Non-taxability of Iwahig Penal Colony

December 4, 1958 BIR RULING NO. 697-58 The Provincial Revenue Officer Puerto Princesa, Palawan (Thru the Regional Director) BIR Regional District No. 3 Manila S i r : In answer to your query as to whether or not the Iwahig Penal Colony is subject to the sales tax on its sales of logs, other minor forest products, and copra, you are hereby informed as follows: The Iwahig Penal Colony is a subsidiary of the national penitentiary at Muntinglupa. The discipline of the persons detained in this Colony is reformatory and probationary in character, and the surveillance over the said Colony and the colonists is less strict than is maintained in the main prison. (Section 1709, Revised Adm. Code) The productive activities of the colony are incidents of its administration undertaken with the end in view of attaining the objectives of its establishment. Prison activities are primarily aimed at the moral, spiritual, and social rejuvenation of the inmates and they should not be looked at from the business viewpoint. As a matter of fact, Section 1719 of the Revised Administrative Code expressly authorizes the sale of colony produce to others than residents of the settlement should there be more to dispose of than is required for the use of the colony and the main prison. This Office is of the view that the logging and agricultural activities of the Iwahig Penal Colony constitute essentially, in respect of the administration of the colony, the exercise of governmental function. We are, therefore, of the opinion that the sale by the Colony of logs and other minor forest products produced in its concession, as well as copra, is not subject to the sales tax. Very truly yours, (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue