EN BANC

G.R. No. L-17870 September 29, 1962

MINDANAO BUS COMAN!, petitioner,
vs.
"#$ CI"! ASS$SSOR % "R$ASUR$R &'( t)e BOARD O* "A+ A$ALS o, C&-&.&'
(e Oro C/t., respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No.
710 holding that the petitioner indanao Bus Co!pan" is lia#le to the pa"!ent of the realt" tax
on its !aintenance and repair e$uip!ent hereunder referred to.
%espondent Cit" Assessor of Caga"an de &ro Cit" assessed at '(,(00 petitioner)s a#ove*
!entioned e$uip!ent. 'etitioner appealed the assess!ent to the respondent Board of Tax
Appeals on the ground that the sa!e are not realt". The Board of Tax Appeals of the Cit"
sustained the cit" assessor, so petitioner herein filed with the Court of Tax Appeals a petition for
the review of the assess!ent.
+n the Court of Tax Appeals the parties su#!itted the following stipulation of facts,
'etitioner and respondents, thru their respective counsels agreed to the following
stipulation of facts,
1. That petitioner is a pu#lic utilit" solel" engaged in transporting passengers and cargoes
#" !otor truc-s, over its authori.ed lines in the +sland of indanao, collecting rates
approved #" the 'u#lic /ervice Co!!ission0
1. That petitioner has its !ain office and shop at Caga"an de &ro Cit". +t !aintains
Branch &ffices and2or stations at +ligan Cit", 3anao0 'agadian, 4a!#oanga del /ur0
5avao Cit" and 6i#awe, Bu-idnon 'rovince0
7. That the !achineries sought to #e assessed #" the respondent as real properties are the
following,
8a9 :o#art Electric ;elder achine, appearing in the attached photograph,
!ar-ed Annex <A<0
8#9 /tor! Boring achine, appearing in the attached photograph, !ar-ed Annex
<B<0
8c9 3athe !achine with !otor, appearing in the attached photograph, !ar-ed
Annex <C<0
8d9 Blac- and 5ec-er =rinder, appearing in the attached photograph, !ar-ed
Annex <5<0
8e9 'EC& :"draulic 'ress, appearing in the attached photograph, !ar-ed
Annex <E<0
8f9 Batter" charger 8Tungar charge !achine9 appearing in the attached
photograph, !ar-ed Annex <><0 and
8g9 5*Engine ;au-esha**>uel, appearing in the attached photograph, !ar-ed
Annex <=<.
(. That these !achineries are sitting on ce!ent or wooden platfor!s as !a" #e seen in
the attached photographs which for! part of this agreed stipulation of facts0
?. That petitioner is the owner of the land where it !aintains and operates a garage for its
T'@ !otor truc-s0 a repair shop0 #lac-s!ith and carpentr" shops, and with these
!achineries which are placed therein, its T'@ truc-s are !ade0 #od" constructed0 and
sa!e are repaired in a condition to #e servicea#le in the T'@ land transportation #usiness
it operates0
A. That these !achineries have never #een or were never used as industrial e$uip!ents to
produce finished products for sale, nor to repair !achineries, parts and the li-e offered to
the general pu#lic indiscri!inatel" for #usiness or co!!ercial purposes for which
petitioner has never engaged in, to date.1awphl.nt
The Court of Tax Appeals having sustained the respondent cit" assessor)s ruling, and having
denied a !otion for reconsideration, petitioner #rought the case to this Court assigning the
following errors,
1. The :onora#le Court of Tax Appeals erred in upholding respondents) contention that
the $uestioned assess!ents are valid0 and that said tools, e$uip!ents or !achineries are
i!!ova#le taxa#le real properties.
1. The Tax Court erred in its interpretation of paragraph ? of Article (1? of the New Civil
Code, and holding that pursuant thereto the !ova#le e$uip!ents are taxa#le realties, #"
reason of their #eing intended or destined for use in an industr".
7. The Court of Tax Appeals erred in den"ing petitioner)s contention that the respondent
Cit" Assessor)s power to assess and lev" real estate taxes on !achineries is further
restricted #" section 71, paragraph 8c9 of %epu#lic Act No. ?110 and
(. The Tax Court erred in den"ing petitioner)s !otion for reconsideration.
%espondents contend that said e$uip!ents, tho !ova#le, are i!!o#ili.ed #" destination, in
accordance with paragraph ? of Article (1? of the New Civil Code which provides,
Art. (1?. B The following are i!!ova#le properties,
x x x x x x x x x
8?9 achiner", receptacles, instru!ents or i!ple!ents intended #" the owner of the
tene!ent for an industr" or wor-s which !a" #e carried on in a #uilding or on a piece of
land, and which tend directly to meet the needs of the said industry or wors . 8E!phasis
ours.9
Note that the stipulation expressl" states that the e$uip!ent are placed on wooden or ce!ent
platfor!s. The" can #e !oved around and a#out in petitioner)s repair shop. +n the case of B. !.
Berenotter "s. #u $n%ieng, A1 'hil. AA7, the /upre!e Court said,
Article 7(( 8Now Art. (1?9, paragraph 8?9 of the Civil Code, gives the character of real
propert" to <!achiner", li$uid containers, instru!ents or i!ple!ents intended #" the
owner of an" #uilding or land for use in connection with an" industr" or trade #eing
carried on therein and which are e&pressly adapted to meet the re'uirements of such
trade or industry.<
+f the installation of the !achiner" and e$uip!ent in $uestion in the central of the
a#alacat /ugar Co., +nc., in lieu of the other of less capacit" existing therein, for its
sugar and industr", converted the! into real propert" #" reason of their purpose, it cannot
#e said that their incorporation therewith was not per!anent in character #ecause, as
essential and principle elements of a sugar central, without them the sugar central would
be unable to function or carry on the industrial purpose for which it was established.
+nas!uch as the central is per!anent in character, the necessar" !achiner" and
e$uip!ent installed for carr"ing on the sugar industr" for which it has #een esta#lished
!ust necessaril" #e per!anent. 8E!phasis ours.9
/o that !ova#le e$uip!ents to #e i!!o#ili.ed in conte!plation of the law !ust first #e
<essential and principal ele!ents< of an industr" or wor-s without which such industr" or wor-s
would #e <una#le to function or carr" on the industrial purpose for which it was esta#lished.< ;e
!a" here distinguish, therefore, those !ova#le which #eco!e i!!o#ili.ed #" destination
#ecause the" are essential and principal elements in the industr" for those which !a" not #e so
considered i!!o#ili.ed #ecause the" are merely incidental, not essential and principal. Thus,
cash registers, t"pewriters, etc., usuall" found and used in hotels, restaurants, theaters, etc. are
!erel" incidentals and are not and should not #e considered i!!o#ili.ed #" destination, for
these #usinesses can continue or carr" on their functions without these e$uit" co!!ents. Airline
co!panies use for-lifts, Ceep*wagons, pressure pu!ps, +B !achines, etc. which are incidentals,
not essentials, and thus retain their !ova#le nature. &n the other hand, !achineries of #reweries
used in the !anufacture of li$uor and soft drin-s, though !ova#le in nature, are i!!o#ili.ed
#ecause the" are essential to said industries0 #ut the deliver" truc-s and adding !achines which
the" usuall" own and use and are found within their industrial co!pounds are !erel" incidental
and retain their !ova#le nature.
/i!ilarl", the tools and e$uip!ents in $uestion in this instant case are, #" their nature, not
essential and principle !unicipal ele!ents of petitioner)s #usiness of transporting passengers and
cargoes #" !otor truc-s. The" are !erel" incidentals B ac$uired as !ova#les and used onl" for
expedienc" to facilitate and2or i!prove its service. Even without such tools and e$uip!ents, its
#usiness !a" #e carried on, as petitioner has carried on, without such e$uip!ents, #efore the
war. The transportation #usiness could #e carried on without the repair or service shop if its
rolling e$uip!ent is repaired or serviced in another shop #elonging to another.
The law that governs the deter!ination of the $uestion at issue is as follows,
Art. (1?. The following are i!!ova#le propert",
x x x x x x x x x
8?9 achiner", receptacles, instru!ents or i!ple!ents intended #" the owner of the
tene!ent for an industr" or wor-s which !a" #e carried on in a #uilding or on a piece of
land, and which tend directl" to !eet the needs of the said industr" or wor-s0 8Civil Code
of the 'hil.9
Aside fro! the ele!ent of essentialit" the a#ove*$uoted provision also re$uires that the industr"
or wor-s #e carried on in a building or on a piece of land. Thus in the case of Berenotter "s.
#u $n%ieng, supra, the <!achiner", li$uid containers, and instru!ents or i!ple!ents< are found
in a #uilding constructed on the land. A saw!ill would also #e installed in a #uilding on land
!ore or less per!anentl", and the sawing is conducted in the land or #uilding.
But in the case at #ar the e$uip!ents in $uestion are destined onl" to repair or service the
transportation #usiness, which is not carried on in a building or permanently on a piece of land ,
as de!anded #" the law. /aid e$uip!ents !a" not, therefore, #e dee!ed real propert".
%esu!ing what we have set forth a#ove, we hold that the e$uip!ents in $uestion are not
a#solutel" essential to the petitioner)s transportation #usiness, and petitioner)s #usiness is not
carried on in a #uilding, tene!ent or on a specified land, so said e$uip!ent !a" not #e
considered real estate within the !eaning of Article (1? 8c9 of the Civil Code.
;:E%E>&%E, the decision su#Cect of the petition for review is here#" set aside and the
e$uip!ent in $uestion declared not su#Cect to assess!ent as real estate for the purposes of the
real estate tax. ;ithout costs.
/o ordered.
Beng(on, #.)., *adilla, Bautista +ngelo, ,eyes, ).B.-., *aredes, .i(on and /aalintal, )).,
concur.
,egala, #oncepcion and Barrera ))., too no part.