Commissioner of Internal Revenue v. Tanjuatco
REITERATIONFacts
The Antecedents: Pilar Tanjuatco imported a Chevrolet "Impala" car with accessories from the United States on June 26, 1960. She paid a compensating tax of P12,699.81 under protest. Procedural History: Taxpayer demanded a refund of P5,118.28 from the Commissioner of Internal Revenue, alleging excess payment. Upon the Commissioner's inaction, she filed a petition for review and refund with the Court of Tax Appeals (CTA). The CTA ordered a refund of P579.90. The Petition: Both the taxpayer and the Commissioner appealed the CTA decision. The taxpayer argued for the use of discounted invoice value converted at par value (P2.00 to $1.00) and a lower tax rate. The Commissioner contended for the use of the "blue book" value and the official exchange rate (P3.20 to $1.00).
Issue(s)
Whether the taxable landed cost of the imported car should be based on the invoice value or the published retail factory price. Whether the conversion rate for determining the compensating tax should be the par value (P2.00 to $1.00) or the current rate of exchange (P3.20 to $1.00). Whether the rate of compensating tax due on the car should be 75% or 100% of the landed cost.
Ruling
The Supreme Court affirmed the decision of the Court of Tax Appeals, ordering the Commissioner to refund P579.90 to the taxpayer. The Court held that the taxable landed cost should be based on the discounted invoice value, converted at the current rate of exchange of P3.20 to $1.00. The compensating tax rate of 100% was upheld as the selling price exceeded P10,000.00.
Ratio Decidendi
On the basis of taxable landed cost: The Court held that the actual purchase price, as reflected in the invoices, should be the basis for computing the compensating tax, provided the invoices are not questionable. Finance Department Order No. 289-A and Section 1405 of the Tariff and Customs Code support this, allowing the use of published retail factory price only if the actual purchase price is unknown or questionable. In this case, the invoices were not shown to be unreliable, thus the discounted invoice value was correctly used by the CTA. The ruling in Commissioner of Customs vs. Cedran was applied, emphasizing that customs authorities may disregard invoice values only if they do not reflect the true value and proper procedures are followed. On the conversion rate: The Court distinguished between "par value" and "rate of exchange." It clarified that Section 204 of the Tariff and Customs Code mandates the use of the "current rate of exchange" published by the Central Bank for "other purposes" besides import duties, which includes compensating taxes. Central Bank Circular No. 105 indicated that transactions not falling under specific controlled categories would be governed by the free market rate. Since the importation did not fall under the exceptions, the free market rate of P3.20 to $1.00, prevailing at the time of importation (June 29, 1960), was correctly applied. The taxpayer's argument that this altered the par value was deemed without merit. On the rate of compensating tax: The Court found that the selling price of the car, computed by the CTA at P12,119.91, exceeded P10,000.00. Therefore, pursuant to Section 184(A) of the Tax Code, it was subject to a compensating tax rate of 100% of the selling price. The taxpayer's contention for a 75% rate was rejected.
Main Doctrine
The taxable landed cost of an imported article should be based on its actual purchase price, as supported by invoices, unless such invoices are questionable or unreliable. The conversion rate from foreign currency to Philippine currency for tax purposes should be the current rate of exchange as published by the Central Bank, not the par value, especially for transactions not covered by official rate allocations.