Treatment of the Crude Oil Premia

March 11, 1981 BIR RULING NO. 053-81 29-a 000-00 053-81 Atty. Juan M. Castillo 2nd Floor Midland Plaza Condominium Adriatico St., Ermita, Manila S i r : This refers to your letter dated February 12, 1981 requesting a ruling on the treatment of the crude oil premia claims recovered by your client, Pilipinas Shell Petroleum Corporation, from the government. You have represented that under the Crude Cost Equalization and Mechanism administered by the Ministry of Energy, oil companies are reimbursed by the difference between the actual cost of crude oil and the "benchmark" cost of crude oil as determined by the Board of Energy; and that this is intended to assure the country of continuous supply of crude oil and to avoid the long and tedious process of the oil companies having to file for price increases as and when crude oil costs increase. The oil companies obtain the reimbursement by filing the crude oil premia claim. In reply, please be informed that the actual cost of crude oil used in the manufacture of the petroleum products was claimed as deduction from the gross income of your client, for income tax purposes (Sec. 67, Revenue Regulations No. 2) Consequently, if the portion of said cost is subsequently recovered, such amount recovered should be declared as part of the gross income of your client, for income tax purposes, in the year of receipt thereof. Very truly yours, RUBEN B. ANCHETA Acting Commissioner