BIR Ruling [DA-162-01]

September 17, 2001 BIR RULING [DA-162-01] Section 30; DA-175-2000 Mr. Dominador J. Riomalos L10 B3 Teachers Village Cainta Rizal S i r : This refers to your letter dated February 28, 2001 requesting exemption from the payment of capital gains tax on a sale of a parcel of land by the Roman Catholic Archbishop of Manila. It is represented that the Roman Catholic Archbishop of Manila is a corporation sole duly registered and existing under the laws of the Philippines; that Roman Catholic Archbishop of Manila has a parcel of land located in "Teachers Village Phase II Cainta, Rizal consisting of one hundred seven (107) square meters covered by Transfer Certificate of Title No. 599151 issued by the Register of Deeds of Cainta, Rizal; that it decided to sell the property to Spouses Fortunato J. Riomalos and Ana Magon, and Spouses Dominador J. Riomalos and Delia Labay of Lot 10 Blk. 3 Walter de Vilder Street, Teachers Village, Cainta, Rizal; and that the proceeds of the sale will be used for funding projects committed to performing charitable works. In reply, please be informed that the income to be derived from the sale of the subject parcel of land is not within the contemplation of the last paragraph of Section 30 of the Tax Code of 1997, and will not result from the productive use of real properties but from a single transaction which is merely incidental to the religious purposes, hence, exempt from the capital gains tax. (BIR Ruling No. DA-101-98 dated March 20, 1998). However, the sale of the land is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realty or on its fair market value in accordance with Section 6(E) of the Tax Code of 1997, whichever is higher. The aforesaid opinion has been sustained and adopted by the Court of Tax Appeals in CTA Case No. 1468 dated October 14, 1968 (Congregacion de la Mission de San Vicente de Paul). Accordingly, the profit or income resulting from the sale transaction would be merely incidental to the religious purposes for which the corporation was created. Since the proceeds of the sale will be used for funding projects committed to performing charitable works and not for monetary gain, the income to be derived is not within the contemplation of the proviso of Section 30 and will therefore, not render such profit taxable as income, (BIR Ruling No. 115-92 dated April 2, 1992 and Opinion of Secretary of Justice, GC No. V-287 dated April 7, 1959.) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group