A.C. No. 5505 - Ramos vs. Velasco-Jacoba

The University of Santo Tomas, a private non-stock corporation exclusively engaged in educational purposes, was assessed an income tax on its net income for the fiscal years 1946 to 1950 by the Collector of Internal Revenue.
The basis for the tax assessment was rooted in the provisions of Executive Order No. 401-A, issued by the President on January 5, 1951, particularly section 20 of the Order.

On July 26, 1950, the Collector of Internal Revenue notified the petitioner that its income, as derived from its educational operations, was subject to income tax.
The initially assessed amount was P718,514.27, which included a 25% surcharge under section 27(e) of the National Internal Revenue Code as amended by Republic Act No. 82; this amount was subsequently reduced to P574,811.41 after the surcharge was eliminated.
By an agreement arranged with the Secretary of Finance, the University was permitted to pay the tax under protest in installments—making an initial payment of P68,514.27 by August 31, 1950, and the balance in monthly installments of P15,000—secured by executing a real estate mortgage.

On July 26, 1951, the petitioner submitted a memorandum to the Secretary of Finance arguing for a different interpretation of section 27(e) related to its tax liability.
Following the memorandum, on February 29, 1952, the petitioner received a letter from the Secretary of Finance granting it 30 days to file a petition for review with the Board of Tax Appeals.
In compliance, the University filed a petition for review on March 31, 1952, which was docketed as B.T.A. case No. 35.

Concurrently with the petition for review, the petitioner filed a motion questioning the Board’s jurisdiction to hear the case, arguing that Executive Order No. 401-A was of doubtful validity because it purportedly deprived the courts of first instance of their jurisdiction to hear cases involving the recovery of taxes.
On April 18, 1952, the Board of Tax Appeals denied the motion and proceeded to assume jurisdiction, leading to the filing of the petition for certiorari and prohibition to enjoin the Board.

Whether Executive Order No. 401-A, issued under the powers conferred by Republic Act No. 422, is unconstitutional by virtue of depriving the courts of first instance jurisdiction in those cases involving the recovery of taxes.