CIR vs. Court of Appeals and Ateneo de Manila

G.R. No. 115349 April 18, 1997


ADMU Institute of Philippine Culture is engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations and government agencies.

On July 1983, CIR sent a demand letter assessing the sum of P174,043.97 for alleged deficiency contractor’s tax. Accdg to CIR, ADMU falls under the purview of independent contractor pursuant to Sec 205 of Tax Code and is also subject to 3% contractor’s tax under Sec 205 of the same code. (Independent Contractor means any person whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractors or their employees.)


1) WON ADMU is an independent contractor hence liable for tax? NO.
2) WON the acceptance of research projects by the IPC of ADMU a contract of sale or a contract for a piece of work? NEITHER.



Hence, to impose the three percent contractor’s tax on Ateneo’s Institute of Philippine Culture, it should be sufficiently proven that the private respondent is indeed selling its services for a fee in pursuit of an independent business.


Records do not show that Ateneo’s IPC in fact contracted to sell its research services for a fee. In the first place, the petitioner has presented no evidence to prove its bare contention that, indeed, contracts for sale of services were ever entered into by the private respondent. Funds received by the Ateneo de Manila University are technically not a fee. They may however fall as gifts or donations which are tax-exempt. Another fact that supports this contention is that for about 30 years, IPC had continuously operated at a loss, which means that sponsored funds are less than actual expenses for its research projects.

In fact, private respondent is mandated by law to undertake research activities to maintain its university status. In fact, the research activities being carried out by the IPC is focused not on business or profit but on social sciences studies of Philippine society and culture. Since it can only finance a limited number of IPC’s research projects, private respondent occasionally accepts sponsorship for unfunded IPC research projects from international organizations, private foundations and governmental agencies. However, such sponsorships are subject to private respondent’s terms and conditions, among which are, that the research is confined to topics consistent with the private respondent’s academic agenda; that no proprietary or commercial purpose research is done; and that private respondent retains not only the absolute right to publish but also the ownership of the results of the research conducted by the IPC.


By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. By its very nature, a contract of sale requires a transfer of ownership. In the case of a contract for a piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. If the contractor agrees to produce the work from materials furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. Whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a party necessarily walks away with an object. In this case, there was no sale either of objects or services because there was no transfer of ownership over the research data obtained or the results of research projects undertaken by the Institute of Philippine Culture.

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