Herrera v Quezon City Board of Assessment

GR No L-15270, September 30, 1961

FACTS:
In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and
Ester Ochangco Herrera to establish and operate the St. Catherine�s Hospital. In
1953, the Herreras sent a letter to the Quezon City Assessor requesting exemption
from payment of real estate tax on the hospital, stating that the same was
established for charitable and humanitarian purposes and not for commercial gain.
The exemption was granted effective years 1953 to 1955. In 1955, however, the
Assessor reclassified the properties from �exempt� to �taxable� effective 1956, as
it was ascertained that out of the 32 beds in the hospital, 12 of which are for
pay-patients. A school of midwifery is also operated within premises of the
hospital.

ISSUE:
Whether St. Catherine�s is exempt from realty tax

RULING:
Yes. The admission of pay-patients does not detract from the charitable character
of a hospital, if all its funds are devoted exclusively to the maintenance of the
institution as a public charity. The exemption extends to facilities which are
incidental to and reasonably necessary for the accomplishment of said purpose � a
school for training nurses, a nurses� home, etc.

CITY ASSESSOR OF CEBU VS. ASSOCIATION OF BENEVOLA DE CEBU

G.R 152904 June 28, 2007

Facts:
Respondent is a non-stock non-profit organization and hospital. In 1990 it
constructed a Medical Arts building right beside it. In 1998 the petitioner, CITY
ASSESSOR OF CEBU issued a certification classifying the new building as commercial
and assessed the building at the assessment level of 35% and not 10% which was then
currently imposed on private respondent. Petitioner in this case claimed that the
building is used as commercial clinic/spaces for renting out physicians and thus
classified as commercial. Respondent contended that the building is used ACTUALLY,
DIRECTLY AND EXCLUSIVELY part of the hospital and should have an assessment level
of 10% as it was currently imposed.

ISSUE:
Whether or not the new building is liable to pay at the 35% assessment level.

Ruling:
NO. Being a TERTIARY HOSPITAL, it is mandated to be fully departmentalized and be
equipped with the service capabilities needed to support certified medical
specialists and other licensed physicians.

The fact that they are holding office in a separate building does not take away the
essence and nature of their services in relation to the overall operation of the
hospital and to its patients.

Under the Local Government Code, Sec. 216: �ALL BUILDINGS AND OTHER IMPROVEMENTS
THEREON actually, directly, and exclusively used for hospitals, cultural or
scientific purposes and those owned and used by local water districts.. shall be
classified as SPECIAL (NOT COMMERCIAL).

CIR v CA (YMCA)
298 SCRA 83

Facts:
In 1980, YMCA earned an income of 676,829.80 from leasing out a portion of its
premises to small shop owners, like restaurants and canteen operators and 44,259
from parking fees collected from non-members. The CIR issued an assessment to YMCA
for deficiency taxes which included the income from lease of YMCA�s real property.
YMCA formally protested the assessment but the CIR denied the claims of YMCA. On
appeal, the CTA ruled in favor of YMCA and excluded income from lease to small shop
owners and parking fees. However, the CA reversed the CTA but affirmed the CTA upon
motion for reconsideration.

Issue:
Whether the rental income of YMCA is taxable

Ruling:
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 not income tax on rentals from its property.

JESUS SACRED HEART COLLEGE VS. CIR

95 SCRA 16

FACTS:
Jesus Sacred Heart College was an educational organization authorized to operate in
Lucena, Quezon. It offered public elementary, secondary and collegiate courses. It
realized net incomes from tuition and other fees in carrying on its educational
activity for the years 1947, 1948 and 1949. The school paid its income tax and
penalties for the net incomes and compromise for late filing of its income tax
returns for said years. It filed a claim for refund with the CIR but was denied. In
a suit filed by the school against the CIR, CFI Manila sentenced the CIR to refund
to the school the sum paid by the school by way of income tax for the years 1947,
1948 and 1949 on the ground that the school is exempt from taxation under section
27(e) of the NIRC.

Issue:
Whether or not the income of the school was taxable

Ruling:
No. Section 27(e) of the National Internal Revenue Code, as amended byRepublic Act
No. 82 (section 5), exempts from taxation the "net income" of corporations
organized and operated exclusively for educational purposes provided no part of the
net income of which inures to the benefit of any private stockholder or individual.

In this case, it was conceded that the school belonged to this class. To hold that
an educational Institution is subject to income tax whenever it is so administered
as to reasonably assure that it will not incur in deficit, is to nullify and defeat
the aforementioned exemption.

The amount of fees charged by a school, college or university depends, ultimately,

upon the policy of a given administration, at a particular time. It is not
conclusive of the purpose of the institution. Otherwise, such purpose would vary
with the particular in charge of the administration of the organization.