G.R. No. 202792 - La Sallian Educational Innovators Foundation, Inc. vs. Commissioner of Internal Revenue

Petitioner: La Sallian Educational Innovators Foundation, Inc. (De La Salle University–College of St. Benilde), a non-stock, non-profit domestic corporation operating an educational institution.
Respondent: Commissioner of Internal Revenue (CIR), vested with authority under Section 204(B) of the NIRC to decide, cancel, and abate tax liabilities.

On June 17, 2005, the CIR issued Assessment Notice No. 33-FY 05-31-02 for FY ending May 31, 2002 for deficiency income tax amounting to P122,414,521.70 (inclusive of interest and increments), premised on adjustments such as disallowed interest expense (Sec. 34[B]), provisions for retirement and doubtful accounts, items allegedly not subjected to withholding tax, “income not subjected to tax” (depository accounts), and “unsupported invoices and vouchers.”
On the same date, a separate assessment for deficiency VAT amounting to P2,752,228.54 (inclusive of interest and surcharge) was issued, based on output tax on auxiliary revenues (ICC revenue, auxiliary services, concessionaires, printing/photocopying, bookstore, parking, boarding house, locker rentals) less disallowed/unsupported input taxes; a separate demand for a P25,000 compromise penalty for VAT was also sent.
BIR “Details of Discrepancies” asserted loss of petitioner’s tax-exempt status under Section 30 of the NIRC, alleging: profit orientation due to tuition-derived “profits” of P643M; large “Cash in Bank” of P775M supposedly invested and not sufficiently donated to charitable purposes; high expenditures for operations and improvements “to increase profit”; and supposed implied revocation of an earlier BIR exemption ruling issued in 1988 after RA 8424 (CTRP).

Petitioner filed a Protest/Request for Reconsideration on July 20, 2005; after submission of documents and BIR inaction, it filed a Petition for Review with the CTA Division by registered mail on April 17, 2006 (last day to appeal).
Docket and legal fees totaling P861,178.34 were paid on April 26, 2006, nine days after filing, upon the CTA’s computation of the amount due.
Petitioner executed an Agreement Form with the BIR on April 21, 2006 and paid P601,487.70 on May 9, 2006 relative to the VAT liability.

Constitutional shield: Article XIV, Section 4(3) of the 1987 Constitution exempts “all revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes” from taxes and duties; mirrored by Section 30(H) of the NIRC.
Non-profit educational character: Articles of Incorporation show primary purpose to operate an educational institution; no capital divided into shares; no dividends; no inurement; trustees uncompensated; BIR Ruling No. 176-88 (Aug. 23, 1988) recognized its status (never revoked).
Rebuttal of “profit” allegations: The cited P643,279,148 represents gross receipts for SY 2002, not profit; total expenses were P582,903,965, leaving net receipts of P60,375,183 (9.38% of operating receipts), corroborated by audited financial statements; alleged P775M “cash” includes P575.7M Funds Held in Trust for capital improvements, scholarships, faculty development, retirement, and other restricted uses, with the remainder in short-term liquid instruments; no income inured to any member, trustee, or officer.

CTA Division (Decision dated July 16, 2010; Resolution dated Nov. 18, 2010): Granted the petition; cancelled the deficiency income tax assessment (P122,414,521.70); held petitioner maintains tax-exempt status; also found the Final Assessment Notice invalid for failure to state factual and legal bases; denied CIR’s MR.
CTA En Banc (Decision dated April 19, 2012; Resolution dated July 17, 2012): Granted CIR’s petition; reversed CTA Division; dismissed petitioner’s appeal on jurisdictional grounds due to late payment of docket and legal fees (mandatory and jurisdictional); alternatively opined that petitioner’s tax-exempt status was impliedly revoked due to excessive profit-earning activities; denied petitioner’s MR.

Petitioner elevated the case via Petition for Review on Certiorari under Rule 16 of the Revised Rules of the CTA in relation to Rule 45, challenging both the CTA En Banc’s procedural dismissal and its adverse substantive pronouncements on tax-exempt status.

Whether petitioner, a non-stock, non-profit educational institution, lost its constitutional tax-exempt status on account of alleged profit-oriented activities and financial indicators, thereby becoming liable for deficiency income tax for FY ending May 31, 2002.

Whether the CTA En Banc erred in dismissing the petition for lack of jurisdiction due to the nine-day delay in payment of docket and legal fees, despite timely filing of the petition by registered mail and subsequent prompt full payment upon assessment by the CTA.