Gonvention Cf Philippine Baptist Chmaghes, et al. vs. <- Cw Gollsctor of Interval Revenue, et al.

——

ee

REPUBLIC OF THE PHILIPPINES

“OURT OF 1°20 APPEALS

MANILA

GONVENTION CF PHILIPPINE

BAPTIST CHMAGHES,

Appellant,

9) 7

7 2| = versus <- Cw C.T.A. CASE NO. 149

GOLLSCTOR OF INTERVAL REVENUE,

Appellee.

Meecewrenwenecae se ese es of

t

DECISION .

This is an eppeel from a decision of the vol-

lester of internal Revenue Sesersing ayalnst, sad

demanding irom, the Convention of Philippine Baptist

‘Geurches, as owners and ‘operators of the licilo wisslon

Heepital, the smount of 1435.00 «s gracuated annual

fixed tex for the years 1946, 1947, 1948, 1949, 19d

4961 and 1992 exclusive of the compromise penalty ia

the amount of | 70.00,

After the Coliector of internel Aevenue hed tiled

his answer to appeliant*s petition for review and while

the case was pending hearing before this vourt, the ape

pellant paid on August 25, 1955 tne fuli amount deusaded

as evidenced by Official Hecelpi Ne, A-GllW4, Exhleit

F ip. 68 expediente) and on Uctober 6, 1955, sent to

the Clerk of this Court by reyistered weil a supplesentel

pleading (p. 24 expediente) wherein it preyed ior the

sefunc of the amount paid in the sum ef /5Oo.K0. hile

it appesrs that « copy ei appellant's supplewental plead-

fing was served to the Solicitor Generel by registered

mail on October 6, 1955, no motion was ever filed by

DECISION «

C.T.A. CASE NO. 149

a Ve

appellent before this Court for its formal eduission

&s required under Sections 2 end 5, ule 17 of the

Rules of Court.

The pertinent facts of this case, as stipulated

by the partfes sre ss follows:

i. On ii i4, igs. the the appellee

assessed and gh oo ye

the payuent of the ssount of #435,060 as

ated fixed annual tex for 1946, 1947,

ta | Rg 19%, i951 and 1992, plus a

analy of of P70,00 in extrajudictel settle-

WRI appellant's violetion of the Ne-

tional Internal Revenue Code, or a total

eof #5405.0C. This letter of demand appears

en page 5 of the 3.1.8. records.

2. in Poy letter dated May 13, 1954,

eek 6 of the 3.1.8. records,

ellant contested the

Goatts of appellee's assessment,

3. After verifying the allegstions

in the 1 oe se Somes 1.

ant dated 1954, the

poeiste in hie letier gy Been March 10, 158

— ag Fo yer by pen pang _

sarc ta ng On page |

of the 5.1.8. BoP guess = Bo the as6-

Sessment and aenand,

He

ee con gle: Ryo nyo neat

assa dt =

lee's Bement as Prac, mares | i A his let-

ters of March 31, ond June 13 h

ccosenam denen 10 aad Wl cf en NLA

records, yee gees ee fhe appellee on

the other hand, reltereted the essessment

sad demand in hie letter of May 6, 1935

on 2 of the 3.1.8. recerds

pe ne BE the appellant en Mey ©,

DECISION «

GeTeAe CASE NO. 149

-3«

5. On June 13, 1955 the appellant filed

by pegeesene | meil the present appeal which

— — by this Honorable Court on June

r) 5.

6. Pending the heering ef this case and

to seen uN me he Snead equipsent from

Heer ape eppellee to satisfy the as-

Sin” the ov appeilant paid the sus of

#505.C0 on August 1955 under Official

Receipt No, hag seg * and filed by segietened

weil en October 6 » 1955 a ee emental pleade

tan whith wee seceived by t 5 Henerable Court

on October 19, 1955,"

"On the siepits ef the Czse

1. The Rag ge oe re a egy sen

a te supply

and medicines sop en and

tients conf aly? te 7 paving pe

The details of wie assessment

contained in his letter April 14, 1954 fole

ows t

Total Awount Received

Period For Medicines. ied Graduated

Geovered Sy the Pharmacy Yept. Eixed Tax

ip Paving Pationts

1946 eeeenne weet esseeseee F Foe? 9)

1947 eernece + be coeresecone aoe

1949 cccsese 69154. 72 ~eresens ee

ey secvesee S4594B.84 srccesess TS,00

eennnes woeszze5 aeoevonnee 75.00

1952 ee@6e08 27 ease aneve

Tetei Fixed. Tax vue ersernee °

reat SBeeweoseneseeseseore

Tor eeeeeeeoseeaevseveeeees

Onl ee tients are ired

Pas paying pa requ

charge cons ral tae tent ato sy

° suc

plus addit y of

a, @ :

In addition to the facts agreed upon es set ferth

above, the appellant also presented the deposition, Exe

hibit I (pp. 33-57 expediente) of Jose Pablico, Adwinis-

Grae CASE mM. 149

oie

trative Officer ef the lleile Mission Hespital, taken

before Notary Public Patricio M, Miguel ef Tleile City,

wherein it appears among other things, that the Phare

macy Department of the LIleilo AMissien Hospital, which

has been operated and maintained by the Letter since

1906 without profit is but an incident of the operas

tion of the hospitals thet although paying patients

are charged an additionel 16) over the acquisition

peice of the medicines, the ovdrprice is not intended

fer profit but to cover the cost of handling, the salery

ef # licensed Pharmacist and the value of medicines

supplied without charge to indigent patients, thet the

Pharmacy Depertment of the Hospital is meintained solely

for the purpose of having ¢ ready stock of medicines in

ease ef emergency for the convenience of the patients

end {te medical stoff; thet for the last forty years when

the Iloile Mission Hospital nes been operating end main-

taining its Pharnacy Department es an incident of {ts

hospital activities, the Suresu of Internal HKevenue hes

never required it to pey a fixed tax on the gross sales

ef the medicines sold from its Pharmacy Department but

enly in 1954 for the years 1946 to 1952; and that the

Pharaacy Department of the hospital sells and gives free

ef charge medicines to its patients exclusively and does

not eater to outsiders,

There being no dispute as te the facts, this ap-

peel as gathered from the memorandum of “pert les narrews

down to two fundamental issues:

eo

DECISION «

G.T.A. CASE NO. 149

o Sa«

was (thet dala tan tatteteey pestal ot

oF aopunlie’Ack Nos 1129? and

2. Whether or not the aasessaent

St setiens i7Se 160 an inated hes

tienal Internal hevenue Code?

On the question of jurisdicticna.

The appellee contends that its original essess-

mant and demand dated April 14, 1954 is the decisiten

which could be reviewed by this Court under the proe-

visions of Nepublic Act No, 1125 and thet if we were

to compute the thirty (@) day period frea May 1,

1954, the date when appellant received said letter ef

assesement and demand, the appellant would heve ¢cen-

sumed fifty-two (52) days up to the dete of filing ef

Ate petition for review before this Court.

The appellant on the cther hend contends that even

if we were to compute the cunning of the prescriptive

period of thirty (30) days from May 10, 1954 when it

received the original assessment and demand of appellee,

it weuld have consumed only twenty-two (22) days ef the

thirty (30) deys given to it within which te perfect its

appeal,

The discrepancy in their respective computations

lies in the fect thet while the appellant considered the

filing of its request for reconsideration of the deci-

sien ef the appellee as having suspended the running of

the prescriptive peried, the appellee on the other hand

ISON eo

CrTLA. CASE NO. 149

e¢@

did net deduct the peried consumed while appellant's

letter of reconsideration was pending consideration

by the appellee,

It appears that éppellee's letter of demand and

assessment dated April 14, 1954 (p, 5, SIR vec.) was

received by appellant on May 10, 1954 (p. 6, SIR rece);

thet on May 14, 1954, appellant through counsel sent by

registered mail (p. 6, 3IR rec.) to appellee its pretest,

dated May 13, 1954, to the said assessment and demand

of appellees that it was only on March 25, 1955, that

Sppellant received sppellee's denial of the former's

request for reconsiderstion of May 13, 1954 (p, 16, GIA

wet.); thet on “arch 31,.1955, the eppeilent wrote ano-

ther letter (p. 19, SIA rec.) of reconsideretion to ap-

pellee the denial of which wes received by appellant on

May 3, 1955 (p. 2%, IR rec,); and that fourteen (14)

days later viz, on June 13, 1955, the appellant filed

the present petition for review by registered mail,

In the computation of the thirty (30) day peried

prescribed under section ll of Republic Act No, 1125,

we have repeatedly held that a motion or request for a

reconsideration of the decision of the Collector of In-

ternal] Revesue suspends the running of the prescriptive

period within which the taxpayer may appeal to this Court

and that the perted of thirty (30) deys should resume to

wun again the dey following the receipt by the taxpayer

of the Collecter’s denial to said motion or request for

reconsideration, The taxpayer should be given an oppor-

tunity te exhsust 211 adwinistretive remediee before

DECISION «

GeT.A. CASE NO, 149

«Ve

@eming te this Court and the Collector on the other

hand should be given an eppertunity to correct his mis-

teke if any has been coamitted in his eriginal assess-

ment. (La Tondefia v, Collector, ©.T.A. Noe 99, March

45, 19563 Tomas Quirino ve Collector, C.olsA. No. Sb, .

June 26, 1956; American Rubber Co, v, Gellector, G.T.A.

Neo. 164, August 25, 1956). In falrness to taxpayers as

the appellant herein who were caught by thet interregnua

with the creation of this Court, we laid down the rule

that in sugh cases the thirty (@) dey period should be

Counted from July 21,1954 when this Court started to func

tien and do business 4s a judicial body with the eppoint-

mant of twe Judges and {ts clericel force, (Ste, Clara

Lumber Co. ve. Collector, C.T.A, Mo. 91, September 2,

4989; Ipekdjian Merchandising Co. v, Collector, C.I.A.

No. 167, Cotober A, 1955, Blas Gutierrez v. Collector,

CofA. No. 65, August 31, 1955).

With these basic considerstfons in mind, it is

evident froa the recerd of this case, thet the thirty-

day period to appeal as fixed under section 11 of Re-

public Ae? No. 1125, should be counted from March 25,

1985, the date when sppellant’ received eppelbe's letter

ef denial to its request fer reconsideration filed on

May 13, 1934 before this Court started to function as a

judicial body, From March 26, 1985 to March 31, 1955,

when: the running of the thirty-dczy period was suspended

besause Of snother sequest for recensiderstion, the ap=

peliant hed consumed ex (¢) days. The period resuned

te run again on day 31, 1998, the day follewing receizt

Sy appeffant of the Ttetter of appeffee denyfng ffs request

“+ 824

DECISION «

GT.A. CASE WO. 149

fer reconsideration of March 31, 1955, and frow said

date up to June 13, 1955, when the present petition

for review was filed, the appellent consused another

fourteen (14) days. All in all therefore, the appel-

Lent sctuslly consumed only twenty (2) days of the

thirty (30) deys allowed it under Section 11 ef Re- '

public Act No, 1125, @ period well within the Liaita-

tion set by law.

Ja connection with the second issue, it appears

that appellee based his assessment and collection of the

tax now in dispute on the provisions of Sections 178, 180,

162 ef the National Internal Revenue Code which read as

A petvilege tax mitt be pelt betene aay essi-

vilege ore an si-

ness or lon heretaafter s tf tee een

pursued,

mess is payable for separate or distinet

eotabligheent ox plese Waane business subject

to the tax is sonteatedy and one occupation or

kine of business does not become exempt by be-

conducted with some other occupation or

es for which such tex has been paid,

“The occupation tax aust be paid by each

engaged in a call subject there-

to; the tax on a business, ~~ person, firm,

er company conducting the same

"Sec. mag a

Pr fll my Coa s h yeér, and, if tendered in

oe eac tendere

Gouknesemela installments, on or before the twen-

tieth of > nga one July, oz if the quarterly

January April. J + ages ve! “it =

ober. . an

person first a a business or a

aa P pay the tax oefore oagaging there

qin

Seite a att Paster et tax of ten

each calendar ipse Ae Seeetion the Lote gy

SR ee G z fraction Chazeot in

DECISION «

GeTeA. CASE NO, 149

«GJ -«

Ripe! person ~~ is net ee to

pay t ag coh ribs ax preecr seco

tions one eighty-four, one hundred

eighty-five and one hundred eighty-six shall

ceding calender year, as follows: x x x"

The appellee contends thet the appellant, in maine

teining and operating a Pharmacy Department in the pre-

mises ef its hospitel is engaged in “business" within”

the contemplation of the above-queted provisions of the

National Internal Revenue Code and must therefore pay

the annuel fixed taxes prescrived therein. The appel-

lant on the ether hand maintains that it cannot be con-

sidered as being engaged~.in “business" with the operation

of its Pharmacy Department vecause the maintenence there-

of is apsolutely necessary for the convenience of its

paying and indigent patients and its medical staff; that

it 4s not eperated for profit since the over-price of

10k on the acquisition price of the medicines which it

charges its paying patients is intended merely to cover

the cost of handling, the salary of a licensed Pharmacist,

and the value of medicines supplied without cheryge to its

indigent patients: and, that the Pharmacy Depertment of the

Zloilo Mission Hospital sells wedicines exclusively to

its paying in and out patients, To buttress its argue

ment that it is not engaged in business with the. opere-

tien and maintenance of its Pharmacy Department, the ap-

pellant cites in its favor our previeus decision in &,I.A.

Gase Ne, 19 entitled "Convention of Philippine Daptist

Churehes va. Collecter of Internal Revenue", promlyeted

DECISION =

Gel A. CASE WO. 149

° 16 «

on October 7, 1954, wherein we feund the same appellant

herein exempt from the payzent of income taxes it deing

@ religious cerporeation devoted exclusively to chari-

taple, missicnary, huwenitarian and educational activie

ties and thet whatever profits are derived therefrouw

are not distributed to any particuler individuel or in- |

dividuals but for the luprovement of its hospital, school

ef nursing, and other facilities, The appellee herein

has net appealed eur decision in said case to the Supreme

Court and we take it that he is agreeable with our finde

tags. |

May we consider the appellent herein as 4 "mer=-

shant" engaged in "business" when it selis medicines to

Sts paying patients from the #harmacy Department of its

heepital, for the preper applieetion ef Sections 178,

480 and 182 of the Watienal Internal Revenue Code?

In Read ve. Tidewater Coal Exchange, 116 A 398,

904, cited in Vol. 34 p, 22, words & Phrases, whieh we

queted and adopted in part as basis of our decision in

favor of the taxpayer in C.T.A. Case No. 14 entitled

“Manila Elks Club vs. Collector of Internal Revenue*

ed on July 31, 1956, it was held thet.

“Where the corporetion handled no money exe

eueh 85 was necessary to cover opere-

ieee, eased io no musinees for

sparation 1a aonsidared net eraanized fa:

"o) fit under the Cenera, Y Corporstion

Te this we might edd that Webster's New Internetional

Dictionary, Second Edition (1954) defines “business” as

aay particuler eceupetion or employnent habitually en-

gaged in fer livelihood er profit. Sallantine’s Law

*" 824