FACTS: St. Luke's is a non-stock non-profit hospital. The BIR assessed St.

Luke's based on the

argument that Section 27(B) of the Tax Code should apply to it and hence all of St. Luke's income
should be subject to the 10% tax therein as it is a more specific provision and should prevail over
Section 30 which is a general provision. St. Luke's countered by saying that its free services to
patients was 65% of its operating income and that no part of its income inures to the benefit of any
individual.

ISSUE: Does Section 27(B) have the effect of taking proprietary non-profit hospitals out of
theincome tax exemption under Section 30 of the Tax Code and should instead be subject to a
preferential rate of 10% on its entire income?

RULING: No. The enactment of Section 27(B) does not remove the possible income taxexemption of
proprietary non-profit hospitals. The only thing that Section 27(B) captures (at 10% tax) in the case
of qualified hospitals is in the instance where the income realized by the hospital falls under the last
paragraph of Section 30 such as when the entity conducts any activity for profit. The revenues
derived by St. Luke's from pay patients are clearly income from activities conducted for profit.