Case Digest (G.R. No. 196596)
Facts:
Commissioner of Internal Revenue v. De La Salle University, Inc., G.R. Nos. 196596, 198841, 198941, November 09, 2016, Supreme Court Second Division, Brion, J., writing for the Court.
The petitioner is the Commissioner of Internal Revenue (CIR); the respondent is De La Salle University, Inc. (DLSU). The petitions are consolidated Rule 45 petitions for review on certiorari challenging decisions of the Court of Tax Appeals (CTA) in CTA En Banc Cases Nos. 622 and 671, which in turn arose from CTA Special First Division Case No. 7303.
In 2004 the BIR issued LOA No. 2794 to DLSU authorizing examination of its books for “Fiscal Year Ending 2003 and Unverified Prior Years.” The BIR issued a Preliminary Assessment Notice (May 19, 2004) and, on August 18, 2004, a Formal Letter of Demand assessing deficiency income tax (on rental earnings from on-campus restaurants/canteens and bookstores), VAT on business income, and documentary stamp tax (DST) on loans and lease contracts for taxable years 2001–2003, demanding P17,303,001.12 inclusive of penalties.
DLSU protested; the Commissioner failed to act on the protest, and DLSU filed a petition for review with the CTA Special First Division on August 3, 2005. On January 5, 2010 the CTA Division partially granted DLSU’s petition: it cancelled the DST assessment on the loan transactions but ordered payment of income tax, VAT and DST on lease contracts plus penalties (totaling about P18.42M). Both parties moved for reconsideration; the Division denied the Commissioner’s motion and held DLSU’s motion in abeyance.
The Commissioner appealed to the CTA En Banc (En Banc Case No. 622). DLSU, after the Division’s decision, formally offered supplemental documentary evidence (filed May 18, 2010). On July 29, 2010 the CTA Division, in view of the supplemental evidence, amended its decision and materially reduced DLSU’s assessed liabilities. The Commissioner challenged the admission of the supplemental evidence before the CTA En Banc.
DLSU separately filed CTA En Banc Case No. 671 arguing (1) the LOA was invalid for covering “unverified prior years,” so the whole assessment should be void; (2) its evidence paralleled that of Ateneo de Manila University (where the CTA cancelled assessments), and thus should be similarly treated; and (3) the Division erred in finding part of its rental income not used actually, directly and exclusively for educational purposes.
The CTA En Banc in Case No. 622 dismissed the Commissioner’s petition and sustained the Division’s findings: it admitted DLSU’s supplemental evidence, held that portions of rental income were proved to have been actually, directly and exclusively used for educational purposes (hence tax-exempt), and found DLSU had paid DST via bank imprinting consistent with Section 200(D) of the Tax Code and RR No. 15‑2001. In Case No. 671 the CTA En Banc partially granted DLSU, further reducing liabilities a...(Pro-only)
Issues:
- Are the portions of DLSU’s income and revenues that were proved to have been used actually, directly and exclusively for educational purposes exempt from duties and taxes under Article XIV, Section 4(3) of the 1987 Constitution?
- Is the Letter of Authority (LOA) covering “Fiscal Year Ending 2003 and Unverified Prior Years” entirely void such that all assessments based on it must be cancelled?
- Was the CTA correct in admitting DLSU’s supplemental documentary evidence offered after trial (upon motion for reconsideration)?
- May the Supreme Court disturb the CTA’s factual appreciation that only a portion of DLSU’s rental income was...(Pro-only)
Ruling:
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Ratio:
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Doctrine:
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