March 4, 1998

DAR OPINION NO. 29-98

RAFAEL PAGUIO

4 Virtue Street

Teresa Village

Project 6, Quezon City

Dear Mr. Paguio:

This refers to your letter of February 20, 1998, which you referred to the Director, Bureau of Agrarian Legal Assistance inquiring whether or not the cost of irrigation is one of the deductible items in the computation of lease rental.

Cited hereunder are the pertinent provisions of R.A. 3844 (Code of Agrarian Reforms) n the matter:

"Sec. 32.       Cost of Irrigation System. — The cost of construction of a permanent irrigation system, including distributory canals, may be borne exclusively by the agricultural lessor who shall be entitled to an increase in rental proportionate to the resultant increase in production: Provided, that if the agricultural lessor refuses to bear the expenses of construction the agricultural lessee or lessees may shoulder the same, in which case the former shall not be entitled to an increase in rental and shall, upon the termination of the relationship, pay the lessee or his heir the reasonable value of the improvement at the time of the termination: Provided, further, That if the irrigation system constructed does not work, it shall not be considered as an improvement within the meaning of this Section."

"Sec. 34.       Consideration for the Lease of Riceland and Lands Devoted to other Crops. — The consideration for the lease of riceland and lands devoted to other craps shall not be more than the equivalent of twenty-five per centum of the average normal harvest during the three agricultural years immediately preceding the date the leasehold was established after deducting the amount used for seeds and the cost of harvesting, threshing, loading, hauling and processing, whichever are applicable. . . ."

Based on the aforecited provisions of Section 32 in conjunction with Section 34 of R.A. No. 3844, it is crystal clear that only those enumerated under Section 34 of said Act are allowed as deductible items, namely, the cost of harvesting, threshing, loading, hauling and processing. Since the enumeration as deductible items under Republic Act No. 3844 are exclusive in character, no other item can be claimed or considered as deductible item. Accordingly, the cost of irrigation should not be considered a deductible item in the computation of lease rental.

Thank you for communicating with us and we hope to have clarified the matter with you.

Very truly yours,

(SGD.) ARTEMIO A. ADASA, JR.

Undersecretary for Legal Affairs, and Policy and Planning