BIR Ruling

November 8, 1968 10th Indorsement Respectfully returned to the Honorable, the Assistant Executive Secretary, Malacaang, Manila thru the Honorable, the Secretary of Finance, Manila, the within papers relative to the Agreement entered into on February 12, 1968, by and between the Director of Vocational Education in behalf of the Davao National Agricultural School and Mr. Antonio A. Tulio, for the clearing of the forested area of a 2,580 hectares tract of public land reserved as a school site for said school and located at Monkayo, Davao del Norte, with the following comment. For ready reference clause 1, 2, and 3 of the aforecited Agreement read as follows: "1. That the cutting, collecting and removing of all the commercial timber on said school reservation by the party of the Second Part, its agents and employees, shall be governed by the Forest and Internal Revenue present laws and regulations, in connection with cutting, collecting and removing of forest products from the area designated for this purpose, in the same manner as if the tract of land covered by this agreement were public forests. "2. That the Party of the Second Part shall pay to the Party of the First Part the regular forest charges and reforestation charges on all timber cut and removed from the area in accordance with Commonwealth Act No. 466 and as computed according to the standard practice of the Bureau of Forestry in addition to P5.00 per 1000 Board feet of commercial timber. "3. That the payment of forest and reforestation charges shall be paid to the Party of the First Part, or its duly authorized representative in the Davao National Agricultural School sixty (60) days after the bill or invoice is presented to the Party of the Second Part and such payment shall form part of the Special Trust Fund of the Davao National Agricultural School." Charges on forest products are national internal revenue taxes (Sec. 18 (g), Tax Code). And under Section 362 of the Tax Code national internal revenue collected shall accrue to the National Treasury and shall be available for the general purposes of the Government. It is clear therefore that the inclusion in the Agreement of provisions to the effect that the forest charges shall be paid to the Davao National Agricultural School, which shall form part of its Special Trust Fund is without legal basis. Only Congress through the enactment of an appropriation measure can dispose of collections forming part of the general fund. In view of the foregoing, it is suggested that Clause 3 of the Agreement as hereinabove quoted be modified so as to effect all payments of forest charges to the BIR Collection Agent at Monkayo, Davao del Norte. adc (SGD.) MISAEL P. VERA Commissioner of Internal Revenue