G.R. No.

L-28896 February 17, 1988

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.

CRUZ, J.:

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.

The main issue in this case is 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. The corollary issue is whether or not the appeal of the private respondent from the decision of the
Collector of Internal Revenue was made on time and in accordance with law.

We deal first with the procedural question.

The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged in
engineering, construction and other allied activities, received a letter from the petitioner assessing it in the total
amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959.  On January 18, 1965, Algue 1

flied a letter of protest or request for reconsideration, which letter was stamp received on the same day in the
office of the petitioner.   On March 12, 1965, a warrant of distraint and levy was presented to the private
2

respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the
pending protest.   A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his
3

file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant.    On April 7, 4

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.  Sixteen days later, on April 5

23, 1965, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court
of Tax Appeals. 6

The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal
may be made within thirty days after receipt of the decision or ruling challenged.  It is true that as a rule the 7

warrant of distraint and levy is "proof of the finality of the assessment"   and renders hopeless a request for
8

reconsideration,"   being "tantamount to an outright denial thereof and makes the said request deemed
9

rejected."   But there is a special circumstance in the case at bar that prevents application of this accepted
10

doctrine.

The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it
filed its letter of protest. This was apparently not taken into account before the warrant of distraint and levy was
issued; indeed, such protest could not be located in the office of the petitioner. It was only after Atty. Guevara
gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the intervening
period, the warrant was premature and could therefore not be served.

As the Court of Tax Appeals correctly noted,"   the protest filed by private respondent was not pro forma and
11

was based on strong legal considerations. It thus had the effect of suspending on January 18, 1965, when it was
filed, the reglementary period which started on the date the assessment was received, viz., January 14, 1965.
The period started running again only on April 7, 1965, when the private respondent was definitely informed of
the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was
filed on April 23, 1965, only 20 days of the reglementary period had been consumed.

Now for the substantive question.

The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an
ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing
with Algue, it held that the said amount had been legitimately paid by the private respondent for actual services
rendered. The payment was in the form of promotional fees. These were collected by the Payees for their work
in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the
properties of the Philippine Sugar Estate Development Company.
1
Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees to be
personal holding company income   but later conformed to the decision of the respondent court rejecting this
12

assertion.  In fact, as the said court found, the amount was earned through the joint efforts of the persons
13

among whom it was distributed It has been established that the Philippine Sugar Estate Development Company
had earlier 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.  Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation
14

purchased the PSEDC properties.  For this sale, Algue received as agent a commission of P126,000.00, and it
15

was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. 16

There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns
and paid the corresponding taxes thereon.  The Court of Tax Appeals also found, after examining the evidence,
17

that no distribution of dividends was involved. 18

The petitioner claims that these payments are fictitious because most of the payees are members of the same
family in control of Algue. It is argued that no indication was made as to how such payments were made,
whether by check or in cash, and there is not enough substantiation of such payments. In short, the petitioner
suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction.

We find that these suspicions were adequately met by the private respondent when its President, Alberto
Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made in one lump sum
but periodically and in different amounts as each payee's need arose.   It should be remembered that this was a
19

family corporation where strict business procedures were not applied and immediate issuance of receipts was
not required. Even so, at the end of the year, when the books were to be closed, each payee made an
accounting of all of the fees received by him or her, to make up the total of P75,000.00.   Admittedly, everything
20

seemed to be informal. This arrangement was understandable, however, in view of the close relationship among
the persons in the family corporation.

We 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
21

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. This finding of the
respondent court is in accord with the following provision of the Tax Code:

SEC. 30. Deductions from gross income.--In computing net income there shall be allowed as
deductions —

(a) Expenses:

(1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year
in carrying on any trade or business, including a reasonable allowance for salaries or other
compensation for personal services actually rendered; ...  22

and Revenue Regulations No. 2, Section 70 (1), reading as follows:

SEC. 70. Compensation for personal services.--Among the ordinary and necessary expenses
paid or incurred in carrying on any trade or business may be included a reasonable allowance for
salaries or other compensation for personal services actually rendered. The test of deductibility in
the case of compensation payments is whether they are reasonable and are, in fact, payments
purely for service. This test and deductibility in the case of compensation payments is whether
they are reasonable and are, in fact, payments purely for service. This test and its practical
application may be further stated and illustrated as follows:

Any amount paid in the form of compensation, but not in fact as the purchase price of services, is
not deductible. (a) An ostensible salary paid by a corporation may be a distribution of a dividend
on stock. This is likely to occur in the case of a corporation having few stockholders, Practically

2
 all of whom draw salaries. If in such a case the salaries are in excess of those ordinarily paid for
similar services, and the excessive payment correspond or bear a close relationship to the
stockholdings of the officers of employees, it would seem likely that the salaries are not paid
wholly for services rendered, but the excessive payments are a distribution of earnings upon the
stock. . . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)

It is worth noting at this point that most of the payees were not in the regular employ of Algue nor were they its
controlling stockholders. 
23

The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity of the
claimed deduction. In the present case, however, we find that the onus has been discharged satisfactorily. The
private respondent has proved 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.

It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed
for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of
one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the
running of the government. The government for its part, is expected to respond in the form of tangible and
intangible benefits intended to improve the lives of the people and enhance their moral and material values. This
symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary
method of exaction by those in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic
regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the
taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the
tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law
has not been observed.

We hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the
respondent court in accordance with Rep. Act No. 1125. And we also find that the claimed deduction by the
private respondent was permitted under the Internal Revenue Code and should therefore not have been
disallowed by the petitioner.

ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without costs.

SO ORDERED.

Teehankee, C.J., Narvasa, Gancayco and Griño-Aquino, JJ., concur.

3
G.R. No. L-22734             September 15, 1967

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.

Office of the Solicitor General for petitioner.

Manuel B. Pineda for and in his own behalf as respondent.

BENGZON, J.P., J.:

On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of
whom is Manuel B. Pineda, a lawyer. Estate proceedings were had in the Court of First Instance of Manila (Case
No. 71129) wherein the surviving widow was appointed administratrix. The estate was divided among and
awarded to the heirs and the proceedings terminated on June 8, 1948. Manuel B. Pineda's share amounted to
about P2,500.00.

After the estate proceedings were closed, the Bureau of Internal Revenue investigated the income tax liability of
the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were
not filed. Thereupon, the representative of the Collector of Internal Revenue filed said returns for the estate on
the basis of information and data obtained from the aforesaid estate proceedings and issued an assessment for
the following:

1. Deficiency income tax

1945 P135.83
1946 436.95
1947 1,206.91 P1,779.69
  Add: 5% surcharge 88.98
1% monthly interest
from November 30,
1953 to April 15, 1957 720.77
Compromise for late
filing 80.00
Compromise for late
payment 40.00

Total amount due P2,707.44

===========
Additional residence tax for P14.50
2.
1945 ===========
3. Real Estate dealer's tax for
the fourth quarter of 1946 and P207.50
the whole year of 1947 ===========

4
Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the Court
of Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to him as one of
the heirs."

After hearing the parties, the Court of Tax Appeals rendered judgment reversing the decision of the
Commissioner on the ground that his right to assess and collect the tax has prescribed. The Commissioner
appealed and this Court affirmed the findings of the Tax Court in respect to the assessment for income tax for
the year 1947 but held that the right to assess and collect the taxes for 1945 and 1946 has not prescribed. For
1945 and 1946 the returns were filed on August 24, 1953; assessments for both taxable years were made within
five years therefrom or on October 19, 1953; and the action to collect the tax was filed within five years from the
latter date, on August 7, 1957. For taxable year 1947, however, the return was filed on March 1, 1948; the
assessment was made on October 19, 1953, more than five years from the date the return was filed; hence, the
right to assess income tax for 1947 had prescribed. Accordingly, We remanded the case to the Tax Court for
further appropriate proceedings.1

In the Tax Court, the parties submitted the case for decision without additional evidence.

On November 29, 1963 the Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the
payment corresponding to his share of the following taxes:

Deficiency income tax

1945 P135.83
1946 436.95
Real estate dealer's
fixed tax 4th quarter
of 1946 and whole
year of 1947 P187.50

The Commissioner of Internal Revenue has appealed to Us and has proposed to hold Manuel B. Pineda liable
for the payment of all the taxes found by the Tax Court to be due from the estate in the total amount of P760.28
instead of only for the amount of taxes corresponding to his share in the estate.1awphîl.nèt

Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due
the estate only up to the extent of and in proportion to any share he received. He relies on  Government of the
Philippine Islands v. Pamintuan 2 where We held that "after the partition of an estate, heirs and distributees are
liable individually for the payment of all lawful outstanding claims against the estate in proportion to the amount
or value of the property they have respectively received from the estate."

We hold that the Government can require Manuel B. Pineda to pay the full amount of the taxes assessed.

Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the
estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he
received from the inheritance.3 His liability, however, cannot exceed the amount of his share. 4

As a holder of property belonging to the estate, Pineda is liable for he tax up to the amount of the property in his
possession. The reason is that the Government has a lien on the P2,500.00 received by him from the estate as
his share in the inheritance, for unpaid income taxes 4a for which said estate is liable, pursuant to the last
paragraph of Section 315 of the Tax Code, which we quote hereunder:

If any person, corporation, partnership, joint-account (cuenta en participacion), association, or insurance

company liable to pay the income tax, neglects or refuses to pay the same after demand, the amount
shall be a lien in favor of the Government of the Philippines from the time when the assessment was
made by the Commissioner of Internal Revenue until paid with interest, penalties, and costs that may
accrue in addition thereto upon all property and rights to property belonging to the taxpayer: . . .

By virtue of such lien, the Government has the right to subject the property in Pineda's possession, i.e., the
P2,500.00, to satisfy the income tax assessment in the sum of P760.28. After such payment, Pineda will have a
5
right of contribution from his co-heirs, 5 to achieve an adjustment of the proper share of each heir in the
distributable estate.

All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and
collecting from each one of them the amount of the tax proportionate to the inheritance received. This remedy
was adopted in Government of the Philippine Islands v. Pamintuan, supra. In said case, the Government filed an
action against all the heirs for the collection of the tax. This action rests on the concept that hereditary property
consists only of that part which remains after the settlement of all lawful claims against the estate, for the
settlement of which the entire estate is first liable. 6 The reason why in case suit is filed against all the heirs the
tax due from the estate is levied proportionately against them is to achieve thereby two results: first, payment of
the tax; and second, adjustment of the shares of each heir in the distributed estate as lessened by the tax.

Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to
property belonging to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in
the hands of an heir or transferee to the payment of the tax due, the estate. This second remedy is the very
avenue the Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the
tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the
lifeblood of government and their prompt and certain availability is an imperious need. 7 And as afore-stated in
this case the suit seeks to achieve only one objective: payment of the tax. The adjustment of the respective
shares due to the heirs from the inheritance, as lessened by the tax, is left to await the suit for contribution by the
heir from whom the Government recovered said tax.

WHEREFORE, the decision appealed from is modified. Manuel B. Pineda is hereby ordered to pay to the
Commissioner of Internal Revenue the sum of P760.28 as deficiency income tax for 1945 and 1946, and real
estate dealer's fixed tax for the fourth quarter of 1946 and for the whole year 1947, without prejudice to his right
of contribution for his co-heirs. No costs. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ.,
concur.

6
G.R. No. 124043 October 14, 1998

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN ASSOCIATION OF THE
PHILIPPINES, INC., respondents.

PANGANIBAN, J.:

Is the income derived from rentals of real property owned by the Young Men's Christian Association of the
Philippines, Inc. (YMCA) — established as "a welfare, educational and charitable non-profit corporation" —
subject to income tax under the National Internal Revenue Code (NIRC) and the Constitution?

The Case

This is the main question raised before us in this petition for review on certiorari challenging two Resolutions
issued by the Court of Appeals  on September 28, 1995  and February 29, 1996  in CA-GR SP No. 32007. Both
1 2 3

Resolutions affirmed the Decision of the Court of Tax Appeals (CTA) allowing the YMCA to claim tax exemption
on the latter's income from the lease of its real property.

The Facts

The facts are undisputed.  Private Respondent YMCA is a non-stock, non-profit institution, which conducts
4

various programs and activities that are beneficial to the public, especially the young people, pursuant to its
religious, educational and charitable objectives.

In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a portion of its
premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees
collected from non-members. On July 2, 1984, the commissioner of internal revenue (CIR) issued an
assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for
deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency
withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its
basic protest, filed a letter dated October 8, 1985. In reply, the CIR denied the claims of YMCA.

Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax Appeals (CTA) on
March 14, 1989. In due course, the CTA issued this ruling in favor of the YMCA:

. . . [T]he leasing of [private respondent's] facilities to small shop owners, to restaurant and
canteen operators and the operation of the parking lot are reasonably incidental to and
reasonably necessary for the accomplishment of the objectives of the [private respondents]. It
appears from the testimonies of the witnesses for the [private respondent] particularly Mr. James
C. Delote, former accountant of YMCA, that these facilities were leased to members and that
7
 they have to service the needs of its members and their guests. The rentals were minimal as for
example, the barbershop was only charged P300 per month. He also testified that there was
actually no lot devoted for parking space but the parking was done at the sides of the building.
The parking was primarily for members with stickers on the windshields of their cars and they
charged P.50 for non-members. The rentals and parking fees were just enough to cover the
costs of operation and maintenance only. The earning[s] from these rentals and parking charges
including those from lodging and other charges for the use of the recreational facilities constitute
[the] bulk of its income which [is] channeled to support its many activities and attainment of its
objectives. As pointed out earlier, the membership dues are very insufficient to support its
program. We find it reasonably necessary therefore for [private respondent] to make [the] most
out [of] its existing facilities to earn some income. It would have been different if under the
circumstances, [private respondent] will purchase a lot and convert it to a parking lot to cater to
the needs of the general public for a fee, or construct a building and lease it out to the highest
bidder or at the market rate for commercial purposes, or should it invest its funds in the buy and
sell of properties, real or personal. Under these circumstances, we could conclude that the
activities are already profit oriented, not incidental and reasonably necessary to the pursuit of the
objectives of the association and therefore, will fall under the last paragraph of Section 27 of the
Tax Code and any income derived therefrom shall be taxable.

Considering our findings that [private respondent] was not engaged in the business of operating
or contracting [a] parking lot, we find no legal basis also for the imposition of [a] deficiency fixed
tax and [a] contractor's tax in the amount[s] of P353.15 and P3,129.73, respectively.

x x x           x x x          x x x

WHEREFORE, in view of all the foregoing, the following assessments are hereby dismissed for
lack of merit:

1980 Deficiency Fixed Tax — P353,15;

1980 Deficiency Contractor's Tax — P3,129.23;

1980 Deficiency Income Tax — P372,578.20.

While the following assessments are hereby sustained:

1980 Deficiency Expanded Withholding Tax — P1,798.93;

1980 Deficiency Withholding Tax on Wages — P33,058.82

plus 10% surcharge and 20% interest per annum from July 2, 1984 until fully paid but not to
exceed three (3) years pursuant to Section 51(e)(2) & (3) of the National Internal Revenue Code
effective as of 1984.  5

Dissatisfied with the CTA ruling, the CIR elevated the case to the Court of Appeals (CA). In its Decision of
February 16, 1994, the CA  initially decided in favor of the CIR and disposed of the appeal in the following
6

manner:

Following the ruling in the afore-cited cases of Province of Abra vs. Hernando and Abra Valley
College Inc. vs. Aquino, the ruling of the respondent Court of Tax Appeals that "the leasing of
petitioner's (herein respondent's) facilities to small shop owners, to restaurant and canteen
operators and the operation of the parking lot are reasonably incidental to and reasonably
necessary for the accomplishment of the objectives of the petitioners, and the income derived
therefrom are tax exempt, must be reversed.

WHEREFORE, the appealed decision is hereby REVERSED in so far as it dismissed the

assessment for:

1980 Deficiency Income Tax P 353.15

8
 1980 Deficiency Contractor's Tax P 3,129.23, &

1980 Deficiency Income Tax P 372,578.20

but the same is AFFIRMED in all other respect.  7

Aggrieved, the YMCA asked for reconsideration based on the following grounds:

The findings of facts of the Public Respondent Court of Tax Appeals being supported by
substantial evidence [are] final and conclusive.

II

The conclusions of law of [p]ublic [r]espondent exempting [p]rivate [r]espondent from the income
on rentals of small shops and parking fees [are] in accord with the applicable law and
jurisprudence.  8

Finding merit in the Motion for Reconsideration filed by the YMCA, the CA reversed itself and promulgated on
September 28, 1995 its first assailed Resolution which, in part, reads:

The Court cannot depart from the CTA's findings of fact, as they are supported by evidence
beyond what is considered as substantial.

x x x           x x x          x x x

The second ground raised is that the respondent CTA did not err in saying that the rental from
small shops and parking fees do not result in the loss of the exemption. Not even the petitioner
would hazard the suggestion that YMCA is designed for profit. Consequently, the little income
from small shops and parking fees help[s] to keep its head above the water, so to speak, and
allow it to continue with its laudable work.

The Court, therefore, finds the second ground of the motion to be meritorious and in accord with
law and jurisprudence.

WHEREFORE, the motion for reconsideration is GRANTED; the respondent CTA's decision is
AFFIRMED in toto. 9

The internal revenue commissioner's own Motion for Reconsideration was denied by Respondent Court in its
second assailed Resolution of February 29, 1996. Hence, this petition for review under Rule 45 of the Rules of
Court. 
10

The Issues

Before us, petitioner imputes to the Court of Appeals the following errors:

In holding that it had departed from the findings of fact of Respondent Court of Tax Appeals
when it rendered its Decision dated February 16, 1994; and

II

In affirming the conclusion of Respondent Court of Tax Appeals that the income of private
respondent from rentals of small shops and parking fees [is] exempt from taxation. 
11

This Court's Ruling

9
The petition is meritorious.

First Issue:
Factual Findings of the CTA

Private respondent contends that the February 16, 1994 CA Decision reversed the factual findings of the CTA.
On the other hand, petitioner argues that the CA merely reversed the "ruling of the CTA that the leasing of
private respondent's facilities to small shop owners, to restaurant and canteen operators and the operation of
parking lots are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of
the private respondent and that the income derived therefrom are tax exempt."   Petitioner insists that what the
12

appellate court reversed was the legal conclusion, not the factual finding, of the CTA.   The commissioner has a
13

point.

Indeed, it is a basic rule in taxation that the factual findings of the CTA, when supported by substantial evidence,
will be disturbed on appeal unless it is shown that the said court committed gross error in the appreciation of
facts.   In the present case, this Court finds that the February 16, 1994 Decision of the CA did not deviate from
14

this rule. The latter merely applied the law to the facts as found by the CTA and ruled on the issue raised by the
CIR: "Whether or not the collection or earnings of rental income from the lease of certain premises and income
earned from parking fees shall fall under the last paragraph of Section 27 of the National Internal Revenue Code
of 1977, as amended."  15

Clearly, the CA did not alter any fact or evidence. It merely resolved the aforementioned issue, as indeed it was
expected to. That it did so in a manner different from that of the CTA did not necessarily imply a reversal of
factual findings.

The distinction between a question of law and a question of fact is clear-cut. It has been held that "[t]here is a
question of law in a given case when the doubt or difference arises as to what the law is on a certain state of
facts; there is a question of fact when the doubt or difference arises as to the truth or falsehood of alleged
facts."   In the present case, the CA did not doubt, much less change, the facts narrated by the CTA. It merely
16

applied the law to the facts. That its interpretation or conclusion is different from that of the CTA is not irregular
or abnormal.

Second Issue:
Is the Rental Income of the YMCA Taxable?

We now come to the crucial issue: Is the rental income of the YMCA from its real estate subject to tax? At the
outset, we set forth the relevant provision of the NIRC:

Sec. 27. Exemptions from tax on corporations. — The following organizations shall not be taxed
under this Title in respect to income received by them as such —

x x x           x x x          x x x

(g) Civic league or organization not organized for profit but operated exclusively for the promotion
of social welfare;

(h) Club organized and operated exclusively for pleasure, recreation, and other non-profitable
purposes, no part of the net income of which inures to the benefit of any private stockholder or
member;

x x x           x x x          x x x

Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and
character of the foregoing organizations from any of their properties, real or personal, or from any
of their activities conducted for profit, regardless of the disposition made of such income, shall be
subject to the tax imposed under this Code. (as amended by Pres. Decree No. 1457)

Petitioner argues that while the income received by the organizations enumerated in Section 27 (now Section
26) of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received by them as
10
such," the exemption does not apply to income derived ". . . from any of their properties, real or personal, or from
any of their activities conducted for profit, regardless of the disposition made of such income . . . ."

Petitioner adds that "rental income derived by a tax-exempt organization from the lease of its properties, real or
personal, [is] not, therefore, exempt from income taxation, even if such income [is] exclusively used for the
accomplishment of its objectives."   We agree with the commissioner.
17

Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation
in construing tax exemptions.   Furthermore, a claim of statutory exemption from taxation should be manifest.
18

and unmistakable from the language of the law on which it is based. Thus, the claimed exemption "must
expressly be granted in a statute stated in a language too clear to be mistaken."  19

In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last
paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the
YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Because
the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real
property,   the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any
20

convoluted attempt at construction.

It is axiomatic that where the language of the law is clear and unambiguous, its express terms must be
applied.   Parenthetically, a consideration of the question of construction must not even begin, particularly when
21

such question is on whether to apply a strict construction or a liberal one on statutes that grant tax exemptions to
"religious, charitable and educational propert[ies] or institutions." 
22

The last paragraph of Section 27, the YMCA argues, should be "subject to the qualification that the income from
the properties must arise from activities 'conducted for profit' before it may be considered taxable."    This 23

argument is erroneous. As previously stated, a reading of said paragraph ineludibly shows that the income from
any property of exempt organizations, as well as that arising from any activity it conducts for profit, is taxable.
The phrase "any of their activities conducted for profit" does not qualify the word "properties." This makes from
the property of the organization taxable, regardless of how that income is used — whether for profit or for lofty
non-profit purposes.

Verba legis non est recedendum. Hence, Respondent Court of Appeals committed reversible error when it
allowed, on reconsideration, the tax exemption claimed by YMCA on income it derived from renting out its real
property, on the solitary but unconvincing ground that the said income is not collected for profit but is merely
incidental to its operation. The law does not make a distinction. The rental income is taxable regardless of
whence such income is derived and how it is used or disposed of. Where the law does not distinguish, neither
should we.

Constitutional Provisions

On Taxation

Invoking not only the NIRC but also the fundamental law, private respondent submits that Article VI, Section 28
of par. 3 of the 1987 Constitution,   exempts "charitable institutions" from the payment not only of property taxes
24

but also of income tax from any source.   In support of its novel theory, it compares the use of the words
25

"charitable institutions," "actually" and "directly" in the 1973 and the 1987 Constitutions, on the one hand; and in
Article VI, Section 22, par. 3 of the 1935 Constitution, on the other hand. 
26

Private respondent enunciates three points. First, the present provision is divisible into two categories: (1)
"[c]haritable institutions, churches and parsonages or convents appurtenant thereto, mosques and non-profit
cemeteries," the incomes of which are, from whatever source, all tax-exempt;   and (2) "[a]ll lands, buildings and
27

improvements actually and directly used for religious, charitable or educational purposes," which are exempt
only from property taxes.   Second, Lladoc v. Commissioner of Internal Revenue,   which limited the exemption
28 29

only to the payment of property taxes, referred to the provision of the 1935 Constitution and not to its
counterparts in the 1973 and the 1987 Constitutions.   Third, the phrase "actually, directly and exclusively used
30

for religious, charitable or educational purposes" refers not only to "all lands, buildings and improvements," but
also to the above-quoted first category which includes charitable institutions like the private respondent. 
31

11
The Court is not persuaded. The debates, interpellations and expressions of opinion of the framers of the
Constitution reveal their intent which, in turn, may have guided the people in ratifying the Charter.   Such intent
32

must be effectuated.

Accordingly, Justice Hilario G. Davide, Jr., a former constitutional commissioner, who is now a member of this
Court, stressed during the Concom debates that ". . . what is exempted is not the institution itself . . .; those
exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used
for religious, charitable or educational
purposes."   Father Joaquin G. Bernas, an eminent authority on the Constitution and also a member of the
33

Concom, adhered to the same view that the exemption created by said provision pertained only to property
taxes. 34

In his treatise on taxation, Mr. Justice Jose C. Vitug concurs, stating that "[t]he tax exemption
covers property taxes only."   Indeed, the income tax exemption claimed by private respondent finds no basis in
35

Article VI, Section 26, par. 3 of the Constitution.

Private respondent also invokes Article XIV, Section 4, par. 3 of the Character,    claiming that the YMCA "is a
36

non-stock, non-profit educational institution whose revenues and assets are used actually, directly and
exclusively for educational purposes so it is exempt from taxes on its properties and income."   We reiterate that
37

private respondent is exempt from the payment of property tax, but not income tax on the rentals from its
property. The bare allegation alone that it is a non-stock, non-profit educational institution is insufficient to justify
its exemption from the payment of income tax.

As previously discussed, laws allowing tax exemption are construed strictissimi juris. Hence, for the YMCA to be
granted the exemption it claims under the aforecited provision, it must prove with substantial evidence that (1) it
falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be
exempted from taxation is used actually, directly, and exclusively for educational purposes. However, the Court
notes that not a scintilla of evidence was submitted by private respondent to prove that it met the said requisites.

Is the YMCA an educational institution within the purview of Article XIV, Section 4, par. 3 of the Constitution? We
rule that it is not. The term "educational institution" or "institution of learning" has acquired a well-known
technical meaning, of which the members of the Constitutional Commission are deemed cognizant.   Under the 38

Education Act of 1982, such term refers to schools.   The school system is synonymous with formal
39

education,   which "refers to the hierarchically structured and chronologically graded learnings organized and
40

provided by the formal school system and for which certification is required in order for the learner to progress
through the grades or move to the higher levels."   The Court has examined the "Amended Articles of
41

Incorporation" and "By-Laws"  of the YMCA, but found nothing in them that even hints that it is a school or an
43

educational institution. 
44

Furthermore, under the Education Act of 1982, even non-formal education is understood to be school-based and
"private auspices such as foundations and civic-spirited organizations" are ruled out.   It is settled that the term
45

"educational institution," when used in laws granting tax exemptions, refers to a ". . . school seminary, college or
educational establishment . . . ."   Therefore, the private respondent cannot be deemed one of the educational
46

institutions covered by the constitutional provision under consideration.

. . . Words used in the Constitution are to be taken in their ordinary acceptation. While in its
broadest and best sense education embraces all forms and phases of instruction, improvement
and development of mind and body, and as well of religious and moral sentiments, yet in the
common understanding and application it means a place where systematic instruction in any or
all of the useful branches of learning is given by methods common to schools and institutions of
learning. That we conceive to be the true intent and scope of the term [educational institutions,]
as used in the
Constitution. 
47

Moreover, without conceding that Private Respondent YMCA is an educational institution, the Court also notes
that the former did not submit proof of the proportionate amount of the subject income that was actually, directly
and exclusively used for educational purposes. Article XIII, Section 5 of the YMCA by-laws, which formed part of
the evidence submitted, is patently insufficient, since the same merely signified that "[t]he net income derived
from the rentals of the commercial buildings shall be apportioned to the Federation and Member Associations as

12
the National Board may decide."   In sum, we find no basis for granting the YMCA exemption from income tax
48

under the constitutional provision invoked.

Cases Cited by Private

Respondent Inapplicable

The cases   relied on by private respondent do not support its cause. YMCA of Manila v. Collector of Internal
49

Revenue   and Abra Valley College, Inc. v. Aquino   are not applicable, because the controversy in both cases
50 51

involved exemption from the payment of property tax, not income tax. Hospital de San Juan de Dios, Inc. v.
Pasay City   is not in point either, because it involves a claim for exemption from the payment of regulatory fees,
52

specifically electrical inspection fees, imposed by an ordinance of Pasay City — an issue not at all related to that
involved in a claimed exemption from the payment of income taxes imposed on property leases. In Jesus
Sacred Heart College v. Com. of Internal Revenue,   the party therein, which claimed an exemption from the
53

payment of income tax, was an educational institution which submitted substantial evidence that the income
subject of the controversy had been devoted or used solely for educational purposes. On the other hand, the
private respondent in the present case has not given any proof that it is an educational institution, or that part of
its rent income is actually, directly and exclusively used for educational purposes.

Epilogue

In deliberating on this petition, the Court expresses its sympathy with private respondent. It appreciates the
nobility of its cause. However, the Court's power and function are limited merely to applying the law fairly and
objectively. It cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it would be
overspilling its role and invading the realm of legislation.

We concede that private respondent deserves the help and the encouragement of the government. It needs laws
that can facilitate, and not frustrate, its humanitarian tasks. But the Court regrets that, given its limited
constitutional authority, it cannot rule on the wisdom or propriety of legislation. That prerogative belongs to the
political departments of government. Indeed, some of the members of the Court may even believe in the wisdom
and prudence of granting more tax exemptions to private respondent. But such belief, however well-meaning
and sincere, cannot bestow upon the Court the power to change or amend the law.

WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated September 28, 1995
and February 29, 1996 are hereby REVERSED and SET ASIDE. The Decision of the Court of Appeals dated
February 16, 1995 is REINSTATED, insofar as it ruled that the income derived by petitioner from rentals of its
real property is subject to income tax. No pronouncement as to costs.

SO ORDERED.

Davide, Jr., Vitug and Quisumbing, JJ., concur.

Bellosillo, J., Please see Dissenting Opinion.

13
G.R. No. 125704 August 28, 1998

PHILEX MINING CORPORATION, petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, COURT OF APPEALS, and THE COURT OF TAX
APPEALS, respondents.

ROMERO, J.:

Petitioner Philex Mining Corp. assails the decision of the Court of Appeals promulgated on April 8, 1996 in CA-
G.R. SP No. 36975   affirming the Court of Tax Appeals decision in CTA Case No. 4872 dated March 16,
1

1995   ordering it to pay the amount of P110,677,668.52 as excise tax liability for the period from the 2nd quarter
2

of 1991 to the 2nd quarter of 1992 plus 20% annual interest from August 6, 1994 until fully paid pursuant to
Sections 248 and 249 of the Tax Code of 1977.

The facts show that on August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities for the
2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992 in the total amount of
P123,821.982.52 computed as follows:

PERIOD COVERED BASIC TAX 25% SURCHARGE INTEREST TOTAL EXCISE

14
 TAX DUE

2nd Qtr., 1991 12,911,124.60 3,227,781.15 3,378,116.16 19,517,021.91

3rd Qtr., 1991 14,994,749.21 3,748,687.30 2,978,409.09 21,721,845.60

4th Qtr., 1991 19,406,480.13 4,851,620.03 2,631,837.72 26,889,937.88

————— ————— —————— ——————

47,312,353.94 11,828,088.48 8,988,362.97 68,128,805.39

————— ————— —————— ——————

1st Qtr., 1992 23,341,849.94 5,835,462.49 1,710,669.82 30,887,982.25

2nd Qtr., 1992 19,671,691.76 4,917,922.94 215,580.18 24,805,194.88

————— ————— —————— ——————

43,013,541.70 10,753,385.43 1,926,250.00 55,693,177.13

————— ————— —————— ——————

90,325,895.64 22,581,473.91 10,914,612.97 123,821,982.52  3

========= ========= ========= =========

In a letter dated August 20, 1992,   Philex protested the demand for payment of the tax liabilities stating that it
4

has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of
P119,977,037.02 plus interest. Therefore these claims for tax credit/refund should be applied against the tax
liabilities, citing our ruling in Commissioner of Internal Revenue v. Itogon-Suyoc Mines, Inc.  5

In reply, the BIR, in a letter dated September 7, 1992,   found no merit in Philex's position. Since these pending
6

claims have not yet been established or determined with certainty, it follows that no legal compensation can take
place. Hence, the BIR reiterated its demand that Philex settle the amount plus interest within 30 days from the
receipt of the letter.

In view of the BIR's denial of the offsetting of Philex's claim for VAT input credit/refund against its excise tax
obligation, Philex raised the issue to the Court of Tax Appeals on November 6, 1992.   In the course of the
7

proceedings, the BIR issued Tax Credit Certificate SN 001795 in the amount of P13,144,313.88 which, applied
to the total tax liabilities of Philex of P123,821,982.52; effectively lowered the latter's tax obligation to
P110,677,688.52.

Despite the reduction of its tax liabilities, the CTA still ordered Philex to pay the remaining balance of
P110,677,688.52 plus interest, elucidating its reason, to wit:

Thus, for legal compensation to take place, both obligations must be liquidated and demandable.
"Liquidated" debts are those where the exact amount has already been determined (PARAS,
Civil Code of the Philippines, Annotated, Vol. IV, Ninth Edition, p. 259). In the instant case, the
claims of the Petitioner for VAT refund is still pending litigation, and still has to be determined by
this Court (C.T.A. Case No. 4707). A fortiori, the liquidated debt of the Petitioner to the
government cannot, therefore, be set-off against the unliquidated claim which Petitioner
conceived to exist in its favor (see Compañia General de Tabacos vs. French and Unson, No.
14027, November 8, 1918, 39 Phil. 34).  8

Moreover, the Court of Tax Appeals ruled that "taxes cannot be subject to set-off on compensation since claim
for taxes is not a debt or contract."   The dispositive portion of the CTA decision   provides:
9 10

15
 In all the foregoing, this Petition for Review is hereby DENIED for lack of merit and Petitioner is
hereby ORDERED to PAY the Respondent the amount of P110,677,668.52 representing excise
tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20%
annual interest from August 6, 1994 until fully paid pursuant to Section 248 and 249 of the Tax
Code, as amended.

Aggrieved with the decision, Philex appealed the case before the Court of Appeals docketed as CA-GR. CV No.
36975.   Nonetheless, on April 8, 1996, the Court of Appeals a Affirmed the Court of Tax Appeals observation.
11

The pertinent portion of which reads:  12

WHEREFORE, the appeal by way of petition for review is hereby DISMISSED and the decision
dated March 16, 1995 is AFFIRMED.

Philex filed a motion for reconsideration which was, nevertheless, denied in a Resolution dated July 11, 1996.  13

However, a few days after the denial of its motion for reconsideration, Philex was able to obtain its VAT input
credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994, computed as follows:  14

Period Covered Tax Credit Date

By Claims For Certificate of

VAT refund/credit Number Issue Amount

1994 (2nd Quarter) 007730 11 July 1996 P25,317,534.01

1994 (4th Quarter) 007731 11 July 1996 P21,791,020.61

1989 007732 11 July 1996 P37,322,799.19

1990-1991 007751 16 July 1996 P84,662,787.46

1992 (1st-3rd Quarter) 007755 23 July 1996 P36,501,147.95

In view of the grant of its VAT input credit/refund, Philex now contends that the same should,  ipso jure, off-set its
excise tax liabilities   since both had already become "due and demandable, as well as fully liquidated;"   hence,
15 16

legal compensation can properly take place.

We see no merit in this contention.

In several instances prior to the instant case, we have already made the pronouncement that taxes cannot be
subject to compensation for the simple reason that the government and the taxpayer are not creditors and
debtors of each other.   There is a material distinction between a tax and debt. Debts are due to the Government
17

in its corporate capacity, while taxes are due to the Government in its sovereign capacity.   We find no cogent
18

reason to deviate from the aforementioned distinction.

Prescinding from this premise, in Francia v. Intermediate Appellate Court,   we categorically held that taxes
19

cannot be subject to set-off or compensation, thus:

We have consistently ruled that there can be no off-setting of taxes against the claims that the
taxpayer may have against the government. A person cannot refuse to pay a tax on the ground
that the government owes him an amount equal to or greater than the tax being collected. The
collection of a tax cannot await the results of a lawsuit against the government.

The ruling in Francia has been applied to the subsequent case of Caltex Philippines, Inc. v. Commission on
Audit,   which reiterated that:
20

16
 . . . a taxpayer may not offset taxes due from the claims that he may have against the
government. Taxes cannot be the subject of compensation because the government and
taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a
debt, demand, contract or judgment as is allowed to be set-off.

Further, Philex's reliance on our holding in Commissioner of Internal Revenue v. Itogon-Suyoc Mines Inc.,
wherein we ruled that a pending refund may be set off against an existing tax liability even though the refund has
not yet been approved by the Commissioner,   is no longer without any support in statutory law.
21

It is important to note, that the premise of our ruling in the aforementioned case was anchored on Section 51 (d)
of the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was
enacted, the same provision upon which the Itogon-Suyoc pronouncement was based was
omitted.   Accordingly, the doctrine enunciated in Itogon-Suyoc cannot be invoked by Philex.
22

Despite the foregoing rulings clearly adverse to Philex's position, it asserts that the imposition of surcharge and
interest for the non-payment of the excise taxes within the time prescribed was unjustified. Philex posits the
theory that it had no obligation to pay the excise tax liabilities within the prescribed period since, after all, it still
has pending claims for VAT input credit/refund with BIR.  23

We fail to see the logic of Philex's claim for this is an outright disregard of the basic principle in tax law that taxes
are the lifeblood of the government and so should be collected without unnecessary hindrance.   Evidently, to
24

countenance Philex's whimsical reason would render ineffective our tax collection system. Too simplistic, it finds
no support in law or in jurisprudence.

To be sure, we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has a pending
tax claim for refund or credit against the government which has not yet been granted. It must be noted that a
distinguishing feature of a tax is that it is compulsory rather than a matter of bargain.   Hence, a tax does not
25

depend upon the consent of the taxpayer.   If any taxpayer can defer the payment of taxes by raising the
26

defense that it still has a pending claim for refund or credit, this would adversely affect the government revenue
system. A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the
government or that the collection of the tax is contingent on the result of the lawsuit it filed against the
government.   Moreover, Philex's theory that would automatically apply its VAT input credit/refund against its tax
27

liabilities can easily give rise to confusion and abuse, depriving the government of authority over the manner by
which taxpayers credit and offset their tax liabilities.

Corollarily, the fact that Philex has pending claims for VAT input claim/refund with the government is immaterial
for the imposition of charges and penalties prescribed under Section 248 and 249 of the Tax Code of 1977. The
payment of the surcharge is mandatory and the BIR is not vested with any authority to waive the collection
thereof.   The same cannot be condoned for flimsy reasons,   similar to the one advanced by Philex in justifying
28 29

its non-payment of its tax liabilities.

Finally, Philex asserts that the BIR violated Section 106 (e)   of the National Internal Revenue Code of 1977,
30

which requires the refund of input taxes within 60 days,   when it took five years for the latter to grant its tax
31

claim for VAT input credit/refund.  32

In this regard, we agree with Philex. While there is no dispute that a claimant has the burden of proof to establish
the factual basis of his or her claim for tax credit or refund,   however, once the claimant has submitted all the
33

required documents it is the function of the BIR to assess these documents with purposeful dispatch. After all,
since taxpayers owe honestly to government it is but just that government render fair service to the taxpayers.  34

In the instant case, the VAT input taxes were paid between 1989 to 1991 but the refund of these erroneously
paid taxes was only granted in 1996. Obviously, had the BIR been more diligent and judicious with their duty, it
could have granted the refund earlier. We need not remind the BIR that simple justice requires the speedy
refund of wrongly-held taxes.   Fair dealing and nothing less, is expected by the taxpayer from the BIR in the
35

latter's discharge of its function. As aptly held in Roxas v. Court of Tax Appeals:  36

The power of taxation is sometimes called also the power to destroy. Therefore it should be
exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be
exercised fairly, equally and uniformly, lest the tax collector kill the "hen that lays the golden egg"

17
 And, in order to maintain the general public's trust and confidence in the Government this power
must be used justly and not treacherously.

Despite our concern with the lethargic manner by which the BIR handled Philex's tax claim, it is a settled rule
that in the performance of governmental function, the State is not bound by the neglect of its agents and officers.
Nowhere is this more true than in the field of taxation.   Again, while we understand Philex's predicament, it must
37

be stressed that the same is not a valid reason for the non-payment of its tax liabilities.

To be sure, this is not to state that the taxpayer is devoid of remedy against public servants or employees,
especially BIR examiners who, in investigating tax claims are seen to drag their feet needlessly. First, if the BIR
takes time in acting upon the taxpayer's claim for refund, the latter can seek judicial remedy before the Court of
Tax Appeals in the manner prescribed by law.   Second, if the inaction can be characterized as willful neglect of
38

duty, then recourse under the Civil Code and the Tax Code can also be availed of.

Art. 27 of the Civil Code provides:

Art. 27. Any person suffering material or moral loss because a public servant or employee
refuses or neglects, without just cause, to perform his official duty may file an action for damages
and other relief against the latter, without prejudice to any disciplinary action that may be taken.

More importantly, Section 269 (c) of the National Internal Revenue Act of 1997 states:

x x x           x x x          x x x

(c) Wilfully neglecting to give receipts, as by law required for any sum collected in the
performance of duty or wilfully neglecting to perform, any other duties enjoyed by law.

Simply put, both provisions abhor official inaction, willful neglect and unreasonable delay in the performance of
official duties.   In no uncertain terms must we stress that every public employee or servant must strive to render
39

service to the people with utmost diligence and efficiency. Insolence and delay have no place in government
service. The BIR, being the government collecting arm, must and should do no less. It simply cannot be
apathetic and laggard in rendering service to the taxpayer if it wishes to remain true to its mission of hastening
the country's development. We take judicial notice of the taxpayer's generally negative perception towards the
BIR; hence, it is up to the latter to prove its detractors wrong.

In sum, while we can never condone the BIR's apparent callousness in performing its duties, still, the same
cannot justify Philex's non-payment of its tax liabilities. The adage "no one should take the law into his own
hands" should have guided Philex's action.

WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED. The assailed decision of the
Court of Appeals dated April 8, 1996 is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Kapunan and Purisima, JJ., concur.

18