CASE DIGEST

Lung Center of the Philippines vs. Quezon City (G.R No. 144104, June 29,2004)

FACTS:

Petitioner is a non-stock, non-profit entity established by virtue of PD No. 1823, seeks exemption from
real property taxes when the City Assessor issued Tax Declarations for the land and the hospital building.
Petitioner predicted on its claim that it is a charitable institution. The request was denied, and a petition
hereafter filed before the Local Board of Assessment Appeals of Quezon City (QC-LBAA) for reversal of
the resolution of the City Assessor. Petitioner alleged that as a charitable institution, is exempted from
real property taxes under Sec 28(3) Art VI of the Constitution. QC-LBAA dismissed the petition and the
decision was likewise affirmed on appeal by the Central Board of Assessment Appeals of Quezon City.
The Court of Appeals affirmed the judgment of the CBAA.

ISSUE:

1. Whether or not petitioner is a charitable institution within the context of PD 1823 and the 1973 and
1987 Constitution and Section 234(b) of RA 7160.

2. Whether or not petitioner is exempted from real property taxes.

RULING:

1. Yes. The Court hold that the petitioner is a charitable institution within the context of the 1973 and
1987 Constitution. Under PD 1823, the petitioner is a non-profit and non-stock corporation which,
subject to the provisions of the decree, is to be administered by the Office of the President with the
Ministry of Health and the Ministry of Human Settlements. The purpose for which it was created was to
render medical services to the public in general including those who are poor and also the rich, and
become a subject of charity. Under PD 1823, petitioner is entitled to receive donations, even if the gift
or donation is in the form of subsidies granted by the government.

2. Partly No. Under PD 1823, the lung center does not enjoy any property tax exemption privileges for its
real properties as well as the building constructed thereon.

The property tax exemption under Sec. 28(3), Art. VI of the Constitution of the property taxes only. This
provision was implanted by Sec.243 (b) of RA 7160.which provides that in order to be entitled to the
exemption, the lung center must be able to prove that: it is a charitable institution and; its real
properties are actually, directly and exclusively used for charitable purpose. Accordingly, the portions
occupied by the hospital used for its patients are exempt from real property taxes while those leased to
private entities are not exempt from such taxes.
 Commissioners of Internal Revenue vs. De La Salle University, Inc. (G.T No. 196596, November 9,
2016)

FACTS:

Sometime in 2004, the Bureau of Internal Revenue(BIR)issued to DLSU Letter of Authority (LOA) No.
2794 authorizing its revenue officers to examine the latter's books of accounts and other accounting
records for all internal revenue taxes for the periodFiscal Year Ending 2003 and Unverified Prior
Years.On August 18, 2004, the BIR through aFormal Letter of Demandassessed DLSU the following
deficiencytaxes: (1)income taxon rental earnings from restaurants/canteens and bookstores operating
within the campus; (2)value-added tax (VAI)on business income; and (3)documentary stamp tax (DSI)on
loans and lease contracts.DLSU protested the assessment. The Commissioner failed to act on the
protest; thus, DLSU filed on August 3, 2005 a petition for review with the CTA Division. DLSU, anon-
stock, non-profit educational institution,principally anchored its petition onArticle XIV, Section 4 (3)of
the Constitution, which reads:(3) All revenues and assets of non-stock, non-profit educational
institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes
and duties. xxx.On January 5, 2010, the CTA Division partially granted DLSU's petition for review. On July
29, 2010, the CTA Division, in view of the supplemental evidence submitted, reduced the amount of
DLSU's tax deficiencies.The CTAEn Bancfound that DLSU was able to prove that aportionof the assessed
rental income was used actually, directly and exclusively for educational purposes; hence, exempt from
tax.Citing jurisprudence, the CTAEn Bancheld that a LOA should cover only one taxable period and that
the practice of issuing a LOA covering audit ofunverified prior yearsis prohibited.The prohibition is
consistent with Revenue Memorandum Order (RMO) No. 43-90, which provides that if the audit
includes more than one taxable period, the other periods or years shall be specifically indicated in the
LOA.

ISSUE:

Whether DLSU' s income and revenues proved to have been used actually, directly and exclusively for
educational purposes are exempt from duites and taxes.

RULING:

The income, revenues and assets of non-stock, non-profit educational institutions proved to have been
used actually, directly and exclusively for educational purposes are exempt from duties and taxes. The
LOA issued to DLSU is not entirely void. The assessment for taxable year 2003 is valid. The CTA correctly
admitted DLSU's formal offer of supplemental evidence; andThe CTA's appreciation of evidence is
conclusive unless the CTA is shown to have manifestly overlooked certain relevant facts not disputed by
the parties and which, if properly considered, would justify a different conclusion.The parties failed to
convince the Court that the CTA overlooked or failed to consider relevant facts. We thus sustain the CTA
En Banc's findings that:DLSU proved that a portion of its rental income was used actually, directly and
exclusively for educational purposes; and DLSU proved the payment of the DST through its bank's on-
line imprinting machine.

Commissioners of Internal Revenue vs S.C Johnson and Sons, Inc.(G.R. No. 127105, June 25, 1999)

FACTS:

Respondent, S.C. Johnson and Son, Inc. is a domestic corporation, entered into a license agreement with
SC Johnson and Son, USA, a non-resident foreign corporation, pursuant to which, respondent was
granted the right to use the trademark, patents, and technology owned by the latter.

Respondent was obliged to pay SC Johnson and Son, USA royalties based on the percentage of net sales
and subjected the same to 25% withholding tax on royalty payments which respondent paid.
Respondent subsequently filed a claim for refund of overpaid withholding tax on royalties with the
International Tax Affairs Division (ITAD) of the Bureau of Internal Revenue. He claims that the
preferential tax rate of 10% should be applied to him.The Commissioner did not act on such refund,
hence the private respondent filed a petition for review before the Court of Tax Appeals (CTA). The CTA
ruled in favor of Private Respondent ordered the commissioner to issue a tax credit certificate in favor of
said respondent.The Commissioner filed a petition for review with the Court of Appeals, which affirmed
in toto the CTA ruling.

ISSUE:

Whether respondent SC Johnson and Son, Inc. is entitled to the 10% royalty under the most favored
nation clause as provided in the RP-US Tax Treaty in relation to the RP-West Germany Tax Treaty.

RULING:

THE COURT OF APPEALS ERRED IN RULING THAT SC JOHNSON AND SON, USA IS ENTITLED TO THE
"MOST FAVORED NATION" TAX RATE OF 10% ON ROYALTIES AS PROVIDED IN THE RP-US TAX TREATY IN
RELATION TO THE RP-WEST GERMANY TAX TREATY.