Delos Santos v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: Petitioner Fritz Bryn Anthony M. Delos Santos, a resident of Makati City and owner of a condominium unit, pays association dues to Classica Tower Condominium Association, Inc. (Classica). On October 31, 2012, the Commissioner of Internal Revenue issued Revenue Memorandum Circular No. 65-2012 (the Circular), clarifying the taxability of association dues, membership fees, and other assessments collected by condominium corporations, imposing Value-Added Tax (VAT) on these collections. Procedural History: Classica informed its unit owners that it would no longer shoulder the VAT on association dues starting January 3, 2016. Consequently, Delos Santos received a billing statement including the additional VAT. He paid his dues and subsequently filed a Petition for Certiorari directly with the Supreme Court, assailing the Circular's validity. The Petition: Petitioner alleged legal standing due to direct injury from paying VAT on association dues. He argued the Circular violated substantive due process for lacking legal basis and constituted a breach of the President's duty to ensure faithful execution of laws. He also invoked the doctrine of capable of repetition yet evading review and the waiver of the hierarchy of courts. Petitioner contended that Section 105 of the National Internal Revenue Code (NIRC) does not apply to association dues, as these are contributions for maintenance costs and not income or services rendered for a fee. He argued the Circular modified Sections 105 and 108 of the NIRC and should be strictly construed against the taxing authority.
Issue(s)
Whether petitioner has legal standing to assail the validity of Revenue Memorandum Circular No. 65-2012. Whether Revenue Memorandum Circular No. 65-2012 is a valid subordinate legislation that correctly imposes Value-Added Tax on association dues, membership fees, and other assessments collected by condominium corporations. Whether the petition is moot and academic.
Ruling
The petition is dismissed for being moot and academic.
Ratio Decidendi
On the issue of legal standing: Petitioner Delos Santos has legal standing to challenge the Circular's constitutionality. He claims his payment of Value-Added Tax for his association dues to Classica resulted in his direct injury, satisfying the actual case or controversy requirement for judicial review due to the Circular's direct adverse monetary effect. On the validity of Revenue Memorandum Circular No. 65-2012: The Supreme Court declared that the Commissioner of Internal Revenue gravely abused its discretion in issuing the Circular. The Court reiterated its pronouncement in Bureau of Internal Revenue v. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, January 15, 2020) that a condominium corporation is not engaged in trade or business, and association dues are not intended for profit but for the maintenance of the condominium project. These collections are for the benefit of the condominium owners and do not arise from transactions involving sale, barter, exchange of goods, rendition of services, or lease of properties as contemplated by Sections 105 to 108 of the National Internal Revenue Code. The Circular unduly expanded and modified provisions of the NIRC, as the nature and purpose of a condominium corporation negates the application of VAT provisions on its transactions and activities. The Court found that the Circular did not merely interpret or clarify but changed altogether the long-standing rules of the Bureau of Internal Revenue. On the issue of mootness: The petition was rendered moot and academic by the promulgation of G.R. Nos. 215801 and 218924, which declared the Circular invalid. A case becomes moot and academic when it loses its justiciability due to a supervening event that takes away its practical use or value. While exceptions exist for grave constitutional violations, paramount public interest, formulation of controlling principles, or issues capable of repetition yet evading review, none of these exceptions were found to be present in this case. Therefore, the Court abstains from passing upon the other issues raised, as the main relief prayed for has already been resolved.
Main Doctrine
Revenue Memorandum Circular No. 65-2012, which imposed Value-Added Tax on association dues, membership fees, and other assessments collected by condominium corporations, was declared void for gravely abusing the Commissioner of Internal Revenue's authority, as it did not merely interpret or clarify but changed long-standing rules and unduly expanded/modified provisions of the National Internal Revenue Code. The petition was rendered moot and academic by a subsequent Supreme Court decision declaring the Circular invalid.