BIR Ruling No. 057-63

July 28, 1963 BIR RULING NO. 057-63 The Regional Director Regional District No. 3 Manila S i r : There are returned to you the papers bearing on the stockbroker's tax case of P. Nolasco Da Silva & Co., Inc., Bank of the Philippine Islands Bldg., Manila, involving the amount of P665.10, proposed assessment for deficiency percentage tax, surcharge and penalty. cdti Said firm is protesting the assessment on the following grounds: "1. That the deficiency tax of P292.08 plus 25% surcharge of P73.02 is based on 6% (Stockbrokers Percentage Tax C-7) of our interest charges on Margin Accounts for the period January to December, 1960 and not on Gross Commissions earned on Stockbrokerage. 2. That the interest earned on receivables from clients do not form part of the brokers' gross compensation which is subject to the 6% tax, for what is subject to this tax is the commissions or brokerage from brokers' intervention in the purchase and/or sale of stocks for clients. The interest in question is earned not as a result of the brokerage; it arose out of the debt of the customers to the broker. The basis of the 6% tax being the commissions received from the purchase and/or sale of stocks for clients, the interest on unpaid commissions, which are earned only in rare instances, are not subject to the tax. "3. That the compromise penalty of P300.00 imposed on us for failing to file the required end of the year sworn statement based on looseleaf invoices used for that period, is without basis as per B.I.R. Ruling No. 446, s. 1959 . . ." cdt It is not denied by the taxpayer that the unpaid broker's commissions earned interests in some instances and so the only question for resolution is whether or not said interests should be considered in the imposition of the broker's tax on the compensation earned by the taxpayer as stockbroker. In a similar case, this Office held that interest charged by a contractor constitutes part of his taxable gross receipts (Ruling, B.I.R., dated January 21, 1926; 24 O.G. 2112). We are of the opinion that where being no reason for a different treatment, the interests in this case are subject to the tax in question. As regards the compromise penalty of P300.00 being imposed for failure to file the sworn statement required of taxpayers authorized to use loose-leaf invoices, this Office shares the view of the taxpayer that the same is without basis (B.I.R. Ruling No. 142, s. 1961). However, for such failure the authority granted to the firm to use loose-leaf invoices may, pursuant to said ruling, be revoked. cdll Very truly yours, (SGD.) JOSE B. LINGAD Acting Commissioner of Internal Revenue The above ruling was duly signed by the Acting Commissioner of Internal Revenue on July 28, 1963. (SGD.) P. F. LANDAS Revenue Operations Head (Legal)