CIR v. CA, Atlas Consolidated Mining and CTA (COMMISSIONER OF INTERNAL REVENUE vs.

COURT OF APPEALS, ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION and COURT OF TAX APPEALS) G.R No. 105563 March 10, 1995 (ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION vs. COURT OF APPEALS COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS) G.R. No. 104151 March 10, 1995

FACTS The Commissioner of Internal Revenue (CIR) caused the service of assessment notice against Atlas Consolidated Mining and Development Corporation (ACMDC) for payment of P12,391,070.51, representing deficiency ad valorem percentage and fixed taxes, including increments for the taxable year 1975, and P13,531,466.80, representing deficiency ad valorem and business taxes with P5,000.00 compromise penalty for the taxable year 1976. ACMDC protested the two assessments but the same were denied, hence the corporation filed two separate petitions for review in the Court of Tax Appeals (CTA). CTA sustained the theory of ACMDC that the ad valorem tax on copper mineral, the refining and smelting charges should be deducted, in addition to freight and insurance charges, but also held ACMDC liable for the amount of P1,572,637.48, exclusive of interest, consisting of 25% surcharge for late payment of the ad valorem tax and late filing of notice of removal of silver, gold and pyrite extracted during certain periods, and for deficiency contractor's tax. ACMDC elevated the decision to the Court of Appeals (CA), which modified the decision of CTA, thereby reducing the tax liability of ACMDC to P906,124.49. Not satisfied with the said judgment ACMDC filed a petition for review on certiorari, contending that it is not liable at all for any deficiency tax assessments.

ISSUES Whether or not petitioner is liable for payment of deficiency tax

RULING YES. The contractor's tax is provided for under Section 191 of the same code, paragraph 17 of which declares that lessors of personal property shall be subject to a contractor's tax of 3% of the gross receipts. Section 191 falls under Title V of the tax code, titled "Privilege Taxes on Business and Occupation." These "privilege taxes on business" are taxes imposed upon the privilege of engaging in

business. They are essentially excise taxes. To be held liable for the payment of a privilege tax, the person or entity must be engaged in business, as shown by the fact that the drafters of the tax code had purposely grouped said provisions under a general heading. The foregoing notwithstanding, it has likewise been ruled that one act may be sufficient to constitute carrying on a business according to the intent with which the act is done. A single sale of liquor by one who intends to continue selling is sufficient to render him liable for "engaging in or carrying on" the business of a liquor dealer. ACMDC was habitually engaged in the leasing out of its plane, motor boat and dump truck, and is perforce subject to contractor's tax. The allegation of ACMDC that it did not realize any profit from the leasing out of its said personal properties, since its income therefrom covered only the costs of operation such as salaries and fuel, is not supported by any documentary or substantial evidence. Assessments are prima facie presumed correct and made in good faith. Contrary to the theory of ACMDC, it is the taxpayer and not the Bureau of Internal Revenue who has the duty of proving otherwise. It is an elementary rule that in the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. All presumptions are in favor of tax assessments. Verily, failure to present proof of error in assessments will justify judicial affirmance of said assessment. The oft-repeated rule is that tax statutes are to receive a reasonable construction with a view to carrying out their purposes and intent. They should not be construed as to permit the taxpayer to easily evade the payment of the tax.