Villagers Montessori School of Quezon City, Inc.

February 21, 2007 BIR RULING [DA-111-07] BIR Ruling No. DA-322-04 & DA-390-06 Villagers Montessori School of Quezon City, Inc. 18 Dalsol Street GSIS Village, Project 8 Quezon City Attention: Mr. Arjohn C. Lascano Vice President for Finance Gentlemen : This refers to your letter requesting for a ruling that the Manila Electric Company (MERALCO) refund to Villagers Montessori School of Quezon City, Inc. is not subject to creditable withholding tax. aEACcS It appears that Villagers Montessori School of Quezon City, Inc. is a non-stock, non-profit educational institution operated exclusively for educational purposes. On August 9, 1991, it was issued a ruling by this Office exempting it from income tax. In reply, please be informed that in a similar case, a non-stock, non-profit corporation exempt from income tax under Section 30 of the Tax Code of 1997 has a refund of the excess utility payments with MERALCO covering the period 1995 to 2003. It is not engaged in any profitable activities that would result in the imposition of income taxes, consequently, it has not claimed the above utility payments as deductions for income tax purposes. It is not subject to income tax. Thus, it has not claimed the utility payments as deductions resulting in a benefit. This Office held in the above case that DEHcTI ". . . considering that LSHA is an organization exempt from income tax and it has not been engaged in any profitable activities that would result in the imposition of taxes, thereby it has not claimed the above utility payments as deductions for income tax purposes, the refund of the excess utility payments in its favor, therefore, will not give rise to or create a taxable income. Consequently, said refund is not subject to the withholding tax prescribed under RR No. 8-2005." (BIR Ruling No. DA-390-2006 dated June 23, 2006) Since Villagers Montessori School of Quezon City, Inc. is an educational institution exempt from income tax under Section 4(3) of Article XIV of the 1987 Constitution, the refund of the excess utility payments in its favor covering the period from February 1994 to May 2003 will not give rise to or create a taxable income. Consequently, said refund is not subject to the 25% withholding tax pursuant to Revenue Regulations No. 8-2005. TCaEIc This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner