Request for Waiver of Interest and Surcharge over Dacion en Pago between TLRC and Pontevedra Prawn Producers, Inc.

May 21, 1998 BIR RULING NO. 063-98 000-00-063-98 Technology and Livelihood Resource Center TLRC Building Sen Gil J. Puyat Avenue Makati City Attention: Mr . Andres V . Sanchez , Jr . Director General Gentlemen : This refers to your letter dated September 9, 1997 requesting for the waiver of the 20% interest and 25% surcharge on the voluntary offer to pay the amount of P2,861,031.00, representing the payment of expanded withholding tax and documentary stamp tax relative to the dacion en pago executed between Technology and Livelihood Resource Center (Center) and Pontevedra Prawn Producers, Inc. (Borrower). cdll It is represented that the Center is a government corporation under the Office of the President; that one of its services is to grant loans with very low interests to deserving export-oriented, small and medium scale enterprises and viable agro-industrial projects; that the borrower availed an P8.5M loan under the lending program of the Center for its prawn hatchery and grow-up business; that, however, when the prawn export industry collapsed, the borrower defaulted in the payment of its obligation; that before the foreclosure action could be initiated on the mortgaged assets, the borrower offered to settle its loan account through a dacion en pago arrangement, involving the following real and personal properties with their corresponding valuation, to wit: (1) TCT No. T-20500 with an area of 274,216 square meters and TCT No. 20501 with an area of 83,160 square meters both located at Butacal, Panay, Capiz with an aggregate appraised value of P7,500,000.00; LLphil (2) Buildings and other land improvements valued at P280,000.00; (3) Machinery and equipment consisting of 24 units paddle wheel aerators, and one axial Flow Pump and one Power Generating Set with an aggregate value of P583,000.00; (4) TCT No. T-20659 with an area of 888 square meters located at Baybay, Roxas City, Capiz with an aggregate value of P266,000.00; and (5) Hatchery buildings and other land improvements on the said lot valued at P560,000.00. that despite the execution of the said dacion en pago agreement, the Center was not able to take actual possession of the properties since squatters actually occupying the same refused to vacate; that on July 15, 1997, you requested the BIR Atrium, East Makati to assess the appropriate taxes necessary for the transfer of ownership in favor of Technology and Livelihood Resource Center; that the said computation is as follows: Documentary Stamp Tax P476,850.00 Add: 25% Surcharge 119,212.50 Total DST Due and Collectible P596,062.50 Expanded Withholding Tax P2,384,181.00 Add: 25% Surcharge 596,045.25 20% Interest from 4/95 to 8/97 1,390,871.59 Compromise 25,000.00 Total Expanded Withholding Tax Due and Collectible P4,396,097.84 Total DST and Expanded Withholding Tax Due P4,992,160.30 =========== that your inability to pay on time the corresponding expanded withholding tax and documentary stamp tax except the real estate tax was brought about by the fact that you were saddled with other more serious problems involving the above-mentioned properties, particularly the unlawful detainer issue at that time; and that considering further that the Center is also a government institution, proceeds from the ultimate disposal of the said properties will form part of the government's payment to OECF, Japan from where these development funds were sourced. In reply, please be informed that based on the foregoing facts and finding the reasons for the delay in the payment of expanded withholding tax and documentary stamp tax to be meritorious, this Office hereby grants your request to pay the total amount of P2,861,031.00 representing the basic expanded withholding tax and documentary stamp tax, as allegedly assessed by our Makati Office, excluding the 25% surcharge but subject to 20% interest per annum and payment of compromise penalty. It is of course understood that the acceptance by this Office of your offer of payment of the aforesaid amount of P2,861,031.00 does not preclude us from conducting an investigation/verification of the income tax return filed by Technology and Livelihood Resource Center for the aforestated period and for issuing an assessment notice against it if it is found out that there is a deficiency in the payment made. LLpr Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue