BIR Ruling No. 023-10

August 4, 2010 BIR RULING NO. 023-10 Sec. 30; RR No. 2-98; BIR Ruling No. DA-(C-058)206-09 Mariza M. Rabago-Uy OIC-Revenue District Officer RDO No. 53-A, Las Pias City Madam : This refers to your memorandum dated March 1, 2010 stating that Mary Immaculate Development Foundation, Inc. (MIDFI) as seller, and Melody Domingo, as buyer, executed a Deed of Sale over a condominium unit located at Unit 9 San Benedicto Building, Emmaus Village I, Talon V, Las Pias City, covered by Condominium Certificate of Title No. C-1336, Registry of Deeds for Las Pias City. EScIAa It appears that MIDFI is a non-stock, non-profit corporation and a legal opinion is sought whether or not it is exempt from paying capital gains tax. In reply thereto, please be informed as follows: The last paragraph of Section 30 (then Section 26) of the 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. " Emphasis 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. (BIR Ruling No. DA-(C-058)206-09) AEIHCS 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 MIDFI 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 Mary Immaculate Development Foundation, Inc. (MIDFI) of its real property 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, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue