BIR Ruling

March 21, 1975 The Revenue Director Revenue Region No. 8 Manila S i r : Returned to you herewith is the entire docket bearing on the internal revenue tax case of Miss Candelaria Parangue of Puerto Princesa City involving the amount of P765.49 under assessment notice No. 38-814140-69/72 dated March 30, 1972 as deficiency income tax for the year 1969. It appears that subject taxpayer is the common-law-wife of Mr. Chua Chong, a chinese national, with whom the following children, namely: Bienvenido, Antonio, Alicia, Anita, Nestor, Lydia, Jose, and Rowena were born on July 26, 1949, September 4, 1959, September 1, 1952, November 16, 1954, July 26, 1956, July 1, 1958, September 7, 1959 and December 3, 1960, respectively; and that in her 1969 income tax return, she claimed the personal exemption of P3,000.00 as head of family and additional exemptions of P6,000.00 for her eight children. However, office audit of the said resulted in the disallowance of her claim for additional exemptions in the total amount of P8,000.00 and the issuance on March 30, 1972 of a deficiency income tax assessment against her in the sum of P765.49. In a letter dated April 28, 1972, the taxpayer protested against the said assessment and requested reconsideration thereof. cdti The issue to be resolved in this case is whether or not the assessment is legal and proper. Section 23(b) and (c) of the Tax Code (before amendment by Presidential Decree No. 69) provides: "(b) Personal exemption of married persons or heads of family . The sum of three thousand pesos, if the person making the return is a married man or a married woman or the head of a family: Provided ; That only one exemption of three thousand pesos shall be made from the aggregate income of both husband and wife when not legally separated. For the purpose of this section, the term "head of family" includes an unmarried man or woman with one or both parents, or one or more brothers or sisters, or one or more legitimate, recognized natural or adopted children living with and dependent upon him or her for their chief support where such brother, sisters, or children are not more than twenty-three years of age, unmarried, and not gainfully employed, or where such children are incapable of self-support because mentally or physically defective." (As amended by Sec. 3, Republic Act No. 590; Sec. 3, Republic Act No. 2343; and Sec. 3, Republic Act No. 5325.)" "(c) Additional exemption of dependents . The sum of one thousand pesos for each legitimate, recognized natural, or adopted child, wholly dependent upon and living with the taxpayer if such dependents are not more than twenty-three years of age, unmarried, and not gainfully employed or incapable of self-support because mentally or physically defective. The additional exemption under this subsection shall be allowed only if the person making the return is the head of the family." (As amended by Sec. 3, Republic Act No. 590 and Sec. 3, Republic Act No. 2343.) It is clear from the aforequoted provisions of law that Miss Parangue is entitled to personal and additional exemptions as head of family with dependent children if such children are recognized natural. Article 269 of the New Civil Code defines natural children as children born outside of wedlock of parents, who at the time of the conception of the former, were not disqualified by any impediment to marry each other. In other words, the eight minor children shall be considered natural if at the time of their conception their parents Candelaria Parangue and Chua Chong were free to get married. However, in case the recognition is made by only one of the parents, it shall be presumed that the child is natural, if the parent recognizing it had legal capacity to contract marriage at the time of the conception. (Art 277, New Civil Code.) In view thereof, that Office should conduct the necessary verification whether the children of Miss Candelaria Parangue are her recognized natural children. In the affirmative case, the taxpayer is entitled to the personal and additional exemptions claimed in her return, in which case, the deficiency income tax assessment issued against her in the amount of P765.49 should be withdrawn and cancelled. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5