BIR Ruling [DA-202-01]

October 19, 2001 BIR RULING [DA-202-01] Siervas de San Jose Holy Family Province 65-A Mapagkawanggawa St. Teacher's Village Quezon City Attention: Sr. Lillian O. Ocenar, SSJ Provincial Superior Gentlemen : This refers to your letter dated June 6, 2000 requesting for exemption from the payment of capital gains/income tax on your sale of two (2) parcels of land used for religious purposes. It is represented that the following are the properties of your Congregation, with their corresponding Transfer Certificates of Title (TCT) No. and Tax Declaration No.: Location TCT No. Tax Declaration No. 1) No. 83 Road 13 RT-33573 D-007-00701 Pag-asa, Quezon City C-007-00393 2) No. 20, 19th Ave. Extension RT-4797 C-102-01443 Murphy, Quezon City B-102-01730 that having been used actually, directly and exclusively for religious purposes as provincial house and formation house, respectively, both properties have been included in the Roll of Tax-Exempt Properties by the Quezon City Assessor's Office; that since both properties no longer meet the needs of a provincial house and a juniorate formation house, you have decided to sell them; that the proceeds of the sale will be used to cover expenses for the replacement of the properties, i.e., the acquisition of the property and construction of the new juniorate formation house located at No. 78, 18th Avenue, Murphy, Quezon City and the construction of your new provincial house located at 65 Mapagkawanggawa St., Teachers' Village, Quezon City. In reply, please be informed that this Office is of the opinion that your sale of the subject parcels of land with the improvements erected thereon is exempt from the capital gains tax considering that the income derived therefrom did not result from the productive use of real properties but from a single transaction which is merely incidental to the purpose for which your Foundation was organized. Hence, the said income is not within the contemplation of the last paragraph of Section 30 of the Tax code of 1997. (BIR Ruling No. 115-92 dated April 2, 1992) 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 purpose for which your Foundation was created. (BIR Ruling No. 115-92 dated April 2, 1992 and Opinion of Secretary of Justice, GC No. V-287 dated April 6, 1959) However, the Deed of Absolute Sale and/or Conveyance of said property shall be subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. (BIR Ruling No. UN-446-95 dated December 21, 1995) 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. 381-97 dated November 13, 1997) Very truly yours, Commissioner of Internal Revenue (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group