CTA Case No. 309 (Decision)

nEPUULIC OP' TilE PlllLlPPINEI f:OUHT OF TAX APPEALS MANILA etitione.r, - veraut - c. T.A. c i � 309 eapondent. ~~~~ ~ x� - � � � � - � - � � - �x , cr o Th1 is an appeal fro a decision of respond nt , da � u ust 6, 19 , ��� asing and de andin fr pet tion r p nt of th u of 6,7 2.7 r pre ent- n x on ~ e ato lu n dd1� t1onal au of iae en lty or 1- leg viol tl n f ct on 12 , in relation to ectlon 146, penalized under eet!on 17 , all o the ational n ernal evenue Code. h foll lng facts have etn eata 11sh in th!a cas � et t oner, hll!ppine nufactur n o - pany ( for rev!ty), a corporation uly or anized under Ph111pptne laws , 11 enga e 1n the nufactur an sale of soap, lard an other � 11 ro eta. ro ay 19, 19~1 to D c , 1 or r fro the ith ound .y e a ratories ( th - rat r ��� for ort), of n Juan, lzal, thirty- two thousand six hundr ninety three ( 2. 3) 1 1 meters of c ne ato ap 1c f!l �� t of t i& nttty, it .1:ej ct one thousand v n hun n venty- ,, 637

. t . A. ' � 309 � 2- tera. ce, f r t at e � pert � petitioner aet ally ace pted, retaine a paid for nly t irt t e n ed an t nty ( ) lineal �r� aru! atlll are 1n � throu bout t il fre o � letter, pet! 1 r 11 P� c. � a res ns 111ty o � payuaen f the apec1fi a � � ��1cl , 9 lin uly 2 , rr �~�tv ratorles ece r � 1 � rec.). bile ot r peclfic ax h r lia lltty t t ad, e y su ject to afor...nt1 e � cir� c stances ci d prll 14, 19~6 tt r on�� flliaa� . tt 1 !t r� like t f s reel, recelv r it torte � lt has ��~.-~ li illty f r .-ciflc tax, if y ally � � n the aald 12,~25 lineal � ters of f ilaa � vu, petitl � contends tha t cineaat apbic fil in q~aeatl are ex t fro � 63

� -- � ay nt f p c fie x. ontequently, lt oug t fl l!D$ in n w re pr ce y the is ued n nd for y t fr t t!oner f t � su of 6, 782. 7 as X0 ftl $ ~uest ton , co uted t the r � of . 15 r 1 n 1 tar i as follo. a ln t .. v u , r P n nt f :ro d iol ct n 124, in � tio n 1 6, r c io 17 � 11 X od � � p. 56, e.) r t& nt, p t p 1d 0 t o rt 0 u t 2 � 1956. � e n t nt pe 1 inly nc r t stlon, c t� tio tt c tograpl c 1 in cat io 1 f l or visual ucatlon� , e X t r o � apec1fk t ax r u ov i �� 146 of th r x c To ttr s t �o � d nc , petltlone e lng present d r� conslatin of t he 1�� ta 1 c tlatng � ' .. nj 1 as ocu- l ations � 1 ef so, �gez, 1\1."1 ant 639

� 3tlj nary e~1d nt , c n 1� 1, f lett~rs of un1c pal quoet in �nd/. r t nk1ng p 1t o r for fr s s 1n their vp cttv co un1t1ea , no $tveral .. o 1� of f ll �� p-tck t r nd a f o tl e ne .atogr p c fllills 1n que t on , e tition r r jcctod on a lllpruv! 5 d tJC � n b �o the ,.ourt. tt rc s no dispute that t rest of he films of 'tM lte ~fore tir larly. th~ the at!eel corr ctn sr. f �� t tti u ctur�, � haaiz d th t p~titio . .- 1t shoul � H a.f ility { 1. .., ,.. legally ' ... f pu~h &eel fr Dc ~� 0� on th 12. 525 lin l ec � r 3 , l 55 0 ., �!y f'!l l an t.t. � t ol o in . { ) '�� clna to ph c 1 tion ax bje t 0 �.,ecif�c t x und r 5\ ) .' anci if th uum !sa � ~tf.v h n titioner ybec el � to y the co pro 1se n� al y of -foze p "' ! ua u lven above. �h 11 ft t d15po ft ��- ln r 640

� - ~- lia U!ty f~ spec lc t o on tha 1 , 773 lineal tet of f1 a, lc t e latter ordeHd but Hjecteci ancl re urn to th lth labOr atories. cording to the Tax � a nt of ~~peclf!c tax on d stic products on lc IUCh tax a posed &hal l , � ~t as ot ~1�� ��peclal ly allo � paid edlat ely befoce the pl � of y �the ufactver , p ciucw, CMDH 0 pv bav!D po�����f.OR of the � . ( ect on 124, 1 nal Int ernal � :mer,ufac urer , produce , owner o perton havln n posHa�l n of the 1 , 773 11neu ten of f ll.aa, wh c it return t a rat~t�� � sbould not,thtrefore.be ld ila le f r a t of apeclfic tax t � :IIIIOll"'eaftZ', con� d.er!D t e fact that t tloner �� lla Ulty f~ the p� t of apectflc tax, lf le ally � � on the c.tneuto ._,hie fil � rder �n cc t f y 1 , 1951 to luly 28. 1956. we lncl 1t nnece�aar to te lne ether t :lt f.a the ufiiCtliHr, p.roctucu-, ~ r puson avin po����� on of aatd f!l:U to re lv. th flret in eatlon. The conuover�y .bet1teM � art!�� on hla .core � n the proper \PPl catton f tbe 1 w 1nvolwei. ectlon 146 of the at1onal Internal �- venue ~ttnent portion� of cb h� nder, pr vl.cleaa 641 a

C ION � �T� � ' � 309 - 6- T � above-quoted prov1� of ,law is eletr. It aojects to a.,.cifi~ tax cine to aph1c f a . t eapressly a � elflcally � ta tberefro �� catlonal f!l.Jis or cine to ap lc 11 use<l for vl.ual catlon�. Con..quently. only f! s 1Ch are rt.arlly ducat1onal tn nature or ich ve n p nufactured pr11aclpally for visual cation y be ex te fr 1~1 1c tax. The clarity he phraseolo d er s y t leg! lature 1ta enact the eace t ax- ex t g clause of -..ectl 146 of t r x & t .l'eftder unwuranted any conr.tructi n o sa 1 �� that goet yond the lan age t &t � tute. ver. .. e aware of duty of the courts to ��are fo~ aeeertaln th tru anin of � � actmtnts gr t!ng tax ex tiona. not J.n � a tence of lgulty 11\ the lan ua e of t ax ex- t tng statute ( ��� ~~ � .Jur. ~31� rder to obviate the poaaib111ty of !staking r� leg1alat1 � anlng of t � excepting 1n clau��� tn tbe event the � 11 not � t cle an ua � th reof. t aotec.Oent� of t � fore� quot d ection 146� a foun ~ 4( 642

� - 7- hat t e cle r 1 ngu g of the tatut co. ports 1th 't � legislative nte t. nua, scov � th t r or to t e end! ont - was no d st t of the x Code, t0 � 1 r cine to aph c � used 11 cat � �� otherwise. It - only ne 16, 1949, epu 1 e t o. 295 in Met 146 0 eC ffec , that �..e<tucatlo 1 fll�� � fr � uae for ax� h vl.ual � e ich too nt tlve or fr � 1 9 (now kn f y .. � e i- ratio lie c � ). 0 �� �an X X X X IE �� � n. � elo ?�� � � ill tl y! 1 643 'J./t

- 8- � pea er Prot� orea The entle en y y el if he s desires. � agu1r1 ana th pleasure. � elo a ben is a 11 consi ered edu� cat nal and when � it not educational? � bey are so properly urked� will ur tllell? � Pa lrlgana be nufacturer of educa- tional t11Jas� � . eloaoa oes not the ntl n thln at f approve this 111, every fila anufacturer or f!l producer wlll k hls f1 �� educatlon�l so as to ta e advanta9e of the eftt of this la tax exemption? � agub:l ana They are intencMd or visual cat ton." ( on ��� onal ecord, us� of epre..ntatlvea, lst ongress, h:lrci ���ton, ol. III , � 71 , if!wrsday, ay 20, 19-48, ages 269 2696) . (Un� deracorlng supplied.) r t a ve� ote reco o e proceed!.n � � 1t s eYldent t at ongress ld ot enc1 o exe t fr specific tax just a y f1 dMII8CI :Wit l� cta.ntal tional value. fo a fr specific t x, lt ls not en u e� e possess ._. c�tl al val e. requisite fozo e tl ia that t f a ))een prock.tc:ec:l o ufact\ae principally fo ational purpose, at ls, te ed for visual atruc 1o or ducat1on. t � tpOnMr of be .u jeot en nt , ongr� a lr! an bas said, epu lie t � 295, seeks to ex t f~oa t � pa nt of ~!fie tax t4ycttlontl fllu fgr ytwal tclycttltHh ancl that a ftl is c~ si&vecl educational when t � same 1� .. .tnt�nded. for 641

� 309 YiiYtJ � tSucl~loq. fhus , we f!nd t t the Congres- sional recorda relative to the passage of the end- t confina our view that only cln tlc fU s bleb are pr lly educat ional or intended for vlsual education y receive the 1 ��lAgs of ex- tlOCl beatowed by MCtlo 146 of the ax ~ . as acted. Conversely, therefore , c tog.raphlc fllas whk.b ue pr!llclly nufectu-ecl or pr ced for ~tertain.ent or for tialn9, although th�y !den al ly posaess ao.. 1nfo tlve or educational value, y �not be considered as "educatlooal fllru� falling within the view of t e eJCMpt!on. conte plated y sectio 146 of our evenue c � � e or � le tM e.rilnu:y fll.lla tllh.lc are dally ,socMn t t aters or plecea of .c par- ticulu fl as a ral lesson oz- ssage to convey, and in that senae lt a loci ntal educatio al v lue. Wlarly, 1\eWU.els and travel es exhibited wlth ordinary fllaa ve incidefttal e cational value or one �� e n r i c h i n g k ountl wlth lnfo~tl.ona events, pl.cea and thlnga the.nfA cMplct.O. ""'� t e OZ"d!nuy fU.a, newsreels an travel uea ue pr � Cluced P1"Uully fOJ> .atuta nt. aga!n, � the caae of fllu ~1Mrlly ~e for advertlaln which nowedaya ~ popularly an appropriately n � rciala� . They have info ative or edu- cattonal value for the reason that t y urniah � fer8atl ~� ardtng the allty and uti lty he product or procMtcts ad8.1't1Md.. t such for lv

i � 309 -1 � or catlonal value is eol!ps d y the cardinal ooject1ve hind the prOduction of ~ ~ctal fi � � n!Ch Objective 1� o advertise and theze~y nerate ~ desire for the product or pz eta advertised. �All these films cannot properly~ clasa1f1ed �� �'.-..w;.;ational fi s or cin tograp 1c f1 a uae f� vtsual education within tb pale of t . �� - tlo allow.d y section 146 of the Xax Code. to hold such f1 a eumpt fNm ..,_,_.._ tax, ld render nu � � tory and Man1n leas t ialative 1ntent1 to l1a1t ant of �� nly t particu r claaa a ic 1a tnten ecl for v1aua education. o cona1 ational" � nd aa tu<:h exe t fro ~lflc tax, any fi ich 1aparta for - tlon. a t no rocluced prila ily f 1 purpo�� or f.nt de for visual education, t alnly fR entut i.naent or advartt~..~.~t , uld nduly ex� pan t � field of ~ tatutory exe dart�� 1 1ted nd here y r ndu all f s x t fr ch tax. or it la ell�n!gh !llpoaatble to conceive of any cf.n ma- tographle fil lch 1� co letely devoid of !nfor � t!v or edUc tional v lue.~ � believe nd so hold tbat only ~in �to phi~ films hich are produced , or aanufactured an inten purely for vlsual in� atructlo o~ educatlon shOuld re p the eneftt of ex-.pt1on anted by aect1 t ax o e.J It is � well aattled rule that � � who cla ex tion, at aatlafactorUy Justify hls cla y 646

DEC �r�� E � - 1.1 - th cl r s nt of or n c statut 1 (Col- . l�cto � nil Jo~ � - 75 � c:h 2 - '}). 11 0 t t h or r at f ctor j 11 cla to t 1 ex� 1 vidtd !or y l ( ct 1 of t � Ta Cod , n d). yt i or X t ion, � � u_r of h ll n d � f 0 � s L'l cl t with of 0 f -� ore a n. of co , 11 1 ct. viti e such p cnlc f r u tly produced uc: ln associ te ppy ln in6 tt �t ~t of tit n :r. t ls nc: ur � to e 0 I'V tio s. hicl ere el v rt c - r or .. � vancedthan h s st t of irectl 1 0 t t evolv lr1t0 an � rt s s ~ ssan �ly th 647

- 12 - 1nfor atf n r gard!n t existe~e , qu l ity and , utility of ro u't� tn.u t e d1a of ill oards, n � - pa r , adios, t 1 v1&1on& an �� as. o evez , of the ~ � 1ou& meal , the u of ine t.� c: rently expl it to the fulle t xtent to ere te a f ~ such ro uc � ng t at &t nu r o c nsu r � Thus, th un~.ary public i ub- jec: ed to bl h� pressu.r� s les t 1 ile t i .s th <;O t g;r phi f nt \l ez- the u ts ~ !the � nterta in i l 1. �f at t tion p 0 uc p rily o dver 1 e t1 io er�s ~ 4u s , ci�� � . in 't � vi. tn udi nc a d products. T � tnf r at on 1 or uc he.c-e s ny, of t e ubjK t f i & & rdi .a o tl � whie i ~o v t se ll " ucts f t.ttion r. exhibits t xhibits to l.} , ch are portealy le ters ic:f.p yor v r!ous he dt f �iffer nt c vic or n % tions r eatin nd/or in p i t ~ er for r � s Q ~ � :ln tb ir re p t � co 1 n t 1 t I: tli court's ings that the sunj ct file ar not rinc p 4ly for educatlot.al purposa. 0 r lfi sa � .h s c 1n 0 t lY :U.<lic ary f t eont ntlo Ol:ld filmz tio 1. -y, conu .. $ �Y.hlb :ts 1 a .. + .h. ob erv t o. that ~ the fre� exhibition of the f!~s st!on wa .:�- 648

�t �� � 309 � lS � e&ted a tit oner w s then ad for t � nt~tatn nt der! fro the f ��� tn c as the t e lne atographle 1.. f sin eat oa co ced ly follow t in otlf or pattern of those exit b t b fore the ourt, we are of t e pini , that he ci. to� aphlc ilms ord r accep d ri ay l � 1951 to July , 19 1 f or cln �t uf e� tl n hfc njoy t exe. pt Y ec� tion 146 of 1 x o , ~� th e l pa speeif c t et t oner , ~inl) � lu ia !llty for JIY, nt of the , ho 1 , t fore , p y th if c t x coll~t � In Yl.. our arl f t oner ld lc ax t 1,773 lin r texa of f t rej t r tur e to th lth La r t r ��� r f 1ng n hl cot ccozd!n ly o i le , an th p t ti n r to pay o ly t eu f 6, 1 . 75 r ter& of cin ato raphic fil � c s all ow proc t c i tl .., lsa � atedly to et ~ r .1ot t pe tt y t p y :th c pro e penalty. hav& � � t a co pro iae e a nti lly cont a~ t. t fo that. as h 649

� - 16 - a d untfol' ly hel , this Court � � th ut jurlsdf.e� t!on to c �- yer topytec ro lse pen� � oll c or of �1 Y� p � 14, 19 ~; ven � � .r�� o. �� - 1 lso hol Land r a s rtat �~nal ven e, c.t � � 261, ep � .,7 ~���� cited 1n 11 � oll c t nal �� � 1 7. ) �t - 1 f po ti� tion .r 1 � � y0 pee1 1~ fl. a it or � " pte yl � ly � � c in~ p t t � lla, Phil!pptn , r , l 7. 650