Case Digest (G.R. No. 11524)
Facts:
The Government of the Philippine Islands v. El Monte de Piedad y Caja de Ahorros de Manila, G.R. No. 11524. October 12, 1916, the Supreme Court En Banc, Moreland, J., writing for the Court.The plaintiff-appellee was the Government of the Philippine Islands; the defendant-appellant was El Monte de Piedad y Caja de Ahorros de Manila, a charitable-sounding savings institution created by royal order of the King of Spain on July 8, 1880, whose statutes and by‑laws were subject to the will of the Catholic Archbishop of Manila. The action below, tried on a stipulation of facts with some additional oral and documentary evidence, proceeded from the Court of First Instance of the City of Manila, whose judgment the defendant appealed to the Supreme Court.
The Government sued to recover internal-revenue taxes assessed against the defendant for the period August 1, 1904 to June 30, 1914: (a) a monthly tax measured by deposits (one‑eighteenth of one percent per month) and (b) a monthly tax on the capital employed in banking (one‑twenty‑fourth of one percent per month), together with statutory penalties for refusal to pay. The trial court rendered judgment for the Government for P138,790.12 with interest from March 4, 1915. The principal factual points admitted were that defendant operated a Manila place of business where deposits and credits were opened; depositors received up to 4% interest under its bylaws; the institution retained and claimed the surplus or accrued profits (P549,912.52); and it conducted a banking business.
The Government's assessment rested on treating the defendant as a bank within the meaning of section 110 and taxable under section 111 of Act No. 1189 (Internal Revenue Law). The defendant claimed exemption under paragraph 4 of section 111 (the exception for “provident institutions, savings banks, savings funds, or savings institutions” that have no capital stock and invest deposits “for the sole benefit of the parties making such deposits and without profit or compensation to the ...(Pro-only)
Issues:
- Does the alleged long-standing failure of successive Collectors of Internal Revenue to assess the defendant constitute a binding practical construction of the statute that precludes taxation?
- Is the defendant within the savings‑bank exemption in paragraph 4 of section 111 of Act No. 1189, i.e., are its deposits “to be loaned or invested for the sole benefit of the parties making such deposits and without profit or compensation to the association or company”?
- Does the defendant’s accumulated surplus or “accrued profits” of P549,912.52 constitute “capital employed” in the business of banking and therefore subject to the c...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)