P. J. KIENER CO. LTD., PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Petition filed by P. J. Kiener Co., Ltd., for the review of that
portion of the decision of the Court of Tax Appeals in C.T.A. No. 102
holding it liable for the payment of the sum of P32,200.22 assessed
against it by the Collector of Internal Revenue as contractor’s tax and
surchage on the sum of P1,288,009.06 which, as subcontractor, it
received from Fortunate Concepcion, Inc. for the construction of the
Gapan-Sta. Rosa Road project, plus the sum of P200 as compromise
penalty.

Petitioner, a duly registered limited co-partnership, was engaged
in business as general contractor. In 1948 Fortunato Concepcion, Inc.,
a contracting firm, was awarded the contract for the construction of
the Gapan-Sta. Rosa Road (Philippine Rehabilitation Project PR-B 87)
for the price of P1,691,969.93. Pursuant to a subcontract with said
awardee, petitioner constructed the road aforesaid, for which it was
paid the sum of P1,288,009.06 upon which the Collector of Internal
Revenue made the questioned assessment.

After a reinvestigation made upon petitioner’s request, the
Collector assessed against and demanded from it the total amount of
P37,082.02 representing deficiency contractor’s tax, surcharge and
penalty allegedly due on gross receipts derived by it from various
projects during the period from the first quarter of. 1949 to the
second quarter of 1950, of which P32,200.22 represented the questioned
assessment.

Petitioner appealed to the Court of Tax Appeals contesting the
validity of the assessment of P32,200.22, alleging that, as
sub-contractor, it was not subject to the percentage tax imposed under
Section 191 of the National Internal Revenue Code, and that,
furthermore, Fortunato Concepcion, Inc. had already paid in full the 2%
contractor’s tax amounting to P33,839.40 on the full contract price of
P1,691,969.93.

After proper proceedings, the Court rendered the appealed decision
upholding the assessment and requiring petitioner to pay the total sum
of P37,032.02 as deficiency contractor’s percentage tax, surcharge and
penalty.

Section 191 of the Internal Revenue Code provides:

“Percentage tax on road, building irrigation,
artesian well, water works, and other construction work contractors,
proprietors or operators of dockyards, and others—Road, building,
irrigation, artesian well, waterworks, and other construction work
contractors; filling contractors; * * * shall pay a tax equivalent to
two (now three, as amended by Rep. Act No. 588) per centum of their
gross receipts.”

In the light of the above provision and the undisputed facts of this case, we find petitioner’s appeal to be without merit.

It is true that Fortunate Concepcion, Inc. was the principal
contractor in connection with the construction of the Gapan-Sta. Rosa
road project, but it is equally undeniable that the construction job
was actually done by petitioner as sub-contractor for which the
principal contractor paid it the total sum of P1,288,009.06.
Petitioner, therefore, received this amount as gross receipts from the
construction of the road aforesaid.

That Fortunato Concepcion Inc. paid in full the 2% contractor’s
percentage tax amounting to P33,889.40 can not in any way exempt
petitioner from its own liability under the legal provision above
quoted. Whether or not said company was liable for the payment of the
tax on the gross price of the project is an entirely different matter
which, in fact, is now the subject of a claim for refund filed by it
with the Bureau of Internal Revenue.

The argument that it has always been the interpretation given to
Section 191 of the National Internal Revenue Code by the Commissioner
of Internal Revenue that the percentage tax therein, provided operates
only once upon the same transaction or undertaking is of no avail to
save petitioner from its own individual liability for the tax. If said
construction or interpretation is correct and has been consistently and
continuously adhered to by the Bureau of Internal Revenue, it could
only work in the sense of exempting Fortunate Concepcion, Inc. from
paying the percentage tax provided for in Section 191 aforesaid upon
the amount it has paid to petitioner as its sub-contractor a matter
which we do not decide for obvious reasons.

Wherefore, the decision subject of review is hereby affirmed, with costs.

Bengzon, C. J., Padilla, Bautista Angelo, Labrador , Concepcion , Reyes, J.B.L., Barrera, Paredes, Regala and Makalintal, JJ., concur.