Joint Ventures

July 30, 1993 BIR RULING NO. 341-93 JOINT VENTURES 29 0-00 41-93 Sycip Gorres Velayo & Co. 6760 Ayala Avenue, Makati Metro Manila Attention: Atty . T . A . Tejada Tax Division This refers to your letter dated February 23, 1993 requesting for confirmation of your opinion to the effect that in computing its net taxable income, the joint venture (JV) referred to in BIR Ruling No. 317-92 dated October 28, 1992 between Ayala Land, Inc. (ALI) and Appleyard Properties, Inc. (API) can claim as deductions from its gross income consisting of rental income received from the building tenants any, some, or all of the items of deductions under Section 29 of the Tax Code, specifically: (a) ordinary and necessary business expenses, subject to the condition of reasonableness and documentary proof; (b) interest on indebtedness in connection with the JV's trade or business; (c) taxes paid or accrued in connection with the JV's trade or business, such as local business taxes and realty taxes on the building from which the rental income is derived; (d) losses not compensated for by insurance or otherwise; (e) bad debts in connection with the JV's trade or business; (f) depreciation on the properties used by it in the trade or business, such as on the building from which it derives the rental income; and (g) contributions. cdtech In reply thereto, I have the honor to inform you that in computing taxable income subject to tax under Sections 24(a), (b) and (c) and 25(a)(1) of the Tax Code as amended, there shall be allowed as deductions the items specified in paragraphs (a) to (1) of Section 29 of the same Code. Such being the case, the items of deductions specified in paragraphs (a) to (i) of Section 29 of the Tax Code, as amended, can be deducted in computing the net taxable income of the joint venture of ALI and API, insofar as such deductible items were incurred or sustained in connection with the JV's trade or business of leasing the floors or portions separately owned by them in the Ayala Office Tower Building. cd LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue