BIR Ruling

May 8, 1998 Oposa Law Office 1807 Cityland 10 Tower I Ayala Ave. cor. H.V. dela Costa St. Makati City 1227 Attention: Atty . Victoria V . Loanzon Gentlemen : In connection with your letter dated September 12, 1996, relative to the tax case of your client, RURAL BANKERS RESEARCH AND DEVELOPMENT FOUNDATION, INC ., (RBRDFI for short) involving the respective amounts of P107,258.40 and P7,861.14 as deficiency income and value added taxes, both for 1990, I regret to inform you that your request for the lifting of the Warrant of Garnishment earlier issued on the bank account of the taxpayer maintained with the Land Bank, cannot be granted for lack of legal/factual basis. LLphil Records of the case disclosed that the above deficiency tax assessments were based on the failure of your client, RBRDFI, to file an income tax return and declare its income consisting of installation fees of P141,775.50 and miscellaneous fees of P17,542.80 earned in 1990, and to pay the corresponding income tax due thereon. A careful study of BIR Ruling No. S26-70-90 dated June 28, 1996, issued in reply to your client's request for tax exemption, shows that RBRDFI is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission; that the purpose for which the corporation is formed is to establish programs, project and/or studies geared towards agricultural research, development and improvement in the various fields of endeavors by engaging in activities, projects, studies and/or programs specifically involving rural development all over the country, and as such, it falls within the purview of a corporation organized for scientific purposes as contemplated under Section 26(e) of the Tax Code, as amended. Accordingly, it is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. However, it is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code on its income derived from any of its properties, real or personal, or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation . We therefore, agree with the findings of the investigating examiner that the installation of microbanker software, not being the primary objective for which the Foundation was organized, is held to be conducted by it for profit, hence, income therefrom is taxable. The same is true with miscellaneous income from sales of manuals and handouts which were obviously conducted for profit. Consequently, you are requested to urge your client, Rural Bankers Research and Development Foundation, Inc., to pay the respective amounts of P107,258.40 and P7,861.14 as deficiency income and value added taxes, plus increments to date of payment, to the RDO where you are registered within fifteen (15) days from your receipt hereof, after payment of which this case will be considered closed and terminated. aisadc This constitutes the final decision of this Office on the matter. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue