BIR Ruling [DA-687-06]

December 6, 2006 BIR RULING [DA-687-06] BIR Ruling No. DA-390-06 Lolomboy Waterworks Association, Inc . Lolomboy, Bocaue Bulacan Attention: Mr. Corlando G. Manalastas President/General Manager Gentlemen : This refers to your letter dated September 25, 2006 indorsed to this Office by Regional Director Anselmo G. Adriano requesting for a ruling that the Manila Electric Company (MERALCO) refund to Lolomboy Waterworks Association, Inc. ("Association") is not subject to the twenty-five percent (25%) creditable withholding tax under Revenue Regulations No. 8-2005. As represented, the Association is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 81724 issued on October 6, 1988. On September 12, 2006, it was issued BIR RDA RR5 Ruling No. 072-06 exempting it from income tax pursuant to Section 30 of the Tax Code of 1997. 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 the Association will not give rise to or create a taxable income, the refund of the excess utility payments with MERALCO is not subject to withholding tax. cIECTH 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