NAPOCOR vs Province of Quezon (GR No. 171586 January 25, 2010)

National Power Corporation vs Province of Quezon
GR No. 171586 January 25, 2010

Facts: The province of Quezon assessed Mirant Pagbilao Corporation for unpaid real property taxes in the amount of Php 1.5billion for the machineries located in its power plant in Pagbilao, Quezon, NAPOCOR, which entered into a build-to-operate-transfer agreement with Mirant, was furnished a copy of the tax assessment. NAPOCOR protested the assessment before the local board of assessment appeals, claiming entitlement to the tax exemption provided under section 234 of the local government code.

Issue: Whether or not NAPOCOR is entitled to question validly the assessment thereon.

Held: No. Legal interest is defined as interest in property or a claim cognizable at law, equivalent to that of a legal owner who has legal title to the property. Given this definition, NAPOCOR is clearly not vested with the requisite interest to protest the tax assessments, as it is not an entity having the legal title over the machines. It has absolutely no solid claim of ownership or even of use and possession of the machineries as the July 15, 2009 decision explained.

A BOT agreement is not a mere financing agreement.

Under BOT agreements, the private corporation/investors are the owners of the facility or machinery concerned. Apparently, even NAPOCOR and Mirant recognize this principle; article 2.12 of their BOT agreement provides that until the transfer date, Mirant shall directly or indirectly, own the power station and all the fixtures, fitting, machinery and equipment on the site shall operate, manage and maintain the power station for the purpose of converting fuel of NAPOCOR into electricity.

The protest contemplated under section 252 is required where there is a question as to the reasonableness or correctness of the amount assessed. Hence if a taxpayer disputes the reasonableness of an increase in a real property tax assessment, he is required to “first pay the tax.” Otherwise, the city or municipal treasurer will not act on his protest.

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