Province of Abra vs. Hernando, 107 SCRA 104 (1981) G.R. No. L-49336 August 31, 1981

Fact: First, there was a denial of a motion to dismiss an action for declaratory relief by private respondent Roman Catholic Bishop of Bangued desirous of being exempted from a real estate tax followed by a summary judgment granting such exemption, without even hearing the side of petitioner, wantonly violated the rights of petitioner to due process, by giving due course to the petition of private respondent for declaratory relief, and thereafter without allowing petitioner to answer and without any hearing, adjudged the case; all in total disregard of basic laws of procedure and basic provisions of due process in the constitution, thereby indicating a failure to grasp and understand the law, which goes into the competence of the Honorable Presiding Judge.” It was the submission of counsel that an action for declaratory relief would be proper only before a breach or violation of any statute, executive order or regulation. Moreover, there being a tax assessment made by the Provincial Assessor on the properties of respondent Roman Catholic Bishop, petitioner failed to exhaust the administrative remedies available under Presidential Decree No. 464 before filing such court action. Further, it was pointed out to respondent Judge that he failed to abide by the pertinent provision of such Presidential Decree.

Issue: Whether Tax exemption is presumed in favor of the claimant?

Held: No, Respondent Judge would not have erred so grievously had he merely compared the provisions of the present Constitution with that appearing in the 1935 Charter on the tax exemption of “lands, buildings, and improvements.” There is a marked difference. Under the 1935 Constitution: “Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation.” The present Constitution added “charitable institutions, mosques, and non-profit cemeteries” and required that for the exemption of “:lands, buildings, and improvements,” they should not only be “exclusively” but also “actually and “directly” used for religious or charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration. Reliance on past decisions would have sufficed were the words “actually” as well as “directly” not added. There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation. According to Commissioner of Internal Revenue v. Guerrero: “From 1906, in Catholic Church v. Hastings to 1966, in Esso Standard Eastern, Inc. v. Acting Commissioner of Customs, it has been the constant and uniform holding that exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimi juris.” In Manila Electric Company v. Vera, a 1975 decision, such principle was reiterated, reference being made to Republic Flour Mills, Inc. v. Commissioner of Internal Revenue; Commissioner of Customs v. Philippine Acetylene Co. & CTA; and Davao Light and Power Co., Inc. v. Commissioner of Customs.

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