BIR Ruling [DA-076-96]

February 20, 1996 BIR RULING [DA-076-96] Sycip Gorres Velayo & Co. 6760 Ayala Avenue Makati City Attention: Atty . F . G . Tagao Tax Division Gentlemen : This refers to your letter dated April 10, 1995 requesting for the waiver of the 20% interest and 25% surcharge on the voluntary offer of your client, Analog Devices Philippines, Inc. (ADPI) to pay the amount of P964,334.00, representing the basic tax due on its amended 1994 Income Tax Return. It is represented that ADPI is a BOI registered enterprise which enjoys fiscal and non-fiscal incentives under Executive Order No. 226 otherwise known as the Omnibus Investments Code; that among the fiscal incentives granted to ADPI is the additional deduction from the taxable income of fifty percent (50%) of the wages corresponding to the increment in the number of direct labor if the project meets the prescribed ratio of capital equipment to the number of workers set by the BOI; that when ADPI initially computed its income tax liability for the year 1994, it claimed the amount of P2,755,240.00 representing the incremental direct labor cost as a deduction allowed by the BOI as incentive to registered enterprise; that upon subsequent review, after ADPI filed its Income Tax Return for 1994, it was discovered that the said deduction should not have been claimed inasmuch as the required ratio of capital equipment to the number of workers was not met by ADPI a condition sine qua non for ADPI to avail of the additional deduction for labor expense; that a s a result of the error/oversight, the tax payable by ADPI was understated by P964,334.00; that in view of the error committed by ADPI, it amended its 1994 income tax return to reflect the true and correct income tax liability and voluntarily offered to pay the amount of P964,334.00. In reply thereto, please be informed that in view of the reasons stated in your letter, this office hereby accepts your clients' voluntary offer to pay the deficiency income tax of P964,334.00 plus interest. This, however does not constitute a waiver of our right to investigate the income tax return filed by your client for the aforestated period, and consequently assess and collect the corresponding deficiency taxes, inclusive of statutory penalties that may be found still due from subject taxpayer as a result thereof. You are thereof, requested to urge your client, Analog Devices Philippines, Inc. to pay the amount of P964,334.00 representing basic deficiency income tax for the year 1994 plus interest within five (5) days from hereof; otherwise, this Office shall enforce collection thereof through the summary remedies prescribed by law. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue