MARIPOSA PROPERTIES VS. CIR (CTA Case No. 6402, 02/13/2007)

(Note: Guys I could not find a full text copy of the case in the internet as this is not one decided by the SC but merely by the CTA. The only available copy is not actually a “copy” but a discussion of the ruling of the court. No facts at all. So I just copied it and reproduce it here. Anyway yung ruling naman ang impt. I hope this will suffice. My source is the website of Punongbayan and Araullo.)

Deductibility of donations: In deciding on the BIR’s disallowance of deduction for donations made to a

private foundation, the CTA required the donor to prove compliance of both the donor and the donee with the requirements for deductibility of donations. Hence, for failure of the donor to present proof that the foundation’s income tax return (ITR) and audited financial statements (AFS) –as well as the annual information report of the foundation- were submitted to the BIR as required in the regulations, the deductions for donation was disallowed.

A donor must not only comply with the substantiation requirements for donors but also prove that the donee complied with the NEDA-prescribed Donee Reporting Requirements under BIR-NEDA Regulation No. 1-81 as a precedent to the full deductibility of a donation pursuant to Sec. 29 (H) (c) (ii) of the NIRC.

In deciding on the BIR’s disallowance of deduction for donation to a private foundation, the CTA required the donor to present evidence to establish that the foundation has been complying with the substantiation requirements for the donees as prescribed under Sec. 11 (B) of BIR-NEDA Reg. No. 1-81.

However, neither the ITR and AFS nor the annual information report duly certified by the authorized official of the foundation containing the annual information report required by Sec. 11 of BIR-NEDA Reg. No. 1-81 was presented by the donor. Thus, on account of its failure to establish that the foundation has been complying with the substantiation requirements for donees, the donor’s claim for deduction of its donations was disallowed.

The CTA further held that the BIR-NEDA Reg. No. 1-81 was a valid administrative issuance since it does not go beyond the confines of what has been provided in the NIRC. The regulation only supplies the details necessary for carrying out the law by enumerating the procedures and requirements necessary for claiming donations as tax deductions. Considering that the provision of BIR-NEDA Reg. No. 1-81 is within the delegated authority of the administrative agency, donors must adhere to the requirements under the said regulation in order to be entitled to a tax deduction.