Abra Valley College v.

Aquino

Summary Cases:

● Abra Valley College, Inc. vs. Juan P. Aquino

Subject:

Test of taxation exemption, interpretation of the phrase “exclusively used for educational purposes”

Facts:

A decision was rendered by the lower court declaring Abra Valley Junior College not exempt from paying
real estate taxes, and ordered the latter to settle its back taxes and penalties amounting to P5,140.31.
Due to its non-payment, the Municipal Treasurer and the Provincial Treasurer served Abra Valley Junior
College with a (1) “Notice of Seizure” of its lot and building, and eventually with a (2) “Notice of Sale”.

Offering the highest bid of P6,000 in the public auction, Dr. Paterno Millare, then Municipal Mayor of
Bangued, Abra, bought the abovementioned properties. A Certificate of Sale was correspondingly issued
in his favor.

Aside from being a school offering Primary, High School and College Course, the second floor of the
main building housed the School Director and his family. Also, the ground floor of the college building is
being rented by a commercial establishment, the Northern Marketing Corporation. Thus, the properties
are not used exclusively for educational purposes, which is a condition for the constitutional tax
exemption to apply.

However, petitioner college contended that the primary use of the lot and building for educational
purposes and not the incidental use thereof, determines exemption from property taxes. Hence, the
seizure and sale of the college lot and building are improper and void.

Held:

Test of Exemption from Taxation

1. The test of exemption from taxation is the use of the property for purposes mentioned in the
Constitution.

Meaning of “Exclusively used for educational purposes”

2. The exemption in favor 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.

3. The use of the second floor of the main building for residential purposes of the Director and his family
may find justification under the concept of incidental use, which is complimentary to the main or primary
purpose educational.

4. However, the lease of the first floor thereof to a commercial establishment cannot be considered
incidental nor reasonably necessary for carrying out the school's educational purpose.

5. Only half of the assessed tax must be returned for only a portion of the facility is used for commerce.
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