BIR Ruling No. 073-64

December 22, 1964 BIR RULING NO. 073-64 Messrs. Ross, Selph & Carrascoso P. O. Box 781 Manila Gentlemen : Reference is made to your letter dated January 7, 1964 requesting concurrence with your view that, under the facts stated hereunder, the corporation or its officials and members do not constitute themselves lending investors as defined and taxable under Sections 194(u) and 182(A)(3)(u), respectively, both of the Tax Code. "In a certain corporation, may Co. "A", the officials and members of the executive and administrative staff do not actually receive their salaries in the usual or regular manner, i.e., on scheduled pay days. Their salaries are credited to their respective accounts at the end of each month. However, the said officials are allowed to draw on the company from time to time, which drawings are debited against them at the end of each month. However, the said officials are allowed to draw on the company from time to time, which drawings are debited against them at the tend of each month. However, if there is a credit balance in favor of each official, the company credits him interest at the rate of, say 4% per annum. On the other hand, if in view of his drawings, there is a debit balance against him, interest is debited against him at the rate of, say, 6% per annum. Interest charges are calculated monthly. "Neither the Company nor the staff members referred to herein are engaged in the business of lending money. The aforesaid policy of permitting the staff members to draw on the Company up to a total maximum, with the consequent charging or crediting of interest on the debit or credit balances, as the case may be, not only encourages thrift among them but also provides for a ready source of funds for those who might be compelled by emergencies or other contingencies to borrow money in excess of the maximum amount allowed by the Company." In reply thereto, I have the honor to inform you that this Office subscribes to your view for the reason that the activity engaged in by the corporation and its employees is only for their mutual convenience and not for profit. Hence, said activity is exempt from the payment of any internal revenue tax. LLphil Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue