CTA Case No. 969 (Decision)

..: llb;P'UJU..lC1 OP' ~ PH11...Ul"l.._, :;t COURT OF TAX APPE.A.U ~&AN I REV. FRo CASIMIRO LLADa;lt CoT.A. CASE NO~ 969 Petitioner. .. versus ... THE COLLECTOR OF INTERNAL 'REVENUE,. OR HIS SUCCESSOR IN OFFICEQ Respondento DECISION The petitioner herein� the Revo Fro Casimiro Lladoc~ in his capacity as incumbent Catholic parish pri~st of Victorias� Negros Occidental 1 seeks by this appeal to set aside an assessment (Exh. 4 1 Po 14 BIR reca) of the respondent Commissioner of Internal Revenuer dated April 29, 1960, issued against him in the amount of ~l 6 370o002 as donee's gift tax inclusive of surcharge 1 interest and compromise penalty on the sum of i1'lORcoo~oo which the petitioner1' s predecessor,. the Revo Fro Crispin Ruiz received in 1957 in behalf of his parishy as cash donation from the Mo B. Estate. Inco of Bacolod City (Exh. 3, Po 10 BIR rec.) for the construction of the new Catholic church of said muni� cipality. It is admitted by the parties that the total amount of cash donated was actually spent for the pur� pose intended and that the new Catholic church of Victorias is still in the process of construction up to the present time (p. 5; t.sono)o The respondent bases his assessment on the pro� visions of Sections 110 and 112 (a)(2) of the Tax Codeo

DECISI<l'J � C.I. A. CASE NOo 969 The petitioner impugns the assessment on two grounds: 1. That at the time the donation was made in 19571 he was not the parish priest of Victorias, Negros Occidental but Revo Fro Crispin Ruiz and~ therefore, he should not be held liable for doneets tax on a gift he did not receive personallyo Peti- tioner contends that the assessment should have been directed against Revo Fr. Ruiz 1 his predecessor, to whom the donation was given or the Roman Catholic Church; and 2o That granting in the alternative that he (petitioner) is the real party in interest~ since the donation was for the construction of a church9 a purpose which is purely religious in natureg he is exempt from paying the doneefs tax under Article VI, Seco 22 (3) of the Constitution of the Philippines which provides as follows~ ��cemeteries1 churches, and parson- -ages or convents appurtenant theretoa and all lands. buildings, and improve- ments used exclusively for religious. charitable6 or educational purposes, shall be exempt from taxationo �� The first contention of the petitioner is devoid of merito In Verzosa vs . Fernandez~ 49 Philo 627-634 1 it was held that the Roman Catholic Bishop of Lipa who is the administrator of the temporalities of the Catholic Church in the diocese of Lipa may sue or be sued in a case involving the properties of the church under his administration a

DECISION ... C.I. A. CASE NOo 969 - 3 ... In Harty vs. Sandin 1 11 Philo 450-453 ~ it was held that "the Roman Catholic Church is a juridical entity and may maintain an action in the courts of the Philippine Islands1 although not registered as a corporation. The archbishop:. as the supreme head of the -church in his diocese, may maintain an action for the recovery of church property belonging to a parish within such diocese . �� (Ponce vs . Rom. Cat h. Church; 28 Suppo Ct . Repo 1 7371 6 Offo Gaz o, 1213; Barlin vs~ Ramirez~ 7 Phil . Rep . 4le) Parish priests of the oman Catholic Church under canon laws are similarly situated as its Archbishops and Bishops with respect to the properties of the church within their parisho They are the guardians, superintendents or administra- tors of these properties, with the right of succession and may sue and be suedo Law II . title 2, book 1, of the Compilation of the Laws of the Indies ordains as follows: " e command that the part of the tithes which belongs to the fund for the erection of churches shall be given to their superintendents to be expended for those things neces-� sary for these churches with the advice of the prelates and officials; and by their warrants 7 and not otherwiseo And we request and charge the arc hbishops and bishops not to interfere in the collection and disbursement thereof~ but to guard these structureso 11 Law XII of the same title also provides that "Although the priests may have such things in their possession , yet they are

� DECI ION - C.T.A. CASE O. 969 4- not the owners thereof. They hold them thus as guardians or servants, or because they have the care of the same and serve God in or with themo Hence they were allowed to take from the revenues of the church and lands what was reasonably necessary for their support; the balance, belonging to God~ was to be devoted to pious purposes, such as the feeding and clothing of the poor, the support of orphansi the marrying of poor virgins to prevent their becoming evil women because of their poverty, and for the re- demption of captives and the repairing of the churchesy and the buying of chalices, clothing, books~ and other ~ things which they might be in need of 9 and other similar charitable purposes." (Bar lin vso amirez, 7 Phil. 41, 49-52 citing Laws II and XII, title 2, book 1, Compilation of the Laws of the Indies; See also Moran's Comments on the Rules of Court 1 Volo I, 1952 editiong Po 28.) The petitioner impugns the fairness of the assess- ment with the argument ~hat he should not be held liable for gift taxes on a donation which he did not receive personally since he was not yet the parish priest of Victorias in the year 1957 when said donation was given. It is intimated that if someone has to pay at all, it should be petitioner1 s predecessor, the Revo Fro Crispin uiz, who received the donation in behalf of the Catholic parish of Victorias or the oman Catholic Church. Fol-

DECISION - C. I . A. CASE NOo 969 - 5- lowing petitionerts line of thinking 1 we would be equally unfair to ' hold that the assessment now in question should have been addressed to, and col- lected from:~ the Revo Fr. Crispin Ruiz to be paid from income derived from his present parish wherever it may be . It does not seem right to indirectly burden the present parishioners of Rev.., Fro Ruiz for doneet s gift taxuon a donation to which they were not benefited u Moreover~ as pointed out by the respondent in his memorandum {Po 55 CIA rec . ) the minutes of the special meeting of the Board of Directors of M. B. Estate 2 Inc. (Exho 3:t Po 10 BIR rec..,) show that the amount of 10, 000. 00 was donated to the Catholic Church of Victorias 1 and not to Rev . Fr. Ruiz who was then its par~sh priest or to the Roman Catholic Church as a juridical entityo J The second issue raised by the petitioner in- volving an interpretation of Section 22 (3), Article VI of the Constitution of the Philippines 2 is not novel as far as this Court is concerned although there still remains for the Supreme Court to set a definite ruling on the matter. In Roman Catholic Archbishop of Cebu vso The Commissioner of Internal Revenue,- c. I .A. Case No. 637�� decided on July 15, 1961 1 involving analogous facts and constitutional issues we sustained the stand taken by the Commissioner of Internal evenue holding that:

DECISIC1'J - C. I . A. CASE 0. 969 - 6�- 11 ection 22( 3), Article VI of the Cons- titution exempts from taxation cemeteries, churches~ and parsonages or conventj, appur- tenant thereto 1 and all lands, buil ings� and improvements used exclusively for reli- gious purposeso It grants the exemption on the properties enumerated therein o The ex- emption, therefore, is only from the payment of taxes assessed on such properties, or pro- perty taxes, as contra-distinguished from excise taxes. nin the case at bar., what the respon- dent assessed was a donee's gift tax. The assessment was not on the _properties them- selveso It did not rest upon general owner- ship. Ratheri it was an excise upon the use made of the propertiesp upon the exercise of the privilege of receiving the properties (Phipps Vo Commissioner of Internal .evenuer 91 F L2d7 627). Obviously, gift tax is not within the embrace of the exemption provi- sion of Section 22(3), Article VI of the Constitution. uMoreover, if, as was held in Phipps v. Commissioner of Internal Revenue~ supra, a tprovision exempting bonds of a sove� reign from taxation x x x, without more, relates exclusively to ad valorem or other direct taxes on them as property', we see no reason why the authorizing constitu- tional provision that �x x x lands x x x used exclusively for religious x x x pur- poses shall be exempt from taxationr should not be held to limit the tax exemption only to property taxes.�� Apparently, the petitioner in the above-quoted case, the Roman Catholic Archbishop of Cebu, who was ably represented by the Padilla Law Office, must have finally realized the futility of pressing his stand any further when he chose to abide by our decision without elevating the case to the Supreme Courto / We saw no legal basis then as we see none now, to include within the Constitutional exemption 1 t axe s whic h part ake of the nat ur e of an e xc i se up on ~ he use

DE lSI ~ ... C.T � � CASE N � 969 - 7- made o the properties or upon the exercise of t he pr iv ilege of r eceiving t he propert ie s.. (Phipps vs. Commissioner of Internal evenue, 91 F (2d ) 627; 1938 7 302 u�� 742.) It is a cardinal rule in taxation that exernp- tions from payment thereof are highly disfavored by law, and the party claiming exemption must justify his claim by a clear, positive or express grant of such privilege by lawo (Collector vs .. Manila Jockey Club, G. R. Noo L�8755, March 231 1956 ; 53 Oo Go 3762.. ) / And by way of addendum to our decision in Roman Catholic Archbishop of Cebu vs. Cornrnissionert supra, we would like to make these suppletory observations. The respondent is not taxing the church of Vic~ torias or any of those religious properties mentioned in Section 22(3), Article VI of the Constitution of the Philippines. What is being taxed in the present instance is the privilege to receive the money donated which donee's gift tax became due and payable even before the church to which the donation was destined, carne into complete existence. In other words, the constitutional exemption refers to direct taxes upon the constructed church and not upon transactions in- volving said church, such as the cash donation now in question.

DECISICN - C.I.A. CASE NOo 969 8 ... The phrase '*exempt from taxationf1 as employed in Section 22(3)J Article VI of the Constitution of the PhilippinesJ should not be interpreted to mean exemption from all kinds of taxeso "Statutes exempt- u. ing charitable and religious property from taxation should be construed fairly though strictly and in such manner as to give effect to the main intent of the lawmakersott (Roman Catholic Church vso Hastings. 5 Philo 701 . ) True indeed, in Roman Catholic Church vso Hast - ings, supra, and Bishop of Nueva Segovia vsa Prov . Board of !locos Norte, 51 Philo 352-354 1 the Supreme Court applied in favor of the taxpayer the constitu- tional exemption from the payment of land taxes on the residence of an archbishop; the parsonage adjacent to the cathedral; andR a vegetable garden adj~cent to a convent. However1 the exemption was not accorded the taxpayer in Apostolic Prefect of Mto Province vsa City Treasurer of Baguio (1941) 71 Philo 547� involving a special assessment on church properties 1 imposed and collected pursuant to Baguio City Ordinance No. 137,_ as amended, to cover extraordinary expenses for a drainage and sewerage systemo We believe and so hold that the instant case is not within the meaning and purview of the phrase "exempt from taxation" as the same is used in Section 22(3)J Article VI of the Phil- ippine Constitution.

DECISI<l'J - C.I.A. CASE NO., 969 - 9 ... On this point, Prof . Formilleza~ in his Com- mentaries and Jurisprudence on the National Internal Revenue Code 1 Vol. II, p., 638 cites with approval a BIR ruling dated October 52 1930 ( 40 Off.. Gaz., No .. 10, pp., 2147, 2148) which reads as follows' '1Gift of property used for religious purposes is taxable .--A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos. Therefore, the imposition of a gift tax upon the transfers of property used exclusively for religious . ~urposes does not impair the provisions of Art .. 14 (c); Title VI of the Constitution of the Philippines, as the tax contemplated there- in is a property tax and ��not an excise tax .. tt ( BIR Ruling _, Oct. 5t 1930y 40 Off. Gaz., No., lOt pp., 2147; 2148.,) WHEREFORE, in view of the foregoing considera- tions, the decision of the respondent Commissioner of Internal Revenue appealed fromi is hereby affirmed except with regard to the imposition of the compromise penalty in the amount of ~20 .00 (Collector of Internal Revenue VSo u.s.r.l G.. R.. No., L...ll274, Novo 281 1958; Commissioner of Internal Revenue vs . Aveline, GoRe No.., L-14847, Sept"' 19 6 1961) ll and the petitioner1 the Rev .. Fr. Casimiro Lladoc is hereby ordered to pay to the respondent the amount of 900. 00 as donee's gift tax, plus �the surcharge of five per centum (5~) as ad valorem penalty under Section ll9(c) of the Tax Code 1 and one eer ~entum (1.%) monthly interest from lvlay 15, 1958 to the date of actual payment.. The surcharge of 25% pro- vided in Section 120 for failure to file a return may not be imposed as the failure to file a return was not

DECISIQ\J - C. T. Ao CAE NO. 969 - 10 - due to willful negle ct . (See Sec . 120, Nato Int . Rev o Code; Coll o of Int o eva v. Batangas Transp o Co. , GaRo Noo L- 9692, Jan . 6, 1958o) No costs o ~0 ORDEREDo anila , Philippines , October 18 1 1961 . E CONCU : --~ Presiding Judge UWIALI M. 1.~� ..-...u� Associate Judge