Republic of the Philippines pump is a cement pad and this cement pad is imbedded in

SUPREME COURT the pavement under the shed, and evidence that the
Manila gasoline underground tank is attached and connected to
the shed or building through the pipe to the pump and the
SECOND DIVISION pump is attached and affixed to the cement pad and
pavement covered by the roof of the building or shed.
G.R. No. L-50466 May 31, 1982
The building or shed, the elevated water tank, the car hoist
under a separate shed, the air compressor, the
CALTEX (PHILIPPINES) INC., petitioner, underground gasoline tank, neon lights signboard,
vs. concrete fence and pavement and the lot where they are
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR all placed or erected, all of them used in the pursuance of
OF PASAY, respondents. the gasoline service station business formed the entire
gasoline service-station.

As to whether the subject properties are attached and

AQUINO, J.: affixed to the tenement, it is clear they are, for the
tenement we consider in this particular case are (is) the
This case is about the realty tax on machinery and equipment installed by pavement covering the entire lot which was constructed by
Caltex (Philippines) Inc. in its gas stations located on leased land. the owner of the gasoline station and the improvement
which holds all the properties under question, they are
attached and affixed to the pavement and to the
The machines and equipment consists of underground tanks, elevated tank, improvement.
elevated water tanks, water tanks, gasoline pumps, computing pumps, water
pumps, car washer, car hoists, truck hoists, air compressors and tireflators.
The city assessor described the said equipment and machinery in this The pavement covering the entire lot of the gasoline
manner: service station, as well as all the improvements, machines,
equipments and apparatus are allowed by Caltex
(Philippines) Inc. ...
A gasoline service station is a piece of lot where a building
or shed is erected, a water tank if there is any is placed in
one corner of the lot, car hoists are placed in an adjacent The underground gasoline tank is attached to the shed by
shed, an air compressor is attached in the wall of the shed the steel pipe to the pump, so with the water tank it is
or at the concrete wall fence. connected also by a steel pipe to the pavement, then to
the electric motor which electric motor is placed under the
shed. So to say that the gasoline pumps, water pumps
The controversial underground tank, depository of and underground tanks are outside of the service station,
gasoline or crude oil, is dug deep about six feet more or and to consider only the building as the service station is
less, a few meters away from the shed. This is done to grossly erroneous. (pp. 58-60, Rollo).
prevent conflagration because gasoline and other
combustible oil are very inflammable.
The said machines and equipment are loaned by Caltex to gas station
operators under an appropriate lease agreement or receipt. It is stipulated in
This underground tank is connected with a steel pipe to the lease contract that the operators, upon demand, shall return to Caltex
the gasoline pump and the gasoline pump is commonly the machines and equipment in good condition as when received, ordinary
placed or constructed under the shed. The footing of the wear and tear excepted.
The lessor of the land, where the gas station is located, does not become appellant. Within that fifteen-day period, a petition for reconsideration may
the owner of the machines and equipment installed therein. Caltex retains be filed. The Code does not provide for the review of the Board's decision by
the ownership thereof during the term of the lease. this Court.

The city assessor of Pasay City characterized the said items of gas station Consequently, the only remedy available for seeking a review by this Court
equipment and machinery as taxable realty. The realty tax on said of the decision of the Central Board of Assessment Appeals is the special
equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of civil action of certiorari, the recourse resorted to herein by Caltex
tax appeals ruled that they are personalty. The assessor appealed to the (Philippines), Inc.
Central Board of Assessment Appeals.
The issue is whether the pieces of gas station equipment and machinery
The Board, which was composed of Secretary of Finance Cesar Virata as already enumerated are subject to realty tax. This issue has to be resolved
chairman, Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary primarily under the provisions of the Assessment Law and the Real Property
of Local Government and Community Development Jose Roo, held in its Tax Code.
decision of June 3, 1977 that the said machines and equipment are real
property within the meaning of sections 3(k) & (m) and 38 of the Real Section 2 of the Assessment Law provides that the realty tax is due "on real
Property Tax Code, Presidential Decree No. 464, which took effect on June property, including land, buildings, machinery, and other improvements" not
1, 1974, and that the definitions of real property and personal property in specifically exempted in section 3 thereof. This provision is reproduced with
articles 415 and 416 of the Civil Code are not applicable to this case. some modification in the Real Property Tax Code which provides:

The decision was reiterated by the Board (Minister Vicente Abad Santos SEC. 38. Incidence of Real Property Tax. There shall be
took Macaraig's place) in its resolution of January 12, 1978, denying Caltex's levied, assessed and collected in all provinces, cities and
motion for reconsideration, a copy of which was received by its lawyer on municipalities an annual ad valorem tax on real property,
April 2, 1979. such as land, buildings, machinery and other
improvements affixed or attached to real property not
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the hereinafter specifically exempted.
setting aside of the Board's decision and for a declaration that t he said
machines and equipment are personal property not subject to realty tax (p. The Code contains the following definitions in its section 3:
16, Rollo).
k) Improvements is a valuable addition made to
The Solicitor General's contention that the Court of Tax Appeals has property or an amelioration in its condition, amounting to
exclusive appellate jurisdiction over this case is not correct. When Republic more than mere repairs or replacement of waste, costing
act No. 1125 created the Tax Court in 1954, there was as yet no Central labor or capital and intended to enhance its value, beauty
Board of Assessment Appeals. Section 7(3) of that law in providing that the or utility or to adapt it for new or further purposes.
Tax Court had jurisdiction to review by appeal decisions of provincial or city
boards of assessment appeals had in mind the local boards of assessment
appeals but not the Central Board of Assessment Appeals which under the m) Machinery shall embrace machines, mechanical
Real Property Tax Code has appellate jurisdiction over decisions of the said contrivances, instruments, appliances and apparatus
local boards of assessment appeals and is, therefore, in the same category attached to the real estate. It includes the physical
as the Tax Court. facilities available for production, as well as the
installations and appurtenant service facilities, together
with all other equipment designed for or essential to its
Section 36 of the Real Property Tax Code provides that the decision of the manufacturing, industrial or agricultural purposes (See
Central Board of Assessment Appeals shall become final and executory sec. 3[f], Assessment Law).
after the lapse of fifteen days from the receipt of its decision by the
We hold that the said equipment and machinery, as appurtenances to the Nor are Caltex's gas station equipment and machinery the same as tools
gas station building or shed owned by Caltex (as to which it is subject to and equipment in the repair shop of a bus company which were held to be
realty tax) and which fixtures are necessary to the operation of the gas personal property not subject to realty tax (Mindanao Bus Co. vs. City
station, for without them the gas station would be useless, and which have Assessor, 116 Phil. 501).
been attached or affixed permanently to the gas station site or embedded
therein, are taxable improvements and machinery within the meaning of the The Central Board of Assessment Appeals did not commit a grave abuse of
Assessment Law and the Real Property Tax Code. discretion in upholding the city assessor's is imposition of the realty tax on
Caltex's gas station and equipment.
Caltex invokes the rule that machinery which is movable in its nature only
becomes immobilized when placed in a plant by the owner of the property or WHEREFORE, the questioned decision and resolution of the Central Board
plant but not when so placed by a tenant, a usufructuary, or any person of Assessment Appeals are affirmed. The petition for certiorari is dismissed
having only a temporary right, unless such person acted as the agent of the for lack of merit. No costs.
owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).
SO ORDERED.
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code
regarding machinery that becomes real property by destination. In the Davao
Saw Mills case the question was whether the machinery mounted on Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
foundations of cement and installed by the lessee on leased land should be
regarded as real property for purposes of execution of a judgment against Concepcion, Jr. and Abad Santos, JJ., took no part.
the lessee. The sheriff treated the machinery as personal property. This
Court sustained the sheriff's action. (Compare with Machinery & Engineering
Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case
machinery was treated as realty).

Here, the question is whether the gas station equipment and machinery
permanently affixed by Caltex to its gas station and pavement (which are
indubitably taxable realty) should be subject to the realty tax. This question
is different from the issue raised in the Davao Saw Mill case.

Improvements on land are commonly taxed as realty even though for some
purposes they might be considered personalty (84 C.J.S. 181-2, Notes 40
and 41). "It is a familiar phenomenon to see things classed as real property
for purposes of taxation which on general principle might be considered
personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630,
633).

This case is also easily distinguishable from Board of Assessment Appeals

vs. Manila Electric Co., 119 Phil. 328, where Meralco's steel towers were
considered poles within the meaning of paragraph 9 of its franchise which
exempts its poles from taxation. The steel towers were considered
personalty because they were attached to square metal frames by means of
bolts and could be moved from place to place when unscrewed and
dismantled.