CTA Case No. 2944 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ASSOCIATED SUGAR INC., C.T.A. CASE HO. 2944 Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - X DECISION This is a simple claim for refund of alleged erroneously paid broker's tax for the years 1976 and 1'377. Petitioner Associated Sugar Inc. is a domestic corporation engaged in business as a sugar broker for which it pays a percentage tax <Broker's Tax>. By virtue of Sugar Quota Administration Circular no. 24, Series 197 3 - 1974, dated February 16, 1974, as amended by Letters o:f Instructions Nos. 113 and 114, the government took over the trading operations of the sugar industry, requiring all sugar producers and millers to exclusively sell their produce to a single government 34 2 /

DEC I SION C. T.A . CASE NO. 2944 - 2- agency. Since then,, the business of sugar brokerage has in effect, been suspended. despite the said law, the petitioner continued paying the 51- until the ending June 1977 of the calendar year ending December 31 , 1':JT!. On 1 978, the petitioner~ filed with the r�� e s pond en t a claim f o 1�' t h e 1�' e fund of the a mount of P99, 148. 54 representing alleged erroneously tax for' the years 1975 and 1977. In the absence of any r~esponse fl-~om the r�� e s pond ent and pr~event pr~e scr-� i pt ion fl�~o m s e t t i ng in, i t filed the instant petition on {~)pr'i l 11, 1~378. The fundamental bas is of the petitioner~ for~ i t s ,claim for refund is that it has ct?ased to o per~ at e as a sugal�' upon the p c1 Ssa ~~e of Sugar~ Quota Aclministration Circular no. 24, as amended. Consequently, its payment of br~ o ~< �~t~ ' s ta>< unt i 1 19T7 was a.l. .le~Jt?dly made erroneously. On t h e o t h e r~ h an cl , i t is the contention of the that the claim for~ l'efund should be denied inasmuch as the petitioner continuously in business a �.-, a sugar' bY'o~<er ' de s pite the effectivity of th e said law. 343

DECISION C.T.A. CASE NO. 2944 - 3- There�ore, the only issue to be resolved in this case is whether or not the petitioner continued to engage in business as a sugar broker even a1ter the e��ectivity o� Sugar Quota Administration Circular no. 24, as amended. It mu~; t be stresse d at this poi n t t h at a re f und of ti..'\Xf? S p.:;, �r' t a l�<<~ s the nat Ut' e of a tax exe mp t i on construed in strict i ss im i juris agains t t h e t ax pa y er a nd in favo r' of the tc.u<ing a u t h ol�' ity. < Insulat~ Lumber Co. vs. Cour t of tax Appeals , 104 SCRA 710; Commissioner of Internal Rev e nue vs. Rio Tuba Nickel Mining Corporation, It t h erefore devolves upo n the petiti one r to prove b y satisfactory and convincing evide n ce t h at t he b t' oke t' ' s tax it s.eeks to r��e fund wa~; i n deed en�'one ou s l y paid. Howe vet', the is dev o id of a n y e v i d e n c e, doc u mentary or testi monial, wh ich tends to establ i s h t hat its payment of bro k er's tax until 19T7 was me t'e 1 y b ase d on an honest or excusab l e mistake. fai led t o establish that it cease d to ope t' at e its an d u s ual busines s operation as a s u gar bro k er or th at it is aut horized and has shifted to anot h er li n e of b u si ne ss ' of be.i.nq "�' br�� o l-< et'. Inas n1 uch as it ca nnot deri v ing inco me fro m 1974 to 344

DECISION C.T.A. CASE NO. 2944 - 4- 1977 �rom which it based the payment o� the percentage (broker's) tax, the only conclusion that can be made there�rom is that it was gained by being such a broker, and the mere allegation o� the �ac~ that Sugar Quota Administration No. 24 and its implementing laws became e��ective does not ipso facto prove otherwise. In �act, the records o� the case at bar reveals that it was only in 1978 that the petitioner �irst came to know that the trading phase o� the sugar industry has been taken over by the government since 1974. Thus: "xxx XXX XXX Q. Since when have you been paying this broker's tax? A. As �ar as I could remember, since we were selling sugar we have been Qaying broker's tax UQ to the time our counsel told us not to 12a~ anymore. Q. Why What is the nature o� business o� Associated Sugar? A. Associated Sugar was acting as broker for selling sugar of Bacolod, Talisay. Q. You said you stopped paying broker's tax upon recommendation o� your counsel. When was �this? A. If I remember corr~ctly, about 1978. IJ. Why, if you know? What i s the , reason �~� 345

- DECISION C.T.A. CASE NO. 2944 5 f.i.. lr.JI'l E' n h<~ pn:inL: t?d to u s Uuq<H' (}uotd (..)d. Circ u l ar No. ? 4 Ser ie s 1973- 197 4 pu rs u ant to LUI 1 ~ and 14 the U o v t~ l '' n 111 l? 11 t .::11�.l t 1�1 o r�' i z e d o n 1 y o n e '"' q e n c y V>J<::~s the Pl��, :i. .l:ipp:ine E ><ch a nqr~ . Llince the circular was promulgated, a ll the p 1��. D d u c e r' s had t o s e .L .L t h e s u q a 1�' t o that s :inqle age ncy and t o no one <:� .1. s E~ .. 11 ( U 11 cJ ~~ r�' s co 1�� :i n q ~,; up p .1. :i. t? d ) t; hi:"~t C dll t h ~? r' <�? f o l"' e be cll~cl ucr>d is t h dt .::1t: tIll~ tim !? i t wa s :i n f o r�� 111 e d by i t 5 coun�;; e.l. of lll l.~ ~~>< .i. ~.; l: ~? li CE' o f' b uqar�' (}uot i:.' ndm in i str' <.:d; io n C :i. l �� cl.ll i::H' no. 2'+? :i. t \'\IC:':\ ~; s t :i. 1 1 a s u 'J ;. ,1, Lw u I�<P 1�'. Lon ~; ~:~ qu f:: nt 1 Y ? f? nq aqt~d :. 11 such bu s:i. nE�ss �r: a , ., cJ r o 1�, 1�1d v .i. �,1 q cl <�.~ 1� � .i. v e cJ .i. 11 co m~~ 1��' o m s u c h C:l t.~ 1.: .i. v .i. t y , it now cann o t c l .::1:i. 111 th c:1t :i.t s pay ment o f b r' o ~< e r"� ' s t.:. y (: i�1 l��� s .1. ':J / c:':\ 11 cl .1. �;:) / / w P y�� f~ ~:~ l"' r�' on f? o u s .1. y mi-.:'1 d e � WHEREFORE , judgment i s he reby rendered denying the fJ e '\; i t i D I I ~~ )�' 1 ~:i C .l C:.\ .i 111 f 0 )� ' j �' f? f U II d () f C.:\ .l J. ('? q (? cJ e l'' l'' (.) 11 P. () U S J y p d i d t:w o I<e ;���' h t a>< lor�' the y P C:H' s :i. ':J'? b .::mel :1. '::f/'7. SO ORDI::: HED. \_, ..w-~~ ERNESTO D. ACOSTA P r�' f~ s i d i 11 q ,J u cl q e 348

- DECISION - 6- C.T. A. CASE NO. 2944 WE CONCUR: CERT IF I CA-r I ON I h~ reby ce rtify that this decision was reached after due consultation among the members of the Court of T ~\ x (..) p p e a 1 s in accor-da nc e with Sectio n 13, (..)j�� ticlf? VIII of the Constitution. <2~o.~ ERNESTO D. ACOSTA P r' e s i d i n g J. u d g e Court of �rax Appeals 34 7