Manila Loan and Building Association Retains Its Tax Exempt Privilege Only When so Insured by the Home Financing Commission

December 9, 1997 BIR RULING NO. 127-97 000-00 127-97 De Castro & Cagampang Law Offices 7th Floor, LTA Building, 118 Perea Street, Legaspi Village Makati City Attention: Atty . Soledad Cagampang-de Castro Gentlemen : This refers to your letter dated March 17, 1997 requesting for a ruling exempting the Manila Building and Loan Association (MBLA) from the payment of income tax. cdti Documentary evidence submitted disclosed that MBLA is a building and loan association duly registered with the then Bureau of Commerce with Certificate of Registration No. 12236-D dated July 8, 1959; that on January 25, 1997, a Certification was filed with the Securities and Exchange Commission (SEC) amending its Articles of Incorporation; and that it is formed for the following purposes: (1) To encourage industry, frugality and home building among its members; (2) To accumulate the savings of its members, who are required or permitted to pay for their shares of capital stock in regular, equal and periodical payments; (3) To repay its members their accumulated savings and profits upon surrender of their stock; and (4) To loan its funds and funds borrowed for the purpose to members on the security of unencumbered real estate and the pledge of shares of capital stock owned by the members as collateral security. that any person may become a member of this Association by making an application for one or more shares and signing the corresponding form therefor; and that no shares shall be valid unless one or more installments have been paid upon it to the Association. In reply, please be informed that under Section 16(f) of Republic Act No. 580, as amended, otherwise known as the Home Financing Act, pertinent portion of which reads: "Sec. 16. . . . (f) when insured by the Commission, such associations including their franchise, capital, reserves, surplus, and their loans, receipts, and income, shall be exempt from all taxation now or hereafter imposed by the Government." xxx xxx xxx It is clear under the above-cited provision that the Manila Loan and Building Association (MBLA) retains its tax exempt privilege only when so insured by the Home Financing Commission. Absent a showing that the Manila Building and Loan Association has been insured by the said Commission, your request cannot be granted for lack of legal basis. Settled is the rule that tax exemption laws are strictly construed. One claiming the benefit thereof must bring himself substantially within the terms of the statute or justify his claim by the clearest grant of the organic or state law (House Vs. Posadas, 53 Phil. 338; Asiatic Petroleum Co. Vs. Llanes, 49 Phil. 446). cdt Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue