American Bible Society v.

City of Manila
(GR L-9637, 30 April 1957)

Facts: Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation

duly registered and doing business in the Philippines through its Philippine agency established in
Manila in 1898. The defendant appellee is a municipal corporation with powers that are to be
exercised in conformity with the provisions of Republic Act No. 409, known as the Revised
Charter of the City of Manila.

In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles
and/or gospel portions thereof (except during the Japanese occupation) throughout the
Philippines and translating the same into several Philippine dialects. On May 29 1953, the acting
City Treasurer of the City of Manila informed plaintiff that it was conducting the business of
general merchandise since November, 1945, without providing itself with the necessary Mayor's
permit and municipal license, in violation of Ordinance No. 3000, as amended, and Ordinances
Nos. 2529, 3028 and 3364, and required plaintiff to secure, within three days, the corresponding
permit and license fees, together with compromise covering the period from the 4th quarter of
1945 to the 2nd quarter of 1953, in the total sum of P5,821.45.

Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff deposit
and pay under protest the sum of P5,891.45, if suit was to be taken in court regarding the same.
To avoid the closing of its business as well as further fines and penalties in the premises on
October 24, 1953, plaintiff paid to the defendant under protest the said permit and license fees in
the aforementioned amount, giving at the same time notice to the City Treasurer that suit would
be taken in court to question the legality of the ordinances under which, the said fees were being
collected, which was done on the same date by filing the complaint that gave rise to this action.
In its complaint plaintiff prays that judgment be rendered declaring the said Municipal Ordinance
No. 3000, as amended, and Ordinances Nos. 2529, 3028 and 3364 illegal and unconstitutional,
and that the defendant be ordered to refund to the plaintiff the sum of P5,891.45 paid under
protest, together with legal interest thereon, and the costs, plaintiff further praying for such other
relief and remedy as the court may deem just equitable.

After hearing, the lower court dismissed the complaint for lack of merit, the Society appealed to
the Court of Appeals, which in turn certified the case to the Supreme Court for the reason that the
errors assigned involved only questions of law.

Issue: Whether the American Bible Society is required to secure municipal permit to allow it to
sell and distribute bibles and religious literature, and to pay taxes from the sales thereof.

Held: No. Under Sec. 1 of Ordinance 3000, one of the ordinance in question, person or entity
engaged in any of the business, trades or occupation enumerated under Sec. 3 must obtain a
Mayors permit and license from the City Treasurer. American Bible Societys business is not
among those enumerated.
Under Sec. 27(e) of Commonwealth Act No. 466 or the National Internal Revenue Code,
Corporations or associations organized and operated exclusively for religious, charitable, . . . or
educational purposes, . . .: Provided, however, That the income of whatever kind and character
from any of its properties, 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 Code shall
not be taxed. The price asked for the bibles and other religious pamphlets was in some instances
a little bit higher than the actual cost of the same but this cannot mean that American Bible
Society was engaged in the business or occupation of selling said "merchandise" for profit
Therefore, the Ordinance cannot be applied for in doing so it would impair American Bible
Societys free exercise and enjoyment of its religious profession and worship as well as its rights
of dissemination of religious beliefs.
Commissioner of Internal Revenue v. Algue
(GR L-28896, 17 February 1988)

Facts: Philippine Sugar Estate Development Company appointed Algue as its agent,
authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such
authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and
Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation,
inducing other persons to invest in it. 14 Ultimately, after its incorporation largely through
the promotion of the said persons, this new corporation purchased the PSEDC
properties. 15 For this sale, Algue received as agent a commission of P126,000.00, and it
was from this commission that the P75,000.00 promotional fees were paid to the
aforenamed individuals. On January 18, 1965 Algue received an assessment from the
Commissioner of Internal Revenue in the amount ofP83,183.85 as delinquency income tax for years 1958
amd 1959., Algue flied a letter of protest or request for reconsideration, which letter was
stamp received on the same day in the office of the petitioner. 2 On March 12, 1965, a
warrant of distraint and levy was presented to the private respondent, through its
counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the
pending protest. 3 A search of the protest in the dockets of the case proved fruitless.
Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes,
who deferred service of the warrant. 4 On April 7, 1965, Atty. Guevara was finally
informed that the BIR was not taking any action on the protest and it was only then that
he accepted the warrant of distraint and levy earlier sought to be served. 5 Sixteen days
later, on April 23, 1965, Algue filed a petition for review of the decision of the
Commissioner of Internal Revenue with the Court of Tax Appeals.
Issue: whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by private respondent Algue as legitimate business expenses in its income tax
returns.

Held: No. The court agree with the respondent court that the amount of the promotional
fees was not excessive. The total commission paid by the Philippine Sugar Estate
Development Co. to the private respondent was P125,000.00. After deducting the said
fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The
amount of P75,000.00 was 60% of the total commission. This was a reasonable
proportion, considering that it was the payees who did practically everything, from the
formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the
Sugar Estate properties. The finding of the respondent court is in accord with of the Tax
Code.

Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance On the other hand, such collection should be made in accordance with law as any
arbitrariness will negate the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real
purpose of taxation, which is the promotion of the common good, may be achieved.

Herein, the claimed deduction of Revenue Regulation as to compensation for personal services
had been legitimately by Algue Inc. The private respondent has proved further that the payment
of the fees was necessary and reasonable in the light of the efforts exerted by the payees in
inducing investors and prominent businessmen to venture in an experimental enterprise and
involve themselves in a new business requiring millions of pesos. This was no mean feat and
should be, as it was, sufficiently recompensed.

YMCA v. Collector of Internal Revenue [GR 7988, 19 January 1916]

First division, Moreland (J): 4 concur
Facts:

The Young Men's Christian Association came to the Philippine with the army of occupation in
1898. When the large body of troops in Manila was removed to permanent quarters at Fort
William McKinley in February, 1905, an independent association for Manila was organized
under the direction of the Army and navy departments. Shortly after the organization of the
association the directors made a formal request to the international committee of the Young
Men's Christian Association in New York City for the assistance and cooperation of its foreign
department. Thereupon the Young Men's Christian Association of Manila was incorporated
under the law of the Philippine Islands and received its character in June, 1907.

A site for the new building was selected on Calle Concepcion, Ermita, and the building contract
was let on the 8th of January following. The building is composed of three parts. The main
structure, located in the center, is three stories high and includes a reception hall, social hall and
game rooms, lecture room, library, reading room and rooming apartments. The small building
lying to the left of the principal structure, as one faces the front from Called Concepcion, is the
kitchen and servant's quarters. The large wing to the right is known as the athletic building,
where the bowling alleys, swimming pool, locker rooms and gymnasium-auditorium are located.
The construction is of reinforced concrete with steel trussed roof covered with interlocking red

The Young Men's Christian Association of Manilas building and grounds are subject to taxation,
under section 48 of the charter of the city of Manila. thus assessed it and levied a tax thereon. It
was paid under protest and this action begun to recover it on the ground that the property was
exempt from taxation under the charter of the city of Manila. The decision was for the city and
the association appealed.
Issue: whether or not the building and grounds of the Young Men's Christian Association of
Manila are subject to taxation.
Held: Yes. YMCA is entitled to be exempted from taxation. The Young Men's Christian
Association of Manila cannot be said to be an institution used exclusively for religious purposes,
or an institution used exclusively for charitable purposes, or an institution devoted exclusively to
educational purposes; There is no doubt about the correctness of the contention that an institution
must devote itself exclusively to one or the other of the purpose mentioned in the statute before it
can be exempt from taxation; but the statute does not say that it must be devoted exclusively to
any one of the purposes therein mentioned. It may be a combination of two or three or more of
those purposes and still be entitled to exempt. However, the court believe it can be truthfully said
that it is an institution used exclusively for all three purposes.

Bishop of Nueva Segovia v. Provincial Board, Ilocos Norte

(GR 27588, 31 December 1927)

Facts: The plaintiff, the Roman Catholic Apostolic Church, represented by the Bishop of Nueva
Segovia, possesses and is the owner of a parcel of land in the municipality of San Nicolas, Ilocos
Norte, all four sides of which face on public streets. On the south side is a part of the churchyard,
the convent and an adjacent lot used for a vegetable garden, containing an area off 1,624 square
meters, in which there is a stable and a well for the use of the convent. In the center is the
remainder of the churchyard and the church. On the north is an old cemetery with two of its
walls still standing, and a portion where formerly stood a tower, the base of which still be seen,
containing a total area of 8,955 square meters.

As required by the defendants, on July 3, 1925 the plaintiff paid, under protest, the land tax on
the lot adjoining the convent and the lot which formerly was the cemetery with the portion where
the tower stood.

The plaintiff filed this action for the recovery of the sum paid by to the defendants by way of
land tax, alleging that the collection of this tax is illegal. The lower court absolved the defendants
from the complaint in regard to the lot adjoining convent and declared that the tax collected on
the lot, which formerly was the cemetery and on the portion where the lower stood, was illegal.
Both parties appealed from this judgment.

Issue: Whether the churchyard, the adjacent lot used for a vegetable garden, and the old
cemetery, besides the church and the convent, are exempt from land taxes.

Held: Yes. Both lots are exempt from land tax and the defendants are ordered to refund to
plaintiff whatever was paid as such tax. The exemption in favor of the convent in the payment of
the land tax (sec. 344 [c] Administrative Code) refers to the home of the parties who presides
over the church and who has to take care of himself in order to discharge his duties. In therefore
must, in the sense, include not only the land actually occupied by the church, but also the
adjacent ground destined to the ordinary incidental uses of man. Except in large cities where the
density of the population and the development of commerce require the use of larger tracts of
land for buildings, a vegetable garden belongs to a house and, in the case of a convent, it use is
limited to the necessities of the priest, which comes under the exemption.lawphi1.net

In regard to the lot which formerly was the cemetery, while it is no longer used as such, neither is
it used for commercial purposes and, according to the evidence, is now being used as a lodging
house by the people who participate in religious festivities, which constitutes an incidental use in
religious functions, which also comes within the exemption

Lladoc vs Commisioner of Internal Revenue (1965)

February 15, 2013June 30, 2015 markerwinsTax Law

Facts: Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to
Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and predecessor of
herein petitioner, for the construction of a new Catholic Church in the locality. The total amount
was actually spent for the purpose intended.

On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of
April 29, 1960, the respondent Commissioner of Internal Revenue issued an assessment for
donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner
was the priest. The tax amounted to P1,370.00 including surcharges, interests of 1% monthly
from May 15, 1958 to June 15, 1960, and the compromise for the late filing of the return.

Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest
and the motion for reconsideration presented to the Commissioner of Internal Revenue were
denied. The petitioner appealed to the Court of Tax Appeals on November 2, 1960. In the petition
for review, the Rev. Fr. Casimiro Lladoc claimed, among others, that at the time of the donation,
he was not the parish priest in Victorias; that there is no legal entity or juridical person known as
the "Catholic Parish Priest of Victorias," and, therefore, he should not be liable for the donee's
gift tax. It was also asserted that the assessment of the gift tax, even against the Roman Catholic
Church, would not be valid, for such would be a clear violation of the provisions of the
Constitution.

Issue: Whether the Catholic Parish is tax exempt.

Held: No. The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the
Constitution of the Philippines, should not be interpreted to mean exemption from all kinds of
taxes. Statutes exempting charitable and religious property from taxation should be construed
fairly though strictly and in such manner as to give effect to the main intent of the lawmakers .
In this case, what the assessed was a donee's gift tax; the assessment was not on the properties
themselves. It did not rest upon general ownership; it was an excise upon the use made of the
properties, upon the exercise of the privilege of receiving the properties The imposition of such
excise tax on property used for religious purpose do not constitute an impairment of the
Constitution.