Tax Liability of the Members or Pilots of Tacloban Pilot Association

August 12, 1960 BIR RULING NO. 366-60 Mr. A. C. Castillo c/o Tacloban Pilot Association Tacloban City Reference is made to your letter, requesting information as follows: "Like all other Pilot Associations through out the Philippines, the entity in caption derives its income from charges collected from incoming and outgoing vessels docking at the port of Tacloban, at rates authorized by the government. Any income therefore received by the association in consideration of the services rendered by the members are being distributed to them at the end of the month or immediately after deducting the allowable expenses. "In order to put their records of accounts in conformity with the standing regulations of the government, kindly inform the undersigned if it is proper to open as item of "SALARY" under their Disbursement account. In my humble opinion, subject of course to your better judgment, whatever amount received by the association and divided by the members represents their share or participation and should not therefore be treated in their books as "SALARY". In the affirmative case, kindly inform me of the proper designation for transmittal to them." In answer thereto, I have the honor to inform you that after investigation conducted by this Office, it was found out among other things, that the members or pilots of the aforenamed association share equally in the net income of the latter derived from its business as a pilot association. Such being the case, this Office shares the view taken by you that the respective income received by the pilots should not be treated in their respective books of accounts as "salary", but rather as "share or participation in the profits or income" of the Tacloban Pilot Association. It may be stated, however, the such treatment of the item in question does not, for purposes of additional residence tax, raise such profits or income to the category of "gross receipts or earnings derived from business" used in section 1(b) of the Residence Tax Law. Said item remains taxable under section 1(c) of the same Law, it being compensation derived from an occupation and, therefore, should be considered as "gross receipts or earnings derived from the pursuit of any occupation". cdtech Very truly yours. MELECIO R. DOMINGO Commissioner of Internal Revenue