GR L 12945; (April, 1960) (Digest)
G.R. No. L-12945; April 29, 1960
THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs. MARIANO R. LACSON, respondent.
FACTS
Respondent Mariano R. Lacson was a lessee of a forest concession under a license from the Secretary of Agriculture and Natural Resources. On June 24, 1953, he was granted a certificate of exemption from all taxes in connection with the manufacture of veneer and plywood from Philippine woods, pursuant to Republic Act No. 901 . From January 1954 to August 1955, Lacson moved 11,147.96 cubic meters of logs from his concession, of which 7,059.96 cubic meters were used exclusively in manufacturing veneer and plywood. The Collector of Internal Revenue demanded payment of forest charges and surcharges totaling P10,129.40 on all the logs moved. Lacson claimed exemption from forest charges on the logs used in his exempted manufacturing industry. The Court of Tax Appeals ruled that Lacson was not liable for forest charges on logs used in manufacturing plywood and veneer but upheld the assessment for charges on logs exported to Japan. The Collector contested the Court of Tax Appeals’ jurisdiction and argued that the tax exemption under Republic Act No. 901 was limited to specific taxes directly payable by the manufacturer and did not include forest charges, which he contended were not taxes but a price for the privilege of exploiting public timber lands.
ISSUE
Whether forest charges are within the purview of the tax exemption granted under Republic Act No. 901 for the manufacture of veneer and plywood.
RULING
The Supreme Court reversed the decision of the Court of Tax Appeals. It held that forest charges are not taxes but a price charged by the government for the privilege granted to concessionaires to exploit timber from the public domain. The tax exemption provided in Republic Act No. 901 is limited to specific taxes enumerated in the law, such as the fixed and privileges tax on business, percentage tax on sales, compensating tax on machinery, documentary stamp tax, and income tax derived from the exempted industry. The Court distinguished the business of operating a forest concession from the manufacturing of plywood and veneer, noting that a manufacturer can obtain logs by purchase from other concessionaires. Therefore, the exemption does not extend to forest charges incurred in the separate business of forest concession operations. The Court sustained the dissenting opinion of Associate Judge Roman M. Umali and ordered the reversal of the appealed decision.