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CIR vs.

De la Salle University,
G.R. No. 196596, 198841, and 198941, November 9, 2016

Facts:
The Commissioner submits that DLSU's rental income is taxable regardless of how
such income is derived, used or disposed of. DLSU's operations of canteens and
bookstores within its campus even though exclusively serving the university
community do not negate income tax liability.

The Commissioner posits that a tax-exempt organization like DLSU is exempt only
from property tax but not from income tax on the rentals earned from property.
Thus, DLSU's income from the leases of its real properties is not exempt from
taxation even if the income would be used for educational purposes.41

DLSU stresses that Article XIV, Section 4 (3) of the Constitution is clear that all
assets and revenues of non-stock, non-profit educational institutions used
actually, directly and exclusively for educational purposes are exempt from taxes
and duties.

Issue:
Whether DLSU's income and revenues proved to have been used actually, directly and
exclusively for educational purposes and are exempt from duties and taxes.

Ruling:
A plain reading of the Constitution would show that Article XIV, Section 4 (3) does
not require that the revenues and income must have also been sourced from
educational activities or activities related to the purposes of an educational
institution. The phrase all revenues is unqualified by any reference to the source
of revenues. Thus, so long as the revenues and income are used actually, directly
and exclusively for educational purposes, then said revenues and income shall be
exempt from taxes and duties.

Thus, when a non-stock, non-profit educational institution proves that it uses its
revenues actually, directly, and exclusively for educational purposes, it shall be
exempted from income tax, VAT, and LBT. On the other hand, when it also shows that
it uses its assets in the form of real property for educational purposes, it shall
be exempted from RPT.

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