BIR Ruling [DA-686-06]

November 30, 2006 BIR RULING [DA-686-06] University of Asia and the Pacific Pearl Drive Ortigas Center, Pasig City Attention: Ms. Emma G. Senica Accounting and Finance Unit Head Gentlemen : This refers to your letter dated August 30, 2006 requesting for a ruling that the Manila Electric Company (MERALCO) refund to University of Asia and the Pacific ("University") is not subject to the twenty-five percent (25%) creditable withholding tax under Revenue Regulations No. 8-2005. As represented, the University (formerly, Center for Research and Communication) is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 39859 issued on August 15, 1995. On March 21, 1997, it was issued BIR Ruling No. ENPS-002-97 exempting it from income tax pursuant to Section 4(3), Article XIV of the 1987 Philippine Constitution. 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 University is an educational institution exempt from income tax under Section 4(3), Article XIV of the 1987 Philippine Constitution, the refund of the excess utility payments in its favor will not give rise to or create a taxable income. Consequently, said MERALCO 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service