TAXATION Catholic church in the locality.

The donated amount was spent for such

purpose.
Tax Exemption
On March 3, 1958, the donor M.B. Estate filed
YMCA vs CIR 33 Phil 217 the donor's gift tax return. Under date of April 29,
1960. Commissioner of Internal Revenue issued
Facts: YMCA is a non-stock, non-profit an assessment for the donee's gift tax against
institution which conducts various programs and the Catholic Parish of Victorias of which
activities that are beneficial for the public, petitioner was the parish priest.
especially the young people pursuant to its
religious, educational and charitable objectives.
YMCA earned an income from leasing a portion Issue: Whether or not the imposition of gift tax
of its premises to small shop owners and from despite the fact the Fr. Lladoc was not the
parking fees collected from non-members, upon Parish priest at the time of donation, Catholic
w/c CIR assessed taxes. YMCA protested the Parish priest of Victorias did not have juridical
assessment and got denied. This led to filing for personality as the constitutional exemption for
petition for review with Court of Tax Appeals. religious purpose is valid.
CTA decided in favour of YMCA citing that the
income from the lease and fees are reasonably
incidental to and reasonably necessary for the Held: Yes, imposition of the gift tax was valid,
accomplishment of the objectives of YMCA. The under Section 22(3) Article VI of the Constitution
earnings from these for the use of recreational contemplates exemption only from payment of
facilities constitute the bulk of its income w/c is taxes assessed on such properties as Property
used to support its many activities to attain its taxes contra distinguished from Excise taxes
objectives. CIR elevated the case to CA w/c The imposition of the gift tax on the property
reversed CTA decision. used for religious purpose is not a violation of
Issue: Whether or not income of YMCA from the Constitution. A gift tax is not a property by
lease and fee are exempt from tax? way of gift inter vivos.
Decision: The income is not exempt from tax.
Under NIRC, the income received by civic The head of the Diocese and not the parish
league or clubs not organized for profit are priest is the real party in interest in the
exempt from tax in respect to income received imposition of the donee's tax on the
by them. The exemption does not apply to property donated to the church for religious
income derived from any of their properties or purpose.
any activities conducted for profit regardless of
the disposition made of such income. Because ABRA VALLEY COLLEGE, INC. represented
taxes are the lifeblood of the nation, stict by PEDRO V. BORGONIA, petitioner,
interpretation in construing tax exemptions vs. HON. JUAN P. AQUINO, Judge, Court of
should be applied. Exemption “must be granted First Instance, Abra; ARMIN M.
in a statute stated in a language too clear to be CARIAGA, Provincial Treasurer,
mistaken.” Abra; GASPAR V. BOSQUE, Municipal
Treasurer, Bangued, Abra; HEIRS OF
LLADOC VS. COMMISSIONER OF INTERNAL PATERNO MILLARE, respondents. 
REVENUE [14 SCRA 292; NO.L-19201; 16
JUN 1965] FACTS: On June 8, 1972 the properties of the
Abra Valley Junior College, Inc. was sold at
Facts: Sometime in 1957, M.B. Estate Inc., public auction for the satisfaction of the unpaid
of Bacolod City, donated 10,000.00 pesos in real property taxes thereon and the same was
cash to Fr. Crispin Ruiz, the parish priest of sold to Paterno Millare who offered the highest
Victorias, Negros Occidental, and predecessor bid of P6,000.00 and a Certificate of Sale in his
of Fr. Lladoc, for the construction of a new favor was issued by the defendant Municipal
Treasurer.  purposes” was further clarified by this Court,
thus““Moreover, the exemption in favor of
(a) that the school is recognized by the property used exclusively for charitable or
government and is offering Primary, High School educational purposes is ‘not limited to property
and College Courses, and has a school actually indispensable’ therefor, but extends to
population of more than one thousand students facilities which are incidental to and reasonably
all in all; (b) that it is located right in the heart of necessary for the accomplishment of said
the town of Bangued, a few meters from the purposes, such as in the case of hospitals, ‘a
plaza and about 120 meters from the Court of school for training nurses, a nurses’ home,
First Instance building; (c) that the elementary property use to provide housing facilities for
pupils are housed in a two-storey building interns, resident doctors, superintendents, and
across the street; (d) that the high school and other members of the hospital staff, and
college students are housed in the main recreational facilities for student nurses, interns,
building; (e) that the Director with his family is in and residents’ (84 CJS 6621), such as ‘athletic
the second floor of the main building; and (f) that fields’ including ‘a firm used for the inmates of
the annual gross income of the school reaches the institution.’ ” 
more than one hundred thousand pesos. 
The exemption extends to facilities which are
The only issue left for the Court to determine incidental to and reasonably necessary for the
and as agreed by the parties, is whether or not accomplishment of the main purpose the lease
the lot and building in question are used of the first floor to the Northern Marketing
exclusively for educational purposes.  Corporation cannot by any stretch of the
imagination be considered incidental to the
ISSUE: Whether or not the properties are purposes of education; Case at bar.—It must be
exclusively for education purposes?  stressed however, that while this Court allows a
more liberal and non-restrictive interpretation of
HELD: Petitioner contends that the primary use the phrase “exclusively used for educational
of the lot and building for educational purposes, purposes” as provided for in Article VI, Section
and not the incidental use thereof, determines 22, paragraph 3 of the 1935 Philippine
and exemption from property taxes under Constitution, reasonable emphasis has always
Section 22 (3), Article VI of the 1935 been made that exemption extends to facilities
Constitution. Hence, the seizure and sale of which are incidental to and reasonably
subject college lot and building, which are necessary for the accomplishment of the main
contrary thereto as well as to the provision of purposes. Otherwise stated, the use of the
Commonwealth Act No. 470, otherwise known school building or lot for commercial purposes is
as the Assessment Law, are without legal basis neither contemplated by law, nor by
and therefore void.  jurisprudence. Thus, while the use of the second
floor of the main building in the case at bar for
On the other hand, private respondents maintain residential purposes of the Director and his
that the college lot and building in question family, may find justification under the concept of
which were subjected to seizure and sale to incidental use, which is complimentary to the
answer for the unpaid tax are used: (1) for the main or primary pur-pose—educational, the
educational purposes of the college; (2) as the lease of the first floor thereof to the Northern
permanent residence of the President and Marketing Corporation cannot by any stretch of
Director thereof, Mr. Pedro V. Borgonia, and his the imagination be considered incidental to the
family including the in-laws and grandchildren; purposes of education. 
and (3) for commercial purposes because the
ground floor of the college building is being used Trial Court correct in imposing the tax not
and rented by a commercial establishment, the because the second floor is being used by the
Northern Marketing Corporation  Director and his family for residential purposes
but because the first floor is being used for
The phrase “exclusively used for educational commercial purposes.—Under the 1935
Constitution, the trial court correctly arrived at against double taxation may not be invoked if
the conclusion that the school building as well as one tax is imposed by the state and the other is
the lot where it is built, should be taxed, not imposed by the city. It is widely recognized that
because the second floor of the same is being there is nothing inherently terrible in the
used by the Director and his family for requirement that taxes be exacted with respect
residential purposes, but because the first floor to the same occupation by both the state and
thereof is being used for commercial purposes. the political subdivisions thereof. Judgment of
However, since only a portion is used for the lower court is reversed with regards to the
purposes of commerce, it is only fair that half of ordinance and affirmed as to the law authorizing
the assessed tax be returned to the school it.
involved.
License Fees
Double Taxation
Physical Therapy Organization vs Municpal
PUNSALAN VS. MUNICIPAL BOARD OF Board GR 10448 30 August 1957
MANILA [95 PHIL 46; NO.L-4817; 26 MAY
1954] Facts: Municipal Board of Manila enacted
Ordinance 3659 regulating the operations of
Facts: Petitioners, who are professionals in the massage clinics in Manila penalizing and
city, assail Ordinance No. 3398 together with the enforcing permit fee for its operation. Petitioner
law authorizing it (Section 18 of the appealed for the dismissal of the ordinance.
Revised Charter of the City of Manila). The They contend that City of Manila is without
ordinance imposes a municipal occupation tax authority to regulate the operation of massagists
on persons exercising various professions in the and the operation of massage clinics and that
city and penalizes non-payment of the same. the fee is unreasonable and unconscionable.
The law authorizing said Trial court dismissed the petition.
ordinance empowers the Municipal Board of the Issue: Whether or not license fee enforced by
city to impose a municipal occupation tax on the Municipal Board is valid?
persons engaged in various professions. Decision: Decision affirmed. The end sought to
Petitioners, having already paid their occupation be attained in the Ordinance is to prevent the
tax under section 201 of the National Internal commission of immorality and the practice of
Revenue Code, paid the tax under protest as prostitution in an establishment masquerading
imposed by Ordinance No. 3398. The lower as a massage clinic where the operators thereof
court declared the ordinance invalid and offer to massage or manipulate superficial parts
affirmed the validity of the law authorizing it. of the bodies of customers for hygienic and
aesthetic purposes. The permit fee is made
payable by the operator of a massage clinic who
Issue: Whether or Not the ordinance and law may not be a massagist himself. Compared to
authorizing it constitute class legislation, permit fees required in other operations,
and authorize what amounts to double taxation. P100.00 may appear to be too large and rather
unreasonable. Manila Municipal Board
considered the practice of hygienic and
Held: The Legislature may, in its discretion, aesthetic massage not as a useful and beneficial
select what occupations shall be taxed, and in occupation which will promote and is conducive
its discretion may tax all, or select classes of to public morals, and consequently, imposed the
occupation for taxation, and leave others said permit fee for its regulation.
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