GR L 11988; (April, 1918) (Digest)
G.R. No. L-11988; April 4, 1918
JACINTO MOLINA, plaintiff-appellee, vs. JAMES J. RAFFERTY, Collector of Internal Revenue, defendant-appellant.
FACTS:
Jacinto Molina was engaged in the production of fish (specifically bangus or milkfish) in fishponds. The Collector of Internal Revenue assessed a percentage tax on his sales under the merchant’s tax provisions of Act No. 2339 (later the Administrative Code of 1917). Molina paid the tax under protest and sued for a refund, contending that the fish he produced and sold were “agricultural products” and thus exempt from the tax under the law. The exemption clause stated that in computing the tax, transactions in “agricultural products when sold by the producer or owner of the land where grown, whether in their original state or not” shall be excluded. The trial court ruled in favor of Molina. The Collector appealed, and the Supreme Court initially reversed the trial court’s decision. However, upon Molina’s motion for reconsideration, the Court granted a rehearing.
ISSUE:
Whether fish artificially propagated and grown in fishponds constitute “agricultural products” within the meaning of the tax exemption provision.
RULING:
Yes. The Supreme Court, upon reconsideration, set aside its original decision and affirmed the judgment of the trial court, holding that the fish in question are agricultural products exempt from the merchant’s tax.
The Court ruled that the legislative intent behind the exemption was to favor and encourage the direct production of goods from the land, thereby increasing the nation’s wealth. The term “agricultural products” should not be construed in a narrow, restrictive sense limited to vegetable substances. In its broader sense, agriculture includes the science and art of producing plants and animals useful to man. The exemption encompasses not only vegetable growths but also animal products derived from the land, such as livestock, dairy, and poultry. The Court found no rational basis to exclude artificially propagated fish from this exemption, as their production involves the application of labor and capital to land (fishponds) to yield a food product, which is in the same public interest as producing other food substances. Therefore, fish grown under the conditions described are agricultural products within the meaning of the tax law.