BIR Ruling

March 26, 1969 1st Indorsement Returned to the Director, Revenue Region No. 4, San Fernando, Pampanga, the within papers relative to the internal revenue case of MRS. SYLVIA SMITH, Olongapo City, involving the amount of P300.00 as compromise penalty. cdll The only question to be resolved here is whether or not the office of a business agent like the Zambales Business Agency which keeps its clients' books of accounts may be considered as an extension of the clients' business establishments such that books and other records of businessmen may be brought into the office of the business agency without violating the provisions of Revenue Regulations No. V-1, as amended. It is alleged that there exists a principal-agent relationship between taxpayer and the Zambales Business Agency which keeps her books of accounts. Under Section 194(u) of the Tax Code, business agent includes all persons who acts as agents of others in the transaction of business with any public officer, as well as those who conduct collecting, advertising, employment, or private detective agencies. Clearly, therefore, the keeping of books of accounts is not one among those activities which a business agency is authorized to conduct or perform. It appears, however, in the affidavit executed by one Saturnino Aragon, Sr. on April 24, 1967 that the Zambales Business Agency is a duly licensed bookkeeping and accounting firm. At this point it is important to note that this Office has consistently ruled that the auditor's office and his/its clients are two independent business entities such that the act of one cannot be considered the act of the other and vice-versa. In fact the prohibition provided for in Section 21 of the Bookkeeping Regulations is very clear that is not to bring the books of accounts outside the business establishment of a taxpayer. The prohibition is further amplified by BIR Ruling dated April 16, 1953, which states: "A certified public accountant, in the exercise of his profession, particularly in auditing the books of accounts of a taxpayer, cannot bring such books outside the business establishment of his client without violating Section 21 of the Bookkeeping Regulations. The law does not provide any exception to these requirements." In view of the foregoing, he is instructed to effect the immediate collection of the above-mentioned compromise penalty and if the taxpayer persists in refusing to pay the said amount, he is instructed to institute the necessary criminal action for violation of the provisions of the Bookkeeping Regulations. prcd Be guided accordingly. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue