TAXATION

The Philippine-British Association, Inc. (Association) is a non-stock, non- profit organization which owns the St. Michael's Hospital (Hospital). Sec. 216 in relation to Sec. 215 of the LGC classifies all lands, buildings and other improvements thereon actually, directly, and exclusively used for hospitals as "special." A special classification prescribes a lower assessment than a commercial classification. Within the premises of the Hospital, the Association constructed the St. Michael's Medical Arts Center (Center) which will house medical practitioners who will lease the spaces therein for their clinics at prescribed rental rates. The doctors who treat the patients confined in the Hospital are accredited by the Association The City Assessor classified the Center as "commercial" instead of "special" on the ground that the Hospital owner gets income from the lease of its spaces to doctors who also entertain out-patients. Is the City Assessor correct in classifying the Center as "commercial?" Explain (15 points)