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Supreme Court orders status quo on MRT controversy

By Mike Frialde Updated December 28, 2008 12:00 AM

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The Supreme Court has issued an order to maintain the status quo in the case between the Metro Rail Transit Corp. (MRTC) and the Mandaluyong City government involving P1.306 billion in unpaid real property taxes owed by the rail operator.

In its ruling, the High Court ordered the parties in the case – the MRTC, the Department of Transportation and Communications, and the Mandaluyong City government – to first wait for its decision on the petition filed by the Office of the Solicitor General (OSG), which asked whether a local government could compel a government agency to pay real property tax.

The OSG maintains that the government, through the Department of Transportation and Communications, could not be subjected to taxation as government agencies are exempted from paying taxes.

However, the Mandaluyong City government argued that improvements have been made on the MRT stations located in Ortigas Avenue, Shaw Boulevard and in Boni Avenue, although these were built under a build-lease-transfer agreement. The city government says that although the stations are government-owned, improvements made in these stations are subject to tax.

Mandaluyong City government says real property refers not only to the structures that serve as MRT stations, railways and carriageways but to the improvements of the stations as well.

On June 24, 2001, the Mandaluyong City assessor declared the properties in the name of MRTC and assessed their liability for real property taxes. Despite several notices, the MRTC failed to pay real property taxes, which at the time came to P1.3 billion.

In 2005, the Mandaluyong City Assessor’s Office issued a notice of delinquency to MRTC and demanded payment of taxes worth P1,306,617,522.96.

The DOTC, on Dec. 5, 2005, then filed a complaint to nullify the tax assessment and warrant of levy before the Mandaluyong court. It also asked the court to stop the sale of the property at a public auction, which the court denied. The case was elevated to the Court of Appeals but has remained pending.

On March 24, 2006, the Mandaluyong City Treasurer proceeded to auction off the property, setting the price at P1.48 billion for the lot.

There were no bidders and the MRTC had one year to redeem the property but failed to do so, prompting the City Treasurer to issue a final bill of sale in favor of the Mandaluyong City government and the City Assessor cancelled the tax declaration in favor of Mandaluyong.


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