YMCA vs.
CIR
G.R. No. 124043 October 14, 1998; 298 SCRA 83
Facts:
Private Respondent YMCA is a non-stock, non-profit institution, which conducts various
programs and activities that are beneficial to the public, especially the young people, pursuant
to its religious, educational and charitable objectives. Private respondent earned, among
others, an income from leasing out a portion of its premises to small shop owners, like
restaurants and canteen operators, and from parking fees collected from non-members. CIR
issued an assessment to private respondent, including surcharge and interest, for deficiency
income tax, deficiency expanded withholding taxes on rentals and professional fees and
deficiency withholding tax on wages. Private respondent formally protested the assessment
and, as a supplement to its basic protest, filed a letter. In reply, the CIR denied the claims of
YMCA. YMCA filed a petition for review at the Court of Tax Appeals (CTA), CTA is in favor with
YMCA. Dissatisfied with the CTA ruling, the CIR elevated the case to the Court of Appeals
(CA). The CA initially decided in favor of the CIR. YMCA asked for reconsideration, however
the CA reversed itself and promulgate its assailed Resolution
Issue:
Whether or not affirming the conclusion of Respondent Court of Tax Appeals that the income of
private respondent from rentals of small shops and parking fees [is] exempt from taxation.
Ruling:
No. Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of
strict interpretation in construing tax exemptions. Furthermore, a claim of statutory exemption
from taxation should be manifest and unmistakable from the language of the law on which it is
based. Thus, the claimed exemption “must expressly be granted in a statute stated in a
language too clear to be mistaken.”
In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very
wording of the last paragraph of then Section 27 of the NIRC which mandates that “The
following organizations shall not be taxed under this Title in respect to income received by them
as such (g) Civic league or organization not organized for profit but operated exclusively for the
promotion of social welfare; (h) Club organized and operated exclusively for pleasure,
recreation, and other nonprofitable purposes, no part of the net income of which inures to the
benefit of any
private stockholder or member;— Notwithstanding the provisions in the preceding paragraphs,
the income of whatever kind and character of the foregoing organizations from any of their
properties, real or personal, or from any of their activities conducted for profit, regardless of the
disposition made of such income, shall be subject to the tax imposed under this Code.
Private respondent also invokes Article XIV, Section 4, par. 3 of the Charter, claiming that the
YMCA “is a non-stock, non-profit educational institution whose revenues and assets are used
actually, directly and exclusively for educational purposes so it is exempt from taxes on its
properties and income.” We reiterate that private respondent is exempt from the payment of
property tax, but not income tax on the rentals from its property. The bare allegation alone that it
is a non-stock, non-profit educational institution is insufficient to justify its exemption from the
payment of income tax.
