BIR Ruling No. 380-11

October 20, 2011 BIR RULING NO. 380-11 Sections 24 (A) (1), 31 & 32 NIRC of 1997; CIR vs. Isabela Cultural Corp. G.R. No. 172231 MGM Food & Commodities Corporation 61 Mariveles cor. Sultan Sts. Mandaluyong City Attention: Jesus L. Escobar, Jr. Gentlemen : This refers to your letter dated October 18, 2010 requesting for exemption from income tax of Mr. Jesus L. Escobar's compensation income. It is represented that Mr. Escobar is an employee of MGM Food & Commodities Corporation ("MGM Corp."); that sometime in February 2010, Mr. Escobar was diagnosed of having an elevated Creatinine due to Polycystic Kidney Disease with final diagnosis of End Renal Disease; that said illness requires Mr. Escobar to undergo Hemo-Dialysis treatment for life at least three (3) times a week (approximately twelve (12) times a month); and that despite the said illness, MGM Corp. allowed Mr. Escobar to work on a partial schedule but with full benefits in order to help him sustain his much needed medical treatments. In reply thereto, please be informed that pursuant to Section 24 (A) (1) (a) in relation to Sections 31 and 32 of the National Internal Revenue Code of 1997, as amended, compensation for services in whatever form paid, including but not limited to fees, salaries, wages, commissions, and similar items, is subject to income tax at the rates prescribed under the 1997 Tax Code. While Section 32 (B) of the same Code enumerates the items of income which are exempt from income tax, the compensation income received by Mr. Escobar on account of his continued employment with MGM Corp. does not fall under any of the items enumerated therein. It is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. One who claims an exemption must be able to justify the same by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications. (CIR vs. Isabela Cultural Corporation, G.R. No. 172231 dated February 12, 2007) Based on the foregoing, this Office hereby rules that your request for exemption from income tax of Mr. Escobar's compensation income is denied for lack of legal basis. CScTED Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue