G.R. No.

L-50466 May 31, 1982 underground gasoline tank, neon lights signboard, concrete
fence and pavement and the lot where they are all placed
CALTEX (PHILIPPINES) INC., petitioner,  or erected, all of them used in the pursuance of the
vs. gasoline service station business formed the entire gasoline
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR service-station. 
OF PASAY, respondents.
As to whether the subject properties are attached and
affixed to the tenement, it is clear they are, for the tenement
we consider in this particular case are (is) the pavement
AQUINO, J.: covering the entire lot which was constructed by the owner
of the gasoline station and the improvement which holds all
the properties under question, they are attached and affixed
This case is about the realty tax on machinery and equipment installed by
to the pavement and to the improvement. 
Caltex (Philippines) Inc. in its gas stations located on leased land. 
The pavement covering the entire lot of the gasoline service
The machines and equipment consists of underground tanks, elevated
station, as well as all the improvements, machines,
tank, elevated water tanks, water tanks, gasoline pumps, computing
equipments and apparatus are allowed by Caltex
pumps, water pumps, car washer, car hoists, truck hoists, air compressors
(Philippines) Inc. ...
and tireflators. The city assessor described the said equipment and
machinery in this manner: 
The underground gasoline tank is attached to the shed by
the steel pipe to the pump, so with the water tank it is
A gasoline service station is a piece of lot where a building
connected also by a steel pipe to the pavement, then to the
or shed is erected, a water tank if there is any is placed in
electric motor which electric motor is placed under the
one corner of the lot, car hoists are placed in an adjacent
shed. So to say that the gasoline pumps, water pumps and
shed, an air compressor is attached in the wall of the shed
underground tanks are outside of the service station, and to
or at the concrete wall fence. 
consider only the building as the service station is grossly
erroneous. (pp. 58-60, Rollo). 
The controversial underground tank, depository of gasoline
or crude oil, is dug deep about six feet more or less, a few
The said machines and equipment are loaned by Caltex to gas station
meters away from the shed. This is done to prevent
operators under an appropriate lease agreement or receipt. It is stipulated
conflagration because gasoline and other combustible oil
in the lease contract that the operators, upon demand, shall return to
are very inflammable. 
Caltex the machines and equipment in good condition as when received,
ordinary wear and tear excepted. 
This underground tank is connected with a steel pipe to the
gasoline pump and the gasoline pump is commonly placed
The lessor of the land, where the gas station is located, does not become
or constructed under the shed. The footing of the pump is a
the owner of the machines and equipment installed therein. Caltex retains
cement pad and this cement pad is imbedded in the
the ownership thereof during the term of the lease. 
pavement under the shed, and evidence that the gasoline
underground tank is attached and connected to the shed or
building through the pipe to the pump and the pump is The city assessor of Pasay City characterized the said items of gas station
attached and affixed to the cement pad and pavement equipment and machinery as taxable realty. The realty tax on said
covered by the roof of the building or shed.  equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of
tax appeals ruled that they are personalty. The assessor appealed to the
Central Board of Assessment Appeals. 
The building or shed, the elevated water tank, the car hoist
under a separate shed, the air compressor, the
The Board, which was composed of Secretary of Finance Cesar Virata as primarily under the provisions of the Assessment Law and the Real
chairman, Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary Property Tax Code. 
of Local Government and Community Development Jose Roño, held in its
decision of June 3, 1977 that the said machines and equipment are real Section 2 of the Assessment Law provides that the realty tax is due "on
property within the meaning of sections 3(k) & (m) and 38 of the Real real property, including land, buildings, machinery, and other
Property Tax Code, Presidential Decree No. 464, which took effect on June improvements" not specifically exempted in section 3 thereof. This
1, 1974, and that the definitions of real property and personal property in provision is reproduced with some modification in the Real Property Tax
articles 415 and 416 of the Civil Code are not applicable to this case. 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 levied, assessed and collected in all provinces, cities and
Caltex's motion for reconsideration, a copy of which was received by its municipalities an annual ad valorem tax on real property,
lawyer on April 2, 1979.  such as land, buildings, machinery and other improvements
affixed or attached to real property not hereinafter
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the specifically exempted. 
setting aside of the Board's decision and for a declaration that the 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 property
The Solicitor General's contention that the Court of Tax Appeals has or an amelioration in its condition, amounting to more than
exclusive appellate jurisdiction over this case is not correct. When Republic mere repairs or replacement of waste, costing labor or
act No. 1125 created the Tax Court in 1954, there was as yet no Central capital and intended to enhance its value, beauty or utility
Board of Assessment Appeals. Section 7(3) of that law in providing that the 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 m) Machinery — shall embrace machines, mechanical
appeals but not the Central Board of Assessment Appeals which under the contrivances, instruments, appliances and apparatus
Real Property Tax Code has appellate jurisdiction over decisions of the attached to the real estate. It includes the physical facilities
said local boards of assessment appeals and is, therefore, in the same available for production, as well as the installations and
category as the Tax Court.  appurtenant service facilities, together with all other
equipment designed for or essential to its manufacturing,
Section 36 of the Real Property Tax Code provides that the decision of the industrial or agricultural purposes (See sec. 3[f],
Central Board of Assessment Appeals shall become final and executory Assessment Law). 
after the lapse of fifteen days from the receipt of its decision by the
appellant. Within that fifteen-day period, a petition for reconsideration may We hold that the said equipment and machinery, as appurtenances to the
be filed. The Code does not provide for the review of the Board's decision gas station building or shed owned by Caltex (as to which it is subject to
by this Court.  realty tax) and which fixtures are necessary to the operation of the gas
station, for without them the gas station would be useless, and which have
Consequently, the only remedy available for seeking a review by this Court been attached or affixed permanently to the gas station site or embedded
of the decision of the Central Board of Assessment Appeals is the special therein, are taxable improvements and machinery within the meaning of
civil action of certiorari, the recourse resorted to herein by Caltex the Assessment Law and the Real Property Tax Code. 
(Philippines), Inc. 
Caltex invokes the rule that machinery which is movable in its nature only
The issue is whether the pieces of gas station equipment and machinery becomes immobilized when placed in a plant by the owner of the property
already enumerated are subject to realty tax. This issue has to be resolved or plant but not when so placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the agent of WHEREFORE, the questioned decision and resolution of the Central
the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).  Board of Assessment Appeals are affirmed. The petition for certiorari is
dismissed for lack of merit. No costs. 
That ruling is an interpretation of paragraph 5 of article 415 of the Civil
Code regarding machinery that becomes real property by destination. In SO ORDERED. 
the Davao Saw Mills case the question was whether the machinery
mounted on foundations of cement and installed by the lessee on leased Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur. 
land should be regarded as real property for purposes of execution of a
judgment against the lessee. The sheriff treated the machinery as personal Concepcion, Jr. and Abad Santos, JJ., took no part.
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

Nor are Caltex's gas station equipment and machinery the same as tools
and equipment in the repair shop of a bus company which were held to be
personal property not subject to realty tax (Mindanao Bus Co. vs. City
Assessor, 116 Phil. 501). 

The Central Board of Assessment Appeals did not commit a grave abuse
of discretion in upholding the city assessor's is imposition of the realty tax
on Caltex's gas station and equipment.