CTA Case No. OC-637 (Decision)

-I ~LIC OJ" Tiffl PHlLIPP!Nl!!F' COURT OF TAX APPEAL.-, !_ANlA..A THE ROil/iAN CATHD.LIG ARCP..BISI-OP C. T. A. OF CEBU , CASE i--JO � 637 Petitioner , - versus - THE C:OII/11V1ISSIONER OF INTER.l'JAL I EVEl,lUE, Respondent . X- � - ~ ~ ~ - - - ~ - - - - X DECISION This is an appeal from a decision of the Com- missioner of Internal Revenue , holding the Roman Catholic Archbishop of Cebu liable for the payment .. of the amount of ~3 , 010 . 90 , representing donee ' s gift tax plus interest on a donation of two parcels of land made to the latter as such Archbishop , for the construction of a churcho On April 4, 1957 , Dakudao and Sons, Inco , through its president , donated in favor of the peti- tioner t~o parcels of land located at the City of Davao for the construction of a church by the Redemp- torist Ordero The donation was accepted by the peti- tioner in the instrument of donation , Exhibit A (PPo 7- 9 BIR rec . ) . Although it was stipulated in the deed of donation that construction of the church should be commenced within one year from the date of donation, the actual construction started only in June, 1958. On May 8 , 1959 (Exh. L - 1 , CTA rec o p. 34) , the Re - dernptorist community moved into residence at the new --

, DECISION - C.I.A. CASE NO . 637 - 2- church and monastery (Exho L, CIA rec. p . 34) . On June 7 , 1957 ,, the petitioner filed a donee 's gift tax return on the two parcels of land in ques - tion (Bin reco p. 1). After condu ct ing an investiga- tion , the rtegional Director of Davao (rlegional Dis- trict No . 10) issued donee 's gift tax assessment no- tices numbered 19 -DE- 25 -58~57 , 19 -DE- 25(1) - 58 - 57 , 19 - DE- 25(2) - 58- 57, 19-DE- 25(3) - 58- 57, 19 -DE- 25- (4) - 58- 57 and 19-DE- 25 - ( 5) - 58- 57 1 all dated lv-ay 30, 1958, demand- ing from petitioner the payment of the total amount of ~3 ,010o90 as donee 1 s gift tax , plus interest (Exhs. B, C, D, E, F and G, Bin rec . pp . 43- 48) . In a letter dated July 30, 1958 , the petitioner protested the assessment (Exh . H, Bid rec . PPo 51- 53) . Thereupon , BIR Regional Director Carpio referred the matter to the Commissi9ner of Internal Revenue (BIR rec . p. 54)~ who held, in a ruling dated January 5 , 1959 , the petitioner liable� for the payment of donee t s gift tax in the amount of ~3 , 010.90 inclusive of in- terest . Hence, this appeal . We are now called upon to resolve whether or not the donation of two parcels of land , made for the pur - pose of constructing a church, is subject to donee's tax . The petitioner claims exemption of the donation from the payment of the tax in question under Section 22(3) , Article VI of the Constitution , which provides as follows;

DECISION - C. T. A. CASE i\JO . 637 - 3- ~(3) Cemeteries , churches and par - sonages or convents appurtenant thereto , and all lands , buildings , and improve- ments used exclusively for religious , charitable , or educational purposes shall be exempt from taxationo :n The petitioner contends that this constitutional ex- e~ption is general and all embracing , encompassing not only property taxes but also all excise and other taxes that would otherwise affect the properties enu - <..., merated thereino Contrarily, the respondent denies the validity of the exemption claim on the ground that the consti- tutional exemption is restricted only to direct or ad - - valorem taxes on the properties therein rnentionedo Moreover , he argues that not being used yet for reli- gious purposes at the time the tax in question accrued , the property did not come within the purview of the constitutional exemption. ( ' 1 Section 22(3), Article VI of the Constitution exempts from taxation cemet er ies, churches , and par - sonages or convents appurtenant thereto, and all lands , ~uildings , and improvements used exclusively for reli- gious purposes . It grants the exemption on the proper - ties enumerated thereino The exemption , therefore, is only from the payment of taxes assessed on such proper- ties , or property taxes , as contra- distinguished from excise taxes . In the case at bar , what the respondent assessed was a donee's gift taxo The assessment was not on the

DECISION - CoT.A . CASE NO . 637 -4- properties themselves . It did not rest upon general ownership . Rather , it was an excise upon the use made of the properties, upon the exercise of the privilege of receivi ng the properties (Phipps v. Commissioner of Internal Revenue , 91 F (2d) 627). Obviously , gift tax is not within the embrace of the exemption provision of Section 22(3) , Artic le VI of the Constitutiono fvioreover , if, as was held in Phipps v. Commis- sioner of Internal Revenue , supra , a '1provision exempt- ing bonds of a sovereign 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 constitutional provision that ux x x lands x x x used exclusively for religious x x x purposes shall be exempt from taxationu should not be held to limit the ta.x exemption only to property taxeso ,, I Finally , it is a rule that exemption from taxa- tion are highly disfavored in law; and the party claim- ing tax exemption must justify his claim by a clear 9 positive or express grant of such privilege by law. (Collector v . Manila Jockey Club , Go R. No . L- 8755 , March 23, 1956o) This rule rests upon abundant autho- rity (The Roman Catholic Apostolic Church of the Phil- ippines Vo Hastings et alo , 5 Phil. 701 , 703) . The petitioner Roman Catholic Archbishop of Cebu failed to justify his exemption claim by a clear , positive or express granto

� DECISION - C. <li. A. CASE NO o 637 // - 5- ~ VISN OF THE FORECDING 1 the decision of the � Commissioner of Internal Revenue is affirmed o Peti- tioner Roman Catholic Arc hbishop of the province and city of Cebu is hereby ordered to pay to the Commis - sioner of Internal Revenue or his authorized repre - sentative the amount of ~2 , 981 . 10 as conee ' s gift tax , � () plus 57~ surcharge for late payment and interest at the rate of ~ per month 'c~ from Iv'iay 16, 1958 to the date of actual payment 00 ORDERED o ' lvianila , July 15 , 19E0o ----- Judge HE OONCU.L :