RECONCILE: ARTICLE XIV Section 4(3) with Section 30 and (H) of the NIRC

ARTICLE XIV Section 4(3) states that:

…all revenues and assets of non-stock, non-profit educational institutions used actually, directly,
and exclusively for educational purposes shall be exempt from taxes and duties…

WHEREAS,

SEC. 30 Exemption from Tax on Corporations – The following organizations shall not be taxed under this
Title in respect to income received by them as such:

H. A nonstock and nonprofit educational institution

Last paragraph:

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 tax imposed under this Code.

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The constitutional exemption is broad and precise. Broad in the sense that it includes ALL
REVENUES AND ASSETS and it does not take into account how these “assets and revenues” are sourced.
According to Bernas’ Constitutional law, such can come from donations, school operation or other
modes of income generation. Nowhere in the deliberations was the manner of acquiring the assets
given any relevance.

However, the title of SEC. 30 states that only those revenues received by them as such (i.e. as a
nonstock and nonprofit educational institution) can be subject to tax exemption and that under the last
paragraph, income from any other activities are taxable regardless of showing of ADE. So if for example
a school generated P50,000 from investment income say in a bank, it is automatically not covered in the
exemption (considered as profit) if we stick to the letter of Section 30, even if that investment income is
subsequently used for A.D.E.

It is in this sense and extent that the two provisions conflicts each other. (in my opinion)

The constitution did not distinguish, and so should the law.

Therefore, we can say that income generated from other sources is not automatically covered
by the exemption. But neither are they automatically taxable. Following the Constitutional provision
cited, if there is a clear showing that there exists A.D.E for educational purposes the P50,000 investment
income is tax exempt. If there is no A.D.E. then it will be considered as “any other activity for profit”.
This is where the last paragraph of Sec. 30 comes into the picture.