Roman Catholic Bishop of Nueva Segovia v. Collector of Internal Revenue
REITERATIONFacts
The Antecedents: The Roman Catholic Bishop of Nueva Segovia, a corporation sole organized for religious, charitable, and educational purposes, established and maintained churches, cemeteries, convents, schools, colleges, a seminary, and charitable institutions. It derived revenue from rents, dividends, and interests from real estate, shares of stock, and money loaned at interest. The plaintiff did not submit an income tax return for 1920, believing it was not subject to the Philippine Income Tax Laws. The Collector of Internal Revenue assessed P1,319.54 as income tax and penalties. Procedural History: The plaintiff paid the assessed amount under protest and filed an action to recover the sum, arguing the tax was illegally levied. The lower court dismissed the complaint, holding that the income in controversy was subject to the tax. The Petition: The plaintiff appealed the decision, contending that its income was exempt from taxation under the provisions of Act No. 2833.
Issue(s)
Whether the income derived by the Roman Catholic Bishop of Nueva Segovia from its properties, real or personal, is subject to income tax under Act No. 2833. Whether the proviso in section 11(a), paragraph VI of Act No. 2833 alters the exemption status of income derived from properties by corporations organized and operated exclusively for religious, charitable, or educational purposes.
Ruling
The Supreme Court ruled that the judgment of the lower court be reversed and another shall issue in favor of the plaintiff and against the defendant for the sum of P1,319.54, without interest and costs.
Ratio Decidendi
On whether the income derived by the Roman Catholic Bishop of Nueva Segovia from its properties, real or personal, is subject to income tax under Act No. 2833: The Court held that the income in controversy was not subject to income tax. It reiterated the principle established in Sagrada Orden de Predicadores vs. Trinidad that the destination of the income is the ultimate test of exemption. The Court found that the plaintiff is a corporation sole organized and operated exclusively for religious, charitable, and educational purposes, and no part of its net income inured to the benefit of any private stockholder or individual. The income was used exclusively for carrying on its religious, charitable, and educational work. On whether the proviso in section 11(a), paragraph VI of Act No. 2833 alters the exemption status of income derived from properties by corporations organized and operated exclusively for religious, charitable, or educational purposes: The Court determined that the proviso, "Provided, however, That the income of whatever kind and character from any of its properties, real or personal, except income expressly exempted by this law, shall be liable to the tax imposed under this chapter," did not alter the exemption status. The Court reasoned that the income in question was expressly exempted by the law, and no part of the net income inured to the benefit of any private stockholder or individual. To hold otherwise would render paragraph 6 of section 11(a) of the Income Tax Law meaningless. The proviso was interpreted as an excessive caution rather than a modification of the exemption.
Main Doctrine
The income of a corporation sole organized and operated exclusively for religious, charitable, and educational purposes, even if derived from properties, real or personal, is exempt from income tax under Act No. 2833, provided that no part of its net income inures to the benefit of any private stockholder or individual.