Luz Yamane vs BA Lepanto Condominium Corporation

written by Howard

G.R. No. 154993 – 510 Phil. 750 – 474 SCRA 258 – Taxation Law – Tax Remedies – Local Taxation – Original & Appellate Jurisdiction in Tax Cases 

In 1998, BA Lepanto Condominium Corporation (Lepanto) received a tax assessment in the amount of P1.6 million from Luz Yamane, the City Treasurer of Makati, for business taxes. Lepanto protested the assessment as it averred that Lepanto, as a corporation, is not organized for profit; that it merely exists for the maintenance of the condominium. Yamane denied the protest. Lepanto then appealed the denial to the RTC of Makati. RTC Makati affirmed the decision of Yamane. Lepanto then filed a petition for review under Rule 42 with the Court of Appeals. The Court of Appeals reversed the RTC.

Yamane now filed a petition for review under Rule 45 with the Supreme Court. Yamane avers that a.) Lepanto is liable for local taxation because its act of maintaining the condominium is an activity for profit because the end result of such activity is the betterment of the market value of the condominium which makes it easier to sell it; that Lepanto is earning profit from fees collected from condominium unit owners; and that b.) Lepanto’s petition for review of the decision of the RTC to the CA is erroneous because when the RTC decided on the appeal brought to it by Lepanto, the RTC was exercising its original jurisdiction and not its appellate jurisdiction; that as such, what Lepanto should have done is to file an ordinary appeal under Rule 41.

ISSUE: Whether or not a RTC deciding an appeal from the decision of a city treasurer on tax protests is exercising original jurisdiction. Whether or not a condominium corporation organized solely for the maintenance of a condominium is liable for local taxation.

HELD:

1. Yes. Although the LGC (Section 195) provides that the remedy of the taxpayer whose protest is denied by the local treasurer is “to appeal with the court of competent jurisdiction” or in this case the RTC (considering the amount of tax liability is P1.6 million), such appeal when decided by the RTC is still in the exercise of its original jurisdiction and not its appellate jurisdiction. This is because appellate jurisdiction is defined as the authority of a court higher in rank to re-examine the final order or judgment of a lower court which tried the case now elevated for judicial review. Here, the City Treasurer is not a lower court.

The Supreme Court however clarifies that this ruling is only applicable to similar cases before the passage of Republic Act 9282 (effective April 2004). Under RA 9282, the Court of Tax Appeals (CTA), not CA, exercises exclusive appellate jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax cases whether originally decided or resolved by them in the exercise of their original or appellate jurisdiction.

2. No. Lepanto was not organized for profit. The fees it was collecting from the condominium unit owners redound to the owners themselves because the fees collected are being used for the maintenance of the condo. Further, it appears that the assessment issued by Yamane did not state the legal basis for the tax being imposed on Lepanto – it merely states that Makati is authorized to collect business taxes under the Local Government Code (LGC) but no other reference specific reference to specific laws were cited.

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