Prepared by: Mica Marie J. Valenzuela

THE BOARD OF ASSESS-MENT APPEALS OF ZAM-

BOANGA DEL SUR v. SAMAR MIN-ING COMPANY, INC. and THE COURT OF TAX AP-

PEAL.G.R. No. L-28034. February 27, 1971

FACTS

Samar Mining Co (Samar)

Buug, Zamboanga del Sur Pier in Pamintayan, Zamboanga del Sur

42 km gravel pit Samico Road

Since the road traversed public lands, Samar filed miscellaneous lease applications for right of way with the Bureau of

Lands and the Bureau of Forestry in 1958 and 1959, respectively. Temporary permits were granted, and eventually the lease applications were granted on Oct. 7, 1965 but the lease con-

tracts were never executed.

FACTS

an assessment letter from the

Provincial Asses-sor, charging

them P 1,117,900.00 as

real estate tax on the taxable por-tion of Samico

Road.

on the ground that the road was

not a taxable improvement be-cause it was con-

structed entirely on public land.

Samar Mining Co (Samar) BAA

upheld the assessment but

held it unen-forceable until the lease con-tracts were

executed.

Upon second denial by the BAA, it elevated its case to the Court of Tax Appeals

the road was constructed on public lands such that it is an in-tegral part of the lands and not an independent improvement thereon, and that upon the termination of the lease the na-

tional government will acquire ownership of the road, Samar should be exempted from paying

CTA

ISSUE

Whether or not respondent Samar should pay realty tax on the assessed value of the road it constructed on alien-

able or disposable public lands that are leased to it by the

government.

ARGUMENTS

-Invalidity of the assessment upon the ground that the road having been constructed entirely on a public land cannot be considered an improvement subject to tax within the meaning of section 2 of Commonwealth Act 470, and invoking further the decision of this Court in the case of Bislig Bay Lumber Company, Inc. v. The Provin-cial Government of Surigao.

-The road is an improvement and, therefore, taxable under Section 2 of the Assessment Law (Commonwealth Act No. 470) -That Bislig Bay does not apply because the road in that case was built on inalienable timber-land. Samico Road was built on alienable landsof the public do-main and is therefore taxable

BAASAMAR

DOCTRINES• Sec. 2. Incidence of real property tax. — Except in chartered

cities, there shall be levied, assessed, and collected, an annual, ad valorem tax on real property including land, buildings, ma-chinery, and other improvements not hereinafter specifically ex-empted.

• Bislig Bay Lumber Co., Inc. v. Provincial Government of Surigao, 100 Phil. 303 – It is well settled that a real tax, being a burden upon the capital, should be paid by the owner of the land and not by a usufructuary (Mercado v. Rizal, 67 Phil., 608; Article 597, new Civil Code). Appellee is but a partial usufructuary of the road in question."

• Municipality of Cotabato, Et. Al. v. Santos, Et Al., 105 Phil. 963, this Court ruled that the lessee who introduced improve-ments consisting of dikes, gates and guard-houses on swamp lands leased to him by the Bureau of Fisheries, in converting the swamps into fishponds, is exempt from payment of realty taxes on those improvements.

RULING• NO.

• The road is indeed an improvement, but it is not taxable un-der Sec. 2 of the Assessment Law pursuant to the ruling in Bislig Bay case which held that a private party who introduces improvements on public land subject of a lease is only a partial usufructuary of the road and therefore cannot be made to pay real estate tax: because in such cases ownership ultimately remains with the govern-ment

and the improvements remain open to public use.

In Municipality of  Cotabato et al. v. Santos, it was held that improvements which form an integral part (such as dikes and gates)  of a publicly –owned immovable (such as swampland con-verted into fishponds) are tax-exempted.

RULING

• The argument is untenable. The road in issue in the Bislig Bay case was exempted not because it was constructed on in-alienable public lands. What is emphasized in the lease is that the improvement is exempt from taxation because it is an integral part of the public land on which it is constructed and the improvement is the property of the government by right of accession. Under Section 3(a) of the Assessment Law (Com. Act 470), all properties owned by the govern-ment, without any distinction, are exempt from taxation.

QUESTIONS

1.Is Samico Road an improvement on the land?

Answer: YES

2. Why is Samico Road not taxable?

Answer: It is not taxable under Sec. 2 of the Assessment Law pursuant to the ruling in Bislig Bay case which held that a private party who introduces improvements on public land subject of a lease is only a partial usufructuary of the road and therefore cannot be made to pay realestate tax: because in such cases ownership ultimately remains with the government and the improvements remain open to pub-lic use.

QUESTIONS3. Why is the Bislig case applicable although

the road in that case was built on inalien-able timberland?

• Answer: The road in issue in the Bislig Bay case was exempted not because it was constructed on inalienable public lands. What is empha-sized in the lease is that the improvement is exempt from taxation because it is an integral part of the public land on which it is constructed and the improvement is the property of the government by right of accession. Un-der Section 3(a) of the Assessment Law (Com. Act 470), all properties owned by the government, without any distinction, are exempt from taxa-tion.

4. Who should pay the Land Taxes?

Answer: Bislig Bay Lumber Co., Inc. v. Provincial Govern-ment of Surigao, 100 Phil. 303 – It is well settled that a real tax, being a burden upon the capital, should be paid by the owner of the land and not by a usufructuary (Mercado v. Rizal, 67 Phil., 608; Article 597, new Civil Code).