BIR Ruling

June 19, 1969 The Philippine Trust Company Manila Attention: Mr . Homobono V . Hukom Assistant Manager Foreign Department Gentlemen : This refers to the letter dated June 3, 1969 of Mrs. Guadalupe R. Robbins, Attorney-in-fact of Mr. Baldomero Fernandez, requesting a certification from this Office to the effect that the separation pay received by Mr. Baldomero Fernandez, from the Compaia General de Tobacos de Filipinas, in the amount of P87,314.73 is exempt from the payment of income tax under Republic Act No. 4917. It appears that Mr. Baldomero Fernandez, an employee of Compaia General de Tobacos de Filipinas, 848 Marques de Comillas, Manila (hereinafter referred to as the Company), was separated from the service of the company effective at the close of business hours on April 30, 1969. The reason for his separation from the service of the said company is stated in the letter dated April 15, 1969 of the Manager of the Finance Division of the company which we quote as follows: "During the last few years there has been a marked business recession which has compelled many companies to effect economies and adopt policies to tighten up the organization, in consonance with prevailing business conditions. Following a comprehensive study of the Company's minimum personnel requirements throughout its entire organization, we are constrained to notify you that you are, among others to be separated from the service of the Company effective at the close of business hours on April 30, 1969." Section 1 of Republic Act No. 4917 provides in part viz: ". . . Provided, finally , That in case of separation of an official or employee from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee, any amount received by him or by his heirs from the employer as a consequence of such separation shall likewise be exempt as hereinabove provided." Section 4(f) of Revenue Regulations No. 1-68 dated March 25, 1968 implementing Republic Act No. 4917 states that the phrase "for any cause beyond the control of said official or employee" connotes involuntariness on the part of the official or employee. The separation from the service of the official or employee must not be asked for or initiated by him. In other words, the separation must not be of his own making. Obviously, if not for the retrenchment policy of the Company, the services of Mr. Fernandez as Manager of its Leaf Department would not have been terminated. In view thereof, and considering that the separation of Mr. Baldomero Fernandez from the services of the Company is for a cause beyond his control, this Office believes and so holds that the separation pay received by him from the company as a consequence thereof in the total amount of P87,314.00 is exempt from the payment of all taxes. cdtech Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue