Chapter 8

Inclusions & Exclusions from the Gross

Income
 INCLUSIONS
Section 32(A) of the Tax Code provides that unless specifically excluded under
the code, gross income includes but not limited to the following:

1. Compensation for services, "in whatever form paid", including but not limited
to fees, salaries, wages, commissions and similar items
2. Gross income derived from the conduct of trade or business or the exercise
of profession (business income)
3. Gains derived from dealings in property
4. Interest
INCLUSIONS
5. Rents
6. Royalties
7. Dividends
8. Annuities
9. Prizes and winnings
10. Pensions
11. Partner’s distributive share from the net income of the general professional
partnerships
 COMPENSATION INCOME

Income arising out of an employer-employee relationship. It encompassed all

remuneration for services performed by an employee for his employer whether
paid in cash or in kind.

Compensation income includes:

Salaries and wages, emoluments, honoraria (payment for professional services

rendered without charge), taxable bonuses, allowances (such as transportation,
representation and entertainment, and the like), fringe benefits, fees (including
directors' fees if the director is at the same time an employee of the employer),
 COMPENSATION INCOME
taxable pensions and retirement pay, commission, compensation for services on
the basis of a percentage of profits, commissions on insurance premiums, tips,
marriage fees, baptismal offerings, sums paid for saying masses for the dead,
and other contributions received by a clergyman, evangelists or religious worker
for services rendered and other income of a similar nature.
The basis upon which the remuneration is paid is immaterial in determining
whether the remuneration constitutes compensation. Thus, it may be paid on
the basis of piece-work, or percentage of profits, and may be paid hourly, daily,
weekly, monthly or annually.
FORMS/MEASUREMENT OF COMPENSATION

Compensation can be paid in money or in some medium other than money such as stocks,
bonds or other forms of property.
If compensation is paid in cash, the full amount received is the measure of compensation
income.
If the services are paid in a medium other than money, the fair market value of the thing taken
in payment is the amount of compensation.
If compensation is paid in kind, such as stocks of the employer, the fair market value of the
stock at the time the services were rendered is the measure of compensation.
Likewise, income tax of the employee assumed or paid by the employer in
consideration of the latter's services is considered compensation income of the
latter.
RR 2-98 defined "employee" as an individual performing services under an
employer-employee relationship. An employer-employee relationship exists when
the person for whom the services were performed has the right to control and
direct the individual who performs the services, not only as to the result to be
accomplished, but also as to the details and means by which such results are
accomplished.
No distinction is made between classes or grades of employees. Thus,
superintendents, managers and officers are considered as employees.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

Regular compensation - Basic salary, fixed allowances for representation,

transportation and others paid to an employee per payroll period)
Supplemental compensation - Overtime pay, fees, including director's fees,
commission, profit sharing, monetized vacation and sick leave, fringe benefits
received by rank & file employees, hazard pay, taxable 13th month pay and other
benefits, other remunerations received from an employee-employer relationship,
with or without regard to payroll period.
The rules on compensation income are applicable only to individual taxpayers,
except nonresident alien not engaged in trade or business. Corporations, estate, and
trusts are not also covered by the rules on compensation due to lack of employer-
employee relationship.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

COMPENSATION INCOME RECEIVED AFTER TERMINATION OF EMPLOYEE-

EMPLOYER RELATIONSHIP
Remuneration for services constitutes compensation income even if the
relationship of employer and employee does not exist any longer at the time
when payment is made between the person in whose employ the services had
been performed and the individual who perform them. Obviously, the related
compensation income was earned before termination. Hence, the income was
derived out of an employer-employee relationship.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

FRINGE BENEFITS AND 13th MONTH PAY

Fringe benefit is any goods, service or other benefit furnished or granted by an
employer in cash or in kind, in addition to basic salaries, to individual
employees.
Fringe benefit subject to fringe benefit tax covers only those fringe benefits
given or furnished to a managerial or supervisory employee.
On the other hand, fringe benefits furnished to rank and file employees are
subject to basic tax and consequently to withholding tax on compensation.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

FIXED OR VARIABLE ALLOWANCES

In general, fixed or variable allowances which are received by a public officer or
employee of a private entity fixed for his position or office is compensation
subject to income tax and consequently, creditable withholding tax on
compensation income. Examples of fixed or variable allowances are
transportation allowance, representation allowance, communication allowance,
living away from home allowance, and the like.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

ADVANCES AND REIMBURSEMENTS FOR TRAVELING AND ENTERTAINMENT EXPENSES

Reasonable amounts of reimbursements/advances for travelling and entertainment
expenses which are pre-computed on a daily basis and are paid to an employee while he
is on an assignment or duty need not be subject to the requirement of substantiation and
to withholding.
When paid specifically, either as advances or reimbursements for travelling if it is used
for and are reasonably expected to be incurred by the employee in the performance of
his duties then they are not compensation subject to withholding.
The employee is required to account/liquidate the foregoing expenses for the
substantiation for each category of expenses.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

PREMIUMS ON LIFE INSURANCE

Premiums on life insurance covering the life of an employee paid by the
employer is taxable income to the employee.

DEDUCTIBLE EXPENSE OF THE EMPLOYER

Any amount given by the employer as benefits to its employees shall constitute
as deductible expense upon such employer.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

RETIREMENT BENEFITS, SEPARATION PAY, PENSION, ETC.

RR 2-98 (as amended) provides that retirement pay as a rule, is taxable, except those
received by officials and employees of private firms, whether individual or corporate,
under a reasonable private benefit plan maintained by the employer which meets the
following requirements:
1. The retirement plan must be approved by the bureau of Internal Revenue;
2. The retiring official or employees must have been in the service of the same employer
for at least (10) years and is not less than fifty (50) years of age at the time of retirement;
and
3. The retiring official or employee shall not have previously availed of the privilege
under the retirement benefit plan of the same or another employer
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

TIPS AND GRATUITIES

Tips or gratuities paid directly to an employee that are not accounted for by the
employee to the employer are considered as taxable income subject to basic
tax.
The same shall not be subject to withholding for the reason that tips are not
accounted for.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

VACATION AND SICK LEAVE ALLOWANCES

Vacation allowances or sick leave credits are treated as compensation income.

The monetized value of unutilized vacation leave credits of ten (10) days or less
which were paid to the employee being de minimis benefits are not subject to
income tax and to withholding tax.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

REPRESENTATION AND TRANSPORTATION ALLOWANCES (RATA)

Granted to certain officials and employees of the government
Considered reimbursements for the expenses incurred in the performance of one's
duties.
If the excess of RATA are not returned will be treated as taxable compensation income of
the employee.
STIPENDS OF RESIDENT PHYSICIANS
Stipends, diems, allowances received by resident physicians during their intensive
training in the residency program are subject to creditable withholding tax (CWT).
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

SERVICE FEES AND ROYALTIES, DISTINGUISHED

To distinguish between compensation for service and royalty payments.

If the payee has proprietary interest in the property that gave rise to the income
then the payment constitutes royalty income.
If the payee has no interest, the payment constitutes compensation for personal
services.
CLASSIFICATION OF COMPENSATION INCOME (RR 10-2008)

COST OF LIVING ALLOWANCE (COLA)

COLA of minimum wage earners is exempt from income tax.
The COLA forms part of the new wage rates. Hence, it is covered by the income
tax exemption of MWEs under RA 9504 which includes holiday pay, overtime
pay, night shift differential pay and hazard pay.
INCOME OR GAIN FROM THE EXERCISE OF STOCK OPTION PLANS
Any income or gain derived by an employee from the exercise of stock option is
considered as additional compensation subject to income tax and consequently,
to withholding tax on compensation (WTC).
 BUSINESS INCOME

Gross income derived from the conduct of trade or business or the exercise of
profession is known as business income.
They may arise from the sale of products or services.
Business income is taxed at progressive rates on net business or professional
income.
Gross income means total sales, less the cost of goods sold plus any income
from investments and from incidental or outside operations or sources.
BAD DEBT RECOVERY
Tax Benefit Rule states written off bad debt in the books is taxable income if it
resulted to a lower taxable income at the time of write-off, however if the
taxpayer did not benefit from the deduction of bad debt because it did not
result to any reduction of his income tax in the year, it will not be treated as
realized taxable income but a mere recovery or return of capital which is not
taxable.
EXAMPLE:

CASE A

X Company has a business connected receivable amounting to P100,000 from Y who was
declared bankrupt by a competent court. Despite earnest efforts to collect the same, Y was
not able to pay, prompting X Company to write-off the entire liability. During the year of write-
off, the entire amount was claimed as a deduction for income tax purposes reducing the
taxable net income of X Company to only P1,000,000. Three years later, Y voluntarily paid his
obligation previously written-off by X Company. Should the recovery of bad debt previously
written-off be considered part of X Company’s gross income?
● Answer: YES- Applying the “Tax Benefit Rule”, X Company should
include the amount recovered in the computation of its taxable income
in the year of recovery considering that it was able to get full tax
benefit three years ago.
TAX REFUND
The “Tax Benefit Rule” also applies with respect to refund or credit for taxes. Thus, tax refunds
are taxable if the tax, when paid, was deducted from gross income (i.e., local taxes and fringe
benefit tax). Taxes which were not previously allowed as deductions from the gross income
should not form part of taxable income when refunded. The following tax refunds are not
taxable:
1. Income tax (except for fringe benefit tax)
2. Estate Tax
3. Donor’s tax
4. Special assessment
5. Stock transaction tax
6. Income tax paid to a foreign country if the taxpayer claimed a credit for such tax in the year
it was paid
Tax refunds shall be reported as income in the year it was received, if the
accounting method employed by the taxpayer is the cash method. Otherwise, if
the accounting method used is the accrual basis, the tax refund must be
reported in the year the refund was ordered.
CANCELLATION OR CONDONATION OF DEBTS

The following tax rules shall be observed with respect to cancellation/condonation of

debts:
TAX TREATMENT OF DEBTS CANCELLED OR CONDONED
Applicable Tax Reason for the cancellation

Subject to basic income tax If services were rendered by the debtor, in

consideration of which the indebtedness was
cancelled by the creditor.

Subject to Donor’s Tax If the creditor, without receiving any

consideration from the debtor, and purely as
an act of liberality, cancels the indebtedness.

Subject to 10% final tax If the debtor is a shareholder of a corporation

that cancels the indebtedness, such
cancellation constitutes indirect dividend.
 GAINS DERIVED FROM DEALINGS IN PROPERTY
Gross income derived from dealings (sale, barter or exchange) in property
includes all income derived from the disposition of property (real or personal,
for sale or in exchange of other property, or both) which results in gain or loss.
The gain from the transaction shall be taxable gain and the loss shall be
deductible if incurred in trade, profession, or business.
 GAINS DERIVED FROM DEALINGS IN PROPERTY
Gains arising from expropriation of properties or other dispositions of properties
to the government of real properties are taxable. It includes taking by the
government through condemnation proceedings. The transfer of property
through condemnation proceedings, and the payment of just compensation is a
sale or exchange and profit from the transaction constitutes capital gain.
 INTEREST INCOME

Generally, interests are taxable income, unless exempted by law, whether or not
usurious. Gross income derived from interest should only refer to such interest
as arising from indebtedness (whether business or non-business, legal or illegal),
that is, compensation for the load or forbearance of money, goods, or credits.
For instance, interest derived from lending money, goods, or credits from one
person to another or interest earned in the normal conduct of trade or business
are subject to basic tax.
 INTEREST INCOME
On the other hand, interest income on deposits made in banking institutions as
well as interest income on deposit substitutes are passive income subject to
20% final withholding tax. Interest income derived from investments in
government securities are also subject to 20% final tax.
 RENTAL INCOME

Section 32(A)(5) of the Tax Code provides that “rent” paid by the lessee for the
use or lease of property is taxable income to the lessor. Rent is the amount paid
for the use or enjoyment of a thing (real or personal) or right.
RENT INCOME may be in the FORM of:
1. Cash, at stipulated price.
2. Obligations of the lessor to third persons paid or assumed by the lessee in
consideration of the contract of lease such as real property taxes assumed
by the lessee on the property being lease, insurance or other fixed charges.
Such payments shall be considered rental payments to be reported by the
lessor as part of its taxable income.
 RENTAL INCOME
3. Advance payment, which may be:
- Prepaid rent
- A security deposit that is applied to rental is a taxable income of the lessor.
Prepaid rent shall be reported as income in full in the year of receipt, regardless
of the accounting method used by the lessor.
NON-TAXABLE RENT
Advance rentals representing option money for the property as well as security
deposits to insure faithful performance of certain obligations of the lessee are
not considered as income on the part of the lessor.

RELATED CASE

In the case of Antam Consolidated, Inc. vs. CIR, C.T.A. (case No. 4580, August 20, 2004), the
Supreme Court held that “... when a person borrows money from another, the amount
borrowed is not income, as the same is neither profit nor gain. This holds true also in cases of
deposits given by a lessee to the lessor as security. For the relationship between lessor and
lessee, with regard to the security deposit, is also that of debtor and creditor, respectively.
LEASEHOLD IMPROVEMENT
A leasehold improvement is an improvement made to a leased asset.
Building erected or improvements made by the lessee on the leased premises are
taxable only if the same were made pursuant to an agreement with the lessor and
the buildings erected or improvements made are not subject to removal by the
lessee.
However, the lessor does not realize taxable gain from leasehold improvements
turned over by the lessee at the end of the lease where leasehold improvements are
considered fully depreciated and where the condition of said property is such that
necessary renovations and extraordinary repairs have to be undertaken to restore
the same to useful condition.
LEASEHOLD IMPROVEMENT

On the other hand, the lessee may claim depreciation of the improvements as
deduction from the lessee’s gross income over the remaining term of the lease
or the life of the improvements, whichever is shorter.

The lessor has the option to report as income the fair market value of such
buildings or improvements (Outright Method), or to spread over the life of the
lease the estimated depreciated value of such buildings or improvements at the
termination of the lease and report as income for each year the lease an aliquot
part thereof (Spread-out Method).
LEASEHOLD IMPROVEMENT

METHOD COMPUTATION

Outright or Lump-sum Method FMV upon completion of the

improvement
Spread-out or Annual Method
Annual Income = BV, end of lease term

Remaining Term of the Lease

PRE-TERMINATION OF LEASE

If for any reason other than a bona fide purchase from the lessee by the lessor,
the lease is terminated, the lessor realized additional income for the year to the
extent that the value of such improvement exceeds the amount already
reported as income on account of such improvement.
The additional income arising from the pre-termination is computed as follows:
FMV upon pre-termination Pxxx
Income already recognized/reported (xxx)
Income, year of pre-termination Pxxx
PRE-TERMINATION OF LEASE

Case A
On December 1, 2018, HP Company leased office space for 5 years to JC Corporation at a
monthly rental of P60,000. On the same date, the HP received the following amounts
from JC:
1. First month’s rent P60,000
2. Second month’s rent P60,000
3. Last month’s rent P60,000
4. Security deposit (refundable upon expiration of the lease) P80,000
JC also improved the office space for a total cost of P360,000.

Question: What amount should HP report as rental income in December 2018?

 ROYALTY INCOME
Royalty was not defined under the Tax Code, nonetheless, Webster Dictionary defined
the same as a share of the earnings as from invention, book or play, paid to the inventor,
writer, etc. for the right to make, use or publish the same.

TAX TREATMENT OF ROYALTY INCOME

Subject to 10% final tax Royalties on books, other literary works and
musical compositions from sources within the
Philippines received by individual taxpayers other
than NRA-NETBs.
Subject to 20% final tax Royalties derived from sources within the
Philippines other than royalties subject to 10%
final tax.
Subject to basic tax
Royalties derived by resident citizens and
domestic corporations from sources without the
Philippines
 DIVIDEND INCOME

Dividends are payments made by a corporation to its shareholder members. It is

the portion of corporate profits paid out to stockholders, direct of indirect.
Direct dividend is one where the paying corporation acknowledges the
distribution of dividend through a resolution of the Board of Directors declaring
such distribution as distribution of dividend. Indirect Dividend is a distribution of
profits disguised as payment of services, properties, etc. Direct and indirect
dividends are subject to tax.
 DIVIDEND INCOME
Examples-Indirect Dividends
- Payment of property purchased from shareholders in excess of its fair
values.
- Payment to shareholder for services rendered in excess of the fair value of
such services
- Cancellation by a corporation of indebtedness of a shareholder

Dividends may be subject to basic tax, final tax or exempt from tax summarized
as follows:
 TAX TREATMENT OF DIVIDEND INCOME

Subject to basic tax ● Dividends from foreign corporations

● Share in the net income of a general professional partnership

Subject to final tax ■ Cash and/or property dividends actually or constructively received by individuals
from domestic corporation or from a joint stock company, insurance or mutual
fund company and regional operating headquarters of multinationals
■ Inter-corporate dividends received from domestic corporation by non-resident
foreign corporations
■ Share of an individual in the distributable net income after tax of a partnership of
which he is a partner
■ Share of an individual in the net income (after tax) of an association, joint account,
or a joint venture or consortium taxable as corporation for which he is a member
or co-venturer.

Exempt from tax ○ Inter-corporate dividends received from domestic corporation by other domestic
corporation and resident foreign corporation

Situs of Dividend ➢ From DC = income within

➢ From FC = within or without
TYPES OF DIVIDENDS

A. Cash dividends
Dividends paid out in currency, and are usually taxable to the recipient in the
year they are paid. This is the most common method of sharing corporate
profits with the shareholders of the company.
B. Property dividends
Dividends paid out in the form of noncash asset from the issuing corporation or
another corporation, such as subsidiary corporation. Property dividends are also
known as dividends in kind.
TYPES OF DIVIDENDS

C. Liquidating Dividends

A liquidating dividend, generally, is not a dividend income. The transaction is considered a sale or
exchange of property between the corporation and the shareholder. When a corporation distribute
all of its assets in complete liquidation or dissolution, the gain realized or loss sustained by the
shareholder, whether individual or corporation, is a taxable income or deductible loss of the latter,
as the case may be.

Liquidating dividends are characterized as gain from sale or exchange of shares subject to ordinary
income tax. The gain is measured by the difference between the fair market value of the assets
received and the adjusted cost to the stockholders of their respective shares.
TYPES OF DIVIDENDS

C. Liquidating Dividends

In determining the fair market value of patents and trademarks (brands) for purposes of
distributing them as liquidating dividends and for purposes of determining gain or loss to the
shareholder-company, the average of the low and high values of the valuation of an
independent professional firm may be used as a basis. The properties received in liquidation
should be recorded in the books of the shareholder-company at their fair market value. The
same valuation may be used as basis for depreciation or amortization and/or determining
gain or loss on the subsequent sale or disposition of the brands in the hands of the
shareholder-company.
TYPES OF DIVIDENDS

D. Stock dividends
A stock dividend reflects the corporation transferring an amount from
“surplus” (retained earnings) to “capital stock” or paid up capital.
Consequently. The preexisting proportionate interest of any stockholder is not
altered and there is no increase in the intrinsic value of a shareholder’s holding
or of the aggregate holdings of the other stockholders. An increase in the value
of capital investment is not income. Nothing of value has been taken from the
corporation and given to the shareholder unlike in the case with of a cash or
property dividend.
 Accordingly, the different provisions of the Tax Code imposing a tax on
dividend income only includes within its purview cash and property dividends
making stock dividends exempt from income tax.
Taxable if it gives the shareholder an interest different from that which his
former stock represented. The shares confer in a change in the proportionate
interests of the shareholders in the net assets of the corporation. (i.e., the
corporation shareholders the option to receive either cash or property dividend
instead of stock dividend.)
Stock dividends are paid out in the form of additional shares of the issuing
corporation, usually issued in proportion to shares owned (i.e., for every 100 shares
of owned, 10% stock dividend will yield 10 additional shares).
 PRIZES AND OTHER WINNINGS
A Prize is an award to be given to a person or a group of people to recognize and reward actions or
achievements. Prizes are also given to publicize noteworthy or exemplary behavior, and to provide
incentives for improved outcomes and competitive efforts. Winnings, on the other hand, for tax purposes,
should refer to rewards/income by virtue of chance or bets. As a rule, prizes and winnings are taxable
unless exempt.

TAX TREATMENT OF PRIZES AND OTHER WINNINGS

Exempt from tax 1. Prizes and award made primarily in recognition of

- Religious, Charitable
- Scientific
- Educational artistic, literary; or
- Civic achievement

Provided the recipient was:

a. Selected without any action on his part to enter the contest or proceeding (not
constituting gains from labor); and
b. Not required to render substantial future services as a condition to receive the award.
 TAX TREATMENT OF PRIZES AND OTHER WINNINGS
Exempt from tax ● All prizes and awards granted to athletes in local and international sports
competitions and tournaments, whether held in the Philippines or abroad and
sanctioned by their respective national sports association.
● PSCO/Lotto winnings not exceeding P10,000 if received by citizens and resident aliens
(TRAIN Law)
● PSCO/Lotto winnings (regardless of amount) received by NRA-ETB (TRAIN Law)

Subject to basic tax ○ Prizes and other winnings derived by resident citizens and domestic corporations from
sources without the Philippines
○ Prizes and winnings received corporations
○ Prizes received by individuals from sources within the Philippines amounting to
P10,000 or less

Subject to 20% final tax ■ Prizes received by individuals (except NRA-NETB) from sources within the Philippines
exceeding P10,000.
■ PSCO/Lotto winnings exceeding P10,000 received by citizens and resident aliens
(TRAIN LAW)
■ Other winnings from sources within the Philippines regardless of amount (Other than
PCSO and Lotto winnings).
 TAX TREATMENT OF PRIZES AND OTHER WINNINGS
Subject to 25% final tax - Prizes and other winnings (including PCSO and Lotto winnings) received by NRA-NETB.
 PENSIONS & PARTNERS’ DISTRIBUTIVE SHARES FROM THE INCOME OF A GPP

Pensions, like retirement benefits, are generally taxable unless exempt under the
law.
 ANNUITY INCOME

Annuity income refers to specified income payable at stated intervals for a fixed or a
contingent period, often for the recipient’s life, in consideration of a stipulated premium
paid either in prior installment payments or in a single payment.

Annuity payments received by a taxpayer represent a part which is taxable and not
taxable.

The amount received representing return of premium is considered return of capital,

hence, should be excluded in the determination of taxable income. In contrast, the
annuity received representing interest or amounts over the premiums paid are
considered return on capital, thus, should form part of the recipient’s taxable income.
CASE A
Pedro purchased a life insurance contract ten (10) years ago requiring him to pay an annual
insurance premium of P6,000 for a period of 15 years. The contract provides that should Pedro
die or outlived his policy within the 15 year period, his beneficiaries will receive P300,000. On
January 1, 2018, Pedro outlived the policy. Consequently, he received the P300,000 as
stipulated in the contract.

Question: How much is the taxable income of Pedro on January 1, 2018?

Question: Assume Pedro died within the 15 year period, how much should be reported by his
beneficiaries as taxable income from the insurance contract?
INFORMER’S AWARD

Income derived as informer’s reward to persons instrumental in the discovery of

violations of the NIRC and in the discovery and seizure of smuggled goods is subject to
10% final tax.

The following rewards shall be subject to a 10% final withholding tax:

- Those given to persons, except an Internal Revenue official or employee, or other

public official or employee or his relative within the 6th degree of consanguinity,
who voluntarily give definite and sworn information not yet in the possession of the
BIR, leading to the discovery of frauds upon the internal revenue laws or violations
of any of the provisions thereof, thereby resulting in the recovery of revenues,
surcharges and fees and/or the conviction of the guilty party and/or imposition of
any fine or penalty.
INFORMER’S AWARD

- Those given to an informer where the offender has offered to compromise the
violation of law committed by him and his offer has been accepted by the
Commissioner and collected from the offender.

The amount of reward shall be equivalent to 10% of the revenues, surcharges or fees
recovered and/or fine or penalty imposed and collected or P1,000,000 per case,
whichever is lower. The reward shall be paid under the rules and regulations issued
by the secretary of Finance upon the recommendation of the Commissioner of any
of his deputies or agents or examiners, or the Secretary of Finance or any of his
deputies or agents.