Republic of the Philippines

CENTRAL BOARD OF ASSESSMENT APPEALS M a n i l a

ADVENTIST INTERNATIONAL INSTITUTE OF ADVANCE STUDIES, INC. (AIIAS),
Petitioner-Appellant,

– versus –

CBAA Case No. L-08
Re: Tax Decl. No. 31705 Municipality of Silang

BOARD OF ASSESSMENT APPEALS OF THE PROVINCE OF CAVITE,
Appellee,

– and –

THE PROVINCIAL ASSESSOR OF CAVITE, Respondent-Appellee,
x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

This is an appeal filed by the Petitioner-Appellant Adventist International

Institute of Advanced Studies, Inc. (AIIAS), seeking to annul, reverse and set

aside the decision rendered by the Provincial Board of Assessment Appeals

(BTAA) of Cavite dispositive portion of which is herein quoted, viz:

“WHEREFORE, the Board is of the view that the subject properties enumerated under Tax Declaration No. 31705 in the name of the Adventist International Advanced Studies, Inc., are all classified as residential and therefore not exempt from payment of real estate taxes.”

Petitioner-Appellant, Adventist International Institute of Advance Studies

(AIIAS for short) is a non-profit educational institution duly recognized and

incorporated under the Philippine Laws. As the name implies, it is a foreign

school of special character, mostly of international student body, faculty,

management, composition, funding support programs, curriculum offerings,

calendar, fee structure, and academic standard, (Section 1, P.D. 2021). It

conducts its operations in its main office and building at Barrio Tubu-an, Silang,

Cavite, more or less 53 kilometers from the City of Manila on a lot which was

declared by the Respondent-Appellee as exempt and enclosed with a concrete

hollow blocks fence. Within this compound, the following structures and

improvements are constructed, viz:

Reference: Book VII, pp. 102-112

a. Five (5) units 4-story building

b. Two (2) single staff houses (No.1 and 2)

c. Six (6) units duplex staff houses

d. Twelve (12) units duplex faculty house

e. A motor pool, a laundry room, and

f. A concrete hollow block fence (CHB)

Sometime on or about January, 1993, Petitioner-Appellant, received from

Respondent-Appellee, the Provincial Assessor of Cavite, a Notice of

Assessment together with the owner’s copy of Tax Declaration Nos. 31704 and

31705. Tax Declaration No. 31704, covers the Administration/Library Buildings,

and two units classrooms which were assessed as Exempt from the payment of

real property taxes. The buildings and improvements, which are now under

consideration with a total assessment of P20,335,090.00, were assessed as

Taxable and declared under Tax Declaration No. 31705.

On March 17, 1993, Petitioner-Appellant, filed an appeal with the Board

of Assessment Appeals of the Province of Cavite, on the assessment of the

buildings under Tax Declaration no. 31705. The said appeal was dismissed by

the local board of which sustained the assessments of Respondent-Appellee.

Hence, this appeal.

The 1987 Constitution of the Philippines exempts from taxation

educational institution under the following provisions:

Sec. 28 (3), Art. VI

“Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands buildings, and improvements, actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt from taxation.”

Sec. 4 (3), Art. XIV:

“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.”

The status of AIIAS as an educational institution is not disputed. The

issue, however, is whether or not the buildings and fence under Tax Declaration

Reference: Book VII, pp. 102-112

No. 31705 are actually, directly and exclusively used for educational purposes

according to the above-provisions of the Constitution. Pursuant thereto, the only

error assigned by Petitioner-Appellant is that:

“The LBAA erred in finding that Appellant’s dormitory, staff houses, faculty houses, motorpool, laundry room and fence should be classified as residential and therefore not exempt from payment of real estate taxes.”

The conclusions reached by the Appellee Board are set forth in the

appealed decision as follows:

“The only issue to be resolved in this particular case is whether the improvements being sought to be exempted from real estate taxes are actually, directly and exclusively used for charitable purposes. This Board believes, that these properties are not actually, directly and exclusively used for educational purposes of the students who are mostly residents and citizens of other countries and of the faculty members and their families who are mostly foreigners, on the other had, the AIIAS, as admitted by its President Dr. John Pesulima, in his affidavit dated March 16, 1993, has been charging minimal rent from these occupant, an amount which allegedly just sufficient for the maintenance of the houses and dormitory. Hence, it may be stated that real properties although owned by religious, charitable and educational institution but not actually, directly and exclusively used for charitable, religious or educational purposes are not exempted from the payment of real property.”

Respondent-Appellee, Provincial Assessor of Cavite, in his Answer to

Appeal, avers that “the aforecited improvements, jointly or severally, is not a

charitable institution, a church, a parsonage, or a convent, mosque or a non-

profit cemetery so exempt by the law. Neither are the said improvements

exempt under the law as they are found not to be actually, directly and

exclusively used for educational purposes. The law favors the exemption on the

use and not on the owner of the property.” Further, he cites this Board’s

decision in CBAA Case No. 87 entitled “City Assessor of Cebu vs. Board of

Assessment Appeals of Cebu City and Central Philippine Union Mission Corp.

of Seventh-Day Adventists and/or Miller Sanitarium and Hospital.” It was held

that, “one of the buildings is occupied by Pastor Clemencio Rosco who is at the

same time the Secretary of the Mission. This building may be considered a

parsonage, being the dwelling of the pastor, under the law above-quoted, it is

exempt from taxation. As to the other buildings in this group it is noted that they

are occupied by other officials of the Mission for residential purposes. It is not

shown that religious or charitable activities are being performed in these

Reference: Book VII, pp. 102-112

buildings. The land on which these buildings are constructed are predominantly

used for residential purposes, hence, taxable as such. (If the land is taxable, it

would logically and necessarily follow that the buildings erected thereon are

also taxable.)”

The Pastor is the visible clergyman duly constituted to serve his church.

The use therefore, of a parsonage or pastor’s residence is actual, direct and

exclusive to the church, because the Pastor is identified with his church.

Other than the Pastor, Minister of Churchman, there is no distinguishing

feature that may connect a lay person to a church as to actually, directly and

exclusively use its property for religious purposes. The same holds true with

charitable institutions. The fact that no religious or charitable activities are

performed in such buildings, how can it be perceived that such properties are

actually, directly and exclusively used for religious or charitable purposes? It

cannot be gainsaid, therefore, that the land on which said buildings, supra, are

constructed, not being occupied by churchmen are predominantly used for

residential purposes.

The Supreme Court in the case of Abra Valley College, Inc. vs. Aquino

(G.R. No. L-39086, June 15, 1988, 162 SCRA 106), citing Herrera vs. Quezon

City Board of Assessment Appeals (G.R. No. L-1570, September 30, 1961, 3

SCRA 1860 and Commissioner of Internal Revenue vs. Bishop of the

Missionary District (14 SCRA 991), clarified the term actually, directly and

exclusively used as follows:

“x x x Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefore (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as in the case of hospitals, a school for training nurses, a nurses home, a property used to provide housing facilities, and other members of the hospital staff, and recreational facilities for student nurses, interns, and residents (18 C. Juris Secundum 621) such as athletics fields, including a farm used for inmates of the institutions. (Cooley on Taxation, Vol. 2 p, 1430.)

Further, the phrase “exclusively used” for educational purposes was

clarified by the court in the case of Herrera vs. Quezon City Board of

Reference: Book VII, pp. 102-112

Assessment Appeals (3 SCRA 186 (1961) and Commissioner of Internal

Revenue vs. Bishop of Missionary District 14 SCRA, 191 (1965) viz:

“It must be stressed however, that while this Court allows a more liberal and nonrestrictive interpretation of the phrase “exclusively used for educational purposes” as provided for in Article VI, Section 22 paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the mean purpose. x x x” (underlining supplied)

Thus, “exclusively used” includes facilities incidental to and reasonably

necessary for the accomplishment of the purpose. For educational purposes it

refers to the primary and inherent use and “does not preclude such incidental

uses as directly connected with, and essential to and in furtherance of, the

primary use.” (84 CJ.S. 579)

“Actually” is defined as “in act or fact; in reality, “Actual” is that something

real or actually existing, as opposed to something merely possible, or to

something which is presumptive or constructive (Salaysay vs. Castro 98 Phil.

385)

“Directly” is defined as ‘without anything intervening; proximately or

without intervening agency or person” (La Carlota Sugar Central vs. Jimenez,

112 Phil. 235).

Actually, Directly and Exclusively Used, refer to the purpose for which the

property is principally utilized for educational purposes (Section 1.6, DOF Order

No. 137-87).

Thus the “use of the property for residences of students and faculties,

where there would otherwise be no housing facilities, as in the case at bar is

one of incident to and direct furtherance of the programs of education and

entitles the property to exemption, (84CJS. 594). This extends to dormitories as

well as the laundry room, for use by the students, faculties and pertinent

personages of AIIAS.

Educational Institutions, however, has much more distinguishable

personages than religious or charitable institutions. For educational institutions

Reference: Book VII, pp. 102-112

are much more than mere classrooms and classes. It is meant to be devoted to

the growth and development of a person, morally, mentally and physically.

“Educational institution may include not only buildings, but also grounds necessary for the accomplishment of the full scope of educational instruction, including those things essential to mental, moral, and physical development (Commissioners of District of Columbia vs. Shannon & Lucha Const. Co., 57 App. D.C. 67, 2d 219-220)”

The faculty members, the staff, the students are distinguishable

personages and indispensable constitutive elements that make up an

educational institution. Boarding schools denote quality education. It is

unfortunate nowadays, only very few schools, especially in the Philippines

operate as boarding institution. We have the “internos” and “internas” of pre-war

years who were observed to be the “cream of the crop” in so called exclusive

schools.

This Board has the occasion to make an Ocular Inspection of the AIIAS

property. It did not fail to notice that AIIAS exemplifies a boarding educational

institution in its design and purpose.

Accordingly, in order therefore, to fully understand and recognize the

nature and context of AIIAS, it must be viewed in its total and complete

perspective and not divided into different and distinct parts, otherwise, the

viewer will just be seeing the proverbial trees but not the forest. To say

therefore, that the buildings and fence of AIIAS under Tax Declaration No.

31705 are not being actually, directly and exclusively used for educational

purposes is to deny the very purpose of its pursuits, nay its existence.

WHEREFORE, the decision of the Provincial Board of Tax Assessment

Appeals of Cavite is hereby reversed. The Provincial Assessor of Cavite is

hereby ordered to drop from the list of taxables in its assessment roll properties

under Tax Declaration No. 31705 in the name of Adventist International Institute

of Advance Studies, and enter the same under the exempt list.

SO ORDERED.

Manila, Philippines, April 7, 1994.

Reference: Book VII, pp. 102-112

(Signed) MARGARITA G. MAGISTRADO
Chairman

(Signed) ELEANOR A. SANTOS
Member

(Signed) ALFONSO M. MEDADO
Member

Reference: Book VII, pp. 102-112