BIR Ruling

August 21, 1975 Philippine Shiakha, Inc. 929 Kipuja St., Sta., Cruz Manila Attention: Mr . See Tiong Cheng President Gentlemen : This refers to your request for exemption from the payment of income tax and the filing of the corresponding income tax return under Section 27(f) of the Tax Code. cdi Investigation disclosed that the Philippine Shiakha Inc., is a non-stock and non-profit corporation duly registered with the securities and Exchange Commission; that as disclosed in its articles of incorporation, the purposes for which the corporation is formed are: 1) The general purpose shall be to advance and promote the commercial, economic, educational and social interest and well-being of the members and the general welfare and prosperity of the Philippines; to promote honesty and good faith, just and equitable principle in industrial and commercial activity, and uniformity in commercial usages and customers and to gather, keep and distribute educational, commercial and financial information and statistic of value; to find and correct abuses; prevent, minimize or adjust differences and controversies among its members; to take part in the deliberations, considerations, and decisions affecting the economic life of that nation, and having relation, direct or indirect, to trade, commerce or industry; 2) To acquire by purchase or lease, or otherwise, lands and interest in land, and to own, hold, improve, develop and manage any real estate so acquired for its own use and benefit as may be necessary or incidental to carry out the objectives of the club, and to erect or cause to be erected to any lands owned, held, or occupied, and to mortgage, sell, lease or otherwise disposed of any lands or interest in lands and in buildings or other structures: 3) That general plan or operation shall be to furnish suitable quarters for the meeting of its members, the establishment of facilities for commercial economics, educational, and scientific research and study, including social and recreational features so as to maintain the interest of its members and secure intelligent action on the part of its board and in the attainment and accomplishment of its general purpose; that the Association is maintained through the entrance, annual dues for membership, from contributions and rentals from its building; and that no part of its net income shall inure to the benefit of any individual member or contributor. It appears, however, that as reflected in its 1973 Profit and Loss Statement, the only income of the Association consists of rental income in the amount of P7,000.00. The investigation also disclosed that the Association derived income from the lease of its building. This proves that the Association engaged in the business as real estates dealer and, therefore, subject to the corresponding fixed tax. Section 31 of the Income Tax Regulations provides: "Sec 31. Business leagues . A Business league is an association of persons having some common business interest, which limits its activities to work for such common interest and does not engage in a regular business of a kind ordinarily carried on for profit. Its work need not be similar to that of a chamber of commerce or board of trade. If it engaged IN a regular business of a kind ordinarily carried on for profit, that fact that the business is conducted on a cooperative basis or produces only sufficient income to be self-sustaining, is not ground for exemption . . ." (Emphasis ours). In view thereof, the Philippine Shiakha, Inc., 929 Kipuja St., Sta. Cruz, Manila, cannot be considered an organization within the purview of Section 27(f) of the Tax Code. Consequently, it should file an income tax return and pay income tax on its net income. Furthermore, it is subject to the real estate dealers fixed tax. aisa dc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5