BIR Ruling

November 2, 1970 2nd Indorsement Respectfully returned to the Revenue Operations Head (Assessment), the entire docket bearing on the deficiency income tax case of the Araneta Institute of Agriculture, Inc., Malabon, Rizal for the fiscal years ended May 31, 1965 and 1966. It appears that the proposed assessment is based on the income derived by the taxpayer from its business operations, such as investments, real estate and manufacturing, and also from rentals, royalties, interests, dividends and others which have no bearing or relation whatsoever to its educational purposes. Such being the case, the taxpayer is subject to the then prevailing corporation income tax rate of 22% and 30% on the net income derived from said activities conducted for profit instead of 10% only, "because a private educational institution which deviates from its purely educational purposes and activities shall be treated like any private domestic corporation engaged in business for profit with respect to income derived therefrom. The protective mantle of income tax benefit or exemption cannot be extended to a private educational institution which chooses to descend from its high pedestal of tax preference or immunity to the level of an ordinary private corporation engaged in profitable undertaking or business.'' (Xavier School, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 1682, October 8, 1969) In view thereof, it is recommended that the corresponding assessment for deficiency income tax and interest in the total sum of P583,729.48 for the fiscal years ended May 31, 1965 and May 31, 1966 be immediately sent to the taxpayer, Araneta Institute of Agriculture, Inc. Malabon, Rizal. PRISCILLA R. GONZALES Acting Revenue Operations Head (Legal)