BIR Ruling

April 28, 1970 MEMORANDUM FOR: The Director Revenue Region No. 8 South Manila There is returned to you herewith the entire docket bearing on the internal revenue tax case of Philippine Ace Lines, Inc., Rm. 1104 TPBC Building, Anda Circle, Port Area, Manila, involving the amount P5,987.41 as miscellaneous and interest incomes of herein taxpayer, for the year 1967. acd The records show that the Philippine Ace Lines, Inc., a domestic corporation, is engaged in the overseas shipping business. It conducted its business within the purview of Republic Act. No. 1407, as amended by Republic Act No. 4146. Hence, it is not subject to the payment of income tax by virtue of the provisions of the aforestated laws. The only issue to be resolved in this case is whether or not the miscellaneous and interest incomes of subject taxpayer in the total amount of P5,987.41 come within the exempting provisions of Republic Act No. 1407, as amended by Republic Act. No. 4146. The pertinent portion of Republic Act No. 1407, as amended by Republic Act No. 4146, is quoted as follows: "SEC. 2. . . . any citizen of the Philippines or any association or corporation organized under the laws of the Philippines, at least sixty percent of the capital of which is owned by citizens of the Philippines, engaged or which shall engaged exclusively in the overseas shipping business, and in the construction of modern boats for overseas shipping business, and in the construction of modern boats for overseas service shall be exempted from the payment of income tax on income derived from his or its shipping business for a period of ten years from the date of approval of this Act, . . ." As per report of the investigating examiner, Marta A. Borjal, in her 1st Indorsement dated February 11, 1969, the miscellaneous income consisted of the refund of the cost of the empty drums which the Philippine Ace Lines returned to the Company from whom it purchased the gas and oils used by the vessels and that the interest income was derived from the Social Security System in connection with the amounts given to said System for the employees of the Philippine Ace Lines. There is no question that the abovementioned incomes were derived by the Philippine Ace Lines, Inc. in connection with the shipping business. Although, they are only incidental income, they could not have been arisen if it were not for subject-taxpayer's overseas shipping business. Hence, they should also be included as exempt under Republic Act. No. 1407, as amended by Republic Act No. 4146. In view thereof, this case should now be considered closed and terminated. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue