BIR Ruling [DA-633-06]

October 27, 2006 BIR RULING [DA-633-06] BIR Ruling No. DA-390-06 Maypajo Market Multi-Purpose Cooperative J.P. Rizal Street Maypajo, Caloocan City Attention: Mr. Leonardo V. Mendoza Vice-Chairman Gentlemen : This refers to your letter dated October 18, 2006 requesting for a ruling that the Manila Electric Company (MERALCO) refund to the cooperative is not subject to the twenty-five percent (25%) creditable withholding tax. Documents show that Maypajo Market Multi-Purpose Cooperative is registered with the Cooperative Development Authority (CDA) under Confirmation No. A-624-0322 issued on May 13, 1993. On August 1, 2006, it was issued a Certificate of Operation under CO No. CDA-MEO-2006-631 to be valid and effective until March 2, 2007. On August 25, 2006, it was issued BIR RDA RR5-3 Ruling No. 070-06 exempting the cooperative from income tax on its transactions with members only for a period of ten (10) years effective on its date of registration with the CDA. In reply, please be informed that your case is similar to the case in BIR Ruling No. DA-390-2006 dated June 23, 2006. The facts of the case are as follows: LSHA is a non-stock, non-profit corporation. It has a refund of the excess utility payments with MERALCO covering the period 1995 to 2003. It is not engaged in any profitable activities that would result in the imposition of income taxes, consequently, it has not claimed the above utility payments as deductions for income tax purposes. It is not subject to income tax, thus, it has not claimed the utility payments as deductions resulting in a benefit. This Office ruled in said case that ". . . considering that LSHA is an organization exempt from income tax and it has not been engaged in any profitable activities 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." Since the refund of the excess utility payments in favor of Maypajo Market Multi-Purpose Cooperative will not give rise to or create a taxable income, the refund of the excess utility payments with MERALCO during the period of its exemption is not subject to the 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. cAaETS Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service