CIR V Bishop of Missionary District

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SUPREME COURT REPORTS ANNOTATED VOLUME 014 24/04/2019, 1)53 PM

VOL. 14, AUGUST 31, 1965 991


Com. of Internal Revenue vs. Bishop of the Missionary
District of the Philippine Islands, etc.

No. L-19445. August 31, 1965.

COMMISSIONER OF INTERNAL REVENUE, petitioner,


vs. BISHOP OF THE MISSIONARY DISTRICT OF THE
PHILIPPINE ISLANDS OF THE PROTESTANT
EPISCOPAL CHURCH IN THE U.S.A. and THE COURT
OF TAX APPEALS, respondents.

Taxation; Compensating tax; Requisites for exemption.·In


order that a taxpayer may claim exemption from the payment of
compensating tax, the following requisites must concur: (1) the
imported articles must have been donated; (2) the donee must be a
duly incorporated or established international civic organization,
religious or charitable society, or institution for civic, religious or
charitable purposes; and (3) the articles

992

992 SUPREME COURT REPORTS ANNOTATED

Com. of Internal Revenue vs. Bishop of the Missionary District of


the Philippine Islands, etc.

so imported must have been donated for the use of the organization,
society or institution or for free distribution and not for barter, sale
or hire.
Same; Same; Hospitals; Exemption from compensating tax;
Effect of admitting pay patients.·A hospital is a charitable
institution and therefore exempt from the payment of compensating

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tax under Republic Act No. 1916. The admission of pay patients
does not detract from the charitable character of a hospital if its
funds are devoted exclusively to the maintenance of the institution,
as in the case at bar.
Same; Same; Same; Same; Power of Secretary of Finance to
limit enjoyment of exemption.·The Secretary of Finance cannot
limit or otherwise qualify the enjoyment of this exemption granted
under Republic Act No. 1916 in implementing the law.

APPEAL from a decision of the Court of Tax Appeals.

The facts are stated in the opinion of the Court.


Solicitor General for petitioner.
Ross, Selph & Carrascoso for respondents.

REGALA, J.:

This is an appeal taken by the Commissioner of Internal


Revenue from a decision of the Court of Tax Appeals
ordering him to refund to the Bishop of the Missionary
District of the Philippine Islands of the Protestant
Episcopal Church in the U.S.A. the sum of P118,847 which
the latter had paid by way of compensating tax.
Respondent Bishop of the Missionary District of the
Philippine Islands of the Protestant Episcopal Church in
the U.S.A. is a corporation sole duly registered with the
Securities and Exchange Commission. He is in charge of
the administration of the temporalities and the
management of the estates and properties in the
Philippines of the Domestic and Foreign Missionary Society
of the Protestant Episcopal Church in the United States
(hereinafter referred to as Missionary Society). On the
other hand, the Missionary District of the Philippine
Islands of the Protestant Episcopal Church in the U.S.A.
(hereinafter referred to as Missionary District) is a duly
incorporated and established religious society. It owns and
operates the St. LukeÊs Hospital in Quezon City, the Brent

993

VOL. 14, AUGUST 31, 1965 993


Com. of Internal Revenue vs. Bishop of the Missionary

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District of the Philippine Islands, etc.

Hospital in Zamboanga City and the St. StephenÊs High


School in Manila.
On different dates in 1957, 1958 and 1959, the
Missionary District in the Philippines received from the
Missionary Society in the United States various shipments
of materials, supplies, equipment and other articles
intended for use in the construction and operation of the
new St. LukeÊs Hospital in Quezon City and the Brent
Hospital and St. StephenÊs High School The Missionary
District also received from a certain William Minnis of
Canada a stove for the use of the Brent Hospital.
On these shipments, the Commissioner of Internal
Revenue levied and collected the total amount of P118,847
as compensating tax.
The Bishop of the Missionary District filed claims for
refund of the amount he had paid on the ground that under
Republic Act No. 1916, the materials and articles received
by him were exempt from the payment of compensating
tax. As the two-year period for recovery of tax was about to
expire, the Bishop of the Missionary District filed a petition
for review in the Court of Tax Appeals, without awaiting
action on his claim for refund. Subsequently, he also filed
two supplemental petitions for review covering other
shipments received by him and on which he had paid
compensating taxes.
On August 21, 1959, the petitioner, the Commissioner of
Internal Revenue denied respondentÊs claim for refund on
the ground that St. LukeÊs Hospital was not a charitable
institution and, therefore, was not exempt under the law.
This is also the position he maintained in his answer to the
first supplemental petition for review in the Tax Court.
After trial, the Tax Court rendered a decision holding
the shipments exempt from taxation ordering the
petitioner to refund to the respondent the amount of
P118,-847. It denied a motion for reconsideration of its
decision, prompting petitioner to interpose this appeal.
Petitioner makes the following assignment of errors:

994

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994 SUPREME COURT REPORTS ANNOTATED


Com. of Internal Revenue vs. Bishop of the Missionary
District of the Philippine Islands, etc.

1. The shipments cannot be considered donations


because the Missionary District is merely a branch
of the Missionary Society. The two hold identical
interests.
2. The Tax CourtÊs holding that the real donors are the
people who contributed money to the Missionary
Society in America is based on the uncorroborated
testimony of Robert Meyer, Treasurer of the
Missionary District in the Philippines, who did not
have personal knowledge of the alleged
contribution. The alleged contributors were not
even identified.
3. The St. LukeÊs Hospital is not a charitable
institution and, therefore, is not exempt from
taxation because it admits pay patients. The
Secretary of Finance states in his Dept. Order No.
18 that hospitals admitting pay patients and
charity patients are not charitable institutions.

This order was issued pursuant to the power given him by


the last proviso of Republic Act No. 1916 which provides:

„SECTION 1. The provisions of existing laws to the contrary


notwithstanding, all donations in any form and all articles imported
into the Philippines, consigned to a duly incorporated or established
international civic organization, religious or charitable society or
institution for civic, religious or charitable purposes shall be exempt
from the payment of all taxes and duties upon proof satisfactory to
the Commissioner of Customs and/or Collector of Internal Revenue
that such donations in any form and articles so imported are
donations for its use or for free distribution and not for barter, sale
or hire: Provided, however, That in case such are subsequently
conveyed or transferred to other parties for a consideration, taxes
and duties shall be collected thereon at double the rate provided
under existing laws payable by the transferor: Provided, further,
That rules and regulations shall be promulgated by the Department
of Finance for the implementation of this Act.‰

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This Court has already held that the following requisites


must concur in order that a taxpayer may claim exemption
under the law: (1) the imported articles must have been
donated; (2) the donee must be a duly incorporated or
established international civic organization, religious or
charitable society, or institution for civic, religious or char-

995

VOL. 14, AUGUST 31, 1965 995


Com. of Internal Revenue vs. Bishop of the Missionary
District of the Philippine Islands, etc.

itable purposes; and (3) the articles so imported must have


been donated for the use of the organization, society or
institution or for free distribution and not for barter, sale or
hire. (Commissioner v. Church of Jesus Christ „New
Jerusalem,‰ G.R. No. L-15772, Oct. 31, 1961)
In this appeal, the petitioner contends that the
importations in question cannot be considered „donations‰
because the Missionary Society, which made the shipments,
and the Missionary District in the Philippines are not
different persons but rather are one and the same, the
latter being a mere branch of the former.
It should be enough to point out that by stipulation of
the parties, the respondent Bishop is admitted to be a
corporation sole duly registered with the Securities and
Exchange Commission and that the Missionary District is a
„duly incorporated and established religious society.‰ They
are, therefore, entities separate and distinct from the
Missionary Society whose address is at 281 Fourth South,
New York 10, N.Y., U.S.A. The fact that the Missionary
District, of which respondent is the Bishop, is a branch of
the Missionary Society is of no moment. For that matter, so
is the Roman Catholic Church in the Philippines·a branch
of the Universal Roman Catholic Apostolic Church, but it is
a branch only in religious matters, in matters of faith and
dogma. In other respects, it is independent. (Roman
Catholic Apostolic Administrator v. Land Registration
Commissioner, G.R. No. L-8451, December 20, 1957)
The Tax CourtÊs finding that the materials and supplies
were purchased by the Missionary Society with money

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obtained from contributions from other people who should


be considered the real donors is also assailed as being
based on the uncorroborated testimony of Robert Meyer,
Treasurer of the Missionary District, who, it is said, did not
have personal knowledge of the matter testified to by him.
This is not so. As respondent points out, the various deeds
of donation state in paragraph 3 that the „Missionary
Society is a non-profit organization and derives its support
from voluntary contributions.‰
PetitionerÊs other point is that St. LukeÊs Hospital is

996

996 SUPREME COURT REPORTS ANNOTATED


De la Victoria vs. Levy Hermanos, Inc.

not a charitable institution considering that it admits


paying patients. Indeed, it was on this ground that peti-z
tioner denied respondentÊs claim for refund. It is argued
that pursuant to the last proviso of Republic Act No. 1916,
the Secretary of Finance issued Department Order No. 18
on October 20, 1958, stating that·

„Hospitals that admit pay patients and charity patients x x x are


not charitable institutions for purposes of Republic Act No 1916.‰

Again, it should be enough to point out that the admission


of pay patients does not detract from the charitable
character of a hospital, if, as in the case of St. LukeÊs
Hospital, its funds are devoted exclusively to the
maintenance of the institution (Cf., e.g., Herrera v. Quezon
City Board of Assessment Appeals, G.R. No. 15270,
September 30, 1961). The Secretary of Finance cannot limit
or otherwise qualify the enjoyment of this exemption
granted under Republic Act No. 1916 in implementing the
law.
WHEREFORE, the decision appealed from is hereby
affirmed with costs.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Dizon,


Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.
Bautista Angelo, J., took no part.

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Decision affirmed.

···o0o···

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