BIR Ruling

July 25, 1977 Mr. Ambrosio Lina LawyerCertified Public Accountant Makati, Rizal S i r : This refers to your letter dated July 1, 1977 requesting reconsideration of our Authority to Release Imported Goods No. 77-10264 and 77-11104 dated May 31 and June 10, 1977, respectively, subjecting the importations of your client, Alliance Textile Mills, Inc. of 16 packages centrifugal water chillers and 34 packages of Luwa air conditioning and humidification plant with refrigeration equipment to the 40% compensating tax. You content that the aforesaid imported articles should be subject to the 7% compensating tax. In support of your contention, you pointed out that the 40% tax under Section 185-A refers mostly to home appliances intended for home convenience and comfort; that the articles in question are not parts of household appliances but are essential and integrated parts of a textile industrial equipment that they are used to maintain certain level of room temperature and humidity to achieve maximum machine production; and that a textile mill cannot function effectively without these essential cooling system. You also cited various rulings of this Office holding that industrial refrigerating equipment are subject to the 7% sales tax. In reply, I have the honor to inform you that in a ruling dated December 22, 1976 involving similar articles as those imported by your aforesaid client, this Office held that the cooling tower which is a part of an airconditioning unit of the central type is subject to the 40% tax-prescribed in Section 185-A(c) of the Tax Code. In said ruling this Office explained: "It will be noted that an airconditioning unit has been classified as a semi-luxury article, such article being among those enumerated in Section 185-A of the Tax Code. (See Section 185-A(c), Tax Code. And it will be noted further that said law does not provide for any exception. Neither can an exception be discerned from the history of the law on semi-luxury articles, for study of the provisions of Section 185 and the various amendments thereto reveal that the provision on air-conditioning units has not undergone any change, and that it has remained as it is now-providing for no exception, and without any additional clause, phrase or word which may be interpreted as providing for certain exceptions. In other words, the classification of an air-conditioning unit as semi-luxury article is definite and conclusive and therefore, this Office is without authority to reclassify said article merely because its use is an industrial necessity." As regards the rulings cited in your letter suffice it to state that they are not applicable to the imported articles in question as said rulings refer to industrial refrigerating equipment and not airconditioning units. In view of the foregoing, your request cannot be granted for lack of legal basis. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8