Deductibility of Expenses Incurred by Private Educational Institution for Expansion of School Facilities

February 28, 1984 BIR RULING NO. 046-84 30-a-000-00-046-84 Gentlemen : This refers to your letters dated October 8, 1982 and March 22, 1983 requesting a ruling as to whether expenses incurred by private educational institution for expansion of school facilities are deductible from its gross income. It is represented that said query is in connection with the 1978 internal revenue tax case of your client, Guagua National Colleges, Guagua, Pampanga involving a proposed deficiency income tax assessment arising from the disallowance of the expenses incurred for the expansion of school facilities. In reply, please be informed that your query is answered in the affirmative. Pursuant to Section 30(a)(3) of the Tax Code, as amended, in addition to the business expenses allowable as deductions, a private educational institution, whether stock or non-stock, shall also be allowed to deduct during the taxable year when they incurred expenses for the expansion of school facilities to be determined by rules and regulations issued jointly by the Ministries of Education and Culture and of Finance. There has been no rules and regulations which will determine said allowable expenses for expansion of school facilities. However, despite the absence of said rules and regulations, private educational institutions can still claim said expenses as deduction from gross income for income tax purposes. It should be emphasized however, that where the expansion expense have been claimed as deduction, no further claims for yearly depreciation of the school facilities will be allowed. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner