Share of 60-40% Basis on Joint Undertaking

February 8, 1980 BIR RULING NO. 028-80 R. R. Arevalo & Associates 2050 J. A. Santos, Sta. Mesa Metro Manila Attention: Mr . Ramon Roces Arevalo President and General Manager Gentlemen : This refers to your letter dated October 22, 1979 stating that you have entered into a joint undertaking with the City of Manila's Barangay Bureau, Office of the Mayor in launching an action-oriented program aimed at combating alcoholism among the youth through a situational application of contemporary philosophy, ideas and principles, seeking to maintain and improve vigilance against a more serious malady than drug addiction; that as programmed, a musical extravaganza will be staged, as vehicle for change and a tool for the information development strategy of the drive to curb-if not eliminate the social ill hereinabove stated; that at no cost to the City of Manila, you will take charge of marketing, production and secure the initial capital requirement of this project; that for this purpose, you are rallying milk fruit, carbonated drinks manufacturers as well as alcoholic drinks and manufacturers to sponsor the extravaganza; and that the net proceeds of the said extravaganza after deducting all expenses shall be shared on a 60-40% basis between the City of Manila and you. cdt Under the foregoing facts, you wish to secure from this Office tax deduction/exemption and/or other tax incentives for you sponsors as well as your company. In reply, you are informed as follows: This Office has no authority to exempt the admission fees to the musical extravaganza from the amusement tax since the collection of said tax has been transferred to the local government concerned in accordance with Presidential Decree No. 231, as amended. Nevertheless, assuming that said fees are exempt from amusement tax, the tickets to be issued by you shall be registered with this Bureau prior to the use thereof, pursuant to Section 17 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations. (BIR Ruling No. 75-003 dated May 6, 1975) Any income, e.g., the 40% share, to be derived by you from the show is subject to income tax and should, therefore, be declared as part of your gross income during the year of receipt. Any amount given by the sponsors to the project, being in effect, a donation to the City of Manila Barangay Bureau's drive against alcoholism among the youth is exempt from the gift tax, pursuant to Section 123(a)(2) of the Tax Code of 1977, as amended. Finally, the donation is deductible from the sponsor's gross income for income tax purposes but only to the extent of 6% in the case of an individual sponsor, and 3% in the case of a corporate sponsor, of the sponsor's taxable net income as computed in accordance with Section 30(h) of the Tax Code of 1977, as amended. Very truly yours, RUBEN B. ANCHETA Acting Commissioner