BIR Ruling

November 9, 1972 Luna (LU) Farmers' Association Cooperative Credit Union, Inc. Magallanes, Luna, La Union Attention: Mr . Ricarte A . Valdez President Gentlemen : This refers to your letter dated October 22, 1972 requesting information as to whether or not a rice mill put up by the members of the cooperative is exempt from the payment of tax under the provisions of Republic Act No. 2023. It is represented that some members of the Luna Farmers' Association Cooperative Credit Union, Inc. pooled together in putting up a rice mill; that the rice mill was purchased through the president in the name of the cooperative and was financed by the members out of loans obtained by them from rural banks; and that under Section 66 of Republic Act No. 2023, cooperatives with net assets of not more than five hundred thousand pesos are exempt from the payment of taxes. cdtech In reply, I have the honor to inform you that under the foregoing circumstances, the operation of the rice mill is subject to the payment of the annual graduated fixed tax prescribed in Section 182(A)(3)(mm) of the Tax Code. Although under Section 66 of Republic Act No. 2023 cooperative (non-agricultural) are exempt from taxes and government fees (except specific tax under Republic Act No. 2023, as amended by Republic Act No. 4362), it should be understood, however, that the tax exemption granted under said law applies only to such taxes for which the cooperative itself would otherwise be liable. In this particular instance, the taxes due thereon are the direct and personal liabilities of the members. Hence, the members cannot invoke exemption, otherwise, that would be tantamount to a shifting of the privilege of exemption to them who are, nevertheless, non-exempt. "Exemption from taxation are highly disfavored in law; and he who claims exemption must be able to justify his claim by the clearest grant of organic and statute law. An exemption from the common burden cannot be permitted to exist upon vague implications." (Collector of Internal Revenue vs. Manila Jockey Club, G.R. No. L-8755, March 23, 1956; Asiatic Petroleum Co. v. Llanes, 49 Hi. 446) cd Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue