Rules and Regulations to Implement E.O. No. 375, s. 2004

EN BANC [C.T.A. EB CASE NO. 671 . October 4, 2011.] (C.T.A. Case No. 7303) DE LA SALLE UNIVERSITY, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION PALANCA-ENRIQUEZ , J p : This resolves: 1) a) petitioner De La Salle University, Inc., (DLSU)'s "Motion for Partial Reconsideration" of the Decision promulgated on June 8, 2011, filed on June 28, 2011; and b) respondent Commissioner of Internal Revenue (CIR)'s "Comment" filed on August 1, 2011; 2) a) respondent CIR's "Motion for Partial Reconsideration" of the Decision promulgated on June 8, 2011, filed on July 6, 2011; and b) petitioner DLSU's "Comment/Opposition (to the Motion for Partial Reconsideration)" filed on August 10, 2011. Petitioner DLSU's "Motion for Partial Reconsideration" Petitioner's "Motion for Partial Reconsideration" is anchored on the following grounds: 1) The assessment issued against DLSU, which was based on an invalid Letter of Authority (LOA), should be cancelled in its entirety; and 2) DLSU was able to show ample reason that its rental income was used actually, directly, and exclusively for educational purposes. Petitioner maintains that the case of Ateneo de Manila University vs. CIR (C.T.A. Case Nos. 7246 and 7293) should be held controlling, pursuant to the principle of uniformity in taxation as espoused by the 1987 Constitution. On the other hand, in her "Comment", respondent CIR counters that the validity of the "base" year is a settled matter in the case of Commissioner of Internal Revenue vs. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010 ("Sony case") ; the supposed disbursement of the rental income for educational purposes was not proven; and the Ateneo case is not applicable as they involved different parties, factual settings, bases of assessments, evidence and defenses. CITaSA We find no merit in the motion. In the Sony case, the BIR issued a letter of authority to audit Sony's book of accounts for fiscal year ending 1997 and unverified prior years. In said case, the Supreme Court upheld the invalidity of the phrase "unverified prior years" in the LOA, pursuant to Revenue Memorandum Order No. 43-90, which provides that a LOA should cover a taxable period not exceeding one taxable year. Thus, the Supreme Court cancelled the assessments made prior to 1997, but sustained the assessments for the "base" year 1997. In this case, records show that LOA No. 2794 covers the audit of petitioner's book of accounts for "Fiscal Year Ending 2003 & Unverified Prior Years". Pursuant to the Sony case, the phrase "Unverified Prior Years" is expressly prohibited, but the base year "Fiscal Year Ending 2003" is valid and any assessment made by the Bureau of Internal Revenue within the fiscal year ending 2003 was within the scope of its authority. As regards the rental income from Alarey, Inc., Zaide Food Corp., Capri International and MTO Bookstore, petitioner still failed to fully account for and substantiate that such disbursements were directly, actually and exclusively used for educational purposes. Lastly, as to the application of the Ateneo case to the case at bar, we reiterate that such ruling cannot be a binding precedent as they involved different parties, factual settings, bases of assessments, set of evidence and defenses. Respondent CIR's "Motion for Partial Reconsideration" Respondent's "Motion for Partial Reconsideration" is anchored on the following grounds: 1) That the issue on the validity of the LOA was never raised in the original proceedings nor was it brought up on appeal to the Honorable Court in Division; and caAICE 2) Petitioner DLSU's use of its assets for commercial purposes necessarily removed such assets and their resultant revenue from the coverage of the constitutional exemption. In its "Comment/Opposition", petitioner counters that in no less than three different occasions, the issue on the validity of LOA No. 2794 was brought up before the CTA First Division and the Constitution mandates that all assets and revenues of non-stock, non-profit educational institutions actually, directly and exclusively used for educational purposes are exempt from taxes and duties. Respondent's "Motion for Partial Reconsideration" is devoid of merit. Records show that the issue regarding the validity of LOA No. 2794 was raised during the trial before the First Division of the CTA, and likewise in petitioner's "Memorandum" filed on August 20, 2009 before the First Division of the CTA and in petitioner's "Motion for Partial Reconsideration" filed before the First Division of this Court on January 29, 2010. Therefore, CIR's contention that the issue regarding the void letter of authority was never raised or that it was raised only on appeal cannot be sustained. DHTCaI As regards petitioner's income from unrelated activities such as cafeterias and bookstores, Article XIV, Section 4 (3) of the 1987 Constitution provides that all assets and revenues of non-stock, non-profit educational institutions actually, directly and exclusively used for educational purposes are exempt from taxes and duties. Thusly: "ARTICLE XIV EDUCATION, SCIENCE AND TECHNOLOGY, ARTS, CULTURE AND SPORTS EDUCATION xxx xxx xxx Section 4. xxx xxx xxx (3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes shall be exempt from taxes and duties ." It bears stressing that the coverage of the exemption is broad because it includes "all revenues and assets" being exempt from taxes and duties. What determines the exemption is the use to which the revenue is utilized. Revenues, howsoever generated, are covered by the constitutional exemption provided that they will be used for education purposes. Considering that petitioner is a non-stock, non-profit educational institution, all its revenues and assets that are used actually, directly and exclusively for educational purposes are, therefore, exempt from taxation. Finding no compelling or valid reason to reverse or set aside our Decision dated June 08, 2011, we deny both motions. WHEREFORE , premises considered, both petitioner DLSU's "Motion for Partial Reconsideration" and respondent CIR's "Motion for Partial Reconsideration" are hereby DENIED for lack of merit. ICTacD SO ORDERED . (SGD.) OLGA PALANCA-ENRIQUEZ Associate Justice Ernesto D. Acosta, P.J., Juanito C. Castaeda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla and Amelia R. Cotangco-Manalastas, JJ., concur.