BIR Ruling

June 29, 1976 Padilla Law Office 6th Floor Shurdut Bldg. Muralla, Manila Attention: Atty . Sabino Padilla, Jr . Gentlemen : In reply to your letter dated March 16, 1976, I have the honor to inform you that under Section 78 of Revenue Regulations No. 2, "interest on indebtedness incurred or continued to purchase bonds and other securities, the interest upon which is exempt from tax, is not deductible"; and that since Central Bank Certificates of Indebtedness (CBCI) are not among those government bonds and securities enjoying exemption from taxation; for although the purchasers thereof are not made to pay income tax on interests earned by them from said certificates, said interests are not actually tax-free, as the Central Bank assumes payment of the income tax due thereon, this Office is of the opinion, as it hereby holds, that interests paid by banks on account of deposits determined to have been used in the purchase of such Central Bank Certificates of Indebtedness are deductible from gross income under Section 30(b)(1) of the Tax Code. cdt Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."