BIR Ruling [DA-405-04]

July 22, 2004 BIR RULING [DA-405-04] Section 35 BIR Ruling No. 007-2004 Ms. Angelita Ramos Name Office of the Chief Justice Supreme Court of the Philippines Corner Taft Ave. and Padre Faura Sts. Ermita, Manila 1000 M a d a m : This refers to your letter dated May 27, 2003 for a ruling that you are the rightful party to claim the additional exemption in respect to your dependent children who are all under your care and custody. It is represented that your TIN No. is 135-900-411; that you are married to Jose T. Name, Jr. with TIN No. 135-902-931; that you have three children ages 12, 9 and 7; that you are both working with the Supreme Court of the Philippines; that since 1999 up to the present, you are de facto separated from him; that all your children are under your care and custody, with no financial support whatsoever from your husband; and that in order to augment your income, you have requested your husband to waive his right in your favor in claiming the additional exemptions in respect to your children but he refused. In reply, please be informed that Section 35(B) of the Tax Code of 1997 (then Section 29(1)(2) of the old Tax Code) provides, to wit: "(B) Additional Exemption for Dependents. There shall be allowed an additional exemption of Eight thousand pesos (P8,000) for each dependent not exceeding four (4). The additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals. In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children: Provided, That the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed. For purposes of this Subsection, a ' dependent ' means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect." It is presumed that the legislature does not intend an absurdity or that its enactments produce absurd results. To allow your husband, Jose T. Name to claim additional exemptions even if he is not giving financial support to your children is an absolute absurdity and so irrational. Surely, this is not the intention of our lawmakers. Tax statutes should be construed strictly with due regard to the true policy of its enactment ( Roman Catholic Church vs. Hasting , 5 Phil. 701). Since your children are chiefly dependent and living with you, you are the one entitled to additional exemptions. This serves as an authority for your employer to stop the deductions of the additional exemption of children from your husband's compensation income and start deducting the additional exemptions of the children from your income beginning on the month when your employer stopped deducting the additional exemptions of children from your husband's income. In the computation of your and your husband's respective taxable income in the income tax return, your husband shall not deduct additional exemptions of children from his compensation income because he is deemed to have waived the same (exemptions of children) in your favor in view of his failure to give financial support to your children. You, on the other hand, will now deduct said exemptions from your income in computing your tax due. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group