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

FACTS

In 1957, the M.B. Estate, Inc., donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, for the construction of a new Catholic Church. The amount was fully spent for that purpose. The donor filed a gift tax return on March 3, 1958. On April 29, 1960, the Commissioner of Internal Revenue issued an assessment for donee’s gift tax against the “Catholic Parish of Victorias, Negros Occidental,” amounting to P1,370.00 including surcharges and interest. Petitioner Rev. Fr. Casimiro Lladoc, the successor parish priest, protested the assessment, arguing he was not the priest at the time of the donation, that there is no juridical entity known as the “Catholic Parish Priest of Victorias,” and that the tax assessment violated the constitutional exemption of churches from taxation. The protest and a subsequent motion for reconsideration were denied, prompting an appeal to the Court of Tax Appeals (CTA). The CTA affirmed the Commissioner’s decision, with modifications, holding petitioner liable for the gift tax. Petitioner appealed to the Supreme Court.

ISSUE

The primary issue is whether petitioner Rev. Fr. Casimiro Lladoc is liable for the assessed donee’s gift tax on the P10,000.00 donation for the construction of the Victorias Parish Church, considering the constitutional exemption of churches from taxation.

RULING

The Supreme Court modified the CTA decision. It held that a donee’s gift tax is validly imposed and does not violate the constitutional exemption. Section 22(3), Article VI of the Constitution exempts cemeteries, churches, parsonages, convents, and all lands, buildings, and improvements used exclusively for religious purposes from property tax, but not from excise taxes. A gift tax is an excise tax imposed on the transfer of property by way of gift, not a property tax on the religious properties themselves. Therefore, the imposition does not impair the constitutional exemption. However, the Court found that petitioner Rev. Fr. Casimiro Lladoc should not be personally liable as he was not the parish priest at the time of the donation. Upon its own motion, the Court substituted the Head of the Diocese (the Roman Catholic Bishop of Bacolod) as the real party in interest, who submitted to the Court’s jurisdiction and adopted petitioner’s brief. The Court affirmed the tax liability but ordered the Head of the Diocese to pay the gift tax, exonerating petitioner from personal liability. The CTA decision was affirmed with this modification.