G.R. No.

L-7988            January 19, 1916

THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF MANILA, plaintiff-appellant,

vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee.

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. In 1980, private respondent earned,
among others, an income of P676,829.80 from leasing out a portion of its premises to small
shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees
collected from non-members.

On July 2, 1984, the commissioner of internal revenue (CIR) issued an assessment to

private respondent, in the total amount of P415,615.01 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 dated October 8, 1985. In
reply, the CIR denied the claims of YMCA.

CTA issued this ruling in favor of the YMCA. CA affirmed. Petitioner argues that while
the income received by the organizations enumerated in Section 27 (now Section 30) of the
NIRC is, as a rule, exempted from the payment of tax "in respect to income received by them
as such," the exemption does not apply to income derived 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. "Rental income derived by a tax- exempt organization from the lease of its
properties, real or personal, [is] not, therefore, exempt from income taxation, even if such
income is exclusively used for the accomplishment of its objectives."

ISSUE:

Whether or not the income derived from rentals of real property owned by YMCA is
subject to income tax.

HELD :

YES. The income is not exempt from tax.

Income of whatever kind and character of non-stock non- profit 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
the NIRC. Rental income derived by a tax-exempt organization from the lease of its properties,
real or personal, is not exempt from income taxation, even if such income is exclusively used
for the accomplishment of its objectives.

Under NIRC, the income received by civic league or clubs not organized for profit are
exempt from tax in respect to income received by them. The exemption does not apply to
income derived from any of their properties or any activities conducted for profit regardless of
the disposition made of such income. Because taxes are the lifeblood of the nation, strict
interpretation in construing tax exemptions should be applied. Exemption “must be granted in a
statute stated in a language too clear to be mistaken.”
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:

Sometime in 1957, M.B. Estate Inc., of Bacolod City, donated10,000.00 pesos in cash
to Fr. Crispin Ruiz, the parish priest of Victorias, Negros Occidental, and predecessor of Fr.
Lladoc, for the construction of a new Catholic church in the locality. The donated amount was
spent for such purpose.

A year later, the donor M.B. Estate filed the donor's gift tax return. Under date of April
29, 1960. Commissioner of Internal Revenue issued an assessment for the donee's gift tax
against the Catholic Parish of Victorias of which petitioner was the parish priest.

Petitioner filed a protest which was denied by the CIR. He then filed an appeal with the
CTA citing that he was not the parish priest at the time of donation, that there is no legal entity
or juridical person known as the "Catholic Parish Priest of Victorias," and, therefore, he should
not be liable for the donee's gift tax and that assessment of the gift tax is unconstitutional.

The CTA denied the appeal thus this case.

ISSUE:

Whether or not the imposition of gift tax despite the fact the Fr. Lladoc was not the
Parish priest at the time of donation, Catholic Parish priest of Victorias did not have juridical
personality as the constitutional exemption for religious purpose is valid.

HELD:

YES. The imposition of the gift tax was valid, under Section 22(3) Article VI of the
Constitution contemplates exemption only from payment of taxes assessed on such
properties as Property taxes contra distinguished from Excise taxes The imposition of the
gift tax on the property used for religious purpose is not a violation of the Constitution. A gift
tax is not a property by way of gift inter vivos.

The head of the Diocese and not the parish priest is the real party in interest in the
imposition of the donee's tax on the property donated to the church for religious purpose.
G.R. No. L-39086 June 15, 1988

ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner,

vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. CARIAGA,
Provincial Treasurer, Abra; GASPAR V. BOSQUE, Municipal Treasurer, Bangued, Abra;
HEIRS OF PATERNO MILLARE, respondents.

FACTS:

Petitioner, an educational corporation and institution of higher learning duly

incorporated with the Securities and Exchange Commission in 1948, filed a complaint to annul
and declare void the “Notice of Seizure’ and the “Notice of Sale” of its lot and bui lding located
at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to P5,140.31.
Said “Notice of Seizure” by respondents Municipal Treasurer and Provincial Treasurer,
defendants below, was issued for the satisfaction of the said taxes thereon.

The parties entered into a stipulation of facts adopted and embodied by the trial court in
its questioned decision. The trial court ruled for the government, holding that the second floor of
the building is being used by the director for residential purposes and that the ground floor used
and rented by Northern Marketing Corporation, a commercial establishment, and thus the
property is not being used exclusively for educational purposes. Instead of perfecting an
appeal, petitioner availed of the instant petition for review on certiorari with prayer for
preliminary injunction before the Supreme Court, by filing said petition on 17 August 1974.

ISSUE:

Whether or not the lot and building are used exclusively for educational purposes.

HELD:

NO. It must be stressed that while the court allows a more liberal and nonrestrictive
interpretation of the phrase “exclusively used for educational purposes” as provided for in the
Article VI, Section 22, Paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis
has always been made that exemption extends to facilities which are incidental to and
reasonably necessary for the accomplishment of the main purpose.

Otherwise stated, the use of the school building or lot for commercial purposes is
neither contemplated by law, nor by jurisprudence. Thus, while the use of the second floor of
the main building in the case at bar for residential purposes of the Director and his family, may
find justification under the concept of incidental use, which is complimentary to the main or
primary purpose – educational, the lease of the first floor thereof to the Northern Marketing
Corporation cannot by any stretch of the imagination be considered incidental to the purposes
of education.
 Under the 1935 Philippine Constitution, the Trial court correctly arrived at the conclusion
that the school building as well as the lot where it is built, should be taxed, not because the
second floor of the same is being used by the director and his family for residential purposes,
but because the first floor thereof is being used for commercial purposes. However, since only
a portion is used for purposes of commerce, it is only fair that half of the assessed tax be return
to the school involved.
G.R. No. L-4817             May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants,

vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants-appellants.

FACTS:

Petitioners, who are professionals in the city, assail Ordinance No. 3398 together with
the law authorizing it (Section 18 of the Revised Charter of the City of Manila). The ordinance
imposes a municipal occupation tax on persons exercising various professions in the city and
penalizes non-payment of the same.

The law authorizing said ordinance empowers the Municipal Board of the city to impose
a municipal occupation tax on persons engaged in various professions. Petitioners, having
already paid their occupation tax under section 201 of the National Internal Revenue Code,
paid the tax under protest as imposed by Ordinance No. 3398. The lower court declared the
ordinance invalid and affirmed the validity of the law authorizing it.

ISSUE:

Whether the ordinance violates the equal protection clause.

HELD:

NO. It is not for the courts to judge what particular cities or municipalities should be
empowered to impose occupation taxes in addition to those imposed by the National
Government.

The Legislature may, in its discretion, select what occupations shall be taxed, and in its
discretion may tax all, or select classes of occupation for taxation, and leave others untaxed. It
is not for the courts to judge which cities or municipalities should be empowered to impose
occupation taxes aside from that imposed by the National Government. That matter is within
the domain of political departments. The argument against double taxation may not be invoked
if one tax is imposed by the state and the other is imposed by the city. It is widely recognized
that there is nothing inherently terrible in the requirement that taxes be exacted with respect to
the same occupation by both the state and the political subdivisions thereof. Judgment of the
lower court is reversed with regards to the ordinance and affirmed as to the law authorizing it.
G.R. No. L-10448             August 30, 1957

IN THE MATTER OF A PETITION FOR DECLARATORY JUDGMENT REGARDING THE

VALIDITY OF MUNICIPAL ORDINANCE NO. 3659 OF THE CITY OF MANILA. PHYSICAL
THERAPY ORGANIZATION OF THE PHILIPPINES, INC., petitioner-appellant,
vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA and ARSENIO H. LACSON, as Mayor
of the City of Manila, respondents-appellees.

FACTS:

Petitioner, an association of registered massagists and licensed operators of massage

clinics in the City of Manila and other parts of the country, filed an action for declaratory
judgment regarding the validity of ordinance 3659 which sought to collect fees for regulation of
massage clinics.

The Physical Therapy Organization, an association of registered massagists and

licensed operators of massage clinics in the City of Manila and other parts of the country,
filed an action in the Court of First Instance (CFI) of Manila for declaratory judgment
regarding the validity of Municipal Ordinance 3659, promulgated by the Municipal Board and
approved by the City Mayor (Enacted 27 August 1954, and approved and effective 7
September 1954). To stop the City from enforcing said ordinance, the Organization secured
an injunction upon filing of a bond in the sum of P1,000.00. A hearing was held, but the
parties without introducing any evidence submitted the case for decision on the pleadings,
although they submitted written memoranda. Thereafter, the trial court dismissed the petition
and later dissolved the writ of injunction previously issued. The Organization appealed said
order of dismissal directly to the Supreme Court.

ISSUE:

Whether the license fees imposed by the Ordinance against massage clinic operators is
unreasonable.

HELD:

NO. The purpose of the Ordinance is not to regulate the practice of massage, much less
to restrict the practice of licensed and qualified massagists of therapeutic massage in the
Philippines.

The end sought to be attained in the Ordinance is to prevent the commission of

immorality and the practice of prostitution in an establishment masquerading as a massage
clinic where the operators thereof offer to massage or manipulate superficial parts of the
bodies of customers for hygienic and aesthetic purposes. The permit fee is made payable not
by the masseur or massagist, but by the operator of a massage clinic who may not be a
massagist himself. Compared to permit fees required in other operations, P100.00 may
appear to be too large and rather unreasonable, but much discretion is given to municipal
corporations in determining the amount of said fee without considering it as a tax for revenue
purposes.

There is a marked distinction between license fees imposed upon useful and beneficial
occupations which the sovereign wishes to regulate but not restrict, and those which are
inimical and dangerous to public health, morals or safety. In the latter case the fee may be very
large without necessarily being a tax. Evidently, the Manila Municipal Board considered the
practice of hygienic and aesthetic massage not as a useful and beneficial occupation which will
promote and is conducive to public morals, and consequently, imposed the said permit fee for
its regulation.