BIR Ruling No. 165-61

May 3, 1961 BIR RULING NO. 165-61 Messrs. Sycip, Gorres, Velayo, & Co. Certified Public Accountants P.O. Box 589, Manila Gentlemen : In answer to the queries contained in your letter dated August 22, 1960, I have the honor to inform you as follows: cdtech Pursuant to General Circular No. V-332, implementing the provisions of Republic Act No. 2698 which amended Section 30(g) of the Tax Code, the term "gross income" as used in the amendatory law means ". . . the 'gross income from the property'. The gross income in the case of gas and oil wells is the amount for which the taxpayer sells the oil and gas in the immediate vicinity of the well. If the oil and gas are not sold on the property but are manufactured or converted into a refined product prior to sale, the gross income from the property shall be assumed to be equivalent to the representative market or field price (as of the date of sale) of the oil and gas before conversion or transportation. "'Gross income from the property' means, in the case of mines, the gross income from mining. The gross income from mining consists of the proceeds from the sales of ores or minerals extracted from the mining property. Where ores are sent abroad where the ordinary treatment processes are applied or where they are refined and where they are sold, the actual cost of ocean freight as well as insurance, should be deducted from the actual selling price for in gross income purposes. Also where minerals or mineral products are sold or consigned abroad by the lessee or owner of the mine under C.I.F. terms, the actual cost of ocean freight and insurance should be deducted". cdti The term "rents or royalties" used in the amendatory law includes ad valorem taxes, provided that the latter has been paid or incurred by the taxpayer in respect to the property upon which the depletion is claimed. The term "net income" used in said law means net income before, not after, income tax. In computing the allowable percentage of depletion for the fiscal or calendar year 1960, a mining company can make an allocation of its gross income for said year. cdt Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue