Tax Exemption Granted to PAAF

March 23, 1960 BIR RULING NO. 164-60 Mr. Isidro Evangelista Attorney-at-Law 84 Labo St., Quezon City S i r : Reference is made to your sworn letter dated January 25, 1960, furnishing information to this Office under Republic Act No. 2338. Among other things, it is stated therein that the Philippine Amateur Athletic Federation (PAAF) should be subject to the amusement tax prescribed in section 260 of the Tax Code on admission to the Asian Basketball Conference. It is also stated that you are aware of B.I.R. Ruling No. 707, s. 1958, exempting the PAAF from said tax. In answer thereto, I have the honor to quote hereunder the pertinent provisions of Act No. 3252, otherwise known as "An Act granting a charter to the Philippine Amateur Athletic Federation to promote and encourage the development of all public recreation and amateur athletic activities in the Philippine Islands, and for other purposes . "Sec. 2. The purposes of this corporation are: to encourage systematic physical exercise and education, to promote and improve athletic sports among amateurs, to establish and maintain a uniform test of amateur standing and uniform rules for the government of all athletic sports, to organize the direct training of athletes to represent the Philippine Islands in international contests, to encourage and promote the establishment of public playgrounds and recreational facilities, . . . ." "Sec. 4. There is hereby created in the Department of Public Instruction, a position of National Physical Director who shall be appointed by the Governor-General with the advice and consent of the Senate. It shall be the duty of the National Physical Director to cooperate with the Philippine Amateur Athletic Federation in carrying out the provisions of this Act . . . ." "Sec. 8. The contribution which from time to time may be granted the Philippine Amateur Athletic Federation by the Legislature shall be expended by the Executive Committee in pursuance of this Act." From the title of Act No. 3262 and the aforequoted sections thereof, it seems quite clear that the PAAF is a corporation organized for the purpose of undertaking or, at least, of helping undertake governmental functions. It is, therefore, exempt from tax, particularly the amusement tax. With regard to the argument that Republic Act No. 104 subjects to tax government-owned and controlled corporations, agencies or instrumentalities, suffice it to state that "Republic Act No. 104 was passed to remove the exemption from taxation enjoyed by Government-owned or controlled corporation engaged in business for profit in competition with private individuals or corporations . . . The purpose was to compel those corporations to reduce their expenditures; . . . and 'in order to place them on an equal footing, on a level with private initiative in order not to discourage entirely private initiative by giving exemption to Government enterprises'" (see: Opinion of the Secretary of Justice No. 70, s. 1948 and No. 206, s. 1947; Emphasis supplied). The PAAF is not engaged in business for profit in competition with private individuals or corporations. Accordingly, we believe that there exists no reason for disturbing B.I.R. Ruling No. 707 mentioned above. With respect to your information concerning religious orders and the schools operated by them, please be further informed that the matter has, on even date, been referred to the Chief of the Investigation Division, this Office, for corresponding investigation and assessment of the tax liabilities, if any, of those institutions. With regard to the penalty (not tax) on reserve deficiencies incurred by banks provided for in section 249, second paragraph of the Tax Code, this Office is of the opinion that said law, as well as section 126 of Act No. 1459, as amended by Act 3610, has been repealed by section 106, in relation to section 140 of Republic Act No. 265, otherwise known as the Central Bank Act. Pursuant to section 106 of Republic Act No. 265, such penalty is payable by the bank concerned to the Central Bank, and no longer to this Office. The information given by you will not, however, fall within the purview of Republic Act No. 2338 inasmuch as they are not definite. aisadc Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue