G.R. No. 12783. March 25, 1961
THE COLLECTOR OF INTERNAL REVENUE, PETITIONER, VS. HON. EULOGIO RODRIGUEZ, JR., ETC., ET AL., RESPONDENTS.
BAUTISTA ANGELO, J.:
holding that the push button auto radio and antenna are not parts and
accessories of the car on which they are installed and ordering him to
refund with interest to respondent the sum of P1,072.68 paid as
compensating tax.
In 1955 respondent imported from the
United States one Sedan Chevrolet (Bel Air) automobile for his personal
use. The automobile was brought unboxed into the Philippines as an
unaccompanied baggage and having the push button radio and antenna
already installed therein. This vehicle was obtained by respondent from
the Foreign Distributors Division, General Motors Corporation, as per
Invoice No. 5-9267, dated February 21, 1955, the details of which may
be summarized as follows:
One 1955 Chevrolet Bel Air 4-door Sedan Model
2403, Body Color Black cyclinder (unboxed)
Net Extra—
Directional Signal, Eye Glass, brakes, extra tires, Kilo-speedo-meter, Power Steering, Power Glide Transmission Low compression equipment (itemization of price omitted)
Push Button Radio and Antenna Block Wiring Junction
Petitioner, in determining the compensating tax, treated the entire
amount of $2,083.00 as the cost of the car and computed the tax as
follows:
Cost Freight Arrastre Consular Fee Documentary Stamp Compensating tax due thereon at 50%
or
Respondent,
contending that the push botton radio and antenna worth $88.05 should
not form part of the taxable base of the vehicle, filed on April 21,
1955 a claim for refund of the amount of P1,072.68. This represents the
difference of the compensating tax already paid and the sum alleged by
petitioner to be lawfully due (P1,507.73) had the tax been computed at
30% of the correct landed cost, after deducting the value of the auto
radio and antenna which allegedly should be taxed separately at 7%.
This claim and a subsequent request for reconsideration having been
denied by petitioner, respondent filed a petition for review in the
Court of Tax Appeals, which sustained respondent and ordered petitioner
to refund the sum of P1,072.68, with interest from the date of payment.
The imposition of compensating tax is governed by section 190 of the National Internal Revenue Code which provides:
“All
persons residing or doing Business in the Philippines, who purchase or
receive from without the Philippines, any commodities, goods, wares or
merchandise * * * shall pay on the total value thereof at the time they
are received by such persons, including freight, postage, insurance,
commission and all similar charges, a compensating tax equivalent to
the percentage taxes imposed under this Title on original transactions
effected by merchants, importers * * *.”
In
accordance with the foregoing provision, the rate of the tax that may
be imposed under sections 184 (a) and 185(a) of the Tax Code would be
as follows:
Automobile chassis and bodies, the selling price of which exceed P5,000 but does not exceed P7,000 50% Automobile chassis and bodies, the selling price of which does exceed P5,000 30% Both Sections 184 (a) and 185 (a) provide that:
“A
sale of automobile shall * * * be considered to be a sale of the
chassis and of the body together with parts and accessories with which
the same are usually equipped.”
If
the auto radio and antenna are parts and accessories with which an
automobile is usually equipped the value thereof of course would form
part of the total landed cost of the automobile within the meaning of
the law. But, before we proceed, what is the legal concept of the terms
parts and accessories?
Our Tax Code does not
define them and because the issue is of first impression resort may be
had to precedents in the United States. The following authorities cited
by the Court of Tax Appeals may help us in our elucidation:
“The term ‘part’ (is) any article designed or manufactured for the special purpose of being used as, or to replace, a component part of such vehicle, and which by reason of some characteristic is not such a commercial article as ordinarily would be sold for general use, but is primarily adapted for use as a component part of such vehicle. (Universal Battery Co. vs. U. S. 281 U.S. 580, 74 L. Ed. 1051, 1055; Marvel Products Co. vs. U.S. 35 F. 2d 979, citing art. 15, Treas. Reg. No. 47; Italics supplied.)”
“The term ‘accessory’ (is) any article designed to be used in connection with such vehicle to add to its utility or ornamentation and which is primarily adapted for such use whether or net essential to the operation of the vehicle.’ (Universal Battery Co. vs. U.S. supra; Marvel Products Co., vs. U.S. 35 F 2d 979; Cune Engineering Corp. vs. U.S. 43 F 2d 259; 262, citing Art. 16, Treas. Reg. No. 47; Italics supplied.)”
Applying the foregoing interpretation we may say that contrary to the
conclusion of the Court of Tax Appeals, the push button radio and
antenna in question may be considered as component parts of the
automobile bought by respondent for they were designed and made
primarily for the use of said vehicle. Those are not the radio and
antenna that are made and intended for sale for general use. In fact,
when the automobile was bought by respondent from the General Motors
Corporation they already formed part of the vehicle for they were
installed therein as component parts thereof. Their price was included
in the invoice issued for the automobile and is one of the items making
up its total cost. At any rate, when respondent bought the automobile
he bought it with the intent of making the radio and antenna in
question as component parts of the automobile, a situation which makes
this case fittingly come within the meaning of Sections 184 (a) and 185
(a) of our Tax Code.
Another factor that may be considered
is the fact that this particular type of radio can only be made to
operate with the use of the current supplied by the battery of the car.
It cannot be made to operate with the use of the ordinary house
current. Because of this distinguishing feature this radio cannot be
advertised and sold for general use.
In the case of Masterbilt Products Corp. vs.
U. S., (Ct. Cls) 42 F. Supp. 294, 28 AFTR 754, it was held that
articles primarily adapted for use in motor vehicles are to be regarded
as parts or accessories of such vehicle even though there has been
some; other use of the articles for which they are not so well adapted.
Thus, the plaintiff in said case was not allowed a refund of excise
taxes paid under the 1932 and 1934 Acts on the manufacturing and
selling of a combination cigarette lighter and dispenser primarily
adapted and intended for use in motor vehicles even though the evidence
showed that the devices could be made to work on a table, desk or ash
receiver.
There is no dispute that the cars of yesteryears
were not equipped with radio sets as indispensable devices or as
necessary components thereof. But time has changed. The designers of
modern cars, in order to keep abreast with the march of progress and
with the tendency of adopting all sorts of attraction and convenience,
seemed to find a void in a car not equipped with a radio or even with
an air-conditioning unit, and so they thought of drawing up plans which
make a radio an ordinary and usual equipment of any car coming out of
their assembly plant. It is ho longer unusual to see cars equipped with
radios. The car in question is one especially built for this kind of
comfort and convenience. It is an added attraction.
We are
therefore of the opinion that the Court of Tax Appeals erred in ruling
that the push button radio and antenna is question do not form part of
the taxable base of the automobile for purposes of the computation of
the compensating tax and must be taxed separately.
Wherefore, the decision of the Court of Tax Appeals is hereby reversed,
and in lieu thereof we hereby affirm the decision of the Collector of
Internal Revenue collecting from respondent the sum of P2,580.46 as 50%
compensating tax on the landed value of the automobile in question
pursuant to Section 190, in relation to Section 184 (a), of the
National Internal Revenue Code. No costs.
Bengzon, Acting C. J., Padilla, Labrador, Concepcion, Reyes, J. B. L., Barrera, Paredes, and Dizon, JJ., concur.