BIR Ruling

July 8, 1969 2nd Indorsement Returned to the Director, Revenue Region No. 13, Cebu City, the entire record bearing on the business tax liability of the TITAY'S LILOAN ROSQUILLOS (hereinafter referred to as TITAY'S) amounting to P600.50, inclusive of surcharge and penalty. prcd It appears that TITAY'S is registered with the NACIDA. Before registration, it had been paying the sales tax on its sales of Rosquillos. After registration, however, it ceased to pay the sales tax in accordance with the certificate of registration of the NACIDA and Republic Act No. 3470. TITAY'S derived gross sales of P4,529.90 from July to December, 1964; P12,422.05, from January to December, 1965; and P3,638.55 from January to May, 1966. Evidently, TITAY'S is a business operated only on a small scale. However, since it was found to be employing 25 persons, it was the impression that TITAY'S cannot qualify for exemption because Republic Act No. 3470 envisaged an industry mainly carried out by members of the family. In the opinion of the Secretary of Justice contained in his letter to the Administrator of the NACIDA dated November 15, 1967, it was held that the determining factors controlling in resolving the issue of whether or not an industry is a cottage industry are limited capitalization and the number of workers, and that the fact alone that the workers of an industry do not belong to the same family does not operate to deprive the activity of the benefits of the law so long as it is a "cottage industry" in the judgment of the NACIDA. In the light of the foregoing, it is the opinion of this Office as it hereby holds that the determination by the NACIDA that TITAY'S LILOAN ROSQUILLOS is a cottage industry should be respected and, therefore, TITAY'S is entitled to the tax benefits provided for by the NACIDA Law. He is, therefore, advised to take corresponding action towards the withdrawal of the assessment against TITAY'S and to consider the case close and terminated. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue