Mindanao Bus Company vs. City Assessor

MINDANAO BUS COMPANY, Petitioner,
vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS OF CAGAYAN DE ORO CITY, Respondents.

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

FACTS: 

Petitioner Mindanao Bus Company questions the decision of the CTA holding that it is liable for the payment of realty tax on its maintenance and repair equipments.

Petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks. It is also the owner of the land where it maintains and operates a garage for its TPU motor trucks, a repair shop, blacksmith and carpentry shops where its TPU trucks are repaired in a condition to be serviceable.

Respondent alleged that subject properties are immovable by reason of their being intended or destined for use in an industry in accordance with par. 5 of Art 415.

ISSUE: 

Are the subject repair equipments immovable properties for the reason of their being intended or destined for use in an industry?

HELD:

No. Art. 415 provides that machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works are immovable properties.

So that movable equipments to be immobilized, it must first be essential and principal elements of an industry or works without which such industry or works would be unable to function or carry on the industrial purpose for which it was established. There’s a distinction between those movable which become immobilized by destination because they are essential and principal elements in the industry from those which may not be so considered because they are merely incidental. The tools and equipments in question are by their nature, not essential and principle municipal elements of petitioner’s business of transporting passengers and cargoes by motor trucks. They are merely incidentals — acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on. 

Aside from the element of essentiality, it is also required that the industry or works be carried on in a building or on a piece of land. In this case, the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property.