Tax Limitations
Content
Commissioner vs. Algue 158 SCRA 9 Facts: The Philippine Sugar Estate Development Company (PSEDC). Appointed Algue Inc. as its¶ agent. Algue received a commission of 125,000.00 and it was from their commission that it paid organizers of VOICP 75,000.00 in proportional fees. He received an assessment from the CIR. He filed a letter of protest or reconsideration. The CIR contends that the claimed deduction was properly disallowed because it was not an ordinary, reasonable or necessary expense. Issue: Is the CIR correct? Ruling: No. taxes are the lifeblood of the government and should be collected without unnecessary hindrance. Every person who is able to pay must contribute his share in the running of the government. The government for its¶ part is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that is an arbitrary method of exaction by those in the seat of power. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself.
Sison vs. Ancheta GR L- 59431 June 25, 1984
Facts: BP 135 was enacted. Sison, as a taxpayer alleged that Sison is thereof unduly discriminated against him by the imposition of higher rate upon his income as a professional, that it amounts to class legislation, and that it transgresses against the equal protection and due process clauses of the 1987 Constitution as well as the rule requiring the uniformity in taxation. Issue: is the contention meritorious? Ruling: No. it is manifest that the field of state activity has assumed a much wider scope. The reason was clearly set forth by justice Makalintal, thus: the areas which need to be left with private enterprise and initiative and which the government was called upon to enter optionally, and only because it was better equipped to administer for the public welfare than any individual or groups and individual continue to lose their well-defined boundaries and to be absorbed within the activities that the government must undertake in the sovereign capacity if it is to meet the increasing social challenges of the times. Hence, there is a need for more revenues. The power to tax, on inherent prerogative, has to be reconciled to assure the performance of vital state functions. It is the source of public funds. Taxes, being the lifeblood of the government, their prompt and certain availability is of the essence.
Pascual vs. Secretary of Public Works 110 SCRA 331, December 29, 1960
Facts: Petitioner seeks to declare RA 920 as unconstitutional as as declaring the donation by Sen. Zulueta as invalid. RA 920 contained an item appropriating 85,000 which the petitioner alleged that it was for the construction of roads improving the private property of Zulueta. He alleges that the said law was not for a public purpose. Issue: Is R.A. 920 unconstitutional? Ruling: Yes. R.A. 920 is an invalid imposition, since it results in promotion of a private enterprise as it benefit the property of a private individual. The provision that the land thereafter be donated to the government has not cure the defect. The rule is that if the public advantage or benefit is merely incidental in promotion of a particular enterprise, such defect shall render the law invalid. On the other hand, if what is incidental is the promotion of a private enterprise the tax law shall be deemed for a public purpose.
Osmeña vs. Orbos March 31, 1993, 220 SCRA 703 Facts: Petitioner seeks to have Sec.8, paragraph 1 C of PD 1956, as amended by EO 137 declared unconstitutional for being undue and invalid delegation of legislative power to the Energy regulatory Board. Under the assailed law, the ERB is given the authority to impose additional amounts on petroleum products and to impose additional amounts to augment the resources of the fund. He argue that the money collected pursuant to PD 1956 must be treated as a special fund, not as a trust account or a trust fund, and that if a special tax is collected for a special purpose it shall be treated as a special fund to be used only for the purpose indicated. Issue: is there undue delegation of legislative power? Ruling: No. for a valid delegation of power, it is essential that the law delegating the power must be 1. Complete in itself, that it must set forth the policy to be executed by the delegate 2. It must fix the standard ± limits of which are sufficiently determinate or determined ± to which the delegate must conform. While the funds may be referred to as taxes, they are enacted in the exercise of the police power of the state. The fund remains subject to the review and accounting of the COA. These measures comply with the constitutional description of a special fund.
MIAA vs. City of Parañaque GR 155650 July 20, 2006 Facts: MIAA operates the NAIA complex in parañaque under EO 903. On June 28, 2001 MIAA received final notices of real estate tax delinquency from the city for the taxable year 1992-2001. Consequently, the city issue notice for levy on the airport land and buildings. MIAA opposed the levy and contended that SEC. 21 of EO 903 specifically exempts it from the payment of real estate tax. MIAA invokes the principle that the government cannot tax itself. Issue: Is the MIAA liable for real estate taxes? Ruling: No. MIAA is not a GOCC but a government instrumentality vested with corporate powers to perform efficiently government functions. A government instrumentality falls under sec 133(o) of the LGC which limits the taxing powers of LGUs. The LGC recognize that the LGUs¶ cannot tax the national government, which delegated the power to tax. Moreover, the airport lands and buildings of MIAA are owned by the republic is not taxable pursuant to Sec 234 (a) of the LGC.
Abra Valley College v. Aquino [GR L-39086, 15 June 1988]
Facts: Petitioner Abra Valley College is an educational corporation and institution of higher learning duly incorporated with the SEC in 1948. On 6 July 1972, the Municipal and Provincial treasurers (Gaspar Bosque and Armin Cariaga, respectively) and issued a Notice of Seizure upon the petitioner for the college lot and building (OCT Q-83) for the satisfaction of said taxes thereon. The treasurers served upon the petitioner a Notice of Sale on 8 July 1972, the sale being held on the same day. Dr. Paterno Millare, then municipal mayor of Bangued, Abra, offered the highest bid of P 6,000 on public auction involving the sale of the college lot and building. The certificate of sale was correspondingly issued to him. The petitioner filed a complaint on 10 July 1972 in the court a quo to annul and declare void the Notice of Seizure and the Notice of Sale of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to P5,140.31. On 12 April 1973, the parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The trial court ruled for the government, holding that the second floor of the building is being used by the director for residential purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not being used exclusively for educational purposes. Instead of perfecting an appeal, petitioner availed of the instant petition for review on certiorari with prayer for preliminary injunction before the Supreme Court, by filing said petition on 17 August 1974. The Supreme Court affirmed the decision of the CFI Abra (Branch I) subject to the modification that half of the assessed tax be returned to the petitioner. The modification is derived from the fact that the ground floor is being used for commercial purposes (leased) and the second floor being used as incidental to education (residence of the director).
Issue: Should there be tax exemption?
Held:
Interpretation of the phrase used exclusively for educational purposes Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants exemption from realty taxes for Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable or educational purposes. This constitution is relative to Section 54, paragraph c, Commonwealth Act 470 as amended by RA 409 (Assessment Law). An institution used exclusively for religious, charitable and educational purposes, and as such, it is entitled to be exempted from taxation; notwithstanding that it keeps a lodging and a
boarding house and maintains a restaurant for its members (YMCA case). A lot which is not used for commercial purposes but serves solely as a sort of lodging place, also qualifies for exemption because this constitutes incidental use in religious functions (Bishop of Nueva Segovia case). Exemption in favour of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefor but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes (Herrera v. Quezon City Board of Assessment Appeals). While the Court allows a more liberal and non-restrictive interpretation of the phrase exclusively used for educational purposes, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. The use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. In the case at bar, the lease of the first floor of the building to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education.
American Bible Society v. City of Manila [GR L-9637, 30 April 1957]
Facts: Plaintiff-appellant, American Bible Society, is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the Philippines through its Philippine agency established in Manila in November 1898. The defendant-appellee, City of Manila, is a municipal corporation with powers that are to be exercised in conformity with the provisions of RA 409, (Revised Charter of the City of Manila). In the course of its ministry, plaintiff s Philippine agency has been distributing and selling bibles and/or gospel portions thereof (except during the Japanese occupation) throughout the Philippines and translating the same into several Philippine dialects. On 29 May 1953, the acting City Treasurer of the City of Manila informed plaintiff that it was conducting the business of general merchandise since November 1945, without providing itself with the necessary Mayor s permit and municipal license, in violation of Ordinance 3000, as amended, and Ordinances 2529, 3028 and 3364, and required plaintiff to secure, within 3 days, the corresponding permit and license fees, together with compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of P5,821.45. On 24 October 1953, plaintiff paid to the defendant under protest the said permit and license fees, giving at the same time notice to the City Treasurer that suit would be taken in court to question the legality of the ordinances under which the said fees were being collected, which was done on the same date by filing the complaint that gave rise to this action. After hearing, the lower court dismissed the complaint for lack of merit. Plaintiff appealed to the CA,, which in turn certified the case to the Supreme Court for the reason that the errors assigned involved only questions of law. The Supreme Court reversed the decision appealed and ordering the defendant to return to plaintiff the sum of P5,891.45 unduly collected from it; without pronouncement as to costs.
Issue: Is the American Bible Society Liable? Ruling: A municipal license tax on the sale of bibles and religious articles by a non-stock, non-profit, missionary organization at a minimal profit constitutes a curtailment of religious freedom and worship which is guaranteed by the constitution. However, the income of such organization from any activity for profit or from any of their property, real or personal, regardless of the disposition made of such income is taxable.
Tolentino vs. Secretary of Finance GR 115455 Oct. 30 1995 Facts: The VAT is levied on the sale, barter, or exchanged of the goods and properties as well as on the sale of services. RA7116 seeks to wider the tax base of the existing VAT system and enhance it administration on by amending the NIRC. CRTBA asserts that R.A. 7116 is unconstitutional as it violate the rule that taxes should be uniform and equitable. Issue: Is it meritorious? Ruling: No. Equity and uniformity in taxation means that all the taxable articles or kinds of properties of the same class be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement, it is enough that the statute or ordinance applies equally to all persons, firms, and corporations placed in a similar situation.
Herrera vs. Quezon City Board of Assessment Appeals G.R. L-15270, September 30, 1961 Facts: In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and Ester Ochangco Herrera to establish and operate the St. Catherine¶s Hospital. In 1953, the Herreras sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax on the hospital, stating that the same was established for charitable and humanitarian purposes and not for commercial gain. The exemption was granted effective years 1953 to 1955. In 1955, however, the Assessor reclassified the properties from ³exempt´ to ³taxable´ effective 1956, as it was ascertained that out 32 beds in the hospital, 12 of which are for pay-patients. A school of midwifery is also operated within the premises of the hospital. Issue: Whether St. Catherine¶s Hospital is exempt from reallty tax. Ruling: The admission of pay-patients does not detract from the charitable character of a hospital, if all its funds are devoted exclusively to the maintenance of the institution as a public charity. The exemption in favour of property used exclusively for charitable or educational purpose is not limited to property actually indispensable therefore, but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purpose, such as in the case of hospitals ² a school for training nurses; a nurses¶ home; property used to provide housing facilities for interns, resident doctors, superintendents and other members of the hospital staff; and recreational facilities for student nurses, interns and residents. Within the purview of the Constitution, St. Catherine¶s Hospital is a charitable institution exempt from taxation.
AMERICAN BIBLE SOCIETY VS MANILA GRN 9637 April 30, 1957 FACTS: Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation and in the course of its ministry, it has been selling bible and or gospel portions throughout the country and translating the same into several Philippine dialects. The City of Manila considered appellant as conducting the business of general merchandize and required it to secure the necessary permit and license fees. ISSUE: Whether or not appellant if engaged in business as a religious corporation and thus be made to pay fees or taxes. RULING: It may be true that the price of bibles and pamphlets was a bit higher than the actual cost of the same, but this could not mean that appellant is engaged in business for profit. For this reason, we believe that the ordinance requiring them to pay fees or taxes would impair its free exercise of its religious freedom thru distribution of pamphlets.
Associaiton of Customs Brokers vs Manila GRN L-4376 May 22, 1953
FACTS: The Municipal Board of Manila passed ordinance No. 3379 which imposes a property tax that is within the power of the City under its revised charter. The ordinance was passed by the Municipal Board under the authority conferred by section 18 of RA 409 ISSUE: Whether or not the ordinance infringes on the uniformity of taxes as ordained by the Constitution.
RULING: The Ordinance exacts the tax upon all motor vehicles operating within Manila and does not distinguish between a motor vehicle registered in the City and one registered in another place nor does it distinguish private of vehicle for hire. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in Manila. There is no pretense that the Ordinance equally applies to vehicles who come to Manila for a temporary purpose.
LLADOC V CIR & CTA GR 19201 June 16, 1965 14 SCRA 293
FACTS: MB Estate of Bacolod City donated Php 10,000 in cash to Fr. Ruiz, then the Parish Priest of Victorias, who was the predecessor of petitioner. MB Estate filed their donor¶s gift tax but petitioner is on protest regarding donee¶s tax claiming that assessment of gift tax against the Catholic Church is against the law; that when the donation was made. He was not yet the parish priest.
ISSUE: Whether or not petitioner should be liable for assessed donee¶s gift tax dontated. RULING: A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on property used exclusively for religious purposes, does not constitute an impairment of Constitution« ³exempt from taxation´ as employed in the Constitution should not be interpreted to mean exemption from all kinds of taxes. And there being no clear, positive or express grant of such privilege by law, in favor of petitioner, the exemption herein must be denied.
LUNG CENTER VS. QUEZON CITY GR 144104 June29, 2004
Facts: The lung center is a charitable institution within the context of 1973 and 1987 constitutions. The elements considered in determining a charitable institution are: the statue creating the enterprise; its corporate purposes; constitution and by-laws, methods of administration, nature of actual work performed, character of the services rendered, indefiniteness of the beneficiaries, and the use occupation of properties. As a gen. principle, a charitable institution doe not lose its character as such and its exemption form taxes simply because it derives income from paying patients, or receives subsidies from government; and no money insures to the private benefit of the persons managing or operating the institution.
Issue: Whether or not the real properties of the lung center are exempt from real property taxes.
Ruling. Partly No. Those portions of its real property that are leased to private entities are not exempt from actually, direct and exclusively used for charitable purpose. Under PD 1823, the lung center does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. The property tax exemption under Sec. 28(3), Art. Vi of the property taxes only. This provision was implanted by Sec.243 (b) of RA 7160.which provides that in order to be entitled to the exemption, the lung center must be able to prove that: it is a charitable institution and; its real properties are actually, directly and exclusively used for charitable purpose. Accordingly, the portions occupied by the hospital used for its patients are exempt from real property taxes while those leased to private entities are not exempt from such taxes.
LUTZ VS. ARANETA GR L-7859 December 22, 1955
FACTS: Walter Lutz, Judicial Administrator of the intestate estate of Ledesma, sought to recover the sum of Php14, 666.40 paid by the estate as taxes, alleging that such tax is unconstitutional as it levied for the aid and support of the sugar industry exclusively which is in his opinion not a public purpose.
ISSUE: Whether or not tax is valid in supporting the sugar industry?
RULING: The court ruled that the tax is valid as it served public purpose. The tax provided for in CA 567 is primarily an exercise of police power since sugar is a great source of income for the country and employs thousands of laborers. Hence, it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain.
COCONUT OIL REFINERS ASSOCIATION, INC. et al vs. RUBEN TORRES, as Executive Secretary, et al G.R. No. 132527. July 29, 2005 Facts: On March 13, 1992, RA No. 7227 was enacted, providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones in order to promote the economic and social development of Central Luzon in particular and the country in general. The law contains provisions on tax exemptions for importations of raw materials, capital and equipment. After which the President issued several Executive Orders as mandated by the law for the implementation of RA 7227. Herein petitioners contend the validity of the tax exemption provided for in the law. Issue: Whether or not the Executive Orders issued by President for the implementation of the tax exemptions constitutes executive legislation. Held: To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the ³free flow of goods or capital within, into, and out of the zones´ is insured. The phrase ³tax and duty-free importations of raw materials, capital and equipment´ was merely cited as an example of incentives that may be given to entities operating within the zone. Public respondent SBMA correctly argued that the maxim expressio unius est exclusio alterius, on which petitioners impliedly rely to support their restrictive interpretation, does not apply when words are mentioned by way of example. It is obvious from the wording of RA No. 7227, particularly the use of the phrase ³such as,´ that the enumeration only meant to illustrate incentives that the SSEZ is authorized to grant, in line with its being a free port zone. The Court finds that the setting up of such commercial establishments which are the only ones duly authorized to sell consumer items tax and duty-free is still well within the policy enunciated in Section 12 of RA No. 7227 that ³. . .the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments.´ However, the Court reiterates that the second sentences of paragraphs 1.2 and 1.3 of Executive Order No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section 12 of RA No. 7227. Said Section clearly provides that ³exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.
Sison vs. Ancheta GR L- 59431 June 25, 1984
Facts: BP 135 was enacted. Sison, as a taxpayer alleged that Sison is thereof unduly discriminated against him by the imposition of higher rate upon his income as a professional, that it amounts to class legislation, and that it transgresses against the equal protection and due process clauses of the 1987 Constitution as well as the rule requiring the uniformity in taxation. Issue: is the contention meritorious? Ruling: No. it is manifest that the field of state activity has assumed a much wider scope. The reason was clearly set forth by justice Makalintal, thus: the areas which need to be left with private enterprise and initiative and which the government was called upon to enter optionally, and only because it was better equipped to administer for the public welfare than any individual or groups and individual continue to lose their well-defined boundaries and to be absorbed within the activities that the government must undertake in the sovereign capacity if it is to meet the increasing social challenges of the times. Hence, there is a need for more revenues. The power to tax, on inherent prerogative, has to be reconciled to assure the performance of vital state functions. It is the source of public funds. Taxes, being the lifeblood of the government, their prompt and certain availability is of the essence.
Pascual vs. Secretary of Public Works 110 SCRA 331, December 29, 1960
Facts: Petitioner seeks to declare RA 920 as unconstitutional as as declaring the donation by Sen. Zulueta as invalid. RA 920 contained an item appropriating 85,000 which the petitioner alleged that it was for the construction of roads improving the private property of Zulueta. He alleges that the said law was not for a public purpose. Issue: Is R.A. 920 unconstitutional? Ruling: Yes. R.A. 920 is an invalid imposition, since it results in promotion of a private enterprise as it benefit the property of a private individual. The provision that the land thereafter be donated to the government has not cure the defect. The rule is that if the public advantage or benefit is merely incidental in promotion of a particular enterprise, such defect shall render the law invalid. On the other hand, if what is incidental is the promotion of a private enterprise the tax law shall be deemed for a public purpose.
Osmeña vs. Orbos March 31, 1993, 220 SCRA 703 Facts: Petitioner seeks to have Sec.8, paragraph 1 C of PD 1956, as amended by EO 137 declared unconstitutional for being undue and invalid delegation of legislative power to the Energy regulatory Board. Under the assailed law, the ERB is given the authority to impose additional amounts on petroleum products and to impose additional amounts to augment the resources of the fund. He argue that the money collected pursuant to PD 1956 must be treated as a special fund, not as a trust account or a trust fund, and that if a special tax is collected for a special purpose it shall be treated as a special fund to be used only for the purpose indicated. Issue: is there undue delegation of legislative power? Ruling: No. for a valid delegation of power, it is essential that the law delegating the power must be 1. Complete in itself, that it must set forth the policy to be executed by the delegate 2. It must fix the standard ± limits of which are sufficiently determinate or determined ± to which the delegate must conform. While the funds may be referred to as taxes, they are enacted in the exercise of the police power of the state. The fund remains subject to the review and accounting of the COA. These measures comply with the constitutional description of a special fund.
MIAA vs. City of Parañaque GR 155650 July 20, 2006 Facts: MIAA operates the NAIA complex in parañaque under EO 903. On June 28, 2001 MIAA received final notices of real estate tax delinquency from the city for the taxable year 1992-2001. Consequently, the city issue notice for levy on the airport land and buildings. MIAA opposed the levy and contended that SEC. 21 of EO 903 specifically exempts it from the payment of real estate tax. MIAA invokes the principle that the government cannot tax itself. Issue: Is the MIAA liable for real estate taxes? Ruling: No. MIAA is not a GOCC but a government instrumentality vested with corporate powers to perform efficiently government functions. A government instrumentality falls under sec 133(o) of the LGC which limits the taxing powers of LGUs. The LGC recognize that the LGUs¶ cannot tax the national government, which delegated the power to tax. Moreover, the airport lands and buildings of MIAA are owned by the republic is not taxable pursuant to Sec 234 (a) of the LGC.
Abra Valley College v. Aquino [GR L-39086, 15 June 1988]
Facts: Petitioner Abra Valley College is an educational corporation and institution of higher learning duly incorporated with the SEC in 1948. On 6 July 1972, the Municipal and Provincial treasurers (Gaspar Bosque and Armin Cariaga, respectively) and issued a Notice of Seizure upon the petitioner for the college lot and building (OCT Q-83) for the satisfaction of said taxes thereon. The treasurers served upon the petitioner a Notice of Sale on 8 July 1972, the sale being held on the same day. Dr. Paterno Millare, then municipal mayor of Bangued, Abra, offered the highest bid of P 6,000 on public auction involving the sale of the college lot and building. The certificate of sale was correspondingly issued to him. The petitioner filed a complaint on 10 July 1972 in the court a quo to annul and declare void the Notice of Seizure and the Notice of Sale of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to P5,140.31. On 12 April 1973, the parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The trial court ruled for the government, holding that the second floor of the building is being used by the director for residential purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not being used exclusively for educational purposes. Instead of perfecting an appeal, petitioner availed of the instant petition for review on certiorari with prayer for preliminary injunction before the Supreme Court, by filing said petition on 17 August 1974. The Supreme Court affirmed the decision of the CFI Abra (Branch I) subject to the modification that half of the assessed tax be returned to the petitioner. The modification is derived from the fact that the ground floor is being used for commercial purposes (leased) and the second floor being used as incidental to education (residence of the director).
Issue: Should there be tax exemption?
Held:
Interpretation of the phrase used exclusively for educational purposes Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants exemption from realty taxes for Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable or educational purposes. This constitution is relative to Section 54, paragraph c, Commonwealth Act 470 as amended by RA 409 (Assessment Law). An institution used exclusively for religious, charitable and educational purposes, and as such, it is entitled to be exempted from taxation; notwithstanding that it keeps a lodging and a
boarding house and maintains a restaurant for its members (YMCA case). A lot which is not used for commercial purposes but serves solely as a sort of lodging place, also qualifies for exemption because this constitutes incidental use in religious functions (Bishop of Nueva Segovia case). Exemption in favour of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefor but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes (Herrera v. Quezon City Board of Assessment Appeals). While the Court allows a more liberal and non-restrictive interpretation of the phrase exclusively used for educational purposes, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. The use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. In the case at bar, the lease of the first floor of the building to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education.
American Bible Society v. City of Manila [GR L-9637, 30 April 1957]
Facts: Plaintiff-appellant, American Bible Society, is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the Philippines through its Philippine agency established in Manila in November 1898. The defendant-appellee, City of Manila, is a municipal corporation with powers that are to be exercised in conformity with the provisions of RA 409, (Revised Charter of the City of Manila). In the course of its ministry, plaintiff s Philippine agency has been distributing and selling bibles and/or gospel portions thereof (except during the Japanese occupation) throughout the Philippines and translating the same into several Philippine dialects. On 29 May 1953, the acting City Treasurer of the City of Manila informed plaintiff that it was conducting the business of general merchandise since November 1945, without providing itself with the necessary Mayor s permit and municipal license, in violation of Ordinance 3000, as amended, and Ordinances 2529, 3028 and 3364, and required plaintiff to secure, within 3 days, the corresponding permit and license fees, together with compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of P5,821.45. On 24 October 1953, plaintiff paid to the defendant under protest the said permit and license fees, giving at the same time notice to the City Treasurer that suit would be taken in court to question the legality of the ordinances under which the said fees were being collected, which was done on the same date by filing the complaint that gave rise to this action. After hearing, the lower court dismissed the complaint for lack of merit. Plaintiff appealed to the CA,, which in turn certified the case to the Supreme Court for the reason that the errors assigned involved only questions of law. The Supreme Court reversed the decision appealed and ordering the defendant to return to plaintiff the sum of P5,891.45 unduly collected from it; without pronouncement as to costs.
Issue: Is the American Bible Society Liable? Ruling: A municipal license tax on the sale of bibles and religious articles by a non-stock, non-profit, missionary organization at a minimal profit constitutes a curtailment of religious freedom and worship which is guaranteed by the constitution. However, the income of such organization from any activity for profit or from any of their property, real or personal, regardless of the disposition made of such income is taxable.
Tolentino vs. Secretary of Finance GR 115455 Oct. 30 1995 Facts: The VAT is levied on the sale, barter, or exchanged of the goods and properties as well as on the sale of services. RA7116 seeks to wider the tax base of the existing VAT system and enhance it administration on by amending the NIRC. CRTBA asserts that R.A. 7116 is unconstitutional as it violate the rule that taxes should be uniform and equitable. Issue: Is it meritorious? Ruling: No. Equity and uniformity in taxation means that all the taxable articles or kinds of properties of the same class be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement, it is enough that the statute or ordinance applies equally to all persons, firms, and corporations placed in a similar situation.
Herrera vs. Quezon City Board of Assessment Appeals G.R. L-15270, September 30, 1961 Facts: In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and Ester Ochangco Herrera to establish and operate the St. Catherine¶s Hospital. In 1953, the Herreras sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax on the hospital, stating that the same was established for charitable and humanitarian purposes and not for commercial gain. The exemption was granted effective years 1953 to 1955. In 1955, however, the Assessor reclassified the properties from ³exempt´ to ³taxable´ effective 1956, as it was ascertained that out 32 beds in the hospital, 12 of which are for pay-patients. A school of midwifery is also operated within the premises of the hospital. Issue: Whether St. Catherine¶s Hospital is exempt from reallty tax. Ruling: The admission of pay-patients does not detract from the charitable character of a hospital, if all its funds are devoted exclusively to the maintenance of the institution as a public charity. The exemption in favour of property used exclusively for charitable or educational purpose is not limited to property actually indispensable therefore, but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purpose, such as in the case of hospitals ² a school for training nurses; a nurses¶ home; property used to provide housing facilities for interns, resident doctors, superintendents and other members of the hospital staff; and recreational facilities for student nurses, interns and residents. Within the purview of the Constitution, St. Catherine¶s Hospital is a charitable institution exempt from taxation.
AMERICAN BIBLE SOCIETY VS MANILA GRN 9637 April 30, 1957 FACTS: Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation and in the course of its ministry, it has been selling bible and or gospel portions throughout the country and translating the same into several Philippine dialects. The City of Manila considered appellant as conducting the business of general merchandize and required it to secure the necessary permit and license fees. ISSUE: Whether or not appellant if engaged in business as a religious corporation and thus be made to pay fees or taxes. RULING: It may be true that the price of bibles and pamphlets was a bit higher than the actual cost of the same, but this could not mean that appellant is engaged in business for profit. For this reason, we believe that the ordinance requiring them to pay fees or taxes would impair its free exercise of its religious freedom thru distribution of pamphlets.
Associaiton of Customs Brokers vs Manila GRN L-4376 May 22, 1953
FACTS: The Municipal Board of Manila passed ordinance No. 3379 which imposes a property tax that is within the power of the City under its revised charter. The ordinance was passed by the Municipal Board under the authority conferred by section 18 of RA 409 ISSUE: Whether or not the ordinance infringes on the uniformity of taxes as ordained by the Constitution.
RULING: The Ordinance exacts the tax upon all motor vehicles operating within Manila and does not distinguish between a motor vehicle registered in the City and one registered in another place nor does it distinguish private of vehicle for hire. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in Manila. There is no pretense that the Ordinance equally applies to vehicles who come to Manila for a temporary purpose.
LLADOC V CIR & CTA GR 19201 June 16, 1965 14 SCRA 293
FACTS: MB Estate of Bacolod City donated Php 10,000 in cash to Fr. Ruiz, then the Parish Priest of Victorias, who was the predecessor of petitioner. MB Estate filed their donor¶s gift tax but petitioner is on protest regarding donee¶s tax claiming that assessment of gift tax against the Catholic Church is against the law; that when the donation was made. He was not yet the parish priest.
ISSUE: Whether or not petitioner should be liable for assessed donee¶s gift tax dontated. RULING: A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on property used exclusively for religious purposes, does not constitute an impairment of Constitution« ³exempt from taxation´ as employed in the Constitution should not be interpreted to mean exemption from all kinds of taxes. And there being no clear, positive or express grant of such privilege by law, in favor of petitioner, the exemption herein must be denied.
LUNG CENTER VS. QUEZON CITY GR 144104 June29, 2004
Facts: The lung center is a charitable institution within the context of 1973 and 1987 constitutions. The elements considered in determining a charitable institution are: the statue creating the enterprise; its corporate purposes; constitution and by-laws, methods of administration, nature of actual work performed, character of the services rendered, indefiniteness of the beneficiaries, and the use occupation of properties. As a gen. principle, a charitable institution doe not lose its character as such and its exemption form taxes simply because it derives income from paying patients, or receives subsidies from government; and no money insures to the private benefit of the persons managing or operating the institution.
Issue: Whether or not the real properties of the lung center are exempt from real property taxes.
Ruling. Partly No. Those portions of its real property that are leased to private entities are not exempt from actually, direct and exclusively used for charitable purpose. Under PD 1823, the lung center does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. The property tax exemption under Sec. 28(3), Art. Vi of the property taxes only. This provision was implanted by Sec.243 (b) of RA 7160.which provides that in order to be entitled to the exemption, the lung center must be able to prove that: it is a charitable institution and; its real properties are actually, directly and exclusively used for charitable purpose. Accordingly, the portions occupied by the hospital used for its patients are exempt from real property taxes while those leased to private entities are not exempt from such taxes.
LUTZ VS. ARANETA GR L-7859 December 22, 1955
FACTS: Walter Lutz, Judicial Administrator of the intestate estate of Ledesma, sought to recover the sum of Php14, 666.40 paid by the estate as taxes, alleging that such tax is unconstitutional as it levied for the aid and support of the sugar industry exclusively which is in his opinion not a public purpose.
ISSUE: Whether or not tax is valid in supporting the sugar industry?
RULING: The court ruled that the tax is valid as it served public purpose. The tax provided for in CA 567 is primarily an exercise of police power since sugar is a great source of income for the country and employs thousands of laborers. Hence, it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain.
COCONUT OIL REFINERS ASSOCIATION, INC. et al vs. RUBEN TORRES, as Executive Secretary, et al G.R. No. 132527. July 29, 2005 Facts: On March 13, 1992, RA No. 7227 was enacted, providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones in order to promote the economic and social development of Central Luzon in particular and the country in general. The law contains provisions on tax exemptions for importations of raw materials, capital and equipment. After which the President issued several Executive Orders as mandated by the law for the implementation of RA 7227. Herein petitioners contend the validity of the tax exemption provided for in the law. Issue: Whether or not the Executive Orders issued by President for the implementation of the tax exemptions constitutes executive legislation. Held: To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the ³free flow of goods or capital within, into, and out of the zones´ is insured. The phrase ³tax and duty-free importations of raw materials, capital and equipment´ was merely cited as an example of incentives that may be given to entities operating within the zone. Public respondent SBMA correctly argued that the maxim expressio unius est exclusio alterius, on which petitioners impliedly rely to support their restrictive interpretation, does not apply when words are mentioned by way of example. It is obvious from the wording of RA No. 7227, particularly the use of the phrase ³such as,´ that the enumeration only meant to illustrate incentives that the SSEZ is authorized to grant, in line with its being a free port zone. The Court finds that the setting up of such commercial establishments which are the only ones duly authorized to sell consumer items tax and duty-free is still well within the policy enunciated in Section 12 of RA No. 7227 that ³. . .the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments.´ However, the Court reiterates that the second sentences of paragraphs 1.2 and 1.3 of Executive Order No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section 12 of RA No. 7227. Said Section clearly provides that ³exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.
