BIR Ruling

November 7, 1975 Mr. Nemesio G. Co Certified Public Accountant Rm. 201 Alliance Bldg. 410 Q. Paredes Street Binondo, Manila S i r : This refers to your letter dated November 3, 1975 stating that you and your business associates would like to established a plant for the production of ingots and/or steel bars; that you are going to use local junks and scrap irons as raw materials in said production; and that your operation will be essentially as follows: "We buy locally junks and scrap iron which were previously finished products subjected to the sales tax. Then we melt the scraps and form them into ingots. We sell these to rolling mills. Sometimes we will cause the ingots to be manufactured by the rolling mills into steel bars and we will pay the rolling mills for services rendered in the manufacture of the steel bars. "We would like to know if the junks and scrap irons used in the manufacture of ingots and steel bars could be deducted in the computation of 7% tax on sales. "While it is our opinion that the cost of the scraps that we use as raw materials is deductible, nevertheless, we would request your confirmation for our future guidance and record." In reply, I have the honor to inform you that under the foregoing facts, the cost of junks and scrap irons is deductible from the gross selling price of your ingots and/or steel bars in determining the sales tax due thereon, (BIR Ruling No. 241, series of 1960). aisa dc Very truly yours, (SGD.) EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3