G.R. No. L-18571 October 29, 1965
PURAKAN PLANTATION COMPANY, petitioner, vs. MELECIO R. DOMINGO, respondent.

FACTS

The petitioner, Purakan Plantation Company, a Philippine corporation, cultivated a cassava plantation and manufactured cassava starch or flour from its products. The Acting Regional Director of the Bureau of Internal Revenue informed the petitioner that it owed sales tax for the years 1950 to October 15, 1953. The assessment was later reduced to P22,393.52 based on gross sales. The petitioner sought reconsideration, arguing for exemption under Section 188(b) of the Revenue Code, which applies to products from one’s own plantation. The respondent Commissioner denied the plea, stating the petitioner’s primary business was manufacturing flour and starch, not producing cassava tubers, and that it also purchased cassava from other plantations, thus making the Philippine Packing Corporation doctrine inapplicable. The petitioner appealed to the Court of Tax Appeals, which sustained the assessment, finding that the petitioner bought cassava tubers from other plantations and failed to present its company records to disprove this, leading to an adverse inference. The petitioner challenged this finding, presenting only a deposition from its Secretary-Treasurer denying purchases. The government presented testimony from Internal Revenue Agent Artemio Jacalan, who investigated and reported that neighboring plantations sold cassava to the petitioner, and affidavits from those planters.

ISSUE

Whether the finding of the Court of Tax Appeals that the petitioner bought cassava tubers from other plantations is supported by the evidence on record.

RULING

Yes, the finding is supported. The Supreme Court affirmed the decision of the Court of Tax Appeals. The petitioner failed to present its books and records, which it was required by law to keep, to disprove the assessment, giving rise to the implication that such evidence would be adverse. The party claiming a tax exemption must justify it by a clear and positive grant, which the petitioner failed to do. The testimony of Internal Revenue Agent Jacalan and the affidavits he gathered were admissible; the Court of Tax Appeals is not strictly governed by technical rules of evidence under Republic Act No. 1125 . The preponderance of evidence leaned against the petitioner. Therefore, the petitioner was not entitled to the exemption under Section 188(b) of the Revenue Code, as it manufactured products from purchased cassava, not solely from its own plantation.