Bureau of Local Government Finance Opinion

January 11, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION The General Manager Lingap Credit Cooperative No. 16 Jewel Street Forest Hills Subdivision Novaliches, Quezon City M a d a m : This refers to your letter dated November 3, 1999 requesting that the real properties of that cooperative be declared exempt from payment of real property taxes pursuant to DOF-CDA Joint Circular No. 1-90, series of 1990, of the Department of Finance and the Cooperative Development Authority, and requesting further that the real property taxes it paid be refunded. In this connection, attached is the 1st Indorsement dated December 23, 1999 of this Bureau to the City Treasurer and the City Assessor, both of Quezon City, which held, thus: "Viewed in the light of the foregoing, this Bureau finds Lingap Credit Cooperative exempt from the payment of real property taxes, pursuant to the provision of R.A. No. 6938, the DOF-CDA Joint Circular No. 1-90; Section 234(d) of R.A. No. 7160 and in line with the abovementioned 1st Indorsement dated March 5, 1999. Consequently therefore, the request for refund of the subject Cooperative should be given favorable consideration based on the abovecited Supreme Court Decision." We trust that this will merit the concerns of that cooperative. Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge 1st Indorsement December 23, 1999 Respectfully referred to the City Treasurer and the City Assessor, both of Quezon City, the herein letter dated November 03, 1999 of the General Manager, Lingap Credit Cooperative. No. 16 Jewel Street, Forest Hills Subdivision, Novaliches, Quezon City, requesting that the subject Cooperative be exempt from the payment of real property taxes pursuant to DOF-CDA Joint Circular No. 1-90, series of 1990, of the Department of Finance and the Cooperative Development Authority, prescribing procedural guidelines in the availment of tax exemption privileges under Article 62(1) of R.A. 6938, otherwise known as the "Cooperative Code of the Philippines"; and requesting further that the real property taxes paid to that Office, be refunded. It is represented herein that the subject cooperative is registered with the Cooperative Development Authority, with CDA Certificate of Registration No. N-121-0758 dated October 5, 1994, copy attached. Likewise, a Financial Statement for the years ending December 3, 1998 and 1997 has also been submitted reflecting a Reserve (Accumulated) of P2,502,143.69 for the year then ended, and a net surplus (undistributed) of P4,993.97, for 1998. Article 62(1) of Republic Act No. 6938, as implemented under DOF-CDA Joint Circular No. 1-90 dated November 7, 1990; and the Provisions of Section 234(d) of Republic Act No. 7160, also known as the Local Government Code of 1991, provide as follows: Article 62, R.A. 6938 : "Article 62. Tax and Other Exemptions . Cooperatives transacting business with both members and non-members shall not be subject to tax on their transactions to members. Notwithstanding the provisions of any law or regulation to the contrary, such cooperatives dealing with non-members shall enjoy the following tax exemptions: (1) Cooperatives with accumulated reserves and undivided net savings of not more than Ten Million Pesos (P10,000,000.00) shall be exempt from all national, city, provincial, municipal or barangay tax of whatever name and nature." Section 234(d), R.A. 7160 : "Section 234. Exemptions from Real Property Tax . The following are exempted from payment of real property tax: "xxx xxx xxx. "(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938." Additionally, this Bureau had in a number of similar and related cases, the latest of which is embodied under the 1st Indorsement dated March 5, 1999 concerning the request for exemption from real property taxes of Central Market Development Corp. Inc., copy attached, resolved that "all real property owned by Cooperatives duly registered with the Cooperative Development Authority (CDA), with a maximum accumulated reserves and undivided net savings of Ten Million Pesos (P10,000,000.00), are exempt from the payment of real property taxes." HcISTE It is noteworthy to mentions hereon that, in addition to the exemption from the payment of real property taxes, cooperatives are exempt from the payment of local taxes, fees, or charges as provided for under Section 133(n) of the same code. However, subject cooperatives are still liable to the payment of service charges or rentals for the use of property and equipment or public utilities owned by local government such as charges for actual consumption of water, electric power, toll fees for the use of public roads and bridges and the like. (BLGF Memorandum Circular No. 02-97 dated March 18, 1997) With respect to the claim for refund of the real property taxes paid for 1999 as evidenced by the attached O.R. No. 081777 dated March 4, 1999 in the amount of Eighty Three Thousand Four Hundred Six Pesos, attention is invited to the Supreme Court Decision (L-32364) dated April 30, 1979, in the case entitled " Ramie Textiles, Inc. vs. Ismael Mathay, Sr. ," the dispositive portion of which reads as follows: "It is not disputed that petitioner is exempt from the payment of realty taxes . . . The fact that petitioner paid thru error, or mistake, and the government accepted the payment, gave rise to the application of the principle of solutio indebiti under Article 2154 of the New Civil Code, which provides that 'if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.' There is therefore created a tie or juridical relation in the nature of solutio indebiti , expressly classified as quasi-contract under Section 2, Chapter I of Title XVII of the New Civil Code." "The quasi-contract of solutio indebiti , is one of the concrete manifestation of the ancient principle that no one shall enrich himself unjustly at the expense of another. Hence, it would seem unedifying for the government, that knowing it has no right at all to collect or to receive money for alleged taxes paid by mistake , it would be reluctant to return the same ." (Emphasis supplied) Applying the abovequoted Supreme Court Decision, this Bureau believes and so holds that the real property taxes paid by the subject Cooperative, through errors or mistake, in the honest belief that it is liable to pay realty taxes, should be refunded. In any case, a taxpayer should not be held to suffer loss by his good intention to comply with what he believes is his legal obligation, where such obligation does not really exist. Viewed in the light of the foregoing, this Bureau finds Lingap Credit Cooperative exempt from the payment of the real property taxes, pursuant to the provision of R.A. No. 6938, the DOF-CDA Joint Circular No. 1-90; Section 234(d) of R.A. No. 7160 and in line with the abovementioned 1st Indorsement dated March 5, 1999. Consequently therefore, the request for refund of the subject Cooperative should be given favorable consideration based on the abovecited Supreme Court Decision. Report of action taken hereon within five (5) days from receipt hereof is requested. (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge