BIR Ruling

June 13, 1973 Insurance Company of North America Zaragosa Building, P. O. Box 287 Makati Commercial Center Gentlemen : This refers to your letter dated May 17, 1973 requesting opinion whether you can offset your net loss of P20,725.94 for December 1972 against your net profit of P494,114.92 for the fiscal period ended November 30, 1972. acd It is represented that you have closed your books and filed your income tax return for the fiscal period ended November 30, 1972; that in compliance with a presidential decree, you have changed the basis of computing your net income from fiscal year to calendar year, for which reason, you have filed a separate income tax return for the month of December 1972, as required by Section 42(a) of the Tax Code. In reply thereto, I have the honor to inform you in the negative. The separate return which is required by Section 42(a) of the Tax Code covers a short period of less than twelve (12) months whenever there is a change of accounting period. The fact of being a separate return means that the return shall declare the gross income and deductions for the period for which separate return is made. Furthermore, Section 173 of Revenue Regulations No. 2 provides that "no returns can be made for a period of more than twelve months." Hence, there is a need to file a separate return whenever there is a change of accounting period. If you are allowed to offset your net loss incurred in December 1972 against your net profit for the fiscal period ended November 30, 1972, in effect, your income tax return would be covering a period of more than twelve (12) months. The same situation will result if, as orally represented, you are allowed to claim the said loss as a deduction in any of your quarterly income tax declarations filed during the year 1973. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue