Tax Liability of a Contractor in Government Projects

February 11, 1959 BIR RULING NO. 097-59 Mr. Jose F. Coronel 170 Mayapis, Makati, Rizal S i r : This has reference to your letter of January 27, 1959, requesting a ruling on the following queries: LexLib "Your opinion is respectfully requested in the case of taxpayer, Mr. X, a contractor in government projects, who has been consistently reporting his income on the basis of finished or completed projects. For the year 1958, Mr. X has only one project completion of which is expected in the middle of this year 1959. Although certain amounts have been collected from the government in respect to this project, the same are not to be regarded as income for the year 1958 pursuant to his accounting system consistently being used in as much as the project is still far from being completed and there is no way of knowing whether it will yield him a profit or a loss. The questions are: 1. Is it still necessary of taxpayer Mr. X to file an income tax return for the year 1958 considering that he has no other source of income? 2. In relation to his business as a contractor, what should be the basis for his residence tax B?" In answer to query No. 1, I have the honor to inform you that, if as represented Mr. X has no other source of income aside from his government projects, he is not required to file an income tax return for 1958, it appearing that he has been consistently reporting his income on the basis of completed projects. However, upon the completion of his projects in 1959, he should file an income tax return for said year and report all the income realized in the said government projects, pursuant to Section 44 (b) of Revenue Regulations No. 2. As regards query No. 2, Mr. X is subject to additional residence tax (residence tax B) every year, based on the gross receipts derived from his business as contractor. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue