Henares v. St. Paul College of Makati
REITERATIONFacts
The Antecedents: Petitioner, Kim S. Jacinto-Henares, in her capacity as Commissioner of Internal Revenue (CIR), issued Revenue Memorandum Order (RMO) No. 20-2013, prescribing policies and guidelines for tax exemption rulings for qualified non-stock, non-profit corporations and associations under Section 30 of the National Internal Revenue Code (NIRC). Respondent, St. Paul College of Makati (SPCM), a non-stock, non-profit educational institution, filed a civil action questioning RMO No. 20-2013, alleging it imposed additional prerequisites for tax exemption, specifically requiring an application for a Tax Exemption Ruling (TER) subject to approval by the CIR, and making failure to file an annual information return a ground for automatic loss of tax-exempt status. Procedural History: The Regional Trial Court (RTC), Branch 143, Makati City, issued a temporary restraining order and subsequently a writ of preliminary injunction against the implementation of RMO No. 20-2013, finding that its non-compliance would cause irreparable injury. The RTC later granted SPCM's Motion for Judgment on the Pleadings, declaring RMO No. 20-2013 unconstitutional for diminishing the constitutional privilege of tax exemption. The CIR's motion for reconsideration was denied. The Petition: The CIR filed a petition for review with the Supreme Court, assailing the RTC's decision. Subsequently, on July 25, 2016, the current CIR issued RMO No. 44-2016, which excluded non-stock, non-profit educational institutions from the coverage of RMO No. 20-2013.
Issue(s)
Whether the trial court correctly concluded that RMO No. 20-2013 imposes a prerequisite before a non-stock, non-profit educational institution may avail of the tax exemption under Section 4(3), Article XIV of the Constitution. Whether the trial court correctly concluded that RMO No. 20-2013 adds to the requirement under Department of Finance Order No. 137-87.
Ruling
The Supreme Court denied the petition on the ground of mootness. It set aside the Decision and Joint Resolution of the Regional Trial Court, Branch 143, Makati City, which declared Revenue Memorandum Order No. 20-2013 unconstitutional. The writ of preliminary injunction was superseded by the Resolution.
Ratio Decidendi
On the Issue of RMO No. 20-2013 Imposing Additional Prerequisites: The Court found the petition to be moot and academic due to a supervening event. Specifically, on July 25, 2016, CIR Caesar R. Dulay issued RMO No. 44-2016, which explicitly excluded non-stock, non-profit educational institutions from the coverage of RMO No. 20-2013. This subsequent issuance clarified that the tax exemption of such institutions is directly conferred by the Constitution and reiterated in Section 30(H) of the NIRC, requiring only that the institution be non-stock and non-profit, and that its income be used exclusively for educational purposes. Therefore, any perceived additional prerequisites imposed by RMO No. 20-2013 on educational institutions became irrelevant with the issuance of RMO No. 44-2016. The Court took judicial notice of this supervening event, which rendered the resolution of the original issues of no practical value or use. On the Issue of RMO No. 20-2013 Adding to Department of Finance Order No. 137-87: Similar to the first issue, this contention is rendered moot by the issuance of RMO No. 44-2016. The subsequent RMO effectively removed non-stock, non-profit educational institutions from the ambit of RMO No. 20-2013. Consequently, any comparison or conflict between RMO No. 20-2013 and Department of Finance Order No. 137-87, as applied to educational institutions, is no longer a live controversy. The Court's focus shifted from adjudicating the constitutionality of RMO No. 20-2013 concerning educational institutions to recognizing that the issue had been superseded by administrative action. The principle of mootness dictates that courts generally decline jurisdiction over cases where the issues have become academic, as is the situation here.
Main Doctrine
A case becomes moot and academic when a supervening event renders the resolution of the issues of no practical value. In this instance, the issuance of a subsequent Revenue Memorandum Order (RMO No. 44-2016) excluding non-stock, non-profit educational institutions from the coverage of the assailed RMO No. 20-2013 rendered the petition moot.