BIR Ruling [DA-315-99]

May 21, 1999 BIR RULING [DA-315-99] Jater Development Corporation Suite 408, Greenhills Mansion #37 Annapolis St., Greenhills San Juan, Metro Manila Attention: Mr. Antonio D. Pascual President Gentlemen : This refers to your letter dated January 13, 1998 requesting for an exemption from payment of donor's tax on your cash donation to Emerald Mansion Condominium Association , Inc., a non-stock, non-profit corporation and that the amount donated be allowed as deduction from your gross income. It is represented that Jater Development Corporation (JDC) with principal office at Tarlac, Tarlac, is the owner of the Emerald Mansion; that Emerald Mansion is a condominium located at Emerald Avenue, Ortigas Center, Pasig City; that as a gesture to the patronage of its unit owners, the Board of Directors, in a resolution, unanimously approved and agreed to donate Five Million Pesos (P5,000,000.00) for the use of the Association in maintaining and improving the condominium on the condition that the said donation be subject to exemption. In reply, please be informed that under Section 101 of the Tax Code of 1997 [then Sec. 94, of the Tax Code, as amended], in case of gifts made by a resident only the following shall be exempt from the Donor's Tax: DEHcTI 1) Dowries or gifts made on account of marriage and before its celebration or within one (1) year thereafter by parents to each of their legitimate, recognized natural, or adopted children to the extent of the first Ten thousand pesos (P10,000); 2) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government; and 3) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization: Provided, however, That not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. Such being the case, and since a homeowners association is not among those in whose favor donations or gifts made are exempt under the aforesaid Section of the Tax Code, and considering that it is a cardinal rule in taxation that exemptions therefrom are highly disfavored in law and he who claims tax exemption must be able to justify his claim or right, the exemption cannot be established by mere implication but it must be clearly expressed ( Wonder Mechanical Engineering Corporation vs. Court of Tax Appeals, et al., 64 SCRA 555 ). Accordingly, your request for exemption from the payment of donor's tax imposed under Section 98 of the Tax Code of 1997 [then Sec. 91 of the Tax Code, as amended] on the P5,000,000 cash donation in favor of Emerald Mansion Condominium Association is denied for lack of legal basis. Likewise, Section 34(H)(2)(c) of the Tax Code of 1997 [then Sec. 29 (H)(2)(c) of the Tax Code, as amended] enumerates the donations which may be allowed as deductions from gross income. Donation made to a homeowners association not being one of those enumerated, cannot be deducted from gross income. Hence, the donation made by JDC to Emerald Mansion Condominium Association cannot be allowed as deduction from gross income of JDC for purposes of computation of income tax. (BIR Ruling No. 248-91 dated November 12, 1991) Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)