G.R. No. 154993. October 25, 2005.
LUZ R. YAMANE, in her capacity as the CITY TREASURER OF MAKATI CITY, Petitioner, vs. BA LEPANTO CONDOMINIUM CORPORATION, Respondent.

FACTS

Respondent BA Lepanto Condominium Corporation, organized under the Condominium Act, holds title to the common areas of its condominium building in Makati. Its members are the unit owners. The Corporation collects regular assessments from members solely for operating expenses, capital expenditures on common areas, and other special assessments as stipulated in its governing documents. In December 1998, the City Treasurer of Makati issued a Notice of Assessment demanding payment of business taxes for 1995-1997, totaling over ₱1.6 million, without specifying the statutory basis.
The Corporation filed a written tax protest, arguing it was not engaged in business as defined by law, as it was a non-profit entity managing the condominium for its owners. The City Treasurer denied the protest, contending that collecting dues to maintain common areas enhanced property values and constituted a profit venture. The Corporation appealed to the Regional Trial Court (RTC) of Makati, which dismissed the appeal, ruling the Corporation’s activities fell under the definition of “business” under the Local Government Code.

ISSUE

Whether a condominium corporation, which collects assessments from its member unit owners exclusively for the maintenance and preservation of common areas, is engaged in “business” subject to local business tax under the Local Government Code.

RULING

The Supreme Court ruled in favor of the respondent condominium corporation. The legal logic is anchored on the statutory definitions of “business” and the specific nature of a condominium corporation. Under Section 13(b) of the Local Government Code, “business” is defined as “trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit.” A condominium corporation, as constituted under the Condominium Act (R.A. No. 4726), has a singular statutory purpose: to hold title to the common areas, manage the condominium, and maintain the property for the benefit of the unit owners.
The Court held that the collection of assessments from members is not a commercial activity pursued for profit. These funds are mandatory contributions for the preservation of the common property and the enforcement of the condominium’s rules, which are essential functions of the corporation’s legal mandate. There is no element of trade, commercial activity, or profit motive. The incidental benefit of maintaining or enhancing property values for unit owners does not transform this non-profit, proprietary function into a taxable business. Therefore, the assessment had no legal basis, as the condominium corporation is not subject to local business tax under the Local Government Code. The Court affirmed the Court of Appeals’ decision setting aside the tax assessment.