Abra Valley College v.
Aquino Relevant Issue/s: W/N the lot and building in question are used
June 15, 1988 | Sec. 28. Taxation (Exemptions) | Nikki Paglicawan
Recit-ready Summary:
Abra Valley College, an educational corporation and institution of
higher learning duly incorporated with the SEC, filed a complaint to annul
the Notice of Seizure and the Notice of Sale of its lot and building in
Bangued, Abra, for non-payment of real estate taxes and penalties
amounting to P5,140.31. These were issued for the satisfaction of the taxes,
putting up the lot and building for public auction. Dr. Paterno Millare the
Mayor gave the highest bid of P6000. The trial court found out that:
(a) that the school is recognized by the government and is offering
Primary, High School and College Courses, and has a school
population of more than one thousand students all in all;
(b) that it is located right in the heart of the town of Bangued, a few
meters from the plaza and about 120 meters from the Court of First
Instance building;
(c) that the elementary pupils are housed in a two storey building
across the street;
(d) that the high school and college students are housed in the main
building;
(e) that the Director with his family is in the second floor of the main
building; and
(f) that the annual gross income of the school reaches more than one
hundred thousand pesos.
The trial court disagreed for the grant of exemption of taxes because
of the residential use of the director of the second floor, thus this petition.
Petitioner contends that the primary use of the lot and building for
educational purposes and not the incidental use thereof determines
exemption from property taxes under Art 6, Sec 25 of the 1935 Constitution
and Commonwealth Act No. 470 otherwise known as the Assessment Law
which both state that all lands buildings and improvements used exclusively
for religious, charitable, scientific or educational purposes are exempted
from real property tax. The respondents added that other than the fact that
the second floor is being used for residential purposes, the ground floor of
the building is being used for commercial purposes, rented out to Northern
Marketing Corporation.
exclusively for educational purposes, and exempts petitioner from tax?
Holding: No. While the court allows a more liberal and non-restrictive
interpretation of the phrase “exclusively used for educational purposes” as
provided for in the Article VI, Section 22, Paragraph 3 of the 1935
Philippine Constitution, reasonable emphasis has always been made that
exemption extends to facilities which are incidental to and reasonably
necessary for the accomplishment of the main purpose.
In YMCA of Manila vs. Collector of lnternal Revenue, this Court
ruled that while it may be true that the YMCA keeps a lodging and a
boarding house and maintains a restaurant for its members, still these do not
constitute business in the ordinary acceptance of the word, but an institution
used exclusively for religious, charitable and educational purposes, and as
such, it is entitled to be exempted from taxation.
There is justification for the use of the second floor as a residence
of the Director, which is complimentary to the primary purpose which is for
education but the use of the ground floor for commercial purposes cannot
be considered incidental. The court agrees with the trial court that the
school building and lot should be taxed not because of the residential
purpose of the second floor but because of the commercial purpose of the
ground floor but since only a portion of the school is being used for
commercial purposes, half of the assessed tax must be returned to the school
involved.
PREMISES CONSIDERED, the decision of the Court of First
Instance of Abra, Branch I, is hereby AFFIRMED subject to the
modification that half of the assessed tax be returned to the petitioner.
Doctrine: Article VI. Sec. 28, Par. 3
Par 3. － Charitable institutions, churches and parsonages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly, and exclusively used
for religious, charitable, or educational purposes shall be exempt from
taxation.