Dr. Jose P. Rizal Memorial Foundation, Inc.

April 22, 2009 BIR RULING [DA-(C-058) 206-09] S-30; RR 2-98 Dr. Jose P. Rizal Memorial Foundation, Inc. Rm. 306, Traders Hotel Manila 3001 Roxas Blvd., Pasay City Attention: Julita C. Benedicto Chairman and President Gentlemen : This refers to your letter dated January 09, 2009 requesting for reconfirmation of exemption from income tax on the proceeds of the sale of a parcel of land. It is represented that Dr. Jose P. Rizal Memorial Foundation, Inc. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission under SEC Registration No. 35807 dated July 18, 1968; that on October 27, 1976 following the provisions of the Laurel Langley Agreement, Pfizer Inc., an American Pharmaceutical Co. opted to donate to the Foundation three (3) parcels of land; that two (2) of the lots were sold in 1979 and all the proceeds of the sale were used by the Foundation; that since the Foundation needs a lot of money to finance the projects particularly the expansion and renovation of the 100 bed charity hospital at Bagong Bayan, Dasmarias, Cavite, the Foundation decided to sell the remaining property covered by TCT No. 7963 issued by the Registry of Deeds of the Municipality of Muntinlupa; that on the sale of the first two lots, no capital gains tax was paid by the Foundation since the same is a charitable Foundation; and that the Foundation expects the same privilege on the sale of the third lot. On September 06, 1999, the BIR issued a ruling under DA-517-99 exempting the sale of the said parcel of land from capital gains tax, however, the sale was not consummated and the ruling on such exemption was never used. In view of this, you are now requesting for reconfirmation of the said ruling for the proceeds of the sale of the third lot. In reply thereto, please be informed as follows: The last paragraph of Section 30 (then Section 26) of the old Tax Code, clearly subjects to tax the income of whatever kind and character derived by any organization otherwise exempt under the same section, from any of its properties or activities conducted for profit, regardless of the disposition made of such income. Specifically, the Tax Code provides as follows: "SEC. 30. Exemptions from Tax on Corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such: xxx xxx xxx (E) Nonstock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or assets shall belong to or inure to the benefit of any member, organizer, officer or any specific person; xxx xxx xxx (G) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare; xxx xxx xxx Notwithstanding, the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any properties, real or personal, or from any of the activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code. " (Underscoring supplied.) The above-quoted provision is literal in its language and plain and categorical in its meaning. The last paragraph of Section 30 (then Section 26) of the Tax Code, particularly, does not leave any room for interpretation; the income from any of the organization's properties is subject to tax under the Tax Code, regardless of the disposition made of such income. We note that the exemption from income tax of Dr. Jose P. Rizal Memorial Foundation, Inc. under Section 8 of R.A. No. 7278 is pursuant to Section 26 (e), (g) and (h) of the old Tax Code, viz. : "The corporation shall be entitled to the following tax and duty privileges: (a) Exemption from income tax pursuant to Section 26(e), (g) and (h) of the National Internal Revenue Code, as amended; xxx xxx xxx" The same provision is now Section 30 (E) and (G) of the Tax Code of 1997. Then Section 26 (h) in the old Tax Code has been deleted in the Tax Code of 1997 while the last paragraph of Section 26 (now Section 30) of the Tax Code has been retained in the new Code. Paragraphs (e), (g) and (h) of Section 26 [now par. (E) and (G) of Section 30] of the Tax Code should be read together with the last paragraph of the same Section since statutes must be construed as a whole. In fact, a cardinal rule of statutory construction is that legislative intent must be ascertained from a consideration of the statute as a whole, and not of an isolated part or a particular provision alone ( Aboitiz Shipping Corporation, et al. vs. City of Cebu, et al., 13 SCRA 449). Accordingly, the last paragraph of Section 30 (then Section 26) of the Tax Code, as well as the whole section should be understood and interpreted in connection and jointly with all the other provisions of the same law, and in the light of the preceding and subsequent provisions, giving a meaning to each word or expression in said Section 30 ( Chartered Bank vs. Imperial, 48 Phil. 931). Moreover, Section 30 of Revenue Regulations No. 2, as amended, provides, among others, that the income of such tax-exempt corporation which is considered as income from its properties, real or personal, includes profits from the sale of property. In other words, the sale by Dr. Jose P. Rizal Memorial Foundation, Inc. of its real property shall be subject to the corresponding income tax imposed under the Tax Code of 1997. Such being the case, this Office hereby rules that the sale by Dr. Jose P. Rizal Memorial Foundation, Inc. of its real property located in the Municipality of Muntinlupa covered by TCT No. 7693 is subject to capital gains tax based on the gross selling price or current fair market value as determined in accordance with Section 6 (E) of the Tax Code of 1997, whichever is higher, of such land and/or buildings pursuant to Section 27 (D) (5) of the same Code (Section 4 (c) (i), Revenue Regulations No. 7-2003). Moreover, the Deed of Absolute Sale of said real property shall be subject to documentary stamp tax imposed under Section 196 of the Tax Code of 1997. 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service