STATUTORY CONSTRUCTION

EXCLUSIVELY
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.

HELD:
The Court held that the petitioner is indeed a charitable institution based on its charter
and articles of incorporation. As a general principle, a charitable institution does not lose
its character as such and its exemption from taxes simply because it derives income
from paying patients, whether out-patient or confined in the hospital, or receives
subsidies from the government, so long as the money received is devoted or used
altogether to the charitable object which it is intended to achieve; and no money inures
to the private benefit of the persons managing or operating the institution.

The Court appreciates the nobility of respondents cause. However, the Courts 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.

Despite this, the Court held that the portions of real property that are leased to private
entities are not exempt from real property taxes as these are not actually, directly and
exclusively used for charitable purposes. (strictissimi juris) Moreover, P.D. No. 1823 only
speaks of tax exemptions as regards to:

Lung Center of the Philippines vs. Quezon City and Constantino Rosas
G.R. No. 144104, June 29, 2004

FACTS:
The Petitioner is a non-stock, non-profit entity which owns a parcel of land in Quezon

City. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of
the Philippines. The ground floor is being leased to a canteen, medical professionals
whom use the same as their private clinics, as well as to other private parties. The right
portion of the lot is being leased for commercial purposes to the Elliptical Orchids and
Garden Center. The petitioner accepts paying and non-paying patients. It also renders
medical services to out-patients, both paying and non-paying. Aside from its income from
paying patients, the petitioner receives annual subsidies from the government.
Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5
million, predicating its claim as a charitable institution. The city assessor denied the
Claim. When appealed to the QC-Local Board of Assessment, the same was dismissed.
The decision of the QC-LBAA was affirmed by the Central Board of Assessment Appeals,
despite the Petitioners claim that 60% of its hospital beds are used exclusively for
charity.

income and gift taxes for all donations, contributions, endowments and
equipment and supplies to be imported by authorized entities or persons and by the
Board of Trustees of the Lung Center of the Philippines for the actual use and benefit of
the Lung Center; and
taxes, charges and fees imposed by the Government or any political subdivision
or instrumentality thereof with respect to equipment purchases (expression unius est
exclusion alterius/expressium facit cessare tacitum).
However, under the Constitution, in order to be entitled to exemption from real property
tax, there must be clear and unequivocal proof that (1) it is a charitable institution
and (2)its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for
charitable purposes. While portions of the hospital are used for treatment of patients
and the dispensation of medical services to them, whether paying or non-paying, other
portions thereof are being leased to private individuals and enterprises.
Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred from
participation or enjoyment. If real property is used for one or more commercial purposes,
it is not exclusively used for the exempted purposes but is subject to taxation.

ISSUE:
Whether or not the Petitioner is entitled to exemption from realty taxes notwithstanding
the fact that it admits paying clients and leases out a portion of its property for
commercial purposes.

PREVIOUSLY
Rura v. Lopena [GR L-69810-14, 19 June 1985]
Second Division, Abad Santos (p): 5 concur

Facts: Teodulo Rura was accused, tried and convicted of five (5) counts of estafa
committed on different dates in the Municipal Circuit Trial Court of Tubigon-Clarin,
Tubigon, Bohol, denominated as Criminal Case 523, 524, 525, 526 and 527. The 5 cases
were jointly tried and a single decision was rendered on 18 August 1983. Rura was
sentenced to a total prison term of 17 months and 25 days. In each criminal case the
sentence was 3 months and fifteen 15 days.
Rura appealed to the RTC Bohol but said court affirmed the decision of the lower court.
When the case was remanded to the court of origin for execution of judgment, Rura
applied for probation. The application was opposed by a probation officer of Bohol on the
ground that Rura is disqualified for probation under Section 9 (c) of PD 968 or the
Probation Law (i.e. applicable to those who have previously been convicted by final
judgment of an offense punished by imprisonment of not less than 1 month and 1 day
and/or a fine of not less than P200). The court denied the application for probation. A
motion for reconsideration was likewise denied. Hence the instant petition.
HELD: The Supreme Court granted the probation and directed the judge to give due
course to the petitioners application for probation; without costs.
1. Previous applies to date of conviction, not to date of commission of a crime
The statute relates previous to the date of conviction, not to the date of the
commission of the crime. When the accused applied for probation he had no previous
conviction by final judgment. When he applied for probation the only conviction against
him was the judgment which was the subject of his application. Conviction does not
retroact to the day of the commission of the crime.

Francisco vs Court of Appeals

G.R. No. 108747
April 6, 1995
Narvasa, C.J., Feliciano, Padilla, Bidin and Regalado, JJ., concur.

Facts:
Petitioner Pablo C. Francisco, upon humiliating his employees, was accused of multiple
grave oral defamation in five (5) separate Informations instituted by five of his
employees, each Information charging him with gravely maligning them on four different
days, i.e., from 9 to 12 April 1980.

On 2 January 1990, after nearly ten (10) years, the Metropolitan Trial Court of Makati, Br.
61, found petitioner Pablo C. Francisco, guilty of grave oral defamation, in four (4) of the
five (5) cases filed against him, and sentenced him to a prison term of one (1) year and
one (l) day to one (1) year and eight (8) months of prision correccional "in each crime
committed on each date of each case, as alleged in the information(s)," ordered him to
indemnify each of the offended parties, Victoria Gatchalian, Rowena Ruiz, Linda Marie
Ayala Pigar and Marie Solis, P10,000.00 as exemplary damages, and P5,000.00 for
attorney's fees, plus costs of suit. However, he was acquitted in for persistent failure of
the offended party, Edgar Colindres, to appear and testify.
Issue:
(a) Whether petitioner is still qualified to avail of probation even after appealing his
conviction to the RTC which affirmed the MeTC except with regard to the duration of the
penalties imposed.
Held:
Fixing the cut-off point at a maximum term of six (6) years imprisonment for probation is
based on the assumption that those sentenced to higher penalties pose too great a risk
to society, not just because of their demonstrated capability for serious wrong doing but
because of the gravity and serious consequences of the offense they might further
commit.
The Probation Law, as amended, disqualifies only those who have been convicted of
grave felonies as defined in Art. 9 in relation to Art. 25 of the Revised Penal Code, and
not necessarily those who have been convicted of multiple offenses in a single
proceeding who are deemed to be less perverse.
Hence, the basis of the disqualification of the petitioner is principally on the gravity of
the offense committed and the concomitant degree of penalty imposed. Those
sentenced to a maximum term not exceeding six (6) years are not generally considered
callous, hard core criminals, and thus may avail of probation.
The Court hereby finds the accused Pablo C. Francisco GUILTY beyond reasonable doubt
in each of the above entitled cases and appreciating in his favor the mitigating
circumstance which is analogous to passion or obfuscation, the Court hereby sentences
the said accused in each case to a straight penalty of eight months imprisonment, with
the accessory penalties prescribed by law; and to pay the costs.
The argument that petitioner had to await the remand of the case to the MeTC, which

necessarily must be after the decision of the RTC had become final, for him to file the
application for probation with the trial court, is to stretch the law beyond comprehension.
The law, simply, does not allow probation after an appeal has been perfected.
Accordingly, considering that prevailing jurisprudence treats appeal and probation as
mutually exclusive remedies, and petitioner appealed from his conviction by the MeTC
although the imposed penalties were already probationable, and in his appeal, he
asserted only his innocence and did not even raise the issue of the propriety of the
penalties imposed on him, and finally, he filed an application for probation outside the
period for perfecting an appeal granting he was otherwise eligible for probation, the
instant petition for review should be as it is hereby DENIED.
EVERY
IBAA Employees Union v. Inciong
GR L52415, 23 October 1984 (132 SCRA 663)
Facts:
On June 20, 1975, the Union filed a complaint against the bank for the payment of
holiday pay before the then Department of Labor, National Labor Relations Commission,
Regional Office IV in Manila. Conciliation having failed, and upon the request of both
parties, the case was certified for arbitration on 7 July 1975. On 25 August 1975, Labor
Arbiter Ricarte T. Soriano rendered a decision in the above-entitled case, granting
petitioners complaint for payment of holiday pay. Respondent bank did not appeal from
the said decision. Instead, it complied with the order of the Labor Arbiter by paying their
holiday pay up to and including January 1976.
On 16 December 1975, Presidential Decree 850 was promulgated amending, among
others, the provisions of the Labor Code on the right to holiday pay. Accordingly, on 16
February 1976, by authority of Article 5 of the same Code, the Department of Labor (now
Ministry of Labor) promulgated the rules and regulations for the implementation of
holidays with pay. The controversial section thereof reads as Status of employees paid
by the month. Employees who are uniformly paid by the month, irrespective of the
number of working days therein, with a salary of not less than the statutory or
established minimum wage shall be presumed to be paid for all days in the month
whether worked or not. On 23 April 1976, Policy Instruction 9 was issued by the then
Secretary of Labor (now Minister) interpreting the above-quoted rule. The bank, by
reason of the ruling laid down by the rule implementing Article 94 of the Labor Code and
by Policy Instruction 9, stopped the payment of holiday pay to an its employees.

On 30 August 1976, the Union filed a motion for a writ of execution to enforce the
arbiters decision of 25 August 1975, which the bank opposed. On 18 October 1976, the
Labor Arbiter, instead of issuing a writ of execution, issued an order enjoining the bank to
continue paying its employees their regular holiday pay. On 17 November 1976, the bank
appealed from the order of the Labor Arbiter to the NLRC. On 20 June 1978, the NLRC
promulgated its resolution en banc dismissing the banks appeal, and ordering the
issuance of the proper writ of execution. On 21 February 1979, the bank filed with the
Office of the Minister of Labor a motion for reconsideration/appeal with urgent prayer to
stay execution. On 13 August 1979,s the NLRC issued an order directing the Chief of
Research and Information of the Commission to compute the holiday pay of the IBAA
employees from April 1976 to the present in accordance with the Labor Arbiter dated 25
August 1975. On 10 November 1979, the Office of the Minister of Labor, through Deputy
Minister Amado G. Inciong, issued an order setting aside the resolution en banc of the
NLRC dated 20 June 1978, and dismissing the case for lack of merit. Hence, the petition
for certiorari charging Inciong with abuse of discretion amounting to lack or excess of
jurisdiction.
ISSUE:
Whether or not, PD 850 was intended only for daily wage workers.
RULING:
It is elementary in the rules of statutory construction that when the language of the law
is clear and unequivocal the law must be taken to mean exactly what it says. In the case
at bar, the provisions of the Labor Code on the entitlement to the benefits of holiday pay
are clear and explicit - it provides for both the coverage of and exclusion from the
benefits. In Policy Instruction No. 9, the then Secretary of Labor went as far as to
categorically state that the benefit is principally intended for daily paid employees, when
the law clearly states that every worker shall be paid their regular holiday pay. This is a
flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states
that "All doubts in the implementation and interpretation of the provisions of this
Code, including its implementing rules and regulations, shall be resolved in favor of
labor." Moreover, it shall always be presumed that the legislature intended to enact a
valid and permanent statute which would have the most beneficial effect that its
language permits (Orlosky vs. Haskell, 155 A. 112.)

National Housing Corp. v. Juco

134 SCRA 172 (1985)
Applicability of Article 6
Facts:
Juco was an employee of the NHA. He filed a complaint for illegal dismissal w/ MOLE but
his case was dismissed by the labor arbiter on the ground that the NHA is a govt-owned
corp. and jurisdiction over its employees is vested in the CSC. On appeal, the NLRC
reversed the decision and remanded the case to the labor arbiter for further
proceedings. NHA in turn appealed to the SC.

This consti provision has been implemented by statute PD 807 is unequivocal that
personnel of GOCC belong to the civil service and subject to civil service
requirements."Every" means each one of a group, without exception. This case refers to
a GOCC. It does not cover cases involving private firms taken over by the government in
foreclosure or similar proceedings.
For purposes of coverage in the Civil Service, employees of govt- owned or controlled
corps. whether created by special law or formed as subsidiaries are covered by the Civil
Service Law, not the Labor Code, and the fact that pvt. corps. owned or controlled by the
govt may be created by special charter does not mean that such corps. not created by
special law are not covered by the Civil Service.

Issue:
Are employees of the National Housing Corporation, a GOCC without original charter,
covered by the Labor Code or by laws and regulations governing the civil service.

Held:
Sec. 11, Art XII-B of the Constitution specifically provides: "The Civil Service embraces
every branch, agency, subdivision and instrumentality of the Government, including
every government owned and controlled corporation.The inclusion of GOCC within the
embrace of the civil service shows a deliberate effort at the framers to plug an earlier
loophole which allowed GOCC to avoid the full consequences of the civil service system.
All offices and firms of the government are covered.

The infirmity of the resp's position lies in its permitting the circumvention or
emasculation of Sec. 1, Art. XII-B [now Art IX, B, Sec. 2 (1)] of the Consti. It would be
possible for a regular ministry of govt to create a host of subsidiary corps. under the
Corp. Code funded by a willing legislature. A govt-owned corp. could create several
subsidiary corps. These subsidiary corps. would enjoy the best of two worlds. Their
officials and employees would be privileged individuals, free from the strict
accountability required by the Civil Service Dec. and the regulations of the COA. Their
incomes would not be subject to the competitive restraint in the open market nor to the
terms and conditions of civil service employment.
Conceivably, all govt-owned or controlled corps. could be created, no longer by special
charters, but through incorp. under the general law. The Constitutional amendment
including such corps. in the embrace of the civil service would cease to have application.
Certainly, such a situation cannot be allowed.