Commissioner of Internal Revenue vs. Court of Appeals and YMCA GR no. 124043 Oct.

14, 1996

FACTS: The Commissioner of Internal Revenue issued an assessment to private respondent (YMCA is a non-stock, non-profit institution) in the total amount of P415,615.01 including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the Commissioner denied the claims of YMCA. YMCA filed a petition for review at the Court of Tax Appeals. The CTA ruled in favor of the YMCA. The Commissioner elevated the case to the Court of Appeals which initially decided in its favor by reinstating the assessment of deficiency fixed, contract of Appeals which initially decided in its favor by reinstating the assessment of deficiency fixed, contractors and income taxes. However, finding merit in YMCAs motion for reconsideration, the appellate court reversed itself and promulgated the first assessed resolution dated September 28, 1995 granting said motion of YMCA by affirming the CTAs decision in toto. On Fe bruary 29, 1996, the Court of Appeals denied the Commissioners motion for reconsideration. ISSUE: Whether or not the rental income of YMCA on its real estate is subject to tax. HELD: The Court ruled that the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph 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. Because the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real property, the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction.