BIR Ruling No. 013-10

June 10, 2010 BIR RULING NO. 013-10 Sec. 204 (B) Masbate Electric Cooperative, Inc. (MASELCO) MASELCO Compound, Pinamarbuhan, Mobo, Masbate Attention: Dr. Eduardo N. Margallo, M.B.A. General Manager Gentlemen : This refers to your letter dated November 10, 2008, received via Indorsement dated November 19, 2008 from the General Government Administration Office, Malacaang, requesting for waiver of the "VAT payables" of Masbate Electric Cooperative, Inc. (MASELCO) . It is represented that MASELCO passed Board Resolution No. 139-S-08 Series of 2008 which resolved as follows: "RESOLVED, as it is hereby resolved, requesting the National Government through Her Excellency President Gloria Macapagal-Arroyo that the MASELCO outstanding payable Value Added Tax (VAT) and up to 2010 shall not be collected, instead, be treated as monetary assistance to its electrification program. xxx xxx xxx" and that the said Resolution was passed with the following considerations: 1) MASELCO is one of the poorest cooperatives throughout the country, (2) there is a need to rehabilitate its distribution lines, (3) it is constantly incurring system loss of 20% monthly average, (4) MASELCO suffered great financial loss when the province was struck by typhoon "Frank" and consumers refused to pay their power bills, and (5) imposition of VAT further drowned the operation of MASELCO. aSTAIH In reply, please be informed that Section 204 of the 1997 Tax Code provides: "SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes . The Commissioner may xxx xxx xxx (B) Abate or cancel a tax liability, when: (1) The tax or any portion thereof appears to be unjustly or excessively assessed; or (2) The administration and collection costs involved do not justify the collection of the amount due. xxx xxx xxx" Revenue Regulations (Rev. Regs.) No. 13-01 dated September 27, 2001 was issued to implement Section 204 (B), in relation to Section 290 of the Tax Code of 1997 regarding abatement or cancellation of internal revenue tax liabilities, as well as penalties and/or interest imposed on the taxpayer. Section 4 thereof states: "SECTION 4. The Commissioner Has the Sole Authority to Abate or Cancel Tax, Penalties and/or Interest . The Commissioner has the sole authority to abate or cancel internal revenue taxes, penalties and/or interest pursuant to Section 204 (B), in relation to Section 7(c), both of the Code. This authority is generally applicable to surcharge and compromise penalties only, however, in meritorious instances, the Commissioner may likewise abate the interest as well as basic tax assessed, provided, however, that cases for abatement or cancellation of tax, penalties and/or interest by the Commissioner shall be coursed through the following officials: 4.1 The Deputy Commissioner (Operations Group), who shall constitute a Technical Working Committee (TWC) for the evaluation and review of any application for abatement or cancellation of tax, penalties and/or interest processed by the Revenue District Office (RDO) as reviewed by the Regional Office (RO) , or by the Large Taxpayers' Service's Collection or Audit Division and Large Taxpayers District Office (LTDO) as reviewed by the Large Taxpayers Service (LTS), or by Collection Enforcement Division/Withholding Agent and Monitoring Division as reviewed by the Collection Service, or by the Legal Service, or any other office that has jurisdiction over the case; and . . ." Based on the foregoing and existing regulations, this Office cannot grant the request for waiver on the ground that MASELCO has not applied for abatement under Section 204 of the 1997 Tax Code, as amended. SaHIEA Very truly yours, (SGD.) JOEL L. TAN-TORRES Commissioner of Internal Revenue