THE COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. CHURCH OF JESUS CHRIST “NEW JERUSALEM”, RESPONDENT.

Respondent Church of Jesus Christ, “New Jerusalem,” hereinafter
referred to as the taxpayer, is a religious corporation organized and
existing under the Philippine laws. Sometime in May, 1958, the taxpayer
received from Nedra Hansen, 527 Lexington Ave., New York U. S. A. a
letter advising the former that she was donating thereto two (2) cases
of cigarettes for free distribution among its poor destitute members.
This donation of cigarettes arrived at Manila, on board S/S “Steel
Chemists”, on June 25, 1958, and consisted of two (2) wooden cases or
crates of king-size “Chesterfield” cigarettes, each case containing 12
regular cases of 50 cartons, or a total of 600 cartons. Invoking
Republic Act No. 1916, the taxpayer thereupon requested the Secretary
of Finance for exemption from the specific tax prescribed in subsection
(b), subparagraphs (2) and (4), of section 137 of the National Internal
Revenue Code, in relation to section 123 and 125 thereof, stating that
the aforementioned cigarettes are donations intended for free
distribution to the poor and destitute members of said taxpayer. In a
letter dated July 28,1958, the Secretary of Finance denied the request
upon the ground that, considering the nature of the articles donated,
the free distribution thereof to said poor and destitute members of the
taxpayer cannot be considered as being for civic, religious or
charitable purposes. On August 26, 1958, another letter request for
exemption was addressed by the taxpayer to the Commissioner of Internal
Revenue, who replied on September 8, 1958, denying said request for the
reasons stated in said communication of the Secretary of Finance of
July 28, 1958. In due course, the taxpayer filed with respondent Court
of Tax Appeals a petition for review of said decision of petitioner
herein. After appropriate proceedings, respondent Court rendered a
decision holding that the cigarettes in question are exempt from the
specific tax above referred to and, accordingly, reversing the decision
of petitioner herein, who has brought the case to us for review.

Republic Act No. 1916 reads:

“The provisions of existing laws to the contrary
notwithstanding, all donations in any form and all articles imported
into the Philippines, consigned to a duly incorporated or established
international civic organization, religious or charitable society or
institution for civic, religious or charitable purposes shall be exempt
from the payment of all taxes and duties upon proof satisfactory to the
Commissioner of Customs and/or Collector of Internal Revenue that such
donations in any form and articles so imported are donations for its
use or for free distribution and not for barter, sale or hire: Provided, however.
That in case such articles are subsequently conveyed or transferred to
other parties for a consideration, taxes and duties shall be collected
thereon at double the rate provided under existing laws payable by the
transferor: Provided, further. That rules and regulations shall be promulgated by the Department of Finance for the implementation of this Act.”

To be exempt from taxes and duties, under this legislation, the
following conditions must concur, namely: (1) the imported articles
must have been donated; (2) the donee consignee must be “a duly
incorporated or established international civic organization, religious
or charitable society, or institution for civic, religious or
charitable purposes”; and (3) the articles so imported must have been
donated for the use of said organization, society or institution, “or
for free distribution and not for barter, sale or hire”. As correctly
held by respondent court:

“* * * All these requirements are present in the
instant case. The cigarettes in question were donated by Nedra Hansen,
527 Lexington Ave., New York; they were donated and consigned to
petitioner, a religious organization; and that they are for free
distribution to the poor and destitute members of petitioner, and not
for barter, sale or hire. Obviously, the said cigarettes are exempt
from the specific tax under Republic Act No. 1916.”

Petitioner insists that “the tax exemption granted by Republic Act
No. 1916 is limited to articles which by their nature are for civic,
religious or charitable purposes”, and that the cigarettes involved in
this case do not fall under such category. This theory is predicated
upon the words “for civic, religious and charitable purposes” found in
said law. It is apparent, however, on the face thereof, that said
qualifying expression characterizes, not the nature of the imported articles, but that of the “institution”
to which they have been donated. Moreover, insofar as the nature of
said articles is concerned, the law is explicit that it covers “all articles”
consigned to the organization, society or institution adverted to
above, provided that the goods have been donated “for its use or for
free distribution and not for barter, sale or hire”. Then, too, even
the cigarettes are not, by their nature, for civic, religious or
charitable purposes, it is patent that its free distribution may be
made for such end. And such was the purpose of Nedra Hansen in making
the donation, for in her aforementioned communication, she requested
that the cigarettes be distributed “free to the poor and destitute
members of the congregation, hoping that in one way or another this manifestation of Christian charity will assuage their feelings and needs”. Again, as stated in the decision appealed from:

“Neither may the interpretation of respondent be
justified by the intention of Congress in enacting Republic Act No.
1916. It will be recalled that after the end of World War II, donations
from abroad began pouring into the country for the relief and
rehabilitation of those who suffered during the war. Because of the
limited exemption from taxation of articles received from abroad,
whether the articles were for free distribution or for commercial
purposes, complaints were heard from the donors that Philippine
authorities were placing obstacles in the way of the poor and the needy
receiving much needed help from those who were ready and willing to
extend. such assistance. As a consequence, the flow of donations from
abroad for relief and rehabilitation were retarded. This is the reason
why Congress saw fit to enact Republic Act No. 1916 to encourage such
donations. The too stilted interpretation of respondent as to the
meaning and scope of said Act would emasculate it and thereby thwart
the purposes for which the law came into being.

“Even
granting that the opinion of respondent that the articles coming from
abroad by way of donation for charitable distribution in the
Philippines must be donated and consigned to charitable organization to
be entitled to exemption—is correct, we believe that the articles in
question, donated and consigned to and received by petitioner, a
religious organization, qualify for the exemption. A religious
organization is not limited to purely religious activities. It is by
its very nature and purpose also a charitable organization. Acts of
charity, ministering to the physical and spiritual needs of the poor
and the sick, are of common knowledge, best handled and performed by
religious organizations.

“But, it may be asked, are
cigarettes a proper subject for charitable distribution to the poor and
the needy? To our mind, there is nothing basically wrong with giving
cigarettes to the poor and the needy. The element of charity is not
destroyed when cigarettes, instead of other articles, are given to the
poor. Donations sent to our soldiers in Korea during the Korean War
were nonetheless charitable notwithstanding that the donations were in
the form of beer and cigarettes. The element of charity is not lost
when a person gives cigarettes during Christmas to the inmates of
Muntinlupa, or of the Tala Leprosarium, or of the charity wards of
Government and private hospitals. That American cigarettes are highly
prized in the Philippines does not alter the situation. They are
ordinary commodities in the country of the donor, in this case, a
resident of New York.

“While the law exempts from taxation
all articles received from abroad as donation to the organizations
mentioned therein for free distribution in the Philippines, it has also
provided for safeguards to prevent its abuse. Where dt is shown that
the articles have been subsequently transferred or conveyed to other
parties for a consideration, the law requires collection from the
transferor of the taxes and duties at double the rates provided under
existing laws. The law also requires the Department of Finance to
promulgate rules and regulation for its proper implementation.

“The
exemption from taxation of donations from abroad may not, therefore, be
denied if all the requisites for their exemption are fully complied
with. It is, however, the duty of respondent [1] to see to it that the
articles donated are distributed free to the intended recipients. If he
finds that the donee has conveyed or transferred the articles for a
consideration to other parties, he is authorized to collect the
corresponding taxes at double the rates provided by existing laws.

We are fully in agreement with the foregoing view, which we adopt as ours.

Wherefore, the decision appealed from is hereby affirmed, without costs. It is so ordered.

Bengzon, C. J., Padilla, Bautista Angelo, Labrador, Reyes, J. B. L., Paredes, Dizon, and De Leon, JJ., concur.