Income to be Derived by the Philippine Tuberculosis Society, Inc. from Sale of Property Not Subject to Income Tax

April 13, 1998 BIR RULING NO. 034-98 27 (C)-000-00-034-98 Philippine Tuberculosis Society, Inc. Quezon Institute Compound Eulogio Rodriguez Avenue Quezon City Attention: Justice Cecilia Muoz Palma Gentlemen : This refers to your letter dated November 12, 1997 stating that the Philippine Tuberculosis Society, Inc. (PTSI) is a non-stock, non-profit, private charitable organization which operates the Quezon Institute and fifty-one (51) TB Centers nationwide; that PTSI is the owner of a parcel of land in Zamboanga City with an area of 39,251 square meters more or less covered by Transfer Certificate of Title No. T-120,184; that this lot is now being sold for the purpose of raising funds to be used exclusively for the construction of the PTSI Zamboanga Chest Clinic and Dispensary in Zamboanga City, purchase of the necessary equipment for said clinic, and in furtherance of the activities of the PTSI in the drive against tuberculosis in Zamboanga City and its environs; that your Zamboanga Chest Clinic and Dispensary was organized since 1935 and is presently housed inside the DOH Compound in Zamboanga City, but is due for demolition by the end of this year; that with the sale of your Zamboanga City lot, you will be able to construct your own building for the clinic; that PTSI has been granted exemption as a non-stock, non-profit organization; and that PTSI has been granted exemption also on the sale of a portion of your Quezon Institute Compound. LLpr Based on the foregoing, you now request for exemption from capital gains tax on the sale of the said property. In reply, please be informed that in the case of Xavier School, Inc., CTA Case No. 1682, October 8, 1969, the Tax Court exempted from income tax the gain derived by the School, stating that the isolated sale of its real property and using the proceeds thereof to purchase lots for a new site and constructing improvement thereon in furtherance of its educational purposes cannot be considered as an activity conducted solely for profit, because a single transaction of incidental character does not constitute engaging in business. In view of the foregoing, this Office is of the opinion as it hereby holds that the income to be derived by PTSI from the sale of its property in Zamboanga City to be used in the furtherance of its services in the prevention, control and treatment of tuberculosis and for charitable and social welfare purposes is not considered income from the productive use of its property because a single transaction of incidental character does not constitute PTSI as engaged in business. Accordingly, said income is not subject to income tax imposed under Section 27(C) of the Tax Code of 1997. The sale of the said property, however, is subject to documentary stamp tax. (BIR Ruling No. 388-93 dated September 16, 1993; BIR Ruling No. 543-93 dated December 28, 1993). 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. cdll Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue