CIR v CA & YMCA (1998)

Digest #1

CIR v CA & YMCA
GR No 124043, October 14, 1998

FACTS:
In 1980, YMCA earned an income of 676,829.80 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators and 44,259 from parking fees collected from non-members. On July 2, 1984, the CIR issued an assessment to YMCA for deficiency taxes which included the income from lease of YMCA’s real property. YMCA formally protested the assessment but the CIR denied the claims of YMCA. On appeal, the CTA ruled in favor of YMCA and excluded income from lease to small shop owners and parking fees. However, the CA reversed the CTA but affirmed the CTA upon motion for reconsideration.

ISSUE:
Whether the rental income of YMCA is taxable

RULING:
Yes. The exemption claimed by YMCA is expressly disallowed by the very wording of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. While the income received by the organizations enumerated in Section 26 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. 

Digest #2

Facts:
The main question in this case is: “is the income derived from rentals of real property owned by Young Men’s Christian Association of the Philippines (YMCA) – established as “a welfare, educational and charitable non-profit corporation” – subject to income tax under the NIRC and the Constitution? In 1980, YMCA earned an income of P676,829 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators and P44k form parking fees.

Issue:
Whether or not the rental income of the YMCA taxable

Ruling:
Yes. The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Sec. 27 of the NIRC; court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction. The said provision mandates that the income of exempt organizations (such as YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Private respondent is exempt from the payment of property tax, but nit income tax on rentals from its property.