Case Digest (G.R. No. 17221)
Case Digest (G.R. No. 17221)
Facts:
Sagrada Orden de Predicadores de la Provincia del Santisimo Rosario de Filipinas v. Wenceslao Trinidad, G.R. No. 17221, November 28, 1921, the Supreme Court (Araullo, C.J., Street, Avancena, Villamor, and Romitaldez, JJ., concurring), Johnson, J., writing for the Court.On October 10, 1919, Wenceslao Trinidad, Collector of Internal Revenue, demanded from plaintiff Sagrada Orden de Predicadores de la Provincia del Santisimo Rosario de Filipinas the sum of P1,541.31 as income tax for the period March 31 to December 31, 1913; the plaintiff paid that amount under protest. The plaintiff thereafter commenced an action in the Court of First Instance of the City of Manila on April 6, 1920, to recover the payment with legal interest and costs. The parties stipulated the material facts.
The stipulation described the plaintiff as a corporation sole incorporated under sections 154–164 of Act No. 1459, organized and operated for religious, charitable, scientific and educational purposes, with no part of its net income inuring to any private stockholder or member even upon dissolution. Exhibits showed receipts of P90,092.70 in rents; P96,465.54 in dividends; P54,239.19 in interest; and P68,144.45 in profits from sales and other receipts. After allowable expenditures the defendant computed net receipts of P154,130.68 and asserted a 1% tax liability under the Federal Income Tax Law of 1913 (yielding the P1,541.31 paid under protest).
The defendant contended that paragraph G(a) of the Federal Income Tax Law of 1913 (and the similar exemption in Act of Congress of February 24, 1919, Sec. 231) exempted only corporations "organized and operated exclusively" for specified purposes, and argued that the plaintiff’s investments in commercial and industrial enterprises meant it was not "operated exclusively" for religious, charitable, scientific or educational purposes. The appellant relied on the three-part test (organized and operated for specified purposes; operated exclusively for those purposes; no part of net income inuring to private individuals) articulated in authorities cited in his brief and an administrative ruling of the U.S. Commissioner of Internal Revenue (May 15, 1919).
The Court of First Instance granted the plaintiff’s prayer and ordered refund/recovery. The Collector appealed to this Court; the Supreme Court reviewed the stipulated facts and the legal question whether the plaintiff was exempt from the income tax under the cited statutes.
Issues:
- Is the plaintiff exempt from income taxation under paragraph G(a) of the Federal Income Tax Law of 1913 and Section 231 of the Act of Congress of February 24, 1919?
- Does the plaintiff’s investment of surplus funds in secular commercial and industrial enterprises defeat the requirement that it be "organized and operated exclusively" for religious, charitable, scientific, or educational purposes so as to deny the exemption?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)