CTA Case No. 981 (Decision)

�PUBLIC 01' THE PHILI?PINIII WURT OF TAX A!'P~ - ' ...A.NU-4 BACOLOD-MURC IA MILIJING CO., INC . , Petitioner, -versus- C. T. A. Case No. 981 COHMI SSIONER OF INTERNAL REVENUE, Respondent . x- - - - - - - - - - - -x DECI S I 0 N This case involves the petitioner ' s claim for refund of the amount of i.:6,633.07 represent- ing alleged excess payment of the percentage tax imposed under Section 189 of the National Internal Revenue Code on molasses produced by it during the agricultural year 1958-1959. Petitioner, a corporation duly organized and existing under the laws of the Philippines, is a producer of molasses, a by- product of sugar cane . On the molasses it produced during the agri- cultural year 1958-1959 and which was either sold to Vistranco or delivered to the Talisay-Bacolod Distilling Company for manufacture or exchange into alcohol for its own use, it paid percentage tax in the total sum of ~14,300 . 58 . In view of the lack of information on the actual sales price from its Nanila office and in order to avoid paying de- linquency penalties, petitioner computed the var- ious amounts it paid as percentage tax on the basis of �45.00 per long ton, the price of molasses dur-

~ I I � .. Decision - CTA C SE No. 981 - 2- ing the preceding year (1957-1958). (See Exhs. B 11 11 to 11B-lo,n pp. 14-24, BIR rec.; Exh. 11D," p. 20, CTA rec.; t.s.n., pp. 17-20). However , upon being furnished by its Manila office with journal entries, petitioner's accountant determined there- from that the actual selling price of the molas- ses during the agricultural year 1958-1959 was only �23.00 per long ton. (See Exh. 11 1, 11 pp. 25-26, BIR rec.; Exh. 11E, 11 p. 21, CTA rec.; Exh$. C 11 11 and "C-1, 11 pp . 17-19, CTA rec.; t.s.n., pp. 23-31). Since the amount of !114,300.58 paid as percentage tax on the molasses was based on �45.00 per long ton, petitioner, therefore, re- quested for the refund of the difference in the sum of ~6,633.07, computed as follows: (a) 2%�tax paid on 2,984,816 gallons Add s: o2l%d to Vistranco ������������� ~14,028,63 tax paid on 57,863 gallons delivered to Talisay-Bacolod Distilling Co. ���������������� 271.~ Total taxes paid (X) ������������� ~14,300. (b) Sales value of above molasses: 2% ta x due sot nr a n2c, 9o8 4a1t79�8. 1 2g6a l lons ld to Vi per so gallon or �376 ,084.55 ������������ ~ 7,521.69 2% tax due on 57,863 gallons delivered to TBD at � .126 per gallon or �7,290.74 �������������� 145,82 (c) Total tax due Total tax paid Excess amount paid This claim for refund was denied by the Commissioner of Internal Revenue on November 15, 1960. Hence,

Decision - CTA CASE No . 981 - 3- the present appeal which was filed on December 3, 1960 . The only issue before us is the determination of the proper basis of the 2.% tax imposed by Sec- tion 189 of the Tax Code, the pertinent provisions of which read: "Sec . 189 . Percentage tax upon pro- prietor~ or operators of rope factories, sugar centrals, rice mills , coconut oil mills, corn mills, and desiccated coco- nut factories.- Proprietors or operators of rope factories, sugar centrals, rice mills, coconut oil mills, corn mills, and desiccated coconut factories shall pay a tax equivalent to two per centum of the gross value in money of all the rope, sugar, rice, coconut oil, ground or milled corn, and desiccated coconut manufactured or milled by them, includ- ing the by-products of the raw materials from which the said articles are pro- duced or manufactured, such tax to be based on the actual selling price or market value of these articles at the time they leave the factory or mill ware- house: x x x � 11 From the evidence of record, we find uncon- tradicted the fact that in view of the absence of information from its ~anila office relative to the actual selling price of the molasses in ques- tion, petitioner computed the �14,300.58, it paid as percentage tax, on the basis of �45, 00 per long ton which was the price obtaining during the preceding agricultural year of 1957-1958. Upon

I I � � Decision - CTA CASE No . 981 ' - 4-- receipt of the journal entries from the Manila office, petitioner determined therefrom that the price of the molasses during the agricul- tural yea r in question was only ~23.00 per long ton. This price is also attested to by the accountant of the molasses department of Luzon Stevedoring Co. which purchased molasses from different centrals in the Philippines for ex- port. On the other hand, respondent Commissioner merely relied upon the report of his agents (Ex- hibi t 1) and has not presented evidence sustain- ing his allega tion rela tive to the price of mo- lasses. Consequently, we hold that the actual selling price of the molasses at the time it left petitioner's warehouse was !!:23.00 per long ton . And the percentage tax on the molasses sold to Vistranco during the agricultural year in question should therefore be computed on the basis of ~23 .00 per long ton. Anent the molasses which petitioner deli- vered to Talisay-Bacolod Distilling Co. for exchange or manufacture into alcohol for its (former ' s) own use, it should be t axed on the basis of its market value at the time it left petitioner's warehouse. But since there is no

Decision - CTA CASE No . 981 - 5- proof regarding the market value of the molasses delivered to the Talisay-Bacolod Di stilling Co ., we are constrained to hold as a valid basis of computing the per centage tax on the molasses so delivered , the sum of ?23 . 00 per long ton which, we believe , approximates , ~f not equals , its market value at the time it left the warehouse / of petitioner . "' /wrlEREFORE , respondent is hereby orde r ed to refund to petitioner Bacolod-lVIurcia Hilling Co ., Inc . the sum of f6 , 633 . 07, without pronouncement as to costs . SO ORDERE l1a.nila, De cember 3 , 1962 . I CONCUR: Associate Judge ROMAN M. UMALI concurs in a separate opinion.

BAOODOD- NIDRClA MILLING C. I . A. CO., INC., CASE NO . 981 Petitioner, - versus - -COMMISSIONER OF INTERNAL REVENUE , i Respondent. X- - - - - - - - - - X CONCURRING OPINION I concur. Under Section 189 of the National Internal Rev- enue Code , sugar centrals are subject to the tax of ~ of the gross value in money of the sugar (including the by- products , such as molasses) produced or manu- factured by them. The tax is based on the actual s ell ~ ing price or market value of the articles at the time they leave the factory or mill warehouse. The tax accrues upon removal of the articles from the mill or mill warehouse whether or not there is a sale upon such removal . Therefore , if the articles are sold on the date of removal from the mill or mill warehouse , the tax is based on the actual selling price. If they are not sold , the fair market value on the date of removal is t. he basis of the .t.ax. . (See B.I . R. General Circular No. 470, Oct . 7 , 1940.} This case involves the taxability of molasses removed from the sugar central of petitioner during the crop year 1958-1959. Part of the molasses was sold to Lu2on Stevedoring Company for i23. 00 per t on

CONCURRING OPINION � CfA CASE NO. 981 - 2- and part was delivered to Talisay-Bacolod Distilling Company for processing into alcohol for petitioner. There is no evidence that molasses had a fair market value during the said crop year above the price for which it was sold to Luzon Stevedoring Company. There is also no evidence to show that the sale of molasses to Luzon Stevedoring Company was not made in good faith. Clearly, the theory of respondent that the tax should be based on the fair market value of molasses during the previous crop year has no legal basis. ROMAN M. UMALI Associate Judge