BIR Ruling [UN-132-94]

April 11, 1994 BIR RULING [UN-132-94] Sr. Mary Anne Evidente Daughter of Charity CONCORDIA COLLEGE 1739 Pedro Gil P. O. Box EA 464 Manila Dear Sr. Mary Anne : This refers to your letter dated February 24, 1994 requesting, in effect, for a ruling that the sale of a portion of land owned by Colegio de Concordia is exempt from income tax if the proceeds are used to purchase materials to repair its Renewal-Mission Center. cdt It is represented that the Colegio de Concordia, a school owned and operated by the Daughters of Charity, owns a parcel of land Tagaytay City, where a Renewal-Mission Center has been built to house the facilities for providing opportunities for spiritual renewal of the members of the school community and related institutions of the Daughters of Charity; that the said structure has already deteriorated and depreciated due to long use and effects of the natural elements; that in view of that, the said structure needs extensive repairs as per of your engineer-consultants; that in order to materialize the said repairs, you may have to sell a portion of the subject land within the compound; and that whatever proceeds you will get from the sale shall be used directly and exclusively to repair the buildings so that the school's apostolate of contributing to the spiritual growth and renewal of Christians may be continued. In reply, please be informed that Colegio de Concordia will not be subject to income tax on the proceeds from the sale of a portion of its real estate located in Tagaytay City. In the case of Xavier School, Inc., CTA Case No. 1682, October 8, 1969, the Tax Court exempted from income tax the gain derived by the School, stating that the isolated sale of its real property and using the proceeds thereof to purchase lots for a new site and constructing improvements thereon in furtherance of its educational purposes cannot be considered as an activity conducted solely for profit, because a single transaction of incidental character does not constitute engaging in business. In view of the foregoing, this Office is of the opinion, as it hereby holds that the proceeds from the sale of a portion of the school's property in Tagaytay City is not subject to income tax, the same been derived from a single and isolated transaction in furtherance of its educational purposes and the same cannot be considered income from the productive use of its property. In view thereof, the aforesaid income is not likewise subject to the 7.5% expanded withholding tax prescribed by Revenue Regulations No. 6-94, amending Revenue Regulations No. 1-90 and Revenue Memorandum Circular No. 7-90. (BIR Ruling No. 388-93 dated September 16, 1993). 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 from the aforestated representations, then this ruling shall be considered null and void. cdtech Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Service)