G.R. No. 215383 March 8, 2017
HON. KIM S. JACINTO-HENARES, in her capacity as COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. ST. PAUL COLLEGE OF MAKATI, Respondent.

FACTS

On July 22, 2013, the Commissioner of Internal Revenue (CIR) issued Revenue Memorandum Order (RMO) No. 20-2013, prescribing policies for issuing Tax Exemption Rulings (TERs) to qualified non-stock, non-profit corporations under the Tax Code. Respondent St. Paul College of Makati (SPCM), a non-stock, non-profit educational institution, filed an action to declare the RMO unconstitutional before the Regional Trial Court (RTC). SPCM alleged that the RMO imposed an unconstitutional prerequisite by requiring educational institutions to apply for and secure a TER from the BIR, valid only for three years and subject to renewal, to enjoy their constitutional tax exemption. SPCM argued this added a layer not found in the Constitution and that the RMO provided for an automatic loss of tax-exempt status for failure to file an annual information return.
The RTC issued a temporary restraining order and later a writ of preliminary injunction against the RMO’s implementation. Subsequently, the RTC granted SPCM’s motion for judgment on the pleadings. In its Decision dated July 25, 2014, the RTC declared RMO No. 20-2013 unconstitutional for violating Article XIV, Section 4(3) of the Constitution, holding that it diminished a constitutional privilege through a mere administrative issuance. The RTC denied the CIR’s motion for reconsideration, prompting the CIR to elevate the case to the Supreme Court via a petition for review.

ISSUE

Whether the Supreme Court should rule on the constitutionality of RMO No. 20-2013.

RULING

The Supreme Court denied the petition on the ground of mootness. The Court took judicial notice that on July 25, 2016, the incumbent CIR had issued RMO No. 44-2016, which expressly amended RMO No. 20-2013 to exclude non-stock, non-profit educational institutions from its coverage. RMO No. 44-2016 explicitly recognized that the tax exemption of such institutions is directly conferred by the Constitution and reiterated in the Tax Code, requiring only that the institution be non-stock and non-profit and that its revenues and assets be used actually, directly, and exclusively for educational purposes.
The legal logic is grounded in the principle that courts will not determine cases where no actual controversy exists or where the issues have become academic. A case becomes moot when there is no more actual controversy between the parties or no useful purpose can be served by a judicial pronouncement. Here, the issuance of RMO No. 44-2016 effectively superseded the challenged provisions of RMO No. 20-2013 as they pertained to educational institutions. Since the subsequent issuance had already excluded respondent SPCM and similarly situated institutions from the onerous application and renewal process, a ruling on the constitutionality of the defunct provisions would be an academic exercise with no practical legal effect. Therefore, the Court refrained from making a constitutional determination, as the matter had been rendered moot by the BIR’s own corrective action.