CIR vs CLUB FILIPINO

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 cater to the operation of a golf course, gymnasium, tennis court, and other
amenities the members could enjoy.

There is no provision either in the articles or in the by-laws relating to dividends and their
distribution, although it is agreed that upon its dissolution, the Club's remaining assets shall
be donated to a charitable Phil. Institution in Cebu.

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 the Club P12,068.84 as fixed and percentage taxes, surcharge and
compromise penalty. On appeal, the CTA reversed the decision 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 because it is a non-stock corporation

Issue: W/N the Club is a non-stock corporation and thus not liable for the tax liability
Held: The Club is a non-stock corpo. 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. Nowhere in its articles of incorporation or by-laws could be found an authority for
the distribution of its dividends or surplu sprofits. Strictly speaking, it cannot, therefore, be
considered a stock corporation, within the contemplation of the corpo law.

Moreover, the Club could not be held liable for the tax liabilities attached. A tax is a
burden, and, as such, it should not be deemed imposed upon fraternal, civic, non-profit, non-
stock organizations, unless the intent to the contrary is manifest and patent. The Club derived
profit from the operation of its bar and restaurant, but such fact does not necessarily convert it
into a profit-making enterprise. 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.

REPUBLIC vs CITY OF PARANAQUE

Facts:
The Public Estates Authority (PEA) is a government corporation created by virtue of PD
No. 1084 to provide a coordinated, economical and efficient reclamation of lands. On
February 14, 1979, by virtue of EO No. 525 issued by then President Marcos, PEA was
designated as the agency primarily responsible for integrating, directing and coordinating all
reclamation projects for and on behalf of the national govt.

On October 26, 2004, then President GMA issued E.O. No. 380 transforming PEA into
PRA, which shall perform all the powers and functions of the PEA relating to reclamation
activities. By virtue of its mandate, PRA reclaimed several portions of the foreshore and
offshore areas of Manila Bay, including those located in Parañaque City. On February 19,
2003, then Parañaque City Treasurer issued Warrants of Levy on PRA's reclaimed properties
located in Parañaque City based on the assessment for delinquent real property taxes.

The RTC rendered decision ruling that PRA was not exempt from payment of real
property taxes as it was a GOCC under Section 3 of P.D. No. 1084. It was organized as a
stock corporation because it had an authorized capital stock divided into no par value shares.

Issue: W/N the PRA is a GOCC

Held: PRA is not a GOCC because it is neither a stock nor a non-stock corporation. It cannot
be considered as a stock corporation because although it has a capital stock divided into no
par value shares, it is not authorized to distribute dividends, surplus allotments or profits to
stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the subsequent
executive issuances pertaining to PRA that authorizes PRA to distribute dividends, surplus
allotments or profits to its stockholders.

It cannot be considered a non-stock corporation because it does not have members. A

non-stock corporation must have members. Moreover, it was not organized for any of the
purposes mentioned in Section 88 of the Corporation Code. Specifically, it was created to
manage all government reclamation projects.
Further, properties of public dominion are not subject to execution or foreclosure sale.
Thus, the assessment, levy and foreclosure made on the subject reclaimed lands by
respondent, as well as the issuance of certificates of title in favor of respondent are without
basis.

MIAA vs CA
Facts: Manila International Airport Authority (MIAA) is the operator of the NAIA located at
Paranaque City. The Officers of Paranaque City sent notices to MIAA due to real estate tax
delinquency. MIAA then settled some of the amount. When MIAA failed to settle the entire
amount, the officers of Paranaque city threatened to levy and subject to auction the land and
buildings of MIAA,which they subsequently did. MIAA sought for a Temporary Restraining
Order from the CA but failed to do so within the 60 days reglementary period, so the petition
was dismissed. MIAA then sought for the TRO with the SC a day before the public auction,
MIAA was granted with the TRO but unfortunately the TRO was received by the Paranaque
City officers 3 hours after the public auction. MIAA claims that although the charter provides
that the title of the land and building are with MIAA still the ownership is with the Republic of
the Philippines. MIAA also contends that it is an instrumentality of the government and as
such exempted from real estate tax. That the land and buildings of MIAA are of public
dominion therefore cannot be subjected to levy and auction sale. On the other hand, the
officers of Paranaque City claim that MIAA is a GOCC, therefore not exempted to real estate
tax.

Issue: W/N MIAA is an instrumentality of the government and not a GOCC and thus
exempted from tax
Held: MIAA is not a GOCC. To be one, MIAA should either be a stock or non stock
corporation. MIAA is not a stock corporation for its capital is not divided into shares. It is not a
non stock corporation since it has no members. MIAA is an instrumentality of the government
vested with corporate powers and government functions.
The court held that the land and buildings of MIAA are part of the public dominion. Since
theairport is devoted for public use, for the domestic and international travel and
transportation. Even if MIAA charge fees, this is for support of its operation and for regulation
and does not change the character of the land and buildings of MIAA as part of the public
dominion. As part of the public dominion the landand buildings of MIAA are outside the
commerce of man. To subject them to levy and public auction iscontrary to public policy.

CIR vs St. Luke’s

Facts: St. Luke’s Medical Center, Inc. (St. Luke’s) is a hospital organized as a non-stock and
non-profit corporation. St. Luke’s accepts both paying and non-paying patients. The BIR
assessed St. Luke’s deficiency taxes for 1998 comprised of deficiency income tax, value-
added tax, and withholding tax. The BIR claimed that St. Luke’s should be liable for income
tax at a preferential rate of 10% as provided for by Section 27(B). Further, the BIR claimed
that St. Luke’s was actually operating for profit in 1998 because only 13% of its revenues
came from charitable purposes. Moreover, the hospital’s board of trustees, officers and
employees directly benefit from its profits and assets.
On the other hand, St. Luke’s maintained that it is a non-stock and non-profit institution for
charitable and social welfare purposes exempt from income tax under Section 30(E) and (G)
of the NIRC. It argued that the making of profit per se does not destroy its income tax
exemption.

Issue: Whether or not SLMC is entitled to tax exemption under Section 30 (E) and (G) of the
1997 NIRC
Held: There is no dispute that St. Luke's is organized as a non-stock and non profit charitable
institution. However, this does not automatically exempt St Luke's from paying taxes.

Even if St. Luke's meets the test of charity, a charitable institution is not ipso facto tax
exempt To be exempt from real property taxes, Section 28(3), Article VI of the Constitution
requires that a charitable institution use the property 'actually, directly and exclusively' for
charitable purposes. To be exempt from income taxes, Section 30(E) of the NIRC requires
that a charitable institution must be 'organized and operated exclusively' for charitable
purposes.

However, if a tax exempt charitable institution conducts 'any' activity for profit, such
activity is not tax exempt even as its not-for-profit activities remain tax exempt.

Thus, even if the charitable institution must be 'organized and operated exclusively' for
charitable purposes, it is nevertheless allowed to engage in 'activities conducted for profit'
without losing its tax exempt status for its not for profit activities. The only consequence is that
the 'income of whatever kind and character' of a charitable institution 'from any of its activities
conducted for profit, regardless of the disposition made of such income, shall be subject to
tax.

It cannot be disputed that a hospital which receives approximately P1.73 billion from
paying patients is not an institution 'operated exclusively' for charitable purposes. Clearly,
revenues from paying patients are income received from 'activities conducted for profit.

REPUBLIC vs SUNLIFE ASSURANCE

Facts: Sun Life is a mutual life insurance company organized and existing under the laws of
Canada. It is registered and authorized by the SEC and the Insurance Commission to engage
in business in the Philippines as a mutual life insurance company with principal office at
Makati City.
On Oct. 20, 1997, Sun Life filed and paid with the CIR its insurance premium tax return
for the third quarter of 1997.
On December 29, 1997, the CTA rendered its decision in Insular Life Assurance Co. Ltd.
v. CIR, which held that mutual life insurance companies are purely cooperative companies
and are exempt from the payment of premium tax. This prompted SunLife to file an
administrative claim for tax credit of its alleged erroneously paid premium tax and DST for the
aforestated tax periods.
For failure of the CIR to act upon the administrative claim for tax credit and with the 2-
year period to file a claim for tax credit or refund dwindling away and about to expire, Sun Life
filed with the CTA a petition for review. CTA ruled in favor of SunLife. Upon appeal, CA
affirmed.

Issue: W/N SunLife is a Cooperative and whether registration with the Cooperative Devt.
Authority is necessary
Held: Having satisfactorily proven to the Court of Tax Appeals, to the Court of Appeals and to
this Court that it is a bona fide cooperative, respondent is entitled to exemption from the
payment of taxes on life insurance premiums and documentary stamps. Not being governed
by the Cooperative Code of the Philippines, it is not required to be registered with the
Cooperative Development Authority in order to avail itself of the tax exemptions.

A cooperative as an association "conducted by the members thereof with the money

collected from among themselves and solely for their own protection and not for profit.
Without a doubt, respondent is a cooperative engaged in a mutual life insurance business.

First, it is managed by its members. Both the CA and the CTA found that the
management and affairs of respondent were conducted by its member-policyholders. Second,
it is operated with money collected from its members. Since respondent is composed entirely
of members who are also its policyholders, all premiums collected obviously come only from
them. Third, it is licensed for the mutual protection of its members, not for the profit of anyone.
 Under the Tax Code although respondent is a cooperative, registration with the
Cooperative Development Authority is not necessary in order for it to be exempt from the
payment of both percentage taxes on insurance premiums.

TAN vs SYCIP
Facts: Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation
with 15 regular members, who also constitute the board of trustees. During the annual
members’ meeting, there were only 11 living member-trustees, as 4 have already died. Out of
the 11, 7 attended the meeting through their respective proxies. The meeting was convened
and chaired by Atty. Sabino Padilla Jr. over the objection of Atty. Antonio C.Pacis, who
argued that there was no quorum. In the meeting, Petitioners Ernesto Tanchi,Edwin Ngo,
Virginia Khoo, and Judith Tan were voted to replace the four deceased member-trustees. The
controversy reached SEC and the petitioners maintained that the deceased member-trustees
should not be counted in the computation of the quorum because, upon their death, members
automatically lost all their rights (including the right to vote) and interests in the corporation.

Issue: W/N dead members in a non-stock corporation should still be counted in determination
of quorum for purpose of conducting the Annual Members’ Meeting
Held: Under the by-laws of GCHS, membership in the corporation shall be terminated by the
death of the member. Sec.91 of the Corpo Code further provides that termination
extinguishes all the rights of a member of the Corporation, unless otherwise provided in the
AOI or by-laws.

Dead members who are dropped from the membership roster in the manner and for the
cause provided for in the by-laws of GCHS are not to be counted in determining the requisite
vote in corporate matters or the requisite quorum. With 11 remaining members, the quorum in
this case should be 6. Thus, the meeting is valid.