BIR Ruling [DA-147-96]

April 16, 1996 BIR RULING [DA-147-96] SGV & Co. 6760 Ayala Avenue Makati City Attention: Atty. E.C. Alcantara Gentlemen : This refers to your letter dated November 17, 1995 requesting for confirmation of your opinion that any gain to be realized from two (2) isolated sales of real property by your client, Ateneo de Manila University (ATENEO), is exempt from income tax under the relevant provisions of the 1987 Philippine Constitution and the National Internal Revenue Code. It is represented that ATENEO is a non-stock, non-profit educational institution duly organized and existing under the laws of the Philippines and operating exclusively for educational purposes; that no part of the net income of the ATENEO inures to the benefit of any private stockholder or individual; that ATENEO was granted tax exemption pursuant to paragraph 3, Section 4 of Article XIV of the 1987 Philippine Constitution; and that ATENEO will sell or dispose of the following University properties: aSIDCT 1. Sale of frontage area of the Loyola campus to the government, represented by the Department of Public Works and Highways; and 2. Anticipated sale of the Ateneo Professional School premises located in Makati City. In reply, please be informed that in BIR Ruling No. 324-88 dated July 13, 1988 this Office has ruled that ATENEO is exempt from taxes under paragraph 3, Section 4, Article XIV of the 1987 Constitution which provides, viz: "3. All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. . . ." In the case of Xavier School, Inc., CTA Case No. 1682, October 8, 1969, the Tax Court exempted from income tax the gain derived by the School, stating that the isolated sale of its real property and using the proceeds thereof to purchase lots for a new site and constructing improvements thereon in furtherance of its educational purposes cannot be considered as an activity conducted solely for profit, because a single transaction of incidental character does not constitute engaging in business. cAHIaE In view of the foregoing, this Office hereby confirms your opinion that having been derived from two (2) isolated transactions in furtherance of its educational purposes, the proceeds from the sale of its real properties cannot be considered income from the productive use of its properties. Hence, said income is not subject to income tax and consequently to the 7.5% expanded withholding tax prescribed by Revenue Regulations No. 1-90 as amended by Revenue Regulations No. 12-94. (BIR Ruling No. 388-93; see also par. 3, Sec. 4, Art. XIV, 1987 Philippine Constitution) CHATEa However, since the documentary stamp tax is a tax on documents executed to evidence a transaction, not a tax on revenues and assets, the aforesaid sale or conveyance of real properties by Ateneo de Manila University shall be subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended by R.A. No. 7660. 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 null and void. (BIR Ruling No. 543-93 dated December 28, 1993) Very truly yours, (SGD.) ALICIA P. CLEMENO Assistant Commissioner (Legal Service)