Deductibility of the Losses Sustained by a Corporation

March 21, 1960 BIR RULING NO. 136-60 Mr. Francisco F. Gonzales IV Lawyer-Certified Public Accountant 302 Shurdust Building Intramuros, Manila S i r : Reference is made to your letter of the 11th instant, requesting information whether or not, under the following circumstances, the losses sustained by "B" are deductible from the profits derived by "A": "X Corporation has two tax exempt divisions, A & B, under the provisions of Rep. Act 901. Due to Rep. Act 2371 repealing Rep. Act 901 exemption from income tax was withdrawn effective July 1, 1959. For the period January 1, to June 30, 1959, A Division made a net profit of P150,000.00 while B Division incurred a loss of P10,000.00. For the period July 1 to December 31, 1959 A Division made a net profit of P300,000.00 while B Division incurred a loss of P40,000.00. Besides these two division, X Corporation has another division which does not enjoy tax exemption and which made a profit of P40,000.00 during the year 1959." In answer thereto, I have the honor to inform you that, for the purpose of arriving at the net income of "X" Corporation for the year 1959, the loss sustained by "B" during the period from January 1 to June 30, 1959 may be deducted from the profit derived by "A" during the same period in the same manner that the loss sustained by "B" during the period from July 1 to December 31, 1959 may be deducted from the profit derived by "A" during that period. In this connection, it may be stated that Republic Act No. 901 was not repealed but only amended and that the amendatory law is Republic Act No. 2351, not Republic Act No. 2371. Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue