Case Digest: La Sallian Educational Innovators Foundation v.

CIR
G.R. No. 202792 | February 27, 2019
Ponente: Justice Caguioa
FACTS:
La Sallian Educational Innovators Foundation, Inc. (LEIFI), a non-stock, non-profit
educational institution, filed a petition for a tax refund with the Bureau of Internal
Revenue (BIR), claiming it was exempt from paying the 12% value-added tax (VAT)
on its educational services. The foundation argued that its activities were
educational and charitable in nature, thus exempt from VAT under the National
Internal Revenue Code (NIRC).
The BIR, however, denied LEIFI’s claim for tax refund, asserting that LEIFI did not
meet the qualifications for VAT exemption under the law. LEIFI contested the
decision and filed a petition for review before the Court of Tax Appeals (CTA), but
the CTA upheld the BIR's ruling.
ISSUE:
Whether La Sallian Educational Innovators Foundation, Inc. is entitled to VAT
exemption under the National Internal Revenue Code (NIRC) as a non-stock, non-
profit educational institution.
RULING:
The Supreme Court ruled in favor of the Commissioner of Internal Revenue (CIR)
and affirmed the decision of the Court of Tax Appeals (CTA). The Court held that
while non-stock, non-profit educational institutions may generally be exempt from
paying VAT, they are still subject to constitutional and statutory limitations.
RATIONALE:
1. Constitutional Limitation: The Court emphasized that the VAT exemption
granted to educational institutions is subject to certain constitutional
limitations. Specifically, the exemption must not extend to non-profit
educational institutions that engage in activities not directly related to their
educational purposes. The Court observed that LEIFI, although a non-profit
institution, engaged in activities beyond traditional educational services,
which led to the denial of the VAT exemption.
2. VAT Exemption under the NIRC: The Court cited the provision of the NIRC,
which grants VAT exemptions to educational institutions "solely" for
educational services. LEIFI's activities, however, were found to include
commercial undertakings unrelated to education. As a result, it did not fully
meet the qualifications for VAT exemption under the law.
3. Non-Profit Status: The Court clarified that being a non-stock, non-profit
organization does not automatically grant a VAT exemption. The institution
 must prove that it is exclusively engaged in educational endeavors and that
its income is directly related to its educational purposes.
4. Commercial Activities: The Court highlighted that institutions engaged in
commercial activities outside the scope of their educational purpose are not
entitled to the same tax exemptions. LEIFI's operations, therefore, did not
qualify for the benefit of the VAT exemption.
CONCLUSION:
The Supreme Court upheld the CTA’s ruling and denied the claim for tax refund by
LEIFI. The case reinforced the principle that tax exemptions for educational
institutions are limited by constitutional and statutory requirements, and any
commercial activity conducted by the institution can disqualify it from VAT
exemption.

Case Digest
Case Name:
Secretary of Finance v. Lazatin, G.R. No. 210588, November 29, 2016
Facts:
The case arose when respondents, who were taxpayers, challenged the validity of
certain Revenue Regulations (RRs) issued by the Secretary of Finance, arguing that
these regulations exceeded the authority granted by law. The respondents claimed
that the RRs imposed taxes not legislatively authorized, violating the principle that
taxation is inherently legislative in nature.
The government contended that the Secretary of Finance had the authority to issue
the regulations under the Tax Code to implement its provisions effectively. The
issue of territoriality also arose concerning the application of the regulations to
transactions involving foreign elements.
Issue:
1. Whether the Revenue Regulations issued by the Secretary of Finance were
valid and within the scope of delegated legislative authority.
2. Whether the principle of territoriality was violated in the enforcement of the
regulations.
Ruling (Held):
The Supreme Court ruled in favor of the Secretary of Finance, upholding the validity
of the Revenue Regulations.
Reasoning:
 1. Delegated Legislative Authority: The Court reiterated that while taxation
is inherently legislative, Congress may delegate the power to promulgate
rules and regulations to administrative agencies like the Department of
Finance, provided these rules do not exceed the limits of the law they
implement. In this case, the RRs were consistent with the Tax Code's
provisions and intended to operationalize its mandates.
2. Principle of Territoriality: The Court found that the regulations adhered to
the territorial principle in taxation. They did not improperly extend the tax
authority beyond Philippine jurisdiction but merely sought to enforce
compliance for taxable transactions with connections to the country.
The Court underscored that the Secretary of Finance acted within the bounds of law,
and the regulations were a valid exercise of delegated legislative power.
Disposition:
The petition was granted, and the validity of the questioned Revenue Regulations
was affirmed.
Significance:
This case highlights the principle that taxation is legislative in nature, but Congress
may delegate the power to prescribe rules and regulations to administrative
agencies, provided these are within the bounds of the enabling law. It also
reiterates the territorial limitations of taxation and the government's authority to
regulate taxable activities with connections to Philippine jurisdiction.

Case Digest
Case Name:
Tinio v. Duterte, G.R. Nos. 236118 & 236295, January 24, 2023
Facts:
The consolidated cases challenge the constitutionality of Republic Act No. 10963,
known as the "Tax Reform for Acceleration and Inclusion" (TRAIN) Act, which
amended the National Internal Revenue Code of 1997. The TRAIN Act was enacted
to fund the government's "Build, Build, Build" infrastructure program and was
certified as urgent by then-President Rodrigo Duterte.
In G.R. No. 236118, petitioners, who were legislators and principal authors of bills
that were substituted by House Bill No. 5636, claimed that the TRAIN Act was
passed without a proper quorum in the House of Representatives during the
ratification of the Bicameral Conference Committee (BCC) Report on December 13,
2017, rendering it unconstitutional.
In G.R. No. 236295, petitioners representing consumers adversely affected by the
excise taxes imposed by the TRAIN Act contended that these taxes were regressive
and disproportionately burdened low-income families, violating their rights to due
process and equal protection under the law.
Issues:
1. Whether the TRAIN Act was validly enacted into law, considering the alleged
lack of quorum during its ratification in the House of Representatives.
2. Whether the excise taxes imposed by the TRAIN Act violate the due process
and equal protection clauses of the Constitution.
Ruling (Held):
The Supreme Court upheld the constitutionality of the TRAIN Act, ruling that it was
validly enacted and did not violate the due process and equal protection clauses.
Reasoning:
1. Validity of Enactment: The Court found that the House Journal indicated a
quorum was present during the session on December 13, 2017, when the
BCC Report was ratified. The Court emphasized the presumption of regularity
in legislative proceedings and the binding nature of official journals, noting
that the petitioners failed to provide sufficient evidence to overcome this
presumption.
2. Due Process and Equal Protection: The Court held that the excise taxes
imposed by the TRAIN Act were within the government's taxing power and
served legitimate state interests, such as funding infrastructure projects and
social services. The Court concluded that the taxes were not confiscatory or
discriminatory, and that the law included measures to mitigate the impact on
low-income families, thereby adhering to the principles of due process and
equal protection.
Disposition:
The petitions were dismissed, and the constitutionality of the TRAIN Act was
affirmed.
Significance:
This case underscores the judiciary's deference to the internal procedures of the
legislative branch, particularly concerning the determination of a quorum. It also
reaffirms the principle that taxation measures, when serving legitimate
governmental purposes and including safeguards for vulnerable sectors, do not
violate constitutional rights to due process and equal protection.

1. University of the Philippines (UP) v. City Treasurer of Quezon City

Citation: G.R. No. 214044, June 19, 2019
Facts: The University of the Philippines (UP), a government instrumentality, owned
a parcel of land in Quezon City. In 2006, UP leased a portion of this land to Ayala
Land, Inc. (ALI) for the development of the UP-Ayala Technohub. Subsequently, the
City Treasurer of Quezon City issued a Statement of Delinquency and a Final Notice
of Delinquency, demanding that UP pay real property taxes (RPT) on the leased
property. UP contested the assessment, asserting its tax exemption under Republic
Act No. 9500, the University of the Philippines Charter of 2008.
Issue: Is UP liable for real property taxes on the land leased to a private entity?
Ruling: The Supreme Court held that UP is exempt from paying real property taxes
on the land it owns, even if leased to a private entity, as long as the property and
the revenues derived from it are used for educational purposes or in support
thereof. However, the improvements introduced by the lessee (ALI) on the leased
land are not owned by UP during the lease term and are thus subject to taxation.
Consequently, ALI is liable for the real property taxes on these improvements.
Significance: This case clarifies that government instrumentalities like UP retain
their tax exemptions on properties they own, even when leased to private entities,
provided the properties and the income generated are utilized for educational or
related purposes. Nonetheless, private entities leasing such properties are
responsible for taxes on any improvements they make.

2. Unimasters Conglomeration Incorporated v. Tacloban City Government

Citation: G.R. No. 214195, March 23, 2022
Facts: Leyte Park Hotel Inc. (LPHI), a property in Tacloban City, was co-owned by
the Assets Privatization Trust (APT), the Province of Leyte, and the Philippine
Tourism Authority (PTA). In 1994, APT, representing the co-owners, leased LPHI to
Unimasters Conglomeration Incorporated (UCI) for 12 years. The lease agreement
stipulated that the lessor (APT) was responsible for real property taxes, with any
payments made by the lessee (UCI) credited against rental dues. UCI initially
complied but later ceased payments, leading to disputes over tax liabilities.
Issue: Who is liable for the real property taxes on government-owned properties
leased to private entities?
Ruling: The Supreme Court affirmed the Court of Tax Appeals' decision, holding
that UCI, as the lessee in possession and beneficial user of the government-owned
property, is liable for the real property taxes. The Court emphasized that when a
government-owned property is leased to a private entity, the tax exemption of the
government does not extend to the lessee. Thus, the private lessee is responsible
for the payment of real property taxes during the lease term.
Significance: This ruling underscores that private entities leasing government-
owned properties cannot invoke the tax exemptions granted to government
instrumentalities. They are liable for real property taxes on the leased properties
during the period of beneficial use.
Case Digest

Case Name:
Film Development Council of the Philippines (FDCP) v. Colon Heritage Realty
Corporation
Citation: G.R. No. 203754, June 16, 2015

Facts:
The Film Development Council of the Philippines (FDCP), a government
instrumentality, leased property owned by Colon Heritage Realty Corporation
(Colon). The leased property was used as a cinematheque to promote Filipino
culture and the arts, particularly the Philippine film industry. Colon sought to evict
the FDCP over unpaid rental dues and demanded payment of real property taxes
(RPT).
FDCP claimed exemption from RPT based on Section 133(o) of the Local
Government Code (LGC), asserting that it was a government instrumentality
performing public functions, and thus its properties, whether real or personal, were
exempt from such taxation.
Colon countered that while FDCP might be tax-exempt, the benefit did not extend to
private property leased by the government, which remained taxable unless
specifically exempted by law.

Issue:
Does the FDCP's status as a government instrumentality exempt it from paying real
property taxes for a property leased from a private entity?

Ruling (Held):
The Supreme Court ruled in favor of Colon Heritage Realty Corporation, holding that
the FDCP was not exempt from paying real property taxes on the leased property.

Reasoning:
1. Plenary Legislative Power:
The Court emphasized that under the Constitution, taxation is primarily a
legislative power, and exemptions from taxation must be expressly granted
by law. Section 133(o) of the LGC exempts properties of the Republic of the
Philippines and its instrumentalities from taxation. However, this exemption
applies only to properties owned by the government, not to those leased
from private entities.
 2. Nature of Lease Agreements:
The property subject to the lease remained privately owned by Colon. The tax
exemption of the FDCP did not extend to the private property it leased. The
government’s use of the property did not alter its ownership or classification
for tax purposes.
3. Strict Interpretation of Tax Exemptions:
The Court underscored that tax exemptions are strictly construed against the
taxpayer claiming the exemption. As such, the private lessor, Colon, was
entitled to demand RPT payments under applicable laws.

Disposition:
The petition filed by the FDCP was denied, and it was held liable for the payment of
real property taxes on the leased property.

Significance:
This case affirms that the government’s tax exemptions are limited to properties it
owns or those explicitly exempted by law. The ruling underscores the principle that
taxation, being a legislative function, is governed by laws that must be interpreted
strictly against claims of exemption. It also highlights the delineation between
government instrumentalities and private property owners in tax matters.

Case Digests

1. Commissioner of Internal Revenue v. Standard Insurance Co., Inc.

Citation: G.R. No. 219340, April 28, 2021
Facts: Standard Insurance Co., Inc., a non-life insurance company, received a
Preliminary Assessment Notice (PAN) from the Bureau of Internal Revenue (BIR) in
2014, citing a deficiency in documentary stamp taxes (DST) for the taxable year
2011 amounting to approximately ₱377 million. After contesting the PAN, the
company received a Final Decision on Disputed Assessment (FDDA) affirming the
tax deficiency. In response, Standard Insurance filed a petition for declaratory relief
with the Regional Trial Court (RTC) of Makati City, challenging the constitutionality
of Sections 108 and 184 of the National Internal Revenue Code (NIRC) as they
pertain to non-life insurance companies. The RTC issued a temporary restraining
order (TRO) and subsequently a writ of preliminary injunction (WPI) against the BIR,
preventing the enforcement of the disputed tax provisions.
Issue: Whether the RTC had jurisdiction to entertain a petition for declaratory relief
challenging tax assessments and to issue an injunction against the collection of
taxes.
Ruling: The Supreme Court ruled that the RTC lacked jurisdiction to entertain the
petition for declaratory relief in tax assessment cases. It emphasized that under
Section 218 of the NIRC, no court has the authority to grant an injunction to restrain
the collection of any national internal revenue tax. The Court held that the proper
remedy for disputing tax assessments is through the procedures outlined in the
NIRC, not through declaratory relief.
Significance: This case underscores the principle that taxes are the lifeblood of the
government and should be collected promptly without hindrance. It reaffirms that
injunctions to restrain tax collection are generally prohibited, and taxpayers must
utilize the remedies provided within the tax code to contest assessments.

3. China Banking Corporation v. Commissioner of Internal Revenue

4.
 5.

Citation: G.R. No. 172509, February 4, 2015

Facts: China Banking Corporation (CBC) engaged in SWAP transactions involving
the sale of foreign exchange to the Central Bank of the Philippines from 1982 to
1986. CBC did not file tax returns or pay the documentary stamp tax (DST) on these
transactions during those years. In 1989, the Bureau of Internal Revenue (BIR)
assessed CBC for deficiency DST amounting to over ₱11 million. CBC protested the
assessment, but the BIR reiterated its demand in 2001. CBC then filed a petition
with the Court of Tax Appeals (CTA), which ruled in favor of the BIR.
Issue: Whether the BIR's right to collect the assessed DST was barred by
prescription.
Ruling: The Supreme Court held that the BIR's right to collect the assessed DST
had prescribed. Under the National Internal Revenue Code of 1977, the BIR had
three years from the date of assessment to collect the tax by distraint, levy, or
court proceeding. In this case, the BIR issued the assessment in 1989 but did not
initiate any collection action within the prescribed three-year period. Therefore,
the government's right to collect the tax was barred by prescription.
Significance: This case highlights the importance of the statute of
limitations in tax collection. It emphasizes that the government's failure to
act within the prescribed period results in the forfeiture of its right to
collect assessed taxes, underscoring the necessity for timely enforcement
actions by tax authorities.
Facts:
Background of the Case
The case involves Toledo Power Company (TPC), a general partnership engaged in
power generation and the sale of electricity to entities such as the National Power
Corporation (NPC), Cebu Electric Cooperative III (CEBECO), Atlas Consolidated
Mining and Development Corporation (ACMDC), and Atlas Fertilizer Corporation
(AFC).
Administrative Claim for Refund
On December 22, 2003, TPC filed an administrative claim with the Bureau of
Internal Revenue (BIR) for a refund or credit of its unutilized input Value Added Tax
(VAT) for the taxable year 2002, amounting to P14,254,013.27, under Republic Act
No. 9136 (EPIRA) and the National Internal Revenue Code of 1997 (NIRC).
Judicial Claim Due to Inaction
Due to the inaction of the Commissioner of Internal Revenue (CIR), TPC filed a
Petition for Review with the Court of Tax Appeals (CTA) on April 22, 2004, docketed
as CTA Case No. 6961.
CTA Division’s Ruling
The CTA Division partially granted TPC’s claim, allowing a refund of P7,598,279.29
attributable to TPC’s zero-rated sales to NPC. However, the CTA Division denied the
refund for sales to CEBECO, ACMDC, and AFC, as TPC failed to prove it was a
generation company under EPIRA by not submitting a Certificate of Compliance
(COC) from the Energy Regulatory Commission (ERC).
CTA En Banc’s Decision
Both parties appealed to the CTA En Banc, which affirmed the CTA Division’s
decision, dismissing the petitions. The En Banc ruled that TPC’s sales to CEBECO,
ACMDC, and AFC were not zero-rated because TPC failed to present a COC during
the trial.
Issue:
 (Unlock)
Ruling:
 (Unlock)
Ratio:
1. Burden of Proof in Tax Refund Claims:
 The burden of proving entitlement to a tax refund rests on the
taxpayer. TPC failed to prove it was a generation company under EPIRA
for its sales to CEBECO, ACMDC, and AFC due to the absence of a COC.
2. Compliance with Administrative Remedies:
  The 120+30-day rule under Section 112 of the NIRC must be strictly
observed. TPC complied with this rule, and its administrative claim was
not pro forma.
3. Validity of Zero-Rated Sales:
 To qualify for VAT zero-rating under EPIRA, a taxpayer must prove it is
a generation company authorized by the ERC. TPC’s failure to present
a COC during the taxable year 2002 rendered its sales to CEBECO,
ACMDC, and AFC invalid for zero-rating.
4. No Assessment in Refund Cases:
 The CIR cannot use a refund claim under Section 112 of the NIRC to
assess a taxpayer for deficiency VAT, especially when the prescriptive
period to assess has expired.