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(Tax2) (CIR v. CA)

This case discusses the tax liabilities of Atas Consolidated Mining and Development Corporation (ACMDC) for tax years 1985 and 1986. The Commissioner of Internal Revenue assessed deficiencies for ad valorem and business taxes. ACMDC protested but the assessments were denied. The Court of Tax Appeals partially ruled in favor of ACMDC, finding they were not liable for ad valorem taxes on copper and silver but were liable for surcharges and certain business taxes. The case was elevated to the Supreme Court which affirmed the Court of Tax Appeals' ruling, though it exempted ACMDC from manufacturer's tax. The key issues addressed were the deductibility of refining and smelting charges in computing ad valorem tax,

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0% found this document useful (0 votes)
101 views4 pages

(Tax2) (CIR v. CA)

This case discusses the tax liabilities of Atas Consolidated Mining and Development Corporation (ACMDC) for tax years 1985 and 1986. The Commissioner of Internal Revenue assessed deficiencies for ad valorem and business taxes. ACMDC protested but the assessments were denied. The Court of Tax Appeals partially ruled in favor of ACMDC, finding they were not liable for ad valorem taxes on copper and silver but were liable for surcharges and certain business taxes. The case was elevated to the Supreme Court which affirmed the Court of Tax Appeals' ruling, though it exempted ACMDC from manufacturer's tax. The key issues addressed were the deductibility of refining and smelting charges in computing ad valorem tax,

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TAXATION LAW II | B2015

CASE DIGESTS
CIR v. CA, ACMDC
March 10, 1995
Regalado, J.
Raeses, Roberto Miguel O.
SUMMARY: The Commissioner of Interna !e"en#e ser"e$
t%o noti&es an$ $eman$ for 'a(ment of the res'e&ti"e
$e)&ien&( a$ "aorem an$ *#siness ta+es for ta+a*e (ears
1,-5 an$ 1,-. a/ainst the res'on$ent Atas Consoi$ate$
0inin/ an$ De"eo'ment Cor'oration 1AC0DC23 The atter
'roteste$ *oth assessments *#t the same %ere $enie$4
hen&e it )e$ t%o se'arate 'etitions for re"ie% in the Co#rt
of Ta+ A''eas3 The CTA ren$ere$ a &onsoi$ate$ $e&ision
ho$in/4 inter aia4 that AC0DC %as not ia*e for $e)&ien&(
a$ "aorem ta+es on &o''er an$ si"er for 1,-5 an$ 1,-.
there*( e5e&ti"e( s#stainin/ the theor( of AC0DC that in
&om'#tin/ the a$ "aorem ta+ on &o''er minera4 the
re)nin/ an$ smetin/ &har/es sho#$ *e $e$#&te$4 in
a$$ition to frei/ht an$ ins#ran&e &har/es3
6o%e"er4 the ta+ &o#rt he$ AC0DC ia*e for the amo#nt
&onsistin/ of 257 s#r&har/e for ate 'a(ment of the a$
"aorem ta+ an$ ate )in/ of noti&e of remo"a of si"er4
/o$ an$ '(rite e+tra&te$ $#rin/ &ertain 'erio$s4 an$ for
ae/e$ $e)&ien&( man#fa&t#rer8s saes ta+ an$ s#&h
&ontra&tor8s ta+ for easin/ o#t of its 'ersona 'ro'erties3
ACD0C ee"ate$ the matter to the SC &aimin/ that the
easin/ o#t %as a mere isoate$ transa&tion4 hen&e sho#$
not *e s#*9e&te$ to &ontra&tor8s ta+3 The SC a:rme$ the
r#in/ of the CA an$ CTA4 tho#/h it e+em'te$ AC0DC from
man#fa&t#rer;s ta+3
DOCTRINE: Assessments are 'rima fa&ie 'res#me$
&orre&t an$ ma$e in /oo$ faith3 <Contrar( to the theor( of
AC0DC=4 it is the ta+'a(er an$ not the BI! %ho has the
$#t( of 'ro"in/ other%ise3 In the a*sen&e of 'roof of an(
irre/#arities in the 'erforman&e of o:&ia $#ties4 an
assessment %i not *e $ist#r*e$3 A 'res#m'tions are in
fa"or of assessments3 >ai#re to 'resent 'roof of error in
assessments %i 9#stif( 9#$i&ia a:rman&e of sai$
assessment3
FACTS: Atas Consoi$ate$ 0inin/ an$ De";t Cor'o 1AC0DC2
is a $omesti& &or'3 %hi&h o'erates a minin/ &on&ession at
Toe$o Cit(3
13 The CI!4 '#rs#ant to the re'ort ma$e *( BI!
e+aminers4 &a#se$ the ser"i&e of an assessment
noti&e an$ $eman$ for 'a(ment of ?124@,140-03513
a3 These %ere $e)&ien&( ad valorem 'er&enta/e
an$ )+e$ ta+es for the ta+a*e (ear 1,-53
23 Another assessment noti&e %as sent4 this time for
the amo#nt of ?1@45@14A..3B0 for the ta+a*e (ear
1,-.3
AC0DC 'roteste$ *oth assessments3 Both %ere $enie$3
13 T%o se'arate 'etitions for re"ie% %ere )e$ to the
CTA3 These %ere e"ent#a( &onsoi$ate$3
CTA ren$ere$ a $e&ision 'art( in fa"or of AC0DC3
13 It %as not ia*e for $e)&ien&( ad valorem ta+es on
&o''er an$ si"er for 1,-5 an$ 1,-.3
a3 S#staine$ AC0DC;s theor( that in &om'#tin/
s#&h ta+4 re)nin/ an$ smetin/ &har/es
sho#$ *e $e$#&te$4 in a$$ition to frei/ht an$
ins#ran&e &har/es4 from the Lon$on 0eta
E+&han/e 1L0E2 'ri&e of man#fa&t#re$
&o''er3
23 6OWECE!4 it he$ AC0DC %as he$ ia*e for
?145-24.@-3AB4 e+&#si"e of interest3
a3 257 s#r&har/e for ate 'a(ment of the ad
valorem ta+ an$ ate )in/ of noti&e of
remo"a of si"er4 /o$4 an$ '(rite e+tra&te$
$#rin/ &ertain 'erio$s
*3 De)&ien&( man#fa&t#rer;s saes ta+ an$
&ontra&tor;s ta+3
The &ase %as ee"ate$ to the CA3
13 The 'etition )e$ *( the Commissioner D#estione$
the $eetion of ad valorem ta+ on &o''er an$ si"er3
a3 This %as $ismisse$ *( the CA3
TAXATION LAW II | B2015
CASE DIGESTS
23 The a''ea *( AC0DC assaie$ the or$er to 'a(
?145-24.@-3AB3
a3 The CA f#rther re$#&e$ the ta+ ia*iit( of
AC0DC3
i3 Deete$ the 257 s#r&har/e on the
si"er an$ '(rite e+tra&te$3
ISSUES:
13 WON in &om'#tin/ ad valorem ta+ on &o''er4
&har/es for smetin/ an$ re)nin/ sho#$ *e
$e$#&te$4 in a$$ition to frei/ht an$ ins#ran&e &osts4
from the 'ri&e of &o''er &on&entrates3
23 WON AC0DC sho#$ *e ia*e for the 1a2 s#r&har/e4
1*2 man#fa&t#rer;s ta+4 an$ 1&2 &ontra&tor;s ta+3

RULING:
13 EES4 &har/es for smetin/ an$ re)nin/ sho#$ *e
$e$#&te$3
23 EES4 it is ia*e for s#r&har/e3 NO4 it is not ia*e for
man#fa&t#rer;s ta+3 EES4 it is ia*e for &ontra&tor;s
ta+3
RATIO:
First Issue: deduction of refning and smelting
charges
CommissionerF The a&t#a marGet "a#e of minera 'ro$#&ts
sho#$ *e the /ross saes reaiHe$ from &o''er &on&entrates4
$e$#&tin/ therefrom minin/4 miin/4 re)nin/4 trans'ortin/4
han$in/4 or an( other e+'enses3
13 IAn( other e+'enseJ in&#$es smetin/ an$ re)nin/
&har/es3
23 The a% ao%s $e$#&tions for a&t#a &ost of o&ean
frei/ht an$ ins#ran&e on( %here the mineras or
minera 'ro$#&ts are &onsi/ne$ a*roa$ #n$er C3I3>3
terms3
Sureme Court! This is #ntena*e3
13 Kn$er Sec. "#$ an$ "#% of the NI!C4 the ad valorem
ta+ of 27 is im'ose$ on the a&t#a marGet "a#e of
the ann#a /ross o#t'#t of the mineras or minera
'ro$#&ts e+tra&te$ or 'ro$#&e$ from a minera
an$s not &o"ere$ *( the ease3
a3 IGross o#t'#tJ sha *e the a&t#a marGet
"a#e of mineras or minera 'ro$#&ts4 or of
*#ion from ea&h mine or minera an$s
o'erate$ as a se'arate entit(4 %itho#t an(
$e$#&tion for minin/4 miin/4 re)nin/4
trans'ortin/4 han$in/4 marGetin/4 or an(
other e+'ense3
*3 If the( are &onsi/ne$ or so$ a*roa$ #n$er
C3I3>3 terms4 the a&t#a &ost of o&ean frei/ht
an$ ins#ran&e sha *e $e$#&te$3
2. In other words, ssess!ent sh"" #e #sed not
on the $ost o% &rod'$t(on or e)tr$t(on o% s(d
!(ner"s or !(ner" &rod'$ts #'t on the &r($e
wh($h the s!e * #e%ore or w(tho't 'nder+o(n+
!n'%$t'r(n+ &ro$ess * wo'"d $o!!nd (n
the ord(nr, $o'rse o% #'s(ness.
@3 Ao%an&e of the CTA of smetin/ an$ re)nin/
&har/es as $e$#&tions is not &ontrar( to the
aforementione$ 'ro"isions3
a3 It %as the L0E 'ri&e on %ire *ar %hi&h %as
#se$ as ta+ *ase *( AC0DC for the 27 ad
valorem ta+ on &o''er &on&entrates4 as there
%as no a"aia*e marGet 'ri&e D#otation nor
%as there an( marGet D#otation o&a(
o*taina*e3
*3 Char/es for smetin/ an$ re)nin/ %ere
therefore assesse$ not on the *asis of the
'ri&e of the &o''er e+tra&te$ at the mine site
*#t on the a&t#a marGet "a#e of the
man#fa&t#re$ &o''er3
A3 >oo%in/ the $o&trine ai$ $o%n in Cebu &ortland v.
C'R4 ad valorem ta+ sho#$ *e &om'#te$ on the *asis
of the marGet "a#e minera in its &on$ition at the
time of s#&h remo"a an$ *efore it #n$er/oes a
&hemi&a &han/e thro#/h the man#fa&t#rin/ 'ro&ess3
53 If the marGet "a#e &hosen for the re&Gonin/ is the
"a#e of the man#fa&t#re$ or )nishe$ 'ro$#&t4 then
TAXATION LAW II | B2015
CASE DIGESTS
a e+'enses of 'ro&essin/ or man#fa&t#rin/ sho#$
*e $e$#&te$ in or$er to a''ro+imate the a&t#a
marGet "a#e of the ra% minera at the mine site3
.3 Co''er %ire *ar is man#fa&t#re$ &o''er3 It is not the
minera e+tra&te$ from the mine as it #n$er%ent a
man#fa&t#rin/ 'ro&ess3
a3 This is s#''orte$ *( Sec. 19#()*4 %hi&h
$e)nes Iman#fa&t#rerJ 1'h(si&a or &hemi&a
'ro&ess23
-3 De&ision *( the CTA %as *ase$ on its 're"io#s r#in/
in the &ase of +CM,C v. C'R.
a3 +d valorem ta+ is a se"eran&e ta+4 a &har/e
#'on the 'ri"ie/e of se"erin/ or e+tra&tin/
mineras3
Commissioner !#in/ in +C,MC v. C'R not *in$in/4
&onsi$erin/ that the in&#m*ent &ommissioner &annot *e
*o#n$ *( $e&isins or r#in/s of his 're$e&essor4 '#rs#ant to
-ilado v. C'R3
Sureme Court! This is #ntena*e3
13 -ilado in"o"e$ a 're"io#s r#in/ of a former
&ommissioner3
23 In CAB4 the &ommissioner *ase$ his )n$in/s on a
're"io#s $e&ision ren$ere$ *( the CTA3
a3 The CTA is not a mere s#'erior a$ministrati"e
a/en&( or tri*#na *#t is a 'art of the 9#$i&ia
s(stem3
i3 Ceste$ %ith e+&#si"e a''eate
9#ris$i&tion o"er NI!C4 Tari5 an$
C#stoms Co$e4 an$ Assessment La%
&ases3
*3 Atho#/h on( the SC &an esta*ish $o&trines4
the $e&isions of &o#rts iGe the CTA ha"e a
'ers#asi"e e5e&t3
i3 Their $e&isions &an e"en *e&ome
$o&trine if the SC $e&i$es that the(
ma( *e so3
&3 As a matter of 'ra&ti&e an$ 'rin&i'e4 the SC
%i not set asi$e the &on&#sions of the CTA3
Second issue: liability on the 25% surcharge,
manufacturers sales tax, and contractors tax.
+CM,C! Not ia*e for the 257 s#r&har/e *e&a#se the
&orre&t D#antit( of /o$ an$ si"er &o#$ *e $etermine$ on(
after the &o''er &on&entrates ha$ /one thro#/h smetin/
an$ re)nin/3 The amo#nt of '(rite &annot *e $etermine$
#nti the Lotation 'ro&ess se'aratin/ &o''er minera from
%aste %as )nishe$3
Sureme Court! Kntena*e3 The CTA is &orre&t in ho$in/
ACMDC ia*e for the s#r&har/e3
13 The estimate$ &ommer&ia D#antit( of the si"er an$
/o$ &o#$ ha"e *een $etermine$ in m#&h the same
%a( the 'etitioner is a*e to estimate the &ommer&ia
D#antit( of &o''er $#rin/ assa(3
23 If it &o#$ estimate the /ra$e of &o''er ore4 an$ has
$etermine$ the /ra$e of not on( &o''er *#t aso
/o$ an$ si"er4 the estimate$ &ommer&ia D#antit( of
si"er an$ /o$ s#*9e&t to ad valorem ta+ &o#$ ha"e
*een $etermine$ an$ 'ro"isiona( 'ai$ for3
+CM,C There %as no remo"a of '(rite *e&a#se it %as
$ei"ere$ to its sister &om'an( 1Atas >ertiiHer Cor'32 %hose
'ant is o&ate$ %ithin the minera &on&ession3
Sureme Court! Barre$ *( esto''e in ais3
13 +d valorem ta+ on '(rite ha$ area$( *een $e&are$
an$ 'ai$ for3
a3 Amo#nt 'ai$ %as #se$ to &om'#te s#r&har/e3
23 Iss#e of s#r&har/e raise$ on( %hen AC0DC %as
area$( *ein/ &har/e$ for s#&h3
@3 The $ei"eries %ere not e+&#si"e( ma$e to its sister
&om'an(3
+C,MC! It is not en/a/e$ in the *#siness of sein/ /rin$in/
stee *as4 *#t it on( 'ro$#&es s#&h for its o%n #se or
&ons#m'tion3 Th#s4 it is not ia*e for man#fa&t#rer;s ta+3
TAXATION LAW II | B2015
CASE DIGESTS
Sureme Court! Ees4 ACD0C &annot *e ia*e #n$er s#&h3
13 A man#fa&t#rer to *e s#*9e&te$ to the ne&essit( of
'a(in/ the 'er&enta/e ta+ im'ose$ *( Sec. 1.%4 it
m#st *e en/a/e$ in the sae4 *arter4 or e+&han/e of
'ersona 'ro'ert(
a3 A 'erson &an har$( *e &onsi$ere$ as
o&&#'ie$ or em'o(e$ in the sae4 *arter4 or
e+&han/e of 'ersona 'ro'ert( %hen he has
ma$e one '#r&hase an$ sae on(3
23 No sho%in/ that the transa&tion #n$ertaGen *(
ACD0C in 1,-5 %herein it so$ /rin$in/ stee *as
%as %ith a "ie% to /ain 'ro)t3
a3 What ha''ene$ %as more of an
a&&ommo$ation to other minin/ &om'anies3
*3 Where a 'erson or &or'oration is en/a/e$ in a
$istin&t *#siness an$4 as a feat#re thereof4 in
an a&ti"it( mere( in&i$enta %hi&h ser"es no
other 'erson or *#siness4 the in&i$enta an$
restri&te$ a&ti"it( is not &onsi$ere$ as
inten$e$ to *e se'arate( ta+e$3
+C,MCF It &annot *e ia*e for &ontra&tor;s ta+ as the
easin/ o#t of its 'ersona 'ro'erties is an isoate$
transa&tion3
Sureme Court! This is #ntena*e3 ACD0C is ia*e for
&ontra&tor;s ta+3
13 The *ooG of a&&o#nts sho% that se"era $istin&t
'a(ments %ere ma$e for the #se of its 'ersona
'ro'erties 1e3/3 'ane4 motor *oat4 an$ $#m' tr#&G2
23 >or the ta+ (ears 1,-5 an$ 1,-.4 there %ere 'ro)ts
earne$ an$ re'orte$ %ith res'e&t to its ease of
'ersona 'ro'erties3
@3 As there %as a series of transa&tions in"o"e$4 '#s
the fa&t that there %as an intent to 'ro)t4 AC0DC
%as th#s ha*it#a( en/a/e$ in easin/ o#t its
'ersona 'ro'erties3
a3 No e"i$en&e to s#''ort &aim that in&ome
earne$ %as 9#st eno#/h to &o"er &osts of
o'eration3
A3 Assess!ents re &r(! %$(e &res'!ed $orre$t
nd !de (n +ood %(th. Contrr, to the theor,
o% ACMDC, (t (s the t)&,er nd not the -IR
who hs the d't, o% &rov(n+ otherw(se. In the
#sen$e o% &roo% o% n, (rre+'"r(t(es (n the
&er%or!n$e o% o.$(" d't(es, n ssess!ent
w("" not #e d(st'r#ed. A"" &res'!&t(ons re (n
%vor o% ssess!ents. F("'re to &resent &roo%
o% error (n ssess!ents w("" /'st(%, /'d($("
.r!n$e o% s(d ssess!ent.
53 Ta+ stat#tes are to re&ei"e a reasona*e &onstr#&tion
%ith a "ie% to &arr(in/ o#t their '#r'oses an$ intent3
a3 The( sho#$ not *e &onstr#e$ as to 'ermit the
ta+'a(er to easi( e"a$e 'a(ment of ta+es3

DIS0OSITI1E: W6E!E>O!E4 the im'#/ne$ 9#$/ment of
res'on$ent Co#rt of A''eas in CANG3!3 S? No3 25,A54
s#*9e&t of the 'resent 'etition in G3!3 No3 10A151 is here*(
A>>I!0EDO an$ its assaie$ 9#$/ment in CANG3! S? No3
2.0B- is here*( 0ODI>IED *( e+em'tin/ Atas Consoi$ate$
0inin/ an$ De"eo'ment Cor'oration4 'etitioner in G3!3 No3
1055.@ of this Co#rt4 from the 'a(ment of man#fa&t#rer8s
saes ta+4 s#r&har/e an$ interest $#rin/ the ta+a*e (ear
1,-53

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