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DISSENTING OPINION

BELLOSILLO, J.:

I vote to deny the petition. The basic rule is that the factual findings of the Court of Tax Appeals when supported by substantial evidence will not be disturbed on appeal unless it is shown that the court committed gave error in the appreciation of facts.¹ In the instant case, there is no dispute as to the validity of the findings of the Court of Tax Appeals that private respondent Young Mens Christian Association (YMCA is an association organized and operated exclusively for the promotion of social welfare and other non-profitable purposes, particularly the physical and character development of the youth.² the enduring objectives of respondent YMCA as reflected in its Constitution and By-laws are:

(a) To develop well-balanced Christian personality, mission in life, usefulness of individuals, and the promotion of unity among Christians and understanding among peoples of all faiths, to the end that the Brotherhood of Man under the Fatherhood of God may be fostered in an atmosphere of mutual respect and understanding;

(b) To promote on equal basis the physical, mental, and spiritual welfare of the youth, with emphasis on reverence for God, social discipline, responsibility for the common good, respect for human dignity, and the observance of the Golden Rule;

(c) To encourage members of the Young mens Christian Associations in the Philippines to participate loyally in the life of their respective churches; to bring these churches closer together; and to participate in the effort to realize the church Universal;

(d) To strengthen and coordinate the work of the Young Mens Christian Associations in the Philippines and to foster the extension of the Youth Men's Christian Associations to new areas;

(e) To help its Member Associations develop and adopt their programs to the needs of the youth;

(f) To assist the Member Associations in developing and maintaining a high standard of management, operation and practice; and

(g) To undertake and sponsor national and international programs and activities in pursuance of its purposes and objectives.³cräläwvirtualibräry

Pursuant to these objectives, YMCA has continuously organized and undertaken throughout the country various programs for the youth through actual workshops, seminars, training, sports and summer camps, conferences on the cultivation of Christian moral values, drug addiction, out-of-school youth, those with handicap and physical defects and youth alcoholism. To fulfill these multifarious projects and attain the laudable objectives of YMCA, fund raising has become an indispensable and integral part of the activities of the Association. YMCA derives its funds from various sources such as membership dues, charges in the use of facilities like bowling and billiards, lodging, interest income, parking fees, restaurant and canteen. Since the membership dues are very minimal, the Association derives funds from rentals of small shops, restaurant, canteen and parking fees. For the taxable year ending December 1980, YMCA earned gross rental income of P676,829.00 and P44,259.00 from parking fees which became the subject of the questioned assessment by petitioner.

The majority of this Court upheld the findings of the Court of Tax Appeals that the leasing of petitioners facilities to small shop owners and to restaurant and canteen operators on addition to the operation of a parking lot are reasonably necessary for and incidental to the accomplishment of the objectives of YMCA.⁴ In fact, these facilities are leased to members in order to service their needs and those of their guests. The rentals are minimal, such as, the rent of P300.00 for barbershop. With regard to parking space, there is no lot actually devoted therefor and the parking is done only along the sides of the building. The parking is primarily for members with car stickers but to non-members, parking fee is P.50 only. The rentals and parking fees are just enough to cover the operation and maintenance costs of these facilities. The earnings which YMCA derives from these rentals and parking fees, together with the charges for lodging and use of recreational facilities, constitute the bulk or majority of its income used to support its programs and activities.

In its decision of 16 February 1994, the Court of Appeals thus committed grave error in departing from the findings of the Court of Tax Appeals by declaring that the leasing of YMCAs facilities to shop owners and restaurant operators and the operation of a parking lot are used for commercial purposes or for profit, which fact takes YMCA outside the coverage of tax exemption. In later granting the motion for reconsideration filed by respondent YMCA, the Court of Appeals correctly reversed its earlier decision and upheld the findings of the Court of Tax Appeals by ruling that YMCA is not designed for profit and the little income it derives from rentals and parking fees helps maintain its noble existence for the fulfillment of its goal for the Christian development of the youth.

Respondent YMCA is undoubtedly exempt from corporate income tax under the provisions of Sec. 27, pars. (g) and (h), of the national Internal Revenue Code, to wit:

Sec. 27. Exemptions from tax on corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such x x x x (g) civic league or organization not organized for profit but operated exclusively for the promotion of social welfare (h) club organized and operated exclusively for pleasure, recreation and other non-profitable purposes, no part of the net income of which inures to the benefit of any private stockholder or members x x x x Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing 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 tax imposed under this Code.

The majority of the Court accepted petitioners view that while the income of organizations enumerated in Sec. 27 are exempt from income tax, such exemption does not however extend to their income of whatever kind or character from any of their properties real or personal regardless of the disposition made of such income; that based on the wording of the law which is plain and simple and does not need any interpretation, any income of a tax exempt entity from any of its properties is a taxable income; hence, the rental income derived by a tax exempt organization from the lease of its properties is not therefore exempt from income taxation even if such income is exclusively used for the accomplishment of its objectives.

Income derived from its property by a tax exempt organization is not absolutely taxable. Taken in solitude, a word or phrase such as, in this case, the income of whatever kind and character x x x from any of their properties might easily convey a meaning quite different from the one actually intended and evident when a word or phrase is considered with those with which it is associated.⁵ it is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, that every part of the statute must be considered together with the other parts and kept subservient to the general intent of the whole enactment.⁶ A close reading of the last paragraph of Sec. 27 of the National Internal Revenue Code, in relation to the whole section on tax exemption of the organizations enumerated therein, shows that the phrase conducted for profit in the last paragraph of Sec. 27 qualifies, limits and describes the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities in order to make such income taxable. It is the exception to Sec. 27 pars. (g) and (h) providing for the tax exemptions of the income of said organizations. Hence, if such income from property or any other property is not conducted for profit, then it is not taxable.

Even taken alone and understood according to its plain, simple and literal meaning, the word income which is derived from property, real or personal, provided in the last paragraph of Sec. 27 means the amount of money coming to a person or corporation within a specified time as profit from investment; the return in money from ones business or capital invested.⁷ Income from property also means gains and profits derived from the sale or other disposition of capital assets; the money which any person or corporation periodically receives either as profits from business, or as returns from investments⁸ The word income as used in tax statutes is to be taken in its ordinary sense as gain or profit.⁹cräläwvirtualibräry

Clearly, therefore, income derived from property whether real or personal connotes profit from business or from investment of the same. If we are to apply the ordinary meaning of income from property as profit to the language of the last paragraph of Sec. 27 of the NIRC, then only those profits arising from business and investment involving property are taxable. In the instant case, there is no question that in leasing its facilities to small shop owners and in operating parking spaces, YMCA does not engage in any profit-making business. Both the Court of Tax Appeals, and the Court of Appeals in its resolution of 25 September 1995, categorically found that these activities conducted on YMCAs property where aimed not only at fulfilling the needs and requirements of its members as part of YMCAs youth program but, more importantly, at raising funds to finance the multifarious projects of the Association.

As the Court has ruled in one case, the fact that an educational institution charges tuition fees and other fees for the different services it renders to the students does not in itself make the school a profit-making enterprises that would place it beyond the purview of the law exempting it from taxation. The mere realization of profits out of its operation does not automatically result in the loss of an educational institutions exemption from income tax as long as no part of its profits inures to the benefit of any stockholder or individual.¹⁰ In order to claim exemption from income tax, a corporation or association must show that it is organized and operated exclusively for religious, charitable, scientific, athletic, cultural or educational purposes or for the rehabilitation of veterans, and that no part of its income inures to the benefit any private stockholder or individual.¹¹ The main evidence of the purpose of a corporation should be its articles of incorporation and by-laws, for such purpose is required by statute to be stated in the articles of incorporation, and the by-laws outline the administrative organization of the corporation which, in turn, is supposed to insure or facilitate the accomplishment of said purpose.¹²cräläwvirtualibräry

The foregoing principle applies to income derived by tax exempt corporations from their property. The criterion or test in order to make such income taxable is when it arises from purely profit-making business. Otherwise, when the income derived from use of property is reasonable and incidental to the charitable, benevolent, educational or religious purpose for which the corporation or association is created, such income should be tax-exempt.

In Hospital de San Juan de Dios, Inc. v. Pasay City¹³ we held-

In this connection, it should be noted that respondent therein is a corporation organized for charitable, educational and religious purposes; that no part of its net income inures to the benefit of any private individual; that it is exempt from paying income tax; that it operates a hospital in which MEDICAL assistance is given to destitute persons free of charge; that it maintains a pharmacy department within the premises of said hospital, to supply drugs and medicines only to charity and paying patients confined therein; and that only the paying patients are required to pay the medicines supplied to them, for which they are charged the cost of the medicines, plus an additional 10% thereof, to partly offset the cost of medicines supplied free of charge to charity patients. Under these facts we are of the opinion and so hold that the Hospital may not be regarded as engaged in business by reason of said sale of medicines to its paying patients x x x x (W)e held that the UST Hospital was not established for profit-making purposes, despite the fact that it had 140 paying beds, because the same were maintained only to partly finance the expenses of the free wards containing 203 beds for charity patients.

In YMCA of Manila v. Collector of Internal Revenue,¹⁴ this Court explained

It is claimed however that the institution is run as a business in that it keeps a lodging and boarding house. It may be admitted that there are 64 persons occupying rooms in the main building as lodgers or roomers and that they take meals at the restaurant below. These facts however are far from constituting a business in the ordinary acceptation of the word. In the first place, no profit is realized by the association in any sense. In the second place it is undoubted, as it is undisputed, that the purpose of the association is not primarily to obtain the money which comes from the lodgers and boarders. The real purpose is to keep the membership continually within the sphere of influence of the institution; and thereby to prevent, as far as possible, the opportunities which vice presents to young men in foreign countries who lack home or other similar influences.

The majority, if not all, of the income of the organizations covered by the exemption provided in Sec. 27, pars. (g) and (h), of the NIRC are derived from their properties, real or personal. If we are to interpret the last paragraph of Sec. 27 to the effect that all income of whatever kind from the properties of said organization, real or personal, are taxable, even if not conducted for profit, then Sec. 27, pars. (g) and (h), would be rendered ineffective and nugatory. As this Court elucidated in Jesus Sacred Heart College v. Collector of Internal Revenue,¹⁵ every responsible organization must be so run as to at least inure its existence by operating within the limits of its own resources, especially its regular income. It should always strive whenever possible to have a surplus. If the benefits of the exemption would be limited to institutions which do not hope or propose to have such surplus, then exemption would apply only to schools which are on the verge of bankruptcy. Unlike the United States where a substantial number or institutions of learning are dependent upon voluntary contributions and still enjoy economic stability, such as Harvard, the trust fund of which has been steadily increasing with the years, there are and there have always been very few educational enterprises in the Philippines which are supported by donations, and these organizations usually have a very precarious existence.¹⁶cräläwvirtualibräry

Finally, the non-taxability of all income and properties of educational institutions finds enduring support in Art. XIV, Sec. 4, par. 3, of the 1987 Constitution

(3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law.

In YMCA of Manila v. Collector of Internal Revenue¹⁷ this Court categorically held and found YMCA to be an educational institution exclusively devoted to educational and charitable purposes and not operated for profit. The purposes of the Association as set forth in its charter and constitution are to develop the Christian character and usefulness of its members, to improve the spiritual, intellectual, social and physical condition of young men and to acquire, hold, mortgage and dispose of the necessary lands, building and personal property for the use of said corporation exclusively for religious, charitable and educational purposes, and not for investment or profit. YMCA has an educational department, the aim of which is to furnish, at much less than cost, instructions on subjects that will greatly increase the mental efficiency and wage-earning capacity of young men, prepare them in special lines of business and offer them special lines of study. We ruled therein that YMCA cannot be said to be an institution used exclusively for religious purposes or an institution devoted exclusively for charitable purposes or an institution devoted exclusively to educational purposes, but it can be truthfully said that it is an institution used exclusively for all three purposes and that, as such, it is entitled to be exempted from taxation.

Endnotes:

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¹ Commissioner of Internal Revenue v. Mitsubishi Metal Corporation, G.R. No. 54908, 22 January 1995, 181 SCRA 2140.

² Rollo, p. 76.

³ Rollo, pp. 76-77.

⁴ Rollo, p. 84.

⁵ Sajonas v. Court of Appeals, G.R. No. 102377, 5 July 1996, 258 SCRA 79.

⁶ Paras v. Commission on Elections, G.R. No. 123169, 4 November 1996, 264 SCRA 49.

⁷ Moreno, Federico B., Philippine Law Dictionary, Third Edition.

⁸ Sibal, Jose Agaton R., Philippine Legal Encyclopedia 1986 Edition.

⁹ Words and Phrases, Vol. 20A 1959 Ed. P. 1616.

¹⁰ Collector of Internal Revenue v. University of the Visayas, L-13554, 28 February 1961, 1 SCRA 669.

¹¹ Ibid.

¹² Jesus Sacred Heart College v. Collector of Internal Revenue, 95 Phil. 16 [1954].

¹³ No. L-19371, 28 February 1966, 16 SCRA 226.

¹⁴ 33 Phil 217 [1916].

¹⁵ See Note 11.

¹⁶ Ibid.

¹⁷ See Note 13.