46.

BLGF Opinion dated August 5, 2004

FACTS:
> The Municipal Assessor, Boac, Marinduque send a letter to the BLGF dated 15 June 2004
inquiring as to whether the printing and developing machine owned by Marinduque Photo Center;
and the equipment being utilized by water refilling station in purification process are exempt from
the payment of real property tax.
ISSUE:
Whether or not the printing and developing machine and the equipment being utilized by water
refilling stations in purification process are exempt from the payment of real property tax.
HELD:
No.
With regard to the equipment being utilized by water Refilling Station, the Bureau, under its letter
dated January 5, 2004, treating on a similar subject matter, rendered the following opinion:
Section 199 (o) of the Local Government Code of 1991 (RA No. 7160), as implemented under
Article 290 (o) of its Implementing Rules and Regulations (IRR) provided the definition of
machinery:
(o) Machinery embraces machine, equipment, mechanical contrivances, instruments,
appliances or apparatus, which may or may not attached, permanently or temporarily
to the real property.
Physical properties for production, installations and appurtenant service
facilities, those which are mobile, self-powered, or self-propelled and those not
permanently attached to the real property shall be classified as real property provided
that:
(1) They are actually, directly and exclusively used to meet the
needs of the particular industry, business or activity; and
(2) By their very nature and purpose are designed for, or necessary
to manufacturing, mining, logging, commercial, and industrial, or
agricultural purposes.
Machinery which are of general purpose use including but not limited to office
equipment, typewriters, telephone equipment, breakable or easily damaged
containers (glass or cartons), microcomputers, fax, telex machines, cash dispensers,
furniture and fixture freezers, refrigerators, display cases of racks, fruit juice or
beverage automatic dispensing machines which are not directly and exclusively used
to meet the needs of a particular industry, business or activity shall not be consider
definition of machinery under this Rule.
x x x.
Further, under Finance Circular No. 001-2002, copy attached, the Department of Finance
made the following clarification:

x x x.
2. Machinery that is not permanently attached to real estate is:
a. Subject to the real property tax if it is an essential and principal
element of an industry, work or activity without which such industry, work
or activity cannot function; (underlining supplied)
b. Not subject to the real property tax if it is not an essential and
principal element of an industry, work or activity.
In view thereof, this Bureau believes that machineries of JVG Aqua Crystal Refilling Center
such as water purifying equipment and apparatus which are being used actually, directly and
exclusively in the business of purified drinking water fall within the definition of Machinery and
considered real property subject to real property tax. This Bureau accordingly finds the action
of the Provincial Assessor of Zamboanga Sibugay in imposing real property tax to the subject
machineries of JVG Aqua Crystal Refilling Center, to be in order.
Similarly, therefore, the equipment being utilized by the water refilling stations thereat in
purification process fall within the definition of machinery and considered real property subject to
real property tax.
Likewise, the printing and developing machine owned by Marinduque Photo Center is a taxable
real property considering that the same falls within the definition of Machinery without which, the
work or activity of the said photo center cannot function, and therefore, an essential and principal
element of the business of photography.