17. CIR vs. CA & YMCA, G.R. No.

124043, October 14, 1998

FACTS: 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. Then, 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 upon motion for

reconsideration, affirmed the CTA.

ISSUE: Whether or not the rental income of YMCA is taxable.

RULING: Yes. The exemption claimed by YMCA is expressly disallowed by the very

wording 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. While the income received by the

organizations enumerated in Section 26 of the NIRC is, as a rule, exempted from the

payment of tax in respect to income received by them as such, the exemption does not

apply to income derived 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.