Tax Refund of a Retired Army Captain

September 15, 1959 BIR RULING NO. 443-59 Atty. Adoracion S. Andal Room 307 Tiong Building 328 Dasmarias, Manila M a d a m : Reference is made to your letter dated January 2, 1959, written in behalf of your client, Mr. Procopio C. Camiring, a retired Army captain, requesting reconsideration of our decision denying his request for refund. In reply thereto, please be informed that "all items of gross income shall be included in the gross income for the taxable year in which received by the taxpayer" and deductions taken accordingly (section 39, Tax Code; section 38 Revenue Regulations No. 2, otherwise known as Income Tax Regulations). The most common method of reporting income, particularly in case of individuals, is the so-called cash method. In general, income should not be construed as being received by taxpayers on the cash basis prior to the date of its actual receipt. The cash method ignores the item to earning income; it is immaterial wether it has been earned in previous years. The doctrine that payments of compensation are income to a taxpayer on a cash basis in the year of receipt, as distinguished from the year in which the compensation is earned, has been too firmly embodied in income tax law to permit any question. The cash basis is usually applicable to recipients of fees, salaries, wages, etc. (Vol. 2 Mertens Law of Federal Income Taxation, pp. 188, 190 and 258) Accordingly, the accumulated pension received by your client under the provisions of the Armed Forces Retirement Law (Republic Act No. 340) is taxable in the year of actual receipt and, hence, the refund of the amount of P3,451.32 may not be granted in his favor. aisadc Very truly yours, (SGD.) MISAEL P. VERA Deputy Commissioner of Internal Revenue