G.R. No. L-20550 April 30, 1971
THE TREASURER-ASSESSOR, THE BOARD OF TAX APPEALS OF BASILAN CITY AND THE CITY OF BASILAN, petitioners, vs. UNIVERSITY OF THE PHILIPPINES AND THE HONORABLE COURT OF TAX APPEALS, respondents.

FACTS

The University of the Philippines (U.P.) is a non-stock, non-profit educational corporation. Pursuant to Act No. 3608 , it was granted a permanent endowment of public land, not exceeding 10,000 hectares, for its support. In 1940, U.P. took possession of approximately 5,000 hectares in Basilan City, known as the U.P.-Basilan Land Grant. U.P. developed major portions into agricultural plantations, with all income exclusively devoted to its educational purposes. From 1940 to 1955, the property was not assessed for real property tax.
In 1955, the City Treasurer-Assessor of Basilan City assessed the land grant for real property taxes, demanding payment starting 1956. U.P. initially resisted but paid certain amounts under protest in 1956 and 1957 after threats of drastic collection measures. Relying on a favorable opinion from the Secretary of Justice that the property was tax-exempt, U.P. refused further payments and requested cancellation of the assessment and a refund. The City Treasurer-Assessor denied the request and demanded additional unpaid taxes. U.P. appealed to the Board of Assessment Appeals of Basilan City, which dismissed the appeal. U.P. then appealed to the Court of Tax Appeals (CTA) without paying the current assessed taxes under protest.

ISSUE

The primary issues were: (1) whether the CTA had jurisdiction over U.P.’s appeal despite its failure to pay the assessed taxes before filing; and (2) whether the U.P.-Basilan Land Grant is exempt from real property tax.

RULING

The Supreme Court affirmed the CTA’s decision, holding that the land grant is tax-exempt and ordering the refund of taxes paid. On jurisdiction, the Court ruled that the CTA correctly entertained the appeal. Under Republic Act No. 1125 , the CTA has exclusive appellate jurisdiction over cases disputing real estate assessments as unjust, erroneous, illegal, or void, even if the tax has not been paid. The law does not require payment of the disputed tax as a prerequisite for appealing an assessment to the CTA. The Court clarified that where only the assessment is disputed and the tax is unpaid, the CTA rules on its validity. If the tax has been paid and a refund is sought, the CTA may also order a refund if it finds the assessment invalid. This ruling superseded a prior contrary decision.
On the merits, the Court upheld the tax exemption. The land was granted to U.P. by virtue of Act No. 3608 as a permanent endowment for its support. All income generated from the land was used exclusively for U.P.’s educational purposes, with no private individual or entity benefiting. The property was thus devoted to actual, direct, and exclusive educational use. Consequently, it falls under the constitutional and statutory tax exemption for properties actually, directly, and exclusively used for educational purposes. The assessment and collection of real property taxes on the land grant were therefore illegal.