BIR Ruling [DA-193-98]

May 15, 1998 BIR RULING [DA-193-98] Marinduque Electric Cooperative, Inc. Boac, Marinduque Attention: Mr . Serafin L . Olmeda President Gentlemen : This refers to your request for exemption from the requirements embodied in Letters (c) and (e) of Sec. 8 (Documentation Requirements) of Revenue Memorandum Circular No. 48-91 per Board Resolution Nos. 96-97 and 96-98 and the stopping of the collection and/or refund of the 2% franchise tax and 1% withholding tax which letter-request was endorsed by the Department of Finance and received by this Office on June 9, 1997. cdtech You stated that Marinduque Electric Cooperative, Inc. (MARELCO) conducted a series of consultative meetings in most districts of its area coverage, particularly Mogpog, Gasan, Torrijos and Boac on June 22, July 27 and August 24, 1996 in compliance with the National Electrification Administration Memorandum dated May 17, 1996; that majority of the member-consumers expressed apprehensions, anxiety and confusion and are therefore indecisive on the issue of undergoing the rigors and intricacies of being permanently registered into the Cooperative Development Authority as provided for under R.A. No. 6938; that the Department of Justice Opinion No. 41 dated April 23, 1996, affirms that: (1) registration of electric cooperatives with the CDA is optional; (2) that if the cooperative opts to register under R.A. Nos. 6938 and 6939, it shall not lose its status as registered electric cooperative under P.D. No. 269, as amended, and shall continue to be governed by said law; (3) if it opts not to register under R.A. 6938, it shall not be entitled to the other privileges granted to CDA-registered electric cooperatives; (4) it can continue employing the word "cooperative" in its corporate name even if it opts not to register under the CDA in view of the mandatory provision of Sec. 17 of P.D. 269, as amended; that NEA qualified MARELCO to be a recipient of a loan in the amount of P16,664,000.00 through the Overseas Economic Cooperation Fund of Japan and to be a recipient of other loans that it may extend for the purpose of electrifying the whole island of Marinduque; and that the BOD resolved to affirm that MARELCO shall continue to be under the aegis of P.D. No. 269, as amended, and with the NEA under Board Resolution No. 96-98. In reply, please be informed that R.A. No. 6938, otherwise known as the Cooperative Code of the Philippines expressly repealed P.D. No. 269 and all cooperative laws as embodied in Section 18 of the Act. Note that a repealing clause is that part of the statute which announces the legislative intent to terminate or revoke , making the repealing law, R.A. 6938, the existing and governing law on cooperatives. Art. 122 of the said Act specifically provides that electric cooperatives shall be covered by the Code subject to the three-year transition period within which the Cooperative Development Authority and the National Electrification Administration shall help and assist electric cooperatives to qualify under the Code. Moreover, the opinion of the Department of Justice has a persuasive effect only. Under Section 9 of RA 6938, the power to register cooperatives is vested on the CDA, thus, transferring the functions of the NEA relating to the registration of cooperatives to the CDA. E.O No. 93 withdrew the tax and duty exemption privileges under P.D. 269. Such being the case, a cooperative registered under P.D. 269, the exemption privileges of which were removed by E.O. 93, has to register with the CDA in order to be entitled to the benefits and incentives granted under R.A. 6938, i.e., exemption from payment of income and sales taxes (now VAT and other percentage taxes) for a period of ten (10) years reckoned from the effectivity date of E.O. 93. llcd On the issue of the use of the word "cooperative" in the corporate name, Section 14 of R.A. 6938 provides, to wit: "SEC. 14. Prohibition . No organization shall be allowed to use the title "cooperative" in its name unless it follows all generally accepted cooperative principles, applicable cooperative laws, and is duly registered under this Act . Provided, That organizations which have the word "cooperative" as part of their nomenclature but which do not qualify as cooperatives under the provisions of this Act shall have three (3) years within which to qualify and to register with the Authority. If at the end of the three-year period provided herein, the said organization still do not qualify, it shall be unlawful for the organizations to continue using the word "cooperative" in their names ." In view of the foregoing, your request for exemption from the requirements embodied in Letters (c) and (e) of Section 8 of Revenue Memorandum Circular No. 48-91 and the stopping and/or refund of the franchise and withholding taxes is hereby denied for lack of legal basis. (BIR Ruling No. ECCP 008-92 dated January 27, 1992) cdta Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)