BIR Ruling [UN-432-95]

December 6, 1995 BIR RULING [UN-432-95] The Honorable The Secretary of Finance Manila S i r : Respectfully forwarded to that Office for approval is the herein claim for informer's reward of Mr. Francis Fullante under Section 281(1) of the Tax Code, as amended, including the pertinent records (xerox copies only) bearing on the internal revenue tax case of L.C. Diaz & Company, a General Professional Partnership as well as its partners for the years 1991 and 1992. The records show that on November 5, 1993, an Affidavit was filed by the abovenamed informer at the Special Investigation Branch, Revenue Region No. 4-A, Manila (now Revenue Region No. 6), denouncing L.C. Diaz & Company for its failure to declare the fees and commissions received in 1991 and 1992 from the Bank of Credit and Commerce International Overseas Limited (BCCI) as the latter's Agent/Liquidator. It was ascertained in the investigation that the income realized by the partnership during the years in question as Agent/Liquidator of BCCI amounted to P10,767,334.46 and P28,302,266.68, respectively, which were distributed to the partners in accordance with the agreed profit sharing ratio. Being a general professional partnership, L.C. Diaz & Company is exempt from income tax but its partners, notably Messrs. Luis C. Diaz, Arturo N. Dalupan and Rustico L. Murillo were found deficient in the payment of their respective income taxes on their shares in the partnership profits as a result of the aforementioned investigation, as follows: 1991 1992 1. Luis C. Diaz P5,306,978.22 P10,259,524.67 2. Arturo N. Dalupan 1,324,862.14 3,191,366.36 3. Rustico L. Murillo 1,072,784.20 2,879,642.87 Aside from the above-stated deficiency income taxes which includes a fraud penalty of 50% surcharge, the investigating Revenue Officers alleged the existence of fraud and recommended for the criminal prosecution of all the above-named partners for violation of the pertinent Tax Code provisions. However, upon review by the Prosecution and Litigation Division, it was determined that the evidences on hand were not sufficient to establish the existence of fraud and to warrant the filing of a criminal complaint against the same. Hence, the entire docket was referred to the Tax Fraud Division for further investigation and to gather additional evidences to establish the subject taxpayers culpability. In the meantime, all the above-named partners filed an Application for Compromise Settlement/Abatement under Revenue Memorandum Order No. 45-93 as amended by RMO 54-93. Considering that the alleged fraud had not been established as yet, the same was approved by this Office. The aggregate payments therefor amounted to P1,397,292.00, broken down as follows: Year Applied Amount Paid 1. Luis C. Diaz 1991 P313,242.00 2. Rustico L. Murillo 1991 142,502.00 1992 113,703.00 3. Arturo N. Dalupan 1991 130,746.00 1992 128,876.00 Total P1,397,292.00 =========== The above amounts actually pertain only to a certain portion of the total recommended assessment of deficiency income taxes to which the subject taxpayers agree. The availment of the privileges under RMO No. 45-93, as amended, by the above-named partners shall not, however, preclude the filing of a criminal charge for violation of any pertinent provision of the Tax Code, as will be determined by the Tax Fraud Division. The records further show that the information furnished by the informer was in writing and under oath; that the same was not yet in the possession of the Bureau of Internal Revenue nor are the aforesaid tax liabilities pending or previously investigated by any official or employee of this Office or by the Department of Finance; and that the informer is not related to any internal revenue officer or employee within the sixth degree of consanguinity. In view of the foregoing, it is respectfully recommended that Mr. Francis Fullante be paid the amount equivalent to 15% of P1,397,292.00 or P209,593.80 as informer's reward pursuant to Section 281(1) of the Tax Code, as amended. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue