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Collectorv CINCO Tax2 Digest

The V.G. Sinco Educational Institution claimed exemption from income tax under Section 27(e) of the National Internal Revenue Code as it was organized and operated exclusively for educational purposes with no private inurement. The Collector of Internal Revenue argued the exemption did not apply as the net income benefited V.G. Sinco as president and founder. The Supreme Court ruled the institution was entitled to the exemption as any potential future benefit to private individuals upon dissolution was too remote and contingent.

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250 views1 page

Collectorv CINCO Tax2 Digest

The V.G. Sinco Educational Institution claimed exemption from income tax under Section 27(e) of the National Internal Revenue Code as it was organized and operated exclusively for educational purposes with no private inurement. The Collector of Internal Revenue argued the exemption did not apply as the net income benefited V.G. Sinco as president and founder. The Supreme Court ruled the institution was entitled to the exemption as any potential future benefit to private individuals upon dissolution was too remote and contingent.

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Collector v. Sinco Educational Institution, 100 Phil.

127

PONENTE: BAUTISTA ANGELO

FACTS:

In June, 1949, Vicente G. Sinco established and operated an educational institution known as
Foundation College of Dumaguete. Sinco would have continued operating said college were it not for
the requirement of the Department of Education that as far as practicable schools and colleges
recognized by the government should be incorporated, and so on September 21, 1951, the V. G. Sinco
Educational Institution was organized. This corporation was non-stock and was capitalized by V. G.
Sinco and members of his immediate family. This corporation continued the operations of Foundation
College of Dumaguete.

Invoking section 27 (e) of the National Internal Revenue Code, the Appellee claims that it is exempt
from the payment of the income tax because it is organized and maintained exclusively for the
educational purposes and no part of its net income inures to the benefit of any private individual. On
the other hand, the Appellant maintains that part of the net income accumulated by the Appellee
inured to the benefit of V. G. Sinco, president and founder of the corporation, and therefore the
Appellee is not entitled to the exemption prescribed by the law.

ISSUE: Whether or not appellee is entitled to the exemption provided by law

RULING:

Yes. Invoking section 27 (e) of the National Internal Revenue Code, the Appellee claims that it is exempt
from the payment of the income tax because it is organized and maintained exclusively for the
educational purposes and no part of its net income inures to the benefit of any private individual. On
the other hand, the Appellant maintains that part of the net income accumulated by the Appellee
inured to the benefit of V. G. Sinco, president and founder of the corporation, and therefore the
Appellee is not entitled to the exemption prescribed by the law. While the acquisition of additional
facilities, may redound to the benefit of the institution itself, it cannot be positively asserted that the
same will redound to the benefit of its stockholders, for no one can predict the financial condition of
the institution upon its dissolution. It has been held that the mere provision for the distribution of its
assets to the stockholders upon dissolution does not remove the right of an educational institution from
tax exemption. The fact that the members may receive some benefit on dissolution upon distribution
of the assets is a contingency too remote to have any material bearing upon the question where the
association is admittedly not a scheme to avoid taxation and its good faith and honesty or purpose is
not challenged.

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