Director Philip A.P. Placer

December 24, 2008 BIR RULING [DA-(S270-005) 573-08] Director Philip A.P. Placer Presidential Anti-Smuggling Group Caraga Regional Office XIII Butuan City Sir : This refers to your letter dated November 24, 2008 requesting this Office to furnish you records of payment by the PHILSAGA Mining Corp., located at Rosario, Bayugan III, Agusan del Sur, on the excise taxes covering the period from June 2006 to present in view of the ongoing investigation being conducted by the PASG Caraga Regional Office at Butuan City. ADaECI In reply, please be informed that Section 270 of the Tax Code of 1997, as amended provides "SEC. 270. Unlawful Divulgence of Trade Secrets. Except as provided in Section 71 of this Code and Section 26 of Republic Act No. 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." The only exception to the rule that BIR officials shall be held criminally liable for divulging information on the income tax return of a taxpayer, which necessarily includes furnishing copies thereof, is if the divulgence or furnishing of copies of the return is made upon the order of the President of the Philippines in accordance with the rules and regulations issued by the Secretary of Finance (Section 71, Tax Code of 1997). In Opinion No. 72, Series of 1991, the Secretary of Justice opined that individual income tax returns under the first paragraph of the aforequoted Section "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." 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. 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 (Section 9, Regulations No. 33). SDTcAH Section 10 of Regulations No. 33 dated October 13, 1922 outlines the procedure in the request by an executive department for the inspection of a taxpayer's return, viz. : "Section 10. Inspection of returns at the instance of other executive departments. When the head of an executive department (other than the Department of Finance) or of any other bureau or office of the Philippine Government, desires to inspect or to have some other officer or employee of his branch of the service inspect a return in connection with some matter officially before him, the inspection may, in the discretion of the Secretary of Finance, be permitted upon written application to him by the head of such executive department or other Government bureau or office. The application must be signed by such head and must show in detail why the inspection is desired, the name and address of the taxpayer who made the return, the name and official designation of the one it is desired shall inspect the return. When the head of a bureau or office in the Department of Finance, not a part of the Bureau of Internal Revenue, desires to inspect a return in connection with some matter officially before him, other than an income tax matter, the inspection may, in the discretion of the Secretary, be permitted upon written application to him by the head of such bureau or office showing in detail why the inspection is desired. The reasons submitted for permission to inspect as provided in this section shall be considered by the Secretary and a decision reached by him whether the reasons are sufficient to permit inspection." Accordingly, if a head of an executive department (other than the Department of Finance) or other Government bureau or office requests the Bureau of Internal Revenue to inspect a taxpayer's return, the following must be complied with: 1. A written application by the head of such executive department (other than the Department of Finance) or other Government bureau or office to the Secretary of Finance; 2. The application must be signed by such head and must show in detail why the inspection is desired, the name and address of the taxpayer who made the return, the name and official designation of the one it is desired shall inspect the return; 3. The application and inspection of the return must be in connection with a matter officially pending before him, other than an income tax matter; and aTEADI 4. Such application must be approved by the Secretary of Finance. If the head of a bureau or office in the Department of Finance, not a part of the Bureau of Internal Revenue, requests to inspect a taxpayer's return, the following must be complied with: 1. A written application to the Secretary of Finance by the head of such bureau or office; 2. The written application must show in detail why the inspection is desired; 3. The application and inspection of the return must be in connection with a matter officially pending before him; and 4. Such application must be approved by the Secretary of Finance. Section 11 of Regulations No. 33 summarizes the process in obtaining tax returns to be used as evidence to certain conditions: "Sec. 11. Copies of returns furnished for use in legal proceedings. When it becomes necessary for the Bureau of Internal Revenue to furnish returns or copies thereof for use in legal proceedings, inspection of such returns or copies that necessarily result from such use is permitted. The original income tax return of an individual, corporation, joint stock company, partnership, joint account (cuentas en participacion) , association, insurance company, or fiduciary, or a copy thereof, may be furnished by the Collector of Internal Revenue for use as evidence in litigation in any court, where the Government of the Philippine Islands is interested in the result, or for use in the preparation of such litigation, to provincial or city fiscal or any attorney connected with the Bureau of Justice designated to handle such matters, upon written request of the Attorney-General or an assistant attorney acting on his behalf. When an income tax return or copy thereof is thus furnished, it must be limited in use to the purpose for which it was furnished, and is under no condition to be made public except where publicity necessarily result from such use. In case, the original return is necessary, it shall be placed in evidence by the Collector of Internal Revenue or by some other officer or employee of the Bureau of Internal Revenue designated by the Collector for that purpose, and after it has been placed in evidence it shall be returned to the files in the Office of the Collector in Manila. Neither the original or a copy of an income tax return, desired for use in litigation in court where the Government of the Philippine Islands is not interested in the result and where such use might result in making public the information contained therein, will be furnished, except as otherwise provided in the next succeeding section." Accordingly, if a tax return will be used as evidence in litigation in any court, where the Government is interested in the result, the following requisites must concur: 1. A written request must be made by the Attorney-General or an assistant attorney acting on his behalf; TADcCS 2. The income tax return will be used as evidence in litigation in any court, or in the preparation for such litigation; 3. The Government must be interested in the result of the said litigation; 4. Such return shall be furnished to the provincial or city fiscal or any attorney connected with the Bureau of Justice designated to handle such matters; 5. Such return must be limited in use to the purpose for which it was furnished; 6. The said return shall in no condition to be made public except where publicity necessarily result from such use; and 7. In case the original return is necessary, it shall be placed in evidence by the Collector of Internal Revenue or by some other officer or employee of the Bureau of Internal Revenue designated by the Collector for that purpose, and after it has been placed in evidence it shall be returned to the files in the Office of the Collector in Manila. On the issue that matters of which you are seeking confirmation are public records, with due respect, the Secretary of Justice, in his Opinion No. 366, Series of 1956, and in answer to the NBI Director's view that the provisions of Section 347 (now Section 270 of the NIRC) should yield to Section 5 (f) of Republic Act No. 157 which empowers the members of the investigation staff of his Office "to have access to all public records", said: "The view proceeds from a misconstruction of the term 'Public Records'. Section 38 of the Rules of Court provides that only the following records shall be considered public: '(a) The written acts or records of the acts of the sovereign authority, of official bodies and tribunals, and public officers, legislative, judicial and executive, whether of the Philippines, or of a foreign country; (b) Public records, kept in the Philippines, of private writing.' And with reference to who makes it and whom a public record is one prepared by a public officer in pursuance of a duty, the immediate purpose of which is to disseminate information to the public, or to serve as a memorial of official transactions for public reference. ( State vs. Grace, 5 Fed. 301, 303; People vs. Purcell, 70 P.2d 706). Also, a record is not public unless it can be inspected by any person interested. 'Public records and documents are such as are placed on the public files for the use and information of the public to which the public have access, and of which the public has the right, usually upon payment of certain fees, to demand copies.' (In Re Comingore, 96 F. 552; See III Moran's Comments on the rules of Court, Second Revised Edition, p. 413). In line with these principles, the Supreme Court of the United States has held that reports made by a taxpayer to the Collector of Internal Revenue are in no sense public records. ( Boske vs. Comingore, 44 L. Ed., 846, 850). SHCaEA Even assuming that the records in the custody of the Collector of Internal Revenue are public record, I still believe that they are not subject to examination by the members of the investigation staff of the National Bureau of Investigation in accordance with the well-established rule of construction that a later statute will be considered as not intended to affect the special or specific provisions of the earlier statute, unless the intention to repeal is clearly manifested or unavoidably implied by irreconciliability of the continued operation of both." Based on the foregoing, your request for records of payment by the PHILSAGA Mining Corp. on the excise taxes covering the period from June 2006 to present, relative to the ongoing investigation being conducted by your office, may be granted provided the above-mentioned conditions are complied with. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service