BIR Ruling

February 20, 1969 Mr. S. L. Chhibber First Secretary Embassy of India 1856 Jorge C. Bocobo Malate, Manila S i r : This refers to your letter dated January 3, 1969 requesting information on a query stated thus: cdta "In connection with an inquiry received from the Federation of Plywood Industry, New Delhi (India), we shall be very grateful to be informed of the rates of depreciation allowed to factories in the Philippines for income tax purposes on plant and machineries for the following industries: a) Plywood Industry b) Fiberboard Industry c) Particleboard Industry "Separate figures may kindly be given for each of the above industries also indicating the useful life which is considered admissible by the tax administrative agencies in the Philippines." In reply, I have the honor to inform you as follows: In case of doubt and in the absence of any local laws or regulations as to the useful life of property, Bulletin "F", a publication of the United States Internal Revenue Service is generally regarded as controlling. The said bulletin contains a comprehensive list of property used in trade, business or profession and the average useful life of each item based upon scientific studies and observation for a long period of time in the United States. The reasonableness of the determination of the useful lives of property in Bulletin "F" has been recognized by the Supreme Court. (Zamora vs. Commissioner of Internal Revenue, G.R. Nos. L-15280-81 and L-15289-90, May 31, 1963) Under Bulletin "F", the depreciation rates allowed by the Commissioner (U.S.) and the Board or Court (U.S.) are as follows: Items Commissioner Board-Court 1) Plywood Mfg. machinery & equipment 7% 10% 2) Lumber Plant Plant 25% Miscellaneous equipment 10% 3) Wood working machinery & equipment 7% 4) Sawmill equipment 5% (1964, Commerce Clearing House, Inc., Vol. II, 6044 p. 22, 303) Where depreciation is computed on a physical life basis, accounts set up vary from single items through all degrees of group or classified accounts to a single composite plant account; but commonly, three broad classifications are used, their composite lives being about as follows: 1) Logging Machinery & equipment 10-15 years 2) Portable sawmills & equipment 10-12 years 3) Sawmill machinery & equipment 20-25 years (652, CCH, Vol. II p. 26,267) Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue