CTA Case No. 2778

DECISION -

petitioner he presented its evidence, and on a question of law as to whether or not limestane dug Out and prac into lime used in the production d valor m hax as aomineral or mineral procduck. Tt appears thats:

A marae ee PEC AA tion ced Y yanizecd ane fang under oancd by wirhue of the Lawe of the Fhoilippines, having ite of fice at A.

riano Blcdrepe 4 Ayala Avenue, Makahi, Rizal. [to ois anqaqged primaridby oon the maining of capper ore fram ites min praperdisy are) coaric tone in oa harrio called Don Anckres Sariang, Toledna, Pravince of Cebu, and orepubedly the biggesh copper’ mine in (hes. n., pp. &, T-19, hearing 1O/1/82, ) a Pati bianer used the open pit method of digging Atay the copper ore deposits. Thi removing all surface and top materials of limestone soa. ane rocke ha reach inte the yer ore deposihs founc below, (¢t Balla ype LO-EL, pipe LG A?, RVI. )

hn Peabikbtoner 5 the owrrer af the land or Toleda City cont ndng Limestone. (Fuh.

tS pe haw mye Sale yg POPDa 18, 22, 24, LOC LABS.) Ando as such owner, petitioner is not required, during the years covered in this case ‘ sj “= te IS?75), toa A governmant permit to iq oak the Limestone, (Sec. 6&7, FD, 46245 Sec.

Oe 5 Consolidated Maines Admin trative Order s the surface of the Biga Lime Quarcey are deaposite of copper ore, are to mine these copper deposits, pebhitioner had toa remove and diq ouk the surface materials of Lames one, Boi] apieh ocean of the limestone was Appareantiy, mea har bh mires site 8, although a small portion thereat utilised by petitioner as a floatation agent oan the conversion of the copper roe b anto concentrate On the had of the deter:

oye iA processed by petitioner ainta Lime: and che Lime became a tleansdimg or gqenk, by chemical reaction with water, in the conversion of the copper ore ante copper concentrate. The effeck of the line mixed with to cause the copper mineral powder to arc ad othe miwartiiec te Jike lime ane obher materials ko de This waste at the bottom

DECISION ~

of the conveyor was bhrown away tailings while the floating copper powder was accumulated and dried, known as capper cancentrate This was the mineral cn that was exported toa Japan “for ing inte capper cathode anid rods .

antily, the line d not become part of the cancentrake, (Exha. C3 Ja h.asemey DP. 16, S/4/BLs pp. Lo-1?, BOOBY, LO/ 1/82.)

Da As shown from the records, the Limestangs proacessed into lime and used flotation agent was removed fran the concession af Loner. Even the L) waste and rocks, were leftoin the mines site as waste.

(t.6.M., pp. Ble EY, LOT /B24 pe. 6, S/14A/EL. } bw The preadcessing by pehitioner of the limestane WW eXSS dearves campletealy inside the COMES LOM. Ct a} aPleg [Da 8, 1O/29/B833 pp. 29 s Lovi 7/8!

FIP x wey LOSL/B2.) And mahady purchased the limestone oor the lime manufactured from it. (huSelMig Pe mF LOST /ES. } Beemingly, neither the limestane nor the pracesgecd "lime" possessed marke VALUE, (heey PP pp. 7B, LS-14, S/14/8i5 Exhs. D, DeT1.)

x é 4 bb ct

DECISION ~

onted shows that for cost 7 4 The evidence pre meer Lrg and internal management. cantroal , peti hianer assigned ‘coat estimates" to each and anbifiable activity or proce involved in the mining of copper fram blasting and digging and hatlaing boo ole adgding for export, Invariably, cast Lgred ota the process of digging away the euirface sail] and wastes to the process af digging Ouk Rhee copper rac ceushing and pulverizing Eham, and oconverhing the mineral into exportable Lo exporting the concentrate.

from thas as iqnment af cost estimate ta the

PAF OCS (2 35 8

of praducing lime fram the limestone, that petitioner established that the "production cost" of lime, during the periad invalved in this case, PPE OG. 2a. (Exbhse Aeed, De-1, Feri toa ha Bolan PD Fr4, O/1L4/B1 5 Pp.

efA7 727 po. Be, F/ESLR ae) proacic: of “lime” that petitioner used ain computing the ad valorem tax af PUBL PS. 25 representing tax on the lime, details af which are as follows:

tS br r ee DECISION CTA CASE NO.

2778 Dates Cet oo FO November December January March April June Juadv Auquat Qe toher Movember December January March 4th F 4,144, 27 By le P, 431, 89 " BGO), OF 7 .

" Tog tdwded a cal) Date Paid

LTR 74

aoe Rb 7 4 oY sass 1 > seese 7 A

FALE 7 G8

OSL7Aag F Cd Se a F

AOFLERS F

t i Ape aD Tole PR GOOROd1 F May " Jape daily LOnB FAR 4OOoR LF F Alacra t Septhemnhear Grand Total

9. Om December Bie, S75, petitioner filed its Claim for tax credit af ithe aforesaid sum of Pied, 92a, 2a that it paid as ad valorem tax. Since no action was taken seasanably by respondent an the Claim, petitioner filed ite pekition for review with this Courek an February 18, 1976, Petitioner poses the following issues:

WHETHER OR NOT FETITIONER IS ENTITLED TO

ITS CLAIM FOR TAX CREDIT.

UTILIZATION OF WASTE

ty THE OF ERATOR CF a4 CO MILNE § SATD TAXABLE MINERAL. TO THE AD VALOREM TAX .

BYP THE

THER CHF NOT THIE HINTING LA ARID

HE GULAT DONS REQUIRE THE QUIN QF THE

AE We AY CONTAINING ‘MIT 37 AWAY

AN 4 CF

TO REACH THE

Me MOT, TAX | (nM

NO MAF

and its position as fallaws:

Ee Digging away the limestone is an incident licensed ta canducty Ii. The limestone was mot removed fram Le averance af mineral products the Sike, hence there was ma taxable Cle like Lhe rocks ane other topsenil garily seraped and duq away in orcder to reach inte the minablé capper denoasits below the surface, the limestone became waste incident af the pracess af copper minines cl, The utilisation of bhais Ww ach Lang & In paying the mineral, the value of the limestone and the cost extraction was eily included as part of material, a natural tax oon cepper aft the cable value of the capper mineral. THUS « anokher hax oon limestone would in effect he collecting a tax twice on the limestone

f. In the alternative, petitioner paid excess ad valorem tax im the amaunt of FLO?, 829.00 because while the tax is measured by the gross value af the raw mineral which is limestane, the petitioner paid on the basis of the coast "lime" which is the processed product. All the expenses af processing must therefore be eliminated: and, CJ» Thera is moa leqal bagsig for using as the hasis of the valor Ty CAM » Since parties are agreed an the fact that limestone Cand “lime for that matter) had no market value at the mines site or e @, a tax hecomes due. Hance, petitioner is entitled to the full credit of its payment of FI@1,925.25. Respandent canmtends that while the provisians af Sechian 4&7 of Presidential Decree No. 4635 does nok require the awner of a privately owned land fram «© weing a permit to extract or remove quarry resources on his land for personal use, the said privilege does mot include exemptian fram payment af the 2% rayalty or ac hax pursuant toa ····· .1.0 .....

~:; f? c t .i o n of thl'?.

then ap plicable National Internal Revenue Code, which provides as follows: ~3r.:>c · 24:::;; • f:\.<::1 ... Y.f:l:J .. f:?.r.r..f!l ..... t~.~::f:3 .2 ..... <.::!.D ... 9.l::~.I.Pl.,\t . o ·f rr.l :Lf:l. q.r::~.9. .1 .J..i::l,J::l.Sj .~.5. ..... .f .. lf:?.1:. ............ FD.Y.f:3r .~.?_f:J.. .. 9.Y ..... J .. f:3 <::':.2.? .. • - There is hereby imposed on the actual market va lue of the annual gross output of the minerals or mineral products extracted or produced from all mineral l an d s not c: o v P r .. e d h y 1 ~-:-~as r::? , a n s\<;L ..... .Y.§. .. l..qx:..§'..f.T.l. t "' ~·: i n t he a mount of two per centum of the va lue of the output, except gold which s hall pay o ne and one- half per centum. Before the minera l s or min era l products are removed from the mines, the Commi ss ioner of Internal Rev enue or hi s representatives s h a ll first be notified of ~'" ' · '· c: l1 ,·- p rnova l on<~ fcH'" fll pt-· e~::.c r·ibec:l for .. the purpos e.

(As arnenc:lec:l b y Sec. 2 , Republic Act No. 909; anc:l Sec. 48, Republic Act No. 6 .110.)

Rc-:>ad:i.nq thE·' pr .. ov.i.sion s of the law, the ad on oJtput of mineral l a nds not covered ,::~nd co llected em the actual mar ket va lue of the annual gross output of the min era l s or mineral produc t s extracted or produced f ,~ om minl~' l'" a 1 land s ..

in this case, cannot ~say that, c:lur-.i.ng the pe:~r iod covered, peti tiorH?r- was f?nga.qecl .i.n the extraction or pi·-oduc t.:i.on of limestone fr-om its mininq proper·ty and con cession s as a distinct activity or busi ness. {1s the evidencr.:> sta.nd s and 1-'Jh.i.ch is not con tr .. o ve r .. tf?d b y respondent, petitioner is engaged 243

-·- ll in the mining of copper ore from its mines property and in the process thereof: 1.

Petitioner had to dig away and remove a ll top material s consisting of lim estone~ top s oil to r~::ac h into thE?

c:oppet·- Dre c:ll:::> poc.~ .i. t:.s ·found bE"? low.

matter· of ·fa ct~ as s t.a t:l·?.d a bovP ~ p<? t :i. tion<=:?r- a~;

CH\Iner· of t• .. .i q h i::.

'"·' i':\ ~;

not Pven required to sec ure a government permit. to dig out the limes ton e . 2.

Mos t of the limeston <? was left in the min e s ite as was te, alt hough a s ma ll portion thereof was utilized by petitione r as a flotation agent in the COnV!:"? I'"S :i .. or·l o ·f t.h E> coppc~r rocks .into concentrates. The l.im f,~<:; tone ~\J a s ·f i ,, .. ~..; t pr··ocpssecl by peti ticmer I i nto lime, and by c hemica l r eac tion with water~ the 1 im fc:

hE~c: a m E-' C:\ c: 1 f.')r.·,,n s:i.nq reaqent in the convers ion of the in t:.o c:nppE? t' .. It appeat~s th,3t.

to cauSE' thE? coppe r- mineral powder to ·float ,;~ nd C E:\ U ~:~ (?. cl t:. h f.~ unwanted waste like lime and to c.:;.i .. n k whi c h were thrown away as

t. E:l . .i 1 i.nq<:;. The ·float.:i.nq copper powder- was a c::c urnul <::\ tf.·?d a nd dried , known as copper concentrate ~'lhi c: h m:i.ner·.:~l f.')~-:por · t e cl t.o a ap .::\n fOI'" --·

1. 2 ..... processi ng into copper cathodes and rods. The lime did not become part of the concentrate. 3.

The limestone processed into lime and used '"'~.;

·f 1 ot,:;~. t:i.on agent was never removed from the mine conce<.;s.i.un of pet:. .i. t .i. on£:! r-· . And the record reveals t.h F!

lim p~:; tonr·?

nor the processed lime possessed mar ke t value. T h i •:; c: ,,, :::; P submitted for decision on pur·!·?. l y qur:>s tion <:', <Tf law, and .in the lic:Jht. of the factual setti ng sta t ed a bove, it seems clear beyond doubt.

t: h <~. t.

t.hr~ • .

..1. l·. ili ~~.:;~. t.icm limPstone by p e tition er~ which is e ngaged in mining copper ore~ b y c:on vr.-?r .. t .in!J ::~•.J c h ""'a~::; -1::. r~ into lime as a cleansing reaqent in the con ve r sion of co ppe r ore into copper I merely inc:idPntal to its mining cop pPr.. ut'"!·:·?

!..•i•e t' .. •"'- t:inn "for .. is ad!:~qua te 1 y t i::l )·(E·' cl .

ThE~ I'"Lil F.:' ,::~J.r- PC:~cly s t. a t E'd: "Wher-·e a c: C) r·· pc:> r·· <3. -t: . .i. c>n i <.::;

Pnq,:<qPd in di s tinct ht...lsine<=:;~; and, as a f eature thereof~ in an activity f merel y incid e ntal 1-'Jhi c: h no other person or I l busi ness , the incidental and res tri c t e d act i v ity i s not tn h!'·? c::onsidf?.r"Pd as intended to be se parately ~ 51 -- .1.:::::

-··· -· o1·· c:\dditioni::\ ll y

t. i3, :-: ~::;> d • II ( Standard-Vac uum Oil~ Co. vs.

Antigua~ 96 Phi l . 909, citing Craig vs. Ballard Co., .1.96 Sc. 238.)

According l y, we hold t.hat.

sincF..~ petitioner Atlas Consolidated Mining & Development Corporation beE~n t;;:~.:-:ed on its copper mining operation, it may not be further doing s omPth.i..nq or..

e nq ag.i nq in an activity or work n·f diqginq out.

lirnest.one and into lime which is merely a part of ;:~nd j_nc idE·n t.i:':\ 1 to tht?.

pr-oduction of copper con c:: f~ n tr .. a tF~<;;;. Petitioner i s therefore e n titled to t hP !""!?. f Ltn d c: lr·e d .i. t of the amount of paid on 1 irnr>.s l: .ont·:>. (juJ· .. inq thP period covering from the 4th quarter of ~973 to the 3rd quarter of 1975 . With thi s conclusion, the other issues posed by petiti o ner become moot a nd academi c. We note however , as pointed to by respondent, that the amount of P.1..1.,448.6.1. paid on January .1.8, 1974 under Official Receipt No. F- 1135765 is barred in ,J.c:c:oJ'"cl i::lnc !' I.AJith t.he pr .. ov.i.s:.i.ons of SE•c:t.i.on ~) 06 of the then a pplicable Nation a l Intern a l Revenue Code, as amended b y Pres idential Decree No. 69. Fr·om the dat.f.:! o'f payment to the f.i..linq of the petition for - review with this Court oan February 18, 1976, the bwo year preescriophbive period had already expired. Courk action for recavery of an internal revenue tax e@rroneausly or dlleqally paid mus t he ingtituted within twa years after payment. (Koppel vs, Collector of Internal Revenue, L-1OS50, Sept. 16, 19741, 3 SCRA 175 Commissioner of Internal Revenue vs. Victorias Milling, L-“24108, Jan. 3, 1968, Be SCRA 12.)

WHEREFORE, respandant Commissianer of Internal Revenue a6 hereby ordered to gqrant a tax credit ta petitioner Atlas Consolidated Mining & Development Corporati qn the amount af PL7O,476.44 representing erraneously paid ad valorem tax for the periad from the test quarter of 1974 to the Ord quarter af LO7S, No costes.

AMANTE FILLER |

Fresiding Jucdge or bw re)

DECISION ~

WE COMCCLHR

mm ae ROAQUIN seociate Jucdde Z. REYES ASsQriate Judge CERTIFICATION I here bry certify that this decision was reached afher due caneultatian among the members of the Courek of Tax Appeals in accordance with Section 13, Article VITI of the Constitutian, Onavey

AMANTE FALLER

Fresidaing Judge Court of Tax Appeals