BIR Ruling [DA-232-97]

July 8, 1997 BIR RULING [DA-232-97] Hacienda Luisita, Incorporated JCS Bldg., 119 de la Rosa corner Carlos Palanca, Jr., Legaspi Village Makati City Attention: Mr . Bernardo R . Lahoz Senior Vice-President Gentlemen : This refers to your letter dated June 24, 1997 requesting for the issuance of a Certificate of Exemption from the creditable expanded withholding tax imposed by Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. LLcd It appears that Hacienda Luisita, Incorporated is a domestic corporation engaged in agricultural pursuits; that you converted a portion of your agricultural land into non-agricultural use and sold 100 hectares thereof to Luisita Realty Corporation for P250,000,000.00 on June 27, 1997; and that as shown in your income tax return, your corporation suffered net operating losses during the immediately preceding two (2) fiscal years, namely, 1995 and 1996, in the amounts of P52,085,772.00 and P10,443,946.00, respectively. In reply, please be informed that Section 3(d) of Revenue Regulations No. 12-94 amending Revenue Regulations No. 4-85, otherwise known as the "Expanded Withholding Tax Regulations", provides that: "SEC. 3. Section 4 of Revenue Regulations No. 6-84 is hereby amended to read as follows: "Section 4. Exemption from Withholding . The withholding of tax prescribed in these regulations shall not apply to income payments in the following cases: xxx xxx xxx (d) In the case of a payee who suffered net operating losses during the immediately preceding two (2) tax years: xxx xxx xxx Accordingly, since your company suffered net operating losses during the immediately two (2) fiscal years, namely, 1995 and 1996, this Office is of the opinion as it hereby holds that the sale of a portion of your agricultural land converted into non-agricultural use is exempt from the creditable expanded withholding tax. (BIR Ruling No. 126-94 dated August 15, 1994) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, the facts turned out to be different, then this ruling shall be considered null and void. cdpr Very truly yours, SIXTO S. ESQUIVIAS IV OIC, Asst. Commissioner Legal Service