BIR Ruling

November 3, 1972 The Regional Director Revenue Region No. 20 Zamboanga City S i r : This refers to your letter dated July 27, 1972 requesting information on the following: cdt 1. The requirements before a cooperative could be registered as an agro-industrial cooperative under Republic Act No. 4403; and 2. Whether or not a registered agro-industrial cooperative engaged in the buy and sell of copras from both members and non-members is exempt from the payment of tax under the provisions of Republic Act No. 4403. You stated that the cooperative concerned is the Basilan Coconut Producer's Cooperative Association which was originally organized under Act No. 3425, as amended by Republic Act No. 702; that in the case between the City of Basilan and the said cooperative, the Court of First Instance of Basilan City ruled that the Basilan Coconut Producer's Cooperative Association, Inc. could not be exempted from taxation under the provisions of Act No. 3425, as amended since it had been buying copras from non-members; that based on the said court decision, an assessment was issued against the cooperative in the amount of P11,851.78 as income tax for the years 1964, 1965, 1966 and 1968; that said cooperative has affiliated itself with the Philcoa as an Agro-Industrial Cooperative under the provisions of Republic Act No. 4403; that subject taxpayer refused to pay said assessment on the ground that it is exempt under the provisions of RA No. 4403; and that a civil case for the collection of the said amount is now pending with the Court of First Instance of Basilan City. cdt In reply, you are informed that under the foregoing facts, the assessment issued against the Basilan Coconut Producer's Cooperative Association, Inc. seem to include income taxes due when the said cooperative was registered under Act No. 3425, as amended by Republic Act No. 702, and appears to be based on the decision of the Court of First Instance of Basilan City wherein it was held that said cooperative is not exempt from taxation under the provisions of Act No. 3425, as amended since it has been buying copras from non-members. Although we may consider the assessment in order, the correctness or legality of the same is no longer in issue at this stage. The assessment which is in the amount of P11,851.78 is already the subject of a collection case filed with the Court of First Instance of Basilan City, hence, the same has become final, executory and demandable. As regards the requirements before a cooperative could be registered as an agro-industrial cooperative under the provisions of Republic Act No. 1145, as amended by Republic Act No. 4403, the same is a matter falling within the jurisdiction of the Philippine Coconut Administration, hence, it is requested that you pose your query to the said agency. As to whether or not a registered agro-industrial cooperative engaged in the buy and sell of copras from both members and non-members is exempt from the payment of tax under the provisions of Republic Act No. 4403, Section 3(f) of Republic Act No. 1145, as amended by Republic Act No. 4403 provides that agro-industrial coconut cooperatives with net assets of not more than five hundred thousand pesos shall be exempt from all taxes and government fees of whatever nature; and those with net assets in excess of five hundred thousand pesos shall be exempt from the payment of documentary stamp tax, residence taxes, tax on banks and insurance companies and municipal and city taxes, but shall be liable for the payment of income tax at the full rate provided for under existing laws on the amount allocated for interest on capital, fixed and percentage taxes at the full rate provided for under existing laws on gross sales to non-members; and all other taxes provided for under existing laws. However, notwithstanding the aforesaid provisions of Section 3(f) of Republic Act No. 1145, as amended, cooperatives thereunder otherwise exempt from income tax are subject to income tax by virtue of the provision of Section 24(d) of the Tax Code, as inserted by Republic Act No. 5431 which became effective on September 30, 1968. Said Section 24(d) of the Tax Code provides: "SEC. 24. . . . (d) The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Section 24(c)(1) and 27 of this Code shall pay the rates provided in this section. All corporations, agencies, or instrumentalities owned or controlled by the Government, including the Government Service Insurance System but excluding educational institutions, shall pay such rate of tax upon their taxable net income as are imposed by this section upon associations or corporations engaged in a similar business or industry." Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue