G.R. No. 124043.

October 14, 1998] COMMISSIONER OF INTERNAL

REVENUE, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS
and YOUNG MENS CHRISTIAN ASSOCIATION OF THE PHILIPPINES,
INC., respondents.
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.
In 1980, private respondent earned, among others, an income of P676,829.80
from leasing out a portion of its premises to small shop owners, like restaurants
and canteen operators, and P44,259.00 from parking fees collected from nonmembers. On July 2, 1984, the commissioner of internal revenue (CIR) issued an
assessment to private respondent, 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
CIR denied the claims of YMCA.
Contesting the denial of its protest, the YMCA filed a petition for review at the
Court if Tax Appeals (CTA) on March 14, 1989. In due course, the CTA issued this
ruling in favor of the YMCA. Dissatisfied with the CTA ruling, the CIR elevated the
case to the Court of Appeals (CA). In its Decision of February 16, 1994, the CA
initially decided in favor of the CIR

Issue: Whether or not rental income of YMCA is Taxable?

Held: YES. The term educational institution or institution of learning has acquired
a well-known technical meaning, of which the members of the Constitutional
Commission are deemed cognizant. Under the Education Act of 1982, such term
refers to schools. The school system is synonymous with formal education,
which refers to the hierarchically structured and chronological graded learnings
organized and provided by the formal school system and for which certification is
required in order for the learner to progress through the grades or move to the
higher levels. The Court has examined the Amended Articles of Incorporation and
By-Laws of the YMCA, but found nothing in them that even hints that it is a
school or an educational institution.
Accordingly, Justice Hilario G. Davide, Jr., a former constitutional
commissioner, who is now a member of this Court, stressed during the Concom
debates that xxx what is exempted is not the institution itself xxx; those
exempted from real estate taxes are lands, buildings and improvements actually,
directly and exclusively used for religious, charitable or educational
purposes. Father Joaquin G. Bernas, an eminent authority on the Constitution and
also a member of the Concom, adhered to the same view that the exemption
created by said provision pertained only to property taxes.

In his treatise on taxation, Mr. Justice Jose C. Vitug concurs, stating that [t]he
tax exemption covers property taxes only.Indeed, the income tax exemption
claimed by private respondent finds no basis in Article VI, Section 28, par. 3 of
the Constitution.
Private respondent also invokes Article XIV, Section 4, par. 3 of the
Charter,claiming that the YMCA 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. We
reiterate that private respondent is exempt from the payment of property tax,
but not income tax on the rentals from its property. The bare allegation alone
that it is a non-stock, non-profit educational institution is insufficient to justify its
exemption from the payment of income tax.
As
previously
discussed,
laws
allowing
tax
exemption
are
construed strictissimi juris. Hence, for the YMCA to be granted the exemption it
claims under the aforecited 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. However, the Court
notes that not a scintilla of evidence was submitted by private respondent to
prove that it met the said requisites.

G.R. No. 115349 April 18, 1997

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
THE COURT OF APPEALS, THE COURT OF TAX APPEALS and ATENEO DE
MANILA UNIVERSITY,respondents.

Facts: Private respondent is a non-stock, non-profit educational institution with

auxiliary units and branches all over the Philippines. One such auxiliary unit is the
Institute of Philippine Culture (IPC), which has no legal personality separate and
distinct from that of private respondent. The IPC is a Philippine unit engaged in social
science studies of Philippine society and culture. Occasionally, it accepts
sponsorships for its research activities from international organizations, private
foundations and government agencies.
On July 8, 1983, private respondent received from petitioner Commissioner of
Internal Revenue a demand letter dated June 3, 1983, assessing private respondent
the sum of P174,043.97 for alleged deficiency contractor's tax, and an assessment
dated June 27, 1983 in the sum of P1,141,837 for alleged deficiency income tax,
both for the fiscal year ended March 31, 1978. Denying said tax liabilities, private
respondent sent petitioner a letter-protest and subsequently filed with the latter a
memorandum contesting the validity of the assessments.
On March 17, 1988, petitioner rendered a letter-decision canceling the assessment
for deficiency income tax but modifying the assessment for deficiency contractor's
tax by increasing the amount due to P193,475.55. Unsatisfied, private respondent

requested for a reconsideration or reinvestigation of the modified assessment. At the

same time, it filed in the respondent court a petition for review of the said letterdecision of the petitioner. While the petition was pending before the respondent
court, petitioner issued a final decision dated August 3, 1988 reducing the
assessment for deficiency contractor's tax from P193,475.55 to P46,516.41,
exclusive of surcharge and interest.

Issue: Whether or not Ateneo is subject to 3% contractor's tax under Section 205
of the Tax Code.
Held. NO. Petitioner Commissioner of Internal Revenue erred in applying the
principles of tax exemption without first applying the well-settled doctrine of strict
interpretation in the imposition of taxes. It is obviously both illogical and impractical
to determine who are exempted without first determining who are covered by the
aforesaid provision. The Commissioner should have determined first if private
respondent was covered by Section 205, applying the rule of strict interpretation of
laws imposing taxes and other burdens on the populace, before asking Ateneo to
prove its exemption therefrom. The Court takes this occasion to reiterate the
hornbook doctrine in the interpretation of tax laws that "(a) statute will not be
construed as imposing a tax unless it does so clearly, expressly, and unambiguously .
. . (A) tax cannot be imposed without clear and express words for that purpose.
Accordingly, the general rule of requiring adherence to the letter in construing
statutes applies with peculiar strictness to tax lawsand the provisions of a taxing act
are not to be extended by implication."
To fall under its coverage, Section 205 of the National Internal Revenue Code
requires that the independent contractor be engaged in the business of selling its
services. Hence, to impose the three percent contractor's tax on Ateneo's Institute of
Philippine Culture, it should be sufficiently proven that the private respondent is
indeed selling its services for a fee in pursuit of an independent business. And it is
only after private respondent has been found clearly to be subject to the provisions
of Sec. 205 that the question of exemption therefrom would arise. Only after such
coverage is shown does the rule of construction that tax exemptions are to be
strictly construed against the taxpayer come into play, contrary to petitioner's
position. This is the main line of reasoning of the Court of Tax Appeals in its
decision, 10 which was affirmed by the CA.
Moreover, the Court of Tax Appeals accurately and correctly declared that the " funds
received by the Ateneo de Manila University are technically not a fee. They may
however fall as gifts or donations which are tax-exempt" as shown by private
respondent's compliance with the requirement of Section 123 of the National Internal
Revenue Code providing for the exemption of such gifts to an educational
institution.

OTHER.
1. Grant of Tax Exemptions.
G.R. No. 130716 December 9, 1998
FRANCISCO I. CHAVEZ, petitioner,
vs.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) and

MAGTANGGOL GUNIGUNDO (in his capacity as chairman of the PCGG),

respondents, GLORIA A. JOPSON, CELNAN A. JOPSON, SCARLET A.
JOPSON, and TERESA A. JOPSON, petitioners-in-intervention.

FACTS: Petitioner Francisco I. Chavez, in his capacity as taxpayer, citizen and a former
government official asked the court to prohibit and enjoin respondents [PCGG and its
chairman]from privately entering into, perfecting and/or executing any agreement with the
heirs of the late President Ferdinand E. Marcos . . . relating to and concerning the properties
and assets of Ferdinand Marcos located in the Philippines and/or abroadincluding the socalled Marcos gold hoard. Chavez assailed the validity of the General and Supplemental
Agreement executed by the government (through PCGG) and the Marcos heirs on December
28,1993.Item No. 2 of the General Agreement states that the assets of the PRIVATE PARTY
(Marcosheirs) shall be net of and exempt from, any form of taxes due the Republic of the
Philippines.
ISSUE: W/N the compromise agreement entered into by the PCGG and the Marcos heirs
which committing to exempt from all forms of taxes the properties to be retained by the
Marcos heirs is valid.
HELD: The petition is GRANTED. The General and Supplemental Agreement dated
December 28, 1993, which PCGG and the Marcos heirs entered into are hereby declared
NULL AND VOIDfor being contrary to law and the Constitution. Under Item No. 2 of the
General Agreement, the PCGG commits to exempt from all forms of taxes the properties to
be retained by the Marcos heirs. This is a clear violation of the Construction. The power to tax
and to grant tax exemptions is vested in the Congress and, to a certain extent, in the local
legislative bodies. Section 28 (4), Article VI of the Constitution, specifically provides: "No law
granting any tax exemption shall be passed without the concurrence of a majority of all the
Member of the Congress." The PCGG has absolutely no power to grant tax exemptions,
even under the cover of its authority to compromise ill-gotten wealth cases. Even
granting that Congress enacts a law exempting the Marcoses form paying taxes on their
properties, such law will definitely not pass the test of the equal protection clause under the
Bill of Rights. Any special grant of tax exemption in favor only of the Marcos heirs will
constitute class legislation. It will also violate the constitutional rule that "taxation shall be
uniform and equitable. "Neither can the stipulation be construed to fall within the power of
the commissioner of internal revenue to compromise taxes. Such authority may be exercised
only when (1) there is reasonable doubt as to the validity of the claim against the taxpayer,
and (2) the taxpayer's financial position demonstrates a clear inability to pay.
Definitely, neither requisite is present in the case of the Marcoses, because under the
Agreement they are effectively conceding the validity of the claims against their properties,
part of which they will be allowed to retain. Nor can the PCGG grant of tax exemption fall
within the power of the commissioner to abate or cancel a tax liability. This power can be
exercised only when (1) the tax appears to be unjustly or excessively assessed, or (2) the
administration and collection costs involved do not justify the collection of the tax due. In this
instance, the cancellation of tax liability is done even before the determination of the
amount due. In any event, criminal violations of the Tax Code, for which legal
actions have been filed in court or in which fraud is involved, cannot be
compromised.
2. Veto of appropriation, revenue or tariff bills.

Section 27,(2), Article 26, 1987 Constitution

The President shall have the power to veto any particular item or items in an
appropriation, revenue, or tariff bill, but the veto shall not affect the item or
items to which he does not object.
Gonzales v. Macaraig, Jr. 1990
GR 87636 -EN BANC
Facts:
December 16, 1988 Congress passed House Bill No. 19186 (GAB of Fiscal Year 1989)
which eliminated or decreased certain items included in the proposed budget submitted
by the president
December 29, 1988 President signed bill into law (RA 6688) but vetoed 7 special
provisions and Sec 55, a general provision.
February 2, 1989 Senate passed Res. No. 381 Senate as an institution decided to
contest the constitutionality of the veto of the president of SEC 55 only.
April 11, 1989 this petition was filed
January 19, 1990 filed motion for leave to file and to admit supplemental petition same
issues but included SEC 16 of House Bill 26934 (Gab for FY 1990 or RA 6831)
SEC. 55 disallows the president and heads of several department to augment any item in
the GAB thereby violation CONSTI ART VI SEC 25 (5) (page 459)
SEC 16 of the GAB of 1990 provides for the same and the reason for veto remains the
same with the additional legal basis of violation of PD 1177 SEC 44 and 45 as amended
by RA 6670 that authorizes the president and the heads of depts. To use saving to
augment any item of appropriations in the exec branch of government (page 460)
ISSUE: Whether or not the veto by the President of SEC 55 of GAB for FY 1989 and SEC
16 of GAB for FY 1990 is unconstitutional.
HELD:The veto is CONSTITUTIONAL. Although the petitioners contend that the veto
exceeded the mandate of the line-veto power of the president because SEC 55 and SEC
16 are provisions the court held that inappropriate provisions can be treated as items
(Henry v. Edwards) and therefore can be vetoed validly by the president. Furthermore
inappropriate provisions must be struck down because they contravene the constitution
because it limits the power of the executive to augment appropriations (ART VI SEC 25
PAR 5.)
The provisions are inappropriate because
o They do not relate to particular or distinctive appropriations
o Disapproved or reduces items are nowhere to be found on the face of the bill
o It is more of an expression of policy than an appropriation
Court also said that to make the GAB veto-proof would be logrolling on the part of the
legislative the subject matter of the provisions should be dealt with in separate and
complete legislation but because they are aware that it would be NOT passed in that
manner they attempt hide it in the GAB
If the legislature really believes that the exercise of veto is really invalid then congress
SHOULD resort to their constitutionally vested power to override the veto. (ART VI SEC 21
PAR 1)
DECISION: Veto UPHELD. Petition DISMISSED.