Sycip Gorres Velayo & Co.

November 7, 2008 BIR RULING [DA-(S40M-015) 396-08] S40, Merger Sycip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Attention: Atty. M.F.A. Balili Tax Division Gentlemen : This refers to your letter dated February 28, 2008 requesting confirmation that the proposed merger of your clients, Oriental & Motolite Marketing Corp. ("OMMC"), Oriental and Motolite Corporation ("OMC"), PLC Corporation ("PLC"), and Ramcar Plastics Co., Inc. ("RPCI") with OMMC as the surviving corporation, is a tax-free merger pursuant to Section 40 (C) (2) (a) and (b), in relation to Section 40 (C) (6) (b) of the Tax Code of 1997, as amended. The facts as represented are as follows: a. OMMC, OMC, PLC, and RPCI (the "constituent corporations") are domestic corporations organized and existing under Philippine laws and are engaged in the following line of businesses: OMMC is engaged in manufacturing of goods such as batteries and accessories on a wholesale and retail basis; OMC is engaged in the manufacturing, fabricating, assembling, producing, trading, and marketing of products of all kinds, such as industrial equipment, machinery, tools, implements, electrical and mechanical appliances, their parts, accessories, instruments and supplies; PLC is engaged in the manufacturing and merchandising of plastic containers and other industrial products; and RPCI is engaged in the business of contracting, fabricating, exporting, buying and selling at wholesale or retail, supplying, repairing, promoting and marketing of all kinds of wares, materials, equipment, and metal parts. b. The authorized capital stock (ACS) and the number of shares outstanding of the constituent corporations are as follows: OMMC has an ACS of P1,000,000.00 divided into 10,000 shares with a par value of P100.00 per share, of which 2,500 shares are issued and outstanding; OMC has an ACS of P500,000,000 divided into 500,000,000 shares with a par value of P1.00 per share, of which 382,930,996 shares are issued and outstanding; PLC has an ACS of P49,900,000.00 divided into 499,000 shares with a par value of P100.00 per share, all of which are issued and outstanding; and RPCI, has an ACS of P50,000,000.00 divided into 500,000 shares with a par value of P100.00 per share, of which 125,000 shares are issued and outstanding. Except for OMMC, all the individual stockholders of the constituent corporations are nominees of Ramcar, Inc., a corporation organized and existing under the laws of the Philippines. c. All the absorbed corporations OMC, PLC and RPCI, are subsidiaries of Ramcar, Inc., it owning 100% of OMC and RPCI, and 89.53% of PLC. STcDIE d. Considering the complementary business of the constituent corporations, the constituent corporations desire to merge, with OMMC as the surviving corporation, for the following business purposes: (a) the integration of the administrative facilities of the corporations will result in economies of scale and efficiency of operations; and (b) the merger will make possible the more productive use of the properties and resources of the constituent corporations. e. On December 17, 2007, OMMC filed with the Securities and Exchange Commission (SEC) its applications for the approval of its merger with OMC, PLC and RPCI, and the increase of its ACS from P1,000,000 to P80,000,000. OMMC likewise filed with the SEC, an application to undergo equity restructuring to wipe out its deficit as of December 31, 2006 in the amount of P14,941,712.65, which shall be effected by way of converting its P30,000,000 advances from Philippine Batteries, Inc. ("PBI") into equity, whereby 10% of said advances amounting to P3,000,000 will be comprised of 30,000 issued shares with a par value of P3,000,000, and the remaining 90% amounting to P27,000,000 will be recorded as additional paid in capital (APIC). f. On February 27, 2008, the SEC approved the merger effected by the Board of Directors of the constituent corporations. On even date, the SEC likewise approved OMMC's requests to undergo equity restructuring and to increase its authorized capital stock. g. Under the merger, all the assets and liabilities of OMC, PLC and RCPI (the "absorbed corporations") were conveyed, assigned and transferred to OMMC solely in exchange for shares of OMMC. These assets were transferred at the net asset value of the absorbed corporations as determined on the basis of their audited financial statements as of August 31, 2007. Among the assets transferred to OMMC pursuant to the merger are 762,174 shares of stock held by OMC in Philippine Batteries, Inc. ("PBI Shares") and 290,910 shares of stock held by PLC in Philippine Recyclers, Inc. ("PRI Shares"). Furthermore, under the Plan of Merger, the effective date of the merger is on December 1, 2007. h. Of the increase in ACS, OMMC will issue the following (1.) 30,000 shares to PBI with a total par value of P3,000,000 as a result of the conversion of its P30,000,000 advances into equity; and (2.) 393,352 shares to the stockholders of the absorbed corporations with a total par value of P39,335,200 and an issue value of P772.02 per share or a total issue value of P303,675,655.49, in exchange for the net assets transferred by the absorbed corporations to OMMC pursuant to the merger amounting to at least P303,675,655.49. The amount of P264,340,455.49 representing the difference between the total par value of P39,335,200.00 and the total issue value of P303,675,655.49 shall be recorded as APIC in the books of OMMC. No OMMC shares of stock will be issued to the nominees of Ramcar, Inc. in the absorbed corporations. i. The total outstanding capital stock of OMMC after the merger, equity restructuring and increase in ACS is P42,585,200, of which 92.3% is owned by Ramcar, Inc. In connection therewith, you are requesting confirmation of your opinion as follows: 1. The merger of OMMC, OMC, PLC, and RPCI, with OMMC as the surviving corporation is a merger within the contemplation of Section 40 (C) (2) (a) and (b), in relation to Section 40 (C) (6) (b) of the Tax Code, as amended. Therefore, no gain or loss shall be recognized by the absorbed corporations, as the transferors, on the transfer of all their assets and liabilities to OMMC pursuant to the merger. Likewise, no gain or loss shall be recognized by OMMC, as the transferee, on its receipt of the assets and liabilities of the absorbed corporations in exchange for OMMC shares. 2. The transfer of the assets by the absorbed corporations to OMMC is not subject to donor's tax since there is no intention on the part of the absorbed corporations to donate their assets to OMMC since the transaction is being undertaken for purely business purposes. DETcAH 3. The transfer of properties by the absorbed corporations to OMMC, including the transfer of 762,174 PBI Shares and 290,910 PRI Shares, is not subject to documentary stamp tax (DST) pursuant to Section 199 (m) of the Tax Code as amended by Republic Act (RA) No. 9243. Likewise, the surrender of the shares of stock held by the stockholders of the absorbed corporations to OMMC in complete redemption and cancellation of the capital stock of the absorbed corporations, pursuant to the merger is likewise not subject to DST. However, DST at the rate of P1.00 on each P200 par value, or fractional part thereof, will be imposed on the original issuance by OMMC of shares to PBI for the conversion of advances into equity and to the stockholders of the absorbed corporations, as a consequence of the merger, pursuant to Section 174 of the Tax Code, as amended by RA No. 9243. 4. The transfer of the assets of the absorbed corporations pursuant to the merger is not subject to the Value-Added Tax (VAT) as provided under Section 4.106-8 (b) (3) of Revenue Regulations (RR) No. 16-05, as amended. Any unused input VAT of the absorbed corporations, as of the effective date of merger, will be absorbed by OMMC pursuant to Section 4.106-8 (b) (3) of RR No. 16-05, as amended. 5. The excess and unutilized creditable withholding taxes of the absorbed corporations as of the effective date of the merger, which form part of the assets to be transferred by the absorbed corporations to OMMC as a consequence of the merger, may be applied as a tax credit by OMMC against its income tax due for the taxable year 2007, the effective date of the merger being December 1, 2007, and in the succeeding taxable years, or may be the subject of a claim for refund or issuance of a tax credit certificate (TCC). 6. The excess MCIT credits of the absorbed corporations will be transferred and vested in OMMC as of the effective date of the merger. 7. The accumulated unutilized NOLCO of the absorbed corporations are preserved, transferred to and vested in OMMC, as the surviving corporation, and may be carried over and claimed by OMMC as a deduction from its gross income, pursuant to Section 34 (D) (3) of the Tax Code, as amended. In reply thereto, please be informed as follows: 1. Tax-Free Exchange The merger of the constituent corporations is a tax-free exchange under Section 40 (C) (2), in relation to Section 40 (C) (6) (b) of the Tax Code, as amended, viz.: "SEC. 40. Determination of Amount and Recognition of Gain or Loss. xxx xxx xxx (C) Exchange of Property. xxx xxx xxx (2) Exception. No gain or loss shall be recognized if in pursuance of a plan of merger or consolidation (a) A corporation, which is a party to a merger or consolidation, exchanges property solely for stock in a corporation, which is a party to the merger or consolidation; or (b) A shareholder exchanges stock in a corporation, which is a party to the merger or consolidation, solely for the stock of another corporation also a party to the merger or consolidation; or cCESaH (c) A security holder of a corporation, which is a party to the merger or consolidation, exchanges his securities in such corporation, solely for stock or securities in another corporation, a party to the merger or consolidation." In this connection, Section 40 (C) (6) (b) of the Tax Code, as amended, defines the term "merger" as follows: "(b) The term "merger" or "consolidation" , when used in this Section, shall be understood to mean: (i) the ordinary merger or consolidation, or (ii) the acquisition by one corporation of all or substantially all the properties of another corporation solely for stock: Provided, That for a transaction to be regarded as a merger or consolidation within the purview of this Section, it must be undertaken for a bona fide business purpose and not solely for the purpose of escaping the burden of taxation; provided, further, that in determining whether a bona fide business purpose exists, each and every step of the transaction shall be considered and the whole transaction or series of transaction shall be treated as a single unit, provided, finally, that in determining whether the property transferred constitutes a substantial portion of the business of the transferor, the term "property" shall be taken to include the cash assets of the transferor." Based on the foregoing, the elements of a tax-free merger are as follows: (1) there must be a merger and a plan of merger; (2) the parties to the merger must, as a general rule, exchange property solely for stock, pursuant to the plan of merger; and (3) the merger must be undertaken for a bona fide business purpose and not solely for purpose of escaping the burden of taxation. Since all these elements are present in the case of the merger of the constituent corporations, the merger qualifies for non-recognition of gain or loss for income tax purposes in accordance with Sections 40 (C) (2) of the Tax Code, as amended. Thus, no gain or loss shall be recognized by the absorbed corporations, as transferors, on the transfer of all their assets and liabilities to OMMC solely in exchange for OMMC shares, pursuant to the Plan of Merger. Likewise, no gain or loss shall be recognized by OMMC, as the transferee, on its receipt of the assets and liabilities of the absorbed corporations pursuant to and as a consequence of the merger. The basis of the assets and liabilities to be received by OMMC shall be the same as it would be in the hands of the absorbed corporations; the cost basis to the transferee of the property transferred, pursuant to the merger, shall be the same as it would be in the hands of the absorbed corporations (Sections 40 (C) (5) (a) and (b) of the Tax Code, as amended) . Accordingly, the substituted bases of the assets transferred by the absorbed corporations to OMMC as of August 31, 2007, and pursuant to the merger, are as follows: ORIENTAL AND MOTOLITE CORPORATION PROPERTY SUBSTITUTED BASIS Cash on hand & in bank P405,000 Receivables net 237,990,000 Advances to affiliates 1,599,008,000 Prepaid expenses and other current assets 937,000 Total Assets P1,838,340,000 ============ Notably, on October 22, 2007, OMC executed a Deed of Assignment with PBI, whereby OMC assigned its receivables of P762,174,000 to PBI, and in consideration thereof, PBI issued in favor of OMC, 762,174 PBI shares with a total par value of P76,217,400. The PBI shares, with a substituted basis of P762,174,000, form part of the assets of OMC which shall be transferred to OMMC pursuant to the merger. PLC CORPORATION PROPERTY SUBSTITUTED BASIS Cash on hand & in bank P131,000 Receivables net 3,057,000 Advances to affiliates 25,704,000 Other current assets 811,000 Investment in an Associate 216,000,000 (converted to PRI Shares) Total Assets P245,703,000 ========== RAMCAR PLASTICS CO., INC. PROPERTY SUBSTITUTED BASIS Cash on hand & in bank P1,000 Receivables net 54,168,000 Advances to affiliates 57,160,000 Other current assets 863,000 Property and equipment 13,000 Total Assets P112,205,000 ========== Likewise, the stockholders of the absorbed corporations shall recognize no gain or loss when they exchange, in complete redemption, their shares for OMMC shares issued pursuant to the Plan of Merger. The basis of the OMMC shares that will be issued to the stockholders of the absorbed corporations shall be the same as the basis of the absorbed corporations' stocks surrendered in exchange therefore (BIR Ruling No. DA-075-03 dated March 11, 2003, BIR Ruling No. DA-037-02 dated July 7, 2002, BIR Ruling No. 039-02 dated March 7, 2002, BIR Ruling No. DA 184-02 dated October 11, 2002). AECIaD SUBSTITUTED BASIS OF SHARES RECEIVED PER SHAREHOLDER OF THE ABSORBED CORPORATIONS Name of Corporate Number of Substituted Substituted Basis Stockholders Shares Basis per share (including its respective nominal stockholders OMC Ramcar, Inc. 391,231 P191,465,501 P486.93 PLC Ramcar, Inc. 1,189 95,297,058 80,148.91 Leelin Industrial Corp. 132 4,976,400 37,700 Banaba Development 7 258,000 36,857.14 RCPI Ramcar, Inc. 793 12,500,000 15,762.93 Total 393,352 ======= It is understood, however, that if the transferor later sells or exchanges the shares of stock it acquired in the exchange, it shall be subject to income tax on the gains it derived from such sale or exchange, taking into consideration that the cost basis of the shares shall be the same as the original acquisition cost or adjusted cost basis to the transferor of the shares of stocks exchanged therefore; and that the cost basis to the transferee of the properties exchanged for stocks shall be the same as it would be in the hands of the transferor (Sections 40 (C) (5) (a) and (b) of the Tax Code of 1997, as amended). 2. Donor's Tax The transfer by the absorbed corporations of their assets and liabilities to OMMC for the latter's shares is not subject to donor's tax. The absorbed corporations and their stockholders have no intention to donate their assets to OMMC since the said transfer was effected purely for legitimate business reasons (BIR Ruling No. DA-401-98 dated September 3, 1998). 3. DST No DST shall be due on the transfer of the absorbed corporations' properties to OMMC, including the transfer of 762,174 PBI Shares and 290,910 PRI Shares, pursuant to the merger in accordance with Section 199 (m) of the Tax Code, as amended by RA No. 9243, in relation to Section 40 (C) (2) of the Tax Code, as amended. However, DST at the rate of P1.00 on each P200 par value, or fractional part thereof, shall be imposed on the original issuance by OMMC of shares to PBI as a result of the equity restructuring and to the stockholders of the absorbed corporations as a consequence of the merger as provided under Section 174 of the Tax Code, as amended. Likewise, all the outstanding shares of the absorbed corporations which will be retired or cancelled as a consequence of the merger are not subject to DST. In various BIR rulings, the BIR has ruled that no DST shall be due upon the surrender by the stockholders of shares of stock for retirement/cancellation made pursuant to a merger (BIR Ruling Nos. DA-371-06 dated June 15, 2006, S-40-013-2006 dated May 26, 2006 and S-40-058-02 dated April 18, 2002) . 4. VAT The transfer of the assets by the absorbed corporations to OMMC, pursuant to the Plan of Merger, is not subject to VAT. Moreover, any unused input tax belonging to the absorbed corporations as of the effective date of the merger, if any, will be absorbed by OMMC. OMMC may apply said input VAT as a credit against its output VAT liabilities (''BIR Ruling No. 030-99 dated March 12, 1999). This is in accordance with Section 4.106-8 (b) (3) of RR No. 4-2007, amending RR 16-2005. Pertinent portions of RR No. 4-2007 read: "SEC. 4.106-8. Change or Cessation of Status as VAT-registered Person. xxx xxx xxx (b) Not subject to output tax The VAT shall not apply to goods or properties existing as of the occurrence of the following: SHacCD xxx xxx xxx 3) Merger or consolidation of corporations. The unused input tax of the dissolved corporation, as of the date of merger or consolidation, shall be absorbed by the surviving or new corporation." Moreover, the exchange of properties pursuant to the merger is not a disposition or exchange of properties "in the course of trade or business" as defined under Section 105 of the Tax Code, as amended, and is, therefore, not subject to VAT (BIR Ruling No. 112-96 dated October 25, 1996). 5. Excess and Unutilized Creditable Withholding Taxes The excess and unutilized creditable withholding taxes are among the assets of the absorbed corporations which shall be transferred as a consequence of the merger to OMMC upon the effective date of merger. Being the surviving corporation, OMMC absorbs the juridical personality of the absorbed corporations and acquires all their rights and obligations. Accordingly, OMMC may apply the excess and unutilized creditable withholding taxes of the absorbed corporations as of the Effective Date of Merger as a tax credit against its income tax due for taxable year 2007 and succeeding years, or file a claim for refund or application for the issuance of tax credit certificate (TCC) therefore (BIR Ruling No. S-40-022-2007 dated August 22, 2007). Notably, in Rhone-Poulenc Rorer Philippines, Inc. vs. Commissioner of Internal Revenue, (C.T.A. Case No. 4869, April 3, 1996), the Court of Tax Appeals (CTA) ruled that by virtue of the merger by and between Rhone-Poulenc Nattermann Pharma, Inc. (the "RP Nattermann") and Rhone-Poulenc Rorer Philippines, Inc. (the "RP Rorer"), the excess tax paid by RP Nattermann forms part of the assets acquired by RP Rorer as the surviving corporation, hence, RP Rorer may file a suit for the judicial refund of said overpaid income tax. 6. Excess MCIT Credits The excess MCIT of the absorbed corporations as of the effective date of merger shall inure to the benefit of OMMC. Based on the August 31, 2007 Audited Financial Statements of the absorbed corporations, the total MCIT which are available for application against the regular corporate income tax, are as follows: MCIT OMC P20,000 PLC - RPCI 1,127,000 Total P1,147,000 ======== In BIR Ruling No. DA-017-02 dated February 7, 2002, citing BIR Ruling No. 137-99 dated August 31, 1999, this Office had the occasion to rule that the excess MCIT of ABCC, GFI, VTCSI, TAPDMI and EPIC as absorbed corporations may be transferred to and vested in ABCI, as the surviving corporation on the effective date of the merger. This Office further held that the excess MCIT of the absorbed corporations may be carried forward and credited against the normal income tax due of ABCI, as the surviving corporation, for the three (3) immediately succeeding taxable years pursuant to said Section 27 (E) (3) of the said Code. 7. NOLCO In BIR Ruling No. DA-017-02 dated February 7, 2002, the BIR ruled that the NOLCO balance of the absorbed corporations are among the rights, privileges, properties and/or interests that will be transferred to and vested in the surviving corporation upon the approval of the merger by the SEC. Accordingly, OMMC, as the surviving corporation, should be allowed to carry-over the accumulated net operating losses of the absorbed corporations and claim the same as deduction from its gross income for as long as the requirements set forth under Section 34 (D) (3) of the Tax Code, as amended, have been complied with viz.: "(3) Net Operating Loss Carryover . The net operating loss of the business or enterprise for any taxable year immediately preceding the current taxable year, which had not been previously offset as deduction from gross income for the next three (3) consecutive taxable years immediately following the year of such loss: Provided, however, That any net loss incurred in a taxable year during which the taxpayer was exempt from income tax shall not be allowed as a deduction under this Subsection: Provided, further, That a net operating loss carry-over shall be allowed only if there has been no substantial change in the ownership of the business or enterprise in that (i) Not less than seventy -five percent (75%) in nominal value of outstanding issued shares, if the business is in the name of a corporation, is held by or on behalf of the same persons; or SDEHCc (ii) Not less than seventy -five percent (75%) of the paid up capital of the corporation, if the business is in the name of a corporation, is held by or on behalf of the same persons." Notably, the absorbed corporations OMC, RPCI, and PLC, are subsidiaries of Ramcar, Inc., with Ramcar, Inc. owning 100% of OMC and RPCI, and 89.53% of PLC. After the merger, Ramcar, Inc. owns 92.336% of the total issued and outstanding capital stock of OMMC, the surviving corporation. Considering therefore that, before and after the merger, there is no substantial and effective change in the ownership of the absorbed corporations (OMC, RPCI, and PLC), hence, OMMC, as the surviving corporation, may claim as a deduction from its gross income the NOLCO balance of said absorbed corporations. Based on the Audited Financial Statements of the absorbed corporations dated August 31, 2007, the total NOLCO which are available for application against future taxable income, are as follows: NOLCO OMC P402,892,000 PLC 15,283,000 RPCI 191,000 Total P418,366,000 =========== Subject therefore to factual verification that the statutory merger of OMMC, OMC, PLC, and RPCI does not result in an effective change in ownership of the business or enterprise, the unutilized and unexpired NOLCO's of OMC, PLC, and RPCI, if any, shall be transferred to and vested in OMMC by operation of law pursuant to the statutory merger of the corporations and may be claimed by OMMC as a deduction from gross income for the remainder of the three-year period counted from the year the NOLCO was incurred (BIR Ruling DA-576-07 dated November 6, 2007) . Further, in order that the above-described re-organization can be considered as a merger under Section 40 (C) (2) of the Tax Code, as amended, the parties to the merger should comply, as it has complied, with the following requirements: A. The plan of reorganization should be adopted by each of the corporations, parties thereto, the adoption being shown by the acts of its duly constituted responsible officers and appearing upon the official records of the corporation. Each corporation, which is a party to the reorganization, shall file, as part of its return for the taxable year within which the reorganization occurred, a complete statement of all facts pertinent to the non-recognition of gain or loss in connection with the reorganization, including: 1. A copy of the plan of reorganization, together with a statement, executed under the penalties of perjury, showing in full the purposes thereof and in detail all transactions incident to, or pursuant to the plan; 2. A complete statement of the cost or other basis of all properties, including all stocks or securities, transferred incident to the plan; 3. A statement of the amount of stock or securities and other property or money received from the exchange including a statement of all distribution or other disposition made thereof. The amount of each kind of stock or securities and other property received shall be stated on the basis of the fair market value thereof at the date of the exchange; and 4. A statement of the amount and nature of any liabilities assumed upon the exchange, and the amount and nature of any liabilities to which any of the property acquired in the exchange is subject. B. Every taxpayer, other than a corporation, who is a party to the reorganization, who received stock or securities and other property or money upon a tax-free exchange in connection with a corporate reorganization shall incorporate in his income tax return for the taxable year in which the exchange takes place a complete statement of all facts pertinent to the non-recognition of gain or loss upon such exchange including: 1. A statement of the cost or other basis of the stock or securities transferred in the exchange; and 2. A statement in full of the amount of the stock or securities and other property or money received from the exchange, including any liability assumed upon the exchange, and any liability to which property received is subject. The amount of each kind of stock or securities and other property (other liabilities assumed upon the exchange) received shall be set forth upon the basis of the fair market value thereof at the date of exchange. C. Permanent records in substantial form shall be kept by every taxpayer who participates in a tax-free exchange in connection with a corporate reorganization showing the cost or other basis of the transferred property or money received (including any liability assumed on the exchange, or any liability to which any of the properties received were subject), in order to facilitate the determination of gain or loss from a subsequent disposition of such stock or securities and other property received from the exchange. (par. 9803-8, Prentice Hall 1963, ed., p. 9611) CADSHI Finally, the parties shall cause the Register of Deeds to annotate on the Transfer Certificates of Title (TCTs), the original or historical cost of acquisition of the properties, the date the transaction takes place and the fact that no gain or loss was recognized as a result of the merger, provided, however, that any violation by the Register of Deeds of the provisions of Section 58 (E) of the Tax Code, as amended, shall be subject to penalties under Section 269 of the said Code. The surviving corporation shall likewise cause the annotation at the back of the Certificates of Stock the substituted basis of the transferred shares of stock, the fact that no gain or loss was recognized as a result of the merger, the date the transaction (merger) takes place and the historical cost of acquisition of the shares transferred. In addition to the foregoing requirements, the parties shall enclose with their respective income tax returns for the taxable year in which the merger occurred a copy of the request for ruling filed with, and the corresponding ruling issued by, the Bureau of Internal Revenue, both duly stamp-received by the appropriate office of the Bureau of Internal Revenue. Such parties shall include as a note to their respective audited financial statements for the taxable year in which the merger occurred a statement to the effect that they hold such assets/shares acquired in a merger and the year in which such merger occurred, and in the taxable years, until the subject properties are subsequently transferred to another transferee. Violation of the above requirements is subject to the penalties provided in Sections 269 and 275 of the Tax Code of 1997, as amended. 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 and/or any of the requirements imposed in this letter is not complied with, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service