BIR Ruling No. 251-82

October 1, 1982 BIR RULING NO. 251-82 37-b 000-00 251-82 Messrs. Sycip, Gorres, Velayo & Co. P. O. Box 589, Manila Attention: Atty . M . Gutierrez Gentlemen : This refers to your letter dated April 3, 1981 requesting reconsideration of the decision of this Office dated August 27, 1979 holding your client, Mitsui & Co., Ltd., (Manila Branch), liable for the payment of the total amount of P12,359,657.53 as deficiency income tax for the years 1967 to 1970. cdt The facts of this case show that your client offered to sell goods to local buyers; that the latter, upon acceptance of the offer, signed the contract of sale and opened letters of credit with local banks; and that upon arrival of the goods in this country, the buyers took delivery thereof. You claimed that on account of shipping arrangements, like FOB and/or CIF, title to the goods passed from the seller to the buyers upon loading of the same in Japan; that since the sale was allegedly consummated upon loading, the transaction becomes taxable only in Japan. Since all the acts pertaining to the sale were all done/executed in the Philippines, said transaction can be considered as having been consummated in the Philippines and, therefore, taxable here. Your position that the sale took place in Japan cannot be sustained because the hypothetical delivery arising from loading in said country cannot prevail over the actual delivery of the goods in this country, in addition to the other acts surrounding the sale which all took place in the Philippines. The allocation to your client of the interest expenses incurred by its head office in Japan in the procurement of the goods in said country cannot also be sustained because the income derived from the sale was not declared for Philippine income tax purposes on account of your position that the same is taxable in Japan. Such being the case, this Office is of the opinion, and so holds, that said interest expenses could only be allocated to your client's business operations provided that the interest income from the deferred payments made by the buyers are also declared and taxed in the Philippines; and, more importantly, all income from sales are also declared in this country. It appears, however, that rulings/decisions were previously issued in favor of other taxpayers involving similar facts, issues and taxable periods. Hence, this Office, for uniformity and equity, has finally decided to apply said rulings/decisions to the instant case. On this basis, the above assessments are hereby withdrawn and cancelled. It is hereby understood that henceforth, branch office sales, under this arrangement/scheme, and allocation of head office expenses to the branch shall be treated by this Office in accordance with the 3rd and 4th paragraphs of this ruling. cdtech Very truly yours, RUBEN B. ANCHETA Acting Commissioner