Ms. Marcelinda Omila-Yap

January 26, 2009 BIR RULING [NSNP-(S30H-010) 033-09] Sec. 30 (H) Ms. Marcelinda Omila-Yap Regional Director Revenue Region No. 17 Butuan City Madame : This refers to your 1st Endorsement dated November 21, 2008 relative to the request of Asian College Foundation for a ruling, whether or not an earlier ruling issued by this Office dated August 29, 2008 is applicable to taxable year 2005. Likewise, you want to be clarified whether non-stock, non-profit educational institutions would be automatically exempted from taxes and duties despite the absence of a ruling or certificate of exemption in their favor. CIaASH Documents submitted disclosed that a Preliminary Assessment Notice has been issued to Asian College Foundation; that said assessment covered income tax and annual registration fee for taxable year 2005; and that on August 29, 2008, BIR Ruling No. NSNP (S30H-024) 129-2008 dated August 29, 2008 has been issued in its favor pursuant to paragraph 3, Section 4, Article XIV of the 1987 Constitution. In reply, please be informed that revenue rulings are interpretations of the law and should apply simultaneously with the latter. They are opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws which are issued in response to a specific request for ruling filed by a taxpayer. Being interpretations, revenue rulings should generally take effect from the time the law became effective. However, an exception to this rule is provided under Section 246 of the Tax Code of 1997, as amended, which we quote as follows: "Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers." Based on the foregoing, retroactive application shall not be allowed in case of rulings which revoke, modify or reverse previous rulings and such revocation, modification, or reversal is prejudicial to the taxpayers. In other words, as long as the rulings are not prejudicial to the taxpayer, the same may be given retroactive effect. Retroactive application of rulings finds support in court decisions. In the case of Commissioner of Internal Revenue vs. Court of Tax Appeals and Warner-Lambert Philippines, Inc. (CA-G.R. SP No. 31025 January 12, 1994), the Court of Appeals (CA) affirmed the decision of the Court of Tax Appeals which ruled, among others, that rulings of the Commissioner of Internal Revenue which are not prejudicial to taxpayers must be given retroactive application. The CA, thus, declared: "It is clear from the foregoing that circulars or rulings promulgated by the Commissioner of Internal Revenue have no retroactive application where to so apply them would be prejudicial to taxpayers. Conversely, if the ruling or circular is beneficial to taxpayers, the same must be given retroactive application to lighten the taxpayer's tax burden. The power of taxation should be exercised with caution to minimize injury to the rights of a taxpayer ( Roxas vs. Court of Tax Appeals, 23 SCRA 276)." AIDTHC Applying the same in the instant case and considering the fact that Section 30 (H) of the Tax Code of 1997 and paragraph 3, Section 4, Article XIV of the 1987 Constitution, specifically states that non-stock and non-profit educational institutions shall not be taxed in respect to income received by them as such, Asian College Foundation is exempt from tax on all revenues derived in pursuance to its purpose as an educational institution and used actually, directly and exclusively for educational purposes. Likewise, Asian College Foundation is exempt from the payment of registration fees pursuant to Revenue Regulations No. 11-2008. Anent the second query, the power to interpret the provisions of the Tax Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner. Taxes, being burdens, are not to be extended by implication and are construed strictly not against the government but against the one who asserts the claim of exemption, hence the necessity of a confirmatory ruling from the Bureau of Internal Revenue, in the form of BIR Rulings. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service