Case Digest (G.R. No. 196596)
Facts:
In November 2004, the Bureau of Internal Revenue (BIR) issued Letter of Authority No. 2794 to examine the books of De La Salle University, Inc. (DLSU), a non-stock, non-profit educational institution, for the Fiscal Year Ending 2003 and “Unverified Prior Years.” On August 18, 2004, the BIR assessed DLSU for deficiency income tax on rental earnings from campus canteens and bookstores, value-added tax (VAT) on business income, and documentary stamp tax (DST) on loans and lease contracts, amounting to ₱17,303,001.12 for taxable years 2001 to 2003. DLSU protested; the Commissioner of Internal Revenue (CIR) failed to act, prompting DLSU to file CTA Division Case No. 7303 on August 3, 2005. On January 5, 2010, the Court of Tax Appeals (CTA) Special First Division partially granted DLSU’s petition, canceling the DST assessment on loan transactions but upholding income tax, VAT, and DST on leases (₱18,421,363.53 with interest and surcharge). Both parties moved for reconsideration. AfterCase Digest (G.R. No. 196596)
Facts:
- Case background
- Consolidated petitions: G.R. Nos. 196596, 198841, and 198941 all originate from CTA Case No. 7303.
- Parties: Commissioner of Internal Revenue (petitioner in G.R. 196596 and 198941) vs. De La Salle University, Inc. (respondent in 196596 and 198941; petitioner in 198841).
- BIR assessment and protest
- In 2004, BIR issued LOA No. 2794 covering “Fiscal Year Ending 2003 and Unverified Prior Years.”
- Preliminary Assessment Notice of May 19, 2004 and Formal Letter of Demand (August 18, 2004) assessed DLSU for income tax on on-campus rentals, VAT on business income, and DST on loans/leases, totaling P17,303,001.12 for 2001–2003.
- DLSU protested; Commissioner failed to act; DLSU filed petition for review with CTA Division on August 3, 2005.
- CTA Division rulings
- January 5, 2010 decision: Cancels DST on loans (P1,168,774), upholds P18,421,363.53 deficiency for income tax, VAT, DST on leases, plus interest and surcharge.
- DLSU moved for reconsideration, offering supplemental evidence; CTA Division (April 6, 2010) denied Commissioner’s motion, held DLSU’s in abeyance.
- July 29, 2010 amended decision: Grants DLSU’s motion in part; reduces deficiency to P5,506,456.71.
- CTA En Banc decisions
- En Banc Case No. 622 (Commissioner’s appeal): Dismisses petition; affirms that
- Portion of rental income used to pay loan for Sports Complex exempt.
- DST on loan/mortgage paid via DST-imprinting machine.
- Supplemental evidence admissible (CTA proceedings not strictly bound by technical evidence rules).
- En Banc Case No. 671 (DLSU’s appeal): Partially grants DLSU; rules that
- LOA covering unverified prior years is prohibited under RMO No. 43-90—assessments for 2001–2002 void, 2003 valid.
- Ateneo precedent inapplicable.
- Further reduces deficiency to P2,554,825.47.
Issues:
- Constitutional tax exemption
- Are DLSU’s revenues and assets actually, directly, and exclusively used for educational purposes exempt from taxes/duties under the 1987 Constitution, Art XIV, Sec 4(3)?
- Validity of LOA
- Is LOA No. 2794 void in its entirety for covering more than one taxable period without specifying each, invalidating assessments?
- Admissibility of supplemental evidence
- Did the CTA correctly admit and weigh DLSU’s supplemental documentary evidence offered during motion for reconsideration?
- Appreciation of evidence
- Are the CTA’s factual findings—that DLSU used a portion of its rental income for educational purposes and paid DST via a DST-imprinting machine—correct and binding?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)