Depreciation is computed on a straight line method over the estimated useful lives of the property ranging from three (3) to fifteen (15) years." The Audited Financial Statements for the years ended December 31, 1990 through 1993 show the appraised values, net of depreciation of the Property, Plant and Equipment as follows: 1990 1991 1992 1993 P229,440,509 P276,068,570 P233,367,109 P204,933,679 The phrase "Property, Plant and Equipment" used in the Financial Statements could not be synonymous with the term "milling plant" since, as shown in the statements, the former term embraces all fixed assets, including personal properties, except Plantation Development Cost, Deferred Charges and Other Assets. We are, therefore, leaving the assessment for the "milling plant" alone. WHEREFORE, this Board has decided to set aside, as it does hereby set aside, the decision rendered by the Local Board of Assessment Appeals of the Province of Agusan del Sur on June 8, 1999 in an unnumbered case entitled "Pilipinas Palm Oil Co., Inc., Petitioner, versus The Provincial Assessor's Office of Agusan del Sur, Respondent," and hereby orders as follows: A. The market value for each oil palm tree should be FIFTY-SEVEN & 55/100 PESOS (P57.55), effective January 1, 1991. The assessment for each municipality shall be based on the corresponding number of trees as listed in Petitioner-Appellee's "Hectarage Statement" discussed hereinabove; B. Petitioner-Appellee should not be made to pay for real property taxes due on the roads starting from January 1, 1991; C. Petitioner-Appellee is not liable to the Government for real property taxes on the lands owned by the Multi-Purpose Cooperatives; D. The housing units with a market value of P175,000.00 or less each shall be subjected to 0% assessment level, starting from the year 1994; E. Road equipment and haulers are not real properties and, accordingly, Petitioner-Appellee is not liable for real property tax thereon; F. Any real property taxes already paid by Petitioner-Appellee which, by virtue of this decision, were not due, shall be applied to future taxes rightfully due from Petitioner-Appellee. ICHDca SO ORDERED. Manila, Philippines, November 21, 2001. (SGD.) CESAR S. GUTIERREZ Chairman (SGD.) BENJAMIN M. KASALA Member (SGD.) ANGEL P. PALOMARES Member