BIR Ruling No. 312-2022

REPUBLICOFTHEPHILIPPINES

BUREAU OF INTERNALREVENUE DEPARTMENT OF FINANCE

Quezon City

EIR Ruling No.[DA-(C-244) 625-09] EIR Ruling No.[DA-222-2005] EIR Ruling No.DA-444-2005] 242022 Sections 98,105.179,and 188 of the Tax Code 07-312-2022

Pres.Diosdado Macapagal Avemie CCP Complex Pasay City 8F PNB Financial Center PHILIPPNEAIRLINES.IME

Attention:MR.NCO THADDEUS P.RODRIGUEZ SVP/Chief Financial Oficer

Gentlemen:

contirmation of your opinion that This refers to your reqest on behalf of Philippine Airlines, Inc.PAL for

1. the eancelled or impaired debt of PAL amounting to USD which resulted from its financial restructuring under a court supervised

any other ty pe of taxeand bankruptey proceeding shall not give rise to ay income tax, donor's tax. or

2. a portion of which. the impairment and discha ge of PAf's deht with Buona Sorte Holdings.Ine.3SHI amounting to SD shall not

give rise to donor's ta as there is no donative ntent in the transaction.

Bachground:

PAL. with registered ottice address at 8F PNE Financial Center, Pres.Diosdado Macapagal Avenue.CCP Comp ex.Pasay City,is a dogestic corporation primarily engaged in air transport of passengers andargo within the Philipp nes and between the Philippines and Several international destinations.It is 79.49% owned bPAL Holdings.Inc.PHr as of December 31.2021.On the oiler hand.PHI is 76.9% owned by Trustmark Holdings Corporation (THC. which inurn is 60% owned by BSHI and 40% owned by Horizon Global Investments.Ltd.HGIL.Hence.BSHI is the ultimate parent of PAL.BSHI,THC and PHI were incorporated in the Philippines and part of che Lucio Tan Group of Companies. while HGIL. was incorporated in Eritish Virgin Islands.

the global aviation industry P embarked on a comprehensive business and financial On September 3.2021.d.: to the devastating inppact of the COVID-19 pandemic on

restructuring by filing a voluntary petition for relief under Chapter Il of the U.S.Bankruptey Code with the United States Barruptey Court for the Southern District of New York (US

authorized to continue to opera its business and manage its operations as a debtor-in- Courtdocketed as Case No.2-15669(Chapter 11ase.The Petition is for PAL to be possession(DIP pursuant to Setions 1107 and 1108 of the US Bankruptey Code and pursue confirmation of the pre-arranged pian of reorganization to effect the contemplated resizing and

Dated May 9.2005.signed by then Coni issioner Jose Mario C.Buna T

PHILIPPINEAIRLINEO.INC OT-312-2022 JUN 2 4 2022

reshaping of its operations. permanent restructuring of its obligations and broad recapitalization.

otherwise known as theFinancI Rehabilitation and Insolvency Act (FRIA of 2010before On September 2+. 2021.&AL also filed a petitiorunder Republic Act (RA) No. 10142,

the Regional Trial Court.Nationil Capital Judicial Regon, Branch 1ll,Pasay City RTC-

confirming PAL's commencement of the Chapter II Case. provisional relief.PALsubmittean Order dated Septerber 09,2021 issued by the US Court Pasay.seeking recognition the Chapter I CaseIn support of its application for

the Plan and a Disclosure Statement before the US Court.The Plan includes. among On October 13.2021.PAi.filed the Plan of Reorganization of Philippine Airlines,Inc

others:-

a. reduction of PAL's aicratt related obligations by restructuring the terms and

conditions of the lease greements with respeci to certain aircraft and engines including PAL's obligations that will be implemented consistent with the terms and conditions set forth in the Plan Term Sheet of the restructuring supporting agreement:"RSAs") with its cred rors:

b. infusion of $. September 17.2021.PAL and BSHI execuied a DIP Credit Agreement during the Chapter IIase of which. DIP A Facility and $ millon working capital to f.ind PAL's ongoing operations million tromPHIDIP B Facility.On illion will come from BSHI

relating to the DIP A Facility. Also. in variou dates in year 2021,PAL and PHI executed the DIP Credit Agreement relati ig to the DIP B Facility.

c. maintenance and enhanement of PAL's key cantracts and business partners

to strengthen its viabili y during the pending COVID-19 pandemic; and

d. execution of commiinents for up to $ million exit facility from new

investors to ensure PAL has adequate available liquidity to complete its restrueturing.

Under the RSAs wit the respective crediters of PAL. the outstanding balanees of the unsecure short-term loans will te settled through issuance of shares of PAL. subject to he US Court's confirmtion of the Plan

On October 22.2021.RTC-Pasay granted PAL petition and rendered judgment (i recognizing the Chapter 11 Caseand (ii giving force ard effect to the Chapter11 Case and all court orders issued or may be issued by the Us Court ielating thereto.

On December 17. 2021. the US Court confirmed its approval of the Plan which calls

million working eapital received by PAL.to the extent of for the conversion of all unsecured creditor loans/claims. including a portion of the $: million from PHI, into new equity in PAL

On December 31.2021.PAL filed with the US Court a Notice of Effective Date and Entry Order (a confirming PAL's Plan and (b Granting Related Relief before the US Court.

and 2020. respectively. which was initially planned to be ised for subscription of capital stock PAL received deposits amounting to $: and$ from BSHI in years 2021

of PAL and was presented as Deposits for Stocks Subseription under noncurrent liabilities in the parent company statement ofinancial position as cf December 31,2019.In 2020,PAL withdrew its application for inerease in authorized ca Jital stock with the Securities and

Per Note 2 ot the NFS Per Note 17of the AFS

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PHILIPPINEAIRLSINC o-312-2022 JUN 2 4 2022

Noncurrent Liabihtes" in the pirent company stateme t of financial position as of December Exchange Commission. Accor:ingly. the entire amount received from BSHI amounting to 31.2020 USD was reclisified asDue to a stoekholderunder Reserves and Other

a capital deficit position to wit hand the imnaired claims ar considered as canceled debts which amounts to USD the amount due from PAL.Ato.since the US Courtapproval of the Plan,PAL has been pay ing the unimpaired claims pursuant to the scheduls contained in the Plan.On the other In 2021.as a result of t1:financial restructurinset forth in the Plan.BSHI condoned However.spite the cancelled ebts, PAL remains insolvent or in

TotalAssets Sefore the cancellation December 31,2020 of debts) (After the cancellation December 31,2021 $ of debts)

8

Capital Deficieney Total Liabilities

In reply-please be inforrued as follows: Income Tax

Court.it must be noted that S103aAandB of the Internal Revenue Code IRC)of1986 1 the discharge occurs in a tit ll ease. or2 the discharge occurs when the taxpayer is insolvent.to wi "IRCstates that discharge of indebtedness is excluded from gross income if, among others: Since this case involves n order from a US Court which was recognized by a Philippine

"26 L.S. Code $ 1os - Inccne from discharge of indeetedness

(c) Exelusion prom gross meone

t An general - Gross irvome does not include cay amount which (but for this whole or in party of inds btedness of the taxpayer . subsection) would be cludible in gross incom by reason of the discharge (in

(A) the discharge ocers in a uile ll case. (B) the discharge oce i's when the taxpayer is insolvent, xxx"

the Uis Bankruptey Court held that condonation or discnarge of debt can be excluded from gross income for income tax purcoses under the afore-quoted IRC provisions. The US Court ruled in this wise: In connection therewithin Hopson vIll.Student Assistance Comm'n In re Hopson

could tace mcome tax liubilitstor the amount forgiven at plan conclusion Debtors can seek exclusion from gross ineome for income tax purposes the amounts forgiven. 26 "The couri is anare of the t.is consequences of the repuyment programs - that a debtor

588 B.R.509 (Bankr: N.D.III.2018) It is the dometic portion of federal statty lux law in the United Stateand is under Title26 of the United States Code SC.The IR has I1 subitles. incluing income taxes employmentaxes.coal industry health benefits. and group health plan requirements.The implemening agency of IRC is the InternRevenue Service (IRS). Refers to Tie I of the United Sates Ce (reluting to bankruptey.buonly if the taxpayer is under the jurisdiction of the couri in such case and the discharge o indebtedness is granted by th e couri or is pursuant to a plan approved by the court Per Balance Sheet of PAt Per Note toot the AFS Note 17 of the AFS

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PHLIPPINEAIRLINESIMC OT-312 -20Z2 JUN 2 4 2022

U.S.Css Io8(a(() am.(Bwhich provide for exclusions from gross income for

court should hanve accototeA tor the potential tax liab lities that she would incur once tax purposes of debis discherged in a chapter ll case Essentially, debtors can seek a bankruptey discharge of th. kind of tax debt after conpletion of the repayment plans. discharged in a chapter I1 use or ger it discharged while they are insolvent.26 U.S.C. $$108(a1A)and(B).SeGreene U.SDept.oEduc.No.+:13C179.2013 WL 5503086.ut *6.E.D.Va.Det.2.2013("Greene finallyargues that the bunkruptcy Debtors can seek exclusior from gross income of the amounts forgiven if they get it

the25 year repuynent perio is.complete und her remuining loan balance is written off by DOE. The bunkrupteycort correctlyfound that this argument is too speculative" at53Fpp'x300thir201+Emphasis and underscoring supplied

Likewise.in Dallus Trarster &Terminal Wareleuse Co.v.Commissioner.10 the US Supreme Court ruled that where an insolvent debtor conveys property to his creditors, or any of them. in full or partial satisfation of his obligations. no taxable gain results if the debtor remains insolvent after the transfer.

If the discharge or condonation occurs in a title l i case, the Internal Revenue Service IRS" states that in order for the debt cancelled be excluded from the computation of gross income. the following conditions must be met:

l. the individual or corporation is under the jurisdiction of the court in the

bankruptey case: and

2. the discharge of indebtedness is granted by the court or is under a plan

approved by the court

In relation thereto.Section 19 of RA No.10142 provides that taxes and fees due to the national government imposed uon the issuance of the commencement order and until the approval of the rehabilitation plan or dismissal of the petition, whichever is earlier, shall be considered waived. to wit

"Section 19.Wuiverof Taxes and Fees due to ne National Government und to Locul Government Units (LcUsi.-Upon issuance of une Commencement Order bythe court,and until the approva of the Rehabilitation Piun or dismissal of the petition whichever is earlierthe imsition of all tuxes and feincluding penalies,interests and churges thereof. due to the mational government ar-to LGUs shall be considered waivedn furthermee of the ohjectives of rehubilitatioiEmphasis and underscoring supplied

Section+(gg of RA No.01+2 defines rehabilitation as follows:

Section.Detinition of Ter-As used in this Act term

XXX XX XXX

(gg) Rehabilitation sall refer to the restoration of the debtor to a condition of suecesstul operation und schvener.if it is shown that its continuance of operation is economicully feasible and t ereditors can recover by way of the present value of puvments projected in the pl.an,more if the debior continues as a going concern than if it is immediately liquidated. (Emphasis and underscoring supplied)

The implementing agency of IRC is the loternal Revenue Service (IRS) 7012d 95(5th (ir. 193+)

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PHILIPPINEAIRLI.S,INC GT-312-2U2 JUN 24 202

Ceramics, Ine. the Supreme ourt held that Group Supervisor Rolundo Ai.Balbido and Examine Reynante DP.Martinez vs.Lepanto In the case of Bureau ot Internal Revenue. Assis'ant Commissioner Alfredo V. Misajon.

aciivities in an etfort io retore and reinstate the corporation to its former position of udminister the assets of an insolvent corporution in the hope of its eventual return from tinumcial stress to solverey l contenplates the eontinuance of corporate life and successtul operation and njuidin "TCJuse low has cetined corporate rehabiliation as an attempt to conserve and

present value ot pumentsprojeted in the plun,mo,if the corporation continues as achieve a sustuinuble operuing form."[li] enublesthe company to gain a new lease in lite and therebyullow editors to be paid [t]heiclains from is earnings. Thus; rehubilitation shall he une'crtuken when it is shown at the continued operation of the corporation is economicail more feasible and iis creditors can recover,by wav of the a going coneern tham if itsimmediately liquidated minimte theexpenses of udistressed corporutionduring the rehabilitation period by providing the hest possib. tramework tor the corporation to graduully regain or Terily,the mherct purpose of rehabilitarion is to find ways and means to

unliquidated. tixed or contingent, matured or unmatured, disputed or undisputed, tocal, including taxes, tari's und customs duties: ard (2) claims against directors and officers of the debior arisine from acts done in the discharge of their functions falling within the scope of their atorin Provided, That,tns inclusion does not prohibit the creditors or third parties t.om filing cuses aguinst the directors and officers acting in their persomal capucities. enforcement ofeluims"asrinst the distressed conpany shall be suspended. Under the same luw. claim shall reter to all claims or demunds of whatever nature or churacter ugainst the debior or its propern.whether for meney or otherwise,liquidated or including, but not limited to:() all claims of the government,whether national or thut upon the issuanee ef a Commencement Oraer - Suspension Order In ordertoachievuch objectives,Section 1of R10142 provides,inter alia all .ictions or proceedings, in court or otherwise, for the - which includes a Stay or

petition whichever is earlier. sh!l be considered waiveds Chapter I I Case and all court orders issued or may be issued by the US Court relating thereto. comniencement order and until he approval of the rehabilitation plan or dismissal of the October 22.2021i recognizinthe Chapter l1 Caseand i giving force and effect to the Thus. all taxes and fees due to the national governmert imposed upon the issuance of the 24.2021 before RTC-Pasay seeking recognition of the Chapter 11 Case,which was granted on In this case. it is undisput.I that PAL filed a petition under RA No. 10142 on September

or atter the approval of the rehabilitation plan, or even after the dismissal of the petition, the issued by this Office.+BIR Rulig No.DA-419-0415 was cited which states that eaneellation of the indebtedness of PAL is still not subject to any tax.In numerous rulings Moreover. it is worthy to ote that even after the suance of the commencement order.

would only be P8+.198.555.2u.Moreover,the condonurion is likewise not subject to gift u.considering that CPl is in u capilal deticiency position and will remain insolvent betore and afier the suid condonution considering that the amount to be condoned "Thus. the condonat:on ot the CPI's debt to shall not be subject to income

C.R.No.22+76+. April 24.2017 Dated August +. 2004 BIR Ruling No.[DA-222-2005].May 9.2005.signed by then Commisser Jose Mario C. BunagBIR Ruling No.[DA 09j. October 27.2009. DOFOpinionNo.012-2020.October32020 C-063216-09] dated May 4.2009:BR Ruling No.[DA-260-07].April 25.2007:BIR Ruling No.[DA-C-244 625-

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PHILIPPINE AIRLSING. U OT-312-22 JUN 2 4 2022

tax since ihere is no uo utive inten on the pa't of SJ but solely for business considerution.

XXX XX XXX

liubilities exeept those to Isu(Emphasis and underscoring supplied the purt of GM-t'S but soleiv tor husiness consideration since Isueu will only acquire the GMPI shares trom GM-i S if GMPI has a"clean"lalance sheet with no oustanding Cuse No.1+0- Dec. 21966.However. a iransaction whereby nothing of tuxable ineome.(See Dullus Transfer und Terminal W arehouse Co.v.Commissioner of GMPI's indebredness by GM-US is not subject to income tax since before and after the condonation GMPI renuins insolvent, i.e.. in. a capital deficiency position. The condonution is likewise Hot subject to gift tax since there is no donative interest on without the deduction.See Burnhuri-Marrow Consolidated y Commissioner of therefore. he reulized tuxaile income Philippine Fiher Processing Co.v. CIR,CTA exchungeuble valuie comes to or is reccived by a taxpaver does not give rise to or create Internal Revemue5 Cir.0 F 2d 95.13AFTR 930Accordingly,the condonation of tux considering thut thededuction of suid interest us epense in prior years didnot offset nor reduce the tuxable inome of GMPI since it wus in a financial loss position even Internal Revenue,+- BTA 500) Moreover. when a cnditor cancels a debt as part of a business transaetion, the d bior is enriched or its nt assets has been increased and. consideruion therefor can.eels the dehi,the umount o,the debi is u gift from the creditor to the debtor and need no he included in the latter's gross income.If a corporation to punment of a dnidend.(S.50 Revenue Regulations No.2 The waiver of interest by the banks on non-trade antrude reluted indebtednes. of GMPI is not subject to income which a stockholder is in bted torgives the debt,th transaction hus the effect of the income,to a giti.or to aepitul transuction depenaent upon the circumstances.If for exumple,an individual pertorns services for u cred tor who,in consideration thereof caneels the debt, incometthut amount is reulized by the debtor as compensation for his services.It, however,ecreditor merely desires ubenefit a debtor and without amy Camcellution anu.rorgiveness of indebtedness may amount to a payment of

intlow of wealth. Therefore, if afier the condonation of the liability, the debtor will remain insolvent or in a capital deficit position. then cancellatiofi of the indebtedness is not subject to income tax if nothing of exchangeable value comes to or is received by the debtor. This is based on the basic and generally accepted principle of taxation that taxable income is created from the any tax It is clear from the foregoing that the condonation of indebtedness is not subject to

this Ottice had the oceasion to apply the"tax benefit doctinein ruling that the interest expense reverted or written off will not result in any taxable income since there was no tax benefit derived from the aeerual. to w it: Also.in BIR Kuling No.DA-545-2004 which ay be applicable to the instant case.

inclusion ingross income omouns deducted in earer tuxable vears and recovered in luter veurs.but only to th.c extent that the earlier deductions resulted in income tax liuhilit of the earlier year. the upplication or the "tax o.nefit doctrine"which is e theory which provides for the "The reversal of amomuts booked and accrued as interest expenses will call for

allowed ornot,the subsequent reversul write off of the amount booked will not resuli in am tuxahle mcome subje to ta Hencethe amonts reverted or written off shall not heconsidered us purt of ue outstanding lounwhichs proposed to be settled byway LIBCdid not undwill not derive unytux benefit whether the said accrued expenses are of dation in puyment. On the husis of the ubove tacts as representel this Office opines that since

Dated November 5.2004

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PHILIPPINE AIRLINESIC OT-31Z-2u22

that any gain resulting from the condonation of debt pursuant to a court-approved and/or mandated restructuring plan is not taxable for income taxourposes. Particularly, in BIR Ruling No. [DA-028-05].18 it was ruled tf:at: Likew ise.it bears emphasi that this Office also ruled and confirmed in several rulings

gift uax sinee there is no donive intent on the part of ies various creditors but is solely action thu thedebirehabilitetion plunwas approvedaad is now being implemented.In other words. the restructuriawus not a result of the Luutual agreement of the debtors ot the Bavuntel's debt to its various creditors shall nct be subject to income tax nor to for husiness considerution. " Underscoring supplied) amd creditorsbuofjudieiufactien.Accordingly, the euin resulting from.condonation "Considering that . the case of your clien Bayantel, it was through court

gain resulting from the condonaticn of RCPI's debt is not taxable for income tax purposes. Philippines, Inc. ("RCPI" entere.: into a debt restructuring plan with its creditor-shareholders under which plan a portion of its cebt were to be converted into equity,the BIR ruled that any Furthermore. in BIR Ruling No. DA-260-07.19 wiere Radio Communications of the

reconveyance of property pursuart to a court order shall not be subject to capital gains tax and documentary stamp tax DST as imposed under Setion 196 of the National Internal Revenue Code of 1997.as amendedTax Code,to wi gained from acts and/or transactions in compliance of a court order is not novel in the Philippines. Please note that thi Office has ruled in BIR Ruling No.530-201720 that Finally. exemption from licome tax of income actually or presumptively received/

Regiomal Trial Court whichus affirmed by the CA and SC and the reconveyance was "Sinee the reconvey.aiee of subject property w as pursuant to the Order of the

in order to return the propertcovered by TCT No.219031 to the legal owner.the trunster of TCTNo.219031itavor ofAntonio Gambou Tizon is not subject to the capital guins tux imposed under Se tion 24 (D) (1) of the Tax Code of 1997. as amended. Likew ise_il is not subject to the documentary stamp ix (DST) imposed under Section 196 ot the Tax Code of 199hut only to the DST impcsed under Sec.188 of the same CodeUnderscoring supplie

Having all these in regard.n the case of PAL.it is clear that: the condonation was made pursuant to the Plan that wasiled relating to the volurtary petition for relief under Chapter 1l of the US Bankruptey Code in the US Court:2the US Court approved PAL's Plan;3the court-approved Plan was then recognized and given foree and effect by RTC-Pasay:(4 PAL did not receive anything with exchangeable value as a res It of the condonation of its debts by its creditors. including BSHI: ani5 based on the auc ited financial statements of PALit remains to be insolvent or in a capi.al deficit position after the condonation.

and(ba portion of which.tne impirment and discharge oPAL's debt with BSHI amounting tax. amount of USD to USD Such being the case. this ffice hereby rules tha the:(a cancellation of debt in the shall not oe subject to income taxand, consequently,to withholding hich resulted from ccurt approved financial restructuring

Donor's Tax

Section 98 of the Tax Code provides that donor's tatshall be imposed upon the transfer by any person. resident or nonrestient. of a property by ift or donation. Article 725 of the

BIR Ruling No.[DA-209-08].April 25.908:BIR Ruiing No.[DA-028-05] dated January 24.2005:BIR Ruling No Dated April 25.2007 November 17.2017:BIR Ruling No.+661.Noyember24.2011:BIR Ruting No.130-15. April 30.2015 January 24.2005 [DA-C-274689-09]. November 20.200.

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PHILIPPINE AIRLSING T-312-2022 JUN 2 2 2022

to do an act of liberality(cmimdonundn: and4the conee accepts the gift. Hence. to be a valid donation. i is essential that:( there is reduction of the patrimony of the donor:(2there is increase in the patrimony of the done;3 the intent on the part of the donor New Civ il Code of the Philippines Civil Codederines donation as an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.

no donative intent on the part f the creditors of PAI.(including BSHI) but the same was business consideration. pursued solely to comply withe order of the US Cout and RTC-Pasayand was purely for Evaluating the faets of this case shows that. in condoning the debts of PAL.there was

resulted from iis financial resiructuring: and (b a pcrtion of which, the impairment and discharge of PAL's debt with BSHI amounting to USD donor's tax. Thus. the: (a) cancellat.cn of debts in the amouint of USD shall not be subject to which

Doeumentary Stanp Tax (DS)

instruments. to wit Section 179 of the Ta Code provides that OST shall be imposed on all debt

proportional cmount in acecrdanee with the ratio of itsterms in number of days to three he imposed on either loun agreement or promissory rotes issued to secure such loan. instruments.there shall t collected documentarytamp tax of One peso and fifty centavos(Pl.50 on each To hundred pesos(P200)or fractional part thereof.of the issue price of cmy such debi instrument: Provided, That for such debt instruments with terms of less thun one (l)car,the documentary stump tax to be collected shall be of hundred sixn dus(365)Fr vided.furtherThat onlyone documentary stamp tax shall "SEC.I~9.Suump Tax orAll Debt Instruments.-- On every original issue of debt

bank notes issued for cireulion.(Underscoring supp lied) instruments amd securities i sued by the governmen of any of its instrumentalities. either drenving interest sigiai icumtly higher than the re gular savings deposit taking into huving a specifie muturit d.ne,orders for payment of cmy sum of money otherwise than those signed ubroad wheren. the object of contract is tucated or used in the Philippines. deposit suhstitute deht instrunents. certificates or other evidences of deposits that are at sight or on demand. prom ssory notes. whether negetiable or non-negotiable, except For purposes ol this setion, the term deht insnument shall mean instruments representing borrowing cnd lending_transactions including but_not_limited to lebenturesceriticates ot debtedness, due hills bods loan agreements, including onsideration the size sf the deposit and the risks i volved or drawing interest and

not subject to DST imposed unde Section 179 of the Ta.Code.Also. it should be noted that any agreement to give effect to e terms and conditions of the condonation pursuant to the Plan is not one among those instrurments falling under any of the documents enumerated under the Tax Code that are subject to DST. Again. the condonation or caneeiation of debt was made pursuant to the court-approved Plan in a bankruptcy proceeding in the JSA.which was recogn.zed by the RTC-Pasay.Thusit shall In this case. the condonation of PAL's debt dors not involve any debt instrument.

debts is not subject to DST.How/er, the notarial acknow ledgment to the said deed is subject to the DST of P30.00 pursuant toection 188 of the Taxode. parties to document and give effet to the terms and con litions of the condonation of PAL's Accordingly.the Plan ane any agreement that was executed or will be executed by the

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Value-AddedTax (VaT) PHILIPPINEAIRLIY...IVC OT-312-2022 JUN 2 4 3J2Z

commercial or an economic activ y. including transactions incidental thereto. in the course of trade or business. sells. barters, exchanges, leases goods or properties. renders services and any person who imports good. In the same section, it was clarified that the phrase 'in the ordinary course of irade or business' means the regular conduct or pursuit of a Section 105 of the Tax Cce.ce provides that VAT shall be imposed upon any person who.

the ordinary course of trade or business but only in compl ance with the court-approved Plan.22 nature of the same is non-recurring. and it cannot be clasified as ordinary income of PAL in Applied in this case,the ondonation of PAL's cbts is not subject to VAT since the

investigation it shall be disclosed that the facts are differen., then this ruling shall be considered null and void. This ruling is issued on the asis of the foregoing fe cts as represented. However, if upon

Very truly yours.

K Comn ssioner of Internal Revenue Aiexaay GAESAR R.DULAY E hha. 051999 G

BIR Ruling No.[DA-(C-02o) 096-09]. Fe ruary, 18. 2009

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