Clarification on the Implementation of Article XIV, Sec. 4, par. 3 of the 1987 Constitution

May 3, 1988 BIR RULING NO. 171-88 24 000-00 171-88 Gentlemen : This refers to your letter dated Sept. 24, 1987 requesting clarification relative to the implementation of Article XIV, Section 4, paragraph 3 of the 1987 Constitution concerning the following activities: "1. Operation of Canteen/Bookstore; "2. Acceptance of jobs from the public to fully utilize the machines (In the case of technical schools); and "3. Maintenance of dormitories (in the case of nursing schools)" In reply, please be informed that exemption under Section 4(3), Article XIV of 1987 Constitution refers to internal revenue taxes and customs duties, in appropriate cases, imposed by the national government on all revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes. This accordingly includes revenues derived from and assets used in the operations of cafeterias/canteens, dormitories, and bookstores provided they are owned and operated by the educational institution as ancillary activities and the same are located within the school premises. However, they shall be subject to internal revenue taxes on income from trade or business or other activity the conduct of which is not related to the exercise or performance by such educational institution of its educational purpose or function, such as (in the case of non-stock, non-profit technical schools) their acceptance of jobs from the public to fully utilize their machines. (Department Order No. 137-87) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner