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CIR V. LINGAYEN GULF ELECTRIC POWER CO., INC.

and THE COURT OF TAX APPEALS, FACTS: This case is an appeal from decision of the CTA in 1964 which jointly heard upon the parties absolving respondent taxpayer here from liability from deficiency percentage, franchise, and fixed rates and surcharge assessed against it in the sums of 19,293 and 3, 616.86 for years 1946-1954 and 1959-1961. Taxpayer respondent Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan, pursuant to the municipal franchise granted it by their respective municipal councils, under Resolution Nos. 14 and 25 of June 29 and July 2, 1946, respectively. Section 10 of these franchises provide that: ...The said grantee in consideration of the franchise hereby granted, shall pay quarterly into the Provincial Treasury of Pangasinan, one per centum of the gross earnings obtained thru this privilege during the first twenty years and two per centum during the remaining fifteen years of the life of said franchise. On February 24, 1948, the President of the Philippines approved the franchises granted to the private respondent. 1955, BIR assessed against and demanded from the private respondent the total amount of P19,293.41 representing deficiency franchise taxes and surcharges for the years 1946 to 1954 applying the franchise tax rate of 5% on gross receipts from March 1, 1948 to December 31, 1954 as prescribed in Section 259 of the National Internal Revenue Code, instead of the lower rates as provided in the municipal franchises. Respondent requested for a reinvestigation of the case alleging that they in fact overpaid for the franchise tax. BIR denied the request reiterated demand for it. Petitioner Commissiooner then demanded to respondent payment of 3,616.86 representing deficiency franchise tax and surcharges for years of 1959-1961 again applying franchise tax rate of 5% on gross receipts as prescribed in Sec 259 of NIRC. Respondent protested and asked for reconsideration. It was denied . Hence they appealed to CA. Pending the hearing of the said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1 963, granting to the private respondent a legislative franchise for the operation of the electric light, heat, and power system in the same municipalities of Pangasinan. Section 4 thereof provides that: In consideration of the franchise and rights hereby granted, the grantee shall pay into the Internal Revenue office of each Municipality in which it is supplying electric current to the public under this franchise, a tax equal to two per centum of the gross receipts from electric current sold or supplied under this franchise. Said tax shall be due and payable quarterly and shall be in lieu of any and all taxes and/or licenses of any kind, nature or description levied, established, or collected by any authority whatsoever, municipal, provincial or national, now or in the future, on its poles, wires, insulator ... and on its franchise, rights, privileges, receipts, revenues and profits, from which taxes and/or licenses, the grantee is hereby expressly exempted and effective further upon the date the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts as provided for in the original franchise shall be collected, any provision of law to the contrary notwithstanding. CA ruled that the provisions of R.A 3843 should apply and accordingly dismissed the claim of the Commissioner of Internal Revenue. The said ruling is now the subject of the petition at bar. ISSUE/S: 1. WON the 5% franchise tax prescribed in Section 259 of the NIRC assessed against

the private respondent on its gross receipts realized before the effectivity of R.A- No. 3843 is collectible? 2. WON Section 4 of R.A. No. 3843 is unconstitutional for being violative of the "uniformity and equality of taxation" clause of the Constitution. 3. If Section 4 of R.A. No. 3843 is valid, whether or not it could be given retroactive effect so as to render uncollectible the taxes in question which were assessed before its enactment. 4. WON the respondent taxpayer is liable for the fixed and deficiency percentage taxes in the amount of P3,025.96 for the period from January 1, 1946 to February 29, 1948, the period before the approval of its municipal franchises. HELD: 1. No . Because R.A. 8343 granted respondent a legislative franchise in June 1963 amending, altering, or even repealing the original municipal franchises and provides that the respondent should only pay a 2% franchise tax on its gross receipts,, in lieu of any and all taxes and/or licenses of any kind nature or description levied established or collected by any authority whatsoever municipal, provincial, or national, now or in the future ... and effective further upon the date the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts ... shall be collected, any provision of law to the contrary notwithstanding." Thus, by virtue of R.A- No. 3843, the private respondent was liable to pay only the 2% franchise tax, effective from the date the original municipal franchise was granted. It is the contention of the petitioner Commissioner of Internal Revenue that the private respondent should have been held liable for the 5% franchise tax on gross receipts prescribed in Section 259 of the Tax Code, instead of the lower franchise tax rates provided in the municipal franchises (1% of gross earnings for the first twenty years and 2% for the remaining fifteen years of the life of the franchises) because Section 259 of the Tax Code, as amended by RA No. 39 of October 1, 1946, applied to existing and future franchises. The franchises of the private respondent were already in existence at the time of the adoption of the said amendment, since the franchises were accepted on March 1, 1948 after approval by the President of the Philippines on February 24, 1948. The private respondent's original franchises did not contain the proviso that the tax provided therein "shall be in lieu of all taxes;" moreover, the franchises contained a reservation clause that they shag be subject to amendment, alteration, or repeal, but even in the absence of such cause, the power of the Legislature to alter, amend, or repeal any franchise is always deemed reserved. 2. Petitioner alleges law is unconstitutional insofar as it provides for the payment by the private respondent of a franchise tax of 2% of its gross receipts, while other taxpayers similarly situated were subject to the 5% franchise tax imposed in Section 259 of the Tax Code, thereby discriminatory and violative of the rule on uniformity and equality of taxation. A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike The Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never been deemed violative of the equal protection clause. It is true that respondents municipal franchises were obtained under Act. no. 667 of the Phil Commission but these original franchises have been replaced by a new legislative franchise(RA 3843) AS held by the CA, it was granted subject to terms and conditions established in Act. No. 3636 amended by CA 132. These conditions Identify the private respondent's power plant as falling within that class of power plants created by Act No. 3636, as amended. The benefits of the tax reduction provided by law apply to the respondent's power plant and others circumscribed

within this class. R.A-No. 3843 merely transferred the petitioner's power plant from that class provided for in Act No. 667, as amended, to which it belonged until the approval of R.A- No. 3843, and placed it within the class falling under Act No. 3636, as amended. Thus, it only effected the transfer of a taxable property from one class to another. We do not have the authority to inquire into the wisdom of such act. Furthermore, the 5% franchise tax rate provided in Section 259 of the Tax Code was never intended to have a universal application. 4 We note that the said Section 259 of the Tax Code expressly allows the payment of taxes at rates lower than 5% when the charter granting the franchise of a grantee, like the one granted to the private respondent under Section 4 of R.A. No. 3843, precludes the imposition of a higher tax. R.A. No. 3843 did not only fix and specify a franchise tax of 2% on its gross receipts, but made it "in lieu of any and all taxes, all laws to the contrary notwithstanding," thus, leaving no room for doubt regarding the legislative intent. "Charters or special laws granted and enacted by the Legislature are in the nature of private contracts. They do not constitute a part of the machinery of the general government. They are usually adopted after careful consideration of the private rights in relation with resultant benefits to the State ... in passing a special charter the attention of the Legislature is directed to the facts and circumstances which the act or charter is intended to meet. The Legislature consider (sic) and make (sic) provision for all the circumstances of a particular case." 5 In view of the foregoing, we find no reason to disturb the respondent court's ruling upholding the constitutionality of the law in question. 3. The question of whether a statute operates retrospectively or only prospectively depends on the legislative intent. In the instant case, Act No. 3843 provides that "effective ... upon the date the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts ... shall be collected, any provision to the contrary notwithstanding." Republic Act No. 3843 therefore specifically provided for the retroactive effect of the law. 4. Franchises approved by Pres only on Feb 24, 1948. before the said date,respondent was liable for the payment of percentage and fixed taxes as seller of light, heat, and power which as the petitioner claims, amounted to P3,025.96. The legislative franchise (R.A. No. 3843) exempted the grantee from all kinds of taxes other than the 2% tax from the date the original franchise was granted. However the exception did not cover the period before the franchise was granted, i.e. before February 24, 1948. However, as pointed out by CA in its findings, during the period covered by the instant case, that is from January 1, 1946 to Dec.31, 1961, the respondent paid the amount of P34,184.36, which was very much more than the amount rightfully due from it. Hence, the private respondent should no longer be made to pay for the deficiency tax in the amount of P3,025.98 for the period from Jan 1, 1946 to Feb 29, 1948. Decision of CTA is affirmed. THE PROVINCE OF MISAMIS ORIENTAL V. CAGAYAN ELECTRIC POWER AND LIGHT COMPANY (CEPALCO) FACTS: CEPALCO was granted a franchise under R.A. 3247 to install, operate and maintain an electric light, heat and power system in the City of Cagayan de Or. Franchise was amended on June 21, 1963 by R.A. 3570 which added municipalities of Tagoloan and Opol to CEPALCO's sphere of operation, and was further amended on 1969 by R.A. No. 6020 which extended its field of operation to the municipalities of Villanueva and Jasaan. R.A. Nos. 3247, 3570 and 6020 uniformly provide that:

Sec. 3. In consideration of the franchise and rights hereby granted, the grantee shall pay a franchise tax equal to three per centum of the gross earnings for electric current sold under this franchise, of which two per centum goes into the National Treasury and one per centum goes into the treasury of the Municipalities of Tagoloan, Opol, Villanueva and Jasaan and Cagayan de Oro City, as the case may be: Provided, That the said franchise tax of three per centum of the gross earnings shall be in lieu of all taxes and assessments of whatever authority upon privileges earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted.

On June 28, 1973, the Local Tax Code (P.D. No. 231) was promulgated, Section 9 of which provides: Sec. 9. Franchise Tax.Any provision of special laws to the contrary notwithstanding, the
province may impose a tax on businesses enjoying franchise, based on the gross receipts realized within its territorial jurisdiction, at the rate of not exceeding one-half of one per cent of the gross annual receipts for the preceding calendar year. I

n the case of newly started business, the rate shall not exceed three thousand pesos per year. Sixty per cent of the proceeds of the tax shall accrue to the general fund of the province and forty per cent to the general fund of the municipalities serviced by the business on the basis of the gross annual receipts derived therefrom by the franchise holder. In the case of a newly started business, forty per cent of the proceeds of the tax shall be divided equally among the municipalities serviced by the business.

Pursuant to this Province of Misamis Oriental ( petitioner) enacted Provincial Revenue Ordinance No. 19, whose Section 12 reads: Sec. 12. Franchise Tax.There shall be levied, collected and paid on
businesses enjoying franchise tax of one-half of one per cent of their gross annual receipts for the preceding calendar year realized within the territorial jurisdiction of the province of Misamis Oriental. (p. 27, Rollo.)

The Provincial Treasurer of Misamis Oriental demanded payment of the provincial franchise tax from CEPALCO. The company refused to pay, alleging that it is exempt from all taxes except the franchise tax required by R.A. No. 6020. Nevertheless, in view of the opinion rendered by the Provincial Fiscal, upon CEPALCO's request, upholding the legality of the Revenue Ordinance, CEPALCO paid under protest on May 27, 1974 the sum of P 4,276.28 and appealed the fiscal's ruling to the Secretary of Justice who reversed it and ruled in favor of CEPALCO. On June 26, 1976, the Secretary of Finance issued Local Tax Regulation No. 3-75 adopting entirely the opinion of the Secretary of Justice. the Province filed in the CFI of Misamis Oriental a complaint for declaratory relief praying that the Court exercise its power to construe P.D. No. 231 in relation to the franchise of CEPALCO (R.A. No. 6020), and to declare the franchise as having been amended by P.D. No. 231. The Court dismissed the complaint and ordered the Province to return to CEPALCO the sum of P4,276.28 paid under protest.The Province has appealed to this Court ISSUE: WON a corporation whose franchise expressly provides that the payment of the "franchise tax of three per centum of the gross earnings shall be in lieu of all taxes and assessments of whatever authority upon privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee. is exempt from paying a provincial franchise tax? HELD: YES. There is no provision in P.D. No. 231 expressly or impliedly amending or repealing Section 3 of R.A. No. 6020. The perceived repugnancy between the two statutes should be very clear before the Court may hold that the prior one has been repealed by the later, since there is no express provision to that effect. The rule is that a special and local statute applicable to a particular case is not repealed by a later statute which is general in its terms, provisions and application even if the terms of the general act are broad enough to include the cases in the special law . unless there is manifest intent to repeal or alter the special law. Republic Acts Nos. 3247, 3570 and 6020 are special laws applicable only to CEPALCO,

while P.D. No. 231 is a general tax law. The presumption is that the special statutes are exceptions to the general law (P.D. No. 231) because they pertain to a special charter granted to meet a particular set of conditions and circumstances. The franchise of respondent CEPALCO expressly exempts it from payment of "all taxes of whatever authority" except the three per centum (3%) tax on its gross earnings. Such exemption is part of the inducement for the acceptance of the franchise and the rendition of public service by the grantee. Local Tax Regulation No. 3-75 issued by the Secretary of Finance on June 26, 1976, has made it crystal clear that the franchise tax provided in the Local Tax Code (P.D. No. 231, Sec. 9) may only be imposed on companies with franchises that do not contain the exempting clause. Thus it provides: The franchise tax imposed under local tax ordinance pursuant to Section 9 of the Local Tax Code,
as amended, shall be collected from businesses holding franchise but not from business establishments whose franchise contain the "in-lieu-of-all-taxes-proviso".

Manila Electric Company vs. Vera, 67 SCRA 351, cited by the petitioner, is not applicable here because what the Government sought to impose on Meralco in that case was not a franchise tax but a compensating tax on the poles, wires, transformers and insulators which it imported for its use. petition is denied. CFI decision affirmed. LLADCO V. CIR FACTS: M.B. Estate Inc of Bacolod City donated 10,000 in cash to Fr. Ruiz, then parish priest of Victorias, Negros Occidental and the predecessor of Petitioner, for construction of a new Catholic Church in the locality. M.B. estate filed donor's gift tax return. !960, CIR issued an assessment for donee's gift tax against the Catholic Parish of Victorias, Negro Occidental( tax amounted to P1,370 including surcharges, interest's of 1% monthly from 1958-1960, and comrpomise for the filing of the return. Petitioner protested to assessment and withdrawal. CIR denied protest. Pet. appealed to CTA alleging that at time of donation he was not the parish priest in Victorias, there is no legal entity or juridical person known as Catholic Priest of Victorias and therefore HE SHOULD NOT BE LIABLE FOR DONEE"S GIFT TAX and also it would be invalid as violating provisions of the Constitution. ISSUE: WON the imposition of gift tax despite the fact the Fr. Lladoc was not the Parish priest at the time of donation, Catholic Parish priest of Victorias did not have juridical personality as the constitutional exemption for religious purpose is valid? HELD: YES. imposition of the gift tax was valid, under Section 22(3) Article VI of the Constitution contemplates exemption only from payment of taxes assessed on such properties as Property taxes contra distinguished from Excise taxes. The imposition of the gift tax on the property used for religious purpose is not a violation of the Constitution. A gift tax is not a property by way of gift inter vivos. In the present case, what the Collector assessed was a donee's gift tax; the assessment was not on the properties themselves. It did not rest upon general ownership; it was an excise upon the use made of the properties, upon the exercise of the privilege of receiving the properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the exempting provisions of the section just mentioned. 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 the Constitution. As well observed by the learned respondent Court, the phrase "exempt from taxation," as employed in the Constitution (supra) 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. The head of the Diocese and not the parish priest is the real party in interest in the imposition of the donee's tax on the property donated to the church for religious purpose. the Rev. Fr. Casimiro Lladoc is hereby ordered to pay to the respondent the amount of P900.00 as donee's gift tax, plus the surcharge of five per centum (5%) as ad valorem penalty under Section 119 (c) of the Tax Code, and one per centum (1%) monthly interest from May 15, 1958 to the date of actual payment. The surcharge of 25% provided in Section 120 for failure to file a return may not be imposed as the failure to file a return was not due to willful neglect.( ... ) PROVINCE OF ABRA vs. HONORABLE HAROLD M. HERNANDO G.R. No. L-49336. August 31, 1981. FACTS: The Provincial Assessor of Abra levied a tax assessment on the properties of respondent Roman Catholic Bishop of Bangued. An action for declaratory relief by private respondent Roman Catholic Bishop of Bangued desirous of being exempted from a real estate tax followed by a summary judgment granting such exemption, without even hearing the side of petitioner. In the rather vigorous language of the Acting Provincial Fiscal, as counsel for petitioner, respondent Judge "virtually ignored the pertinent provisions of the Rules of Court; . . . wantonly violated the rights of petitioner to due process, by giving due course to the petition of private respondent for declaratory relief, and thereafter without allowing petitioner to answer and without any hearing, adjudged the case; all in total disregard of basic laws of procedure and basic provisions of due process in the constitution, thereby indicating a failure to grasp and understand the law, which goes into the competence of the Honorable Presiding Judge." The latter filed a petition for declaratory relief on the ground that it is exempted from payment of real estate taxes, its properties being actually, directly and exclusively used for religious or charitable purposes as sources of support for the bishop, the parish priest and his helpers. Petitioner filed a motion to dismiss but the same was denied. After conducting a summary hearing, respondent Judge granted the exemption without hearing the side of petitioner. Hence, this present petition for certiorari and mandamus alleging denial of procedural due process. ISSUE: WON the present requirement of actual exclusive and direct use of property for charitable and religious purposes is material. HELD: Under Article VI, Section 22, paragraph 3 of the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, building, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation." The present Constitution (Article VIII, Section 17, paragraph 3) added "charitable institutions, mosques, and non-profit cemeteries" and required that for the exemption of "lands, buildings, and improvements," they should not only be "exclusively" but also "actually" and "directly" used for religious or charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration. Petitioner Province of Abra is therefore fully justified in invoking the protection of procedural due process. If there is any case where proof is necessary to demonstrate that there is compliance with the constitutional provision that allows an exemption, this is it. Instead, respondent Judge accepted at its face the allegation of private respondent. All that was alleged in the petition for declaratory relief filed by private respondents, after mentioning certain parcels of land owned by it, are that they are used "actually, directly and exclusively" as sources of support of the parish priest and his helpers and also of private respondent Bishop. In the motion to dismiss filed on behalf of petitioner Province of Abra, the objection was based primarily on the lack of jurisdiction, as the validity of a tax assessment may be questioned before the Local Board of Assessment Appeals and not with a court. There was also mention of a lack of a cause of action, but only because, in its view, declaratory relief is not proper, as there had been breach or violation of the right of government to assess and collect taxes on such property. It clearly appears, therefore, that in failing to accord a hearing to petitioner Province of Abra and deciding the case immediately in favor of private respondent, respondent Judge failed to abide by the constitutional command of procedural due process.

LUNG CENTER v. Q.C. et. al Facts: Lung Center of the Philippines is a non-stock and non-profit entity established by virtue of PD No. 1823. It is the registered owner of the land on which the Lung Center of the Philippines Hospital is erected. A big space in the ground floor of the hospital is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics. Also, a big portion on the right side of the hospital is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center. When the City Assessor of Quezon City assessed both its land and hospital building for real property taxes, the Lung Center of the Philippines filed a claim for exemption on its averment that it is a charitable institution with a minimum of 60% of its hospital beds exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The claim for exemption was denied, prompting a petition for the reversal of the resolution of the City Assessor with the Local Board of Assessment Appeals of Quezon City, which denied the same. On appeal, the Central Board of Assessment Appeals of Quezon City affirmed the local boards decision, finding that Lung Center of the Philippines is not a charitable institution and that its properties were not actually, directly and exclusively used for charitable purposes. Hence, the present petition for review with averments that the Lung Center of the Philippines is a charitable institution under Section 28(3), Article VI of the Constitution, notwithstanding that it accepts paying patients and rents out portions of the hospital building to private individuals and enterprises. Issue: Is the Lung Center of the Philippines a charitable institution within the context of the Constitution, and therefore, exempt from real property tax? Held: The Lung Center of the Philippines is a charitable institution. To determine whether an enterprise is a charitable institution or not, the elements which should be considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the methods of administration, the nature of the actual work performed, that character of the services rendered, the indefiniteness of the beneficiaries and the use and occupation of the properties. However, under the Constitution, in order to be entitled to exemption from real property tax, there must be clear and unequivocal proof that (1) it is a charitable institution and (2)its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. While portions of the hospital are used for treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals and enterprises. Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred from participation or enjoyment. If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation.

CIR v. CA & YMCA

Doctrine: - Rental income derived by a tax-exempt organization from the lease of its properties, real or personal, is not exempt from income taxation, even if such income is exclusively used for the accomplishment of its objectives. - A claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, it must expressly be granted in a statute

stated in a language too clear to be mistaken. Verba legis non est recedendum where the law does not distinguish, neither should we. - The bare allegation alone that one is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. It must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. - The Court cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it would be overspilling its role and invading the realm of legislation. The Court, given its limited constitutional authority, cannot rule on the wisdom or propriety of legislation. That prerogative belongs to the political departments of government. Facts: Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. YMCA earned income from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and from parking fees collected from non-members. Petitioner issued an assessment to private respondent for deficiency taxes. Private respondent formally protested the assessment. In reply, the CIR denied the claims of YMCA.

YMCA filed a petition for review at the Court of Tax Appeals. CTA ruled in favor of CTA, ad allege that the leasing of facilities to small shop owners, restaurants, canteen operators are reasonably incidental to and reasonably necessary for the accomplishment of the objectives. CTA could conclude that the activities are already profit oriented, not incidental and reasonably necessary to the pursuit of the objectives of the association and therefore, will fall under the last paragraph of section 27 of the Tax Code and any income derived therefrom shall be taxable. Dissatisfied with ruling . CIR elevated to CA. CA ruled in favor of CIR.
Issue: Whether or not the income derived from rentals of real property owned by YMCA subject to income tax Held: Yes. Income of whatever kind and character of non-stock non-profit organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to the tax imposed under the NIRC. Rental income derived by a tax-exempt organization from the lease of its properties, real or personal, is not exempt from income taxation, even if such income is exclusively used for the accomplishment of its objectives.

Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax exemptions ( Commissioner of Internal Revenue v. Court of Appeals, 271 SCRA 605, 613, April 18, 1997 ). Furthermore, a claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, the claimed exemption must expressly be granted in a statute stated in a language too clear to be mistaken ( Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue and Court of Appeals, G.R. No. 117359, p. 15 July 23, 1998). Verba legis non est recedendum. The law does not make a distinction. The rental income is taxable regardless of whence such income is derived and how it is used or disposed of. Where the law does not distinguish, neither should we. Private respondent also invokes Article XIV, Section 4, par. 3 of the Constitution, claiming that it is a non-stock, non-profit educational institution whose revenues and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its properties and income. This is without merit since the exemption provided lies on the payment of property tax, and not on the income tax on the rentals of its property. The bare allegation alone that one is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. For the YMCA to be granted the exemption it claims under the above provision, it must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. Unfortunately for respondent, the Court noted that not a scintilla of evidence was submitted to prove that it met the said requisites. The Court appreciates the nobility of respondents cause. However, the Courts power and function are limited merely to applying the law fairly and objectively. It cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it would be overspilling its role and invading the realm of legislation. The Court regrets that, given its limited constitutional authority, it cannot rule on the wisdom or propriety of legislation. That prerogative belongs to the political departments of government.

Yes. The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Sec. 27 of the NIRC; court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction. The said provision mandates that the income of exempt organizations (such as YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Private respondent is exempt from the payment of property tax, but nit income tax on rentals from its property. American Bible Society vs. City of Manila GR No. L-9637 | April 30, 1957 Facts: 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

City of Manila is a municipal corporation with powers that are to be exercised in conformity with the provisions of Republic Act No. 409, known as the Revised Charter of the City of Manila American Bible Society has been distributing and selling bibles and/or gospel portions throughout the Philippines and translating the same into several Philippine dialect City Treasurer of Manila informed American Bible Society that it was violating several Ordinances for operating without the necessary permit and license, thereby requiring the corporation to secure the permit and license fees covering the period from 4Q 1945-2Q 1953 To avoid closing of its business, American Bible Society paid the City of Manila its permit and license fees under protest American Bible filed a complaint, questioning the constitutionality and legality of the Ordinances 2529 and 3000, and prayed for a refund of the payment made to the City of Manila. They contended: a. They had been in the Philippines since 1899 and were not required to pay any license fee or sales tax b. it never made any profit from the sale of its bibles City of Manila prayed that the complaint be dismissed, reiterating the constitutionality of the Ordinances in question Trial Court dismissed the complaint American Bible Society appealed to the Court of Appeals Issue: WON American Bible Society liable to pay sales tax for the distribution and sale of bibles Ruling: NO Under Sec. 1 of Ordinance 3000, one of the ordinance in question, person or entity engaged in any of the business, trades or occupation enumerated under Sec. 3 must obtain a Mayors permit and license from the City Treasurer. American Bible Societys business is not among those enumerated However, item 79 of Sec. 3 of the Ordinance provides that all other businesses, trade or occupation not mentioned, except those upon which the City is not empowered to license or to tax P5.00 Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax said business, trade or occupation. 2 provisions of law that may have bearing on this case: a. Chapter 60 of the Revised Administrative Code , the Municipal Board of the City of Manila is empowered to tax and fix the license fees on retail dealers engaged in the sale of books b. Sec. 18(o) of RA 409 : to tax and fix the license fee on dealers in general merchandise, including importers and indentors, except those dealers who may be expressly subject to the payment of some other municipal tax. Further, Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For purposes of the tax on retail dealers, general merchandise shall be classified into four main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. A separate license shall be prescribed for each class but where commodities of different classes are sold in the same establishment, it shall not be compulsory for the owner to secure more than one license if he pays the higher or highest rate of tax prescribed by ordinance. Wholesale dealers shall pay the license tax as such, as may be provided by ordinance The only difference between the 2 provisions is the limitation as to the amount of tax or license fee that a retail dealer has to pay per annum As held in Murdock vs. Pennsylvania, The power to impose a license tax on the exercise of these freedoms provided for in the Bill of Rights, is indeed as potent as the power of censorship which this Court has repeatedly struck down. It is not a nominal fee imposed as a regulatory measure to defray the expenses of policing the activities in question. It is in no way apportioned.

It is flat license tax levied and collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably tends to suppress their exercise. That is almost uniformly recognized as the inherent vice and evil of this flat license tax. Further, the case also mentioned that the power to tax the exercise of a privilege is the power to control or suppress its enjoyment. Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of the resources necessary for its maintenance. Those who can tax the privilege of engaging in this form of missionary evangelism can close all its doors to all those who do not have a full purse Under Sec. 27(e) of Commonwealth Act No. 466 or the National Internal Revenue Code, Corporations or associations organized and operated exclusively for religious, charitable, . . . or educational purposes, . . .: Provided, however, That the income of whatever kind and character from any of its properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of such income, shall be liable to the tax imposed under this Code shall not be taxed The price asked for the bibles and other religious pamphlets was in some instances a little bit higher than the actual cost of the same but this cannot mean that American Bible Society was engaged in the business or occupation of selling said "merchandise" for profit Therefore, the Ordinance cannot be applied for in doing so it would impair American Bible Societys free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs. Read more: %e2%80%99#ixzz2XkRE9YO7 http://opinion.inquirer.net/7518/dealing-with-the-%e2%80%98pajeros

The first clarification that has come out is that it seems that the vehicles were not Pajeros after all. Rather they were different types of utility vehicles. Or, what were given were not vehicles at all but money for the purchase of unspecified vehicles. Nobody seems to be talking of ambulances or pick-up vehicles intended for social work. Ambulances or pick-up vehicles would be easier to explain. But whether the controversy is about vehicles or about money, both the Congress and the CBCP will be looking for answers. And even if it was all about money, the principles both the Senate and the CBCP will be looking into would be the samewas public money used for a constitutional purpose? But first, a number of preliminaries. The Senate is engaged in legislative investigation presumably in aid of legislation. Soon the House will follow. One question that might arise is whether bishops may be summoned, and not just invited, to such investigation. We know that summons have to be obeyed under pain of contempt or even imprisonment. As far as I know, however, only the President and justices of the Supreme Court may not be summoned to such investigations. The reasons generally for this exception would be separation of powers and interdepartmental courtesy between equals. It seems to me that courtesy is also being extended to bishops by the Senate Committee. They are simply being invited. I see nothing to stop them from honoring the invitation. I understand that some of them, if not all, would indeed be happy to appear and give their explanation to clear the air. I do not believe that summons under pain of punishment would be necessary. I have also been asked what the liability of bishops might be if the donations are found to be unconstitutional. I am pretty certain that there would be no criminal liability. There is no crime unless a penal law is violated. Criminal liability can only fall on PCSO officials. Whether the liability can go higher than PCSO officials will depend partly on the role played by higher officials or on the applicability or not of the principle of command responsibility. Now to more substantial matters. What will the investigators be looking for? As I wrote in an earlier piece, there is no absolute constitutional prohibition of the donation of public funds to religious persons or institutions. Public money can be made available to religious persons or institutions if the use of the money (1) will be for a secular purpose, (2) will neither primarily inhibit nor advance religion and (3) will not involve excessive government entanglement with religion. I believe, however, that the CBCP investigation and the congressional investigation will not have the same

primary focus. Of course, the CBCP will be interested in legality; but another focus, perhaps more important, will be on propriety and the effect the incidents can have on the primary work of the Church. The congressional investigations for their part will avoid judgments on propriety but will be looking only into legality. Hence, it is important to look into the meaning of the three-part requirement testing the validity of the use of public funds. I must admit that except for the Aglipay case and the Manalo case, there is not much useful Philippine jurisprudence on the subject. But American jurisprudence, especially on donations to sectarian educational institutions, can offer some very useful guidelines. How does the three-part test work? Let me just give one set of examples. The lending of secular textbooks to parochial schools and the grant of construction aid for a science building to colleges have been allowed. These were seen to be clearly for a secular purpose. Of course such aid had the effect of lessening the financial burden of religious schools, but the benefit to the schools themselves was purely incidental and has not been allowed to be an obstacle to a legitimate legislative purpose. But the grant of salary supplement to teachers of secular subjects in parochial schools has been disallowed on the argument that it would be difficult to assure that the teachers would not engage in religious teaching in an atmosphere where a primary object of the school was religion. Moreover, it has been said that the need for state monitoring to insure that the aid would not be used for propagating religion has been seen as an invitation to prohibited entanglement of the state in religion. (One might now ask if the vaguely purposed PCSO donations have already had the effect of inviting legislative and Ombudsman entanglement in religion.) I must also admit that the various types of aid to sectarian schools, especially to parochial schools, have spawned various controversies and the results have not always been easy to predict. It is easier to justify donations to higher education which, even if sectarian, are not as predominantly religion-driven as parochial schools. And this perhaps is the challenge which donations to the works of the church will have to facehow to separate the religious from the secular work, if they are separable at all. The promotion of justice and of charitable works is very much an integral part of the mission of the Church today.