CTA Case No. 596 (Decision)

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REFIINLIC OF THE PHILIPPINEL COUREOP TAX APPEALS QUEZON SITY

ATKIN,KROLLCO Petitioner ING.

- veraus- C.A.CASE 1O.596 NIO .DONINGO,s xa Commissioner of Intornal Revamie of the Philip- pines, Respondent 9l:

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DECISION

This is an appeal from the dacision of respondent

declaring petitioner e Gommoreial broker as defined in

$eotion l9+(t) of the Mational Internal Revenue Code from 1951 to 1955 incinsiv0, in ita bu ines rsnac-

tions with Pillic0Sa, mnd holaing said petitioner iiable

for oommercial broxer's tax of 6 imposed by Section 195 of the same Code 1n the amount of 4719.54, plus

Pl00.00 as suggested compromise penalty in ox re judioial

settlement for violation of Section 209 ol the Tex Code.

From 1951 to 1955, petitioner supplied the Philip-

pine Council For United statoa aid (PHIICUaA) with

goods which the latter intended to give as aia to the

Philippines. As a auccessful biader for supplying the goods needed by PHILCUSA, petitioner imported the said

goods in its own nnme. It opened the corresponding

iettars of credit in its name, executed the parformance bonda in favor of PHIICUBA to ansver for damages in case

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DHCISION - CTACASB HO 596

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of failure to import the Saie goods, and recelved from the suppliers abroad the commercial invoices and othar documents showing that it wag the importer thereof. Nowever as importer of the snid goods, the same were not dslivered to the petitioner in the Philippines be- cnuse the delivery time under the bid transagtions

meana the delivery aboard tho ship ia foreign port previded that the goods were properly packed and labellad To Boort

The imported goods were not paid by the petitioner

becausa the suppliern ahroad are pnid in dollars ty the A Waahington (U.S.. thru the United tntes or

foreign corresponient of the Philippine Hational Bank.

Thie profit or compensation of petitioner in its busi- ness transactions with PrILCUSA consists of the aif-

ferance between the quotation in Philippine cnrrency subnitted by petitionor to PHIlCUaA and the eonivalant

of cost mnd freight C F dollar cost which was paid

in peaos to petitioner upon receipt of the documents hy PHILCUSA exc pt as otherwise provided in the con-

traet.

The only question at issue in thia cese is whethes

or not petitioner acted as a commareisl broker in its

burinees transactions with PllILCuSa covering the period

from 1951 to 3955, incinsive.

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CTA CSENO.59 DECISION

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Respondent coutenda that petitioner is neither an importer ncr a merabant insofar as tho Eoods celd to Piilcuea are concerned but a comnereial broker as tho saae is dcfined in Bection lgh(t) of the fstional Intermi Reveaue Codo as foilows

other means of transportation, or Por the freight earriad by vossals or cthar naans or transportation. er* producers, or hona fiae eur loyees who for compensation or profi- aoll or bring shout sales or purohases of merehandiae for otaer persons, or bring proposad buyars and othor businsaa for owners of veasels, or shippero, or consigoora or consignoas oi persons, other than importers, manufaetur- sollers together, or nagotiate froights or mission merchants. t Commerctal broker ineludex all The teru inolades com-

Cn soveral occasions subsequent to tho filing of

rasponsent'a answer to the petition for reviaw, this

Court, upon motions of tne parties, poatponed the

hesring of the case untii auch time as the Jupreme Court shall have decided the oase of The Collector of

Internal Roveuue Y, Tan Ing Hong, G.R.o. L-l6893

the fscte and issues sf which, as admitted Dy the Dar-

ties, nre identisal to tha ease at bar.

Aftor the eomarulal broker's tax case of Tan

Eng Hong va deeiled by tha upreme Court, petitioner

filed a motion for #ummary judgment to whlch responient

interposed ao objection

In tho case af THE COLLmCTOR nOv Cemmissioner)

OF IWTAL NVNUE VS.TAX NG HCNG, .RNO.-16893

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CTA CAS O. DECISION - 596

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October 22 1966, the decisiou of which is pertinent to the case at ber, our Supreme Court hela aa followst

he carried out the importation, ng was pot boeauso PiILcUsi had asked him to bat becaums he had obligatei himself to deliver failed to import the sela goods so that when and no one else's. for himself he vas discharging his Said agenoy. first mnd foremost, sorving his ovn interest this case that importation of fecting the gation as the wiuner in the Uy PHILSUSA. the oane to PHILCUsA wheu he Participated and iiabio in damsges to PiIlcusn ir he had won in the publie biaaing called by the "It seems and not for PHILcUSA. importation of He importad tha comaodities Tan Eng Hong would hva been Tan Eng Imng undertook tho the good# needad y PRILCOBA obvious from the faets of own, the said goods, bidding enlled personal obli- In ef-

demd be quite dirrienlt to sustain any as- sertion that Tan Eng Hong was acting for and Or both. senti to nis businesa addreas. his foreign supplier were strietly between them aione,i.., Tan ng long and the Telatione whataoever to the end that nelther in beialf of of credit, porformance bonda, invoiees en all other documents relative to the transac- foreign supplier only. and PiIIcusi had no privity of contractual of them could havo had any claim against each other f r waatover fault or breagh Tan his bids or proposals under hin name and the correaponding letters of credit wur tions were in his name. were atrictly between Tan Eng iong and Phiicusi just as the formeris contraets with the pears that Tan Eng Hong oigned and subuitted Dng transactions in aispute Hong might havo committed relevant to pon the records of thi case, it a PiilLCUsA or his foreign suppiier The foreign supplier Tha bid contraets It would in- The letters

or the procuring cause or the sale. The maans euployed by him aun his efforts uat rosult "the broker must ue the efricient agent in the sale. Ho raust find the purchaser,

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DESISION - CTACA N.59

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G-86695195 for the purchase of the saia gooda. If, ctibn or recady againnt the said foreign agtine an a brokor. mersiy bring PnIicUsa an hi of gertsin comaoitles. for cee reason or another Plllslgn tud otheriso. foreign zupplior haa deraultan in the per- fornance of ita obligaticne to Tan En Hong, Pliil0s4 couid not ave had any supplier. All these incicate the distinct aong as An impcrter and not a coiereia and the aale mst proterd froa Chis conaition may not De aald In the ease on hand. who eontraeted with his fcreigg adppliey ood to it by Tan Lng Fong supplisr coula not hava eompellad Pilllcusn snd indapandent peraoneiity of Tan Eng brokef. pliar to come to an agreezent fo- the 3aie refaned to sccept tha dellvary cl the said similarly, if somehow the Reyes y. Tan I was he himself E0 to roreign foreigasup Long aid ao hi ffort Rosqueds .. to obtain

Wiaonr, in the light of the foragoing derision

ve holl that petitionor is not a comnereial broker ad,

therefore, the deeision of respondent appealed frot is

hereby fevarsod Consequantiy, the nssesanent of ra

spendent agaiust petitionsr fer comareial brcker's

percentege tan ia tne smount or ,719.5, lis com

promis penslty of l0000, has to be,as it is nereoy

cancelled and aet aside.

SO ONDERID.

uezon it, August 7, 1967.

LTANJSLAOKALVAA Asscela te Judge lesVLMrn

WE CONOUR

HCN L.AVAICERA Fresiaing b NCMANM. UMALT Asyociata Judge Pa MaL Judge 265