Digest For CIR Vs DLSU

This case involves consolidated petitions for review on certiorari filed by the Commissioner of Internal
Revenue and De La Salle University, Inc or DLSU before the Supreme Court.
The case originated from the Court of Tax Appeals or CTA and involves a tax assessment on DLSU’s
deficiencies on income tax on rental earnings from Restaurants/canteens and bookstores operating
within its campus; Value added tax on Business income; Doc stamp tax on loans and lease contracts.
All begun in 2004 when the BIR issued a letter to DLSU authorizing its revenue officers to examine the
latters book of accounts and other accounting records for all internal revenue taxes for the period of
fiscal year ending 2003 and unverified prior years.
BIR demanded DLSU to pay some 17million plus, inclusive of surcharges, interest and penalties for
taxable years 2001, 2002 and 2003.
DLSU protested the said assessment. Because of BIR failure to attend on the said protest, DLSU filed
before the CTA division a petition for review.
CTA Division partially granted DLSU’s petition. Both Commissioner of Internal Revenue and DLSU moved
for reconsideration. CTA division denied Commissioner of Internal Revenue’s motion while it held in
abeyance the resolution on DLSU’s motion for reconsideration.
Prompting CIR to appeal before the CTA En Banc. Arguing that DLSU’s use of its revenues and assets for
non-educational or commercial purposes removed these items from the exemption coverage under the
constitution.
Issue:
Whether DLSU’s income and revenues used actually, directly, or exclusively for educational purposes are
exempt from duties and taxes.
Ruling:
The income, revenues and assets of non-stock, non-profit educational institutions that are proven to
have been used actually, directly, and exclusively for educational purposes are exempt from duties and
taxes.
This exemption is granted under Article XIV Section 4 paragraph 3 of the 1987 Constitution.
The court observed that the constitutional provision refers to two kinds of educational institutions;
1. Non-stock, non-profit educational institutions

2. Proprietary educational institutions
And DLSU falls under the first category.
The tax exemption granted to non-stock, non-profit educational institutions is not subject to limitations
imposed by law, unlike proprietary educational institutions.
The tax exemption granted to non-stock, non-profit educational institutions is conditioned only on the
actual, direct and exclusive use of their revenues and assets for educational purposes. While tax
exemptions may also be granted to proprietary educational institutions, these exemptions may be
subject to limitations imposed by Congress or provided by law.
In previous case decided by the court, it explained that what is exempted is not the institution itself,
those exempted from real estate taxes are lands, buildings and improvements actually, directly and
exclusively used for religious, charitable or educational purposes.
The term educational institution, when used in laws granting tax exemptions, refers to the school system
(synonymous with formal education); it includes a college or an educational establishment; it refers to
the hierarchically structured and chronologically graded learnings organized and provided by the formal
school system.
The court also laid down the requisites for availing the tax exemption under Article XIV, Section 4 (3),
namely: (1) the taxpayer falls under the classification non-stock, non-profit educational institution; and
(2) the income it seeks to be exempted from taxation is used actually, directly and exclusively for
educational purposes.
WHEREFORE, premises considered, we DENY the petition of the Commissioner of Internal

Revenue in G.R. No. 196596 and AFFIRM the December 10, 2010 decision and March 29, 2011
resolution of the Court of Tax Appeals En Banc in CTA En Banc Case No. 622, except for the total
amount of deficiency tax liabilities of De La Salle University, Inc., which had been reduced.
We also DENY both the petition of De La Salle University, Inc. in G.R. No. 198841 and the petition of
the Commissioner of Internal Revenue in G.R. No. 198941 and thus AFFIRM the June 8, 2011
decision and October 4, 2011 resolution of the Court of Tax Appeals En Banc in CTA En Banc Case
No. 671, with the MODIFICATION that the base for the deficiency income tax and VAT for taxable
year 2003 is ₱343,576.70.
SO ORDERED.

Digest For CIR Vs DLSU

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This case involves consolidated petitions for review on certiorari filed by the Commissioner of Internal

1. Non-stock, non-profit educational institutions

And DLSU falls under the first category.

WHEREFORE, premises considered, we DENY the petition of the Commissioner of Internal

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