Philippine Public Safety College

August 21, 2007 BIR RULING [DA-458-07] BIR Ruling No. DA-332-04 & DA-390-06 Philippine Public Safety College Fort Bonifacio Taguig City Attention: Ms. Margarita R. Cojuangco, MNSA, PH.D President Gentlemen : This refers to your letter dated August 3, 2006 requesting on behalf of Philippine Public Safety College ("PPSC") for a ruling that the Manila Electric Company (MERALCO) refund to the corporation is not subject to creditable withholding tax. As represented, the PPSC, which was created by virtue of Republic Act (R.A.) No. 6975, is a government agency attached with the Department of the Interior and Local Government. It is mandated to provide continuing education and training for the uniformed personnel of the Philippine National Police, the Bureau of Fire Protection, and the Bureau of Jail Management and Penology. In reply, please be informed that the same issue has been passed upon in BIR Ruling No. DA-390-2006 dated June 23, 2006. Therein, it was ruled that where a non-stock, non-profit corporation, exempt from income tax under Section 30 of the National Internal Revenue Code of 1997, as amended, is not engaged in any profitable activity that would result in taxable income, the utility payments made by that entity to MERALCO were not claimed as deductions for income tax purposes. Conversely, a refund from MERALCO of excess utility payments neither gives rise to any taxable income nor any tax benefit. Hence the refund is not subject to the withholding tax under the purview of Revenue Regulations (RR) No. 8-2005. This Office held in the above case that CSIHDA ". . . considering that LSHA is an organization exempt from income tax and it has not been engaged in any profitable activities (sic) that would result in the imposition of taxes, thereby it has not claimed the above utility payments as deductions for income tax purposes, the refund of the excess utility payments in its favor, therefore, will not give rise to or create a taxable income. Consequently, said refund is not subject to the withholding tax prescribed under RR No. 8-2005." (BIR Ruling No. DA-390-2006 dated June 23, 2006) Since PPSC is a Government educational institution exempt from income tax under Section 30 (I) of the Tax Code of 1997, the refund of the excess utility payments in its favor will not give rise to or create a taxable income. Consequently, said refund is not subject to withholding tax. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner