TAXATION CASES

THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF MANILA, plaintiff-appellant, vs. THE

COLLECTOR OF INTERNAL REVENUE, defendant-appellee. G.R. No. L-7988 January 19, 1916

MORELAND, J.:

The question at issue in this case is whether or not the building and grounds of the Young Men's
Christian Association of Manila are subject to taxation, under section 48 of the charter of the city of
Manila quoted in the footnote [syllabus].

The city of Manila, contending that the property is taxable, assessed it and levied a tax thereon. It
was paid under protest and this action begun to recover it on the ground that the property was
exempt from taxation under the charter of the city of Manila. The decision was for the city and the
association appealed.

The Young Men's Christian Association came to the Philippine with the army of occupation in 1898.
When the large body of troops in Manila was removed to permanent quarters at Fort William
McKinley in February, 1905, an independent association for Manila was organized under the
direction of the Army and navy departments. Shortly after the organization of the association the
directors made a formal request to the international committee of the Young Men's Christian
Association in New York City for the assistance and cooperation of its foreign department. I
response to this request Mr. John R. Mott, general secretary of the foreign department, visited
Manila in January 1907. After a conference with the directors and interested friends it was decided to
conduct a campaign to secure funds for an adequate and permanent association. In the name of the
international committee and friends in America Mr. Mott guaranteed P170,000 for the construction of
a building on condition that friend in the Philippines secure the site and adequately furnish the
building. The campaign for funds was begun here on February 15, 1907, and, by the 15th of March
following, P83,000 was subscribed, nearly one thousand different persons contributing. Thereupon
the Young Men's Christian Association of Manila was incorporated under the law of the Philippine
Islands and received its character in June, 1907.

A site for the new building was selected on Calle Concepcion, Ermita, and the building contract was
let on the 8th of January following. The cornerstone was laid with appropriate ceremonies on July
10, 1908, and the building was formally dedicated on October 20, 1909.

The building is composed of three parts. The main structure, located in the center, is three stories
high and includes a reception hall, social hall and game rooms, lecture room, library, reading room
and rooming apartments. The small building lying to the left of the principal structure, as one faces
the front from Called Concepcion, is the kitchen and servant's quarters. The large wing to the right is
known as the athletic building, where the bowling alleys, swimming pool, locker rooms and
gymnasium-auditorium are located. The construction is of reinforced concrete with steel trussed roof
covered with interlocking red tiles.

The main or central portion of the building is 150 by 45 feet and stands 20 meters back from the
sidewalk. An iron canopy, suspended by brackets, projects over the driveway which lies in front and
shelters the main entrance. A wide arched doorway opens into a large reception room, on the left of
which is the public office and the secretary's private office, while on the right is the reading and
writing rooms, and beyond that the library, each about 30 feet square. From the reception room, on
the left, a broad concrete stairway leads to the second floor.

Passing out of the rear of the reception hall one enters upon a veranda some 15 feet in width
running the full length of the main structure which looks out on the tennis courts and affords an
excellent place for lounging, games and general social purposes. To the left of the entrance hall and
also opening upon the veranda are two large rooms of about the same size as those on the right of
the reception hall, the first being the billiard room and the other the restaurant. The athletic building
is entered from the rear veranda. It is a two story wing 68 by 85 feet. Passing from the veranda into
the athletic hall one finds first, on the left, the toilet room, and beyond this, to the rear, the shower
baths and locker rooms. The swimming pool is in the center of the athletic wing and is 60 by 19 feet
in size, lined with cement. To the right of the swimming pool are the bowling alleys. A wide stairways
leads to the second floor. Above the swimming-pool and bowling alley is a large room 50 by 85 feet
which is the gymnasium and also the auditorium when occasion requires. About one-third of the roof
converting the athletic wing is used as a roof garden.

The second and third floors of the main building are given over almost wholly to rooming apartments
and baths. On the second floor over the entrance hall is a members' parlor, from which a small
balcony projects over the main entrance. The remainder of the second floor and all to the third are
composed of the living rooms. These apartments, of which there are 14 on the second and 20 on the
third floor are approximately 18 by 14 feet each. They provide accommodations for 64 men.

The purposes of the association, as set forth in its charter and constitution, are:

To develop the Christian character and usefulness of its members, to improve the spiritual,
intellectual, social and physical condition of young men, and to acquire, hold, mortgage, and
dispose of the necessary lands, buildings and personal property for the use of said
corporation exclusively for religious, charitable and educational purposes, and not for
investment or profit.

The purposes of this association shall be exclusively religious, charitable and educational, in
developing the Christian character and usefulness of its members and in improving the
spiritual, mental, social and physical condition of young men.

Speaking generally, the association claims exemption from taxation on the ground that it is a
religious, charitable and educational institution combined. That it has an educational department is
not denied. It is undisputed that the aim of this department is to furnish, at much less than cost,
instruction in subjects that will greatly increase the mental efficiency and wage-earning capacity of
young men, prepare them in special lines of business and offer them special lines of study. Attention
is given to subjects included in civil service and consular examinations both here and in the United
States. The courses offer commercial subjects, as well as many others, and include stenography
and typewriting, bookkeeping, arithmetic, English composition, foreign languages, including
elementary and advanced Spanish and Tagalog, special courses in Philippine history, public
speaking, surveying, horticulture, tropical dependencies, and the group of subjects required for
entrance into the consular services, such as political economy, American and modern history.
Courses are also offered in law, social, ethics, political economy and other subjects.

The institution has also its religious department. In that department there are, generally speaking,
three main lines of work Bible study, religious meetings and special classes. Course are offered in
the Life of Christ and the Old Testament and in the larger social significance of the teachings of
Jesus. Meetings are held on Sunday afternoons and several times during the week and courses are
offered in the study of missions, in the method of teaching the Bible and kindred subjects.

The atmosphere of the Young Men's Christian Association is distinctly religious and there is constant
effort on the part of the officials to create a religious spirit; and to that end there is continuous
pressure to induce members to attend not only the religious services of the association but also
those of one or another of the churches of Manila. While the association is nonsectarian, it is
preeminently religious; and the fundamental basis and groundwork is the Christian religion. All of the
officials of the association are devoted Christians, members of a church, and have dedicated their
lives to the spread of the Christian principles and building of Christian character.

The institution also has charitable features. It makes no profit on any of its activities. The professors
and instructors in all departments serve without pay and freely give of their time and ability to further
the purposes of the institution. The chief secretary and his assistant receive no salary from the
institution. Whatever they are paid comes from the United States. In estimating the cost of instruction
in the various departments, or of the other things for which pay is received, no account is taken of
the interest on the money invested in the grounds and building, of deterioration in value resulting
from the lapse of time, or of the fact that the professors and instructors and certain officials receive
no pay. We have, then, a building and grounds, professors and instructors, and certain institution
officials, furnished free of charge, and which makes no profit even on that basis. This, it would seem,
would lend some color to the claim that the association takes on some of the aspect of a charitable
institution. While it appears that the association is not exclusively religious or charitable or
educational, it is demonstrated that it is a happy combination of all three, giving to its membership
the religious opportunities of the church, the educational opportunities of the school and the
blessings of charity where needed without the recipient feeling or even knowing that he is the object
of charity.

It is claimed, however, that the institution is run as a business in that it keeps a lodging and boarding
house. It may be admitted that there are 64 persons occupying rooms in the main building as
lodgers or roomers and that they take their meals at the restaurant below. These facts, however, are
far from constituting a business in ordinary acceptation of the word. In the first place, no profit is
realized by the association in any sense. In the second place, it is undoubted, as it is undisputed,
that the purpose of the association is not, primarily, to obtain the money which comes from the
lodgers and boarders. The real purpose is to keep the membership continually within the sphere of
influence of the institution; and thereby to prevent, as far as possible, the opportunities which vice
president to young men in foreign countries who lack home or other similar influences. We regard
this feature of the institution not as a business or means of making money, but, rather, as a very
efficient means of maintaining the influence of the institution over its membership. As we held in the
case of the Columbia Club, religious and moral teachings do not always stop with the spoken word;
but to be effective in the highest degree they must follow the young man through as many moments
of his life as possible. To this end the feature of the Young Men's Christian Association to which
objection is made lends itself with great effect; and we are, accordingly, forced to regards this activity
of the institution not as a business but as a method by which the institution maintains its influence
and conserves the benefits which its organization was designed to confer.

As we have seen in the description already given of the association building and grounds, no part is
occupied for any but institutional purposes. From end to end the building and grounds are devoted
exclusively to the purposes stated in the constitution of the association. The library and reading
rooms, the game and lounging halls, the lecture rooms, the auditorium, the baths, pools, devices for
physical development, and the grounds, are all dedicated exclusively to the objects and purpose of
the association the building of Christian character and the creation of moral sentiment and fiber in
men. It is the belief of the Young Men's Christian Association that a Christian man, a man of moral
sentiment and firm moral fiber, is yet a better man for being also all-round man one who is sound
not only according to Christian principles and the highest moral conceptions, but physically and
mentally; whose body and mind act in harmony and within the limits which the rights of others set;
who are gentleman in physical and mental struggles, as well as in religious service; who have self-
respect and self-restraint; who can hit hard and still kindly; who can lose without envy; who can
congratulate his conqueror with sincerity; who can vie without temper, contend without malice,
concede without regret; who can win and still be generous, in short, one who fights hard but
square. To the production of such men the association lends all its efforts, husbands all its
resources.

We are aware that there are many decisions holding that institutions of this character are not exempt
from taxation; but, on investigation, we find that the majority of them are based on statutes much
narrower than the one under consider and that in all probability the decisions would have been
otherwise if the court had been passing on a statute similar to ours. On the other hand, there are
many decisions of the courts in the United States founded on statutes like the Philippine statute
which hold that associations of this class are exempt from taxation. We have examined all of the
decisions, both for and against, with care and deliberation, and we are convinced that the weight of
authority sustains the positions we take in this case.

There is no doubt about the correctness of the contention that an institution must devote itself
exclusively to one or the other of the purpose mentioned in the statute before it can be exempt from
taxation; but the statute does not say that it must be devoted exclusively to any one of the purposes
therein mentioned. It may be a combination of two or three or more of those purposes and still be
entitled to exempt. The Young Men's Christian Association of Manila cannot be said to be an
institution used exclusively for religious purposes, or an institution used exclusively for charitable
purposes, or an institution devoted exclusively to educational purposes; but we believe it can be
truthfully said that it is an institution used exclusively for all three purposes, and that, as such, it is
entitled to be exempted from taxation.

The judgment appealed from is reversed and the cause remanded with instructions to enter a
judgment against the city of Manila and in favor of the Young Men's Christian Association of Manila
in the sum of P6,221.35. Without costs in this instance. So ordered.

Arellano, C.J., Torres, Johnson and Araullo, JJ., concur.

Separate Opinions

CARSON, J., dissenting:

I dissent.

I base my dissent on substantially identical grounds with those upon which I dissented in the
Columbia Club case (No. 5336, Domestic, etc., Missionary Society vs. City of Manila, March 16,
1910., unpublished); and in explanation of my dissent in this case, I set out here my dissenting
opinion in the former case. With the substitution of the name of the Young Men's Christian
Association of Manila for that of the Columbia Club, that opinion sets forth very summarily the
grounds of my dissent in this case.

Firmly convinced as I am that statutory exemptions from taxation should be strictly

constructed, I am constrained to dissent.

This cardinal rule of American jurisprudence is based on the strongest reasons of public
policy and is supported by abundant authority. As stated Mr. Justice Johnson in his
dissenting opinion in Roman Catholic Church vs. Hastings and City of Manila ( 5 Phil. Rep.,
701, 708). "It is the theory of the Government that all property within the State held by
individuals or corporations should contribute equally, in portions to its value to the support of
the Government, in return for the protection which such property receives at the hands of the
Government. This being the policy of the Government, a law which relieves any property
from this burden should be strictly construed, to the end that no individual or corporation
shall be relieved from bearing his or its full share of the burdens of taxation unless the law
expressly so provides. This exemption should not be allowed by any strained or unnatural
interpretation of law."

I am not a whit less satisfied than my brethren that, in the language of appellee's brief, "To
have lived in the city of Manila is to know the immeasurable benefit accomplished by the
Young Men's Christian Association, a benefit so extensively as to call forth gratitude and
appreciation, not only from those personally interested in the purity of life led by Manila's
young manhood, but from the foremost administrators of America's benign mission in these
Islands;" but I am wholly unable to agree, that the lands or buildings occupied by it are "used
exclusively for religious, charitable, scientific or educational purposes, and not for profit," the
only ground upon which the exemption form taxation in question in these proceedings can
sustained.

THE ROMAN CATHOLIC BISHOP OF NUEVA SEGOVIA, as representative of the Roman

Catholic Apostolic Church, plaintiff-appellant, vs. THE PROVINCIAL BOARD OF ILOCOS
NORTE, ET AL., defendants-appellants. G.R. No. L-27588 December 31, 1927

AVANCEA, J.:
The plaintiff, the Roman Catholic Apostolic Church, represented by the Bishop of Nueva Segovia,
possesses and is the owner of a parcel of land in the municipality of San Nicolas, Ilocos Norte, all
four sides of which face on public streets. On the south side is a part of the churchyard, the convent
and an adjacent lot used for a vegetable garden, containing an area off 1,624 square meters, in
which there is a stable and a well for the use of the convent. In the center is the remainder of the
churchyard and the church. On the north is an old cemetery with two of its walls still standing, and a
portion where formerly stood a tower, the base of which still be seen, containing a total area of 8,955
square meters.

As required by the defendants, on July 3, 1925 the plaintiff paid, under protest, the land tax on the lot
adjoining the convent and the lot which formerly was the cemetery with the portion where the tower
stood.

The plaintiff filed this action for the recovery of the sum paid by to the defendants by way of land tax,
alleging that the collection of this tax is illegal. The lower court absolved the defendants from the
complaint in regard to the lot adjoining convent and declared that the tax collected on the lot, which
formerly was the cemetery and on the portion where the lower stood, was illegal. Both parties
appealed from this judgment.

The exemption in favor of the convent in the payment of the land tax (sec. 344 [c] Administrative
Code) refers to the home of the parties who presides over the church and who has to take care of
himself in order to discharge his duties. In therefore must, in the sense, include not only the land
actually occupied by the church, but also the adjacent ground destined to the ordinary incidental
uses of man. Except in large cities where the density of the population and the development of
commerce require the use of larger tracts of land for buildings, a vegetable garden belongs to a
house and, in the case of a convent, it use is limited to the necessities of the priest, which comes
under the exemption. lawphi1.net

In regard to the lot which formerly was the cemetery, while it is no longer used as such, neither is it
used for commercial purposes and, according to the evidence, is now being used as a lodging house
by the people who participate in religious festivities, which constitutes an incidental use in religious
functions, which also comes within the exemption.

The judgment appealed from is reversed in all it parts and it is held that both lots are exempt from
land tax and the defendants are ordered to refund to plaintiff whatever was paid as such tax, without
any special pronouncement as to costs. So ordered.

Johnson, Street, Villamor, Ostrand, Johns and Villa-Real, JJ., concur.

Separate Opinions

MALCOLM, J., dissenting:

The Assessment Law exempts from taxation "Cemeteries or burial grounds . . . and all lands,
buildings, and improvements use exclusively for religious . . . purposes, but this exemption shall not
extend to property held for investment, or which produces income, even though the income be
devoted to some one or more of the purposes above specified." (Administrative Code, sec. 344; Act
No. 2749, sec. 1.) That is the applicable law. The facts may be taken as found by the judge of First
Instance, who made his findings more certain by an ocular inspection of the property under
consideration. The testimony and the inspection disclosed that the lot Known as "huerta" was not
devoted to religious purposes, and that the old cemetery had long since leased to be used as such
and had been planted to corn. Those are the facts. The test to be applied to the combined law and
facts must be the actual use of the property. The property legally exempt from the payment of taxes
must be devoted to some purpose specified in the law. A "huerta" not needed or used exclusively for
religious purposes is not thus exempt. A cemetery or burial ground no longer a cemetery or a burial
ground is not thus exempt. Accordingly, I prefer to vote for the affirmance of Judge Mariano's
decision.

REV. FR. CASIMIRO LLADOC, petitioner, vs. The COMMISSIONER OF INTERNAL REVENUE
and The COURT of TAX APPEALS, respondents. G.R. No. L-19201 June 16, 1965
PAREDES, J.:

Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr.
Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and predecessor of herein petitioner,
for the construction of a new Catholic Church in the locality. The total amount was actually spent for
the purpose intended.

On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of April
29, 1960, the respondent Commissioner of Internal Revenue issued an assessment for donee's gift
tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner was the priest.
The tax amounted to P1,370.00 including surcharges, interests of 1% monthly from May 15, 1958 to
June 15, 1960, and the compromise for the late filing of the return.

Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest and
the motion for reconsideration presented to the Commissioner of Internal Revenue were denied. The
petitioner appealed to the Court of Tax Appeals on November 2, 1960. In the petition for review, the
Rev. Fr. Casimiro Lladoc claimed, among others, that at the time of the donation, he was not the
parish priest in Victorias; that there is no legal entity or juridical person known as the "Catholic Parish
Priest of Victorias," and, therefore, he should not be liable for the donee's gift tax. It was also
asserted that the assessment of the gift tax, even against the Roman Catholic Church, would not be
valid, for such would be a clear violation of the provisions of the Constitution.

After hearing, the CTA rendered judgment, the pertinent portions of which are quoted below:

... . Parish priests of the Roman Catholic Church under canon laws are similarly situated as
its Archbishops and Bishops with respect to the properties of the church within their parish.
They are the guardians, superintendents or administrators of these properties, with the right
of succession and may sue and be sued.

xxx xxx xxx

The petitioner impugns the, fairness of the assessment with the argument that he should not
be held liable for gift taxes on donation which he did not receive personally since he was not
yet the parish priest of Victorias in the year 1957 when said donation was given. It is
intimated that if someone has to pay at all, it should be petitioner's predecessor, the Rev. Fr.
Crispin Ruiz, who received the donation in behalf of the Catholic parish of Victorias or the
Roman Catholic Church. Following petitioner's line of thinking, we should be equally unfair to
hold that the assessment now in question should have been addressed to, and collected
from, the Rev. Fr. Crispin Ruiz to be paid from income derived from his present parish where
ever it may be. It does not seem right to indirectly burden the present parishioners of Rev. Fr.
Ruiz for donee's gift tax on a donation to which they were not benefited.

xxx xxx xxx

We saw no legal basis then as we see none now, to include within the Constitutional
exemption, taxes which partake of the nature of an excise upon the use made of the
properties or upon the exercise of the privilege of receiving the properties. (Phipps vs.
Commissioner of Internal Revenue, 91 F [2d] 627; 1938, 302 U.S. 742.)

It is a cardinal rule in taxation that exemptions from payment thereof are highly disfavored by
law, and the party claiming exemption must justify his claim by a clear, positive, or express
grant of such privilege by law. (Collector vs. Manila Jockey Club, G.R. No. L-8755, March 23,
1956; 53 O.G. 3762.)

The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the
Constitution of the Philippines, should not be interpreted to mean exemption from all kinds of
taxes. Statutes exempting charitable and religious property from taxation should be
construed fairly though strictly and in such manner as to give effect to the main intent of the
lawmakers. (Roman Catholic Church vs. Hastrings 5 Phil. 701.)
 xxx xxx xxx

WHEREFORE, in view of the foregoing considerations, the decision of the respondent

Commissioner of Internal Revenue appealed from, is hereby affirmed except with regard to
the imposition of the compromise penalty in the amount of P20.00 (Collector of Internal
Revenue v. U.S.T., G.R. No. L-11274, Nov. 28, 1958); ..., and the petitioner, the Rev. Fr.
Casimiro Lladoc is hereby ordered to pay to the respondent the amount of P900.00 as
donee's gift tax, plus the surcharge of five per centum (5%) as ad valorem penalty under
Section 119 (c) of the Tax Code, and one per centum (1%) monthly interest from May 15,
1958 to the date of actual payment. The surcharge of 25% provided in Section 120 for failure
to file a return may not be imposed as the failure to file a return was not due to willful
neglect.( ... ) No costs.

The above judgment is now before us on appeal, petitioner assigning two (2) errors allegedly
committed by the Tax Court, all of which converge on the singular issue of whether or not petitioner
should be liable for the assessed donee's gift tax on the P10,000.00 donated for the construction of
the Victorias Parish Church.

Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation
cemeteries, churches and parsonages or convents, appurtenant thereto, and all lands, buildings,
and improvements used exclusively for religious purposes. The exemption is only from the payment
of taxes assessed on such properties enumerated, as property taxes, as contra distinguished from
excise taxes. In the present case, what the Collector assessed was a donee's gift tax; the
assessment was not on the properties themselves. It did not rest upon general ownership; it was an
excise upon the use made of the properties, upon the exercise of the privilege of receiving the
properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the exempting
provisions of the section just mentioned. A gift tax is not a property tax, but an excise tax imposed on
the transfer of property by way of gift inter vivos, the imposition of which on property used
exclusively for religious purposes, does not constitute an impairment of the Constitution. As well
observed by the learned respondent Court, the phrase "exempt from taxation," as employed in the
Constitution (supra) should not be interpreted to mean exemption from all kinds of taxes. And there
being no clear, positive or express grant of such privilege by law, in favor of petitioner, the exemption
herein must be denied.

The next issue which readily presents itself, in view of petitioner's thesis, and Our finding that a tax
liability exists, is, who should be called upon to pay the gift tax? Petitioner postulates that he should
not be liable, because at the time of the donation he was not the priest of Victorias. We note the
merit of the above claim, and in order to put things in their proper light, this Court, in its Resolution of
March 15, 1965, ordered the parties to show cause why the Head of the Diocese to which the parish
of Victorias pertains, should not be substituted in lieu of petitioner Rev. Fr. Casimiro Lladoc it
appearing that the Head of such Diocese is the real party in interest. The Solicitor General, in
representation of the Commissioner of Internal Revenue, interposed no objection to such a
substitution. Counsel for the petitioner did not also offer objection thereto.

On April 30, 1965, in a resolution, We ordered the Head of the Diocese to present whatever legal
issues and/or defenses he might wish to raise, to which resolution counsel for petitioner, who also
appeared as counsel for the Head of the Diocese, the Roman Catholic Bishop of Bacolod,
manifested that it was submitting itself to the jurisdiction and orders of this Court and that it was
presenting, by reference, the brief of petitioner Rev. Fr. Casimiro Lladoc as its own and for all
purposes.

In view here of and considering that as heretofore stated, the assessment at bar had been properly
made and the imposition of the tax is not a violation of the constitutional provision exempting
churches, parsonages or convents, etc. (Art VI, sec. 22 [3], Constitution), the Head of the Diocese,
to which the parish Victorias Pertains, is liable for the payment thereof.

The decision appealed from should be, as it is hereby affirmed insofar as tax liability is concerned; it
is modified, in the sense that petitioner herein is not personally liable for the said gift tax, and that the
Head of the Diocese, herein substitute petitioner, should pay, as he is presently ordered to pay, the
said gift tax, without special, pronouncement as to costs.
THE PROVINCE OF ABRA, represented by LADISLAO ANCHETA, Provincial
Assessor, petitioner, vs. HONORABLE HAROLD M. HERNANDO, in his capacity as Presiding
Judge of Branch I, Court of First Instance Abra; THE ROMAN CATHOLIC BISHOP OF
BANGUED, INC., represented by Bishop Odilo etspueler and Reverend Felipe
Flores, respondents. G.R. No. L-49336 August 31, 1981

FERNANDO, C.J.:

On the face of this certiorari and mandamus petition filed by the Province of Abra, 1 it clearly appears
that the actuation of respondent Judge Harold M. Hernando of the Court of First Instance of Abra left
much to be desired. First, there was a denial of a motion to dismiss 2 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 3granting such exemption, without even hearing the side
of petitioner. In the rather vigorous language of the Acting Provincial Fiscal, as counsel for petitioner,
respondent Judge "virtually ignored the pertinent provisions of the Rules of Court; ... 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." 4

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. 5 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 which provides as follows: "No court
shall entertain any suit assailing the validity of a tax assessed under this Code until the taxpayer,
shall have paid, under protest, the tax assessed against him nor shall any court declare any tax
invalid by reason of irregularities or informalities in the proceedings of the officers charged with the
assessment or collection of taxes, or of failure to perform their duties within this time herein specified
for their performance unless such irregularities, informalities or failure shall have impaired the
substantial rights of the taxpayer; nor shall any court declare any portion of the tax assessed under
the provisions of this Code invalid except upon condition that the taxpayer shall pay the just amount
of the tax, as determined by the court in the pending proceeding." 6

When asked to comment, respondent Judge began with the allegation that there "is no question that
the real properties sought to be taxed by the Province of Abra are properties of the respondent
Roman Catholic Bishop of Bangued, Inc." 7 The very next sentence assumed the very point it asked
when he categorically stated: "Likewise, there is no dispute that the properties including their
procedure are actually, directly and exclusively used by the Roman Catholic Bishop of Bangued, Inc.
for religious or charitable purposes." 8 For him then: "The proper remedy of the petitioner is appeal
and not this special civil action." 9 A more exhaustive comment was submitted by private respondent
Roman Catholic Bishop of Bangued, Inc. It was, however, unable to lessen the force of the objection
raised by petitioner Province of Abra, especially the due process aspect. it is to be admitted that his
opposition to the petition, pressed with vigor, ostensibly finds a semblance of support from the
authorities cited. It is thus impressed with a scholarly aspect. It suffers, however, from the grave
infirmity of stating that only a pure question of law is presented when a claim for exemption is made.

The petition must be granted.

1. 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." 10 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. 11 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: 12"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." 13 In Manila Electric Company v. Vera, 14 a 1975 decision, such principle
was reiterated, reference being made to Republic Flour Mills, Inc. v. Commissioner of Internal
Revenue; 15 Commissioner of Customs v. Philippine Acetylene Co. & CTA; 16 and Davao Light and
Power Co., Inc. v. Commissioner of Customs. 17

2. Petitioner Province of Abra is therefore fully justified in invoking the protection of procedural due
process. If there is any case where proof is necessary to demonstrate that there is compliance with
the constitutional provision that allows an exemption, this is it. Instead, respondent Judge accepted
at its face the allegation of private respondent. All that was alleged in the petition for declaratory
relief filed by private respondents, after mentioning certain parcels of land owned by it, are that they
are used "actually, directly and exclusively" as sources of support of the parish priest and his helpers
and also of private respondent Bishop. 18 In the motion to dismiss filed on behalf of petitioner
Province of Abra, the objection was based primarily on the lack of jurisdiction, as the validity of a tax
assessment may be questioned before the Local Board of Assessment Appeals and not with a court.
There was also mention of a lack of a cause of action, but only because, in its view, declaratory relief
is not proper, as there had been breach or violation of the right of government to assess and collect
taxes on such property. It clearly appears, therefore, that in failing to accord a hearing to petitioner
Province of Abra and deciding the case immediately in favor of private respondent, respondent
Judge failed to abide by the constitutional command of procedural due process.

WHEREFORE, the petition is granted and the resolution of June 19, 1978 is set aside. Respondent
Judge, or who ever is acting on his behalf, is ordered to hear the case on the merit. No costs.

G.R. No. L-9637 April 30, 1957

AMERICAN BIBLE SOCIETY, plaintiff-appellant, vs. CITY OF MANILA, defendant-appellee.

FELIX, J.:

Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered

and doing business in the Philippines through its Philippine agency established in Manila in
November, 1898, with its principal office at 636 Isaac Peral in said City. The defendant appellee is a
municipal corporation with powers that are to be exercised in conformity with the provisions of
Republic Act No. 409, known as the Revised Charter of the City of Manila.

In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles
and/or gospel portions thereof (except during the Japanese occupation) throughout the Philippines
and translating the same into several Philippine dialects. On May 29 1953, the acting City Treasurer
of the City of Manila informed plaintiff that it was conducting the business of general merchandise
since November, 1945, without providing itself with the necessary Mayor's permit and municipal
license, in violation of Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and
3364, and required plaintiff to secure, within three days, the corresponding permit and license fees,
together with compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of
1953, in the total sum of P5,821.45 (Annex A).

Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff deposit
and pay under protest the sum of P5,891.45, if suit was to be taken in court regarding the same
(Annex B). To avoid the closing of its business as well as further fines and penalties in the premises
on October 24, 1953, plaintiff paid to the defendant under protest the said permit and license fees in
the aforementioned amount, giving at the same time notice to the City Treasurer that suit would be
taken in court to question the legality of the ordinances under which, the said fees were being
collected (Annex C), which was done on the same date by filing the complaint that gave rise to this
action. In its complaint plaintiff prays that judgment be rendered declaring the said Municipal
Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and 3364 illegal and
unconstitutional, and that the defendant be ordered to refund to the plaintiff the sum of P5,891.45
paid under protest, together with legal interest thereon, and the costs, plaintiff further praying for
such other relief and remedy as the court may deem just equitable.

Defendant answered the complaint, maintaining in turn that said ordinances were enacted by the
Municipal Board of the City of Manila by virtue of the power granted to it by section 2444, subsection
(m-2) of the Revised Administrative Code, superseded on June 18, 1949, by section 18, subsection
(1) of Republic Act No. 409, known as the Revised Charter of the City of Manila, and praying that the
complaint be dismissed, with costs against plaintiff. This answer was replied by the plaintiff
reiterating the unconstitutionality of the often-repeated ordinances.

Before trial the parties submitted the following stipulation of facts:

COME NOW the parties in the above-entitled case, thru their undersigned attorneys and
respectfully submit the following stipulation of facts:

1. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac Peral,
Manila, Bibles, New Testaments, bible portions and bible concordance in English and other
foreign languages imported by it from the United States as well as Bibles, New Testaments
and bible portions in the local dialects imported and/or purchased locally; that from the fourth
quarter of 1945 to the first quarter of 1953 inclusive the sales made by the plaintiff were as
follows:

Quarter Amount of Sales 1st quarter 1950 18,562.46

4th quarter 1945 P1,244.21 2nd quarter 1950 21,816.32

1st quarter 1946 2,206.85 3rd quarter 1950 25,004.55

2nd quarter 1946 1,950.38 4th quarter 1950 45,287.92

3rd quarter 1946 2,235.99 1st quarter 1951 37,841.21

4th quarter 1946 3,256.04 2nd quarter 1951 29,103.98

1st quarter 1947 13,241.07 3rd quarter 1951 20,181.10

2nd quarter 1947 15,774.55 4th quarter 1951 22,968.91

3rd quarter 1947 14,654.13 1st quarter 1952 23,002.65

4th quarter 1947 12,590.94 2nd quarter 1952 17,626.96

1st quarter 1948 11,143.90 3rd quarter 1952 17,921.01

2nd quarter 1948 14,715.26 4th quarter 1952 24,180.72

3rd quarter 1948 38,333.83 1st quarter 1953 29,516.21

4th quarter 1948 16,179.90

1st quarter 1949 23,975.10

2nd quarter 1949 17,802.08

3rd quarter 1949 16,640.79

4th quarter 1949 15,961.38

 2. That the parties hereby reserve the right to present evidence of other facts not herein
stipulated.

WHEREFORE, it is respectfully prayed that this case be set for hearing so that the parties
may present further evidence on their behalf. (Record on Appeal, pp. 15-16).

When the case was set for hearing, plaintiff proved, among other things, that it has been in existence
in the Philippines since 1899, and that its parent society is in New York, United States of America;
that its, contiguous real properties located at Isaac Peral are exempt from real estate taxes; and that
it was never required to pay any municipal license fee or tax before the war, nor does the American
Bible Society in the United States pay any license fee or sales tax for the sale of bible therein.
Plaintiff further tried to establish that it never made any profit from the sale of its bibles, which are
disposed of for as low as one third of the cost, and that in order to maintain its operating cost it
obtains substantial remittances from its New York office and voluntary contributions and gifts from
certain churches, both in the United States and in the Philippines, which are interested in its
missionary work. Regarding plaintiff's contention of lack of profit in the sale of bibles, defendant
retorts that the admissions of plaintiff-appellant's lone witness who testified on cross-examination
that bibles bearing the price of 70 cents each from plaintiff-appellant's New York office are sold here
by plaintiff-appellant at P1.30 each; those bearing the price of $4.50 each are sold here at P10 each;
those bearing the price of $7 each are sold here at P15 each; and those bearing the price of $11
each are sold here at P22 each, clearly show that plaintiff's contention that it never makes any profit
from the sale of its bible, is evidently untenable.

After hearing the Court rendered judgment, the last part of which is as follows:

As may be seen from the repealed section (m-2) of the Revised Administrative Code and the
repealing portions (o) of section 18 of Republic Act No. 409, although they seemingly differ in
the way the legislative intent is expressed, yet their meaning is practically the same for the
purpose of taxing the merchandise mentioned in said legal provisions, and that the taxes to
be levied by said ordinances is in the nature of percentage graduated taxes (Sec. 3 of
Ordinance No. 3000, as amended, and Sec. 1, Group 2, of Ordinance No. 2529, as
amended by Ordinance No. 3364).

IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of the opinion and so

holds that this case should be dismissed, as it is hereby dismissed, for lack of merits, with
costs against the plaintiff.

Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certified the
case to Us for the reason that the errors assigned to the lower Court involved only questions of law.

Appellant contends that the lower Court erred:

1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, are not
unconstitutional;

2. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code under
which Ordinances Nos. 2592 and 3000 were promulgated, was not repealed by Section 18 of
Republic Act No. 409;

3. In not holding that an ordinance providing for taxes based on gross sales or receipts, in
order to be valid under the new Charter of the City of Manila, must first be approved by the
President of the Philippines; and

4. In holding that, as the sales made by the plaintiff-appellant have assumed commercial
proportions, it cannot escape from the operation of said municipal ordinances under the
cloak of religious privilege.

The issues. As may be seen from the proceeding statement of the case, the issues involved in
the present controversy may be reduced to the following: (1) whether or not the ordinances of the
City of Manila, Nos. 3000, as amended, and 2529, 3028 and 3364, are constitutional and valid; and
(2) whether the provisions of said ordinances are applicable or not to the case at bar.

Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides
that:

(7) No law shall be made respecting an establishment of religion, or prohibiting the free
exercise thereof, and the free exercise and enjoyment of religious profession and worship,
without discrimination or preference, shall forever be allowed. No religion test shall be
required for the exercise of civil or political rights.

Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos. 2529
and 3000, as respectively amended, are unconstitutional and illegal in so far as its society is
concerned, because they provide for religious censorship and restrain the free exercise and
enjoyment of its religious profession, to wit: the distribution and sale of bibles and other religious
literature to the people of the Philippines.

Before entering into a discussion of the constitutional aspect of the case, We shall first consider the
provisions of the questioned ordinances in relation to their application to the sale of bibles, etc. by
appellant. The records, show that by letter of May 29, 1953 (Annex A), the City Treasurer required
plaintiff to secure a Mayor's permit in connection with the society's alleged business of distributing
and selling bibles, etc. and to pay permit dues in the sum of P35 for the period covered in this
litigation, plus the sum of P35 for compromise on account of plaintiff's failure to secure the permit
required by Ordinance No. 3000 of the City of Manila, as amended. This Ordinance is of general
application and not particularly directed against institutions like the plaintiff, and it does not contain
any provisions whatever prescribing religious censorship nor restraining the free exercise and
enjoyment of any religious profession. Section 1 of Ordinance No. 3000 reads as follows:

SEC. 1. PERMITS NECESSARY. It shall be unlawful for any person or entity to conduct
or engage in any of the businesses, trades, or occupations enumerated in Section 3 of this
Ordinance or other businesses, trades, or occupations for which a permit is required for the
proper supervision and enforcement of existing laws and ordinances governing the
sanitation, security, and welfare of the public and the health of the employees engaged in the
business specified in said section 3 hereof, WITHOUT FIRST HAVING OBTAINED A
PERMIT THEREFOR FROM THE MAYOR AND THE NECESSARY LICENSE FROM THE
CITY TREASURER.

The business, trade or occupation of the plaintiff involved in this case is not particularly mentioned in
Section 3 of the Ordinance, and the record does not show that a permit is required therefor under
existing laws and ordinances for the proper supervision and enforcement of their provisions
governing the sanitation, security and welfare of the public and the health of the employees engaged
in the business of the plaintiff. However, sections 3 of Ordinance 3000 contains item No. 79, which
reads as follows:

79. All other businesses, trades or occupations not

mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00

Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax
said business, trade or occupation.

As to the license fees that the Treasurer of the City of Manila required the society to pay from the 4th
quarter of 1945 to the 1st quarter of 1953 in the sum of P5,821.45, including the sum of P50 as
compromise, Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028
prescribes the following:

SEC. 1. FEES. Subject to the provisions of section 578 of the Revised Ordinances of the
City of Manila, as amended, there shall be paid to the City Treasurer for engaging in any of
the businesses or occupations below enumerated, quarterly, license fees based on gross
sales or receipts realized during the preceding quarter in accordance with the rates herein
 prescribed: PROVIDED, HOWEVER, That a person engaged in any businesses or
occupation for the first time shall pay the initial license fee based on the probable gross sales
or receipts for the first quarter beginning from the date of the opening of the business as
indicated herein for the corresponding business or occupation.

xxx xxx xxx

GROUP 2. Retail dealers in new (not yet used) merchandise, which dealers are not yet
subject to the payment of any municipal tax, such as (1) retail dealers in general
merchandise; (2) retail dealers exclusively engaged in the sale of . . . books, including
stationery.

xxx xxx xxx

As may be seen, the license fees required to be paid quarterly in Section 1 of said Ordinance No.
2529, as amended, are not imposed directly upon any religious institution but upon those engaged in
any of the business or occupations therein enumerated, such as retail "dealers in general
merchandise" which, it is alleged, cover the business or occupation of selling bibles, books, etc.

Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) of
said legal body, as amended by Act No. 3659, approved on December 8, 1929, empowers the
Municipal Board of the City of Manila:

(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both,
and (b) retail dealers in new (not yet used) merchandise, which dealers are not yet subject to
the payment of any municipal tax.

For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in
general merchandise, and (2) retail dealers exclusively engaged in the sale of (a) textiles . . .
(e) books, including stationery, paper and office supplies, . . .: PROVIDED, HOWEVER, That
the combined total tax of any debtor or manufacturer, or both, enumerated under these
subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned herein,
SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS PER ANNUM.

and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, were
enacted in virtue of the power that said Act No. 3669 conferred upon the City of Manila. Appellant,
however, contends that said ordinances are longer in force and effect as the law under which they
were promulgated has been expressly repealed by Section 102 of Republic Act No. 409 passed
on June 18, 1949, known as the Revised Manila Charter.

Passing upon this point the lower Court categorically stated that Republic Act No. 409 expressly
repealed the provisions of Chapter 60 of the Revised Administrative Code but in the opinion of the
trial Judge, although Section 2444 (m-2) of the former Manila Charter and section 18 (o) of the new
seemingly differ in the way the legislative intent was expressed, yet their meaning is practically the
same for the purpose of taxing the merchandise mentioned in both legal provisions and,
consequently, Ordinances Nos. 2529 and 3000, as amended, are to be considered as still in full
force and effect uninterruptedly up to the present.

Often the legislature, instead of simply amending the pre-existing statute, will repeal the old
statute in its entirety and by the same enactment re-enact all or certain portions of the
preexisting law. Of course, the problem created by this sort of legislative action involves
mainly the effect of the repeal upon rights and liabilities which accrued under the original
statute. Are those rights and liabilities destroyed or preserved? The authorities are divided as
to the effect of simultaneous repeals and re-enactments. Some adhere to the view that the
rights and liabilities accrued under the repealed act are destroyed, since the statutes from
which they sprang are actually terminated, even though for only a very short period of
time. Others, and they seem to be in the majority, refuse to accept this view of the situation,
and consequently maintain that all rights an liabilities which have accrued under the original
statute are preserved and may be enforced, since the re-enactment neutralizes the repeal,
 therefore, continuing the law in force without interruption. (Crawford-Statutory Construction,
Sec. 322).

Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces a new and wider
concept of taxation and is different from the provisions of Section 2444(m-2) that the former cannot
be considered as a substantial re-enactment of the provisions of the latter. We have quoted above
the provisions of section 2444(m-2) of the Revised Administrative Code and We shall now copy
hereunder the provisions of Section 18, subdivision (o) of Republic Act No. 409, which reads as
follows:

(o) To tax and fix the license fee on dealers in general merchandise, including importers and
indentors, except those dealers who may be expressly subject to the payment of some other
municipal tax under the provisions of this section.

Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail
dealers. For purposes of the tax on retail dealers, general merchandise shall be classified
into four main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential
commodities, and (4) miscellaneous articles. A separate license shall be prescribed for each
class but where commodities of different classes are sold in the same establishment, it shall
not be compulsory for the owner to secure more than one license if he pays the higher or
highest rate of tax prescribed by ordinance. Wholesale dealers shall pay the license tax as
such, as may be provided by ordinance.

For purposes of this section, the term "General merchandise" shall include poultry and
livestock, agricultural products, fish and other allied products.

The only essential difference that We find between these two provisions that may have any bearing
on the case at bar, is that, while subsection (m-2) prescribes that the combined total tax of any
dealer or manufacturer, or both, enumerated under subsections (m-1) and (m-2), whether dealing in
one or all of the articles mentioned therein, shall not be in excess of P500 per annum, the
corresponding section 18, subsection (o) of Republic Act No. 409, does not contain any limitation as
to the amount of tax or license fee that the retail dealer has to pay per annum. Hence, and in
accordance with the weight of the authorities above referred to that maintain that "all rights and
liabilities which have accrued under the original statute are preserved and may be enforced, since
the reenactment neutralizes the repeal, therefore continuing the law in force without interruption",
We hold that the questioned ordinances of the City of Manila are still in force and effect.

Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved by the
President of the Philippines as per section 18, subsection (ii) of Republic Act No. 409, which reads
as follows:

(ii) To tax, license and regulate any business, trade or occupation being conducted within the
City of Manila, not otherwise enumerated in the preceding subsections, including percentage
taxes based on gross sales or receipts, subject to the approval of the PRESIDENT, except
amusement taxes.

but this requirement of the President's approval was not contained in section 2444 of the former
Charter of the City of Manila under which Ordinance No. 2529 was promulgated. Anyway, as stated
by appellee's counsel, the business of "retail dealers in general merchandise" is expressly
enumerated in subsection (o), section 18 of Republic Act No. 409; hence, an ordinance prescribing a
municipal tax on said business does not have to be approved by the President to be effective, as it is
not among those referred to in said subsection (ii). Moreover, the questioned ordinances are still in
force, having been promulgated by the Municipal Board of the City of Manila under the authority
granted to it by law.

The question that now remains to be determined is whether said ordinances are inapplicable, invalid
or unconstitutional if applied to the alleged business of distribution and sale of bibles to the people of
the Philippines by a religious corporation like the American Bible Society, plaintiff herein.
With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028,
appellant contends that it is unconstitutional and illegal because it restrains the free exercise and
enjoyment of the religious profession and worship of appellant.

Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the
freedom of religious profession and worship. "Religion has been spoken of as a profession of faith to
an active power that binds and elevates man to its Creator" (Aglipay vs. Ruiz, 64 Phil., 201).It has
reference to one's views of his relations to His Creator and to the obligations they impose of
reverence to His being and character, and obedience to His Will (Davis vs. Beason, 133 U.S., 342).
The constitutional guaranty of the free exercise and enjoyment of religious profession and worship
carries with it the right to disseminate religious information. Any restraints of such right can only be
justified like other restraints of freedom of expression on the grounds that there is a clear and
present danger of any substantive evil which the State has the right to prevent". (Taada and
Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p. 297). In the case at bar the license
fee herein involved is imposed upon appellant for its distribution and sale of bibles and other
religious literature:

In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a
license be obtained before a person could canvass or solicit orders for goods, paintings,
pictures, wares or merchandise cannot be made to apply to members of Jehovah's
Witnesses who went about from door to door distributing literature and soliciting people to
"purchase" certain religious books and pamphlets, all published by the Watch Tower Bible &
Tract Society. The "price" of the books was twenty-five cents each, the "price" of the
pamphlets five cents each. It was shown that in making the solicitations there was a request
for additional "contribution" of twenty-five cents each for the books and five cents each for
the pamphlets. Lesser sum were accepted, however, and books were even donated in case
interested persons were without funds.

On the above facts the Supreme Court held that it could not be said that petitioners were
engaged in commercial rather than a religious venture. Their activities could not be
described as embraced in the occupation of selling books and pamphlets. Then the Court
continued:

"We do not mean to say that religious groups and the press are free from all financial
burdens of government. See Grosjean vs. American Press Co., 297 U.S., 233, 250, 80 L. ed.
660, 668, 56 S. Ct. 444. We have here something quite different, for example, from a tax on
the income of one who engages in religious activities or a tax on property used or employed
in connection with activities. It is one thing to impose a tax on the income or property of a
preacher. It is quite another to exact a tax from him for the privilege of delivering a sermon.
The tax imposed by the City of Jeannette is a flat license tax, payment of which is a condition
of the exercise of these constitutional privileges. The power to tax the exercise of a privilege
is the power to control or suppress its enjoyment. . . . Those who can tax the exercise of this
religious practice can make its exercise so costly as to deprive it of the resources necessary
for its maintenance. Those who can tax the privilege of engaging in this form of missionary
evangelism can close all its doors to all those who do not have a full purse. Spreading
religious beliefs in this ancient and honorable manner would thus be denied the needy. . . .

It is contended however that the fact that the license tax can suppress or control this activity
is unimportant if it does not do so. But that is to disregard the nature of this tax. It is a license
tax a flat tax imposed on the exercise of a privilege granted by the Bill of Rights . . . The
power to impose a license tax on the exercise of these freedom is indeed as potent as the
power of censorship which this Court has repeatedly struck down. . . . It is not a nominal fee
imposed as a regulatory measure to defray the expenses of policing the activities in
question. It is in no way apportioned. It is flat license tax levied and collected as a condition
to the pursuit of activities whose enjoyment is guaranteed by the constitutional liberties of
press and religion and inevitably tends to suppress their exercise. That is almost uniformly
recognized as the inherent vice and evil of this flat license tax."

Nor could dissemination of religious information be conditioned upon the approval of an

official or manager even if the town were owned by a corporation as held in the case
of Marsh vs. State of Alabama (326 U.S. 501), or by the United States itself as held in the
 case of Tucker vs. Texas (326 U.S. 517). In the former case the Supreme Court expressed
the opinion that the right to enjoy freedom of the press and religion occupies a preferred
position as against the constitutional right of property owners.

"When we balance the constitutional rights of owners of property against those of the people
to enjoy freedom of press and religion, as we must here, we remain mindful of the fact that
the latter occupy a preferred position. . . . In our view the circumstance that the property
rights to the premises where the deprivation of property here involved, took place, were held
by others than the public, is not sufficient to justify the State's permitting a corporation to
govern a community of citizens so as to restrict their fundamental liberties and the
enforcement of such restraint by the application of a State statute." (Taada and Fernando
on the Constitution of the Philippines, Vol. 1, 4th ed., p. 304-306).

Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code,
provides:

SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. The following organizations

shall not be taxed under this Title in respect to income received by them as such

(e) Corporations or associations organized and operated exclusively for religious, charitable,
. . . or educational purposes, . . .: Provided, however, That the income of whatever kind and
character from any of its properties, real or personal, or from any activity conducted for profit,
regardless of the disposition made of such income, shall be liable to the tax imposed under
this Code;

Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from this
tax and says that such exemption clearly indicates that the act of distributing and selling bibles, etc.
is purely religious and does not fall under the above legal provisions.

It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was
in some instances a little bit higher than the actual cost of the same but this cannot mean that
appellant was engaged in the business or occupation of selling said "merchandise" for profit. For this
reason We believe that the provisions of City of Manila Ordinance No. 2529, as amended, cannot be
applied to appellant, for in doing so it would impair its free exercise and enjoyment of its religious
profession and worship as well as its rights of dissemination of religious beliefs.

With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit
before any person can engage in any of the businesses, trades or occupations enumerated therein,
We do not find that it imposes any charge upon the enjoyment of a right granted by the Constitution,
nor tax the exercise of religious practices. In the case of Coleman vs. City of Griffin, 189 S.E. 427,
this point was elucidated as follows:

An ordinance by the City of Griffin, declaring that the practice of distributing either by hand or
otherwise, circulars, handbooks, advertising, or literature of any kind, whether said articles
are being delivered free, or whether same are being sold within the city limits of the City of
Griffin, without first obtaining written permission from the city manager of the City of Griffin,
shall be deemed a nuisance and punishable as an offense against the City of Griffin, does
not deprive defendant of his constitutional right of the free exercise and enjoyment of
religious profession and worship, even though it prohibits him from introducing and carrying
out a scheme or purpose which he sees fit to claim as a part of his religious system.

It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if
applied to plaintiff Society. But as Ordinance No. 2529 of the City of Manila, as amended, is not
applicable to plaintiff-appellant and defendant-appellee is powerless to license or tax the business of
plaintiff Society involved herein for, as stated before, it would impair plaintiff's right to the free
exercise and enjoyment of its religious profession and worship, as well as its rights of dissemination
of religious beliefs, We find that Ordinance No. 3000, as amended is also inapplicable to said
business, trade or occupation of the plaintiff.
Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision
appealed from, sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it.
Without pronouncement as to costs. It is so ordered.