Court of Tax Appeals
0“" Xepublic of the Philippine? | Court of Tax Appeals Quezon “City Luaal I Palducts, Inc vs. Q Prow a Letter-Decision Ef
“"
XEPUBLIC OF THE PHILIPPINE? |
COURT OF TAX APPEALS
QUEZON “CITY
LUAAL I PALDUCTS, INC.
Petitioner,
THs — OF INTBRNAL
x - -— 2s @ ad -— -— eee wo ” - A . a9
BECTIsSivs Q
Prow a letter-decision ef respondent deted Febras-
ry 26, 1966, holding petitioner liable in the sua ef
#61,517.22 representing deficieney sales and contractor's —
taxes, surcharges and compromise penalties, the latter
has appealed to this Court. + ey Cire
Petitioner is a domestic corporation engazed tn
the business of ugnufacturing jalousies, Venetian wine
aows and doors. Upon its request, it was granted tex
exeuption privileges under Republic act Ne. 35 fora
period of four years frou the date of the organization
ef the industry, per letter dated April 255 1L95G, ef
the secretary of Finanee (Exe “B-1"5 po 50, CIA rec.).
Bupsequentiy, the tex exssption privileges were extended
antii Deceader bis 19386 Thereafter, petitioner was ..
allowed to enjoy a dewinisning exemption until June 20,
1959, as provided in Section a or Republic Act No. 90l,
per letter dated vctober 9, 1953, of the secretary al
' Pinance (ixn. mls pps pln 52 CYA Pree.). .
Upon investigation, an exewiner of the Bureau of
| taternal evenue reported thet aside from wood jaiou-
eles, petitioner acnafestured giass jalousies allegedly
net covered by the certificate of exemption. He also
LECISION -
CTA CASE Ho. 1922 ; 2
reported that the instelletion fees were considered
‘part of the selling prices of the wood or gless jaelou-
gles. As a result of these findings, petitioner was
required to show cause why it should not be held lia-
ble for the seles tex vn ite gross sales of glass Ja
Lousies in the totel anount of #+07,962.71 for 1957 and
3% tax on its gross reeeipts derived from the installae
tion eof jalousies for tae sane year under Section 192
of the Revenue Code. in reply, petitioner alleged that
the sales cf glass jalousies were covered by the tax
excuption eranted under Republic acts Nos. 35 and GOL,
and thet the emounts eharced for the installations of
the jalousies sold vere integral parts of the sales
‘price of jsloustes. Notwithstanding the allegations
_ of petitioner, respondent decided thet it was liable
for the totel smount of 061,917.22, represer. tiny defi-~
ciency sales snd contrector's taxes, surcharges. ond
compromise penalties, computed as follows:
i “Gross gales/receipts per return - = § 16,1. 70
Gross Salesfreceipts ef glass
jalousies per investigation- _487,962.7)
Total gross sales/receipts per
investigation ~-<--+--+--+ <= #504%,107.41
Lees; Deductible costs « = « « + « tps
Totel taxeble sales/receipts - « «= # °
Less; Taxable sales/receipts of -
aye jJalousies uot covered
y the exemption « --+<« r
Taxable sales/receipts under the
ap age lane ataglin. Sug
7h tax due thereon - - - + + «
Less: Tax already pald - ~ ~ - «
Deficiency tax due - - « «= «=
25) surcharge due thereon - < «
Total amount due ~<c« es cine
Compromise penalty « «~~... ~~ «=
172
DECISIGH =e yy
CTA CASE No. 1922 _ 3
’
Taxable sales/receipts ef glass
alousies net covered
the exe aptien <= - = - = #487,962.71
Lesa: Costs Lange dh deducted
as shown in the above
' computation) - - « «= «=< «
. Taxable salee/reteipts - - - + -' = a ie) a
7% tex due thereon. - +--+ <2 = 345157039
Leas: Tex paid (already deducted
as shown in the above
computetion) - --+-+-+-.
pesisienty tox + kina con a PR
75% sureherge due thereon on
the ground of fraud - + = « epee
Compromisn penslity ---<=-<+-« $00.06
960, 675.-4%3
Tetel frosa ressteha as instale —
iation fees per inves-
: Sigation « = <= on ~ §aeeteel
. jm contractor's tex due thereon- - * °
- Less: Tax paid (already deducted
as shown in the above ‘A
competetion) «-<« «© ws = «= | ett
Defleiency tax ~ =-«<+« «4+ =< sss Ff ; Ze
75% surcharge due thereon on /
the groune of fread - «- = = 2
wid ieatene es... ee a
Compromise penalty -s wee aa ws = "200.00
Grand total of tax due and collectible “22 - - BEE
(Exh. Ll, pp. Y9<50, BIA Pee.).
tn Septexber 2/5 i90/, petitioner asked for rede - ;
vestigation and cancellation of tae foregoing assess- |
ment, contending (a) that tue sales being taxed are .
covered by ‘he tax exemption granted the taxpayer under
Republic Act ho. July end (b) that the taxpayer has not
Committed any fraud Viawese Aly pp» 5-55, BIR rete).
On the ground taat the wanufecture of glass jalousies
is mot incluced in the tax exenption eranted; and that |
the deviation frum the mmnufaeture of wood jalousies to
giess. Jelousios Was designed to defrand the Governaent
of lawful revenus, respondent, in a letter dated Pebrua~
ry 28, 1905, denied the request for reinvestigation and
* 473
DECISION « :
CTA CASE Ne. 1922 7 y
4
Cancellation of the eoevoemet. ‘Hence, this appeal. .
The issues to be resolved in this case are as
= | | |
: grants idacludes the menufacture of class je~
‘leusies; and
Cludes the 3» contractor's tax sought to be .
ote auf pats.
Since petitioner wes granted tex enti “a
the Secretary of Finance in respect to the sanufac-
ture of “wood jalousies, venetian windows and venetian
doors" under the provisions of Republic Acts Nog. 35
and 901, it is argued that the manufacture or class
jalousies by petitioner is covered by its tex exeap-
tion privilege because the term “glass jalousios" is.
but another none ef, or is synonysous to, venetian
doors and venetian windows". Kespondent brushed aside
this stand ef petitioner as an erroneous eonelusion of
lew and/or ‘feet for the reason that the word "tod"
attached to the tera "jelousies, venetian windows and
‘venetian doers” as indicated in the latter's certifi-
cate of tex exemption ‘ie used te deseribe all the three
articles. And averring that a jealousy, venetian Wine
dow oF venetian door aay be wade either of gless, or 7
woed, netal, OF even plastic, depending upon the kind
of slats or asterials used in the wsanufeecture thereof, —
respondent contends that the tax exemption eranted te .
| ~ipetitioner does not inelude ‘the use of glass in the
+ 474
~
DECISION -
CEA Cane Noe 1922 5
manufacture of. jalousies.
Worthwhile noting is petitioner's detailed des- eription of the products manufactured by it, includ- ing the specifications of the usterials used (Bake Ip ppe 60=62, CTA records), which was the besis of the favor- able recommendetion of its application for tax exemp~- tion by the Director of Commerce (ixh. Hy pp. 56-59) CTA records) and of the subsequent approval thereof by the Secretary of Finance (Exh. Ay pe ¥S, CTA reeords). When its original application for tex exemption from the payment of internal revenue texes under the provi- sions of itepublic Acts Kos. 35 and 90) wes forwarded by the Secretary of Finence thru the Secretary of Coa- merce and industry ana the Comaissioner of the Budget to the President of the Philippines (lizh. D-ly po Jy CTA records), the Director of Commerce, who was asked to make his comment and recommendstion therevn, re~- - quested petitioner, in order to have an exect appreisal of its menufacture as defined hy las, to subsait. miniature Samples of the products end detailed inforuation regard- ing quotations and description thereof (Exh. Gy Pe 57s CTA records). :
in its letter dated Uctober 11, 19%) to the Suresu of Commeree (Exh. 1) supra), petitioner cescribed its products as follows: :
This corporation (petitioner) was not existe ing before the war and was organised for the pur- pose of introducing and manufacturing these new products namely: Jelousies, Jalousie windows, Je- leusle Doors, Venetial walk or Partitions, Vene- tien Windows, Venetian Doors and Awning Windows, ' ander factory production basise beclSick «
| CTA CASE Boe 1982 ' 6
aa) series gf wood slats pivoted at each end to retate about a gd mph. dy ~¥ . eee ans tocuon be ame ancteel ance ob securely in a closed position, tapough an ‘Wenning sereen or other member.
Venetian waiis ana Partitions, Vene Seabhen ahah the Gitbecnees thik wo pub gnaee Gate City Awning Windows which are the type @f Awning we manufectare are controlled by a worm end geer drive at the right hang sice of the opening. Sach tier operates independentiy. bavce even ation is achieved by the use of wo gets of eeGhatisa conmected by uerison-. tel bers which distribute the raising force — iy ‘te beth sides of the sash.
bo ‘Zhe seterieis we use for the manufacture of . au tnese products are as follows:
a brass Jaraware
2. Cop Serews 4 G6. I. Naiis e woe te or Copper-or Aldure sereans
+ Kiln-Dried Native Wood :
De Painte ;
be Por Venetial ecils or partition vene tien Windows and Doors:
‘le Urass Sardware - 2. Gopper Screws 46..\l. taiis .
é° Lumite or Copper a %--- Aiaura Screens - ee Local Giass 7/32" thick
5. -Kilnme-Dried Native Wood
Ge Selats
2" Lamite or Copper or * aldure screens + Silnebried 4etive wood 2 Woodlife preservative paints..
SECISICN < a a .
CIA Case nee aaa 7 In recommending the apepeve). of the tax incaiaaehit ' of + petationsr, vie Bizester of Commerce mieten in port thats , | Venetian walle: and Partitions, Venetian Windows end Venetian doors are the sale as ja~ iousies with the difference thet giase Vanes are ed in the former insteed of vouden siats in the letter. These cousist of cleer,. te pote) tinted or heateresisting gless vanes, 4” centers. The Vanes are adjustable te — position within 115 Pees turcugh a screen or etuer seaber, amc ore iccked sevurely in place by Seams of a brass reck and pinion gear operator.
_ bouble interlocking angles provide couplcte water resistence at the end a of the vanese (ane ey pe 5B, Cla records.)
The Secretary of finance, soting Severubsy ou the ] eforesaid appiicaiion for tax exeupeion, granted peti- tioner e tax exemption privilege “in seqpest to the mant- facture of wood jelousies, vecetian windows ene venetian doors.® {Exns. A & lg pe Sy CTA records.)
Cnaer tnese circumstences, woat are the Linos of ielousies that were to be nanufactured by petitioner in respect of whieh it was granted tax exemption as @ new 4 and necessary industry uncer the previsions of Republic Acts Hos. 35 and QOL? Petitioner Ateclf gave the reedy + answer. Jelousies which are of adjustable louvres and wndeh eonsist, of a series of woos pivoted ot each end so ~ ge to rotate about « horisontel axis and so connected ’ ' that they may be moved in unison, As 6 watter of fact, in specifying the seterigis used for the manufacture of © jalousies, Kilo-dried wood wes iisted as one of them by petitioner, Gless, glass pane or gless vane was net in- cluded. The word “woud" before jalgusies in its tex exemption certificate is therefore bat a confirnation MAIN = .
OTA URGE Noe 1922: _ =
ef what peti tionos specifica in its application sel _ emeapticn. necordingly, the tea exeaption privilege erented by the Secretary of. Finanee ve petitioner with pespect te the eanufectare © setousies woud apparently _ met include class jaiousies.
| Petithoner, however, ergves that the umnufecture of glass jplousies ie covered by its tex exeaption erantea ) ander fepablic Acts Nes. 35 and 901 because the tera "glass jaiousies” is but another name for, or is synonymous to, “venetien windows and venetian doors.” Gr to put at wore " sueeintly in interrogative form, sinee the ‘only itens appeering in ‘the sales inwolces of petitioner were woos and glass jalousies (Bxhe ly pe 35, BIA records), are “glass jeiousics" the same as “Venetian windows ead vene- tian doors” as ihe ters 1s used ond understood in the cere Lirleate of tax exemption? i This brings us back to petitioner's own detailed inn forsation with recare to the industry it is engaged in, - Sne lading the specifications of the sateriels used in the wanufecture oe Ats products. Petitioner's products have (been tlassifiea by it into three groups: iret, jalousies, jalousie windows end jalousie doors; second, veustian walle and: partitions, Venetian windews ana venetian doors; end third, gate city ewiing windows. Petitioner was granted taa casa: tion in Tespect to the menufecture of “wood _jdousios" as far ae the first éFoup 1s encerneds toe wanufeature or ( Venetian windows eno Venetian doors" regarding the second gPoup; aod oo tax exeaption in respect to the aanufec ture of ewiing windows. And es slready stated above, the nater- « 178.
eetisicn - i | CTA CABE NO. Lyee 9 dele used for the manufacture of julousios include kilu-dried netive wood but do not include glass ox glass panes, walle for veuetian windows and venetian doors, lecal gless 7/32" tales is’ indindede . AS Gestribed by petitioner te the birector of Commpree when its original application for tax exemp- tion was still pending investigation and inspection, | Jelousies are adjustacle louvres anu consist of @ series of wooo slats pivoted at eres and so as te rotate about a horiguntel axis end so connected thet toey way oe moved in auison. Hencns insofar as the uenulacture of jeicusies 15 cuncernea, pelisioner was gractesa tax exeap= . tlon privilege in respect to the asnufscture of wood ja- leusies only. On tne CtHOF Deli, venetian windows and Vengtian doors are the sent as jolousics vite the euly Gifference thet glass vanes exe placed in the foreer . (venetian windows and venetian doors) instead ef wood glate in the latter (jolousies). Thur the word “weee 4 Was not attached to the ters “veretias windows anu vene- = in the cert ificate or ezenption of petitioner. , insofer 48 Ube certificate of tex exenption oc peti-.
tiener is concorscd, whet thei is we aitterence setween ) Wood jalousies on one usnd and voustian windows and vene- ' tien doors ei tne other hand? in the ight of the above, we Gemmot but draw the conelugion tuat veue tian windows Cre Venetisn Goors are. the seme as class jelousics, it Can not be said that the. word "woos" attached to the tere , tion de also used to deserite "venetion windows and vene~
DECISIGN «
CLA CABG BOs ljee cc ie ‘tian doors" tor thet woul be tanteasount to deleting or removing the words “venetian windows end venetian doors” from the tex ezouption certificate ef petitioner. Yor if ‘veuetian windows and venetian doors are the sane a6 jelou- sles ia which both consist of a series ef woou slats pivoted at each end so as to rotate about « horiscntal axis ahd e0 eonnecled thal they aay be soved in univon, the tera *vene- ' then windows end venetian doors” 4a petitioner's tex exoupe tica gertiricute would be a surpiusaces seedless te ear, the wording of the tax excuption certificate -proviaes tne safest guide as wo the extent and scope, Amport and m@aDe ing of the tax cxeuption privileges of petiticuer waiea should be exforesd as written and from whien bo Geviation : '. @F deletion should be aude. ~“ <a couras, we leave aot everloukea tae woli-settied vane that exenption from taxation ie not favored, and is never presumed, so that if granted, it must be siviete dy construc. aguinst the Leapas et. (Coll. Vs Haniia Jookey Glub, 96 Phil, 67c;. Solis Ve vouila Jockey Club, 99 whhie 209; Abad v. Court of Tax penis, id GCHA 3745 Paulie Agen tyiene Co., Inc., Vs Oakes 20 sthA 10963 Geuu. ve Guerre- WO, 21 SCRA 1EL; Coan, Vv. Visayan Bleetric Cos 45 uema 7150) But the tex exeaption privilege of peritionsry free from any legal defueta, uust be enforced as written. tue vera “wood! jabusies, venetian WenGoys ond venetian ucors"y viewed as « wacle, neakes it clear thet @oeh proguct is @ifferent fron the others. And in seeordance with the Amtention of the parties who were instrasented in the pre- peration and wording of the tax eavaption certificate of petitioner, we aust apply the term and provisions thereof ' DECISI0“# « CTA GASES No, 1922 + as intended. Consequently, we are of ine opinion that the tax exemption privilege of jetitioner under Republic Ast No. 35 and Republic Act ho. GOL (reinstatexeat of | the exeaption) included Venetian ‘windows woich were re tented to be the sane as gless jalousies. P sok FGoning te the second Issue whieh involves the 3% contractor's tax sought te bs iapeses by respondent under» Gection igi of the Naticusi internal ievesue Code for the installation of petitioner "'s agnufactured One toils question bas already beck foreclosed by tue case of Colle ‘We Btermit Corps, 105 Fuil. 5656 The Suprene Sourt, in effiraing the decision of this Court, held tuats .. 7% agres te the above reasoning atid cone . @iuslons the Court of Tax .A By, in that the cost of ne preducts retailed Pony free from tax under the exemption granted by Hee ..
pablic Act So. Jol, but refusing tue clais of the Gerporation for exeuption from \he contract- or's tax ou tus cost of the ins tion of sheets | they had avid apd Gelivered, because in tuis iate _ ter respect it is perforiing the work of « contract- oF eae is ry toe ad spony 4 UA provisions.
In combiusion; the appesied decision ls reversed iasofar es it holds petitioner liable rer daficisney sales tan, surchatye and compromise pensity. in the sus of PG0,075.43. lowever, petitioner, es a CUnLractur, is hiebdle for the ancunt of P0026 Fs eonputes as follows Totar ervsa receipts Gerivea fram I See oe git. tah FE wet A tex due thereon « « Geb Se warcherge «+--+ 52 +46 == :
Total of tex end surcherge - « « <
DECISION -
. CTA CASE mee 1922 di2 .
the sphesienhais penalty of #200.00, as far as this part of the appealed sociation is eoncerned, can not be imposed unless petitioner consents thereto. if respond~ ent believes that petitioner has incurred a criningl © _ Miability for violation of the Revenue Code, he is free to institute the corresponding criminal proceedings, but for him to impose a penalty without its consent is clear- ly illegal and unauthorized. (Coll. Ve U.S.Te, 10% Phil. 10625 Dy Peh v. Coll., 28 SCRA 216; Comm. v. ItegoneBuyoo Mines, Inc. 28 SCRA 867) ne WHERE FORE , petitioner Luxa bre Products, Inc., is | hereby eSneee. to pay respondent Commissioner of Inter- nel Revenue ‘the awount gf 2852.92, representing deficien- ey contractor's tax and surcharge. No outs. - SO URDERED.
— Quezon City, Septeaber 30, .1971.
Presiding Judge
WE CONCURs ©
Break bes Be nav ania
* Associate Judge
sre i