BIR Ruling

June 30, 1970 Mr. Archibal R. Rellosa Assistant General Manager Home Financing Commission 53 Dasmarias, Manila S i r : This refers to the query contained in your letter dated May 18, 1970 which was clarified in your letter dated June 8, 1970 in the following manner: "This is supplementary to our query posed in our letter dated May 18, 1970, as to whether the tax exemption privilege under Sec. 25(c) of R.A. 1557, as amended by R.A. 5488 (Home Financing Act), on income realized from interest on housing loans insured by this Commission is applicable not only during the year it was earned but could be carried over to any succeeding year. "By way of elaboration on this query, could a lending institution, for instance, which realized on interest income from insured loans during 1969 but inspite of tax exemption under Sec. 25(c) of the Home Financing Act thereon pays income tax and then in 1970 invokes said tax exemption not enjoyed for income received in 1969? In other words, could the Bureau of Internal Revenue extend a tax credit to a taxpayer who inspite of tax exemption for a particular income chooses to pay tax thereon and which tax credit shall be availed of any said taxpayer during the next or succeeding years?" In reply, I have the honor to inform you that by express provision of Section 25(c) of Republic Act No. 1557, as amended, otherwise known as the Home Financing Act, "interests accumulated, by lending institutions on mortgages insured under the provisions of this Act shall be exempt from all taxation." In other words, interests earned by lending institutions on mortgages under the Home Financing Act is exempt from income tax. aisa dc In case such interest earned during a taxable year, was, nevertheless, declared for income tax purposes and the corresponding tax was paid thereon said tax is considered as having been collected illegally or erroneously. In such case, the income tax paid may be claimed as tax credit, provided that a claim is filed within two (2) years from the date of payment of the tax, in accordance with Section 309 of Tax Cade. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue