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CIR vs. THE CLUB FILIPINO, INC.

DE CEBU
GR No. L-12719 | May 31, 1962 | Paredes, J.
FACTS: The Club Filipino, is a civic corporation organized under the laws of the Philippines with an
original authorized capital stock of P22,000, which was subsequently increased to P200,000 to
operate and maintain a golf course, tennis, gymnasiums, bowling alleys, billiard tables and pools, and
all sorts of games not prohibited by general laws and general ordinances, and develop and
nurture sports of any kind and any denomination for recreation and healthy training of its
members and shareholders" (sec. 2, Escritura de Incorporacion (Deed of Incorporation) del Club
Filipino, Inc.). There is no provision either in the articles or in the by-laws relative to dividends and
their distribution, although it is covenanted that upon its dissolution, the Club's remaining assets, after
paying debts, shall be donated to a charitable Phil. Institution in Cebu (Art. 27, Estatutos del (Statutes
of the) Club).
The Club owns and operates a club house, a bowling alley, a golf course (on a lot leased from the
government), and a bar-restaurant where it sells wines and liquors, soft drinks, meals and short
orders to its members and their guests. The bar-restaurant was a necessary incident to the operation
of the club and its golf-course. The club is operated mainly with funds derived from membership fees
and dues. Whatever profits it had, were used to defray its overhead expenses and to improve its golfcourse. In 1951, as a result of a capital surplus, arising from the re-valuation of its real properties, the
value or price of which increased, the Club declared stock dividends; but no actual cash dividends
were distributed to the stockholders.
In 1952, a BIR agent discovered that the Club has never paid percentage tax on the gross receipts of
its bar and restaurant, although it secured licenses. In a letter, the Collector assessed against and
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demanded from the Club P12,068.84 as fixed and percentage taxes, surcharge and compromise
penalty. Also, the Collector denied the Club’s request to cancel the assessment.
On appeal, the CTA reversed the Collector and ruled that the Club is not liable for the assessed tax
liabilities of P12,068.84 allegedly due from it as a keeper of bar and restaurant as it is a non-stock
corporation. Hence, the Collector filed the instant petition for review.
ISSUE: WON the Club is a stock corporation
HELD: NO. It is a non-stock corporation.
The facts that the capital stock of the Club is divided into shares, does not detract from the finding of
the trial court that it is not engaged in the business of operator of bar and restaurant. What is
determinative of whether or not the Club is engaged in such business is its object or purpose,
as stated in its articles and by-laws. The actual purpose is not controlled by the corporate form or
by the commercial aspect of the business prosecuted, but may be shown by extrinsic evidence,
including the by-laws and the method of operation. From the extrinsic evidence adduced, the CTA
concluded that the Club is not engaged in the business as a barkeeper and restaurateur.
For a stock corporation to exist, two requisites must be complied with:
1. a capital stock divided into shares and
2. an authority to distribute to the holders of such shares, dividends or allotments of the surplus
profits on the basis of the shares held (sec. 3, Act No. 1459).
Nowhere in its articles of incorporation or by-laws could be found an authority for the distribution of its
dividends or surplus profits. Strictly speaking, it cannot, therefore, be considered a stock corporation,
within the contemplation of the corpo law.

                                                                                                                         
1  P9,  599.07  as  percentage  tax  on  its  gross  receipts  (tax  years  1946-­‐1951),  P2,399.77  surcharge,  P70  fixed  tax  (tax  years  1946-­‐1952,  
and  P500  compromise  penalty.      

. it should not be deemed imposed upon fraternal. Ratio: The liability for fixed and percentage taxes. to have surplus (Jesus Sacred Heart College v. Institution in Cebu. as provided by these sections.  182.  Keepers  of  restaurants.  "Unless  otherwise  provided.068. That a Club makes some profit. REPUBLIC VS. 1956). managed and/or operated by. The Club derived profit from the operation of its bar and restaurant. after paying debts. HELD: NO. A tax is a burden. civic. Sinco Educational Corp.84. Sweeney. it stands to reason that the Club is not engaged in the business of an operator of bar and restaurant. The bar and restaurant are necessary adjuncts of the Club to foster its purposes and the profits derived therefrom are necessarily incidental to the primary object of developing and cultivating sports for the healthful recreation and entertainment of the stockholders and members.  provides  "Percentage  tax  . 2004. et al. Affirmed. 1979. and the administration and operation of lands belonging to.  etc. unless the intent to the contrary is manifest and patent" (Collector v. for the healthful recreation and entertainment of its stockholders and members. 1084 to provide a coordinated. in connection with the operation of its bar and restaurant. directing and coordinating all reclamation projects for and on behalf of the National Government.D. the government with the object of maximizing their utilization and hastening their development consistent with public interest.) No. does not ipso facto attach by mere reason of the operation of a bar and restaurant.  . which is not the case here. B. and for P500 as compromise penalty. restricted to activities for profit or livelihood (CIR v. should be construed in its plain and ordinary meaning. As has been remarked a club should always strive. by virtue of Executive Order (E. 1954. CIR.  refreshment  parlors  and  other  eating  places  shall  pay   a  tax  three  per  centum.) No. whenever possible. nonstock organizations. The plain and ordinary meaning of business is restricted to activities or affairs where profit is the purpose or livelihood is the motive. as fixed and percentage taxes and 2 3 4 surcharges prescribed in sec. that it is operated mainly with funds derived from membership fees and dues. Manila Polo Club v. economical and efficient reclamation of lands."   3  Sec. Meer. 525.  . L.  of  the  Tax  Code  states. that the Club's bar and restaurant catered only to its members and their guests.  191. CIR v.   . For the liability to attach. Manila Lodge & CTA. and the term business when used without qualification.ISSUE: WON the Club is liable for the payment of P12. 183 and 191 of the Tax Code. CIR v. 1959. then President Gloria Macapagal-Arroyo                                                                                                                           2  Sec.). CITY OF PARANAQUE The Public Estates Authority (PEA) is a government corporation created by virtue of Presidential Decree (P. non-profit.O. its remaining assets. that there was in fact no cash dividend distribution to its stockholders and that whatever was derived on retail from its bar and restaurant was used to defray its overall overhead expenses and to improve its golf-course (cost-plusexpenses-basis).  same  Tax  Code.  and  keepers  of  bar  and  cafes  where  wines  or  liquors  are  served  five  per  centum  of  their  gross  receipts  . Having found as a fact that the Club was organized to develop and cultivate sports of all class and denomination. 182 .. 1960).".. On October 26.   183   provides   in   general   that   "the   percentage   taxes   on   business   shall   be   payable   at   the   end   of   each   calendar   quarter   in   the   amount  lawfully  due  on  the  business  transacted  during  each  quarter. that upon its dissolution. and. PEA was designated as the agency primarily responsible for integrating. the operator thereof must be engaged in the business as a barkeeper and restaurateur. does not make it a profit-making Club. On February 14.  ."   4  Sec.  every  person  engaging  in  a  business  on  which  the  percentage  tax  is   imposed  shall  pay  in  full  a  fixed  annual  tax  of  ten  pesos  for  each  calendar  year  or  fraction  thereof  in  which  such  person  shall  engage   in  said  business. 1959. but such fact does not necessarily convert it into a profit-making enterprise. et al. as such.  . BPOE Elks Club. shall be donated to a charitable Phil.

No. and owned by the Government directly or through its instrumentalities either wholly. usually through a charter. the levy based on the said assessment. 2. – x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or nonstock corporation. 1084. 2. RTC issued an order denying PRA’s petition for the issuance of a temporary restraining order . 2003. On February 19. It was organized as a stock corporation because it had an authorized capital stock divided into no par value shares. vested with functions relating to public needs whether governmental or proprietary in nature. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows: SEC.D.issued E. PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay. Carabeo sent a letter stating that the public auction could not be deferred because the RTC had already denied PRA’s TRO application. –– x x x x (10) Instrumentality refers to any agency of the National Government. or. RULING: SEC. administering special funds. as a GOCC. endowed with some if not all corporate powers. Therefore. vested with special functions or jurisdiction by law. No. 7160 Local Government Code (LGC) which was the prevailing law in 2001 and 2002 with respect to real property taxation. PRA filed a Motion for Leave to File and Admit Attached Supplemental Petition which sought to declare as null and void the assessment for real property taxes. General Terms Defined. RTC denied PRA’s prayer for the issuance of a writ of preliminary injunction for being moot and academic considering that the auction sale had already been consummated. RTC rendered its decision dismissing PRA’s petition. to the extent of at least fifty-one (51) percent of its capital stock: x x x. PRA admitted its corporate personality and that said properties were registered in its name as shown by the certificates of title. PRA sent a letter to Carabeo requesting the latter not to proceed with the public auction In response. local tax exemption is withdrawn by virtue of Section 193 of RA No. x x x . In fact. General Terms Defined. Carabeo (Carabeo) issued Warrants of Levy on PRA’s reclaimed properties (Central Business Park and Barangay San Dionisio) located in Parañaque City based on the assessment for delinquent real property taxes. where applicable as in the case of stock corporations. PRA filed a petition for prohibition with prayer TRO and/or writ of preliminary injunction against Carabeo before the RTC. then Parañaque City Treasurer Liberato M. which shall perform all the powers and functions of the PEA relating to reclamation activities. and enjoying operational autonomy. the public auction sale and the Certificates of Sale issued pursuant to the auction sale. 380 transforming PEA into PRA. On the other hand. RTC reasoned out that it was a GOCC under Section 3 of P. not integrated within the department framework. including those located in Parañaque City.O. PRA was not exempt from payment of real property taxes.

when the law makes a government instrumentality operationally autonomous.D. namely: (1) that it has capital stock divided into shares. they must have members 3 and must not distribute any part of their income to said members. No. No. however. A non8 stock corporation must have members. surplus allotments or profits to stockholders. it administers the land. which is the governing law 2 defining the legal relationship and status of government entities." Section 87 thereof defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members. it was created to manage all government reclamation projects. it cannot be properly classified as a stock corporation. and (2) that it is authorized to distribute dividends and allotments of surplus and profits to its stockholders. These government instrumentalities are sometimes loosely called government corporate entities. Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x. Facts: The Manila International Airport Authority (MIAA) operates the Ninoy AquinoInternational Airport (NAIA) Complex in Parañaque City under Executive Order No.D. the instrumentality remains part of the National Government machinery although not integrated with the department framework. E. Specifically. 155650. GOCCs in the strict sense as understood under the Administrative Code. Court of Appeals G. as amended. Section 88 provides that nonstock corporations are "organized for charitable. 798 that authorizes PRA to distribute dividends. 903 (MIAACharter). social. industry. Unless the government instrumentality is organized as a stock or non-stock corporation. Likewise. scientific. it was not organized for any of the purposes mentioned in Section 88 of the Corporation Code. E. As such operator. professional. Moreover. 1084 or in any of the subsequent executive issuances pertaining to PRA. particularly. When the law vests in a government instrumentality corporate powers. They are not. 1084." Further. 061 to the effect that the Local Government Code of 1991 (LGC) withdrew the . improvements andequipment within the NAIA Complex. July 20. No. No. agriculture and like chambers. the University of the Philippines. PRA is not a GOCC because it is neither a stock nor a non-stock corporation. which is a necessary condition before an agency or instrumentality is deemed a GOCC. the instrumentality does not necessarily become a corporation. civil service.O. educational. the Philippine Ports Authority. and Bangko Sentral ng Pilipinas. cultural. 654 and EO No. fraternal. it is not authorized to distribute dividends." Two requisites must concur before one may be classified as a stock corporation. religious. the Office of the Government CorporateCounsel (OGCC) issued Opinion No. There is no provision whatsoever in P. trustees or officers. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. it remains a government instrumentality exercising not only governmental but also corporate powers. Examples are the Mactan International Airport Authority. If only one requisite is present. It cannot be considered as a stock corporation because although it has a capital stock divided into no 4 par value shares as provided in Section 7 of P. 5 6 7 525. No. surplus allotments or profits to its stockholders. 2006 Carpio. As for non-stock corporations. In the case at bench. it is clear that a GOCC must be "organized as a stock or non-stock corporation" while an instrumentality is vested by law with corporate powers.From the above definitions. like trade. or similar purposes. PRA cannot be considered a non-stock corporation either because it does not have members. literary. In March 1997. MIAA v.R. Correlatively. Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations. J. recreational.O.

movable and immovable[.00) Pesos to consist of: (a) The value of fixed assets including airport facilities. Meanwhile. 147 clarifying Opinion No. the OGCC issued Opinion No. Sec. It invokes the principle thatthe government cannot tax itself as a justification for exemption. 193 of the LGC. 21 of its charter and Sec.000. where applicable as in the case of stock corporations.000. vested with functions relating to public needs whether governmental or proprietary in nature.00) Pesos to Ten Billion (P10. MIAA. MIAA applied with the Court for the issuance of a TRO to restrain the auctionsale. to the extent of at least fifty-one (51) percent of its capital stock: x x x. or. Issue: Whether or not MIAA is a GOCC Held: There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax.exemption from real estate tax granted to MIAA under Section 21of its Charter. The City Treasurer subsequently issued notices of levy and warrants of levy on the airport lands and buildings. – x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation. the City of Parañaque invokes Sec. General Terms Defined.Hence. but this was dismissed forhaving been filed out of time. whichexpressly withdrew the tax exemption privileges of governmentowned and controlledcorporations (GOCC) upon the effectivity of the LGC. it receivedFinal Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxableyears 1992 to 2001. MIAA has no stockholders or 9 voting shares. the same wasreceived only by the City of Parañaque three hours after the sale. being devoted to public use and public service. pointing out that it is exempt from realestate tax under Sec.pointing out that Sec. However. thus. Capital. since the airport lands andbuildings. The Court issued a TRO on the day of the auction sale. levying against. In June 2001. MIAA is not a stock corporation because it has no capital stock divided into shares. Thus. 206 of the LGC requires persons exempt from real estate tax to showproof of exemption. however.500. the valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties.] which may be contributed by the National Government or transferred by it from any of its agencies.000." MIAA is not organized as a stock or non-stock corporation. 061.It asserts that an international airport is not among the exceptions mentioned in thesaid law. MIAA paid some of the real estate tax already due. filed a petition with the Court of Appealsseeking to restrain the City of Parañaque from imposing real estate tax on. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows: SEC. MIAA is not a government-owned or controlled corporation.and auctioning for public sale the airport lands and buildings. and owned by the Government directly or through its instrumentalities either wholly. In the afternoon before the scheduledpublic auction. are owned by the Republic of thePhilippines. (Emphasis supplied) A government-owned or controlled corporation must be "organized as a stock or non-stock corporation. MIAA filed this petition for review. Section 10 of the MIAA Charter provides: SECTION 10.000. 21 of the MIAA Charter is the proof thatMIAA is exempt from real estate tax. — The capital of the Authority to be contributed by the National Government shall be increased from Two and One-half Billion (P2.At the instance of MIAA. According to the OGCC. On the other hand. . 234 of the LGC.000. 2. runways and equipment and such other properties. the City of Parañaque posted and published notices announcing thepublic auction sale of the airport lands and buildings.

is organized to operate an international and domestic airport for public use." CIR vs." MIAA is not organized for any of these purposes. religious. 1986 representing about seventy percentum (70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the National Treasury as provided for in Section 11 of E. cultural. the Government contribution to the capital of the Authority shall be provided in the General Appropriations Act. social. endowed with some if not all corporate powers. . MIAA is not a stock corporation. and enjoying operational autonomy. trustees or officers. –– x x x x (10) Instrumentality refers to any agency of the National Government. MIAA exercises the governmental powers of eminent domain. scientific. literary. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows: SEC. MIAA is also not a non-stock corporation because it has no members. the only difference is that MIAA is vested with corporate powers. MIAA does not have capital stock that is divided into shares. General Terms Defined. insofar as these powers are not inconsistent with the provisions of this Executive Order. Thus. Thereafter. Clearly. agriculture and like chambers. like trade. recreational. not integrated within the department framework. Hence. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. it remains a government instrumentality exercising not only governmental but also 12 corporate powers. MIAA has no stockholders or voting shares." MIAA has capital but it is not divided into shares of stock. Non-stock corporations cannot distribute any part of their income to their members. industry. vested with special functions or jurisdiction by law. Unless the government instrumentality is organized as a stock or non-stock corporation. or similar purposes. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members.(b) That the amount of P605 million as of December 31." A non-stock corporation must have members. LUKE’S MEDICAL CENTER St. At the same time. 10 Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x. MIAA. Luke’s Medical Center. under its Charter. ST. administering special funds. police 13 14 authority and the levying of fees and charges. usually through a charter. shall be converted into the equity of the National Government in the Authority. a public utility. x x x (Emphasis supplied) When the law vests in a government instrumentality corporate powers. Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable. MIAA does not qualify as a governmentowned or controlled corporation. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to 11 the National Treasury. This prevents MIAA from qualifying as a non-stock corporation. Even if we assume that the Government is considered as the sole member of MIAA. professional. fraternal. educational. No. the instrumentality does not become a corporation. this will not make MIAA a non-stock corporation. MIAA is like any other government instrumentality. O. 903 as amended. 2. civil service. Since MIAA is neither a stock nor a non-stock corporation. MIAA exercises "all the powers of a corporation under the Corporation Law.

" However. Thus. whenever necessary or proper. Article VI of the Constitution requires that a charitable institution use the property "actually. Thus. officer or any specific person. (3) Operated exclusively for charitable purposes. Section 30(E) of the NIRC specifically requires that the corporation or association be non-stock. and (4) No part of its net income or asset shall belong to or inure to the benefit of any member. Luke's is organized as a non-stock and non-profit charitable institution. The last paragraph of Section 30 provides that if a tax exempt charitable institution conducts "any" activity for profit. a charitable institution is not ipso facto tax exempt. 30 of the NIRC." It likewise qualifies the requirement in Section 30(G) that the civic organization must be "operated exclusively" for the promotion of social welfare. Luke's from paying taxes." The use of lands. organizer. or officers" and that any profit "obtain[ed] as an incident to its operations shall. This only refers to the organization of St. under Lung Center." The operations of the charitable institution generally refer to its regular activities. There is no dispute that St. Luke’s accepts both paying and non-paying patients. (2) Organized exclusively for charitable purposes. Accepting paying patients does not destroy the exemption of St. organizer. With respect to its non-paying patients. shall be subject to tax imposed under this Code. buildings and improvements of the institution is but a part of its operations. be used for the furtherance of the purpose or purposes for which the corporation 50 was organized. Luke's meets the test of charity. as shown by its articles of incorporation. officer or any specific person. even if the charitable institution must be "organized and operated exclusively" for charitable purposes. Luke’s is exempted from income tax pursuant to Sec. Instead. (St. both the organization and operations of the charitable institution must be devoted "exclusively" for charitable purposes. 49 trustees. To be exempt from income taxes. However. this does not automatically exempt St." but must be "devoted or used altogether to the 51 charitable object which it is intended to achieve. The organization of the institution refers to its corporate form. the last paragraph of Sec. To be exempt from real property taxes. RULING: Section 30(E) of the NIRC provides that a charitable institution must be: (1) A non-stock corporation or association. Even if St. Likewise. St. Luke’s) is a hospital organized as a non-stock and non-profit corporation. Luke’s under Sec.Inc. directly and exclusively" for charitable purposes. Section 30(E) of the NIRC requires that these operations be exclusive to charity. St. such activity is not tax exempt even as its not-for-profit activities remain tax exempt. by-laws and other constitutive documents. to be exempt from income taxes. 30 (E) and (G) of the NIRC for being a non-stock corporation or organization operated exclusively for charitable or social welfare purposes. Luke’s activities conducted for profit. it is nevertheless allowed to engage in "activities conducted for profit" without losing its tax . This paragraph qualifies the requirements in Section 30(E) that the "[n]on-stock corporation or association [must be] organized and operated exclusively for x x x charitable x x x purposes x x x. Luke's. Section 28(3). any profit by a charitable institution must not only be plowed back "whenever necessary or proper. Section 30(G) of the NIRC requires that the institution be "operated exclusively" for social welfare. regardless of the disposition of such income. There is also a specific requirement that "no part of [the] net income or asset shall belong to or inure to the benefit of any member. which is defined by the Corporation Code as "one where no part of its income is distributable as dividends to its members. Section 30(E) of the NIRC requires that a charitable institution must be "organized and operated exclusively" for charitable purposes. 30 of the NIRC provides that St.

shall be subject to tax. Luke's is a corporation that is not "operated exclusively" for charitable or social welfare purposes insofar as its revenues from paying patients are concerned. An institution under Section 30(E) or (G) does not lose its tax exemption if it earns income from its for-profit activities. it remains a proprietary non-profit hospital under Section 27(B) of the NIRC as long as it does not distribute any of its profits to its members and such profits are reinvested pursuant to its corporate purposes. With the introduction of Section 27(B). This ruling is based not only on a strict interpretation of a provision granting tax exemption. Section 30(E) and (G) of the NIRC requires that an institution be "operated exclusively" for charitable or social welfare purposes to be completely exempt from income tax. previously at the ordinary corporate rate but now at the preferential 10% rate pursuant to Section 27(B). Luke's had total revenues of P1.965 from services to paying patients. REPUBLIC V.367. Clearly. is merely subject to income tax. the tax rate on such income from for-profit activities was the ordinary corporate rate under Section 27(A). St. revenues from paying patients are income received from "activities conducted for profit. It cannot be disputed that a hospital which receives approximately P1. is entitled to the preferential tax rate of 10% on its net income from its for-profit activities. In 1998. regardless of the disposition made of such income. under the last paragraph of Section 30.exempt status for its not-for-profit activities. Luke's fails to meet the requirements under Section 30(E) and (G) of the NIRC to be completely tax exempt from all its income. A profit-making entity should not be allowed to exploit this subsidy to the detriment of the government and other taxpayers. by this reason alone. St. Luke's." XXX Being a non-stock and non-profit corporation does not. SUNLIFE ASSURANCE FACTS: Ø Ø Ø Ø Ø Ø Sun Life Assurance Company of Canada (Sun Life) is a mutual life insurance company organized and existing under the laws of Canada Sun Life is registered and authorized by the Securities and Exchange Commission (SEC) and the Insurance Commission (IC) to engaged in business in the Philippines as a mutual life insurance company Sun Life filed with the Commissioner of Internal Revenue (CIR) its insurance premium tax return for the third quarter of 1997. A tax exemption is effectively a social subsidy granted by the State because an exempt institution is spared from sharing in the expenses of government and yet benefits from them. Such income from for-profit activities. but also on the clear and plain text of Section 30(E) and (G). completely exempt an institution from tax. An institution cannot use its corporate form to prevent its profitable activities from being taxed. St." Prior to the introduction of Section 27(B). and paid the necessary premium taxes Sun Life also filed with the CIR its documentary stamp tax (DST) declaration returns and paid the total amount therefor the Court of Tax Appeals (CTA) held in one case that mutual life insurance companies are purely cooperative companies and are exempt from payment of premium tax and DST Sun Life filed with the CIR an administrative claim for tax credit of its alleged erroneously paid premium tax and DST .1âwphi1 St. Tax exemptions for charitable institutions should therefore be limited to institutions beneficial to the public and those which improve social welfare.73 billion from paying patients is not an institution "operated exclusively" for charitable purposes. The only consequence is that the "income of whatever kind and character" of a charitable institution "from any of its activities conducted for profit. However. as a proprietary non-profit hospital.730. the tax rate is now 10%.

arguing that Sun Life (1) should have registered with the Cooperative Development Authority before it could enjoy the exemptions from premium tax and DST extended to purely cooperative companies or associations under the NIRC. organized and conducted solely by the members thereof for the exclusive benefit of each member and not for profit.(1) it is managed by its members. not primary. not for the profit of anyone NOTE: it does not follow that because respondent is registered as a non-stock corporation and thus exists for a purpose other than profit. NIRC. and (2) failed to prove that ownership of the company was vested in its members who are entitled to vote and elect the Board of Trustees among them CTA denied the motion for reconsideration CIR appealed to the CA w/c affirmed the CTA's ruling hence this petition ISSUE: Was Sun Life a purely cooperative company/association under Sec. and (3) it is licensed for the mutual protection of its members. and thus exempt from having to pay premium tax and DST? RULING: YES Ø Ø Ø Ø Ø Ø Ø Ø NIRC's definition of a "cooperative": association conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit SC: Sun Life is a cooperative engaged in a mutual life insurance business -. 121. purpose in fact. and not profit or gain CTA ruled in Sun Life's favor CIR filed a motion for reconsideration. invest its corporate funds in order to earn additional income for paying its operating expenses and meeting benefit claims any excess profit it obtains as an incident to its operations can only be used. (2) operated with money collected from members. the company can no longer make any profits earning profits is merely its secondary. contending that it is a mutual life insurance company vested with all the characteristic features and elements of a cooperative company/association (see Sec. NIRC): (1) management and affairs. praying for the issuance of a tax credit certificate. whenever necessary or proper. for the furtherance of the purpose for which it was organized under the Tax Code. for to do so would change or contradict its nature as a non-profit entity it may. (3) purpose = mutual protection of members. (2) it is operated with money collected from its members[-policyholders].Ø Ø Ø Ø Ø Ø Ø CIR failed to act upon the claim for tax credit Sun Life filed with the CTA a petition for review. registration with the Cooperative Development Authority (CDA) is not necessary in order for it to be exempt from premium tax and DST . conducted by members. 121. its management and affairs are conducted by member-policyholders. however. it may not lawfully engage in any business activity for profit. although respondent is a cooperative.