Henares v. St. Paul College of Makati G.R. No. 215383 (Resolution) March 8, 2017

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Jacinto-Henares v. St. Paul College of Makati

G.R. No. 215383 (Resolution)

March 8, 2017

 

Principle: Non-stock, non-profit educational institutions are constitutionally exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly and exclusively for educational purposes. Provided that; (1) The school must be non-stock and non-profit; and (2) The income is actually, directly and exclusively used for educational purposes. There are no other conditions and limitations.

 

Facts: Petitioner Kim S. Henares, acting in her capacity as then CIR, issued an RMO - Prescribing the Policies and Guidelines in the Issuance of Tax Exemption Ruling. RMO No. 20-2013 adds a prerequisite to the requirement under Department of Finance Order No. 137-87, and makes failure to file an annual information return a ground for a nonstock, nonprofit educational institution to "automatically lose its income tax-exempt status." Applicants must submit an application for tax exemption to the BIR subject to approval by CIR in the form of a Tax Exemption Ruling (TER) which is valid for a period of three years and subject to renewal."

 

Respondent St. Paul College of Makati SPCM), a non-stock, non-profit educational institution filed action to declare RMO as unconstitutional. SPCM alleged that "RMO No. 20-2013 imposes as a prerequisite to the enjoyment by non-stock, non-profit educational institutions of the privilege of tax exemption under Sec. 4(3) of Article XIV of the Constitution both a registration and approval requirement.

 

Issue: Whether or not the RMO No. 20-2013 is unconstitutional.

 

Ruling: Petition denied; issue has become moot and academic.  The present CIR Caesar R. Dulay issued RMO No. 44-2016; this Order is being issued to exclude nonstock, non-profit educational institutions from the coverage of RMO 20-2013.

 

Non-stock, non-profit educational institutions are constitutionally exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly and exclusively for educational purposes. This constitutional exemption gives the non-stock, non-profit educational institutions a distinct character.

 

And for the constitutional exemption to be enjoyed, jurisprudence and tax rulings affirm the doctrinal rule that there are only two requisites: (1) The school must be non-stock and non-profit; and (2) The income is actually, directly and exclusively used for educational purposes. There are no other conditions and limitations.

 

In this light, the constitutional conferral of tax exemption upon non-stock and non-profit educational institutions should not be implemented or interpreted in such a manner that will defeat or diminish the intent and language of the Constitution.

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