CD: Commissioner of Internal Revenue v. YMCA
COMMISSIONER OF INTERNAL REVENUE v. YMCA
G.R. No. 124043 October 14, 1998
Panganiban, J.
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, non-profit 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 non-members. 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 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.
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, 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.” 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 respondent’s cause. However, the Court’s 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.
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