BIR Ruling

January 14, 1972 The General Manager Compania General de Tabacos de Filipinas 9th Floor, Bank of the Phil. Islands Bldg. Ayala Avenue, Makati, Rizal S i r : This refers to your letter dated January 13, 1972 requesting information as to whether or not the contemplated transaction hereinbelow explained would contravene the internal revenue laws or be considered as a scheme for tax evasion. It is represented that if "A" were to ship its pending cargo for Europe on "bottoms" to be provided by the Philippine-European Conference to which it is a signatory, it will pay freight of $70 per ton, whereas if it were to effect shipment thru "B", "B" can effect shipment on a non-conference carrier at only $40 per ton of cargo. If "A" were to pay $70 freight per ton of cargo it would lose in the transaction, but if the freight would be only $40, it will make some gain. It is now contemplated to ship the cargo thru "B" to whom the letter of credit will be opened. After collecting on the letter of credit, "B" will deliver the purchase price to "A" less a little amount which shall correspond to the profit of "B" in the transaction. In reply, I have the honor to inform you that, it is the opinion of this Office, as it hereby holds, that the foregoing contemplated transaction will not contravene any internal revenue law nor be considered as a scheme for tax evasion. It is of course understood that the gains or profit to be derived by "A" and "B" in the transaction shall be subject to income tax. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue