CTA Case No. 2010 (Decision)

REPURUC OF THF. PHILIPPINES COURT OF TAX APPEALS QUEZON CITV . THE UNITED CHURCH OF CHRIST IN THE PHILIPPINES, Petitioner, - v rsus - C. T.A. CASE No. 2010 THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - X DECISION This is an appeal from the decisi0n ef th� Commissiener ef Internal Revenue assessing against and demanding fr m petitioner the sum of Pl,215.46 as inceme tax and interests due from the peration of its Goodwill Pharmacy and Clinic in Lubuagan, Kalinga, Apayao for 1963. Petitioner is a en-stock, nen-profit, reli- gi us and charitable corporation. As ne ef its medical projects, petiti ner started on June 10, 1962 the operation f the Goodwill Pharmacy aad Clinic at Lubuagan, Kalinga, Apayae Province. On April 8, 1961-t, petitio er fil ed its 1963 . inco e tax return. An investigation was conducted by respo deat f its activity f perating said pharmacy and eli ic in 1963, and then an assessment notice dated January 31, 1968 was issuei against petiti ner in the sum ef Pl,235.46 after dis- allewiag in its return the claim f bad debts due t the peration f said pharmacy aad clinic.

DECISION - C.T.A. CASE NO . 2010 On Nevember 11, 1968, petitioner, through Miss Ruth Eo Rauch, protested the said assessment on the ground that the disallowan.ce of the bad debts is unreaseaable and unjust and should be &llewable as the debtors were already dead and that the Goodwill Pharmacy and Cli~ic, beiAg eperated by the United Church of Christ in the Philippines, which is itself a religious and charitable cerpera- tion not being conducted f r profit, it is exempt from income tax under Section 27(e) of the National Internal Revenue Code. In a letter dated December 9, 1968, Regional Director D. R. R que ef Regional District No . 1, Bureau of Internal Revenue, denied petitioner's pretest, whi ch is quoted hereunder: 11 December 9, 1968 United Church f � Christ in the Philippines Lubuagan, Kalinga- Apayae ill.n: M;i.ss Rutb E. Rtuch Gentlemen: Reference is made to yeur letter of Nevember 11, ~968 pr testing the income tax assessment of ~1 , 235 . 46 on the operatioa ef your Goodwill Pharmacy a�d Clinic for the year 1963. The records show that the aforesaid assessment arose mainly from the disallow- ance ef your claim for bad debts ia the amount of P3 , 247 . 09 . Your claim was dis- allowed due to your failure to submit

DECISION - C. T. A. CASE NO . 2010 - 3- together with y�ur inco e tax retur , a statement on the propriety f such deduc- tion, showi g such pertinent facts as: (a) the natur e f the debt (b) the name of the debtor (c) y0ur relationship with the debt r (d) when the debt was incurred (e) when the debt became due (f) your effort made to collect the debt (g) hew the debt was determined to be worthless, aRd other 'vital informatio concerning the same . In erder that a claim fer bad debt may be all wed as deduction from gross income , it is imperative to show that (1) t e debt is actually ascertai:aed te be worthless , nd (2) th&t t e same is charge - off in the books within the same taxable year. Yeur general contention that it is "quite impossible" to collect the debts be- cause the debtors were all deceased, does not fully demonstrate the uncollectibility of the obligation, for the simple reason that collection ay still be effected against their respective estates . For a debt to be allowed, it must not only be uncollectible, but must also appear t be uncollectible at any time in the future. Regarding your other contention that the G odwill Pharmacy and Clinic is perated, managed and subsidized by the United Church of Christ in the Philippines which is a reli- gious corporation exempt from ~axation under Section 27(e) of the Tax Code , please be in- formed that the same section also provides that "the income of whatever kind and cha- racter from any �f its pr perties, 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 ~d~ . Indeed, the Goodwill Pharmacy And Clinic is your property , and .therefore , the income should be declared f r taxation purposes pursuant to the afore- mentioned provision of the law. In fine , the operation of the Goodwill Phar acy And Clinic is "not a purely religious activity" as to '��" warrant exemption under the Tax Code .

DECISION . - c . T. A. CASE NO . 2010 4- Finally, it is to be emphasized that exemption from taxati n is to be strictly construed , and should not be made to rest on mere inferences . He who claims exemption must be able to justify his claim with the clearest grant of organic or sta- tute law. In view of all the foregoing , it is regretted that your protest has to be, as it is hereby , denied , and you are requested to cause the immediate settlement f the above liability so as to avoid further accrual f penaltie s o Very truly yours , (Sgd . ) D. R. ROQUE Regional Director" An fficial stamp on this letter shows that it was released by the BIR Revenue Regional Office No . 1 on January 13 , 1969 . On February 10 , 1969 , Regional Director D. R. Roque again wrote petitioner with the observatio� that the l atter n t having settled the income tax liability in the sum of Pl , 235. 46 plus i crements thereto , demanded for the settlement thereof not later thailr- the end of the month of February , 1969 and threatened that failure to do so will constrain him to collect by summary remedies . In a letter dated March 16, 1969, petitioner , through SimplicionCaguay , together with enclosures thereto, requested for reconsideration of respondent's letter dated December 9 , 1968 maintaining , among others, that the Goodwill Pharmacy and Clinic is

DECISION - C. T. A. CASE No . 2010 - 5- operated by it as a religious , non- profit, n.n- stock erganization and is exempt from payment ef all kinds of t xes under Sectiom 22(3), Article VI f the Philippine Constitution and that its exemption on its pr perties and activities extends to those that are incidental to , and necessary to the accomplishment of its purposes , and citing as authority the decisions in the cases of Jesus Sacred Heart College vs . Collector of Internal Revenue (G . R. No . L-6807 , May 24, 1954 , 95 Phil 16 . ) and J se V. Herrera and Ester Herrera vs . Quezon City B ard of Assessment Appeals (G oR. No . L-15270 , Sept . 30, 1961, 113 Phil 177 . ) and that its activity of operating said pharmacy and clinic being a religious r charitable character and not an activity conducted for pr fit, is exempt under Section 27(e) of the National Inter- nal Revenue Code . On April 11 , 1969, lett er was again sent to petiti ner , but this time by Regional Director Mauro Calaguio , denying the motion for reconsidera- tion for the same reasons stated in their letter of December 9 , 1968 , which, in effect , is predicated on the ground that said Goodwill Pharmacy and Clinic was not organized and operated exclusively

DECISION - C. T. A. CASE NO o 2010 - 6- for religious or charitable purposes so as to fall under the exemption granted in Section 27(e) of the Tax Code , because it cannot be said that the operation of said pharmacy and clinic is incidental to , or necessarily coftnected with , the accomplish- ment of petitioner ' s function as a religious organizatian, said pharmacy and clinic being undeniably its property and subsidiary and that, under the proviso in Section 27(e) of the Tax Code , the income received from any of its proper- ties , real or personal, regardless of the disposi- tion of such income shall be liable to income tax; that ~he claim that under the Constitution (Sec . 22(3) of Art . XI) , it is exempt from all kinds of taxes is incorrect as this provision refers only to real property taxes; and that while it may be true that petitioner is exempt from taxation under Section 27(e) of the Tax Code , said exemption cannot be extended to cover the operation of any of its instrumentality which is not exclusively organized for, essential to , or reasonably connected with its r eligious purposes under the general principle that exemption from taxation is a derogation of the power to tax and must strictly be construed and cannot rest on mere implication and that whoever claims exemption thereon must be able to justify

DECISION - C. T. A. CASE NO . 2010 - 8- as mare tham. 30 ,Q9.ys had elapsed fre>m January 20 , � I 1969 , the date the letter of December 9 , 1968 was presumed te have been received through the mails , since said ietter was released by the BIR Adminis - trative Branch at Baguio City on January 13 , 1969 . We are in agr' eement with the claim of res- pendent that the decision to be appealed from , and to be brought to us upon appeal under SectiQns 7 and 11 of Republic Act No . 1125, is that letter dated December 9 , 1968 . The assessment in this case is that letter- notiee dated January 31 , 1968 since it determined petitioner ' s l i ability and fixed the sum for which it is liable for income tax for 1963 in the sum 0f Pl , 235 . 46 inclusive of interests . (Ventanilla v ~ BTA , G. R. No . L- 7382 , Dec . 19 , 1955; see also Bull VS o U. S. 295 US 247 , 260o) This assessment was then subjected to a prot~st by petitioner in a letter dated November 11 , 1968 ~ue9tioning the assessment and claiming that it is exempt from said tax . The letter of Regional Director D. Ro Roque dated December 9 , . 1968, subsequently denying petitioner ' s protest is , therefore, the decision on the disputed or protested assessment which whould be appealed from , and brought to thi s Court , within 30 days from the date of receipt thereof . (Comm . of Int . Rev . v.

DECISION - C. T. A. CASE NO . 2010 ,_ 9 - Vi lla , et al ., G. R. No . L- 23988 , Jan . 2, 1968 , 22 SCRA 3 ; St . Stephen ' s Assn et al . v. Coll . of Int . Rev ., 104 Phll 314 . ) The Supreme Court said in the aforesaid case of St . Stephen ' s Assn ., su,pra. . : 11 x.xx Where a taxpayer questions an assessment and asks the Collector to re~ consider or cancel the same because he . (the taxpayer) believes he is not liable therefor , the assessment becomes a'dis- puted assessment' that the Collector must decide , and the taxpayer can appeal to the Court of Tax Appeals only upon r eceipt of the decision of the Collector on the dis- puted assessment . xxxn This decision having been released or se�t by mail to petitioner on Janu~ry 13 , 1969 , aforesaid , it is presumed to have been received within 5 days from mailiftg under Section 8, Rule 13 of the Rules of Court , or on January 18 , 1969 (not January 20 as asserted by respondent) . This decision can be made subject of a motion f or reconsideration which , in order to be given due course , must be filed within the 30- day period of appeal and which, if not pro forma (Antonio H. Noblejas vs . Comm . of Int o Rev . CTA 1923 , Reso~utiQn , Octo 4 , 1968) , will sus~eRd the 30-day periGd to ap peal . (Rufino Lopez & Sons vs . CTA, G. R. No . L-9274 , Feb . 1 , 1957 , 100 Phil 850 ; Muller & Phipps, Manila Ltd . vs . Call ., G.R. L- 10694, March 20 , 1958 , 103 PHil 145; North Camarines Lumber Co . vs . Call . of Int . Rev .,

DECISION - C. T. A. CASE NO . 2010 r - 10 - G. R. L- 12353 , Sept . 30 , 1960 , 109 Phil 511 ; Pang . Transp . Co . vs . Blaquera G.Ro L- 13101 , April ~9 , 1960 , 107 Phil 975 . ) The 30- day period to file a motion for reconsideration or appeal ended February 17 , 1969 . The motion for reconsideration naving been fil ed 0nly on March 16 , 1969 , it was fil ed out of time by petitioner and , therefore , never susp ended the said 30- day period of appeal . Consequently , we hold that due to petitioner ' s failure to file said motion for reconsideration or otherwise appeal within 30 days from receipt of said decision , it , therefore , !b~cama3 final and ~ unappealable , and this Court lacks the juri sdiction to take cognizance of the appeal. Having just held that this Court has no juris- diction over this case, the disposition of the second issue becomes unnecessary . WHEREFORE, the instant petition for review filed by petitioner should be, as it is , hereby dismissed . With costs against petitioner o SO ORDERED . Quezon City , May 7 , 1977 . I CONCUR: CO~NTE C. ROAQUIN ( Associate Judge