YAMANE, vs. BA LEPANTO CONDOMINUM CORPORATION
G.R. No. 154993 October 25, 2005
Facts:
Respondent BA-Lepanto Condominium Corporation is a duly organized condominium corporation constituted in accordance with the Condominium Act, which owns and holds title to the common and limited common areas of the BA-Lepanto Condominium (the “Condominium”), situated in Paseo de Roxas, Makati City. Its membership comprises the various unit owners of the Condominium. The Corporation is authorized, under Article V of its Amended By-Laws, to collect regular assessments from its members for operating expenses, capital expenditures on the common areas, and other special assessments as provided for in the Master Deed with Declaration of Restrictions of the Condominium.
On 15 December 1998, the Corporation received a Notice of Assessment dated 14 December 1998 signed by the City Treasurer. The Notice of Assessment stated that the Corporation is “liable to pay the correct city business taxes, fees and charges,” computed as totaling ₱1,601,013.77 for the years 1995 to 1997. The Notice of Assessment was silent as to the statutory basis of the business taxes assessed.
Through counsel, the Corporation responded with a written tax protest dated 12 February 1999, addressed to the City Treasurer. It was evident in the protest that the Corporation was perplexed on the statutory basis of the tax assessment. It assert that there has no basis as the Corporation is not liable for business taxes and surcharges and interest thereon, under the Makati [Revenue] Code or even under the Local Government Code
From the denial of the protest, the Corporation filed an Appeal with the Regional Trial Court (RTC) of Makati. On 1 March 2000, the Makati RTC Branch 57 rendered a Decision9 dismissing the appeal for lack of merit. Accepting the premise laid by the City Treasurer, the RTC acknowledged, in sadly risible language, the RTC concluded that the activities of the Corporation fell squarely under the definition of “business” under Section 13(b) of the Local Government Code, and thus subject to local business taxation.11
From this Decision of the RTC, the Corporation filed a Petition for Review under Rule 42 of the Rules of Civil Procedure with the Court of Appeals. Initially, the petition was dismissed outright on the ground that only decisions of the RTC brought on appeal from a first level court could be elevated for review under the mode of review prescribed under Rule 42. However, the Corporation pointed out in its Motion for Reconsideration that under Section 195 of the Local Government Code, the remedy of the taxpayer on the denial of the protest filed with the local treasurer is to appeal the denial with the court of competent jurisdiction. Persuaded by this contention, the Court of Appeals reinstated the petition.
On 7 June 2002, the Court of Appeals Special Sixteenth Division rendered the Decision and reversed the RTC decision and declared that the Corporation was not liable to pay business taxes to the City of Makati.
Issue:
Whether the City of Makati may collect business taxes on condominium corporations.
Held:
No, because the condo corp existence is not intended for the incurrence of profit but to shoulder the expenses for the maintenance of the Condominium project.
Under Section 151 of the Local Government Code, cities such as Makati are authorized to levy the same taxes fees and charges as provinces and municipalities. In Article II, Title II, Book II of the Local Government Code, governing municipal taxes, where the provisions on business taxation relevant to this petition may be found. Also, nowhere therein is there any citation made by the City Treasurer of any provision of the Revenue Code which would serve as the legal authority for the collection of business taxes from condominiums in Makati.
In the instant case, the assessment which appears to be based solely on the Corporation’s collection of assessments from unit owners, such assessments being utilized to defray the necessary expenses for the Condominium Project and the common areas. There is no contemplation of business, no orientation towards profit in this case. The assailed tax assessment has no basis under the Local Government Code or the Makati Revenue Code, and the insistence of the city in its collection of the void tax constitutes an attempt at deprivation of property without due process of law.
Hence, the collection of business taxes from condominiums in Makati is void.
Real LexEcon 