BIR Ruling

January 11, 1967 Societe Internationale de Telecommunications Aeronautiques Manila Communication Center 6th Floor, Insular Life Building Plaza Moraga, Manila Attention: Mr . Richard Baumann Gentlemen : This refers to your letter dated January 10, 1964 requesting information as to whether or not the Societe Internationale de Telecommunications Aeronautiques, hereinafter referred to as S.I.T.A., is exempt from the payment of income tax and filing of the yearly income tax returns. cdti In reply thereto, I have the honor to inform you as follows: From the Articles of Incorporation of S.I.T.A. and other documents submitted, it appears that S.I.T.A. is a stock corporation registered under the laws of Belgium; that it was organized for the purpose of centralizing aerial communications among airline members; that the voting rights are based on shares; that the member company pays for services rendered it by S.I.T.A.; and that in case of liquidation, profits go to members in proportion to their subscription. Under the set-up the costs of communications paid by airline members to S.I.T.A. are in effect payment to themselves. Nevertheless, they can claim deductions of the same, for income tax purposes, as ordinary expenses. Consequently, any amount that they acquire after liquidation over and above their capital investment will be considered income. cdll In view of the foregoing, this Office believes and so holds that the S.I.T.A. is not entitled to exemption under Section 27(e) of the Tax Code. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue