Bookkeeping Regulations - Part 2

CHAPTER V

General Administrative Provisions

"All such corporations, companies, partnership, or persons shall keep the books or records mentioned in section 334 hereof in a native language, English or Spanish: Provided, however, That if in addition to said books or records the taxpayers keeps other books or records in a language other than a native language, English, or Spanish, he shall make a true and complete translation of all the entries in such other books or records into a native language, English, or Spanish, the said translation must be made by the bookkeeper or such taxpayer, or, in his absence, by his manager and must be certified under oath as to its correctness by the said bookkeeper or manager, and shall form an integral part of the books of accounts aforesaid. The keeping of such books or records in any language other than a native language, English or Spanish, is hereby prohibited." (Sec. 336, Commonwealth Act No. 466, as amended by sec. 12. Rep. Act No. 48; Sec. 1, Rep. Act No. 445.)

"All the books of accounts, including the subsidiary books, and other accounting records of such corporations, companies, partnership, or persons shall be preserved by them for a period of at least five years from the date of the last entry in each book and shall be subject to examination an inspection at any time by internal-revenue officers: Provided, That all corporations, companies, partnerships, or persons who retire from business shall within ten days from the date of such retirement or within such period of time as may be allowed by the Commissioner of Internal Revenue in special cases, submit their books of accounts, including the subsidiary books, and other accounting records, to the Commissioner of Internal Revenue or any of his deputies for examination, after which they shall be returned." (Sec. 337, Commonwealth Act No. 466.)

17(1). TICKETS SOLD TO EXCLUSIVE MEMBERS OF AN ORGANIZATION. — That fact that tickets to a particular amusement place shall be sold exclusively to the members of an organization, club or society, will not of itself exempt said tickets from the registration requirements. However, exhibitions which are exempt from tax, such as those covered by Republic Act No. 722, the admission tickets to such exhibition need not be presented for registration. (B.I.R. Ruling No. 227, s. 1960).

17(2). COMPLIMENTARY ADMISSION TICKETS TO BENEFIT SHOWS. — The complimentary admission tickets to benefit shows are required to be registered with the office concerned before the same are used or disposed of, pursuant to Section 17 of Revenue Regulations No. V-I. (B.I.R. Ruling dated Jan. 5, 1954).

17(3). REGISTRATION OF TICKETS USED IN AMUSEMENT PLACES. — The 3rd paragraph of Section 17 of the Bookkeeping Regulations requires that before the admission tickets are used, they should be registered with the authorities concerned without any mention as to whether the operator, proprietor, lessee of the amusement place is subject to the amusement tax. (B.I.R. Ruling dated July 9, 1953).

17(4). ADMISSION TICKETS REGISTERED BEFORE THE SHOW. — The admission tickets to a proposed boxing exhibition are required to be registered with the Bureau of Internal Revenue before the same are sold or disposed of, pursuant to Section 17 of Revenue Regulations No. V-I. (B.I.R. Ruling dated Feb. 17, 1953).

SECTION 18.    Language to be Used in Keeping Books of Accounts and Supporting Papers; Translation of Entries in Other Books and Records. — The books and records prescribed in section 334 of the National Internal Revenue Code shall be kept in a native language. English, or Spanish. The vouchers and other supporting papers and documents, being part of the accounting system shall, likewise be kept in a native language, English, or Spanish. However, persons who keep other books in addition to the books and records prescribed in this section 334 of the Tax Code in a language other than a native language English or Spanish, shall, within ten days from the date of the transaction, make a true and complete translation thereof into a native language, English, or Spanish, the said translation to form an integral part of such books, registers and records.

Translation shall be made in a neat and legible manner in ink or indelible pencil, either on the same page of the books, registers or records, opposite or below such entry or on a separate page opposite the page to be translated. The taxpayers, or his bookkeeper or manager shall certify to the correctness of the translation of the entries in the books, register, or record by executing, within ten days after each book has been filled or its use completed, a certificate to be sworn to before a notary public or an internal-revenue officer authorized to administer oaths. The certificate shall be placed immediately following the translation of the last entry on the last page of each book and shall be substantially in the following form:

"CERTIFICATE OF CORRECTNESS

I hereby certify that the foregoing translation is a true and complete translation of all entries contained in this ________________ covering the period from ________________ to ______________, 19____

____________________

(Owner, Bookkeeper, or

Manager)

"Subscribed and sworn to before me at _________________________ Philippine, on this ______________________ day of ___________________ 196______________ Affiant exhibited to me his Residence Tax Certificate No. ________________, issued at _______________________________ on ________________, 19____

_________________________

   (Internal Revenue Agent or

Notary Public)

18(1). HOW ENTRIES ARE MADE IN THE GENERAL JOURNAL. — Typewritten entries may be made in the general journal if the same may be necessary for the exigencies of the business. (B.I.R. Ruling dated Feb. 10, 1953)

18(2). PUBLISHING REPUBLIC ACT NO. 445. AMENDING SECTION 336 OF THE NATIONAL INTERNAL REVENUE CODE REGARDING THE LANGUAGE IN WHICH MERCHANTS, BOOKS AND ACCOUNTS ARE TO BE KEPT. — Republic Act No. 445 amended section 336 of the Tax Code by adding thereto a new provision which prohibits the keeping of books or records in a language other than a native language, English or Spanish. The books or record which must be kept only in native language, English or Spanish, are the journal and ledger or their equivalents prescribed under Section 334 of the Tax Code. They constitute the primary and official books of accounts which corporations, companies, partnerships, or persons shall keep, in which all transactions must be record and to which all supporting vouchers must relate. If the said primary and official books of accounts are not kept in a native language, English or Spanish, the taxpayer violates section 336 of the Tax Code, as amended by Republic Act No. 445, punishable under section 355 of the same Code.   

However, if in addition to the said primary and official books of accounts, a taxpayer choose to keep other books or records, such additional books or records may be kept in a language other than a native language, English or Spanish, provided the entries in said additional books or records have a true and complete translation into a native language, English or Spanish, made by their bookkeeper or such taxpayer, or, in his absence by his manager and must certified under oath as correct by the said bookkeeper or manager, and such translation shall form an integral part of the primary and official books of accounts mentioned above. (B.I.R. General Circular No. V-102, Dec. 15, 1950).

18(3). POWER OF MUNICIPAL CORPORATIONS TO DESIGNATE LANGUAGE TO BE USED IN BOOKS OF ACCOUNTS. — The City Government of Manila possess the power to enact Ordinance requiring receipts in duplicate in English and Spanish duly signed showing the kind and number of articles delivered by laundries and dyeing and cleaning establishments . . ." The object of the Ordinance was, accordingly, the promotion of peace and good order and the prevention of fraud, deceit, cheating, and imposition. The convenience of the public would also presumably be served in a community where there is a Babel of tounges by having receipts made out in the official language. Reasonable restraints of a lawful business for such purpose are permissable under the police power. (Kwong Sing vs. City of Manila, 41 Phil. 103)

18(4). LANGUAGE TO BE USED IN THE BOOKS OF ACCOUNTS. — The Collector of Internal Revenue shall have power to make regulations, not inconsistent with law . . . That the regulations of the BIR shall, among other things, contain provisions specifying, prescribing or defining the manner in which the proper books, records, etc., shall be kept, do not empower the Collector to designate the language in which the entries in such books shall be made by merchants subject to the percentage tax. (K.S. Young et al. vs. James Rafferty, Collector, 33 Phil. 556)

"The requirement that the record must be kept in the form of a book of numbered pages certified to by the Revenue Agents is, of course, only an additional security against uncertainty and possible loss or disorder of parts of the records which might result if the record were kept on loose sheets of paper.(Ibid.)

18(5). BOOKS TO BE TRANSLATED. — Journal, ledger, or their equivalents if kept in a language other than in English, Spanish, or in a native language, must be translated. Other books and records kept in languages other than the three languages mentioned above must, likewise, be translated.

Thus, sales invoices kept in Chinese form part of the sales journal and should be translated. (Ruling, B.I.R. 106.1, July 12, 1940, Bull, 3rd Qtr. 1940)

Also, inventory sheets supporting journal entries should, if kept in Chinese, be translated. (Ruling, BIR 106.1, Feb. 28, 1941, Bull, 1st Qtr 1941)

SECTION 19.    Prior Approval and Registration of Books of Accounts, Registers, Records, Invoices and Receipts. — Persons required to keep books of accounts, internal revenue books, records of receipts and disbursement, additional registers and other records, invoices and receipts for recording their transactions as prescribed in these regulations, shall before using any of the aforesaid books, records, registers, invoices and receipts first present them to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial revenue officer or to the deputy provincial or city treasurer, if in the province, for approval and registration. A register book for every book, register, or record which has been approved shall be kept showing such information as the date of approval; the name and address of the taxpayer, his citizenship; the number of the alien registration certificate or landing certificate, if an alien; the kind of business and the schedule, paragraph and number of privilege tax receipt issued for the business, if any; and the kind, volume, number of pages, or sheets of the book, register or record. Every book, register or record so approve and registered shall be serially numbered for each taxpayer.

A draft copy of invoices and receipts proposed to be used by the persons required to keep books of accounts and records prescribed by these regulations shall first be presented to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial revenue officer or to the deputy provincial or city treasurer, if in the province, for approval. All approved draft copies of invoices and receipts shall be recorded in a register showing such data as the date of approval; the name, address, and the kind of business of the taxpayer; the schedule, paragraph, and number of his privilege tax receipt. No change shall be made in the form or type of invoices or receipts used by the said persons and no new or different invoice or receipt shall be used by said person without prior approval as required herein. Every invoice or receipt must be serially numbered.

Before ordering invoices or receipts for printing, a taxpayer shall send to the Commissioner of Internal Revenue if his place of business is in Manila, or to the provincial revenue officer or city deputy provincial treasurer, if in the province, a written notice of the name and address of the printer with whom he intends to place the order, and the total number of booklets and the inclusive serial number of the invoices or receipts ordered.

Before any book, register, or record is presented for registration there shall be place on the front cover by the owner thereof an identification as to the kind of book, register, or record, the name and business address of the owner, citizenship, the number of the alien registration certificate or landing certificate, if an alien, the kind of business engaged, and the schedule, paragraph, and number of the privilege tax receipt issued for the business, serially numbered in a permanent and legible manner. If a book, register or record is approved, the following authentication shall be made by the approving officer on the reverse side of the front cover thereof:

"This ________________, Volume No. ____________ with _________ pages or sheets, is approved on this _____________ day of _______________ 19___, for purposes of Revenue Regulations No. __________________

_________________

      Signature

____________________

(Designation of Officer)

If the book, register, or record presented for approval is a continuation of previous books, registers, or records, besides the foregoing authentication, the following notation shall be added to the authentication:

"Volume No. ________________ of this ______________________ was approved on the __________________ day of ____________________ 19_____

____________________

          Signature

_____________________

(Designation of Office)

In the case of invoices and receipts, the approval shall be indicated by an appropriate stamp placed on the front cover, on the back of the middle page and on the back page of the last invoice or receipt of the booklet or pad approved, together with the signature of the officer authorized to approve the same. (As amended by Sec. 1. Rev. Reg. No. V-35 and by Sec. 1, Rev. Reg. No. V-45)

19(1). AUTHORITY TO USE LOOSE-LEAF LEDGERS AND INVOICES. — The use of loose-leaf general ledgers and sales invoices shall be authorized only by the Commissioner.

All applicants for the use of loose-leaf ledgers and invoices should be forwarded to the Commissioner of Internal Revenue together with the reasons or basis or the use therefor.

It may be stated in this connection that the use of loose-leaf ledgers and invoices should not be authorized as a matter of course. As a matter of fact, the use thereof should be discouraged and not encouraged because they only provide means for tax evasion. Such use should only be authorized in extremely meritorious cases. It is, therefore, necessary that the use of loose-leaf ledgers an invoices should be controlled by the Commissioner. (B.I.R. Unnumbered ruling dated Aug. 10, 1964)

19(2). CERTIFICATION AS TO THE USE OF INVOICES. — A sworn certificate attesting to the number of invoices used during a given fiscal or calendar year is required only in the case of loose-leaf invoices. There is no such requirement in the case where the taxpayer uses invoices in bound form.

Said certification should be filed within fifteen (15) days after the end of a fiscal year, unless upon request of the taxpayer before the lapse of the 15-day period, the Commissioner of Internal Revenue extends said period. (B.I.R. Ruling No. 66, s. 1961).

19(3). REGISTRATION OF BOOKS OF ACCOUNT OF A CORPORATION AND ITS SUBSIDIARIES. — Three companies formed an association for the purpose of marketing their products and promoting their interests in the industry. An office was put up in Manila under the management of a representative who will sell the products in the individual company's invoices and other sales forms and receiving payments also in the names of the respective companies.  

Under the circumstances, the association is considered a separate and distinct entity from the three companies. Any income or compensation received by the association is subject to tax. Accordingly, its books of accounts must be registered prior to its use. (B.I.R. Ruling No. 27, s. 1961)

19(4). PRINTING OF INVOICES AND RECEIPTS. — Before ordering invoices and receipts for printing, a taxpayer must, if in the province, give a written notice to the Provincial Revenue Officer or municipal treasurer (now Collection Agent) stating therein the name and address of the printer, the number of booklets of sales invoices or receipts ordered, and the inclusive serial numbers thereof, together with a sample of the invoice or receipts ordered (B.I.R. Ruling No. 272, s. 1960)

19(5). RE-USE OF BOOKS OF ACCOUNTS WITHOUT REGISTRATION. — Books of accounts registered and use in 1959 used again for the year 1960 and succeeding years without need of further registration, provided that the portion pertaining to a particular year is properly labeled or marked. (B.I.R. Ruling No. 447, s. 1960)

19(6). OFFICE MANAGER COUNTER'S RECEIPT. — The so-called "office manager's counter receipt" which a company uses merely for internal control purposes and is not a basis of entries in the company's book of accounts need not be registered and approved in accordance with the Bookkeeping Regulations. (B.I.R. Ruling No. 238, s. 1960)

19(7). BOOKS OF ACCOUNTS USE BY EDUCATIONAL INSTITUTIONS. — A school which is a stock and profit corporation should, before using its books of accounts and receipts for tuition fees, present them for registration and approval. (B.I.R. Ruling No. 230, s. 1960).

19(8). RECORDING OF TRANSACTIONS IN DIFFERENT YEARS. — It is a part of business routine that at the end of every calendar or fiscal year, all corporations, companies, partnerships or persons required by law to pay internal revenue taxes have to close their invoices and receipts. But if the pages of the old books of account have not yet been exhausted, they can still be used for the succeeding years without need of further registration, provided that the portion pertaining to a particular year is properly labeled or marked. (Ruling. B.I.R. No. 447, Series of 1960). It is not advisable, however, to follow said ruling, i.e., to combine in one book of account the record of business transactions pertaining to different fiscal or calendar years because instead of keeping the book for five years only, as required by Section 21 of Revenue Regulations No. V-1, it is kept for a longer period and therefore, it can still be subject to inspection and examination by internal revenue officers.

19(9). PROCEDURE TO BE FOLLOWED IN THE REGISTRATION OF BOOKS OF ACCOUNT, INVOICES AND RECEIPTS. — Books of account, register or record:

In going about the registration of books of accounts, invoices, and receipts, the provision of Section 19 of Revenue Regulations No V-1 must be complied with. According to said section, persons who are required by law to keep books of account, records and invoices for recording their transaction, must present them first for approval and registration to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial or city treasurer, if in the province, before using any of the aforesaid books, records, registers, invoices or receipts. A register book for every books, register or record which has been approved must be kept showing:

(1)        such information as of the date of approval;

(2)        the name and address of the taxpayer;

(3)        his citizenship;

(4)        the number of the alien registration certificate or landing certificate, if an alien;

(5)        the kind of business and schedule, paragraph and number of the privilege tax-receipt issued for the business if any;

(6)        and the kind, volume, number of pages of sheets of the book, register or record. Every book, register or record so approved and registered shall be serially numbered for each taxpayer.

Before any book, register or record is presented for registration, an identification as to the kind of book, register or record, and the name and address of the owner, citizenship, the number of alien registration certificate or landing certificate, if an alien, the kind of business engaged in, and the schedule, paragraph and the number of privilege tax receipt issued for the business, if any, must be placed on the front cover by the owner thereof. The pages of the book, register or record must be serially numbered in a permanent and legible manner. If a book, register or record is approved, the following authentication shall be made by the approving officer on the reverse side of the front cover thereof:

"This _______________ volume No. ______________ with ______ pages or sheets is approved on this _________________ day of ____________ 196_____, for purposes of Revenue Regulations No. _____"

__________________

       Signature

__________________

(Designation of Officer)

If the book, register or record presented for approval is a continuation of previous books, registers or record, besides the foregoing authentication, the following notation must be added to the authentication:

"Volume No. ______________ of his ____________ was approve on the day of ___________________, 196 _____"

__________________

        (Signature)

___________________

(Designation of Officer)

Invoices and receipts —

A draft copy of invoices and receipts proposed to be used by the persons required to keep books of account and records must be presented to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial revenue officer or to the deputy provincial or city treasurer, if in the province, for approval. All approved draft copies of invoices and receipts must be recorded in a register showing:

(1)        date of approval;

(2)        the name, address and kind of business of the taxpayers; and

(3)        the schedule, paragraph, and the number of his privilege tax receipt.

No change can be made in the form or type of invoices or receipts used by the said without prior approval as required herein. Every invoice or receipt must be serially numbered. Furthermore, the approval shall be indicated by an appropriate stamp placed on the front cover, or on the back of the middle part of the last invoice or receipt of the booklet or pad approved; together with the signature of the officer authorized to approve the same.

The taxpayer, before ordering invoices and receipts or printing, must send a written notice of the name and address of the printer with whom he intends to place the order, and the total numbers of booklets and the inclusive serial numbers of the invoices or receipts ordered, to the Commissioner of Internal Revenue, if his place of business is in Manila, or to the provincial revenue officer or city or provincial treasurer, if in the province. (Section 19, Revenue Regulations No. V-1 as amended by Revenue Regulations No. V-45).

In applying the above-mentioned provision of the Bookkeeping Regulations, the Commissioner of Internal Revenue state that a confirmatory receipt issued by a company still in the process of incorporation which is similar to a "Broker's Advice" issued to an investor, to advise him that his money was used in paying his subscription to the company shares must be presented for approval and registration prior to the use thereof, pursuant to Section 19 of Revenue Regulations No V-I. (B.I.R. Ruling No. 94, February 5, 1960)

19(10). INVOICES AND RECEIPTS USED BY FRANCHISE GRANTEE. — As franchise taxes are internal revenue taxes, a franchise grantee is subject to the provisions of section 204 of the Tax Code, requiring person subject to an internal revenue tax to issue sales or commercial invoices or records, and Revenue Regulations No. V-I, which requires, among other things the presentation of said invoices and receipts for approval and registration prior to their use. (B.I.R. Ruling No. 285, 1960)

19(11). THE USE OF THE SO-CALLED "PURCHASE CONFIRMATION RECEIPTS. — The so-called "purchase confirmation official receipt" may be used without the prior approval of and registration with the Bureau of Internal Revenue, provided that said receipts pass IBM machines before the same are issued to customers. (B.I.R. Ruling No. 59, s. 1959)

19(12). USE OF LOOSE-LEAF JOB ORDER SHEETS NEED NOT BE REGISTERED. — Loose-leaf job order sheets can be used without previous authority from the Bureau of Internal Revenue, there being no requirement that they be in bound form. (B.I.R. Ruling No. 186, s. 1959). 

19(13). REGISTRATION OF BOOKS, MANDATORY. — The requirement of submitting to the Bureau of Internal Revenue books of accounts, registers, records, invoices, receipts and other accounting records for approval and registration prior to their use in mandatory and the Commissioner has no power to exempt a taxpayer from complying with said requirements: (B.I.R. Ruling No. 138, s. 1959 and B.I.R. Ruling date Feb. 20, 1959).

19(14). PROCEDURE IN CHANGING BOOKS OF ACCOUNTS. — A taxpayer contemplating to change his books of accounts to suit the needs of his business should, before using the new books, present the latter for approval and registration in accordance with section 19 of Revenue Regulations No. V-I, as amended. The entries in the old books should be closed as of the date immediately preceding the date the new books are used.

Under Section 334 of the Tax Code, the choice of the principal books of accounts which a taxpayer should keep and use is limited to either the journal and ledger, or their equivalents, or the simplified set of bookkeeping records, depending upon whether or not his gross quarterly sales, earnings, receipts, or output exceed P5,000.00. (B.I.R. Ruling No. 526, s. 1958).

If a taxpayer has been employing a method of accounting different from that prescribed by Section 44(b) of Revenue Regulations No. 2, (regross income from long-term contracts) to be reported when contract is finally completed and accepted by said taxpayer, and application for permission to change such method and the basis upon which the income tax return is to be made should be filed with the Commissioner of Internal Revenue within ninety (90) days after the beginning of the taxable year to be covered by the return and the terms and conditions of the change should be agreed upon the Commissioner and the taxpayer. A statement showing the composition of all items appearing on the taxpayer's balance sheet and used in connection with the method of accounting formerly employed by him shall accompany his return, pursuant to Section 44(b) of said Regulations. (B.I.R. Ruling No. 526 s. 1958).   

SECTION 20.    Inspection of Books, Registers and Records. — All books, registers and other records, and vouchers and other supporting papers required by these regulations shall be kept at all times at the place of business of the taxpayer, subject to inspection of any internal revenue officer, and upon demand, the same must be immediately produced and submitted for inspection. When required by inspecting officers, the owner, bookkeeper, or manager shall give the necessary explanations regarding the items in the entries contained in the said books, registers and records. In the case of a branch store, or where the controlling books are kept in a place other than the business establishment, there shall be kept in the store or business establishment such books and records as would clearly reflect all the transactions effected therein. When the books, register, record and other papers are needed by an internal revenue officer for examination outside of the taxpayer's place of business, the said officer shall issue a receipt therefor on the required internal revenue form. After making the inspection or examination of the said books, registers, records and other papers, the Internal Revenue Officer shall inform the taxpayer that he will receive a confirmation of the investigation within thirty (30) days upon termination of the investigation from the revenue office who authorized the investigation in accordance with the following form:

ANNEX "C"

LETTER OF CONFIRMATION NO. . . .

(Name of Taxpayer)

(Address)

Sir/Madam/Gentlemen:

With reference to our letter of Authority No. _____________________ addressed to you ______________________________________, please be informed that the results of the investigation conducted by Revenue Examiner _________________ of your tax liability/liabilities for the year(s) period _________________ the findings are:

Discrepancies               P ______________

Deficiency Tax(es) Due  ________________

The above findings are subject to review and final approval by the proper officer of this Bureau.

Very truly yours,

___________________

(Head of Office)

To be signed by CME, CMA, PRO, Asst. PRO (For province of Rizal only), chief of Regional Investigating Branches, or Chief of National Office Divisions, as the case may be.

IMPORTANT: This letter of confirmation should be pasted on the inside cover of the ledger for the year(s) investigated.

"In this confirmation letter, the taxpayer shall be informed that the corresponding report of investigation of his tax liability has been submitted and that the recommendation of the investigating Internal Revenue Officer is under consideration by the Revenue Office concerned. The taxpayer upon receipt of the confirmation letter shall paste the said letter on the inside cover of the ledger for the year or years investigated. The confirmation letter shall be prepared in triplicate and numbered consecutively. The original shall be sent to the taxpayer, the duplicate shall be attached to the report of the investigating Internal Revenue Officer and the triplicate shall be retained as the file copy."

(As amended by Rev. Reg. No. V-77.)

20(1). JURISDICTION IN THE INSPECTION OF BOOKS OF ACCOUNTS.  — Facts: "A" company has its head office located in Manila, and a factory at Quezon City. In the desire of said company to consolidate the filing of its income tax returns and business tax, it filed the same at the Regional Office in Manila. Question: Is the Regional Office of Quezon City totally deprived of jurisdiction to look into the records of the factory which is located in Quezon City?

Answer: As a rule, the regional office within whose territory the taxpayer is residing and where his principal place of business is located and where he files his returns and pays its taxes has jurisdiction to examine the taxpayer's returns and books of accounts and other records. The Manila regional office has the primary jurisdiction, for tax purposes, over the company's business operations.

However, the Quezon City regional office is not totally deprived of jurisdiction to look into the records of the company located at Quezon City, if the examination of the records therein is necessary in the determination of its tax liabilities, as the Manila regional office can exercise its jurisdiction only within the limits of its territory. For this purpose, therefore, of securing any and all information relative to the operations of the factory located in Quezon City, the regional office thereat will naturally have to be utilized to undertake the work of examination and investigation. (B.I.R. Ruling No. 2, s. 1964).

20(2). EXTENT OF AUTHORITY OF MUNICIPAL OFFICIALS TO EXAMINE BOOKS OF ACCOUNTS OF TAXPAYERS WITHIN THEIR DISTRICTS. — The matter of inspection or examination of books of merchants by municipal authorities solely for municipal purposes is a matter over which the Bureau of Internal Revenue has no business whatsoever to interfere, much less as to the legality thereof. Where such inspection or examination releases to internal revenue, this Office, in a previous ruling held:

". . . that the power of inspection and examination of the books of accounts of taxpayers is exclusively lodged with the provincial (now chief) revenue officers and their assistants or examiners applies only to acts of inspection and examination for internal revenue purposes and does not embrace those done by agents and inspectors of other government bureaus or offices for purposes which may be germane to their duties." (B.I.R. Ruling dated March 21, 1956, Int. Rev., Vol. 1, No. 3; B.I.R. Ruling dated August, 1964).

20(3). DUTIES OF TAX CENSUS EXAMINERS. — Section 7-b of Field Circular No. V-157 provides as follows: —

"(b)       Tax Census Examiners are not authorized to conduct direct investigation of taxpayers, i.e., they are not allowed to examine books of accounts of taxpayers whose tax census statements are being verified, to interview them in their business establishments, or to call the taxpayer to their offices. Any discrepancy discovered by any Tax Census Examiner involving income, assets, liabilities shall be reported to the Chief of the Tax Census Branch who shall in turn forward the same for action to the corresponding Provincial Revenue officer if it is an ordinary case or to the Chief, Investigation Branch if the case is one where there is an indication of fraud."

The foregoing provisions of the circular are still in full force and effect.

Accordingly, your client may refuse to submit themselves to direct investigation by the Tax Census Examiners. Tax Census Examiners are authorized only to verify statements of income, assets and liabilities of taxpayers but not books of accounts. ((B.I.R. Ruling dated July 10, 1964).