BIR Ruling No. 160-11

May 19, 2011 BIR RULING NO. 160-11 Section 30; Revenue Regulations No. 2; BIR Ruling No. 023-10; BIR Ruling No. DA-(C-058) 206-09) Provincia Del Santisimo Nombre De Jesus De Filipinas Del Orden De Ermitaos De Nuestro Padre San Agustin (Corporacion De PP Agustinos) Saint Augustine Convent Intramuros, Manila Attention: Rev. Fr. Jesus Garcia-Encinas Authorized Church Representative Gentlemen : This refers to your letter dated January 12, 2009 requesting for a ruling that the sale by Provincia Del Santisimo Nombre De Jesus De Filipinas Del Orden De Ermitaos De Nuestro Padre San Agustin, commonly known as CORPORACION DE PP AGUSTINOS, of its real property is exempt from capital gains tax (CGT). ICHcaD It is represented that CORPORACION DE PP AGUSTINOS is a religious corporation sole constituted and incorporated under the laws of the Republic of the Philippines with postal address at Saint Agustin Convent, Intramuros, Manila; that it is the registered owner in fee simple of a parcel of land located at Pasong Tamo, Quezon City, Metro Manila as evidenced by Transfer Certificate of Title No. RT-76124 (356287) with Four Thousand Two Hundred Seven (4,207) square meters, more or less; and that an unnotarized and undated Deed of Absolute Sale was executed between CORPORACION DE PP AGUSTINOS, represented by Rev. Fr. Jesus Garcia Encinas and EJ Realty and Development Corporation, represented by its President and Authorized Officer Elizabeth C. Reyes, a domestic corporation duly organized and existing by virtue of the laws of the Philippines, with office address at No. 16 Moncado Street, BF Homes, Holy Spirit, Quezon City, wherein for and in consideration of the sum of Two Million Pesos (Php2,000,000.00), CORPORACION DE PP AGUSTINOS sells, cedes, transfers and conveys by way of Absolute Sale to EJ Realty and Development Corporation the subject real property. It is further represented that the sale of said property is in furtherance of CORPORACION DE PP AGUSTINOS' educational or religious purpose and to use the proceeds for deserving youth and missionaries who wish to serve the congregation and be active followers of Catholic Faith; and that this single transaction is not intended for any business activity or profit. In reply thereto, please be informed that 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, real or personal, from any of its 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; SCEDaT 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. 023-10 dated August 2, 2010 citing BIR Ruling No. DA-(C-058) 206-09) dated April 22, 2009) Paragraph (e) of Section 26 [now par. (E) 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 CORPORACION DE PP AGUSTINOS 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 CORPORACION DE PP AGUSTINOS 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. LibLex Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue