SC cancels P122M tax assessment against DLSU-College of St. Benilde

Published July 4, 2019, 9:15 PM

by Martin Sadongdong & Antonio Colina

By Rey Panaligan 

The Supreme Court (SC) has reversed the Court of Tax Appeals (CTA) as it cancelled the P122.4 million deficiency income tax assessment notice for 2002 issued by the Bureau of Internal Revenue (BIR) in 2005 against the La Sallian Educational Innovators Foundation (De La Salle University-College of St. Benilde).


In a decision written by Associate Justice Andres B. Reyes Jr., the SC granted the petition filed by De La Salle-College of St. Benilde which challenged the April 19, 2012 decision of the CTA.

The SC said the 1987 Constitution categorically exempts all revenues and assets of non-stock, non-profit educational institutions from taxes provided that they are actually, directly and exclusively used for educational purposes.

It cited Article XIV, Section 4, Paragraph 3 of the 1987 Constitution which states that “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.”

In its assessment, the BIR claimed that the La Sallian foundation had failed to comply with the constitutional requirements for being a profit-oriented educational institution.

Thus, it said, the foundation is no longer a tax-exempt entity and is subject to a 10 percent income tax rate as a taxable proprietary educational institution.

At the same time, the BIR pointed out that the foundation is not a non-profit educational institution anymore due to its alleged enormous profits.

It said the foundation generated profits of more than P643 million from tuition fees and had cash of more than P775 million in banks.

The CTA ruled in favor of the BIR. The La Sallian foundation elevated the case to the SC.

In reversing the CTA, the SC said the BIR’s allegations were not supported by facts.

The SC said the P643 million was not the foundation’s profit as it was just its gross receipts from school year 2002.

It pointed out that the BIR overlooked the foundation’s administrative and non-administrative expenses amounting to more than P582 million in 2002 for its total operating expenses.

“Considering the clear explanation of the nature of the money involved, it is evident that all of petitioner Foundation’s income is actually, directly and exclusively used or earmarked for promoting its educational purpose,” the SC stressed in its decision that was made public recently.