BIR Ruling [DA-024-02]

February 20, 2002 BIR RULING [DA-024-02] 270 DA-1-98 Hon. Alberto G. Romulo Executive Secretary Malacaang Palace Manila S i r : This refers to your memorandum dated February 13, 2001 requesting for the following: "1. A Certification from the Bureau of Internal Revenue (BIR) on the payment by Philippine International Air Terminal Co., Inc. (PIATCO) of withholding taxes for the following pre-operating consultancy contracts and project development costs incurred by it, on the years stated below: 1997-1999 Sebastian Liganor Galetierra Law Offices Quasha Ancheta Pena & Nolasco Law Offices 1998-1999 Pacific Consultants International GPK Legal Advisor Datacenta Limited Allan Stratford/Hyder Ashurst Morris Crisp Nippon Koie Thomas Consultants Raintree Partners Trevor Camahoff Quisumbing & Torres Law Offices People's Air Cargo & Warehousing Co., Inc. (for rentals) Philippine Airport & Ground Services, Inc. PAGS Terminals Inc. Flughafen Frankfurt Main A.G./FRANPORT A.G. Konsulta Philippines Pacific Consultants International Skidmore Owing Meryll Ltd. Geodesy Geotechnics SMDI Consultants, Inc. Landco Pacific Corporation Japan Airports Consultants, Inc. "2. Copies of Withholding Tax Returns filed by PIATCO with BIR from 1997 to 2002. "3. Income Tax Returns of the following for the years 1997, 1998, 1999 and 2000: Datacenta Limited Sebastian Liganor Galetierra Law Offices People's Air Cargo & Warehousing Co., Inc." Please be informed that Section 270 of the Tax Code of 1997 provides, viz: "SEC. 270. Unlawful Divulgence of Trade Secrets . Except as provided in Section 71 of this Code and Section 26 of Republic Act Numbered 6388, any officer or employee of the Bureau of Internal Revenue who divulges to any person or makes known in any other manner than may be provided by law information regarding the business, income, or estate of any taxpayer, the secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential information regarding the business of any taxpayer , knowledge of which was acquired by him in the discharge of his official duties, shall upon conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000), or suffer imprisonment of not less than two (2) years but not more than five (5) years, or both." ( Emphasis supplied ) The foregoing provision imposes penal sanctions upon any BIR official or employee who discloses "information regarding the business, income, or estate of any taxpayer", "knowledge of which was obtained by him in the discharge of his official duties", unless such disclosure comes within the purview of Section 71 of the Tax Code of 1997, which reads: "SEC. 71. Disposition of Income Tax Returns, Publication of Lists of Taxpayers and Filers . After the assessment shall have been made, as provided, in this Title, the returns, together with any corrections thereof which may have been made by the Commissioner, shall be filed in the Office of the Commissioner and shall constitute public records and be open to inspection as such upon the order of the President of the Philippines, under rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner. The Commissioner may, in each year, cause to be prepared and published in any newspaper the lists containing the names and addresses of persons who have filed income tax returns." By the first paragraph of the aforequoted section of law, individual income tax returns "shall constitute public records and be open to inspection as such upon the order of the President of the Philippines under rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner". The existing rules on inspection of such returns provide that such inspection is allowed only to: (a) BIR officials and employees whose official duties require such inspection; (b) the person who made the return, or his duly constituted attorney in fact; (c) the administrator, executor, or trustee of the taxpayer's estate or the duly constituted attorney-in-fact of such administrator, executor, or trustee, where the maker of the return has died; and (d) in the discretion of the Commissioner of Internal Revenue, one of the heirs of law or next of kin of such deceased person upon showing that he has a material interest which will be affected by the information contained in the return. (See Section 4 of Regulations No. 33 cited in de Leon, The National Internal Revenue Code Annotated, 1989 ED., pp. 501-502; See also Vera vs. Cusi, Jr. , 91 SCRA 153). On the other hand, in the case of a corporation, the return shall be open to inspection a) By the officers and employees of the Bureau of Internal Revenue whose official duties require such inspection; and b) Upon satisfactory evidence of identity and official position, by the president, vice-president, secretary, treasurer, or any of the members of the board of directors, or any executive or principal officer of such corporation. (Sec. 9, RR 33) Based on the foregoing, we cannot grant the request in view of the prohibition under Section 270 of the Tax Code of 1997 unless you secure an order from Her Excellency, President Gloria Macapagal-Arroyo. Very truly yours, Commissioner of Internal Revenue By: (SGD.) ESTELITA C. AGUIRRE Deputy Commissioner Resource Management Group Officer-in-Charge