BIR Ruling

March 15, 1967 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountant P.O. Box 589, Manila Attention: Mr . M . Gutierrez Tax Department Gentlemen : This refers to your letter dated July 27, 1966 requesting confirmation of your opinion that the new mines purchased by your client, Benguet Consolidated, Inc., from the Balabac Mining Co., located at Balabac Island, Palawan, and which your client will operate and develop starting October, 1966 are exempt from income tax under Section 4 of Republic Act No. 909, which reads thus: LLpr "New mines and old mines which resume operation, when certified to as such by the Secretary of Agriculture and Natural Resources upon the recommendation of the Director of Mines, shall be exempt from the payment of income tax during the first three years of actual commercial productions; Provided, That, any such mine and/or mines making a complete return of its capital investment at any time within the said period, shall pay income tax from that year ." (Emphasis supplied) In reply, please be advised that contrary to your belief, the exemption under the abovequoted provision of the law is granted to new mining companies and old mining companies which resume operation and not to new mines to be developed and operated by mining companies which do not qualify as new mining companies or as old mining companies resuming operation. An analysis of the provisions of the law clearly shows that the legislators who enacted the law could not have intended to exempt the mines themselves. For example, the clause "shall be exempt from the payment of income tax during the first three years of actual commercial production" could not have referred to the mines being operated since it obviously refers to the taxpayer which is the corporation or person operating the mines. If the legislators intended to exempt from tax the income derived from all new mines, and those old mines which resume operation, they would have stated the law in this way: "The income derived from the operation of new mines or old mines, the operation of which is resumed, is exempt from income tax." prll In view of the foregoing, this Office is of the opinion that Benguet Consolidated, Inc. cannot be granted exemption under Section 4 of Republic Act No. 909 with respect to the new mining claims it purchased from the Balabac Mining Co., it appearing that in this case the former is a mining company that has been operating for a long time and is neither a new mining company or an old one resuming operation. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue