Tax Credit Against the Income Tax Liability

October 14, 1988 BIR RULING NO. 504-88 50 (b) 000-00 504-88 S i r : This refers to your letter dated September 1, 1988 requesting in behalf of your sister, Mrs. Luz Lourdes L. Fernandez, a ruling that the expanded withholding tax withheld by Societe Generale, lessee of a house and lot which she recently purchased from the former lessor, Ms. Mercedes D. Jaime and Ms. Matilde D. Jaime, pertaining to rental income from June 13, 1988 to October 12, 1988 be allocated or credited in favor of your sister Mrs. Fernandez. It is represented that on March 4, 1988, a contract of lease was concluded between the Jaime Sisters and Societe Generale covering a house and lot situated at #5378 Amorsolo St., cor. Mahogany St., Dasmarias Village, Makati, Metro Manila; that an advance rental amounting to P480,000.00 was paid by the lessee and correspondingly withheld the amount of P24,000.00 representing 5% of the advance rental; that on June 13, 1988, Mrs. Fernandez purchased the subject property from the Jaime sisters; that the lease on the subject property was continued and Mrs. Fernandez was substituted as her new lessor in the contract; that it was agreed upon by the Jaime sisters and Mrs. Fernandez; that the remaining portion of the rental income will be credited in Mrs. Fernandez's favor and correspondingly the expanded withholding tax should also be allocated in her favor; and that on October 12, 1988, Mrs. Fernandez will sell the property in favor of a certain Dr. Macasaet. In reply, please be informed that your request is hereby granted. Under Section 6 of Revenue Regulations No. 6-85, as amended, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 50(b) of the Tax Code, as amended, the amount so withheld shall be allowed as a tax credit against the income tax liability of the payee in the taxable quarter or year in which the income was earned or received. In this connection, Section 10 of the same Regulations provides that claims for tax credit or refund of income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received was declared as part of the gross income and the fact of withholding is established by a copy of the statement duly issued by the payor to the payee (BIR Form No. 1743.1) showing the amount paid and the amount of tax withheld therefrom. Accordingly, and since as a consequence of the sale of the aforementioned rented property in favor of your sister Mrs. Luz Lourdes Fernandez on June 13, 1988, she was substituted as the new lessor of said property being the new owner, the expanded withholding tax pertaining to rental income from June 13, 1988 to October 12, 1988, the period within which she is the owner-lessor of the said property, is hereby credited in her favor. This will therefore, serve as an authority for Societe Generale, Corinthian Plaza Building, Legaspi Village, Makati, Metro Manila, as withholding agent and lessee of the house and lot situated at No. 5378 Amorsolo St., cor. Mahogany, Dasmarias Village, Makati, Metro Manila, to allocate the expanded withholding tax and its rental payments from June 13, 1988 to October 12, 1988 in favor of Mrs. Luz Lourdes Fernandez, the owner-lessor of said property during the period. cdtech Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner