BIR Ruling No. 353-61

September 8, 1961 BIR RULING NO. 353-61 The International Air Transport Association Regional Agency Investigation Board No. 5 c/o Philippine Air Lines, Inc. M.R.S. Building, Plaza Cervantes Manila Gentlemen : Reference is made to your letter, stated that the last paragraph of B.I.R. Ruling No. 200, s. of 1959, is erroneous and so you request that the same be revoked. We are quoting said paragraph: prcd "However, gross receipts derived from passage tickets sold by airline companies operating flights in the Philippines covering continuous passage originating in the Philippines to points outside the Philippines, although requiring trans-shipment from point to point by different airline companies, the tickets for such trans-shipment being sold in the Philippines, are subject to the 2% tax". As reasons for asserting that the aforequoted paragraph is erroneous, you stated that the passage cannot be continuous because there are trans-shipments; that the passage fares corresponding to the portions of the passage outside the Philippines and in which the company selling the ticket has no flight services are received by it merely as agent of the companies undertaking the transshipment and, therefore, cannot be considered receipts of the former; and that the ruling in question is inconsistent with our ruling dated June 3, 1953 (File No. 140.04). llcd In answer thereto, I have the honor to inform you that we cannot share the view that a passage is not continuous simply because there are trans-shipments involved. For the contract of the company (Selling the ticket) with the passenger is to transport him from the Philippines to his place of destination, although not having any flight services up to the passenger's destination, the company makes arrangements with other companies for his trans-shipment. The contract, therefore, is one indivisible contract of transportation and the full consideration there should be considered as receipts of that company alone, the others being mere sub-contractors. As a matter of fact, only one ticket is issued to the passenger in such cases. The fact that the ruling in question has been issued later than the ruling dated June 3, 1953, and the two being inconsistent with each other, can only mean that the later superseded the earlier ruling. In view thereof, it is regretted that your request has to be, as it hereby denied. LLjur It may be stated, however, that should the case really be that the company selling the ticket is a mere agent of the company or companies undertaking the trans-shipments, then the former may be considered a commercial broker subject to the fixed and percentage taxes imposed in Sections 182(A)(3)(s) and 195 of the National Internal Revenue Code, but the passage fares corresponding to those portions of the passage undertaken by other companies shall not be taxes as receipts thereof. That of course, is a matter of evidence. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue