BIR Ruling

April 15, 1976 Land Bank of the Philippines Not Required to Include in form 1701 . B Interest Payments to LBP Bondholders This refers to your letter dated March 2, 1977 requesting information on whether that Bank shall include in Form 1701 B for purposes of Section 243 of Revenue Regulations No. 2, as amended by Revenue Regulations No. 8-76, interest payments made to LBP bondholders. In reply, I have the honor to inform you that interests paid by that Bank to its LBP bondholders are exempt from income tax. (Sections 76 and 80 of Republic Act No. 3844, as amended by P.D. 251); hence, the same need not be declared in the income tax returns of the corresponding payees. Such being the case, the purpose for which Revenue Regulations No. 8-76 was promulgated, i.e., to ascertain the correct amount paid to the payee and whether such amount is declared in his income tax return will not be served. Moreover, it appearing that the said bonds among the evidences of indebtedness issued by the Bank which is a government instrumentality; that they are fully guaranteed by the Government; that they are negotiable and may be mortgaged in accordance with established banking procedures and practices with government institutions, to enable the holders thereof to make use of them in investments in productive enterprises. (Sec. 76, R.A. 3844, as amended); and that said bonds are issued to landowners who elect such mode of settlement when their farm lots are transferred to tenant/farmers, pursuant to Presidential Decree No. 27 (Sec. 80, Ibid), said bonds are considered "investments in bonds issued by the Government of the Philippines," and therefore disclosure of any information concerning said bonds is prohibited by Republic Act No. 1405. Thus said Section 2 thereof provides: "SEC. 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines , its political subdivisions and its instrumentalities are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials or in cases where the money deposited or invested is the subject matter of the litigation." (Emphasis ours) In view thereof, your query is answered in the negative. techasia