BIR Ruling [DA-335-97]

October 8, 1997 BIR RULING [DA-335-97] Techno-Asia Construction & Development, Inc. Km. 14 Edison Avenue Paraaque, Metro Manila Attention: Mr. Nepomuceno M. Terrible President Gentlemen : This refers to your letter dated September 22, 1997 requesting for the tax exemption of Philippine Baptist, S.B.C., Inc., (BAPTIST) on the sale of its four (4) parcels of land to Techno-Asia Construction & Development, Inc. It is represented that Philippine Baptist, S.B.C., Inc. is a non-stock, non-profit religious organization formed to promote its religious activities in the Philippines; that it was organized and is existing under the Philippine laws with principal office at 2444 Taft Avenue, Manila; that it is an organization solely engaged in the propagation of doctrines based on the teaching of the Gospel of Jesus Christ, the formation of Christian values and related activities in accordance with the Gospel that Jesus requires his servants to build houses of worship for His Glory; that it is devoted in the construction of local churches and appurtenant structures, such as offices for administrative purposes all over the Philippines; that since 1975, it has not engaged or conducted any activity for profit, much less devoted any of its properties, real or personal, into any such activity and no part of its income is being used to the benefit of any private individual, but is devoted solely, exclusively and directly for its religious purpose for which it was organized; that it sold its four (4) parcels of land located in Makati covered by TCT Nos. S 29328, S 29329, S 29330, and S 29331 containing an area of 249 sq. m., 288 sq. m., 252 sq. m. and 289 sq. m., more or less, respectively which were acquired by the Baptist on June 14, 1976 for the purpose of improving the existing house therein to be used as a house of worship and office for administrative purposes; that the building was demolished to fully satisfy the obligations of Baptist to Techno-Asia Construction and Development, Inc., the sole buyer of the hour parcels of land, regarding the sale of properties; and that the proceeds of the sale of the said four parcels of land was used in the acquisition of another bigger parcel of land located in Paraaque under TCT No. 90390 containing an area of 1,905 sq.m., more or less, and for the construction of new and bigger house of worship, pastoral houses and offices for administrative purposes. SHDAEC In reply, please be informed that Section 26 (e) of the Tax Code, as amended, provides, viz: "Section 26. Exemptions from tax on corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such xxx xxx xxx (e) Corporation or association organized and operated exclusively for religious, charitable, scientific, athletic or cultural purposes, or for the rehabilitation of veterans, no part of the net income of which inures to the benefit of any private stockholder or individual.'' Similarly situated, is the case of Manila Bethel Temple, Inc. (BIR Ruling No. 26-143-59-569-88, dated November 29, 1988) wherein it was held that: ''Obviously, the income involved in the case of your client as well as the tax exempt organizations subject of the above ruling, having been derived from a single and isolated transaction in furtherance of the purposes for which they were organized cannot be considered as income from the productive use of their property since the latter connotes regular, continuous and a series of transactions. Accordingly, said income of your client is not subject to income tax." Such being the case, this Office is of the opinion as it hereby holds that the proceeds from the sale of the Philippine Baptist of its aforementioned real properties which it is going to use to defray the reconstruction costs of a local church cannot be considered as income from the productive use of its property and, therefore, the same is not subject to income tax and consequently, to the creditable withholding tax on sales, exchange or transfers of real property under Revenue Regulations No. 12-94. (BIR Ruling No. 387-93 dated September 16, 1995) However, the said transaction is subject to documentary stamp tax imposed under Sec. 196 of the Tax Code, as amended. (BIR Ruling No. 543-93 dated December 28, 1993) 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. DIETcC Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)