Philippine School for the Deaf

February 20, 2009 BIR RULING [DA-(C-029) 108-09] BIR Ruling Nos. DA-322-04 & DA-390-06 Philippine School for the Deaf 2620 F.B. Harrison Pasay City Attention: Ms. Yolanda T. Capulong, Ed. D. Special Schools Principal II Gentlemen : This refers to your letter dated August 29, 2006 requesting on behalf of Philippine School for the Deaf ("PSD") for a ruling that the Manila Electric Company (MERALCO) refund to the school is not subject to creditable withholding tax. EHScCA As represented, PDS (formerly, School for the Deaf and Blind) with Tax Identification (TIN) No. 002-074-193-000 is registered with the Bureau of Internal Revenue under Certificate of Registration No. OCN-9RC0000184617 issued on June 30, 1994. PSD is the pioneer school for the handicapped in the country and in Asia. It is a semi-residential school and the only government owned institution for the deaf in the country. By virtue of Republic Act No. 3562, the School for the Deaf was separated from the Philippine National School for the Blind. It is under the administration of the City Schools Division, Pasay City, Department of Education-National Capital Region. In reply, please be informed that in a similar case, a non-stock, non-profit corporation exempt from income tax under the Tax Code of 1997 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 held in the above 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." (BIR Ruling No. DA-390-2006 dated June 23, 2006) Since PSD is a Government educational institution performing an essential governmental function, it is exempt from income tax under Section 32 (B) (7) (b) of the Tax Code of 1997. Hence, 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 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. IcaHTA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service