BIR Ruling [UN-025-96]

January 18, 1996 BIR RULING [UN-025-96] Manalo Puno Tuason Jocson & Placido Law Offices 8th Floor, Valero Tower 122 Valero Street, Salcedo Village Makati City Attention: Attys . Florentino A . Tuason, Jr . and Damian M . Placido, Jr . Gentlemen : This refers to your letter dated March 28, 1995 requesting in behalf of Capitol City Farms, Inc., for a ruling exempting it from the payment of the expanded withholding tax imposed under Revenue Regulations No. 12-94 on the intended sale in 1995 of its several real properties located in Silang, Cavite, on the ground that it has incurred operational losses since 1987. It appears that Capitol City Farms, Inc. is a domestic corporation engaged in the business of planting, cultivating, growing and producing agricultural products; that its primary activity had been in its mango plantation; that sometime in 1987, its office at the Manila Bank Arcade in Greenhills Shopping Center, San Juan, was burned; that worse, shortly thereafter, in 1988, its mango plantation on which its business chiefly depended, was also burned; that the following years, it tried to rehabilitate its plantation but due to lack of necessary funds, it has not been successful in its rehabilitation efforts to this date; that the plantation has been penetrated, invaded and occupied by squatters preventing any successful replanting of its mango plantation; that since 1988, when its plantation was razed to the ground, it has been operated at a loss; that in order to raise the much needed capital to meet its operational requirements and to make the company viable, it is contemplating on selling several of its parcels of lands located in Silang, Cavite, to wit: cdtech TCT No. Area (sq. m.) 128672 2,215,048 144245 1,123,172 128673 32,290 128674 280,354 that the above parcels of land are presently mortgaged with the Manila Bank; and that the portion of the proceeds of the sale will be utilized to pay the mortgaged debts. In reply, please be informed that under Section 4(d) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, implementing Section 50(b) of the Tax Code, as amended, the withholding tax prescribed in these regulations shall not apply to income payments of a payee who suffered net operating losses during the immediately preceding two (2) taxable years. Such being the case, and since as represented, it has incurred net operating losses since 1988, and particularly for years 1993 and 1994 in the respective amounts of P477,396.27 and P318,627.48, Capitol City Farms, Inc. is exempt from the payment of the creditable withholding tax prescribed under Revenue Regulations No. 12-94 for the year 1995. (BIR Unnumbered Ruling No. 061-95, dated February 13, 1995, citing BIR Ruling No. 126-94 dated August 15, 1994) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation the facts turned out to be different, then this ruling shall be considered null and void. cdta Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)