CTA Case No. 626

DECISION -

C. T. A. CASE NO . 626 - 2 - Unless preserved in tin cans , fresh pine- apple fruits are very perishable and will not keep longer than two days.• (Phil.

Packing Corp. v. Cell. of Int. Rev., G. R. No. L-9040, Dec. 26 , 1956.) In the processing of its pineapple products from June 18, 1952 to June 18, 1957, petitioner con- sumed oils on which the sum of ~254 , 434 . 26 was paid as specific tax under Section 142 of the National In- ternal Revenue Code , as amended. This section of the Revenue Code was amended by Republic Act No. 755, ef- fective on June 18, 1952, which provides: "Whenever any of the oils mentioned above are , during the five years from June eighteen , nineteen hundred and fifty- two , used in agriculture , fifty Re~ ~­ tum of the specific ta~ paid thereon shall be refunded by the Collector of In- ternal Revenue x x

x. " Contending that it is entitled to the refund of 50% of the specific tax on the oils consumed by it from June 18, 1952 to June 18, 1957 , as provided in Section 142 of the Revenue Code , as amended by Repub- lic Act No, 755, petitioner filed with the Bureau of Internal Revenue a written claim .for refund of 50% of the aforesaid sum of ~254 , 434.26 . The claim for refund was denied , hence this appeal. The claim for refund of petitioner was denied by respondent on the following grounds: •x x x the aforesaid protest can- not be given due course for the reason that the packing , preserving and refining of pineapples grown by the said corpora - tion is not comprehended in the term ' agricultural use ' within the purview of the section 142 of the Tax Code~ (

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DECISION -

C.T.A. CASE NO_ 626 - 3 - ttThe term ' agriculture' is construed as the 'act or science of cultivating the ground , especially in fields or large quantities , including the preservation of the soil , planting of seeds , the rais- ing and harvesting of crops , and the rearing , feeding and management of live- stock.' {Snyt~v. Phoenix , 123 P. Ed. 1010, 1012, 63 Idaho 585 "It will be noted from the above definition that the word 'agriculture' embraces two departments of labor , namely:

(a) the preservation of soil , planting of seeds , raising and harvesting of crops; in gen- eral the cultivation of plant; (b). the rearing , feeding and management of livestock. "The first category is what is cor- rectly denoted as arming' which is a branch of agriculture .

ccordingly , in- as -much as the raising and harvesting of pineapples of your client falls under the branch of 'farming', an examination of the extent ~nd scope of the term is made in order to determine whether or not the term ' agriculture ' in the parti- cular department of ' farming ' comprehends the packing, refining and preserving of pineapples.

'1The term '-farming ' denotes the operation , mane'\gement , conservation , improvement , or maintenance of the farm or tools or equipments including ~­ ling 1 drying , packing , grading or stor- ing any agricultural or horticultural commodit in its unmanufactured state. Federal Tax Service, 36 , 808, 38, 641- 645) (undersc f ing ours) Consequently, in-as-much as the packing , refining and preserving pineapples by your client t the Philippine Packing Corporation , in- volves manufacturing process , the proviso of Section 142 of the Tax Code does not apply in your clients case and , there- fore , · cannot be used as an authority in the claim for refund. • (Exh. 1, pp.

183-184, BIR records.)

The sole issue presented for our consideration .• '·

DECISION -

C. I . A. CASE NO. 626 - 4 - is whether or not the oils in question used by pet~ ­ tioner in the operation of its machiner¥ and equip- ment at Bugo , Misamis Oriental , were •used in agricul - ture~ within the meaning of Section 142 of the Rev- enue Code , as amended by Republic ct No. 755 , so as to entitle petitioner to the refund of 50% of the specific tax paid on said oils. In Philippine Packing Corporation v. Collector of Internal Revenue , G. R .. No. L- 9040, December 26 , 1956 (motion for reconsideration denied on January 22 , 1957) , it was held that the canned pineapple prod - ucts produced by petitioner in its Bugo plant are agricultural products , although not in their original state.

Said the Supreme Court:

"The state has not shown that the canned products of appellant corpora - tion have acquired , as a consequence of the processing to which they are subjected , any_use to which the ori - ginal fruit was not suited , or could not be devoted 9 I t is practically admitted (and the Court may well take judici al cognizance thereof) that the nature , qualiti es and texture of the products are in no way altered , and it di tinctly remains an agricultural Q!Oduct .

Certainly the

canned pine- apples as compared to the original fruit have undergone less change than that found in the case of centri- fugal sugar obtained from the sugar cane or of abaca fiber when compared with the raw plant stalks.

And yet the state admits that the sugar from the can~ is exempt from the _ tax under sec. 188(b) of the

Internal

Revenue

Code. • (Unders coring ours. )

I f canned pineapple products produced by peti- tioner in its Bugo plant are agricultural products , it - 116

DECISION -

\ C.I . A. CASE NO. 626 - 5 - follows that the oils used in the operation of its machinery and equipment in said plant for the produc- t i on of such agricultural products were ~~ed in agri- culture within the meaning of Section 142 of the Revenue Code , as amended.

Such being the case , peti - refund of 50% of the speci - . fie on said oils.

decision appealed from is reversed , and respondent is ordered to refund to petitioner the sum of ~127 , 217 . 13 , withou~ pronoucement as to costs. Manila , November 29 , 1961.

WE CONCUR:

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Presiding Judge

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