CIR vs CA and YMCA, [298 SCRA 83]

Facts: The main question in this case is: is the income

derived from rentals of real property owned by Young Mens
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: Is the rental income of the YMCA taxable?
Held: 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.

CIR
GR
No.
298 SCRA 83

124043,

v.

October

14,

YMCA
1998

FACTS: Private Respondent YMCA--a non-stock, non-profit

institution, which conducts various programs beneficial to the
public pursuant to its religious, educational and charitable
objectives--leases out a portion of its premises to small shop
owners, like restaurants and canteen operators, deriving
substantial income for such. Seeing this, the commissioner of
internal revenue (CIR) issued an assessment to private
respondent for deficiency income tax, deficiency expanded
withholding taxes on rentals and professional fees and
deficiency withholding tax on wages. YMCA opposed arguing
that its rental income is not subject to tax, mainly because of
the provisions of Section 27 of NIRC which provides that civic
league or organizations not organized for profit but operate
exclusively for promotion of social welfare and those
organized exclusively for pleasure, recreation and other nonprofitble businesses shall not be taxed.
ISSUE: Is the contention of YMCA tenable?
HELD: No. Because taxes are the lifeblood of the nation, the
Court has always applied the doctrine of strict in
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."

COMMISSIONER
G.R.
No.
Panganiban, J.

OF
INTERNAL REVENUE
v.
124043
October
14,

YMCA
1998

Doctrine:
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.
A claim of statutory exemption from taxation should be
manifest and unmistakable from the language of the law on
which it is based. Thus, it must expressly be granted in a
statute stated in a language too clear to be mistaken. Verba
legis non est recedendum where the law does not
distinguish, neither should we.
The bare allegation alone that one is a non-stock, nonprofit educational institution is insufficient to justify its
exemption from the payment of income tax. It must prove
with substantial evidence that (1) it falls under the
classification non-stock, non-profit educational institution;
and (2) the income it seeks to be exempted from taxation is
used actually, directly, and exclusively for educational
purposes.
The Court cannot change the law or bend it to suit its
sympathies and appreciations. Otherwise, it would be
overspilling its role and invading the realm of legislation.
The Court, given its limited constitutional authority, cannot
rule on the wisdom or propriety of legislation. That
prerogative belongs to the political departments of
government.

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.
YMCA earned income from leasing out a portion of its
premises to small shop owners, like restaurants and canteen
operators, and from parking fees collected from nonmembers. Petitioner issued an assessment to private
respondent for deficiency taxes. Private respondent formally
protested the assessment. In reply, the CIR denied the claims
of YMCA.

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

Held:
Yes. Income of whatever kind and character of non-stock nonprofit 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.
Because taxes are the lifeblood of the nation, the Court has
always applied the doctrine of strict in interpretation in
construing tax exemptions (Commissioner of Internal
Revenue v. Court of Appeals, 271 SCRA 605, 613, April 18,
1997). 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 (Davao Gulf Lumber
Corporation v. Commissioner of Internal Revenue and Court
of Appeals, G.R. No. 117359, p. 15 July 23, 1998).
Verba legis non est recedendum. The law does not make a
distinction. The rental income is taxable regardless of
whence such income is derived and how it is used or disposed
of. Where the law does not distinguish, neither should we.
Private respondent also invokes Article XIV, Section 4, par. 3
of the Constitution, claiming that it is a non-stock, nonprofit 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. This is without merit since the exemption provided
lies on the payment of property tax, and not on the income
tax on the rentals of its property. The bare allegation alone
that one is a non-stock, non-profit educational institution is
insufficient to justify its exemption from the payment of
income tax.
For the YMCA to be granted the exemption it claims under the
above provision, it must prove with substantial evidence that
(1) it falls under the classification non-stock, non-profit
educational institution; and (2) the income it seeks to be
exempted from taxation is used actually, directly, and
exclusively for educational purposes. Unfortunately for
respondent, the Court noted that not a scintilla of evidence
was submitted to prove that it met the said requisites.
The Court appreciates the nobility of respondents cause.
However, the Courts power and function are limited merely
to applying the law fairly and objectively. It cannot change
the law or bend it to suit its sympathies and appreciations.
Otherwise, it would be overspilling its role and invading the
realm of legislation. The Court regrets that, given its limited
constitutional authority, it cannot rule on the wisdom or
propriety of legislation. That prerogative belongs to the
political departments of government.

ESSO STANDARD EASTERN, INC. vs. ACTING COMMISSIONER OF

CUSTOMS
18
SCRA
488
GR No. L-21841, October 28, 1966

"Exemptions from taxation are construed in strictissimi juris

against the taxpayer and liberally in favor of the taxing
authority."
FACTS: Petitioner, engaged in the industry of processing
gasoline, oils etc., claims for the refund of special import
taxes paid pursuant to the provision of RA 1394 which
imposed a special import tax "on all goods, articles or
products imported or brought into the Philippines." Exempt
from this tax, by express mandate of Section 6 of the same
law are "machinery, equipment, accessories, and spare parts,
for the use of industries, miners, mining enterprises, planters
and farmers". Petitioner argued that the importation it made
of gas pumps used by their gasoline station operators should
fall under such exemptions, being directly used in its
industry. The Collector of Customs of Manila rejected the
claim, and so as the Court on Tax Appeals. The CTA noted that
the pumps imported were not used in the processing of
gasoline and other oil products but by the gasoline stations,
owned by the petitioner, for pumping out, from underground
barrels, gasoline sold on retail to customers.
ISSUE: Is the contention of the petitioner tenable? Does the
subject imports fall into the exemptions?
HELD: No. The contention runs smack against the familiar
rules that exemption from taxation is not favored, and that
exemptions in tax statutes are never presumed. Which are
but statements in adherence to the ancient rule that
exemptions from taxation are construed in strictissimi juris
against the taxpayer and liberally in favor of the taxing
authority. Tested by this precept, we cannot indulge in
expansive construction and write into the law an exemption
not therein set forth. Rather, we go by the reasonable
assumption that where the State has granted in express terms
certain exemptions, those are the exemptions to be
considered, and no more. Since the law states that, to be
tax-exempt, equipment and spare parts should be "for the use
of industries", the coverage herein should not be enlarged to
include equipment and spare parts for use in dispensing
gasoline at retail.

Davao

Gulf

Lumber

G.R.

No.

117359.

Corporation
July

vs.
23,

CIR
1998.

FACTS: From July 1, 1980 to January 31, 1982 petitioner

purchased, from various oil companies, refined and
manufactured mineral oils as well as motor and diesel fuels.
Said oil companies paid the specific taxes imposed on the sale
of said products. Being included in the purchase price of the
oil products, the specific taxes paid by the oil companies
were eventually passed on to the petitioner in this case.
Petitioner filed before Respondent CIR a claim for refund in
the amount of P120, 825.11, representing 25% of the specific
taxes actually paid on the above-mentioned fuels and oils
that were used by petitioner in its operations as forest
concessionaire.
On January 20, 1983, petitioner filed at the CTA a petition for
review. The CTA rendered its decision finding petitioner
entitled to a partial refund of specific taxes in the reduced
amount of P2, 923.15. In regard to the other purchases, the
CTA granted the claim, but it computed the refund based on
rates deemed paid under RA 1435, and not on the higher rates
actually
paid
by
petitioner
under
the
NIRC.
Insisting that the basis for computing the refund should be
the increased rates prescribed by Sections 153 and 156 of the
NIRC, petitioner elevated the matter to the Court of Appeals.
The Court of Appeals affirmed the CTA Decision. Hence, this
petition
for
review.
ISSUE:
Whether or not petitioner is entitled to the refund of 25% of
the amount of specific taxes it actually paid on various
refined
and
manufactured
mineral
oils.
RULING:
At the outset, it must be stressed that petitioner is entitled
to a partial refund under Section 5 of RA 1435, which was
enacted to provide means for increasing the Highway Special
Fund.
A tax cannot be imposed unless it is supported by the clear
and express language of a statute; on the other hand, once

the tax is unquestionably imposed, [a] claim of exemption

from tax payments must be clearly shown and based on
language in the law too plain to be mistaken. Since the
partial refund authorized under Section 5, RA 1435, is in the
nature of a tax exemption, it must be construed strictissimi
juris against the grantee. Hence, petitioners claim of refund
on the basis of the specific taxes it actually paid must
expressly be granted in a statute stated in a language too
clear to be mistaken.

DAVAO
GULF
LUMBER
GR
No.
117359,
293 SCRA 77

CORP
v.
July
23,

CIR
1998

FACTS: Republic Act No. 1435 entitles miners and forest

concessioners to the refund of 25% of the specific taxes paid
by the oil companies, which were eventually passed on to the
user--the petitioner in this case--in the purchase price of the
oil products. Petitioner filed before respondent Commissioner
of Internal Revenue (CIR) a claim for refund in the amount
representing 25% of the specific taxes actually paid on the
above-mentioned fuels and oils that were used by petitioner
in its operations. However petitioner asserts that equity and
justice demands that the refund should be based on the
increased rates of specific taxes which it actually paid, as
prescribed in Sections 153 and 156 of the NIRC. Public
respondent, on the other hand, contends that it should be
based on specific taxes deemed paid under Sections 1 and 2
of RA 1435.
ISSUE: Should the petitioner be entitled under Republic Act
No. 1435 to the refund of 25% of the amount of specific taxes
it actually paid on various refined and manufactured mineral
oils and other oil products, and not on the taxes deemed paid
and passed on to them, as end-users, by the oil companies?
HELD: No. According to an eminent authority on taxation,
"there is no tax exemption solely on the ground of equity."
Thus, the tax refund should be based on the taxes deemed
paid. Because taxes are the lifeblood of the nation, statutes
that allow exemptions are construed strictly against the
grantee and liberally in favor of the government. Otherwise
stated, any exemption from the payment of a tax must be
clearly stated in the language of the law; it cannot be merely
implied therefrom.