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Rogelio C.

Lascoa Jr
Taxation 4th Batch

1. Case Digest: Lung Center of the Philippines vs. Quezon City and Constantino Rosas
G.R. No. 144104
June 29, 2004
The Petitioner is a non-stock, non-profit entity which owns a parcel of land in Quezon City. Erected in
the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. The ground
floor is being leased to a canteen, medical professionals whom use the same as their private clinics, as
well as to other private parties. The right portion of the lot is being leased for commercial purposes to
the Elliptical Orchids and Garden Center. The petitioner accepts paying and non-paying patients. It also
renders medical services to out-patients, both paying and non-paying. Aside from its income from
paying patients, the petitioner receives annual subsidies from the government.
Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5 million, predicating
its claim as a charitable institution. The city assessor denied the Claim. When appealed to the QC-Local
Board of Assessment, the same was dismissed. The decision of the QC-LBAA was affirmed by the
Central Board of Assessment Appeals, despite the Petitioners claim that 60% of its hospital beds are
used exclusively for charity.
Whether or not the Petitioner is entitled to exemption from realty taxes notwithstanding the fact that it
admits paying clients and leases out a portion of its property for commercial purposes.
The Court held that the petitioner is indeed a charitable institution based on its charter and articles of
incorporation. As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether out-patient or
confined in the hospital, or receives subsidies from the government, so long as the money received is
devoted or used altogether to the charitable object which it is intended to achieve; and no money inures
to the private benefit of the persons managing or operating the institution.
Despite this, the Court held that the portions of real property that are leased to private entities are not
exempt from real property taxes as these are not actually, directly and exclusively used for charitable
purposes. (strictissimi juris) Moreover, P.D. No. 1823 only speaks of tax exemptions as regards to:
income and gift taxes for all donations, contributions, endowments and equipment and supplies
to be imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the
Philippines for the actual use and benefit of the Lung Center; and
taxes, charges and fees imposed by the Government or any political subdivision or
instrumentality thereof with respect to equipment purchases (expression unius est exclusion
alterius/expressium facit cessare tacitum).
2. American Bible Society vs. City of Manila
GR No. L-9637 | April 30, 1957
American Bible Society 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 November, 1898
City of Manila 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
American Bible Society has been distributing and selling bibles and/or gospel portions throughout
the Philippines and translating the same into several Philippine dialect
City Treasurer of Manila informed American Bible Society that it was violating several Ordinances for
operating without the necessary permit and license, thereby requiring the corporation to secure the
permit and license fees covering the period from 4Q 1945-2Q 1953
To avoid closing of its business, American Bible Society paid the City of Manila its permit and license
fees under protest
American Bible filed a complaint, questioning the constitutionality and legality of the Ordinances
2529 and 3000, and prayed for a refund of the payment made to the City of Manila. They
They had been in the Philippines since 1899 and were not required to pay any license fee or
sales tax
it never made any profit from the sale of its bibles
City of Manila prayed that the complaint be dismissed, reiterating the constitutionality of the
Ordinances in question

Trial Court dismissed the complaint

American Bible Society appealed to the Court of Appeals

Issue: WON American Bible Society liable to pay sales tax for the distribution and sale of bibles
Ruling: 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
However, item 79 of Sec. 3 of the Ordinance provides that all other businesses, trade or
occupation not mentioned, except those upon which the City is not empowered to license or to
tax P5.00
Therefore, the necessity of the permit is made to depend upon the power of the City to license or
tax said business, trade or occupation.
2 provisions of law that may have bearing on this case:
Chapter 60 of the Revised Administrative Code, the Municipal Board of the City of
Manila is empowered to tax and fix the license fees on retail dealers engaged in the sale of
Sec. 18(o) of RA 409: to tax and fix the license fee on dealers in general merchandise,
including importers and indentors, except those dealers who may be expressly subject to the
payment of some other municipal tax. Further, Dealers in general merchandise shall be
classified as (a) wholesale dealers and (b) retail dealers. For purposes of the tax on retail
dealers, general merchandise shall be classified into four main classes: namely (1) luxury
articles, (2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. A
separate license shall be prescribed for each class but where commodities of different classes
are sold in the same establishment, it shall not be compulsory for the owner to secure more
than one license if he pays the higher or highest rate of tax prescribed by ordinance.
Wholesale dealers shall pay the license tax as such, as may be provided by ordinance
The only difference between the 2 provisions is the limitation as to the amount of tax or license fee
that a retail dealer has to pay per annum
As held in Murdock vs. Pennsylvania, The power to impose a license tax on the exercise of these
freedoms provided for in the Bill of Rights, is indeed as potent as the power of censorship which this
Court has repeatedly struck down. It is not a nominal fee imposed as a regulatory measure to defray
the expenses of policing the activities in question. It is in no way apportioned. It is flat license tax
levied and collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the
constitutional liberties of press and religion and inevitably tends to suppress their exercise. That is
almost uniformly recognized as the inherent vice and evil of this flat license tax.
Further, the case also mentioned that the power to tax the exercise of a privilege is the power to
control or suppress its enjoyment. Those who can tax the exercise of this religious practice can make
its exercise so costly as to deprive it of the resources necessary for its maintenance. Those who can
tax the privilege of engaging in this form of missionary evangelism can close all its doors to all those
who do not have a full purse
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
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.
Wherefore, and on the strength of the foregoing considerations, We hereby reverse the
decision appealed from, sentencing defendant return to plaintiff the sum of P5,891.45
unduly collected from it