G.R. No. L-11988; February 1, 1918
JACINTO MOLINA, plaintiff-appellee, vs. JAMES J. RAFFERTY, as Collector of Internal Revenue, defendant-appellant.

FACTS:
Jacinto Molina owned fishponds (pesquerias) in Bulacan. Between January 1 and September 30, 1915, he consigned fish from these ponds to a Manila commission merchant, with sales totaling P5,264.89. The commission merchant paid the corresponding percentage and fixed taxes under the Internal Revenue Law. Molina, however, had not paid the merchant’s tax himself, as he claimed exemption on the ground that he was an agriculturist and not a merchant. On October 26, 1915, under protest, he paid P71.81 to the Bureau of Internal Revenue, representing the internal revenue tax on his gross sales for that period. His protest was denied by the Collector of Internal Revenue, who held he was a merchant. Molina filed suit in the Court of First Instance of Manila to recover the amount paid. The trial court ruled in Molina’s favor, ordering a refund. The Collector appealed.

The fishponds required preparation such as constructing dikes, cleaning, and deepening. Caretakers maintained the ponds and regulated water flow. The fish (bañgus) were cultivated by placing small fry (semillas) in prepared compartments, where the land was plowed and cleaned. The ponds were managed to grow specific marine plants (algae) as food for the fish.

ISSUE:
Are fish harvested from cultivated fishponds “agricultural products” within the meaning of the exemption under the Internal Revenue Law, thereby exempting the fishpond owner from the merchant’s tax?

RULING:
No. Fish are not agricultural products under the Internal Revenue Law. The owner of a fishpond who sells fish is a “merchant” as defined by the law and is not exempt from the merchant’s tax.

The Court held that the term “agricultural products” in the tax exemption refers to products resulting from the cultivation of the soil. While the operation of a fishpond involves some preparation and care of the land, the primary activity is the cultivation or rearing of fish, which are animals, not products of soil cultivation. The Court distinguished this from products like crops or even bakawan (mangrove) firewood, which directly result from planting and soil cultivation. The exemption for “agricultural products” sold by the producer was intended for farmers selling the direct produce of the land through tillage, not for aquacultural products. Therefore, Molina was engaged in the sale of personal property (fish) and was correctly classified as a merchant liable for the corresponding tax. The decision of the trial court was reversed.

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