Landbank Countryside Development Foundation, Inc. v. Commissioner of Internal Revenue

SPECIAL SIXTH DIVISION [CA-G.R. SP No. 64450. August 29, 2002.] LANDBANK COUNTRYSIDE DEVELOPMENT FOUNDATION, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N VIDALLON-MAGTOLIS , J p : This case stemmed from an administrative claim for refund of tax payment for the year 1997 in the amount of P10,408,851.60 filed by the petitioner with the Bureau of Internal Revenue (BIR). It appears that the petitioner was organized primarily to establish and operate a private, non-profit foundation which shall initiate, stimulate, encourage, promote, develop, support, assist, undertake, finance, provide, manage, operate and/or maintain programs, plans, projects or enterprises for the improvement, promotion and advancement of agrarian reform beneficiaries, farmers, tillers, fishermen and other agricultural workers and the social economic development of the countryside. On November 24, 1992, the petitioner registered with the BIR as a donee institution under BIR NEDA Regulation No. 1-81. On September 14, 1993, the petitioner was recognized by the BIR as a corporation exempt from the payment of income taxes under Section 26 (now Section 30) of the Tax Code. On March 11, 1995, the petitioner received, by way of donation from Landbank of the Philippines, a 3.4-hectare parcel of land situated in Nancayasan, Urdaneta, Pangasinan. The petitioner sold the aforesaid land to Antonio Dy, Rody Sy, Victoria Tan, Esperanza Chua, Elena Young, John Chu, Alexander Chu, Napoleon Chu, Honorio Chu and Corazon Dy for a total sum of P32,500,000.00, the proceeds of which were used by the petitioner to finance its various projects, allegedly pursuant to its main purpose. On May 8, 1997, the amount of P2,437,500.00 representing 7.5% of the selling price was withheld and remitted to the BIR to enable the processing of the transfer of title over the land to the buyers. On April 15, 1998, the petitioner filed its Annual Information/Income Tax Return of Exempt Organization wherein it declared a taxable income from the aforementioned sale of the parcel of land in the sum of P29,739,756.00, an income tax due of P10,408,851.00, a tax credit/payment of P2,437,500.00, and an amount due and collectible by the BIR of P7,971,351.60, which the petitioner paid on the same date. On May 6, 1999, claiming exemption from income tax pursuant to then Section 26 (now Section 30) of the Tax Code, the petitioner filed an administrative claim for refund with the BIR in the amount of P10,408,851.00, representing the total tax credits/payments for the year 1997. On May 7, 1999, the petitioner filed with the Court of Tax Appeals (CTA) its petition for review to preserve its claim for refund of its alleged erroneous income payments for the taxable year 1997. On January 19, 2001, the CTA rendered a Decision dismissing the petitioner's petition for lack of merit. 1 The petitioner's motion for reconsideration 2 was likewise denied. 3 Hence, this appeal under Rule 43 of the Rules of Court. DAaEIc In this petition, the respondent failed to file its comment despite notice. PETITIONER'S ARGUMENTS The petitioner contends that contrary to the findings of the tax court, the sale of the subject property was done in the pursuit of its purposes as a tax-exempt entity; hence the income from such transaction should not have been subjected to income tax. The petitioner further argues that any income received or earned by any of the tax-exempt entities enumerated under Section 26 of the tax code should be and is exempt from income tax even if it arises from its real and personal properties. Moreover, the case of Commissioner of Internal Revenue vs. Court of Appeals, et. al . 4 is not applicable in the case at bar considering that the factual settings of the said case are totally different from this case. Allegedly, in the aforesaid case, YMCA contended that the leasing out of its real property was reasonably incidental and necessary to the carrying out of the organization's objectives which obviously was an admission that the leasing activity was not pursuant to YMCA's purposes. Besides, the leasing activity of YMCA was a sustained activity, involving a series of transactions characterized by regularity, habituality and continuity, suggesting an intention to engage in business for the purpose of profit. On the other hand, in this case, it has been shown that the sale of the subject realty was made pursuant to petitioner's purposes as a non-stock, non-profit organization. Likewise, it is clear that the proceeds of the sale were used by the petitioner to finance its various projects pursuant to its main purpose. Furthermore, the petitioner's sale of the subject property was a mere isolated transaction and was not done to engage in the real estate business. COURT'S RULING The appeal is bereft of merit. The pertinent provision of Section 30 (former Section 26) of the National Internal Revenue Code of 1997 under which the petitioner anchors its claim for tax exemption provides: "Sec. 30. Exemptions from Tax on Corporations . The following organizations shall not be taxed under this Title in respect to income received by them as such: (a) . . . (g) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare; xxx xxx xxx Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code." The last paragraph of Section 30 unequivocally and explicitly provides that the exemptions do not include income derived from any of the properties of the foregoing organizations, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income. The court is therefore duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction. 5 In the case of Commissioner of Internal Revenue vs. Court of Appeals , 6 it was held that a reading of the aforesaid last paragraph of Section 30 ineludibly shows that the income from any property of exempt organizations, as well as that arising from any activity it conducts for profit, is taxable. The phrase "any of their activities conducted for profit" does not qualify the word "properties." This makes income from the property of the organization taxable, regardless of how the income is used whether for profit or for lofty non-profit purposes. 7 The petitioner alleges, though, that the said case is not applicable to the case at bench, considering that in that case the leasing out of its real property was not pursuant to YMCA's purposes, the same being reasonably incidental and reasonably necessary to the carrying out of its organizational objectives, while in this case, it is indubitably shown that the sale of the realty in question was made pursuant to its purpose as a non-stock, non-profit organization and the proceeds of the sale were used to finance its various projects pursuant to its main purpose. We disagree. It must be stressed that when a statute is clear and explicit, there is no need for any extended court ratiocination on the law. There is no room for interpretation, vacillation or equivocation; there is room only for application. 8 In the case at bench, it appears that the petitioner realized income from the proceeds of the sale of its donated property. Ergo, as correctly found by the tax court, such income squarely falls under the last paragraph of Section 30 of the tax code, which categorically provides that the income of whatever kind and character of the exempt organization under Section 30 of the tax code from any of their property, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income shall be subject to income tax . It must be noted that the law does not qualify whether it is a single isolated transaction of incidental character or whether or not characterized by regularity, habituality and continuity suggesting as intention to engage in business for the purpose of profit. Where the law makes no distinctions, one does not distinguish. 9 WHEREFORE, the petition is hereby DISMISSED for lack of merit. SO ORDERED. * Guevarra-Salonga and Pestao, JJ . , concur. Footnotes 1. Rollo , p. 43. 2. Id . at p. 57. 3. Id . at p. 28. 4. 298 SCRA 83 5. Id . at 93. 6. See note 4. 7. Id . at p. 94. 8. Caguioa vs. Lavia, 345 SCRA 49, 61. 9. Ramirez vs. CA , 248 SCRA 590, 598. * Acting member, vice Justice Rivera, per Office Order No. 104-02-CG.